<PAGE>   1
 
     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 29, 1998
                                                 REGISTRATION NO. 333-
================================================================================
 
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             ---------------------
                                    FORM S-4
 
            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
                             ---------------------
                     CRESCENT REAL ESTATE EQUITIES COMPANY
             (Exact Name of Registrant as Specified in Its Charter)
 
<TABLE>
<S>                                      <C>                                      <C>
                DELAWARE                                   6798                                  52-1862813
      (State or Other Jurisdiction             (Primary Standard Industrial                   (I.R.S. Employer
   of Incorporation or Organization)           Classification Code Number)                 Identification Number)
</TABLE>
 
                          777 MAIN STREET, SUITE 2100
                            FORT WORTH, TEXAS 76102
                           TELEPHONE: (817) 321-2100
  (Address, Including Zip Code, and Telephone Number, Including Area Code, of
                   Registrant's Principal Executive Offices)
                             ---------------------
                               GERALD W. HADDOCK
               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
                          777 MAIN STREET, SUITE 2100
                            FORT WORTH, TEXAS 76102
                           TELEPHONE: (817) 321-2100
 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
                             of Agent For Service)
                             ---------------------
                                   Copies to:
 
<TABLE>
<S>                                      <C>                                      <C>
        ROBERT B. ROBBINS, ESQ.                    DAVID M. DEAN, ESQ.                      ERIC H. SCHUNK, ESQ.
        SYLVIA M. MAHAFFEY, ESQ.          CRESCENT REAL ESTATE EQUITIES LIMITED          KENNETH J. BARONSKY, ESQ.
    SHAW PITTMAN POTTS & TROWBRIDGE                    PARTNERSHIP                    MILBANK, TWEED, HADLEY & MCCLOY
          2300 N STREET, N.W.                  777 MAIN STREET, SUITE 2100         601 SOUTH FIGUEROA STREET, 30TH FLOOR
         WASHINGTON, D.C. 20037                  FORT WORTH, TEXAS 76102             LOS ANGELES, CALIFORNIA 90017-5735
                                                                                               (213) 892-4000
</TABLE>
 
                             ---------------------
    APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement and all
other conditions to the merger of Station Casinos, Inc. with and into Crescent
Real Estate Equities Company pursuant to an Agreement and Plan of Merger dated
as of January 16, 1998, as amended, described in the enclosed Proxy
Statement/Prospectus, have been satisfied or waived.
    If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box.  [ ]
    If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.  [ ]
    If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]
                             ---------------------
                        CALCULATION OF REGISTRATION FEE
 
<TABLE>
<CAPTION>
=================================================================================================================================
              TITLE OF EACH CLASS                   AMOUNT TO BE       OFFERING PRICE         AGGREGATE            AMOUNT OF
         OF SECURITIES TO BE REGISTERED             REGISTERED(1)         PER UNIT          OFFERING PRICE     REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>                 <C>                 <C>                  <C>
Common Shares, par value $.01(2)................     16,671,565           $30.46(3)          $507,815,870          $149,806
---------------------------------------------------------------------------------------------------------------------------------
$3.50 Convertible Preferred Shares..............      2,070,000           $48.32(4)          $100,022,400          $ 29,507
---------------------------------------------------------------------------------------------------------------------------------
         Total..................................                                             $607,838,270          $179,313
=================================================================================================================================
</TABLE>
 
(1) Based upon the 35,311,792 shares of common stock of Station Casinos, Inc.
    ("Station"), the 2,070,000 shares of Station's $3.50 Convertible Preferred
    Stock and the 464,098 shares of Station Common Stock issuable upon the
    exercise of in-the-money options outstanding on June 26, 1998. Upon
    consummation of the Merger described herein, each outstanding share of
    Station common stock will convert into the right to receive .466 Common
    Shares of Crescent Real Estate Equities Company ("Crescent"), each share of
    Station $3.50 Convertible Preferred Stock will convert into the right to
    receive one Crescent $3.50 Convertible Preferred Share and each option to
    purchase one share of Station common stock will convert into an option to
    purchase .466 Common Shares of Crescent.
 
(2) There are being registered hereunder such presently indeterminate number of
    Common Shares of Crescent into which the $3.50 Convertible Preferred Shares
    are convertible. Accordingly, pursuant to Rule 457(i) under the Securities
    Act, no additional registration fee is required to be paid in respect of the
    Common Shares into which the $3.50 Convertible Preferred Shares are
    convertible.
 
(3) Estimated solely for purposes of calculating the registration fee in
    accordance with Rule 457(f)(l).
 
(4) Estimated solely for purposes of calculating the registration fee in
    accordance with Rule 457(f)(l).
 
     THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE>   2
 
                             STATION CASINOS, INC.
                            2411 WEST SAHARA AVENUE
                            LAS VEGAS, NEVADA 89102
                                 (702) 367-2411
 
                             ---------------------
 
           NOTICE OF JOINT ANNUAL AND SPECIAL MEETING OF STOCKHOLDERS
                           TO BE HELD: AUGUST 4, 1998
                  TO BE HELD AT: SUNSET STATION HOTEL & CASINO
 
                             ---------------------
 
To the Stockholders:
 
     NOTICE is hereby given that the joint Annual Meeting of holders of Station
Common Stock par value $.01 per share (including certain rights associated with
such stock) ("Station Common Stock") and Special Meeting of holders of Station
$3.50 Convertible Preferred Stock ("Station Convertible Preferred Stock")
(collectively, the "Meeting") of Station Casinos, Inc., a Nevada corporation
(together, unless the context otherwise requires, with the surviving entity of
the Reincorporation Merger (as defined herein), "Station") will be held at
Sunset Station Hotel & Casino, 1301 West Sunset Road, Henderson, Nevada on
August 4, 1998, beginning at 10:00 a.m. local time, for the following purposes:
 
          1. To consider and vote upon a proposed merger pursuant to the
     Agreement and Plan of Merger dated as of January 16, 1998, as amended (the
     "Merger Agreement"), by and between Station and Crescent Real Estate
     Equities Company, a Texas Real Estate Investment Trust ("Crescent")
     (including the merger (the "Reincorporation Merger") of Station with and
     into its wholly-owned Delaware subsidiary prior to the merger of the
     surviving entity of the Reincorporation Merger with and into Crescent,
     collectively the "Merger");
 
          2. To elect two directors to serve until the earlier of (i)
     consummation of the Merger and (ii) the 2001 annual meeting of Station and
     until their respective successors have been duly elected and qualified;
 
          3. To ratify the appointment of Arthur Andersen L.L.P. as Station's
     independent public accountants for Station's 1999 fiscal year; and
 
          4. To consider and transact such other business as may properly come
     before the Meeting or any adjournment thereof;
 
all as more fully described in the accompanying Proxy Statement/Prospectus.
 
     As permitted by the Merger Agreement, Station will be reincorporated in
Delaware through the Reincorporation Merger and the surviving entity will merge
with and into Crescent at the time of effectiveness of the Merger (the
"Effective Time"), whereupon the separate corporate existence of Station will
cease and Crescent will continue as the surviving entity. As of the Effective
Time, by virtue of the Merger, and without any action on the part of Crescent,
Station or the holders of any securities of Station or Crescent and subject to
certain provisions of the Merger Agreement, each share of Station Common Stock
(including restricted shares of Station Common Stock issued under Station's
stock compensation program) issued and outstanding immediately prior to the
Effective Time (other than treasury shares and shares of Station Common Stock
held by Crescent which will be cancelled) will be converted into the right to
receive 0.466 shares of validly issued, fully paid and nonassessable Crescent
Common Shares of beneficial interest, par value $.01 per share ("Crescent Common
Shares") and each share of Station Convertible Preferred Stock will be converted
into the right to receive one $3.50 Convertible Preferred Share of Crescent,
which will have the conversion rights and other terms required by the governing
documents for the Station Convertible Preferred Stock.
 
     Holders of Station Common Stock at the close of business on June 19, 1998,
the record date fixed by Station's board of directors (the "Station Board of
Directors"), are entitled to notice of and to vote at the
<PAGE>   3
 
Meeting. No business other than the proposals described in this notice is
expected to be considered at the Meeting or any adjournment. The Station Board
of Directors urges all stockholders of record to exercise their right to vote at
the Meeting personally or by proxy FOR the Merger and the other matters listed
in this notice. Accordingly, we are sending you the following Proxy
Statement/Prospectus and the enclosed proxy card.
 
     WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SPECIFY YOUR VOTE ON
THE ACCOMPANYING PROXY CARD AND SIGN, DATE AND RETURN IT AS PROMPTLY AS POSSIBLE
IN THE ENCLOSED PRE-ADDRESSED, POSTAGE-PAID ENVELOPE.
 
     Your prompt response will be appreciated.
 
                                            By Order of the Board of Directors
 
                                            Scott M Nielson
                                            Secretary
 
Las Vegas, Nevada
June 29, 1998
 
                                        2
<PAGE>   4
 
                                                           Station Casinos, Inc.
                                                         2411 West Sahara Avenue
                                                         Las Vegas, Nevada 89102
 
June 29, 1998
 
Dear Fellow Stockholder:
 
     Station Casinos, Inc. ("Station") cordially invites you to attend the joint
Annual Meeting of holders of Station Common Stock, par value $.01 per share
(including certain rights associated therewith, "Station Common Stock"), and
Special Meeting of holders of Station $3.50 Convertible Preferred Stock
("Station Convertible Preferred Stock") to be held beginning at 10:00 a.m.
(local time) on August 4, 1998 at Sunset Station Hotel & Casino, 1301 West
Sunset Road, Henderson, Nevada (collectively, the "Meeting").
 
     At the Meeting you will be asked to consider and vote upon a proposed
merger pursuant to the Agreement and Plan of Merger dated as of January 16,
1998, as amended (the "Merger Agreement"), by and between Station and Crescent
Real Estate Equities Company, a Texas real estate investment trust ("Crescent")
(including the merger of Station with and into its wholly-owned Delaware
subsidiary prior to the merger of the surviving entity with and into Crescent,
the "Merger"). As a result of the Merger each share of Station Common Stock will
be converted into the right to receive 0.466 Common Shares, par value $.01 per
share, of beneficial interest of Crescent. Each share of Station Convertible
Preferred Stock will be converted into the right to receive one $3.50
Convertible Preferred Share of Crescent, which will have the conversion rights
and other terms required by the governing documents for the Station Convertible
Preferred Stock.
 
     Upon consummation of the Merger, an operating company that will be 50%
owned by certain members of Station's management and certain board members
involved in management will operate the six casino properties currently operated
by Station pursuant to a lease with Crescent. The lease will provide for base
and percentage rent although the amount of rent has not yet been determined. The
consummation of the Merger is subject to the satisfaction of certain closing
conditions, including the approval of holders of Station Common Stock and
Station Convertible Preferred Stock and approval of Nevada and Missouri gaming
authorities. Consequently, there can be no assurance that the Merger will occur
in a timely manner or at all.
 
     In addition, holders of Station Common Stock will be asked to elect two new
directors to serve until consummation of the Merger or until the 2001 annual
meeting of Station, whichever comes first, and to ratify the appointment of
Arthur Andersen L.L.P. as Station's independent public accountants.
 
     Management believes that the proposed Merger will provide holders of
Station Common Stock and Station Convertible Preferred Stock an opportunity to
participate in the potential growth of Crescent, diversify such holders'
investment, give such holders the opportunity to receive current distributions
and give the casino operations access to lower cost capital, although there can
be no assurances that the benefits of such opportunities will be realized.
 
     The Station Board of Directors believes the Merger is in the best interests
of holders of Station Common Stock and Station Convertible Preferred Stock and
unanimously recommends that you vote FOR the Merger and that holders of Station
Common Stock also vote for the other matters to be considered at the Meeting.
Certain executive officers and directors of Station that hold approximately
40.4% of the outstanding shares of Station Common Stock have agreed to vote in
favor of the Merger. Enclosed is a form of the proxy solicited by the Station
Board of Directors in connection with the Meeting. Please carefully review and
consider all of the enclosed information.
 
     WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, IT IS VERY IMPORTANT THAT
YOUR SHARES BE REPRESENTED AS THE MERGER REQUIRES THE AFFIRMATIVE VOTE OF
HOLDERS OF NOT LESS THAN SIXTY-SIX AND TWO-THIRDS PERCENT OF THE OUTSTANDING
SHARES OF EACH OF THE STATION COMMON STOCK AND THE STATION CONVERTIBLE PREFERRED
STOCK. It would therefore be helpful if you would return your signed and dated
proxy promptly; please use the enclosed postage prepaid envelope to return the
executed proxy card. If you attend the Meeting you may revoke your proxy at that
time by voting in person. If you have any questions regarding the Merger, please
call D.F. King & Co., Inc. toll free at (800) 669-5550.
 
                                            Sincerely,
 
                                            Frank J. Fertitta III
                                            Chairman of the Board,
                                            President and Chief Executive
                                            Officer
<PAGE>   5
 
[CRESCENT LOGO]                                                   [STATION LOGO]
 
                             STATION CASINOS, INC.
 
                                PROXY STATEMENT
                                      FOR
                JOINT ANNUAL AND SPECIAL MEETING OF STOCKHOLDERS
                            OF STATION CASINOS, INC.
                          TO BE HELD ON AUGUST 4, 1998
 
                             ---------------------
 
                     CRESCENT REAL ESTATE EQUITIES COMPANY
 
                                   PROSPECTUS
 
                                 COMMON SHARES
 
                       $3.50 CONVERTIBLE PREFERRED SHARES
 
                             ---------------------
 
     This Proxy Statement/Prospectus is being furnished to stockholders of
Station Casinos, Inc., a Nevada corporation (together, unless the context
otherwise requires, with the surviving entity of the Reincorporation Merger (as
defined herein), "Station"), in connection with the solicitation of proxies by
Station's Board of Directors (the "Station Board of Directors") for use at
Station's joint Annual Meeting of holders of Station Common Stock (as defined
herein) and Special Meeting of holders of Station Convertible Preferred Stock
(as defined herein) and at any adjournments or postponements thereof
(collectively, the "Meeting"), at the time and place, and for the purposes,
specified in the accompanying Notice of Meeting.
 
     The Meeting has been called to consider and vote upon a proposed merger
(including the Reincorporation Merger, the "Merger") pursuant to an Agreement
and Plan of Merger dated as of January 16, 1998, as amended, by and between
Station and Crescent Real Estate Equities Company, a Texas real estate
investment trust ("Crescent") (the "Merger Agreement").
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS HAVE NOT
  BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY
  STATE SECURITIES COMMISSION, THE NEVADA GAMING COMMISSION, THE NEVADA STATE
    GAMING CONTROL BOARD, THE MISSOURI GAMING COMMISSION OR ANY OTHER GAMING
 AUTHORITY NOR HAS THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES
COMMISSION, THE NEVADA GAMING COMMISSION, THE NEVADA STATE GAMING CONTROL BOARD,
 THE MISSOURI GAMING COMMISSION NOR ANY OTHER GAMING COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS OR THE INVESTMENT MERITS
   OF THE SECURITIES OFFERED HEREBY. ANY REPRESENTATION TO THE CONTRARY IS A
                               CRIMINAL OFFENSE.
 
     Pursuant to the Merger Agreement, Station will be reincorporated in
Delaware through merger with and into its wholly-owned Delaware subsidiary (the
"Reincorporation Merger"), and the surviving entity of the Reincorporation
Merger will be merged with and into Crescent, with the result that (a) the
separate corporate existence of Station will cease, (b) each outstanding share
of Station Common Stock, par value $.01 per share (together with certain
associated rights "Station Common Stock"), other than shares held by Station or
Crescent, will be converted into the right to receive 0.466 shares of validly
issued, fully paid and nonassessable Common Shares of beneficial interest, par
value $.01 per share, of Crescent (the "Crescent Common Shares") and (c) each
outstanding share of Station's $3.50 Convertible Preferred Stock (the "Station
Convertible Preferred Stock") will be converted into the right to receive one
validly issued, fully paid and nonassessable $3.50 Convertible Preferred Share
of Crescent (the "Crescent Convertible Preferred Shares"), which will have the
conversion and other terms required by the Certificate of Resolutions
Establishing Designation, Preferences and Rights of $3.50 Convertible Preferred
Stock of Station dated March 25, 1996 (the "Certificate of Designation").
 
     Based on the 35,311,792 shares of Station Common Stock outstanding on June
19, 1998, the record date for determining Station stockholders entitled to vote
at the Meeting (the "Record Date"), the 464,098 shares of Station Common Stock
issuable upon exercise of vested options to purchase Station Common Stock with a
strike price below the market value of Station Common Stock on the Record Date
and assuming none of the Station Convertible Preferred Stock is converted, the
number of Crescent Common Shares issued in the Merger is expected to be
approximately 16,671,500 with an aggregate market value of $561,662,835, based
on the average of the average daily high and low prices per Crescent Common
Share as reported on the NYSE Composite Transaction Tape for the 30 consecutive
trading days ending June 19, 1998. Based on the 2,070,000 shares of Convertible
Preferred Stock outstanding on the Record Date, the number of Crescent
Convertible Preferred Shares issued in the Merger is expected to be 2,070,000.
 
     The terms of the Merger Agreement and the Crescent Common Shares and
Crescent Convertible Preferred Shares to be issued in connection therewith are
described in this Proxy Statement/Prospectus.
 
     This Proxy Statement/Prospectus and the related forms of proxy are first
being mailed to stockholders of Station Common Stock and Station Convertible
Preferred Stock on or about July 2, 1998.
 
         The Date of This Proxy Statement/Prospectus is June 29, 1998.
<PAGE>   6
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                                              PAGE(S)
                                                              -------
<S>                                                           <C>
AVAILABLE INFORMATION.......................................      v
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.............     vi
SUMMARY.....................................................      1
  Crescent..................................................      1
  Station...................................................      1
  The Meeting...............................................      2
  Vote Required.............................................      2
  Recommendation of the Station Board of Directors; Reasons
     for Merger.............................................      2
  Opinion of Financial Advisor to Station...................      3
  Dissenters' Rights of Appraisal...........................      3
  Comparison of Stockholder and Shareholder Rights..........      3
  The Merger................................................      3
  Summary Risk Factors......................................      8
  Summary of Recent Developments............................      9
  Structure of Crescent.....................................     10
  Summary Consolidated Financial Data of Station............     11
  Summary Consolidated Historical Financial Data of
     Crescent...............................................     13
  Comparative Per Share Data................................     15
  Comparative Market Prices.................................     16
THE MEETING AND VOTING......................................     18
  The Meeting...............................................     18
  Revocation of Proxies.....................................     18
  Voting....................................................     18
  Vote Required.............................................     19
  Recommendation of the Station Board of Directors; Reasons
     for Merger.............................................     19
  Independent Accountants...................................     19
  Dissenters' Rights of Appraisal...........................     19
RISK FACTORS................................................     20
  Stock Price Fluctuations; Fixed Exchange Ratio............     20
  Failure to Approve the Merger.............................     20
  Interests of Certain Persons in the Merger................     21
  Differences in Stockholder and Shareholder Rights.........     21
  Taxability of the Merger..................................     21
  Risks Relating to Qualification and Operation as a REIT...     22
  Risks Relating to Changes in Tax Law......................     22
  Concentration of Assets...................................     23
  Risks Related to Issuance of Rights.......................     23
  Risks Relating to Control of Certain Properties...........     23
     Revenues from Proposed Casino/Hotel Investments
      Dependent on Third-Party Operators and Casino/Hotel
      Industry..............................................     23
     Revenues from Hotels Dependent on Third-Party Operators
      and Hospitality Industry..............................     24
     Lack of Control of Residential Development
      Corporations..........................................     24
     Lack of Control of Americold and URS...................     24
     Lack of Control of the Operating Joint Venture/Income
      from Joint Venture....................................     25
  Real Estate Risks Specific to Crescent's Business.........     25
     Investment Risks.......................................     25
     Risks of Joint Ownership of Assets.....................     25
</TABLE>
 
                                        i
<PAGE>   7
 
<TABLE>
<CAPTION>
                                                              PAGE(S)
                                                              -------
<S>                                                           <C>
  Hotel/Casino Specific Industry Risks......................     26
     Uncertain Effect of Recent Court Decision..............     26
     Regulation.............................................     27
     Competition............................................     28
     Uncertain Effect of National Gambling Commission.......     28
  Conflicts of Interest.....................................     28
     Common Ownership and Management........................     28
     Relationship with Operating Joint Venture..............     28
     Relationship with Crescent Operating...................     29
     Relationship with Magellan Health Services, Inc. ......     30
     Joint Investments......................................     30
     Competition for Management Time........................     30
     Legal Representation...................................     30
  Risk of Inability to Manage Rapid Growth and Acquisition
     of Substantial
     New Assets Effectively.................................     30
  General Real Estate Risks.................................     30
     Uncontrollable Factors Affecting Performance and
      Value.................................................     30
     Illiquidity of Real Estate Investments.................     31
     Environmental Matters..................................     31
  Purchases from Financially Distressed Sellers.............     31
  Change in Policies........................................     32
  Possible Adverse Consequences of Ownership Limit..........     32
  Reliance on Key Personnel.................................     32
  Risks Relating to Debt....................................     32
  Risk That Adequate Financing Will Not Be Available to
     Refinance Station Debt.................................     33
  Potential Dilution from Transactions with Affiliates of
     Union Bank of Switzerland and Merrill Lynch
     International..........................................     33
THE MERGER..................................................     34
  General...................................................     34
  The Reincorporation Merger................................     35
  Background of the Merger..................................     35
  Recommendation of the Station Board of Directors; Reasons
     for the Merger.........................................     36
  Opinion of the Financial Advisor to Station...............     37
  Interests of Certain Persons in the Merger................     41
  Accounting Treatment......................................     44
  Regulatory Approvals......................................     44
  Antitrust.................................................     51
  Federal Securities Laws Consequences......................     51
  Recent Developments.......................................     52
THE MERGER AGREEMENT........................................     53
  General...................................................     53
  Effective Time............................................     53
  Conversion of Shares......................................     53
  Exchange of Certificates..................................     54
  Dividends.................................................     55
  No Fractional Securities..................................     56
  Return of Exchange Fund...................................     56
  Station Stock Options.....................................     56
  Representations and Warranties............................     57
  Business of Station Pending the Merger....................     58
  Business of Crescent Pending the Merger...................     60
  Acquisition Proposals.....................................     60
  Agreement to Vote for the Merger..........................     62
</TABLE>
 
                                       ii
<PAGE>   8
 
<TABLE>
<CAPTION>
                                                              PAGE(S)
                                                              -------
<S>                                                           <C>
  Certain Transactions......................................     62
  Indemnification; Directors and Officers Insurance.........     64
  Conditions to the Consummation of the Merger..............     64
  Termination...............................................     68
  Certain Fees and Expenses.................................     69
  Waivers...................................................     69
TAX CONSIDERATIONS..........................................     70
  Certain Federal Income Tax Consequences...................     70
  Federal Income Tax Consequences of the Merger.............     70
  Taxation of Crescent Entities.............................     71
  Taxation of Crescent Convertible Preferred Shares.........     80
PRINCIPAL SHAREHOLDERS OF CRESCENT..........................     87
MANAGEMENT OF CRESCENT PRIOR TO THE MERGER..................     90
NOMINEES FOR ELECTION OF DIRECTORS..........................     91
DIRECTORS AND EXECUTIVE OFFICERS............................     92
  Meetings of the Board of Directors........................     93
  The Audit Committee.......................................     93
  The Human Resources Committee.............................     93
  Compensation of Directors.................................     94
  Human Resources Committee Interlocks and Insider
     Participation..........................................     94
  Compliance With Section 16(a) of the Securities Exchange
     Act....................................................     94
  Legal Proceedings Involving Directors, Officers,
     Affiliates or Beneficial Owners........................     94
PRINCIPAL STOCKHOLDERS OF STATION...........................     95
EXECUTIVE COMPENSATION......................................     96
  Options Granted in Fiscal 1998............................     97
  Fiscal Year End Option Values.............................     97
  Replacement of and Grant of Stock Options.................     98
  Employment Agreements.....................................     98
  Stock Compensation Program................................    100
  Certain Federal Income Tax Consequences...................    101
  Supplemental Executive Retirement Plan....................    103
  Supplemental Management Retirement Plan...................    104
  Deferred Compensation Plan For Executives.................    105
  Special Long-Term Disability Plan.........................    105
  Long-Term Stay-On Performance Incentive Plan..............    106
  Split-Dollar Insurance Program............................    106
  Limitation Of Liability And Indemnification Of Directors
     And Officers...........................................    106
REPORT ON EXECUTIVE COMPENSATION............................    107
  Stock Performance Graph...................................    110
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............    111
  Boulder Station Lease.....................................    111
  Texas Station Lease.......................................    111
  McNabb/McNabb/DeSoto/Salter & Co..........................    111
  Gordon Biersch Brewing Company............................    111
  Merger Related Transactions...............................    112
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS.................    112
COMPARISON OF RIGHTS OF STOCKHOLDERS OF STATION AND
  SHAREHOLDERS OF CRESCENT..................................    113
  General...................................................    113
  Special Meetings of Shareholders and Stockholders.........    113
  Stockholder Action by Written Consent.....................    114
</TABLE>
 
                                       iii
<PAGE>   9
 
<TABLE>
<CAPTION>
                                                              PAGE(S)
                                                              -------
<S>                                                           <C>
  Stockholder Nominations and Proposals for Business........    114
  Limitation on Ownership of Shares of Stock and Beneficial
     Interest...............................................    115
  Certain Extraordinary Transactions........................    117
  Business Combinations Involving Interested Stockholders
     and Shareholders.......................................    117
  Control Share Acquisitions................................    118
  Removal of Directors or Trustees..........................    119
  Standards of Conduct for Directors and Trustees...........    119
  Limitation of Liability of Directors, Trustees and
     Officers...............................................    120
  Indemnification of Directors, Trustees and Officers.......    120
  Amendment to Governing Documents..........................    122
  Rights Plan...............................................    122
  Appraisal and Dissenters' Rights..........................    122
  Dividends and Distributions...............................    123
  Stockholder and Shareholder Inspection Rights.............    123
  Classified Board..........................................    124
DESCRIPTION OF CAPITAL STOCK OF CRESCENT....................    125
  Description of Crescent Common Shares.....................    125
  Description of Preferred Shares...........................    127
  Description of Common Share Warrants......................    131
  Certain Provisions of the Declaration of Trust, Crescent
     Bylaws and Texas Law...................................    132
  Description of $3.50 Convertible Preferred Shares of
     Crescent...............................................    135
  Description of Transferable Subscription Rights Proposed
     for Issuance by Crescent...............................    142
LEGAL OPINIONS..............................................    143
EXPERTS.....................................................    143
OTHER MATTERS...............................................    143
STOCKHOLDER PROPOSALS.......................................    143
ANNEX A -- FAIRNESS OPINION.................................    A-1
ANNEX B -- MERGER AGREEMENT.................................    B-1
ANNEX C -- REINCORPORATION MERGER AGREEMENT.................    C-1
ANNEX D -- STATEMENT OF DESIGNATION.........................    D-1
</TABLE>
 
                                       iv
<PAGE>   10
 
     Except for historical information contained in this Proxy
Statement/Prospectus, the matters discussed herein contain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934 (the "Exchange Act"). Such statements appear in a number of places in
this Proxy Statement/Prospectus, including, without limitation, under "Summary,"
"The Meeting and Voting -- Recommendation of the Station Board of Directors;
Reasons for the Merger," "Risk Factors", "The Merger" and "Recent Developments."
Such forward-looking statements include statements regarding the intent, belief
or current expectations with respect to the matters discussed in this Proxy
Statement/Prospectus. Stockholders are cautioned that any such forward-looking
statements involve risks and uncertainties, and that actual results may differ
materially from those in the forward-looking statements as a result of various
uncertainties and other factors, including, without limitation, completion of
the transactions described herein and future acquisitions and restructurings,
the ability to retain existing management, competition within the gaming
industry, the cyclical nature of the real estate business, the hotel business
and the gaming business, real estate and economic conditions, the continuing
ability of Crescent to qualify as a real estate investment trust (a "REIT") and
other risks described in this Proxy Statement/Prospectus and in the annual,
quarterly and current reports and proxy statements of Crescent and Station
incorporated by reference herein, including those identified in the Crescent
Form 10-K (as defined herein), the Crescent Form 8-K dated April 17, 1998 and
filed April 28, 1998, as amended on June 22, 1998 and the Station Form 10-K (as
defined herein).
 
     The information set forth or incorporated by reference in this Proxy
Statement/Prospectus concerning Crescent and its subsidiaries has been furnished
by Crescent. Station does not have independent knowledge of the matters set
forth or incorporated by reference in this Proxy Statement/Prospectus concerning
Crescent and its subsidiaries.
 
                             AVAILABLE INFORMATION
 
     Crescent and Station are each subject to the informational requirements of
the Exchange Act, and in accordance therewith file reports, proxy or information
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy or information statements and other
information filed with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C., 20549 and at the following
Regional Offices of the Commission: 7 World Trade Center, Suite 1300, New York,
New York, 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois, 60661. Copies of such material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C., 20549 at prescribed rates. The Commission maintains a
site on the World Wide Web at http://www.sec.gov that contains reports, proxy
statements and information statements and other information regarding
registrants that file electronically with the Commission. Crescent and Station
file electronically with the Commission. The Station Common Stock, Station
Convertible Preferred Stock, the Crescent Common Shares and Crescent's 6 3/4%
Series A Convertible Cumulative Preferred Shares ("Crescent Series A Preferred
Shares") are listed on the New York Stock Exchange, Inc. (the "NYSE"), and such
material may also be inspected at the offices of the NYSE, 20 Broad Street, New
York, New York 10005. After consummation of the Merger, Station will no longer
file reports, proxy statements or other information with the Commission.
Instead, such information will be provided, to the extent required, in filings
made by Crescent.
 
     Crescent has filed with the Commission a registration statement on Form S-4
(together with all amendments, exhibits and schedules thereto, the "Registration
Statement") under the Securities Act, relating to the Crescent Common Shares
that will be issued to holders of Station Common Stock in connection with the
Merger, the Crescent Convertible Preferred Shares that will be issued to holders
of the Station Convertible Preferred Stock in connection with the Merger and the
transferable subscription rights to be issued to holders of Crescent Common
Shares upon completion of the Merger. See "The Merger Agreement -- Conversion of
Shares." This Proxy Statement/Prospectus, which constitutes a part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement filed by Crescent with the Commission, certain portions
of which are omitted as permitted by the rules and regulations of the
 
                                        v
<PAGE>   11
 
Commission. Such additional information is available for inspection and copying
at the offices of the Commission. Statements contained in this Proxy
Statement/Prospectus or in any document incorporated into this Proxy
Statement/Prospectus by reference as to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement or such other document, each such
statement being qualified in all respects by such reference.
 
                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
 
     The documents listed below have been filed under the Exchange Act by
Crescent (Exchange Act File No. 1-13038) with the Commission and are
incorporated herein by reference:
 
           1. Crescent's Registration Statement on Form 8-B filed on March 24,
     1997 registering the Crescent Common Shares under Section 12(b) of the
     Exchange Act.
 
           2. The Proxy Statement in connection with Crescent's 1998 Annual
     Meeting of Stockholders.
 
           3. Crescent's Annual Report on Form 10-K for the year ended December
     31, 1997, as amended on May 15, 1998 (the "Crescent Form 10-K").
 
           4. Crescent's Quarterly Report on Form 10-Q for the quarter ended
     March 31, 1998.
 
           5. Crescent's Current Report on Form 8-K dated January 29, 1997 and
     filed March 24, 1997, as amended on April 9, 1997, April 24, 1997, May 23,
     1997 and July 2, 1997.
 
           6. Crescent's Current Report on Form 8-K dated October 15, 1997 and
     filed June 24, 1998
 
           7. Crescent's Current Report on Form 8-K dated December 22, 1997 and
     filed March 4, 1998.
 
           8. Crescent's Current Report on Form 8-K dated January 6, 1998 and
     filed June 19, 1998.
 
           9. Crescent's Current Report on Form 8-K dated January 16, 1998 and
     filed January 27, 1998, as amended on February 13, 1998, April 27, 1998 and
     June 10, 1998.
 
          10. Crescent's Current Report on Form 8-K dated February 12, 1998 and
     filed February 23, 1998.
 
          11. Crescent's Current Report on Form 8-K dated February 13, 1998 and
     filed February 18, 1998.
 
          12. Crescent's Current Report on Form 8-K dated February 13, 1998 and
     filed February 18, 1998.
 
          13. Crescent's Current Report on Form 8-K dated April 17, 1998 and
     filed April 28, 1998 as amended June 22, 1998.
 
          14. Crescent's Current Report on Form 8-K dated April 23, 1998 and
     filed April 27, 1998.
 
          15. Crescent's Current Report on Form 8-K dated June 15, 1998 and
     filed June 16, 1998.
 
          16. Crescent's Current Report on Form 8-K dated June 24, 1998 and
     filed June 25, 1998.
 
     The following documents previously filed by Station (Exchange Act File No.
1-12037) with the Commission pursuant to the Exchange Act are incorporated
herein by reference:
 
          1. Station's Annual Report on Form 10-K for the fiscal year ended
     March 31, 1998 (the "Station Form 10-K").
 
          2. Station's Current Report on Form 8-K dated June 15, 1998 and filed
     June 18, 1998.
 
     All documents filed by Crescent and Station pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act subsequent to the date hereof and prior
to the date of the Meeting shall be deemed to be incorporated by reference
herein and to be part hereof from the date any such document is filed.
 
     Any statements contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document which also is incorporated by reference
herein) modifies
 
                                       vi
<PAGE>   12
 
or supersedes such statement. Any statement so modified or superseded shall not
be deemed to constitute a part hereof except as so modified or superseded. All
information appearing in this Proxy Statement/ Prospectus is qualified in its
entirety by the information and financial statements (including notes thereto)
appearing in the documents incorporated herein by reference, except to the
extent set forth in the immediately preceding statement.
 
     THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF SUCH DOCUMENTS
RELATING TO CRESCENT AND STATION, RESPECTIVELY, OTHER THAN EXHIBITS TO SUCH
DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE THEREIN, WILL BE
SENT WITHOUT CHARGE BY FIRST CLASS MAIL TO ANY PERSON, INCLUDING ANY BENEFICIAL
OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED WITHIN ONE BUSINESS
DAY OF RECEIPT OF A WRITTEN OR ORAL REQUEST, IN THE CASE OF CRESCENT, TO 777
MAIN STREET, SUITE 2100, FORT WORTH, TEXAS 76102, ATTENTION: COMPANY SECRETARY,
TELEPHONE NUMBER: (817) 321-2100 AND, IN THE CASE OF STATION, TO 2411 WEST
SAHARA AVENUE, LAS VEGAS, NEVADA, 89102, ATTENTION: INVESTOR RELATIONS
(TELEPHONE NUMBER: (800) 544-2411). IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BEFORE JULY 31, 1998.
 
                                       vii
<PAGE>   13
 
                                    SUMMARY
 
     The following is a summary of certain information contained elsewhere in
this Proxy Statement/ Prospectus. This summary is qualified in its entirety by
the more detailed information contained elsewhere in this Proxy
Statement/Prospectus and in the attached Annexes. Stockholders are urged to read
this Proxy Statement/Prospectus and the attached Annexes, and in particular the
section entitled "Risk Factors," carefully and in their entirety. Unless the
context otherwise requires, (i) references in this Proxy Statement/ Prospectus
to corporate entities shall be deemed to refer to such entities and their direct
and indirect subsidiaries and (ii) the information in this Proxy
Statement/Prospectus is based on the assumption that the Merger will be approved
at the Meeting.
 
CRESCENT
 
     On December 31, 1996, Crescent Real Estate Equities Company, a Texas real
estate investment trust ("Crescent"), became the successor to Crescent Real
Estate Equities, Inc., a Maryland corporation (the "Predecessor Corporation"),
through the merger of the Predecessor Corporation and CRE Limited Partner, Inc.,
a subsidiary of the Predecessor Corporation, into Crescent. The term "Crescent"
includes, unless the context otherwise requires, Crescent, the Predecessor
Corporation, Crescent Real Estate Equities Limited Partnership, a Delaware
limited partnership (the "Operating Partnership"), Crescent Real Estate
Equities, Ltd., the general partner of the Operating Partnership ("CREE Ltd.")
and the other subsidiaries of Crescent.
 
     Crescent is a fully integrated real estate company operating as a real
estate investment trust for federal income tax purposes (a "REIT") which, as of
March 31, 1998, owned a portfolio of real estate assets (the "Properties") that
included 86 office properties (the "Office Properties") with an aggregate of
approximately 30.8 million net rentable square feet, approximately 89 behavioral
healthcare facilities (the "Behavioral Healthcare Facilities"), seven
full-service hotels with a total of 2,276 rooms and two destination health and
fitness resorts that can accommodate up to 452 guests daily (collectively, the
"Hotel Properties"), the real estate mortgages and non-voting common stock in
five residential development corporations (the "Residential Development
Corporations"), which in turn, through joint ventures or partnership
arrangements, own interests in 12 residential development properties (the
"Residential Development Properties"), and seven retail properties (the "Retail
Properties") with an aggregate of approximately 0.8 million net rentable square
feet. The Office Properties and the Retail Properties are located primarily in
21 metropolitan submarkets in Texas and Colorado. In addition, Crescent owns an
indirect 38% interest in each of two partnerships, one of which owns Americold
Corporation ("Americold") and the other of which owns URS Logistics, Inc.
("URS"). Americold and URS are the two largest suppliers of public refrigerated
warehouse space in the United States and currently own and/or operate
approximately 89 refrigerated warehouses with an aggregate of approximately
424.5 million cubic feet. Such corporations have entered into an agreement to
acquire an additional five refrigerated warehouses with an aggregate of
approximately 60.9 million cubic feet.
 
     Crescent owns its assets and carries on its operations and other
activities, including providing management, leasing and development services for
certain of its Properties, through the Operating Partnership and its other
subsidiaries. The structure of Crescent is designed to facilitate and maintain
its qualification as a REIT and to permit persons contributing Properties (or
interests therein) to Crescent to defer some or all of the tax liability that
they otherwise might incur.
 
     Crescent's executive offices are located at 777 Main Street, Suite 2100,
Fort Worth, Texas 76102, and its telephone number is (817) 321-2100.
 
STATION
 
     Station Casinos, Inc., a Nevada corporation (together, unless the context
otherwise requires, with the surviving entity of the Reincorporation Merger (as
defined herein), "Station") is a multi-jurisdictional gaming company that owns
and operates six distinctly themed casino properties, four of which are located
in Las Vegas, Nevada, one of which is located in Kansas City, Missouri and one
of which is located in St. Charles, Missouri. In Las Vegas, Station owns and
operates Palace Station Hotel & Casino ("Palace Station"), Boulder Station Hotel
& Casino ("Boulder Station"), Texas Station Gambling Hall & Hotel
                                        1
<PAGE>   14
 
("Texas Station") and Sunset Station Hotel & Casino ("Sunset Station") which
opened in June 1997. In Kansas City, Station owns and operates Station Casino
Kansas City, a historic Missouri riverboat-themed dockside gaming and
entertainment complex which opened in January 1997. In St. Charles, Station owns
and operates Station Casino St. Charles, a themed riverboat and dockside gaming
and entertainment complex ("Station Casino St. Charles," together with Station
Casino Kansas City, Palace Station, Boulder Station, Texas Station and Sunset
Station, the "Casino Properties"). Station's principal executive offices are
located at 2411 West Sahara Avenue, Las Vegas, Nevada 89102, and its telephone
number is (702) 367-2411.
 
THE MEETING
 
     Station will hold the joint Annual Meeting of holders of Station Common
Stock (as defined herein) and the Special Meeting of holders of Station
Convertible Preferred Stock (as defined herein) (collectively, the "Meeting") at
Sunset Station Hotel & Casino, 1301 West Sunset Road, Henderson, Nevada on
August 4, 1998, beginning at 10:00 a.m. local time. Holders of record of shares
of Station's common stock, par value $.01 per share, together with the
associated preferred share purchase right issued pursuant to that certain Rights
Agreement (the "Rights Agreement") by and between Station and Continental Stock
Transfer and Trust Company, dated as of October 6, 1997 (a "Right" and,
collectively with such common stock, the "Station Common Stock"), at the close
of business on June 19, 1998, the record date (the "Record Date") fixed by the
Station Board of Directors, are entitled to notice of and to vote at the
Meeting. At the Meeting, holders of Station Common Stock will be asked to
consider and vote upon (i) the Merger (as defined herein), (ii) the election of
two directors to serve until the earlier of consummation of the Merger and the
2001 annual meeting of Station, (iii) a proposal to ratify the appointment of
Arthur Andersen L.L.P. as Station's independent public accountants for Station's
1999 fiscal year and (iv) such other business as may properly come before the
Meeting. See "The Merger" and "The Meeting and Voting."
 
     Holders of record of shares of Station's $3.50 Convertible Preferred Stock
(the "Station Convertible Preferred Stock") at the close of business on the
Record Date are entitled to notice of and to vote at the Meeting as a class upon
the Merger. See "The Merger" and "The Meeting and Voting."
 
VOTE REQUIRED
 
     The Merger will be accomplished through consummation of the Reincorporation
Merger (as defined herein) followed by the merger of the surviving Delaware
corporation ("Delaware Station") and Crescent. See "The Merger." Article IX of
Station's Amended and Restated Articles of Incorporation (the "Station
Articles") and Nevada Revised Statutes ("NRS") Section 92A.120(6) combined
require the affirmative vote of not less than sixty-six and two-thirds percent
(66 2/3%) of the voting power of all shares of Station entitled to vote, with
each class constituting a separate voting class, to approve the Reincorporation
Merger. Shares as to which a stockholder abstains or withholds from voting on
the Merger will have the effect of a vote against the Merger. Messrs. Frank J.
Fertitta III, Lorenzo J. Fertitta and Blake L. Sartini collectively hold
approximately 40.4% of the outstanding Common Stock and have agreed to vote in
favor of the Merger. See "Principal Stockholders of Station" and "The Merger
Agreement -- Agreement to Vote for the Merger."
 
     The election of the director nominees requires a plurality of the votes
cast in person or by proxy at the Meeting. Under the Station Articles and the
Station Restated Bylaws (the "Station Bylaws"), abstentions from the election of
directors will not be counted as voting thereon and therefore will not affect
the election of the nominees receiving a plurality of the votes cast.
 
     Ratification of the appointment of Arthur Andersen L.L.P. as Station's
independent public accountants for Station's 1999 fiscal year requires the
affirmative vote of a majority of shares present or represented by proxy at the
Meeting and entitled to vote at the Meeting. Under the Station Articles and the
Station Bylaws, each abstention on this proposal will have the same legal effect
as a vote against such proposal.
 
RECOMMENDATION OF THE STATION BOARD OF DIRECTORS; REASONS FOR MERGER
 
     The Station Board of Directors believes the Merger is in the best interests
of Station and its stockholders and unanimously recommends that stockholders
vote FOR the Merger. Approval of the Merger will permit
                                        2
<PAGE>   15
 
the consummation of the transactions described in this Proxy
Statement/Prospectus. Although there can be no assurances that the Merger will
occur or that it will have the intended results, management of Station believes
that if the Merger occurs, it would provide holders of the Station Common Stock
and the Station Convertible Preferred Stock an opportunity to participate in the
potential growth of Crescent, diversify such holders' investment, give such
holders the opportunity to receive current distributions and give the casino
operations access to lower cost capital, although there can be no assurances
that the benefits of such opportunities will be realized.
 
     The Station Board of Directors believes that the election of its director
nominees and the approval of the appointment of Arthur Andersen, L.L.P. as
Station's independent accountants are in the best interests of Station and its
stockholders and recommends to the stockholders the approval of each of the
nominees and of the appointment of Arthur Andersen, L.L.P. as Station's
independent accountants.
 
OPINION OF FINANCIAL ADVISOR TO STATION
 
     Salomon Brothers Inc and Smith Barney Inc., conducting business jointly as
Salomon Smith Barney ("Salomon") has delivered its written opinion, dated as of
January 16, 1998, to the Station Board of Directors that, as of January 16,
1998, and based on and subject to certain matters stated therein, the
consideration to be received by stockholders of Station in the Merger is fair to
such stockholders from a financial point of view. A copy of the written opinion
of Salomon (the "Salomon Opinion") is attached hereto as Annex A. See "The
Merger -- Opinion of Financial Advisor to Station."
 
DISSENTERS' RIGHTS OF APPRAISAL
 
     Under Nevada law, neither holders of Station Common Stock nor holders of
Station Convertible Preferred Stock are entitled to dissent from the Merger and
obtain a valuation of their shares of Station Common Stock or Station
Convertible Preferred Stock, respectively in connection with the Merger. See
"The Meeting and Voting -- Dissenters' Rights of Appraisal."
 
COMPARISON OF STOCKHOLDER AND SHAREHOLDER RIGHTS
 
     As a result of the Merger, holders of Station Common Stock and Station
Convertible Preferred Stock will become shareholders of Crescent. For a
description of material differences between the rights of holders of Station
Common Stock and Station Convertible Preferred Stock, and holders of common
shares, par value $.01 per share of Crescent ("Crescent Common Shares") and
$3.50 Convertible Preferred Shares of Crescent ("Crescent Convertible Preferred
Shares"), see "Comparison of Rights of Stockholders of Station and Shareholders
of Crescent."
 
THE MERGER
 
  General
 
     The Agreement and Plan of Merger, dated as of January 16, 1998, as amended,
by and between Station and Crescent (the "Merger Agreement") provides for the
merger (the "Merger") of Station and Crescent at the time of effectiveness of
the Merger in accordance with the Merger Agreement (the "Effective Time").
Pursuant to the Merger Agreement and as the first step of the Merger, Station
will be reincorporated in Delaware by the merger of Station with and into its
wholly-owned subsidiary Delaware Station, with Delaware Station as the surviving
entity (the "Reincorporation Merger"). Delaware Station will then be merged with
and into Crescent, with the result that, among other things, the separate
corporate existence of Station will cease and Crescent will continue as the
surviving entity. Upon consummation of the Merger, an operating joint venture
(the "Operating Joint Venture") that will be 50% owned by certain members of
Station's management and certain board members involved in management will,
pursuant to a lease with Crescent, operate the Casino Properties. The lease will
provide for base and percentage rent although the amount of rent has not yet
been determined.
 
                                        3
<PAGE>   16
 
     Prior to the Effective Time, Station will sell, assign, transfer and convey
to the Operating Joint Venture, certain of Station's non-real estate assets
pursuant to a bill of sale. See "The Merger Agreement -- Certain
Transactions -- Joint Venture." Following the Merger, it is anticipated that
Crescent will transfer the stock of certain Station subsidiaries and certain
other assets of Station to one or more subsidiaries of Crescent in which
Crescent does not maintain a voting interest (the "Decontrolled Subsidiary").
See "The Merger -- General." In addition, following the Merger, Crescent expects
to contribute substantially all of the real estate assets acquired in the Merger
to a new partnership that will invest principally in casinos, other gaming
properties and other real estate property in Las Vegas, Nevada. See "Recent
Developments."
 
  Merger Consideration
 
     As of the Effective Time, by virtue of the Merger, and without any action
on the part of Crescent or Station (collectively, the "Constituent Entities"),
or the holders of any securities of the Constituent Entities, and subject to
certain provisions of the Merger Agreement: (i) each share of Station Common
Stock (including restricted shares of Station Common Stock issued under the
Station Plans (as defined herein)) issued and outstanding immediately prior to
the Effective Time (other than treasury shares and shares of Station Common
Stock held by Crescent which will be cancelled) will be converted into the right
to receive 0.466 shares of validly issued, fully paid and nonassessable Crescent
Common Shares and (ii) each share of Station Convertible Preferred Stock issued
and outstanding immediately prior to the Effective Time will be converted into
the right to receive one validly issued, fully paid and nonassessable Crescent
Convertible Preferred Share. See "The Merger Agreement -- Conversion of Shares."
 
     STOCKHOLDERS OF STATION SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR
PROXIES. STATION COMMON STOCK CERTIFICATES AND CONVERTIBLE PREFERRED STOCK
CERTIFICATES WILL BE EXCHANGED FOR THE CONSIDERATION PAYABLE IN THE MERGER
FOLLOWING CONSUMMATION OF THE MERGER IN ACCORDANCE WITH THE TERMS OF THE MERGER
AGREEMENT.
 
  Preferred Stock Investment
 
     The Merger Agreement provides that, at the option of Station, Crescent will
purchase from Station up to an aggregate of 115,000 shares of a new series of
preferred stock of Station with the designations, rights, preferences and other
terms set forth in the Certificate of Resolution attached to the Merger
Agreement (the "Redeemable Preferred Stock"). Each share of Redeemable Preferred
Stock will be purchased at a price of $1,000 per share (plus accrued dividends
from the previous regular quarterly dividend payment date or, if there has not
yet been a regular quarterly dividend payment date, then as of January 16, 1998,
based on a 365-day year) in cash in increments of 5,000 shares. Unless written
consent is received from Crescent, Station has agreed to use the net proceeds
from sales of shares of Redeemable Preferred Stock to repay indebtedness under
Station's Amended and Restated Reducing Revolving Loan Agreement dated as of
March 19, 1998, as amended, borrowings under which were used for acquisitions
and master-planned expansions. The parties have agreed that the provisions
relating to the sale of the Redeemable Preferred Stock set forth in the Merger
Agreement will survive any termination of the Merger Agreement. Crescent has
agreed to vote all shares of Station's equity securities held by Crescent in
favor of the Merger, and any transferee of the Redeemable Preferred Stock will
be subject to such agreement to vote in favor of the Merger.
 
  Conditions to the Merger
 
     The obligations of Crescent and Station to consummate the Merger are
subject to the satisfaction or waiver of various conditions, including, without
limitation, approval by stockholders of Station and receipt of certain
regulatory approvals and consents, including approvals from Nevada and Missouri
gaming authorities. See "The Merger Agreement -- Conditions to the Consummation
of the Merger."
 
                                        4
<PAGE>   17
 
  Acquisition Proposals
 
     The Merger Agreement provides that, subject to the exercise of the
fiduciary duties of the Station Board of Directors with respect to certain
unsolicited written takeover proposals, Station will not, nor will it permit any
of its Subsidiaries (as defined herein) to, nor will it authorize or permit any
officer, director or employee of or any advisor or representative of Station or
any of its subsidiaries to, (i) solicit, initiate or encourage the submission
of, any takeover proposal, (ii) except to the extent permitted by the Merger
Agreement, enter into any agreement with respect to any takeover proposal or
(iii) participate in any discussions or negotiations regarding, or furnish to
any person any information with respect to Station's business, properties or
assets, or take any other action to facilitate any inquiries or the making of
any proposal that constitutes, or may reasonably be expected to lead to, any
takeover proposal. See "The Merger Agreement -- Acquisition Proposals."
 
  Right of Station Board to Withdraw Recommendation
 
     Subject to the exercise of the fiduciary duties of the Station Board of
Directors, the Merger Agreement provides that neither the Station Board of
Directors nor any committee thereof will (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Crescent, the approval or
recommendation by the Station Board of Directors or any such committee of the
Merger Agreement or the Merger, (ii) approve or recommend, or propose to approve
or recommend, any takeover proposal or (iii) take action to render the Rights
inapplicable to any takeover proposal. See "The Merger Agreement -- Acquisition
Proposals."
 
  Termination
 
     The Merger Agreement may be terminated at any time prior to the Effective
Time whether before or after the approval of any matters presented in connection
with the Merger by the stockholders of Station (a) by mutual written consent of
Crescent and Station; (b) by either Crescent or Station if there has been a
material breach of the representations, warranties, covenants and agreements set
forth in the Merger Agreement on the part of the other, which breach has not
been cured within ten business days following receipt by the breaching party of
notice of such breach from the nonbreaching party; (c) by either Crescent or
Station if any permanent order, decree, ruling or other action of a court or
other competent authority restraining, enjoining or otherwise preventing the
consummation of the Merger shall have become final and non-appealable; (d)
subject to certain limitations, by either Crescent or Station if the Merger
shall not have been consummated before March 31, 1999; (e) by either Crescent or
the Station Board of Directors if any required approval of the Merger by the
holders of each class of capital stock of Station shall not have been obtained
by reason of the failure to obtain the required vote at a duly held meeting of
such stockholders or at any adjournment thereof; (f) by Crescent if the Station
Board of Directors shall or shall resolve to (i) not recommend, or withdraw its
approval or recommendation of, the Merger, the Merger Agreement or any of the
transactions contemplated by the Merger Agreement, (ii) modify such approval or
recommendation in a manner adverse to Crescent or (iii) approve or recommend a
Superior Proposal (as defined herein); or (g) by the Station Board of Directors
if (i) to the extent permitted by the Merger Agreement, the Station Board of
Directors authorizes Station to enter into a binding written agreement
concerning a transaction that constitutes a Superior Proposal, (ii) Crescent
does not make, within ten business days of receipt of Station's written
notification of its intention to enter into a binding agreement for a Superior
Proposal, an offer that the Station Board of Directors determines, in good
faith, after consultation with its financial advisors, is at least as favorable,
from a financial point of view, to the stockholders of Station as the Superior
Proposal and (iii) Station, prior to such termination, has paid to Crescent
$54.0 million (the "Crescent Termination Fee") in same-day funds plus all
Expenses (as defined herein). See "The Merger Agreement -- Termination" and "The
Merger Agreement -- Certain Fees and Expenses."
 
  Certain Fees and Expenses
 
     The Merger Agreement provides that, except as described below, whether or
not the Merger is consummated, all costs and expenses incurred in connection
with the Merger Agreement and the transactions contemplated thereby, including
the fees and disbursements of counsel, financial advisors and accountants,
                                        5
<PAGE>   18
 
will be paid by the party incurring such costs and expenses, except that
expenses incurred in connection with printing and mailing this Proxy
Statement/Prospectus and the Registration Statement of Crescent in connection
therewith (the "Registration Statement") will be borne equally by Crescent and
Station.
 
     Provided that Crescent is not in material breach of its representations,
warranties and agreements under the Merger Agreement, (i) if the Merger
Agreement is terminated by either Crescent or the Station Board of Directors
pursuant to clause (e) under "-- Termination" above, (ii) if the Merger
Agreement is terminated by Crescent pursuant to clause (f) under
"-- Termination" above or (iii) if the Merger Agreement is terminated by the
Station Board of Directors pursuant to clause (g) under "-- Termination" above,
then Station shall pay the Crescent Termination Fee to Crescent on the date of
such termination or, if Crescent so elects, over a two-year period beginning on
the date of termination with payment amounts and dates to be determined by
Crescent.
 
     If the Merger Agreement is terminated and, as a result of such termination,
Crescent is entitled to the Crescent Termination Fee as provided above, then
Station shall, on the date of such termination, pay to Crescent the Expenses in
cash. See "The Merger Agreement -- Certain Fees and Expenses."
 
  Interests of Certain Persons in the Merger
 
     In considering the recommendation of the Station Board of Directors,
Station stockholders should be aware that certain members of Station's
management and the Station Board of Directors have interests in the Merger that
are different from, or in addition to, the interests of Station stockholders
generally, and that those interests may create potential conflicts of interest.
Three executive officers of Station, Mr. Frank J. Fertitta III and Messrs.
Sartini and Christenson are members of the Station Board of Directors that
approved the Merger and two additional members, Lorenzo J. Fertitta and Delise
F. Sartini are related to these executive officers. Certain officers and
employees of Station have certain rights under existing employment contracts
which provide for substantial payments upon a change of control of Station, such
as the Merger. Also certain Station directors and officers will receive
indemnification, exculpation and directors' and officers' insurance in
connection with the Merger. In addition, (i) certain members of Station's
management and certain board members involved in management will own 50% of the
Operating Joint Venture which will operate the Casino Properties currently
operated by Station pursuant to a lease with Crescent, (ii) members of the
management of Station that were employed by Station pursuant to written
agreements generally will receive employment agreements with the Operating Joint
Venture in connection with the Merger and (iii) in connection with the Merger,
Mr. Frank J. Fertitta III and Mr. Lorenzo J. Fertitta will have rights to be
appointed to the Crescent Board of Trust Managers (the "Crescent Board of Trust
Managers") and the Board of Directors of a parent of the Operating Joint Venture
(the "JV Parent"), which may be Crescent Operating Inc. ("Crescent Operating").
See "The Merger Agreement -- Conditions to Consummation of the Merger",
"-- Certain Transactions -- Joint Venture" and "-- Additional Agreements" and
"Executive Compensation."
 
     As of the Effective Time, each option to purchase Station Common Stock (a
"Station Stock Option") that is outstanding immediately prior to the Effective
Time pursuant to the stock option plans that are part of Station's Stock
Compensation Program (the "Stock Compensation Program") (and excluding any
"stock purchase plan" within the meaning of Section 423 of the Internal Revenue
Code of 1986, as amended (the "Code")) in effect on January 16, 1998 (the "Stock
Plans") will be assumed by Crescent and become an option to purchase the number
of Crescent Common Shares (a "Substitute Option") (decreased to the nearest full
share) determined by multiplying (i) the number of shares of Station Common
Stock subject to such Station Stock Option immediately prior to the Effective
Time by (ii) the Exchange Ratio, at an exercise price per Crescent Common Share
(rounded up to the nearest tenth of a cent) equal to the exercise price per
share of Station Common Stock immediately prior to the Effective Time divided by
the Exchange Ratio. Also, options to purchase an aggregate of 1.4 million shares
of Station Common Stock held by Mr. Frank J. Fertitta III and Mr. Blake L.
Sartini will vest immediately upon consummation of the Merger pursuant to the
terms of their grant. See "The Merger -- Interests of Certain Persons in the
Merger."
 
                                        6
<PAGE>   19
 
     In addition, each restricted share of Station Common Stock issued under the
Stock Plans and outstanding immediately prior to the Effective Time will be
converted into the right to receive 0.466 Common Shares.
 
     The employment agreements of each of Mr. Frank J. Fertitta III, Mr. Glenn
C. Christenson, Mr. Blake L. Sartini, Mr. Scott M Nielson and Mr. William W.
Warner contain a provision providing for a lump sum payment upon a Change of
Control (as defined herein). Each such person's employment agreement provides
that immediately upon a Change of Control such as the Merger, such person will
receive a payment equal to three times his base amount (as defined in Section
280G of the Code) less one dollar. In addition, certain payments are triggered
under such agreements upon a termination following a Change of Control. See "The
Merger -- Interests of Certain Persons in the Merger" and "Executive
Compensation." Additionally, such agreements will be assumed by the Operating
Joint Venture.
 
     Pursuant to the Merger Agreement, Crescent has agreed that all rights to
indemnification and exculpation from liabilities for acts or omissions occurring
prior to the Effective Time existing on January 16, 1998 in favor of the current
or former directors or officers of Station and its Subsidiaries as provided in
their respective articles or certificates of incorporation or by-laws (or
comparable organizational documents) and any indemnification agreements of
Station will survive the Merger and will continue in full force and effect in
accordance with their terms for a period of not less than five years from the
Effective Time and the obligations of Station in connection therewith will be
assumed by Crescent. Crescent has agreed to provide, or to cause the Surviving
Entity (as defined herein) to provide, Station's current directors and officers
an insurance and indemnification policy (including any fiduciary liability
policy) that provides coverage with respect to any claims made during the
five-year period following the Effective Time for events occurring prior to the
Effective Time (the "D&O Insurance") that is substantially similar to Station's
existing policies or, if substantially equivalent insurance coverage is
unavailable, the best available coverage; provided, however, that the Surviving
Entity will not be required to pay an annual premium for the D&O Insurance in
excess of 120 percent of the last annual premium paid prior to January 16, 1998,
but if such annual premium would but for this proviso exceed such amount, then
Crescent has agreed to purchase as much coverage as possible for such amount.
See "The Merger -- Interests of Certain Persons in the Merger -- Benefits to
Station Employees and Directors."
 
  Regulatory Approvals
 
     The consummation of the Merger is subject to approval of gaming and liquor
license authorities in Nevada and Missouri. Crescent has submitted individual
and company gaming applications to the Nevada State Gaming Control Board (the
"Nevada Board"). In addition, individual and corporate Class A gaming license
applications have been submitted to the Missouri Gaming Commission (the
"Missouri Commission"). Additional applications may be required.
 
     The Antitrust Division of the Department of Justice (the "Antitrust
Division") and the Federal Trade Commission (the "FTC") have jurisdiction to
review certain aspects of the Merger pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"). Station and the JV Parent
are expected to make filings required under the HSR Act sufficiently in advance
of the Merger to allow normal waiting periods thereunder to expire without early
termination. See "The Merger -- Regulatory Approvals."
 
     No assurance can be provided that the required approvals and licenses will
be timely received or received at all.
 
  Material Federal Income Tax and State Transfer Tax Consequences
 
     The Merger is intended to qualify as a reorganization within the meaning of
Section 368(a) of the Code. It is a condition to Station's and Crescent's
obligation to consummate the Merger that each shall have received an opinion
from Shaw Pittman Potts & Trowbridge, counsel to Crescent ("Shaw Pittman"),
stating (i) that Crescent is a REIT for federal income tax purposes, (ii) that
consummation of the transactions contemplated by the Merger Agreement will not
cause Crescent to cease to qualify as a REIT and (iii) that the Merger will be
treated for federal income tax purposes as a reorganization within the meaning
of
 
                                        7
<PAGE>   20
 
Section 368(a) of the Code and that each of Crescent and Station will be a party
to the reorganization within the meaning of Section 368(b) of the Code. Because
the Merger will be a reorganization within the meaning of Section 368(a) of the
Code, no gain or loss will be recognized by a Station stockholder as a result of
the Merger except with respect to cash received by such stockholder in lieu of
fractional shares.
 
     The transactions could generate sales tax liability in Nevada and Missouri
to the extent that there are transfers of tangible personal property. First,
Station will sell, assign, transfer and convey to the Operating Joint Venture
certain of Station's non-real estate assets pursuant to a bill of sale. Second,
it is anticipated that the ownership of other tangible personal property
currently owned by subsidiaries of Station will be transferred by operation of
law or assigned pursuant to (i) a merger of such subsidiaries into Station, (ii)
the Reincorporation Merger, (iii) the merger of Delaware Station into Crescent,
(iv) the drop-down of such assets from Crescent to the Operating Partnership and
(v) the further drop-down of certain tangible personal property from the
Operating Partnership to the Decontrolled Subsidiary. The Nevada and Missouri
sales tax generated by these transactions is not expected to be significant.
 
  Accounting Treatment
 
     The Merger is expected to be accounted for using purchase accounting, with
Crescent being deemed to have acquired Station.
 
SUMMARY RISK FACTORS
 
     In considering whether to approve the various matters to be considered at
the Meeting, the stockholders of Station should consider that:
 
     - the stock prices of Station Common Stock and Crescent Common Shares may
       fluctuate and the market value of the Crescent Common Shares received by
       holders of Station Common Stock on the date of the Merger may be
       different than it would have been on the date the Merger Agreement was
       signed, the date of this Proxy Statement/Prospectus or the date of the
       Meeting;
 
     - failure to approve the Merger may result in material adverse consequences
       to Station including substantial termination payment obligations;
 
     - certain officers, directors and employees of Station have material
       interests in the Merger through their stock ownership, stock options,
       benefit plans, indemnification and employment agreements, as well as
       rights of Frank J. Fertitta III and Lorenzo J. Fertitta to be appointed
       to the Crescent Board of Trust Managers and the Board of Directors of the
       JV Parent;
 
     - there are differences in rights of holders of Station stock and Crescent
       shares due to differences in organizational documents and governing state
       law;
 
     - the tax treatment of the Merger may vary from the treatment expected,
       which could lead to significantly greater tax liability for Station
       stockholders participating in the Merger than expected;
 
     - if Crescent were to fail to meet the requirements for treatment as a REIT
       for federal income tax purposes, its income would be subject to taxation
       at regular corporate tax rates for the year in which REIT qualification
       was lost and potentially for the following four years, which would reduce
       Crescent's ability to pay dividends to its shareholders;
 
     - because Crescent is a REIT, its business activities are restricted by the
       Code, and there is federal legislation proposed that would further
       restrict its activities;
 
     - Crescent's assets are concentrated in the Dallas/Fort Worth and Houston
       metropolitan areas and Crescent's financial condition and results of
       operations could be adversely affected by an economic decline in either
       of these areas;
 
     - Crescent has announced its intention to distribute certain rights to
       purchase shares of beneficial interest of Crescent and, potentially, a
       newly formed gaming subsidiary, which distribution would mean
 
                                        8
<PAGE>   21
 
       Crescent's shareholders would be required to purchase additional shares
       of beneficial interest upon exercise of such rights to maintain their
       proportionate interests in Crescent and the gaming business;
 
     - Crescent does not control the operation of certain of its properties from
       which it derives substantial revenue, which means that Crescent is unable
       to control the timing or amount of revenue it receives from those
       investments and is dependent on the ability of its tenants or co-owners
       to manage the properties successfully;
 
     - there are risks related to the different types of assets in which
       Crescent invests, including risks specific to the office, healthcare,
       hotel and refrigerated warehouse industries;
 
     - conflicts of interest that exist or may arise due to relationships or
       contractual arrangements between Crescent, affiliates of Crescent and
       management of Crescent and such affiliations may lead to decisions that
       are not exclusively in the interest of Crescent; and
 
     - there are risks related to Crescent's ability to manage its rapid growth
       effectively.
 
     - there can be no assurance that Crescent Common Shares will yield a
       greater return than Station Common Stock would have yielded had the
       Merger not been consummated.
 
     See "Risk Factors."
 
SUMMARY OF RECENT DEVELOPMENTS
 
     On June 15, 1998, Crescent filed a registration statement on Form S-3 (No.
333-56809) with the Securities and Exchange Commission (the "Commission")
relating to a planned rights offering to be made upon consummation of the Merger
to holders of the Crescent Common Shares (including holders of Crescent Common
Shares as a result of the conversion of Station Common Stock in the Merger). It
is expected that Crescent will distribute one transferable subscription right
(each a "Crescent Right") for each Crescent Common Share held. In addition, it
is expected that every five Crescent Rights will entitle the holder thereof to
purchase one Crescent Common Share at an exercise price of $31 1/8 per share. At
the same time, Crescent announced that the Crescent Board of Trust Managers had
approved, subject to consummation of the Merger, an increase in its quarterly
dividend from $0.38 per Crescent Common Share to $0.63 per share. Crescent also
announced its intent to contribute, following consummation of the Merger,
substantially all of the real estate assets acquired in the Merger to a new
partnership that will invest principally in casinos, other gaming properties and
other real estate property in Las Vegas, Nevada. Crescent expects to offer
holders of Crescent Common Shares rights (each a "Gaming Right") to acquire
common or preferred equity interests in such partnership or in a REIT which
would hold interests in such partnership. Such partnership and its owners will
be subject to strict regulatory requirements similar to those that will be
applicable to Crescent. Such Gaming Rights are expected to be taxable to the
holders of Common Shares upon issuance of such Gaming Rights. Crescent does not
believe distribution of the Crescent Rights will be taxable to holders of
Crescent Common Shares. However, no assurances can be made in this regard. Tax
information will be provided to such shareholders at the time of such
distribution. The record date for either such offering will occur after the
Effective Time. The conversion price for Crescent Convertible Preferred Shares
received in the Merger in exchange for Station Convertible Preferred Stock will
be adjusted in accordance with the Statement of Designations (the "Statement of
Designation") for the Crescent Convertible Preferred Shares (which has
substantially the same terms as the Certificate of Designations except for
certain REIT related provisions) to account for such distributions. See Annex D.
Holders of options to purchase Station Common Stock converted to options to
purchase Crescent Common Shares pursuant to the Merger will receive the same
adjustments to their options, if any, as other holders of options to purchase
Crescent Common Shares. See "Recent Developments" and "Regulatory Approvals."
 
                                        9
<PAGE>   22
 
STRUCTURE OF CRESCENT
 
     Crescent is a fully integrated real estate company operating as a REIT for
federal income tax purposes. Crescent provides management, leasing and
development services with respect to certain of its Properties. The direct and
indirect subsidiaries of Crescent include the Operating Partnership; CREE Ltd.;
seven special purpose limited partnerships in which the Operating Partnership
owns substantially all of the economic interests directly or indirectly, with
the remaining interests owned indirectly by Crescent through seven separate
corporations, each of which is a wholly owned subsidiary of CREE Ltd. and the
general partner of one of the seven limited partnerships. Crescent conducts all
of its business through the Operating Partnership and its other subsidiaries.
Crescent also has an economic interest in the development activities of the
Residential Development Corporations. In addition, Crescent owns an economic
interest in each of two corporations that own and operate refrigerated
warehouses. Crescent also has an interest in a partnership that owns an
executive conference center and has several partner interests in additional
office, retail, multi-family and industrial properties.
 
     The following table sets forth, by subsidiary, the properties owned by such
subsidiary as of March 31, 1998:
 
<TABLE>
<S>                                            <C>
Operating Partnership                          Fifty-nine office properties, six hotel
                                               properties and five retail properties
Crescent Real Estate
  Funding I, L.P. ("Funding I")                The Aberdeen, The Avallon, Caltex House, The
                                               Citadel, Continental Plaza, The Crescent
                                               Atrium, The Crescent Office Towers, Regency
                                               Plaza One and Waterside Commons
Crescent Real Estate
  Funding II, L.P. ("Funding II")              Albuquerque Plaza, Barton Oaks Plaza One,
                                               Briargate Office and Research Center, Hyatt
                                               Regency Albuquerque, Hyatt Regency Beaver
                                               Creek, Las Colinas Plaza, Liberty Plaza I &
                                               II, MacArthur Center I & II, Ptarmigan Place,
                                               Stanford Corporate Centre, Two Renaissance
                                               Square and 12404 Park Central
Crescent Real Estate
  Funding III, IV and V, L.P.
  ("Funding III, IV and V")                    Greenway Plaza Portfolio(1)
Crescent Real Estate
  Funding VI, L.P. ("Funding VI")              Canyon Ranch-Lenox
Crescent Real Estate
  Funding VII, L.P. ("Funding VII")            Behavioral Healthcare Facilities
</TABLE>
 
---------------
 
(1) Funding III owns the Greenway Plaza Portfolio, except for the central heated
    and chilled water plant building and Coastal Tower office building, both
    located within Greenway Plaza, which are owned by Funding IV and Funding V,
    respectively.
 
     In connection with the Merger, it is expected that Green Valley Station
Inc. and Southwest Gaming Services, Inc. ("Southwest Gaming"), wholly owned
subsidiaries of Station, will each become a subsidiary of the Decontrolled
Subsidiary. Also, certain assets of Station will be transferred to a subsidiary
of the Decontrolled Subsidiary. In addition, following the Merger, Crescent
expects to contribute substantially all of the real estate assets acquired in
the Merger to a new partnership that will invest principally in casinos, other
gaming properties and other real estate property in Las Vegas, Nevada. See
"Recent Developments."
 
                                       10
<PAGE>   23
 
                 SUMMARY CONSOLIDATED FINANCIAL DATA OF STATION
 
     The summary consolidated financial data presented below as of and for
Station's fiscal years ended March 31, 1994, 1995, 1996, 1997 and 1998 have been
derived from audited consolidated financial statements for such periods. The
summary consolidated financial data set forth below are qualified in their
entirety by, and should be read in conjunction with the consolidated financial
statements, the notes thereto and other financial and statistical information
incorporated by reference in this Proxy Statement/Prospectus. See "Incorporation
of Certain Documents by Reference."
 
<TABLE>
<CAPTION>
                                                                    YEARS ENDED MARCH 31,
                                                  ---------------------------------------------------------
                                                    1994        1995        1996        1997        1998
                                                  ---------   ---------   ---------   ---------   ---------
                                                      (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                               <C>         <C>         <C>         <C>         <C>
STATEMENT OF OPERATIONS DATA:
Net revenues....................................  $ 169,543   $ 290,278   $ 466,857   $ 583,515   $ 769,610
Depreciation and amortization...................     12,976      22,220      35,039      44,589      67,414
Preopening expenses.............................         --      19,378       2,436      31,820      10,866
Operating income................................     25,696       6,388      69,464      58,123      84,186
Interest expense, net...........................      9,179      19,967      30,563      36,698      78,826
Income (loss) before income taxes and
  extraordinary item............................     18,709     (11,419)     40,051      21,378      (4,120)
Net income (loss)...............................      9,417      (7,942)     25,472      13,763      (5,196)
Preferred stock dividends.......................         --          --         (53)     (7,245)     (7,245)
Net income (loss) applicable to common stock....      9,417      (7,942)     25,419       6,518     (12,441)
Pro forma net income (unaudited)(1).............     12,309          --          --          --          --
Basic and diluted earnings (loss) per share:
Earnings (loss) per common share................  $      --   $   (0.26)  $    0.75   $    0.18   $   (0.35)
Pro forma earnings per share (unaudited)(1).....  $    0.42   $      --   $      --   $      --   $      --
OTHER DATA(2):
Number of hotel rooms...........................      1,028       1,328       1,528       1,728       2,195
Average daily occupancy rate:
  Palace Station................................         97%         95%         94%         95%         94%
  Boulder Station...............................         --          93%         94%         98%         95%
  Sunset Station................................         --          --          --          --          92%
  Texas Station.................................         --          --          86%         95%         89%
  Station Casino Kansas City....................         --          --          --          95%         89%
Casino square footage...........................     84,000     206,000     278,000     432,000     512,000
Number of slot machines.........................      3,323       7,020       9,555      13,008      16,237
Capital expenditures(3).........................  $ 102,687   $ 163,884   $ 307,745   $ 506,096   $ 134,385
EBITDA, As Adjusted(4)..........................     41,743      47,986     106,939     136,548     162,466
EBITDAR, As Adjusted(4).........................     41,983      50,563     113,476     141,921     174,894
Cash flows provided by (used in):
  Operating activities..........................  $  23,685   $  48,494   $  77,953   $ 111,803   $ 104,955
  Investing activities..........................   (111,072)   (157,585)   (266,935)   (479,008)   (219,407)
  Financing activities..........................     92,073     109,893     286,889     294,859     122,088
</TABLE>
 
<TABLE>
<CAPTION>
                                                                      AS OF MARCH 31,
                                                  --------------------------------------------------------
                                                    1994       1995       1996        1997         1998
                                                  --------   --------   --------   ----------   ----------
                                                                   (DOLLARS IN THOUSANDS)
<S>                                               <C>        <C>        <C>        <C>          <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......................  $ 16,159   $ 16,961   $114,868   $   42,522   $   50,158
Total assets....................................   301,486    436,538    827,314    1,234,118    1,300,216
Long-term debt..................................   159,460    299,814    464,998      760,963      900,226
Stockholders' equity............................    95,791     87,886    278,470      298,848      286,887
</TABLE>
 
---------------
 
(1) Reflects provisions for federal income taxes (assuming a 34% effective tax
    rate for both periods) as if Station had not been treated as an S
    corporation during the year ended March 31, 1994.
 
(2) Other Data relating to the number of hotel rooms, the casino square footage
    and the number of slot machines represent end of period data.
 
(3) Capital expenditures for the fiscal year ended March 31, 1994 included $52.8
    million related to the development of Station Casino St. Charles and $31.9
    million related to the development of Boulder
 
                                       11
<PAGE>   24
 
    Station. Capital expenditures for the fiscal year ended March 31, 1995
    include $52.9 million related to the development of Station Casino St.
    Charles and $90.7 million related to the development of Boulder Station.
    Capital expenditures for the fiscal year ended March 31, 1996 include $84.9
    million related to the acquisition and completion of Texas Station, $25.0
    million related to the parking garage and entertainment complex at Boulder
    Station, $62.8 million related to the development and construction of
    Station Casino Kansas City, $29.7 million related to the development and
    construction of Sunset Station and $39.4 million related to an expansion
    project at St. Charles. Capital expenditures for the fiscal year ended March
    31, 1997 included $211.1 million related to the development and construction
    of Station Casino Kansas City, $112.8 million related to the development and
    construction of Sunset Station and $99.6 million related to the development
    and construction of the expansion project at St. Charles. Capital
    expenditures for the fiscal year ended March 31, 1998 include $43.5 million
    related to the development and construction of Sunset Station, and $31.9
    million related to the development and construction of the expansion project
    at St. Charles.
 
(4) "EBITDA, As Adjusted" consists of operating income plus depreciation,
    amortization, preopening expenses and a one-time restructuring charge in
    1997. EBITDAR, As Adjusted represents EBITDA, As Adjusted plus rent expense.
    The Company believes that in addition to cash flows and net income, EBITDA,
    As Adjusted and EBITDAR, As Adjusted are useful financial performance
    measurements for assessing the operating performance of the Company.
    Together with net income and cash flows, EBITDA, As Adjusted and EBITDAR, As
    Adjusted provide investors with an additional basis to evaluate the ability
    of the Company to incur and service debt and incur capital expenditures. To
    evaluate EBITDA, As Adjusted and EBITDAR, As Adjusted and the trends they
    depict, the components of each should be considered. The impact of interest,
    taxes, depreciation and amortization, preopening expenses, a one time
    restructuring charge in 1997 and rent expense, each of which can
    significantly affect the Company's results of operations and liquidity and
    should be considered in evaluating the Company's operating performance,
    cannot be determined from EBITDA, As Adjusted or from EBITDAR, As Adjusted.
    Further, EBITDA, As Adjusted and EBITDAR, As Adjusted do not represent net
    income or cash flows from operating, financing and investing activities as
    defined by generally accepted accounting principles ("GAAP") and do not
    necessarily indicate that cash flows will be sufficient to fund cash needs.
    They should not be considered as an alternative to net income, as an
    indicator of the Company's operating performance or to cash flows as a
    measure of liquidity. In addition, it should be noted that not all gaming
    companies that report EBITDA or EBITDAR information or adjustments to such
    measures may calculate EBITDA, EBITDAR or such adjustments in the same
    manner as the Company, and therefore, the Company's measures of EBITDA, As
    Adjusted and EBITDAR, As Adjusted may not be comparable to similarly titled
    measures used by other gaming companies.
 
                                       12
<PAGE>   25
 
           SUMMARY CONSOLIDATED HISTORICAL FINANCIAL DATA OF CRESCENT
 
     The following table sets forth certain financial information for Crescent
on a consolidated historical basis and for the Rainwater Property Group
(Crescent's predecessor) on a combined historical basis, which consists of the
combined financial statements of the entities that contributed properties in
exchange for Units or Crescent Common Shares in connection with the formation of
Crescent. All information relating to Crescent Common Shares has been adjusted
to reflect the two-for-one stock split effected in the form of a 100% share
dividend paid on March 26, 1997 to shareholders of record on March 20, 1997.
Such information should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Historical Results of Operations and the
Financial Statements and Supplementary Data incorporated by reference in this
Proxy Statement/Prospectus. See "Incorporation of Certain Documents by
Reference."
 
     The pro forma information for the three months ended March 31, 1998 and the
year ended December 31, 1997 assumes completion, as of January 1, 1997 in
determining operating and other data and March 31, 1998 in determining balance
sheet data, of (i) Crescent's public offering of 24,500,000 Crescent Common
Shares in April 1997 and the additional public offering of 500,000 Crescent
Common Shares that closed on May 14, 1997 and use of the net proceeds to fund
approximately $593.5 million of property acquisitions and other investments in
the second quarter of 1997, (ii) Crescent's offering of 4,700,000 Common Shares
to an affiliate of Union Bank of Switzerland in August 1997 and use of the net
proceeds to repay approximately $145 million of indebtedness under Crescent's
credit facility, (iii) the Operating Partnership's public offering of notes in
September 1997 in an aggregate principal amount of $400 million and the use of
the net proceeds therefrom to fund approximately $337.6 million of the purchase
price of two properties and to repay approximately $57.2 million of indebtedness
incurred under the credit facility and other short-term indebtedness, (iv)
Crescent's public offering of 10,000,000 Crescent Common Shares in October 1997
and use of the net proceeds to fund approximately $45 million of the purchase
price of one property and to repay approximately $325.1 million of short-term
indebtedness and indebtedness incurred under the credit facility, (v) Crescent's
offering of 5,375,000 Common Shares to Merrill Lynch International in December
1997 and use of the net proceeds to repay approximately $199.9 million of
indebtedness under the credit facility, (vi) Crescent's public offering of
8,000,000 Crescent Series A Preferred Shares in February 1998 and use of the net
proceeds to repay approximately $191.3 million of indebtedness under the credit
facility, (vii) Crescent's offering of 1,365,138 Crescent Common Shares to
Merrill Lynch & Co. in April 1998 which Merrill Lynch & Co. deposited with the
trustee of a unit investment trust and use of the net proceeds to repay
approximately $44.0 million of indebtedness under the credit facility, (viii)
property acquisitions, other investments and related financing and share
issuances during 1997 and 1998, and (ix) the Merger and related financing,
including $1.04 billion for refinancing and/or assumption of indebtedness, and
associated financing and transaction costs.
 
                     CRESCENT REAL ESTATE EQUITIES COMPANY
            CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA AND
                            RAINWATER PROPERTY GROUP
                       COMBINED HISTORICAL FINANCIAL DATA
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
                                RAINWATER PROPERTY GROUP
                                     (PREDECESSOR)                                          CRESCENT
                             ------------------------------   --------------------------------------------------------------------
                                                              FOR THE PERIOD
                                            FOR THE PERIOD     FROM MAY 5,
                              YEAR ENDED    FROM JANUARY 1,      1994 TO                     YEAR ENDED DECEMBER 31,
                             DECEMBER 31,   1994 TO MAY 4,     DECEMBER 31,    ---------------------------------------------------
                                 1993            1994              1994           1995         1996         1997         1997(3)
                             ------------   ---------------   --------------   ----------   ----------   -----------   -----------
                                                                                                                        PRO FORMA
                                                                                                                       (UNAUDITED)
<S>                          <C>            <C>               <C>              <C>          <C>          <C>           <C>
OPERATING DATA:
Total revenue..............    $ 57,168        $ 21,185         $   50,343     $  129,960   $  208,861   $   447,373   $  789,489
Operating income (loss)....     (53,024)         (1,599)            10,864         30,858       44,101       111,281      141,547
Income (loss) before
 minority interests and
 extraordinary item........     (53,024)         (1,599)            12,595         36,358       47,951       135,024      177,823
Preferred distributions....          --              --                 --             --           --            --       20,745
Net income applicable to
 common shareholders.......          --              --              8,300         27,395       37,135       117,341      140,474
Basic Earnings Per Common
 Share:
 Income before
   extraordinary item......          --              --         $      .28     $      .66   $      .72   $      1.25   $     1.03
 Net income................          --              --                .26            .66          .70          1.25         1.03
Diluted Earnings Per Common
 Share:
 Income before
   extraordinary item......          --              --         $      .28     $      .65   $      .70   $      1.20   $     1.00
 Net income................          --              --                .26            .65          .68          1.20         1.00
 
<CAPTION>
 
                                            CRESCENT
                             ---------------------------------------
 
                                  THREE MONTHS ENDED MARCH 31,
                             ---------------------------------------
                                1997          1998         1998(4)
                             -----------   -----------   -----------
                             (UNAUDITED)   (UNAUDITED)    PRO FORMA
                                                         (UNAUDITED)
<S>                          <C>           <C>           <C>
OPERATING DATA:
Total revenue..............  $   80,930    $  161,149    $   214,453
Operating income (loss)....      16,144        41,309         49,909
Income (loss) before
 minority interests and
 extraordinary item........      20,245        47,154         56,240
Preferred distributions....          --         1,575          5,186
Net income applicable to
 common shareholders.......      16,751        40,833         45,851
Basic Earnings Per Common
 Share:
 Income before
   extraordinary item......  $      .23    $      .35    $       .34
 Net income................         .23           .35            .34
Diluted Earnings Per Common
 Share:
 Income before
   extraordinary item......  $      .22    $      .33    $       .32
 Net income................         .22           .33            .32
</TABLE>
 
                                       13
<PAGE>   26
<TABLE>
<CAPTION>
                                RAINWATER PROPERTY GROUP
                                     (PREDECESSOR)                                          CRESCENT
                             ------------------------------   --------------------------------------------------------------------
                                                              FOR THE PERIOD
                                            FOR THE PERIOD     FROM MAY 5,
                              YEAR ENDED    FROM JANUARY 1,      1994 TO                     YEAR ENDED DECEMBER 31,
                             DECEMBER 31,   1994 TO MAY 4,     DECEMBER 31,    ---------------------------------------------------
                                 1993            1994              1994           1995         1996         1997         1997(3)
                             ------------   ---------------   --------------   ----------   ----------   -----------   -----------
                                                                                                                        PRO FORMA
                                                                                                                       (UNAUDITED)
<S>                          <C>            <C>               <C>              <C>          <C>          <C>           <C>
BALANCE SHEET DATA (AT
 PERIOD END):
Total assets...............    $290,869              --         $  538,354     $  964,171   $1,730,922   $ 4,179,980           --
Total debt.................     278,060              --            194,642        444,528      667,808     1,710,124           --
Total shareholders'
 equity....................       2,941              --            235,262        406,531      865,160     2,197,317           --
OTHER DATA:
Funds from Operations
 before minority
 interests(1)..............          --              --         $   32,723     $   64,475   $   87,616   $   214,396   $  367,469
Cash distribution declared
 per Common Share..........          --              --         $      .65     $     1.05   $     1.16   $      1.37           --
Weighted average Common
 Shares and Units
 outstanding -- basic......          --              --         44,997,716     54,182,186   64,684,842   106,835,579  149,368,969
Weighted average Common
 Shares and Units
 outstanding -- diluted....                                     45,039,840     54,499,690   65,865,517   110,973,459  153,969,823
Cash flow provided by (used
 in)
 Operating activities......    $  9,313        $  2,455         $   21,642     $   65,011   $   77,384   $   211,714   $       --(2)
 Investing activities......     (20,572)         (2,379)          (260,666)      (421,406)    (513,038)   (2,294,428)          --(2)
 Financing activities......      28,861         (21,310)           265,608        343,079      444,315     2,123,744           --(2)
 
<CAPTION>
 
                                            CRESCENT
                             ---------------------------------------
 
                                  THREE MONTHS ENDED MARCH 31,
                             ---------------------------------------
                                1997          1998         1998(4)
                             -----------   -----------   -----------
                             (UNAUDITED)   (UNAUDITED)    PRO FORMA
                                                         (UNAUDITED)
<S>                          <C>           <C>           <C>
BALANCE SHEET DATA (AT
 PERIOD END):
Total assets...............  $1,986,604    $4,591,728    $ 6,429,348
Total debt.................     934,767     1,974,927      3,072,777
Total shareholders'
 equity....................     860,282     2,387,958      3,127,728
OTHER DATA:
Funds from Operations
 before minority
 interests(1)..............  $   33,591    $   83,544    $   109,318
Cash distribution declared
 per Common Share..........  $     .305    $      .38    $        --
Weighted average Common
 Shares and Units
 outstanding -- basic......  85,585,856    131,063,125   149,368,969
Weighted average Common
 Shares and Units
 outstanding -- diluted....  89,139,497    135,751,468   154,520,286
Cash flow provided by (used
 in)
 Operating activities......  $   30,443    $   11,494    $        --(2)
 Investing activities......    (253,265)     (415,366)            --(2)
 Financing activities......     239,922       405,798             --(2)
</TABLE>
 
---------------
 
Notes:
 
(1) Funds from Operations ("FFO"), based on the revised definition adopted by
    the Board of Governors of the National Association of Real Estate Investment
    Trusts ("NAREIT") and as used herein, means net income (loss) (determined in
    accordance with GAAP), excluding gains (or losses) from debt restructuring
    and sales of property, plus depreciation and amortization of real estate
    assets, and after adjustments for unconsolidated partnerships and joint
    ventures. FFO was developed by NAREIT as a relative measure of performance
    and liquidity of an equity REIT in order to recognize that income-producing
    real estate historically has not depreciated on the basis determined under
    GAAP. Crescent considers FFO an appropriate measure of performance of an
    equity REIT. However, FFO (i) does not represent cash generated from
    operating activities determined in accordance with GAAP (which, unlike FFO,
    generally reflects all cash effects of transactions and other events that
    enter into the determination of net income), (ii) is not necessarily
    indicative of cash flow available to fund cash needs and (iii) should not be
    considered as an alternative to net income determined in accordance with
    GAAP as an indication of Crescent's operating performance, or to cash flow
    from operating activities determined in accordance with GAAP as a measure of
    either liquidity or Crescent's ability to make distributions. Crescent has
    historically distributed an amount less than FFO, primarily due to reserves
    required for capital expenditures, including leasing costs. An increase in
    FFO does not necessarily result in an increase in aggregate distributions
    because the Crescent Board of Trust Managers is not required to increase
    distributions unless necessary in order to enable Crescent to maintain REIT
    status. Because Crescent must distribute 95% of its real estate investment
    trust taxable income (as defined in the Code), however, a significant
    increase in FFO will generally require an increase in distributions to
    shareholders and unitholders although not necessarily on a proportionate
    basis. Accordingly, Crescent believes that in order to facilitate a clear
    understanding of the consolidated historical operating results of Crescent,
    FFO should be considered in conjunction with Crescent's net income (loss)
    and cash flows as reported in the consolidated financial statements and
    notes thereto incorporated by reference into this Proxy Statement/
    Prospectus. However, Crescent's measure of FFO may not be comparable to
    similarly titled measures for other REITs because these REITs may not apply
    the modified definition of FFO in the same manner as Crescent.
 
(2) Pro forma information relating to operating, investing and financing
    activities has not been included because management of Crescent believes
    that the data would not be meaningful due to the number of assumptions
    required in order to calculate this data.
 
(3) The pro forma operating data reflects for the Merger transaction an
    estimated lease payment using the historical operating results of the
    casino/ hotel properties for the twelve months ended December 31, 1997.
    Current negotiations provide for a lease payment equal to 100% of Station's
    operating income for the twelve months ended December 31, 1997, plus
    depreciation, amortization, preopening expenses and a one-time restructuring
    charge for the twelve-month period, and a historical equipment rental lease
    payment which will be eliminated upon consummation of the Merger. The
    definitive terms of the lease agreement have not yet been finalized.
 
(4) The pro forma operating data reflects for the Merger transaction an
    estimated lease payment using the historical operating results of the
    casino/ hotel properties for the three months ended March 31, 1998. Current
    negotiations provide for a lease payment equal to 98% of Station's operating
    income for the three months ended March 31, 1998, plus depreciation,
    amortization and preopening expenses for the three month period, and a
    historical equipment rental lease payment which will be eliminated upon
    consummation of the Merger. The definitive terms of the lease agreement have
    not yet been finalized.
 
                                       14
<PAGE>   27
 
COMPARATIVE PER SHARE DATA
 
     Set forth below are historical and pro forma income per common share, cash
dividends or distributions declared per common share and book value per share
and the pro forma per common share data of Crescent and Station. The data set
forth below should be read in conjunction with the Station and Crescent audited
consolidated financial statements and the Crescent unaudited interim
consolidated financial statements, including the notes thereto, which are
incorporated by reference in this Proxy Statement/Prospectus. The data should
also be read in conjunction with the unaudited pro forma consolidated condensed
financial information set forth herein.
 
<TABLE>
<CAPTION>
                                        NET INCOME (LOSS)   CASH DIVIDENDS/DISTRIBUTIONS      BOOK VALUE
                                        PER COMMON SHARE          PER COMMON SHARE         PER COMMON SHARE
                                        -----------------   ----------------------------   ----------------
<S>                                     <C>                 <C>                            <C>
As of and for the Three Months Ended
  March 31, 1998
  Crescent Historical (unaudited).....       $ 0.35(1)                 $ 0.38                   $18.43
  Station Historical..................        (0.13)                       --                     8.13
  Crescent Pro Forma..................         0.34(1)                   0.63                    20.68
  Station Equivalent Pro Forma........         0.16                      0.29                     9.64
As of and for the Year Ended December
  31, 1997
  Crescent Historical (year ended
     December 31, 1997)...............       $ 1.25(1)                 $ 1.37                   $18.62
  Station Historical (unaudited) (12
     months ended December 31,
     1997)............................        (0.69)                       --                     8.25
  Crescent Pro Forma (unaudited)......         1.03(1)                   2.52                         (2)
  Station Equivalent Pro Forma........         0.48                      1.17                         (2)
</TABLE>
 
---------------
 
(1) Represents earnings per share -- basic.
 
(2) Not applicable.
 
                                       15
<PAGE>   28
 
COMPARATIVE MARKET PRICES
 
     The Crescent Common Shares are listed and traded principally on the NYSE
under the symbol "CEI." Station Common Stock is listed and traded principally on
the NYSE under the symbol "STN." The following table sets forth for the periods
indicated, the high and low sales price, as reported on the NYSE Composite
Transactions Tape or, with respect to Station for periods prior to listing with
the NYSE, the Nasdaq Composite Transactions Tape, and distributions made per
Crescent Common Share.
 
<TABLE>
<CAPTION>
                                                                                                               STATION
                                                           CRESCENT COMMON SHARES                              COMMON
                                            ----------------------------------------------------              STOCK(1)
                                                                                   DISTRIBUTIONS    -----------------------------
                                              HIGH                 LOW                 MADE           HIGH                 LOW
                                              ----                 ---             -------------      ----                 ---
<S>                                         <C>                  <C>               <C>              <C>                  <C>
1998
First Quarter.............................     40 3/8               33 1/16           $0.38            16 5/8                9 15/16
Second Quarter (through June 25, 1998)....     37 7/16              30 3/4            --               15 7/8               13 3/16
1997
First Quarter.............................     31 3/8               25 1/8             0.305           10 7/8                8
Second Quarter............................     32                   25 1/8             0.305(2)         9 1/2                8
Third Quarter.............................     40 1/8               30                 0.38             8 3/8                7
Fourth Quarter............................     40 7/8               30                 0.38            10 1/2                6 1/8
1996
First Quarter.............................     17 7/16              16 1/16            0.275           15 1/8                9 3/4
Second Quarter............................     19 1/16              16 11/16           0.275           16 3/8               11 5/8
Third Quarter.............................     21 3/16              17 1/2             0.305           14 1/2               10 11/16
Fourth Quarter............................     26 5/8               26 5/16            0.305           13                    9 3/8
1995
First Quarter.............................     14 5/8               12 1/2             0.250           14 1/4               10 1/4
Second Quarter............................     16                   13 15/16           0.250           17 1/2               10 3/8
Third Quarter.............................     16 3/16              14 7/8             0.275           20                   14 7/8
Fourth Quarter............................     17 15/16             15 1/8             0.275           16                   12 1/2
</TABLE>
 
---------------
 
(1) Station paid no dividends in the periods presented.
 
(2) In addition to the regular quarterly distribution, Crescent made a one-time
    distribution of shares of the common stock of Crescent Operating valued at
    $0.99 per share, which was distributed to the shareholders of Crescent and
    the partners of the Operating Partnership, on a pro rata basis, in a
    spin-off effective June 12, 1997.
 
     The following table sets forth the closing price per Crescent Common Share,
per share of Station Common Stock and per share of Station Convertible Preferred
Stock and the equivalent price per share of Station Common Stock on (i) January
15, 1998, the business day preceding the public announcement of the Merger and
(ii) June 25, 1998, the most recent practicable date prior to mailing of the
Proxy Statement/ Prospectus:
 
<TABLE>
<CAPTION>
     MARKET PRICE           CRESCENT           STATION        STATION CONVERTIBLE     EQUIVALENT STATION
     PER SHARE AT         COMMON SHARES     COMMON STOCK        PREFERRED STOCK          COMMON STOCK
     ------------         -------------     -------------     -------------------     ------------------
<S>                       <C>               <C>               <C>                     <C>
January 15, 1998.......        $37 1/8           $11 3/8              $53 3/4                $17 3/10
June 25, 1998..........        $32 5/16          $14 3/16             $48 1/4                $15 1/20
</TABLE>
 
     Stockholders and shareholders are advised to obtain current market
quotations. No assurance can be given as to the market price of the Crescent
Common Shares, Station Common Stock or Station Convertible Preferred Stock at,
or in the case of the Crescent Common Shares, after the Effective Time.
 
                                       16
<PAGE>   29
 
     Station has not declared or paid any cash dividends on shares of Station
Common Stock to date and presently has no plans to declare or pay any cash
dividends. As of the Record Date there were approximately 891 holders of record
of Station Common Stock.
 
     In order to qualify as a REIT, Crescent is required to distribute dividends
(other than capital gain dividends) to its shareholders in an amount at least
equal to (A) the sum of (i) 95% of the "real estate investment trust taxable
income" of Crescent (computed without regard to the dividends paid deduction and
Crescent's net capital gain) and (ii) 95% of the net income (after tax), if any,
from foreclosure property, minus (B) certain excess noncash income. See "Tax
Considerations -- Taxation of Crescent Entities -- Annual Distribution
Requirements."
 
                                       17
<PAGE>   30
 
                             THE MEETING AND VOTING
 
THE MEETING
 
     The Meeting will be held at Sunset Station Hotel & Casino, 1301 West Sunset
Road, Henderson, Nevada on August 4, 1998, beginning at 10:00 a.m. local time.
Holders of record of shares of the Station Common Stock and the Station
Convertible Preferred Stock at the close of business on the Record Date are
entitled to notice of and to vote at the Meeting. At the Meeting, holders of
Station Common Stock will be asked to consider and vote upon (i) the Merger,
(ii) the election of directors to serve until the earlier of consummation of the
Merger and the 2001 annual meeting of Station, (iii) a proposal to ratify the
appointment of Arthur Andersen L.L.P. as Station's independent public
accountants for Station's 1999 fiscal year and (iv) such other business as may
properly come before the Meeting. At the Meeting, holders of Station Convertible
Preferred Stock will be asked to consider and vote upon the Merger. See "The
Merger."
 
     The Merger, if approved, will not become effective unless and until the
Effective Date. The closing of the Merger (the "Closing") is conditioned upon a
number of factors, including approval of Nevada and Missouri gaming authorities.
There can be no assurance that the Closing will occur or will not be delayed.
See "The Merger."
 
REVOCATION OF PROXIES
 
     Any holder of Station Common Stock or Station Convertible Preferred Stock
giving a proxy may revoke it at any time prior to its exercise at the Meeting by
giving notice of such revocation either personally or in writing to the
Secretary of Station at Station's executive offices, by subsequently executing
and delivering another proxy or by voting in person at the Meeting. Attendance
at the Meeting will not, by itself, constitute revocation of a proxy.
 
VOTING
 
     Shares represented by duly executed and unrevoked proxies on the enclosed
form of proxy received by Station will be voted at the Meeting in accordance
with the specifications made therein by the stockholders returning such proxies,
unless authority to do so is withheld. If no specification is made, shares
represented by duly executed and unrevoked proxies in the enclosed form will be
voted FOR the Merger, FOR the election as directors of the nominees listed
herein, FOR ratification of the appointment of Arthur Andersen L.L.P. as
Station's independent accountants and, with respect to any other matter that may
properly come before the meeting, in the discretion of the persons voting the
respective proxies.
 
     The cost of preparing, assembling and mailing the proxy materials will be
borne equally by Station and Crescent. Station has retained D.F. King & Co.,
Inc. to solicit proxies at an estimated base cost of $7,500 plus per call
charges for calls to holders of Station Common Stock, however, directors,
executive officers and selected other employees of Station may also solicit
proxies in person or by telephone or facsimile. Directors, executive officers
and other employees of Station who solicit proxies will not be specially
compensated for such services. Brokerage houses, nominees, fiduciaries and other
custodians will be requested to forward soliciting materials to beneficial
owners and will be reimbursed for their reasonable out-of-pocket expenses
incurred in sending proxy materials to beneficial owners.
 
     Only holders of record, at the close of business on the Record Date, of the
Station Common Stock and the Station Convertible Preferred Stock, will be
entitled to notice of and to vote at the Meeting. On the Record Date, there were
35,311,792 shares of Station Common Stock outstanding and 2,070,000 shares of
Station Convertible Preferred Stock outstanding. Each share of Station Common
Stock and each share of Station Convertible Preferred Stock entitles its holder
to one vote on the Merger with respect to its class. Each share of Station
Common Stock entitles its holder to one vote on all other matters presented at
the Meeting.
 
                                       18
<PAGE>   31
 
VOTE REQUIRED
 
     The Merger will be accomplished through consummation of the Reincorporation
Merger followed by the merger of Delaware Station and Crescent. See "The
Merger." Article IX of the Station Articles and NRS 92A.120(6) combined require
the affirmative vote of not less than sixty-six and two-thirds percent (66 2/3%)
of the voting power of all shares of Station entitled to vote, with each class
constituting a separate voting class, to approve the Reincorporation Merger.
Under the Station Articles and the Station Bylaws, shares as to which a
stockholder abstains from voting or withholds such stockholder's vote and shares
as to which a broker indicates that it does not have discretionary authority to
vote ("broker non-votes") will have the same legal effect as a vote against such
proposal. Messrs. Frank J. Fertitta III, Lorenzo J. Fertitta and Blake L.
Sartini collectively hold approximately 40.4% of the outstanding Station Common
Stock and have agreed to vote in favor of approval of the Merger. See "Principal
Stockholders of Station" and "The Merger Agreement -- Agreement to Vote for the
Merger."
 
     The election of the director nominees requires a plurality of the votes
cast in person or by proxy at the Meeting. Under the Station Articles and the
Station Bylaws, abstentions from the election of directors will not be counted
as voting thereon and therefore will not affect the election of the nominees
receiving a plurality of the votes cast.
 
     Ratification of the appointment of Arthur Andersen L.L.P. as Station's
independent public accountants for Station's 1999 fiscal year requires the
affirmative vote of a majority of shares present or represented by proxy at the
Meeting and entitled to vote at the Meeting. Under the Station Articles and the
Station Bylaws, each abstention on this proposal will have the same legal effect
as a vote against such proposal.
 
     The stockholders of Station will have no dissenters' or appraisal rights in
connection with any of proposals to be voted upon.
 
RECOMMENDATION OF THE STATION BOARD OF DIRECTORS; REASONS FOR MERGER
 
     The Station Board of Directors believes the Merger is in the best interests
of Station and its stockholders and unanimously recommends that stockholders
vote FOR the Merger. Although there can be no assurances that the Merger will
occur or that it will have the intended results, management of Station believes
that if the Merger occurs, it will provide holders of the Station Common Stock
and the Station Convertible Preferred Stock an opportunity to participate in the
potential growth of Crescent, diversify such holders' investment, give such
holders the opportunity to receive current distributions and give the casino
operations access to a lower cost of capital, although there can be no
assurances that the benefits of such opportunities will be realized.
 
     The Station Board of Directors believes that the election of its director
nominees and the approval of the appointment of Arthur Andersen, L.L.P. as
Station's independent accountants are in the best interests of Station and its
stockholders and recommends to the stockholders the approval of each of the
nominees and of the appointment of Arthur Andersen, L.L.P. as Station's
independent accountants.
 
INDEPENDENT ACCOUNTANTS
 
     It is expected that representatives of Arthur Andersen, L.L.P., Station's
independent accountants, will be present at the Meeting. Such representatives
will have the opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions.
 
DISSENTERS' RIGHTS OF APPRAISAL
 
     Under Nevada law, neither holders of Station Common Stock nor holders of
Station Convertible Preferred Stock are entitled to dissent from the Merger and
obtain a valuation of their shares of Station Common Stock or Station
Convertible Preferred Stock in connection with the Merger. See "Comparison of
Rights of Stockholders of Station and Shareholders of Crescent -- Appraisal and
Dissenters' Rights."
 
                                       19
<PAGE>   32
 
                                  RISK FACTORS
 
     Except for historical information contained in this Proxy
Statement/Prospectus the matters discussed herein contain forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. Such statements appear in a number of places in this
Proxy Statement/ Prospectus, including, without limitation, under "Summary,"
"The Meeting and Voting -- Recommendation of the Station Board of Directors;
Reasons for Merger," "Risk Factors," "The Merger" and "Recent Developments."
Such forward-looking statements include statements regarding the intent, belief
or current expectations with respect to the matters discussed in this Proxy
Statement/Prospectus. Stockholders are cautioned that any such forward-looking
statements involve risks and uncertainties, and that actual results may differ
materially from those in the forward-looking statements as a result of various
uncertainties and other factors, including, without limitation, completion of
the transactions described herein and future acquisitions and restructurings,
the ability to maintain existing management, competition within the gaming
industry, the cyclical nature of the real estate business, the hotel business
and the gaming business, real estate and economic conditions, the continuing
ability of Crescent to qualify as a REIT and other risks described in this Proxy
Statement/Prospectus and in the annual, quarterly and current reports and proxy
statements of Crescent and Station incorporated by reference herein, including
those identified in the Crescent Form 10-K, in the Crescent Form 8-K dated April
17, 1998 and filed April 28, 1998, as amended on June 22, 1998, and the Station
Form 10-K. Stockholders should consider the following key factors affecting
future operations of Crescent in addition to the other information set forth in
this Proxy Statement/Prospectus which Stockholders should read carefully and in
its entirety.
 
STOCK PRICE FLUCTUATIONS; FIXED EXCHANGE RATIO
 
     The relative stock prices of the Crescent Common Shares and the shares of
Station Common Stock at the Effective Time may vary significantly from the
prices as of the date of execution of the Merger Agreement, the date of this
Proxy Statement/Prospectus or the date of the Meeting, due to changes in the
business, operations and prospects of Crescent and Station, market assessments
of the likelihood that the Merger will be consummated and the timing thereof,
general market and economic conditions and other factors such as market
perception of REIT stocks, hotel stocks, REIT hotel stocks, gaming stocks, REIT
gaming stocks and the stock market generally. The exchange ratio establishing
the number of Crescent Common Shares into which shares of Station Common Stock
will be converted, however, has been fixed by the Merger Agreement. The Merger
Agreement does not contain any provisions for adjustment of the exchange ratio
or termination of the Merger Agreement based solely on any such fluctuations.
Accordingly, it is possible that the relative value of the consideration to be
received by Station stockholders per share of Station Common Stock will vary
depending on the direction of the price movement of each of the Station Common
Stock and the Crescent Common Shares. There can be no assurance that the
relative price of Crescent Common Shares to Station Common Stock will not vary
significantly from the relative prices used at the time of the calculation of
the exchange ratio. See "The Merger Agreement -- Conversion of Shares."
 
FAILURE TO APPROVE THE MERGER
 
     If the holders of Station Common Stock or the Station Convertible Preferred
Stock fail to approve the Merger or if it is not consummated for any reason,
Station may be subject to a number of material risks, including the requirement
that Station pay a $54.0 million termination fee and a possible decline in the
market price of Station Common Stock or Station Convertible Preferred Stock to
the extent current market prices reflect an assumption that the Merger will be
consummated. In the event that following termination of the Merger the Station
Board of Directors determines to seek another merger or business combination,
there can be no assurance that it will be able to find a partner willing to pay
an equivalent or more attractive price than would be provided by the Merger. In
addition, Station may be required to obtain the consent of its lenders to
payment of any such termination fee. There can be no assurance such consent
would be given. See "The Merger Agreement -- Termination" and "-- Certain Fees
and Expenses."
 
                                       20
<PAGE>   33
 
INTERESTS OF CERTAIN PERSONS IN THE MERGER
 
     In considering the recommendation of the Station Board of Directors,
Station stockholders should be aware that certain members of Station's
management and the Station Board of Directors may have interests in the Merger
that are different from, or in addition to, the interests of Station
stockholders generally, which may create potential conflicts of interest. Three
executive officers of Station, Mr. Frank J. Fertitta III and Messrs. Sartini and
Christenson are members of the Station Board of Directors that approved the
Merger and two additional members, Lorenzo J. Fertitta and Delise F. Sartini,
are related to these executive officers. Certain officers and employees of
Station have certain rights under existing employment contracts which provide
for substantial payments upon a Change of Control of Station, such as the
Merger, and under options which result in immediate vesting upon the
consummation of the Merger. Also, certain Station directors and officers will
receive indemnification, exculpation and directors' and officers' insurance in
connection with the Merger. In addition, (i) certain members of Station's
management and certain board members involved in management (namely Frank J.
Fertitta III, Blake L. Sartini, Lorenzo J. Fertitta, Glenn C. Christenson, Scott
M Nielson and other members of management, the "Management Group") will own 50%
of the Operating Joint Venture which will operate the six casino properties
currently operated by Station pursuant to a lease with Crescent, (ii) members of
the management of Station that were employed by Station pursuant to written
agreements generally will receive employment agreements with the Operating Joint
Venture in connection with the Merger and (iii) in connection with the Merger,
Mr. Frank J. Fertitta III and Mr. Lorenzo J. Fertitta will have rights to be
appointed to the Crescent Board of Trust Managers and the Board of Directors of
the JV Parent. See "The Merger Agreement -- Conditions to the Consummation of
the Merger", "-- Certain Transactions -- Joint Venture" and "-- Additional
Agreements" and "Executive Compensation."
 
DIFFERENCES IN STOCKHOLDER AND SHAREHOLDER RIGHTS
 
     Crescent is organized under the laws of the State of Texas, and Station is
incorporated under the laws of the State of Nevada. If the Merger is
consummated, the holders of Station stock, whose rights as stockholders are
currently governed by Chapter 78 of the NRS (the "Nevada General Corporation
Law"), the Station Articles and the Station Bylaws, will, at the Effective Time,
become holders of Crescent shares and their rights as such will be governed by
the Texas Business Corporation Act (the "TBCA"), the Texas Real Estate
Investment Trust Act ("TRA"), the Restated Declaration of Trust of Crescent (the
"Declaration of Trust") and the Crescent Amended and Restated Bylaws, as amended
(the "Crescent Bylaws").
 
     Ownership of shares of Station stock and Crescent shares are subject to
differing ownership restrictions imposed in connection with gaming and REIT
laws. In addition, among other things, the governing documents of Station and
Crescent have different voting requirements and procedures and Crescent does not
have a shareholder rights plan such as the plan reflected in the Rights
Agreement. The provisions in the Crescent Bylaws and Declaration of Trust could
have a greater effect in discouraging offers to acquire Crescent than did
provisions of the Station Articles and Station Bylaws in discouraging offers to
acquire Station and, therefore, could adversely impact the ability of holders of
Crescent Common Shares and Crescent Convertible Preferred Shares to realize a
premium in connection with such a transaction. See "Comparison of Rights of
Stockholders of Station and Shareholders of Crescent."
 
TAXABILITY OF THE MERGER
 
     Neither Station nor Crescent intends to obtain a ruling from federal,
state, or local authorities as to the tax consequences of the Merger. If the
Merger is treated as taxable, a Station stockholder generally will have taxable
gain on the difference between the aggregate market value of the Crescent shares
and any cash in lieu of fractional shares received by such stockholder in the
Merger and such stockholder's aggregate tax basis in the Station stock
surrendered in exchange therefore. In addition, Station would incur tax as if it
had sold its assets to Crescent in a taxable sale and distributed the
consideration received in the Merger to its stockholders in complete
liquidation. See "Tax Considerations -- Federal Income Tax Consequences of the
Merger."
 
                                       21
<PAGE>   34
 
RISKS RELATING TO QUALIFICATION AND OPERATION AS A REIT
 
     Crescent intends to continue to operate in a manner so as to qualify as a
REIT under the Code. A qualified REIT generally is not taxed at the corporate
level on income it currently distributes to its shareholders, so long as it
distributes at least 95 percent of its taxable income currently and satisfies
certain other highly technical and complex requirements. Unlike many REITs,
which tend to make only one or two types of real estate investment, Crescent
invests in a broad range of real estate products, and certain of its investments
are more complicated than those of other REITs. As a result, Crescent is likely
to encounter a greater number of interpretative issues under the REIT
qualification rules, and more such issues which lack clear guidance, than are
other REITs. Crescent, as a matter of policy, regularly consults with outside
tax counsel in structuring its new investments. Crescent has received an opinion
from Shaw Pittman that Crescent qualified as a REIT under the Code for its
taxable years ending on or before December 31, 1997, it is organized in
conformity with the requirements for qualification as a REIT under the Code and
its proposed manner of operation will enable it to continue to meet the
requirements for qualification as a REIT. However, this opinion is based upon
certain representations made by Crescent and the Operating Partnership and upon
existing law, which is subject to change, both retroactively and prospectively,
and to possibly different interpretations. Furthermore, Shaw Pittman's opinion
is not binding upon either the Internal Revenue Service (the "IRS") or the
courts. Because Crescent's qualification as a REIT in its current and future
taxable years depends upon its meeting the requirements of the Code in future
periods, no assurance can be given that Crescent will continue to qualify as a
REIT in the future. If, in any taxable year, Crescent were to fail to qualify as
a REIT for federal income tax purposes, it would not be allowed a deduction for
distributions to shareholders in computing taxable income and would be subject
to federal income tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates. In addition, unless entitled to
relief under certain statutory provisions, Crescent would be disqualified from
treatment as a REIT for federal income tax purposes for the four taxable years
following the year during which qualification was lost. The additional tax
liability resulting from the failure to so qualify would significantly reduce
the amount of funds available for distribution to shareholders.
 
RISKS RELATING TO CHANGES IN TAX LAW
 
     The tax rules governing REITs have been under review by the President and
Congress. In particular, President Clinton recently proposed four legislative
changes. Two of those changes, limiting new acquisitions by "stapled" REITs
(REITs whose stock trades together with the stock of an affiliated management
company) and limiting the amount of stock in a REIT that can be owned by a
single person (whether or not an individual), are not likely to affect Crescent.
President Clinton's third proposal would cause gain recognition for a
corporation and its shareholders if it were worth more than $5 million and were
to merge into a REIT after 1998; comparable proposals in recent years were never
adopted; however, there can be no assurance this proposal will not be adopted.
President Clinton's fourth proposal would affect Crescent. Under current law, a
REIT may not own 10% or more of the voting stock of a subsidiary. A number of
REITs, including Crescent, own less than 10% of the voting stock of a subsidiary
but 90% or more of the economic value of that stock. The subsidiary holds assets
or conducts activities the REIT could not hold or conduct directly. Under the
proposed legislation, a REIT would not be allowed to hold more than 10% of
either the vote or the value of the stock of any subsidiary. This proposal would
be effective with respect to stock acquired after the date of Committee action
and with respect to stock held on that date if the corporation engaged in a new
trade or business or acquired substantial new assets after that date. This
proposal, if enacted, will limit the way Crescent holds some of Station's assets
and affect the structure of future Crescent acquisitions.
 
     The Chairmen of the House Ways and Means Committee and the Senate Finance
Committee have introduced legislation to enact the proposal concerning stapled
REITs effective March 26, 1998, and such legislation (but not any of the other
proposals) is currently part of the IRS restructuring legislation that was
passed by the Senate and the House of Representatives and is included the
Conference Agreement between the House and the Senate. It is not clear whether
any of the other proposals will be introduced or enacted and, if they are, their
effective dates. Additional proposals affecting REITs may be made by the
President or his administration or by members of Congress. It is impossible to
predict the nature of those proposals, whether
 
                                       22
<PAGE>   35
 
they would be enacted and their effect on Crescent. However, there can be no
assurance that changes in legislation would not have a material adverse effect
on Crescent.
 
CONCENTRATION OF ASSETS
 
     A significant portion of Crescent's assets are, and revenues are derived
from, properties located in the metropolitan areas of Dallas-Fort Worth and
Houston, Texas. Due to this geographic concentration, any deterioration in
economic conditions in the Dallas-Fort Worth or Houston metropolitan areas or
other geographic markets in which Crescent in the future may acquire substantial
assets could have a substantial effect on the financial condition and results of
operations of Crescent and adversely impact Crescent's ability to pay dividends.
Upon consummation of the Merger, Crescent's gaming activities will similarly be
dependent on two key markets and subject to economic conditions in Nevada and
Missouri.
 
RISKS RELATED TO ISSUANCE OF RIGHTS
 
     On June 15, 1998, Crescent filed a registration statement with the
Commission relating to the offering of the Crescent Rights upon consummation of
the Merger. Crescent also announced its intent, upon consummation of the Merger,
to contribute substantially all of the real estate assets acquired in the Merger
to a new partnership that will invest principally in casinos, other gaming
properties and other real estate in Las Vegas, Nevada and its expectation that
it would offer holders of Crescent Common Shares the Gaming Rights to permit
holders to acquire common or preferred equity interests in such partnership or
in a REIT which would hold interests in such partnership. As a result, holders
of Crescent Common Shares after the Merger will be required to exercise such
rights in order to retain their proportionate ownership interests in Crescent
and/or the gaming business.
 
RISKS RELATING TO CONTROL OF CERTAIN PROPERTIES
 
 Revenues from Proposed Casino/Hotel Investments Dependent on Third-Party
 Operators and Casino/Hotel Industry
 
     In connection with the Merger, Crescent intends to lease the six
hotel/casino properties currently owned and operated by Station (the "Casino
Properties") to the Operating Joint Venture. Crescent expects that it will
receive both base rent and a percentage of gross revenues above a certain
minimum level pursuant to the lease, which will expire in 2008, subject to one,
five-year renewal option. Although the rental payments have not yet been finally
determined, it is anticipated that base rental payments will exceed 20% of
current base rental revenues of Crescent on an annual basis. As a result of the
percentage rent payments, Crescent will participate in the economic operations
of the Casino Properties only through its indirect participation in gross
revenues. The amount of rent payable to Crescent under the lease with respect to
the Casino Properties will depend on the ability of the Operating Joint Venture
to maintain and increase revenues from the Casino Properties. Accordingly,
Crescent's results of operations will be affected by (i) changes in general and
local economic conditions and the level of demand for the services of the Casino
Properties, a deterioration in either of which could adversely affect Crescent's
results of operations and its ability to pay dividends, (ii) competition in the
casino/hotel industry, an increase in which could reduce the gross revenues at
the Casino Properties and adversely affect Crescent's result of operations and
its ability to pay dividends, (iii) governmental regulation that limits the
ability of the Casino Properties to continue conducting their business as
presently conducted, (iv) any decision by the Nevada Gaming Commission or the
Missouri Gaming Commission to suspend, revoke, limit or not reissue a gaming
license held by Crescent or one of its Subsidiaries or the Operating Joint
Venture or one of its subsidiaries, which decision would adversely affect the
ability of the Operating Joint Venture to continue making its lease payments to
Crescent and (v) the temporary or permanent loss of a riverboat or dockside
facility due to casualty, mechanical failure or severe weather, which could
prevent the Operating Joint Venture from deriving revenue from the affected
location and thereby decrease its ability to make lease payments to Crescent.
 
                                       23
<PAGE>   36
 
  Revenues from Hotels Dependent on Third-Party Operators and Hospitality
Industry
 
     Crescent has leased the Hotel Properties to subsidiaries of Crescent
Operating, and such subsidiaries, rather than Crescent, are entitled to exercise
all rights of the owner of the respective hotel. Crescent will receive both base
rent and a percentage of gross sales above a certain minimum level pursuant to
the leases, which expire between the years 2004 and 2012. As a result, Crescent
will participate in the economic operations of the Hotel Properties only through
its indirect participation in gross revenues. To the extent that operations of
the Hotel Properties may affect the ability of such subsidiaries to pay rent,
Crescent also may indirectly bear the risks associated with any increases in
expenses. Each of the Hotel Properties is managed pursuant to a management
agreement. The amount of rent payable to Crescent under the leases with respect
to the Hotel Properties will depend on the ability of such subsidiaries and the
managers of the Hotel Properties to maintain and increase revenues from the
Hotel Properties. Accordingly, Crescent's results of operations, and ultimately
its ability to meet its obligations, will be affected by such factors as changes
in general economic conditions, the level of demand for rooms and related
services at the Hotel Properties, the ability of such subsidiaries and the
managers of the Hotel Properties to maintain and increase gross revenues at the
Hotel Properties, competition in the hotel industry and other factors relating
to the operation of the Hotel Properties. In addition, Crescent expects, in
accordance with the terms of an intercompany agreement between Crescent and
Crescent Operating (the "Intercompany Agreement"), to lease any hotel properties
that it may acquire in the future to Crescent Operating or any of its
subsidiaries which, as lessees of any such hotel properties, will be entitled to
exercise all rights of the owner.
 
  Lack of Control of Residential Development Corporations
 
     Crescent is not able to elect the boards of directors of the Residential
Development Corporations, and does not have the authority to control the
management and operation of the Residential Development Corporations. As a
result, Crescent does not have the right to control the timing or amount of
dividends paid by the Residential Development Corporations and, therefore, does
not have the authority to require that funds be distributed to it by any of
these entities. The inability of Crescent to control its access to its dividends
from the Residential Development Corporations increases the likelihood that such
dividends might not be available to Crescent, which may adversely affect its
results of operations and its ability to pay dividends.
 
  Lack of Control of Americold and URS
 
     Crescent owns, through two subsidiaries (the "Crescent Subsidiaries"), a
38% interest in each of two partnerships, one of which owns Americold and the
other of which owns URS. Crescent Operating, through the Crescent Subsidiaries,
owns a 2% interest in each of the partnerships. The remaining 60% interest in
the partnerships is owned by two subsidiaries of Vornado Realty Trust
(collectively, "Vornado"). The Operating Partnership currently owns all of the
non-voting common stock, representing an approximately 95% economic interest, in
each of the Crescent Subsidiaries, and Crescent Operating owns all of the voting
stock, representing an approximately 5% economic interest, in each of the
Crescent Subsidiaries. As a result, Crescent is not able to elect the boards of
directors of the Crescent Subsidiaries and does not have the authority to
control the management or operation of the Crescent Subsidiaries. Under the
terms of the existing partnership agreements for each of the partnerships,
Crescent does not have the right to participate in the decisions with respect to
the partnerships. Vornado has the right to make all decisions relating to the
management and operation of the partnerships other than certain major decisions
that require the approval of both Crescent Operating and Vornado. The
partnership agreement for each of the partnerships provides for a buy-sell
arrangement upon a failure of Crescent Operating and Vornado to agree on any of
the specified major decisions pursuant to which the entire interest of Crescent
and Crescent Operating or the entire interest of Vornado may be purchased by the
other party. Until November 1, 2000, the buy-sell arrangement can only be
exercised by Vornado. There can be no assurance that Vornado or Crescent
Operating will operate the partnerships in a way that will maximize Crescent's
return on its investment. See "-- Real Estate Risks Specific to Crescent's
Business -- Risks of Joint Ownership of Assets."
 
                                       24
<PAGE>   37
 
  Lack of Control of Operating Joint Venture/Income from Joint Venture
 
     Crescent will be unable to participate in the management of the Operating
Joint Venture and will not have the authority to control the management and
operation of the Casino Properties. As a result, Crescent and stockholders of
Station who will receive Crescent shares in the Merger will be dependent upon
management of the Operating Joint Venture to operate the Casino Properties in a
manner adequate to produce income sufficient to pay amounts due under the lease
of such properties. In addition, the income Crescent will receive from the
Operating Joint Venture will depend on a variety of factors including the
economic terms of the property leases and the success management of the
Operating Joint Venture experiences operating the Casino Properties.
 
REAL ESTATE RISKS SPECIFIC TO CRESCENT'S BUSINESS
 
     The following risks, in addition to the other risks discussed herein, are
material risks relevant to a holder of Crescent Common Shares or Crescent
Convertible Preferred Shares.
 
  Investment Risks
 
     In implementing its investment strategies, Crescent has invested in a broad
range of real estate assets, and in the future, may invest in additional types
of real estate assets not currently included in its portfolio. There can be no
assurance, however, that the Operating Partnership will be able to implement its
investment strategies successfully in the future. As a result of its real estate
investments, the Operating Partnership will be subject to risks, in addition to
general real estate risks, relating to the specific assets and asset types in
which it invests. The Operating Partnership is subject to risks that, upon
expiration, leases for space in the Office Properties and Retail Properties may
not be renewed, the space may not be re-leased, or the terms of renewal or
re-lease (including the cost of required renovations or concessions to tenants)
may be less favorable than current lease terms. Similarly, Crescent is also
subject to the risk that the success of its investment in the Hotel Properties
will be highly dependent upon the ability of the Hotel Properties to compete in
such features as access, location, quality of accommodations, room rate
structure and, to a lesser extent, the quality and scope of other amenities such
as food and beverage facilities. In addition, Crescent is subject to risks
relating to the Behavioral Healthcare Facilities, including the effect of any
failure of the tenant to make required lease payments (which equal more than 10%
of Crescent's current base rental revenues); the effects of factors, such as
regulation of the healthcare industry and limitations on government
reimbursement programs, on the ability of the tenant to make the required lease
payments, and the limited number of replacement tenants in the event of default
under, or non-renewal of, the lease.
 
     Similarly, Crescent will be subject to risks relating to the Casino
Properties to the extent such risks impact the ability of the Operating Joint
Venture to make required lease payments (which are projected to equal more than
20% of Crescent's current base rental revenues) including risks relating to
regulation of the gaming industry, intense competition in the gaming industry,
litigation related to the Casino Properties located in Missouri, construction
risks associated with expansion of the Casino Properties and initial dependence
of the Casino Properties on key markets. If any one or a combination of such
risks were realized, Crescent could experience a material adverse change in its
financial condition and results of operations, which could impact the amount of
funds Crescent has available for distribution to shareholders. See
"-- Hotel/Casino Specific Industry Risks."
 
  Risks of Joint Ownership of Assets
 
     Crescent has the right to invest and in some cases has invested in
properties and assets jointly with other persons or entities. Joint ownership of
properties, under certain circumstances, may involve risks not otherwise
present, including the possibility that Crescent's partners or co-investors
might become bankrupt, that such partners or co-investors might at any time have
economic or other business interests or goals which are inconsistent with the
business interests or goals of Crescent, and that such partners or co-investors
may be in a position to take action contrary to the instructions or the requests
of Crescent or contrary to Crescent's policies or objectives, including
Crescent's policy with respect to maintaining its qualification as a REIT.
Because this
 
                                       25
<PAGE>   38
 
gives a third party, which is not controlled by Crescent and which may have
different goals and capabilities than Crescent, the opportunity to influence the
return Crescent can achieve on some of its investments, joint ownership may
impact the amount of funds Crescent has available for distribution to
shareholders. See "-- Risks Relating to Control of Certain Properties -- Lack of
Control of Americold and URS."
 
HOTEL/CASINO SPECIFIC INDUSTRY RISKS
 
  Uncertain Effect of Recent Court Decision
 
     On January 16, 1997, Station's gaming license for Station Casino Kansas
City was formally issued for its facility, which is located in a man-made basin
filled with water piped in from the surface of the Missouri River. In reliance
on numerous approvals from the Missouri Commission specific to the configuration
and granted prior to the formal issuance of its gaming license, Station built
and opened the Station Casino Kansas City facility. The license issued to
Station and the resolutions related thereto specifically acknowledge that the
Missouri Commission had reviewed and approved this configuration.
 
     On November 25, 1997, the Supreme Court of Missouri ruled, in a case
challenging the gaming licenses of certain competitors of Station Casino St.
Charles located in Maryland Heights, Missouri, that gaming in artificial spaces
may occur only in spaces that are contiguous to the surface stream of the
Missouri or Mississippi Rivers. The case was remanded to the trial court for a
factual determination as to whether such competing operators meet this
requirement.
 
     Based upon this Missouri Supreme Court ruling (the "Akin Ruling"), the
Missouri Commission attempted to issue preliminary orders for disciplinary
action to all licensees in Missouri that operate gaming facilities in artificial
basins. These preliminary orders started the hearing process which allows the
affected licensees to demonstrate that they are, in fact, contiguous to the
surface stream of the Missouri or Mississippi River. Station Casino Kansas City
was issued a preliminary order for disciplinary action. Station Casino St.
Charles did not receive such an order. The preliminary orders were challenged by
the licensees. The Circuit Court of Cole County granted writs of prohibition
preventing the Missouri Commission from proceeding with such hearings under the
Missouri Commission's existing procedures. The Missouri Commission sought
further review of these writs of prohibition in the Missouri Supreme Court. On
May 28, 1998, the Missouri Supreme Court quashed the writs of prohibition,
allowing the Missouri Commission to proceed with hearings concerning Station
Casino Kansas City and other licensees for alleged noncompliance with the Akin
Ruling. Subsequent thereto, on June 18, 1998, the Missouri Commission issued an
Amended Preliminary Order for Disciplinary Action against Station Casino Kansas
City for noncompliance with the Akin Ruling.
 
     Prior to this ruling, on January 16, 1998, Station Casino Kansas City's
licenses were renewed for one year subject to the satisfactory resolution of the
issues raised in the Akin Ruling. Furthermore, after the Akin Ruling was entered
by the Missouri Supreme Court, but before any further proceeding on remand, the
plaintiffs dismissed the Akin case without prejudice. Because of the open
questions raised but not answered in the Akin Ruling, it is not possible to
predict what affect, if any, the Akin Ruling or Missouri Commission's action
will have on operations at Station Casino Kansas City.
 
     At this time, based on discussions with its Missouri legal counsel,
management of Station believes that it has potentially meritorious defenses in
any lawsuits or administrative actions that are based on the Akin Ruling.
Management cannot provide any assurance, however, as to whether the Station
Casino Kansas City facility would be found to comply with the guidelines
described in the Akin Ruling, whether it would be permitted to modify the
facility to comply with such standards, or whether Station's legal defenses,
electoral alternatives or other means available to permit the continued use of
this current configuration would succeed. Further, it is unclear, in the event
of a determination that the configuration of Station Casino Kansas City does not
comply with the Akin Ruling, whether Station Casino Kansas City would be able to
continue to operate or whether such findings would result in the temporary or
permanent closure of Station Casino Kansas City. Any or all of the steps
management of Station is currently taking in response to the Akin Ruling,
including consideration of possible remediation of the site at a cost that
management believes would not have a material adverse effect on the Company's
financial position, could reverse or mitigate the financial impact of this
action. However, Station cannot provide any assurance that there would not be a
material adverse impact on
 
                                       26
<PAGE>   39
 
its consolidated results of operations due to the Akin Ruling. Management of
Station does not believe that the Akin Ruling will have a material adverse
impact on the existing Station Casino St. Charles operations.
 
  Regulation
 
     The ownership and operation of casino gaming facilities are subject to
extensive state and local regulation. The states of Nevada and Missouri and the
applicable local authorities require various licenses, findings of suitability,
registrations, permits and approvals (individually, a "Gaming License" and
collectively, "Gaming Licenses") to be held by Crescent, the Operating
Partnership and the JV Parent (once they are Registered Corporations (as defined
herein), assuming JV Parent is a "publicly traded corporation" as such term is
defined in the Nevada Gaming Control Act) and the Operating Joint Venture and
their respective subsidiaries. The Nevada Gaming Commission (the "Nevada
Commission") and the Missouri Commission may, among other things, limit,
condition, suspend or revoke a Gaming License to own the stock of any of the
Nevada or Missouri subsidiaries, respectively, any of Crescent or the
Decontrolled Subsidiary (collectively with their direct and indirect
subsidiaries, the "Crescent Entities") for any cause deemed reasonable by such
licensing authority. Substantial fines or forfeiture of assets for violations of
gaming laws or regulations may be levied against the Crescent Entities, the
Operating Joint Venture, their respective subsidiaries and the persons involved.
The suspension or revocation of any of the Crescent Entities' or the Operating
Joint Venture's Gaming Licenses or the levy on any of the Crescent Entities or
the Operating Joint Venture of substantial fines or forfeiture of assets would
have a material adverse effect on the ownership and leasing of the Casino
Properties or the operation of the Casino Properties by the Operating Joint
Venture.
 
     The Crescent Entities and the Operating Joint Venture expect to be able to
obtain all Gaming Licenses necessary for the ownership, leasing and operation of
the Casino Properties and approvals of the Merger. Gaming Licenses and related
approvals are deemed to be privileges under Nevada and Missouri law, however,
and no assurances can be given that such Gaming Licenses will be obtained or
that if obtained, they will be obtained on a timely basis, or that any new
Gaming Licenses that may be required in the future will be given or that
existing ones will not be revoked or that approval of the Merger, if required,
will be obtained. Any expansion of Crescent's casino property holdings or the
Operating Joint Venture's gaming operations in Nevada or Missouri or into new
jurisdictions will require various Gaming Licenses and approvals of the relevant
gaming authorities, which approval process can be time-consuming and costly and
has no assurance of success.
 
     Gaming authorities have the authority generally to require that any record
or beneficial owner of Crescent's, the Operating Partnership's or the JV
Parent's securities, including the Crescent Common Shares, the Crescent
Convertible Preferred Shares and the limited partnership interests of the
Operating Partnership, file an application and be investigated for a finding of
suitability. If a record or beneficial owner of Crescent Common Shares, the
Crescent Convertible Preferred Shares, the JV Parent's securities or limited
partnership interests of the Operating Partnership is required by any Gaming
Authority to be found suitable, such owner will be required to apply for a
finding of suitability within 30 days after request of such Gaming Authority or
within such earlier period prescribed by such Gaming Authority. The applicant
for a finding of suitability must pay all costs of the investigation for such
finding of suitability. If a record or beneficial owner is required to be found
suitable and is not found suitable by such Gaming Authority, such owner may be
required to dispose of the Crescent Common Shares, the Crescent Convertible
Preferred Shares, the securities of the JV Parent or limited partnership
interests of the Operating Partnership.
 
     The Operating Joint Venture, as the operator of the Casino Properties, will
be subject to gaming regulations on its gaming activities similar to those
applicable to Station prior to the Merger. Any failure by the Operating Joint
Venture to obtain and maintain Gaming Licenses necessary for the operation of
gaming activities at the Casino Properties could materially adversely impact
such operations and the Operating Joint Venture's ability to make required lease
payments and, therefore, Crescent's ability to make distributions. No assurances
can be given that the Operating Joint Venture will obtain and maintain such
Gaming Licenses. See "The Merger -- Regulatory Approvals."
 
                                       27
<PAGE>   40
 
  Competition
 
     The gaming industry includes land-based casinos, dockside casinos,
riverboat casinos, casinos located on Indian reservations and other forms of
legalized gaming. There is intense competition among companies in the gaming
industry. To a lesser extent, the Casino Properties compete with gaming
operations in other parts of the state of Nevada, such as Reno, Laughlin and
Lake Tahoe, with facilities in Atlantic City, New Jersey, facilities in other
parts of Missouri and the midwest and other parts of the world and with casino
gambling on Indian reservations, state-sponsored lotteries, on- and off-track
pari-mutuel wagering, card parlors and other forms of legalized gambling.
 
  Uncertain Effect of National Gambling Commission
 
     The U.S. Congress has created the National Gambling Impact and Policy
Commission to conduct a comprehensive study of all matters relating to the
economic and social impact of gaming in the United States. The enabling
legislation provides that, not later than two years after the enactment of such
legislation, the commission would be required to issue a report containing its
findings and conclusions, together with recommendations for legislation and
administrative actions. Any such recommendations, if enacted into law, could
adversely impact the gaming industry and have a material adverse effect on
Crescent's or the Operating Joint Venture's business, financial condition or
results of operations.
 
     From time to time, certain legislators have proposed the imposition of a
federal tax on gross gaming revenues. Any such tax could have a material adverse
effect on Crescent's or the Operating Joint Venture's business, financial
condition or results of operations.
 
CONFLICTS OF INTEREST
 
  Common Ownership and Management
 
     Richard E. Rainwater and John C. Goff are, respectively, the Chairman of
the Board and the Vice Chairman of the Board of both the Crescent Board of Trust
Managers and the Board of Directors of Crescent Operating; Gerald W. Haddock
also serves as President, Chief Executive Officer and a director of Crescent
Operating, and serves as President, Chief Executive Officer and a trust manager
of Crescent; and Frank J. Fertitta III and Lorenzo J. Fertitta will both have
rights to be trust managers of Crescent and directors of the JV Parent and
significant shareholders in the Operating Joint Venture. As a result, Messrs.
Rainwater, Goff, Haddock, Frank J. Fertitta III and Lorenzo J. Fertitta have or
may have a fiduciary obligation to Crescent, the Operating Partnership, Crescent
Operating and/or the JV Parent. As of April 9, 1998, senior management and the
trust managers of Crescent beneficially owned approximately 15.1% of Crescent's
common equity both indirectly through their ownership interest of 10,590,746
units of beneficial interest of the Operating Partnership ("Units") and directly
through their ownership of 9,398,269 Common Shares of Crescent, and
approximately 15.0% of the outstanding common stock of Crescent Operating
through their ownership of 1,712,251 shares of Crescent Operating common stock.
Following the Merger, the percentage of beneficial ownership of Crescent's
common equity by senior management and trust managers of Crescent will increase
to 16.3% due to the interests held by Mr. Frank J. Fertitta III and Mr. Lorenzo
J. Fertitta. The common management and ownership among these entities may lead
to conflicts of interest in connection with transactions between Crescent, the
Operating Partnership, and Crescent Operating, because management of Crescent
may not have the same financial interests as the other shareholders or other
investors in Crescent. Members of management of Crescent who also own shares of
Crescent Operating, which may be the JV Parent, will have a financial interest
in the success of Crescent Operating that will not be shared by shareholders of
Crescent that are not investors in Crescent Operating. There can be no assurance
that, as a result of such conflicts, Crescent will not have less revenue
available for distribution to shareholders.
 
  Relationship with the Operating Joint Venture
 
     In connection with the Merger transactions, Crescent and certain of its
affiliates will enter into the Right of First Refusal and Non-Competition
Agreement with the Operating Joint Venture. Under the Right of First Refusal and
Non-Competition Agreement, Crescent and certain of its affiliates will give a
right of first refusal
 
                                       28
<PAGE>   41
 
to the Operating Joint Venture as to any lease arrangement for a gaming property
(defined as real estate on which hotel and casino or other gaming-related
operations are conducted) in which the operators of the business conducted at
the property prior to the date the property is owned or acquired by Crescent or
such affiliates will cease to operate the business. Under the agreement, the
Operating Joint Venture and certain of its affiliates will give a right of first
refusal to a Crescent affiliate as to any direct or indirect opportunity to
invest in (i) gaming properties, real estate mortgages, real estate derivatives
or entities that invest primarily in or have a substantial portion of their
assets in such real estate assets and (ii) any other gaming-related investments
which may be structured in a manner so as to be suitable for investment by a
REIT. In addition, without prior written consent, neither Crescent and certain
of its affiliates nor current members of Station management participating in the
Operating Joint Venture will be permitted to own or operate or otherwise engage
in any activities related to any gaming properties other than gaming properties
operated and leased by the Operating Joint Venture or any entity under its
control; provided that a Crescent affiliate may own a gaming property if a
master lease arrangement already exists at the property, if gaming activities
conducted at the property are incidental to the primary business operations at
the property or if the sellers or operators desire to enter into a master lease
arrangement with such affiliate.
 
  Relationship with Crescent Operating
 
     The Operating Partnership has entered into the Intercompany Agreement with
Crescent Operating that provides, subject to certain terms, that the Operating
Partnership will provide Crescent Operating with a right of first refusal to
become the lessee of any real property acquired by the Operating Partnership if
the Operating Partnership determines that, consistent with Crescent's status as
a REIT, it is required to enter into a master lease arrangement, provided that
Crescent Operating and the Operating Partnership negotiate a mutually
satisfactory lease arrangement and the Operating Partnership determines, in its
sole discretion that Crescent Operating is qualified to be the lessee. As to
opportunities for Crescent Operating to become the lessee of any assets under a
master lease arrangement, the Intercompany Agreement provides that the Operating
Partnership must provide Crescent Operating with written notice of the lessee
opportunity. During the 30 days following such notice, Crescent Operating has a
right of first refusal with regard to the offer to become a lessee and the right
to negotiate with the Operating Partnership on an exclusive basis regarding the
terms and conditions of the lease. If a mutually satisfactory agreement cannot
be reached within the 30-day period (or such longer period to which Crescent
Operating and the Operating Partnership may agree), the Operating Partnership
may offer the opportunity to others, on terms not more favorable than those
offered to Crescent Operating, for a period of one year thereafter before it
must again offer the opportunity to Crescent Operating in accordance with the
procedures specified above. The Operating Partnership may in its discretion,
offer any investment opportunity other than a lessee opportunity to Crescent
Operating upon such notice and other terms as the Operating Partnership may
determine. The certificate of incorporation of Crescent Operating, as amended
and restated, generally prohibits Crescent Operating, for so long as the
Intercompany Agreement remains in effect, from engaging in activities or making
investments that a REIT could make, unless the Operating Partnership was first
given the opportunity, but elected not to pursue such activities or investments.
 
     Subsidiaries of Crescent Operating are the lessees of each of Crescent's
hotel properties. Crescent Operating owns a 50% interest in Charter Behavioral
Health Systems, LLC ("CBHS"), which is the lessee of Crescent's behavioral
healthcare facilities and currently is Crescent's largest tenant in terms of
base rental revenues. On March 5, 1998, Crescent Operating entered into a
definitive agreement to acquire from a subsidiary of Magellan Health Services,
Inc. ("Magellan") the remaining 50% interest in CBHS. The Operating Partnership
owns all of the non-voting stock and Crescent Operating owns all of the voting
stock of the entities through which the Operating Partnership made certain other
investments. In addition, it is anticipated that Crescent Operating will have
the opportunity to own a 50% interest in the Operating Joint Venture. Crescent
expects to offer Crescent Operating the opportunity to become a lessee and
operator of other assets in accordance with the Intercompany Agreement.
 
     Due to the common management and ownership between Crescent and Crescent
Operating, management of Crescent could experience conflicts of interest in the
event of a dispute relating to any of the leases in which Crescent Operating is
the lessee or if there were a default by Crescent Operating under a lease.
 
                                       29
<PAGE>   42
 
Conflicts of interest also could arise in connection with the renegotiation or
renewal of any lease or other agreement with Crescent Operating.
 
  Relationship with Magellan Health Services, Inc.
 
     Mr. Rainwater, along with certain affiliates of and members of his family,
owns approximately 19% of the outstanding common stock of Magellan, a subsidiary
of which is a 50% owner (along with Crescent Operating) of the lessee of the
Behavioral Health Facilities. Mr. Rainwater's spouse, Darla D. Moore, is a
member of the board of directors of Magellan. Through these relationships, Mr.
Rainwater may have the ability to influence decisions of Magellan in a manner
that may benefit Magellan to the detriment of Crescent Operating or Crescent, or
vice versa.
 
  Joint Investments
 
     Crescent has in the past and may in the future structure investments as
joint investments with Crescent Operating. Crescent could experience potential
conflicts of interest in connection with the negotiation of the terms of such
joint investments due to its ongoing business relationship with Crescent
Operating and the common management and common ownership among Crescent, the
Operating Partnership and Crescent Operating.
 
  Competition for Management Time
 
     Messrs. Rainwater, Goff, Haddock, Frank J. Fertitta III and Lorenzo J.
Fertitta currently are engaged, and will in the future continue to engage, in
the management of other properties and business entities, including Crescent
Operating or such other entity as becomes the JV Parent. Messrs. Rainwater,
Goff, Haddock, Frank J. Fertitta III and Lorenzo J. Fertitta may experience
conflicts of interest in allocating management time, services and functions
among Crescent and the various other business activities, including the
operation of the Operating Partnership and Crescent Operating or such other
entity as becomes the JV Parent, in which any of them are or may become
involved.
 
  Legal Representation
 
     Shaw Pittman, which has served as legal counsel to Crescent in connection
with the Merger, also serves as special counsel to Crescent Operating in
connection with certain matters. In the event any controversy arises in which
the interests of Crescent appears to be in conflict with those of Crescent
Operating, other counsel may be retained for one or both parties.
 
RISK OF INABILITY TO MANAGE RAPID GROWTH AND ACQUISITION OF SUBSTANTIAL NEW
ASSETS EFFECTIVELY
 
     From the time it commenced operations in May 1994 through March 31, 1998,
Crescent has experienced rapid growth, increasing its total assets by
approximately 1,781% (after giving pro forma effect to the Merger and
investments completed after March 31, 1998). There can be no assurance that
Crescent will be able to manage its growth effectively, or that Crescent will be
able to maintain its current rate of growth in the future, and the failure to do
so may have a material adverse effect on the financial condition and results of
operations of Crescent. If any such adverse effect were great enough, it could
impact Crescent's ability to pay dividends. In addition, Crescent may purchase
additional hotel/casino properties, although there can be no assurance that
opportunities for such purchases will be available on attractive terms.
 
GENERAL REAL ESTATE RISKS
 
  Uncontrollable Factors Affecting Performance and Value
 
     The economic performance and value of Crescent's real estate assets will be
subject to the risks normally associated with changes in national, regional and
local economic and market conditions, as discussed below. The principal markets
in which Crescent's Properties are located are Dallas/Fort Worth, Houston and
Austin, Texas and Denver, Colorado. Upon consummation of the Merger, Crescent's
gaming activities will similarly
 
                                       30
<PAGE>   43
 
depend on two key markets and be subject to economic conditions in Nevada and
Missouri. The economic condition of each of these markets is dependent on a
limited number of industries, and an economic downturn in some or all these
industries could adversely affect Crescent's performance in that market. Other
local economic conditions that may affect the performance and value of
Crescent's Properties include excess supply of office space and competition for
tenants, including competition based on rental rates, attractiveness and
location of the property and quality of maintenance and management services.
These factors may adversely affect the ability or willingness of the tenants to
pay rent. In addition, other factors may affect the performance and value of a
property adversely, including changes in laws and governmental regulations
(including those governing usage, zoning and taxes), changes in interest rates
(including the risk that increased interest rates may result in decreased sales
of lots in any Residential Development Property) and the availability of
financing. Any of these factors, each of which is beyond the control of
Crescent, could reduce the income that Crescent receives from the Properties,
thereby adversely affecting Crescent's ability to pay dividends.
 
  Illiquidity of Real Estate Investments
 
     Because real estate investments are relatively illiquid, Crescent's ability
to vary its portfolio promptly in response to economic or other conditions will
be limited. In addition, certain significant expenditures, such as debt service
(if any), real estate taxes, and operating and maintenance costs, generally are
not reduced in circumstances resulting in a reduction in income from the
investment. The foregoing and any other factor or event that would impede the
ability of Crescent to respond to adverse changes in the performance of its
investments could have an adverse effect on Crescent's financial condition and
results of operations, thereby adversely affecting its ability to pay dividends.
 
  Environmental Matters
 
     Under various federal, state and local laws, ordinances and regulations, an
owner or operator of real property may become liable for the costs of removal or
remediation of certain hazardous or toxic substances released on or in its
property, as well as certain other costs relating to hazardous or toxic
substances. Such liability may be imposed without regard to whether the owner or
operator knew of, or was responsible for, the release of such substances. The
presence of, or the failure to remediate properly, such substances, when
released, may adversely affect the owner's ability to sell the affected real
estate or to borrow using such real estate as collateral. Such costs or
liabilities could exceed the value of the affected real estate. Crescent has not
been notified by any governmental authority of any non-compliance, liability or
other claim in connection with any of the properties and Crescent is not aware
of any other environmental condition with respect to any of the properties that
management believes would have a material adverse effect on Crescent's business,
assets or results of operations. The application of environmental laws to a
specific property owned by Crescent will be dependent on a variety of
property-specific circumstances, including the former uses to which the property
was put and the building materials used at each such property. Prior to
Crescent's acquisition of its properties, independent environmental consultants
conducted or updated Phase I environmental assessments (which generally do not
involve invasive techniques such as soil or ground water sampling) on the
properties. None of these Phase I assessments or updates revealed any materially
adverse environmental condition not known to Crescent or the independent
consultants preparing the assessments. There can be no assurance, however, that
environmental liabilities have not developed since such environmental
assessments were prepared, or that future uses or conditions (including, without
limitation, changes in applicable environmental laws and regulations) will not
result in imposition of environmental liability. If Crescent were subject to
environmental liability, the liability could be sufficiently great that it could
adversely affect Crescent's ability to pay dividends.
 
PURCHASES FROM FINANCIALLY DISTRESSED SELLERS
 
     Implementation of Crescent's strategy of investing in real estate assets in
distressed circumstances has resulted in the acquisition of certain properties
from owners that were in poor financial condition, and such strategy is expected
to result in the purchase of additional properties under similar circumstances
in the future. In addition to general real estate risks, properties acquired in
distress situations present risks related to
 
                                       31
<PAGE>   44
 
inadequate maintenance, negative market perception and continuation of
circumstances which precipitated the distress originally. If a property has been
inadequately maintained, capital and maintenance expenditures may be
significant. A negative market perception of a property may make the property
more difficult to lease than originally expected, resulting in lower occupancy
rates and lease revenues for a longer period of time than originally
anticipated. A continuation of factors precipitating distress, such as adverse
regional economic conditions, could adversely affect Crescent's return on its
investment in the property or asset and the amount of funds Crescent has
available for distribution to shareholders.
 
CHANGE IN POLICIES
 
     The Board of Trust Managers elects the sole director of CREE Ltd., the
general partner of the Operating Partnership, and provides guidance to CREE Ltd.
regarding operating and financial policies and strategies, including its
policies and strategies with respect to acquisitions, growth, operations,
indebtedness and capitalization. These policies and strategies may change from
time to time without shareholder approval. Changes in or failure to change
Crescent's policies and strategies could adversely affect Crescent's financial
condition and results of operations. If any such adverse effect were great
enough it could impact Crescent's ability to pay dividends. In addition,
Crescent has the right and intends to acquire additional real estate assets
pursuant to and consistent with its investment strategies and policies without
shareholder approval.
 
POSSIBLE ADVERSE CONSEQUENCES OF OWNERSHIP LIMIT
 
     The limitation on ownership of Common Shares set forth in the Declaration
of Trust could have the effect of discouraging offers to acquire Crescent and of
inhibiting or impeding a change in control and, therefore, could adversely
affect the ability of its shareholders (including, following the Merger, the
current Station stockholders) to realize a premium over the then-prevailing
market price for the Common Shares in connection with such a transaction. See
"Description of Capital Stock of Crescent -- Ownership Limits and Restrictions
on Transfer."
 
RELIANCE ON KEY PERSONNEL
 
     Crescent and the Operating Partnership are dependent on the efforts of
members of the Board of Trust Managers and senior management personnel and will
indirectly depend on senior management of Station. These senior management
personnel of Crescent include Richard E. Rainwater, Chairman of the Board of
Trust Managers, John C. Goff, Vice Chairman of the Board of Trust Managers, and
Gerald W. Haddock, President, Chief Executive Officer and Trust Manager, and
President, Chief Executive Officer and sole director of CREE Ltd. While Crescent
believes that it could find replacements for these key executives, the loss of
their services could have a material adverse effect on the financial condition
and results of operations of Crescent. Mr. Rainwater has no employment agreement
with Crescent and, therefore, is not obligated to remain with Crescent for any
specified term. Mr. Goff, Trust Manager and Vice Chairman of the Board of Trust
Managers, and Mr. Haddock, President, Chief Executive Officer and Trust Manager,
have employment agreements with the Operating Partnership that expire on April
14, 1999, subject to automatic renewal for one-year periods unless terminated by
the Operating Partnership or Messrs. Goff or Haddock, as the case may be. Frank
J. Fertitta III and certain other senior managers of Station each have entered
into employment agreements with Station and will enter into employment
agreements with the Operating Joint Venture. Messrs. Rainwater, Goff, Haddock
and Fertitta and such other managers each has entered or will enter into a
noncompetition agreement with Crescent or the Operating Joint Venture. Crescent
has not obtained key-man insurance for any of its senior management personnel,
and the Operating Joint Venture is not expected to do so either.
 
RISKS RELATING TO DEBT
 
     Crescent's organizational documents do not limit the level or amount of
debt that it may incur, although the Operating Partnership is subject to certain
debt limitations under its indentures. It is Crescent's current policy to pursue
a strategy of conservative use of leverage, generally with a ratio of debt to
total market capitalization targeted at approximately 40 percent, although this
policy is subject to reevaluation and
 
                                       32
<PAGE>   45
 
modification by Crescent and could be increased above 40 percent. Crescent has
based its debt policy on the relationship between its debt and its total market
capitalization, rather than the book value of its assets or other historical
measures, because management believes that market capitalization more accurately
reflects the ability of Crescent to borrow money and to meet its debt service
requirements. Market capitalization is, however, more variable than book value
of assets or other historical measures. There can be no assurance that the ratio
of indebtedness to market capitalization (or any other measure of asset value)
or the incurrence of debt at any particular level would not adversely affect the
financial condition and results of operations of Crescent.
 
RISK THAT ADEQUATE FINANCING WILL NOT BE AVAILABLE TO REFINANCE STATION DEBT
 
     As of March 31, 1998, Station had approximately $900 million of
indebtedness outstanding at rates in excess of the Operating Partnership's
current cost of capital. At the time of the closing of the Merger, as a result
of covenants under certain Station indebtedness, Crescent will be required to
refinance an aggregate of approximately $359 million of such outstanding
indebtedness. In addition, Crescent intends to finance the transaction in part
by incurring an additional $135 million in debt primarily related to transaction
costs. There are no definitive agreements or arrangements for any such
refinancing or the obtaining of any new debt, and there can be no assurance that
Crescent will be able to complete the refinancing or obtain the necessary
financing or that the terms thereof will be favorable to Crescent. In addition,
the Merger will be a change of control pursuant to Station's subordinated debt
indentures and, in the event the rating assigned to the notes issued under such
indentures declines by two gradations within 90 days of public notice of the
occurrence of the Merger (or longer in certain circumstances), holders of such
subordinated notes may require the notes be repurchased.
 
POTENTIAL DILUTION FROM TRANSACTIONS WITH AFFILIATES OF UNION BANK OF
SWITZERLAND AND MERRILL LYNCH INTERNATIONAL
 
     On August 12, 1997, Crescent entered into two transactions with affiliates
of Union Bank of Switzerland. In one transaction, Crescent sold 4,700,000
Crescent Common Shares to one of the affiliates for approximately $148 million
and received approximately $145 million in net proceeds. In the other
transaction, Crescent entered into a forward share purchase agreement with a
second affiliate. Under the forward share purchase agreement, Crescent committed
to purchase 4,700,000 Crescent Common Shares from the second affiliate by August
12, 1998. The price to be paid by Crescent for the 4,700,000 Crescent Common
Shares will be determined on the date Crescent settles the forward share
purchase agreement and will include a forward accretion component, minus an
adjustment for Crescent's distribution rate. The forward accretion component,
which is variable and cannot be determined at this time, represents a guaranteed
rate of return to the second affiliate. Crescent may fulfill its settlement
obligations under the forward share purchase agreement in cash or Crescent
Common Shares, at its option. In the event that Crescent issues additional
Crescent Common Shares pursuant to the forward share purchase agreement,
Crescent's net income per Crescent Common Share and net book value per Crescent
Common Share will decrease.
 
     On December 12, 1997, Crescent entered into two transactions with Merrill
Lynch International. In one transaction, Crescent sold 5,375,000 Crescent Common
Shares at $38.125 per share to Merrill Lynch International for approximately
$205 million and received approximately $199.9 million in net proceeds. In the
other transaction, Crescent entered into a swap agreement (the "Swap Agreement")
with Merrill Lynch International relating to 5,375,000 Crescent Common Shares
(the "Settlement Shares"), pursuant to which Merrill Lynch International will
sell, as directed by Crescent on or before December 12, 1998, a sufficient
number of Crescent Common Shares to achieve net sales proceeds equal to the
market value of the Settlement Shares on December 12, 1997 (approximately $204.9
million), plus a forward accretion component, minus an adjustment for Crescent's
distribution rate. The forward accretion component, which is variable and cannot
be determined at this time, represents a guaranteed rate of return to Merrill
Lynch International. The precise number of Crescent Common Shares that will be
required to be sold pursuant to the Swap Agreement will depend primarily on the
market price of the Crescent Common Shares at the time of settlement. The
Crescent Common Shares required to be sold by Merrill Lynch International
pursuant to the
 
                                       33
<PAGE>   46
 
Swap Agreement are expected to be the same Crescent Common Shares initially
issued by Crescent (although Merrill Lynch International, at its option, may
substitute other Crescent Common Shares that it holds). If however, as a result
of a decrease in the market price of the Crescent Common Shares, the number of
Crescent Common Shares required to be sold is greater than the number of
Settlement Shares, Crescent will deliver additional Crescent Common Shares to
Merrill Lynch International. In contrast, if such number of Crescent Common
Shares is less than the number of Settlement Shares as a result of an increase
in the market price of the Crescent Common Shares, Merrill Lynch International
will deliver Crescent Common Shares or, at the option of Crescent, cash to
Crescent. In the event that Crescent issues additional Crescent Common Shares
pursuant to the Swap Agreement, Crescent's net income per Crescent Common Share
and net book value per Crescent Common Share will decrease.
 
     On February 20, 1998, Crescent issued an additional 525,000 Crescent Common
Shares to Merrill Lynch International as a result of the decline in market price
of the Crescent Common Shares from the date of issuance on December 12, 1997
through February 12, 1998. On June 25, 1998, Crescent issued an additional
759,254 Crescent Common Shares to Merrill Lynch International as a result of a
decline in the market price of the Crescent Common Shares from February 12, 1998
through June 12, 1998. The issuances of these shares did not have a material
impact on Crescent's net income per Crescent Common Share or net book value per
Crescent Common Share.
 
                                   THE MERGER
 
     This section of the Proxy Statement/Prospectus, as well as the section
entitled "The Merger Agreement," describe certain aspects of the Merger. To the
extent that it relates to the Merger Agreement or the merger agreement for the
Reincorporation Merger (the "Reincorporation Merger Agreement"), the following
description does not purport to be complete and is qualified in its entirety by
reference to the Merger Agreement and the Reincorporation Merger Agreement,
respectively, copies of which are attached as Annex B and Annex C, respectively,
and are incorporated herein by reference. All stockholders are urged to read the
Merger Agreement and the Reincorporation Merger Agreement carefully and in their
entirety.
 
GENERAL
 
     The Merger Agreement provides that the Merger will be consummated if the
required approvals of the holders of Station Common Stock and Station
Convertible Preferred Stock are received and all other conditions to the Merger
are satisfied or waived. As a result of the Merger, the separate corporate
existence of Station will cease and Crescent will continue as the surviving
corporation (the "Surviving Corporation").
 
     As of the Effective Time, by virtue of the Merger, and without any action
on the part of the Constituent Entities or the holders of any securities of the
Constituent Entities and subject to certain provisions of the Merger Agreement,
(i) each share of Station Common Stock (including restricted shares of Station
Common Stock issued under the Station Plans (as defined herein)) issued and
outstanding immediately prior to the Effective Time (other than treasury shares
and shares of Station Common Stock held by Crescent which will be cancelled)
together with the associated Right will be converted into the right to receive
0.466 shares of validly issued, fully paid and nonassessable Crescent Common
Shares and (ii) each share of Station Convertible Preferred Stock issued and
outstanding immediately prior to the Effective Time will be converted into the
right to receive one validly issued, fully paid and nonassessable Crescent
Convertible Preferred Share. See "The Merger Agreement -- Conversion of Shares."
The Merger will be accomplished through consummation of the Reincorporation
Merger followed by the merger of Delaware Station with and into Crescent.
 
     Prior to the Effective Time, Station will sell, assign, transfer and convey
to the Operating Joint Venture, certain of Station's non-real estate assets
pursuant to a bill of sale. See "The Merger Agreement -- Certain
Transactions -- Joint Venture." As part of the Merger, it is anticipated that
Crescent will transfer the stock of certain Station subsidiaries and certain
other assets of Station (primarily consisting of the furniture, fixtures and
equipment of Station subsidiaries) to the Decontrolled Subsidiary. In addition,
following the Merger, Crescent expects to contribute substantially all of the
real estate assets acquired in the Merger to a new
 
                                       34
<PAGE>   47
 
partnership that will invest principally in casinos, other gaming properties and
other real estate property in Las Vegas, Nevada. See "Recent Developments."
 
THE REINCORPORATION MERGER
 
     Pursuant to the Reincorporation Merger, Station will be merged with and
into Delaware Station with the result that Station will be reincorporated in
Delaware. After the Reincorporation Merger, Station will have a capital
structure substantially identical to its capital structure prior to the
Reincorporation Merger (with the exception that the Rights will have been
converted into common stock of Delaware Station). Delaware Station will have
articles and bylaws substantially identical to those of Station prior to the
Reincorporation Merger with certain changes to reflect differences between
Delaware and Nevada law. See Annex C.
 
BACKGROUND OF THE MERGER
 
     In early December 1997, Salomon Brothers Inc and Smith Barney Inc.,
conducting business jointly as Salomon Smith Barney ("Salomon"), approached
Gerald Haddock, President and Chief Executive Officer of Crescent, about a
possible merger of Crescent and Station. On December 11, 1997, Frank J. Fertitta
III, President and Chief Executive Officer of Station, certain other members of
Station's management and Salomon met with Mr. Haddock in Fort Worth, Texas to
discuss a possible strategic relationship.
 
     Beginning on December 12, 1997, legal advisors to Crescent and members of
Crescent management began to conduct due diligence with respect to the
non-public information of Station and legal and financial advisors to Station
and members of Station management conducted due diligence with respect to the
non-public information of Crescent. During the same period such parties
discussed additional details of the structure and terms of the Merger.
 
     On December 16, 1997, Mr. Haddock met in Las Vegas, Nevada with Mr.
Fertitta and other members of Station's management to continue discussions and
tour Station's properties. On December 18 and 19, 1997, Crescent representatives
met with Station representatives and Salomon to continue discussions and
property visits.
 
     Following the execution of a confidentiality agreement dated as of December
22, 1997, members of management of Station, representatives of Station's
financial advisors, Salomon and Station's legal advisors, Milbank, Tweed, Hadley
& McCloy ("Milbank"), engaged in further discussions with Crescent's
representatives.
 
     From the first week of January, representatives of Station, Crescent and
Salomon met in Las Vegas and negotiated terms of the strategic merger.
 
     On January 15, 1998, the Station Board of Directors convened the first of
two special meetings to review the status of negotiations with Crescent. During
the first meeting, the Station Board of Directors was informed by management and
its legal and financial advisors as to such status. A presentation was made by
Salomon summarizing the factors that Salomon considered during the course of
their engagement to prepare a fairness opinion for the Merger. See "-- Opinion
of Financial Adviser to Station." The Station Board of Directors discussed the
details of the current status of the Merger negotiations including (i) the
consideration for the Merger, which, based on the $38 per share closing price
for the Crescent Common Shares on Friday, January 9, 1998, represented a 71%
premium over the Station Common Stock on the same day, (ii) the option for
Station to sell up to 115,000 shares of the Redeemable Preferred Stock (as
defined herein) to Crescent regardless of consummation of the Merger, (iii) the
formation and structure of the Operating Joint Venture, (iv) the "outs" that
Station and Crescent would have under the Merger Agreement, (v) the $54.0
million termination fee which Station would be required to pay under certain
circumstances, (vi) the primary strategic reasons for and benefits of the
Merger, (vii) the relative valuation of Crescent and the framework for the
valuation, (viii) the treatment of options to buy Station Common Stock held by
Station management, (ix) the availability of additional capital for profitable
expansion made possible by the Merger and the sale of the Redeemable Preferred
Stock and (x) the market uncertainty surrounding Station's proposed REIT
offering and the opportunity for Station to continue its growth plans with a
strategic partner. At the end of the
 
                                       35
<PAGE>   48
 
first meeting the Station Board of Directors decided that final approval of the
Merger should be delayed until the final documentation was completed.
 
     Subsequent to the first special meeting of the Station Board of Directors,
on January 15, 1998, the final terms of the Merger Agreement that had been
negotiated that day were considered by the Board. At the second special meeting
on January 15, 1998, the Station Board of Directors met and gave its approval to
the proposed Merger. In reaching its determination the Station Board of
Directors considered, among other matters, the oral opinion of Salomon (which
was confirmed in writing on January 16, 1998) that the consideration to be
received by holders of Station Common Stock and Station Convertible Preferred
Stock pursuant to the Merger Agreement was fair from a financial point of view.
Following the second special board meeting the Merger Agreement was executed and
delivered by the parties. During the final portion of the negotiations with
Crescent, Station did not explore alternatives to the Merger with other parties.
 
     On January 15, 1998, the Crescent Board of Trust Managers met to consider
the terms of the Merger Agreement and the transactions contemplated thereby and
approved the terms of the Merger Agreement presented to them and the
transactions contemplated thereby and authorized the execution and delivery of
the Merger Agreement.
 
     On January 16, 1998, Station and Crescent issued a press release announcing
the Merger.
 
RECOMMENDATION OF THE STATION BOARD OF DIRECTORS; REASONS FOR THE MERGER
 
     THE STATION BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AND
UNANIMOUSLY RECOMMENDS THAT HOLDERS OF STATION COMMON STOCK AND STATION
CONVERTIBLE PREFERRED STOCK VOTE FOR APPROVAL OF THE MERGER.
 
     The recommendation of the Station Board of Directors is based on a number
of factors, including the factors listed below.
 
     - The Station Board of Directors considered information and presentations
       by management of Station with respect to the financial condition, results
       of operations, businesses and properties of Station and Crescent, on both
       a historical and prospective basis, and current industry conditions.
 
     - The Station Board of Directors considered the 71% premium represented by
       the Exchange Ratio (as defined herein) on January 9, 1998, and the
       liquidity which would be provided by Station's option to sell up to
       115,000 shares of the Redeemable Preferred Stock to Crescent regardless
       of consummation of the Merger.
 
     - The Station Board of Directors considered presentations by, and the
       advice and views of, Salomon, financial advisors to Station, concerning
       Station and the financial aspects of the Merger. The Station Board of
       Directors also considered the opinion of Salomon to the effect that, as
       of January 16, 1998, and subject to the qualifications and limitations
       set forth in such opinion, the consideration to be received by holders of
       Station Common Stock and Station Convertible Preferred Stock pursuant to
       the Merger Agreement was fair to such stockholders from a financial point
       of view. See "-- Opinion of Financial Advisor to Station."
 
     - The Station Board of Directors closely reviewed the terms and conditions
       of the Merger Agreement and the likelihood that the conditions to the
       Merger would be satisfied. The Station Board of Directors also took into
       account the terms of the Merger Agreement that prohibit Station from (i)
       soliciting, initiating or encouraging the submission of, any takeover
       proposal, (ii) entering into any agreement with respect to a takeover
       proposal or (iii) taking any action to facilitate any inquiries or the
       making of any proposal that constitutes, or may reasonably be expected to
       lead to, any takeover proposal, except in response to unsolicited written
       takeover proposals from a reputable buyer to the extent Station receives
       a written opinion of Salomon, as Station's financial advisors, that such
       offer appears to be a Superior Proposal and a written opinion from legal
       counsel that the Station Board of Directors is legally obligated to
       consider such offer by principles of fiduciary duty under Nevada law. To
       the extent Station complies with the conditions of the Merger Agreement,
       including those noted above and
 
                                       36
<PAGE>   49
 
       payment of the $54.0 million termination fee and Expenses, Station may
       terminate the Merger Agreement. The Station Board of Directors believes
       that the provisions of the Merger Agreement should not deter a more
       attractive offer for Station if any party is prepared to initiate one.
       The Station Board of Directors also considered the provisions of the
       Merger Agreement relating to the treatment of employee stock options,
       directors' and officers' insurance, indemnification and exculpation and
       the other covenants and agreements of the parties. See "The Merger
       Agreement."
 
     - The Station Board of Directors considered the terms of the Merger
       Agreement relating to the conversion of Station Common Stock into
       Crescent Common Shares and Station Convertible Preferred Stock into
       Crescent Convertible Preferred Shares, historical trading prices for
       Station Common Stock, Station Convertible Preferred Stock and Crescent
       Common Shares and the possibility that the market prices of Crescent
       Common Shares and Station Common Stock used to calculate the exchange
       ratio could increase or decrease. See "Summary -- Comparative Market
       Prices," "The Merger" and "Risk Factors -- Stock Price Fluctuation; Fixed
       Exchange Ratio."
 
     - The Station Board of Directors considered the fact that the Merger
       consideration for holders of Station Common Stock is Crescent's Common
       Shares and that the Merger consideration for holders of Station
       Convertible Preferred Stock is Crescent Convertible Preferred Stock,
       giving such stockholders an opportunity to maintain a continuing equity
       interest in the business of Station through the strategic alliance with
       Crescent as well as diversification into other real estate investment
       opportunities through the REIT structure that Station had been in the
       process of creating.
 
     - The Station Board of Directors considered that the Merger would be
       tax-free to stockholders of Station. See "Tax Considerations -- Federal
       Income Tax Consequences of the Merger."
 
     - The Station Board of Directors considered the loss of the potential for
       Station to convert its operations to permit election of REIT status
       independently, the market uncertainty surrounding such conversion, the
       opportunity to continue its growth plans with a strategic partner and the
       commitment by Crescent to purchase up to $115 million of the Redeemable
       Preferred Stock regardless of consummation of the Merger together with
       the opportunities to participate in the potential growth of Crescent,
       diversify stockholders' investment, access lower cost capital, and expand
       the gaming business in partnership with Crescent, if the Merger was
       completed. The Station Board also considered the size of the break-up fee
       compared to the estimated transaction value at the time the Merger
       Agreement was executed.
 
     The Station Board of Directors did not find it practicable to and did not
quantify or otherwise assign relative weights to the foregoing factors or
determine that any factor was of particular importance. Rather, the Station
Board of Directors views its recommendation as being based on the totality of
the information presented and considered by it. The Station Board of Directors
determined that the positive effects of the foregoing factors outweighed the
negative effects of the foregoing factors and based on such determination, and
its determination that the consideration to be received by Station stockholders
in the Merger is fair, resolved to approve the Merger and recommend that
stockholders of Station vote to approve the Merger.
 
OPINION OF THE FINANCIAL ADVISOR TO STATION
 
     Salomon acted as financial advisor to Station in connection with the
Merger. At the first special meeting of the Station Board held on January 15,
1998, Salomon delivered its oral opinion, and on January 16, 1998, confirmed
such opinion in writing that, as of January 16, 1998, the consideration to be
received by the holders of Station Common Stock and Station Convertible
Preferred Stock in the Merger was fair from a financial point of view.
 
     The full text of the Salomon Opinion is attached as Annex A to this Proxy
Statement/Prospectus and sets forth a complete description of the assumptions
made, procedures followed, matters considered and limits of the review
undertaken by Salomon. No limits were imposed by the Station Board of Directors
upon Salomon with respect to the investigations made or the procedures followed
by Salomon in rendering its opinion. Holders of Station Common Stock and Station
Convertible Preferred Stock are urged to read the
 
                                       37
<PAGE>   50
 
Salomon Opinion in its entirety. The summary of the Salomon Opinion as set forth
in this Proxy Statement/ Prospectus is qualified in its entirety by reference to
the full text of the Salomon Opinion.
 
     In connection with rendering the Salomon Opinion, Salomon reviewed certain
publicly available information concerning Station and Crescent and certain other
financial information concerning Station and Crescent, including financial
forecasts that were provided to Salomon by Station and Crescent, respectively.
Salomon discussed the past and current business operations, financial condition
and prospects of Station and Crescent with certain officers and employees of
Station and Crescent, respectively. Salomon also considered such other
information, financial studies, analyses, investigations and financial, economic
and market criteria that it deemed relevant.
 
     In its review and analysis, and in arriving at the Salomon Opinion, Salomon
assumed and relied upon the accuracy and completeness of the information
reviewed by it for purposes of the Salomon Opinion, and Salomon did not assume
any responsibility for independent verification of such information. With
respect to the financial forecasts of Station and Crescent, Salomon assumed that
they had been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the respective managements of Station and
Crescent, and Salomon expressed no opinion with respect to such forecasts or the
assumptions upon which they are based. Salomon did not assume any responsibility
for making or obtaining any independent evaluation or appraisals of any of the
assets (including properties and facilities) or liabilities of Station or
Crescent. Salomon was not asked to, and did not, solicit other proposals to
acquire Station.
 
     The Salomon Opinion was necessarily based upon conditions as they existed
and could be evaluated as of the date thereof and can be evaluated only as of
such date. The Salomon Opinion did not imply any conclusion as to the likely
trading range of Crescent Common Shares or Crescent Convertible Preferred Shares
following the consummation of the Merger, which may vary depending upon, among
other factors, changes in interest rates, dividend rates, market conditions,
general economic conditions and other factors that generally influence the price
of securities. The Salomon Opinion did not address Station's underlying business
decision to effect the Merger. The Salomon Opinion was directed only to the
fairness, from a financial point of view, of the consideration to be received by
the shareholders of Station Common Stock and Station Convertible Preferred Stock
and did not constitute a recommendation as to how holders of Station Common
Stock or Station Convertible Preferred Stock should vote with respect to the
Merger.
 
     The following is a summary of the material analyses presented and discussed
by Salomon with the Station Board of Directors at its first special meeting on
January 15, 1998, in connection with the delivery of the Salomon Opinion. Based
on such analyses, Salomon noted that, for each Share of Station Common Stock
exchanged in the Merger, the holders of Station Common Stock would receive an
amount of Crescent Common Shares with a stock market value of $18.00 based upon
the exchange ratio of 0.466 Crescent Common Shares per share of Station Common
Stock and Crescent's average closing price for the 20 trading days prior to and
including January 9, 1998, of $38.63.
 
  Historical Stock Price Performance
 
     Salomon reviewed the history of trading prices for shares of Station Common
Stock over the period from January 1, 1996 to January 9, 1998. Salomon also
evaluated the trading volumes of Station Common Stock over the same period which
indicated that the weighted average trading price was $10.77 during such period,
and $8.68 during the one year period prior to the Merger announcement.
 
  Exchange Ratio Analysis
 
     Salomon reviewed the historical ratio of the daily closing prices of
Station Common Stock and Crescent Common Shares over the period from January 1,
1997 to January 9, 1998. Over such period, the Exchange Ratio reached its high
value of 0.402 in January 1997 and its low value of 0.172 in December 1997,
while the median ratio was 0.264. Salomon noted that the Exchange Ratio implied
a 76.6% premium to the median ratio.
 
                                       38
<PAGE>   51
 
  Analysis of Selected Publicly Traded Gaming Companies
 
     Using publicly available information, Salomon compared the financial and
market performance of Station with those of the following comparable gaming
companies: Circus Circus Enterprises, Inc.; Harrah's Entertainment, Inc.; Hilton
Hotels Corporation; ITT Corporation; MGM Grand, Inc.; and Mirage Resorts, Inc.
(the "Large Cap Gaming Universe"); and Aztar Corporation; Boyd Gaming
Corporation; Harvey's Casino Resorts; Primadonna Resorts; Rio Hotel & Casino;
Showboat, Inc.; and Trump Hotels and Casino Resorts, Inc. (the "Mid Cap Gaming
Universe," and together with the Large Cap Gaming Universe, the "Comparable
Companies").
 
     For Station and each of the Comparable Companies, Salomon calculated
multiples of equity value plus straight debt, minority interest, straight
preferred stock, all out-of-the-money convertibles less investments in
unconsolidated affiliates and cash (collectively, "Firm Value") to estimated
1997 and estimated 1998 earnings before interest, taxes, depreciation, and
amortization ("EBITDA"). The calculations yielded, for the Large Cap Gaming
Universe, median Firm Value multiples of 9.4x and 8.2x estimated 1997 and 1998
EBITDA, respectively, and for the Mid Cap Gaming Universe, median Firm Value
multiples of 6.9x and 6.4x estimated 1997 and 1998 EBITDA, respectively. Salomon
noted Station's pre-transaction price of $10.50 implied multiples of 8.7x
estimated 1997 EBITDA and 7.5x estimated 1998 EBITDA.
 
     By applying multiple ranges arrived at after examining the Comparable
Companies' multiples to Station's estimated 1997 and 1998 EBITDA, Salomon
derived an implied equity value per share of Station Common Stock ranging from
$5.00 to $10.00.
 
  Precedent Transaction Analysis
 
     Salomon also reviewed selected acquisition transactions in the gaming
sector. For transactions involving the acquisition of an entire casino company
with its respective management team, Salomon reviewed the following transactions
(the "Precedent Company Transactions"): ITT Corporation's acquisition of
Caesar's World (March 1995), Circus Circus Enterprises, Inc.'s acquisition of
Goldstrike Casinos (June 1995), Hilton Hotels Corporation's acquisition of
Bally's Entertainment, Inc. (December 1996), Starwood Lodging Trust's
acquisition of ITT Corporation (pending at the time of the Salomon Opinion) and
Harrah's Entertainment's acquisition of Showboat, Inc. (pending). Salomon also
reviewed the following land-based property-only acquisition transactions (the
"Precedent Property Transactions," and together with the Precedent Company
Transactions, the "Precedent Transactions"): ITT Sheraton's acquisition of the
Desert Inn Properties (November 1993), Circus Circus Enterprises, Inc.'s
acquisition of Hacienda (September 1995), William G. Bennett's acquisition of
the Sahara Hotel & Casino (October 1995) and Sun International's acquisition of
Griffin Gaming (December 1996).
 
     Salomon derived the Firm Values implied by the terms of the Precedent
Transactions and then calculated the resulting multiples of Firm Value to the
latest twelve month ("LTM") EBITDA and projected forward calendar year ("CY+1")
EBITDA. For the Precedent Company Transactions, the median Firm Value to LTM and
CY+1 EBITDA multiples were 11.0x and 8.0x, respectively. For the Precedent
Property Transactions, the median Firm Value was 8.1x LTM EBITDA. Based on this
analysis, Salomon applied multiple ranges of 10.0x to 12.0x Station's LTM EBITDA
and 7.5x to 9.5x to Station's CY+1 EBITDA to derive a reference valuation range
of $9.00 to $16.50 per share of Station Common Stock.
 
     No transaction used in the analysis of the Precedent Transactions
summarized above is identical to the Merger. Accordingly, any such analysis of
the value of the Merger involves complex considerations and judgments concerning
the differences in the potential and operating characteristics of the comparable
companies and other factors in relation to the trading and acquisition values of
the comparable companies and publicly announced transactions. Mathematical
analysis is not, in itself, a meaningful method of ensuring comparable
transaction data.
 
                                       39
<PAGE>   52
 
  Discounted Cash Flow Analysis
 
     Salomon derived ranges of per share equity value for Station Common Stock
based upon the sum of (i) the value, discounted to present, of a five-year
stream of projected unlevered cash flows and (ii) the projected terminal values
based on a range of multiples applied to Station's year 2001 projected EBITDA if
Station were to continue on a stand-alone basis (without giving effect to the
Merger). Salomon applied a weighted average cost of capital ranging from 10.0%
to 11.0% and multiples of terminal EBITDA ranging from 8.0x to 9.0x. Based on
this analysis, Salomon calculated an implied per share equity value for Station
ranging from $9.00 to $13.00.
 
  Pro Forma Combination Analysis
 
     Assuming an exchange ratio of 0.466 and using management projections,
Salomon estimated the pro forma combined funds from operations ("FFO") per share
for 1998 and noted that the transaction would be approximately 15.7% accretive
to Crescent's estimated 1998 FFO per share.
 
  Analysis of Crescent Common Shares
 
     In connection with the evaluation of the consideration being offered under
the terms of the Merger, Salomon compared the financial and market performance
of Crescent to the following publicly traded diversified, lodging and office
REITs: Boston Properties, Carr-America Realty, Equity Office Properties, Patriot
American Hospitality, Starwood Lodging Trust and Vornado Real Estate Equities
(the "Comparable REITs").
 
     For Crescent and each of the Comparable REITs, using publicly available
information, Salomon calculated the ratios of price to estimated 1997, 1998 and
1999 FFO ("P/FFO") per share. Salomon determined median P/FFO multiples for the
Comparable REITs of 16.9x, 11.6x and 10.6x for 1997, 1998, and 1999,
respectively, compared with Crescent's own multiples of 19.5x, 14.5x and 12.5x
for 1997, 1998, and 1999, respectively. Salomon then analyzed for Crescent and
each of the Comparable REITs the ratios of estimated year-to-year FFO growth
rates to their present trading P/FFO multiples ("Growth to Multiple Ratios").
The median Growth to Multiple Ratios for the Comparable REITs were 1.2, 2.4 and
1.2, while Crescent's ratios were 1.2, 3.5 and 2.6 for 1997, 1998, and 1999,
respectively. Salomon then noted that Crescent's premium P/FFO multiples were
supported by Crescent's higher than average growth prospects relative to the
Comparable REITs.
 
     The preparation of a fairness opinion is a complex process not susceptible
to partial analysis or summary descriptions. The summary set forth above does
not purport to be a complete description of the analyses underlying the Salomon
Opinion or of Salomon's presentation to the Station Board. Salomon believes that
its analysis and the summary set forth above must be considered as a whole and
that selecting portions of its analyses and the factors considered by it,
without considering all analyses and factors, could create an incomplete view of
the processes underlying the analysis set forth in its opinion. The ranges of
valuation resulting from any particular analysis described above should not be
taken to be the view of Salomon of the actual value of Station, Crescent or the
combined entity.
 
     In performing its analyses, Salomon made numerous assumptions with respect
to industry performance, general business, financial, market and economic
conditions and other matters, many of which are beyond the control of Station or
Crescent. Any estimates contained in such analyses are not necessarily
indicative of actual values or actual future results, which may be significantly
more or less than such estimates. Estimated values do not purport to be
appraisals and do not necessarily reflect the prices at which businesses or
companies might actually trade or be sold in the future.
 
     In the ordinary course of its business, Salomon and its affiliates may
actively trade the equity securities of Station and Crescent for their own
account and the accounts of their customers and, accordingly, may at any time
hold a long or short position in such securities. Salomon and its affiliates
have previously rendered certain investment banking and financial advisory
services to Station and Crescent for which they have received
 
                                       40
<PAGE>   53
 
customary compensation. Salomon and its affiliates (including Travelers Group
Inc.) may have other business relationships with Station or Crescent in the
ordinary course of their businesses.
 
     Salomon has acted as financial advisor to Station in connection with the
Merger and will receive a fee for its services. Pursuant to an engagement letter
dated December 23, 1997, Station agreed to pay Salomon a fee payable upon the
closing of the Merger. Station also agreed, under certain circumstances, to
reimburse Salomon for certain out-of-pocket expenses incurred by Salomon in
connection with its engagement, and agreed to indemnify Salomon and certain
related persons against certain liabilities, including liabilities under the
Federal securities law, relating to or arising out of its engagement.
 
     Salomon is an internationally recognized investment banking firm that
provides financial services in connection with a wide range of business
transactions. As part of its business, Salomon regularly engages in the
valuation of companies and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and for
other purposes. The Station Board retained Salomon based on Salomon's expertise
in the valuation of companies as well as its familiarity with companies in the
gaming industry.
 
INTERESTS OF CERTAIN PERSONS IN THE MERGER
 
     In considering the recommendation of the Station Board of Directors,
Station stockholders should be aware that certain members of Station's
management and the Station Board of Directors have interests in the Merger that
are different from, or in addition to, the interests of Station stockholders
generally, and that those interests may create potential conflicts of interest.
 
  Benefits to Station Employees and Directors
 
     Three executive officers of Station, Mr. Frank J. Fertitta III and Messrs.
Sartini and Christenson are members of the Station Board of Directors that
approved the Merger and two additional members, Mr. Lorenzo J. Fertitta and Ms.
Delise F. Sartini are related to such executive officers. Members of the
management of Station that were employed by Station pursuant to written
agreements generally will receive employment agreements with the Operating Joint
Venture in connection with the Merger (see "Executive Compensation -- Employment
Agreements") and Mr. Frank J. Fertitta III and Mr. Lorenzo J. Fertitta will have
rights to be appointed to the Crescent Board of Trust Managers and the Board of
Directors of the JV Parent. The Management Group will own 50% of the Operating
Joint Venture which will operate the six casino properties currently operated by
Station pursuant to a lease with Crescent. See "The Merger Agreement -- Certain
Transactions -- Joint Venture", "-- Conditions to Consummation of the Merger"
and "-- Additional Agreements."
 
  Stock Options
 
     As of the Effective Time, each Station Stock Option that is outstanding
immediately prior to the Effective Time pursuant to the Stock Plans will be
assumed by Crescent and become and represent a Substitute Option (decreased to
the nearest full share) determined by multiplying (i) the number of shares of
Station Common Stock subject to such Station Stock Option immediately prior to
the Effective Time by (ii) 0.466, at an exercise price per Crescent Common Share
(rounded up to the nearest tenth of a cent) equal to the exercise price per
share of Station Common Stock immediately prior to the Effective Time divided by
the Exchange Ratio. See "The Merger Agreement -- Station Stock Options." Also,
options to purchase an aggregate of 1.4 million shares of Station Common Stock
held by Mr. Frank J. Fertitta III and Mr. Blake L. Sartini will vest immediately
upon consummation of the Merger pursuant to the terms of their grant.
 
     In addition, each restricted share of Station Common Stock issued under the
Stock Plans issued and outstanding immediately prior to the Effective Time will
be converted into the right to receive 0.466 Common Shares.
 
                                       41
<PAGE>   54
 
     The following tables set forth as of March 31, 1998, the number of Station
Stock Options and restricted shares of Station Common Stock held by executive
officers and directors of Station:
 
                                    OPTIONS
 
<TABLE>
<CAPTION>
                        NAME                           NO. OF SHARES    DATE OF GRANT    EXERCISE PRICE
                        ----                           -------------    -------------    --------------
<S>                                                    <C>              <C>              <C>
Frank J. Fertitta III................................       30,000       5/21/93            $22.000
                                                           720,000       5/21/93             20.000
                                                           125,000        4/4/94             18.000
                                                           106,027        6/1/95             14.375
                                                         1,000,000       5/21/96             14.625(1)
                                                           160,000       9/12/97              7.500
Blake L. Sartini.....................................       30,000       5/21/93             22.000
                                                            90,000       5/21/93             20.000
                                                            25,000        4/4/94             18.000
                                                             7,500       6/14/94             13.000
                                                            39,063        6/1/95             14.375
                                                           400,000       5/21/96             14.625(1)
                                                           110,000       9/12/97              7.500
Lorenzo J. Fertitta..................................       30,000       5/21/93             22.000
                                                            69,000       5/21/93             20.000
Delise F. Sartini....................................       14,627        5/1/95             12.000
Glenn C. Christenson.................................      132,860        5/1/95             12.000
                                                            41,853        6/1/95             14.375
                                                            65,000       5/21/96             14.625
                                                           180,000       9/12/97              7.500
Scott M Nielson......................................      108,951        5/1/95             12.000
                                                            36,272        6/1/95             14.375
                                                            40,000       5/21/96             14.625
                                                           130,000       9/12/97              7.500
William W. Warner....................................      100,000       9/12/97              7.500
R. Hal Dean..........................................       10,000       5/21/93             20.000
                                                             1,000       5/21/94             14.500
                                                             1,500       10/24/94            13.750
                                                             2,500       5/21/95             11.625
                                                             2,500       5/21/96             14.625
                                                             2,500       5/21/97              9.250
Lowell H. Lebermann, Jr..............................       10,000       12/16/93            20.000
                                                             2,500       10/24/94            13.750
                                                             2,500       10/24/95            13.375
                                                             2,500       10/24/96            11.750
                                                             2,500       10/24/97            8.5625
</TABLE>
 
---------------
 
(1) This option becomes exercisable in cumulative increments of 20% when the
    stock price of the Station Common Stock equals or exceeds target prices
    separated into 12% increments in excess of the noted price or 100% upon a
    change of control such as the Merger.
 
                                       42
<PAGE>   55
 
                                RESTRICTED STOCK
 
<TABLE>
<CAPTION>
NAME                                                          NO. OF SHARES(2)
----                                                          ----------------
<S>                                                           <C>
Frank J. Fertitta III.......................................       75,000
Blake L. Sartini............................................       12,000
Glenn C. Christenson........................................       18,000
Scott M Nielson.............................................       15,000
William W. Warner...........................................        5,000
</TABLE>
 
---------------
 
(2) The restricted stock reflected in the table above vests 20% per year in
    accordance with its terms with the final vesting to occur April 4, 1999 or,
    with respect to Mr. Warner, October 24, 1999.
 
  Employment Agreement Provisions
 
     Pursuant to the provisions and the terms of their employment agreements, as
a result of the Merger, each of Mr. Frank J. Fertitta III and Messrs.
Christenson, Sartini, Nielson and Warner will receive compensation equal to
three times his base amount (as defined in Section 280G of the Code) for an
aggregate of up to $10 million. In addition, pursuant to the Merger Agreement,
the change of control provisions of the employment agreements of such
individuals and Station benefit plans (other than plans under the Station Stock
Compensation Program) to which such individuals are party will remain in effect
after the Merger, will be assumed by the Operating Joint Venture and will be
subject to unconditional guarantee by the JV Parent, which guarantee will be
unconditionally guaranteed by Crescent. See "The Merger Agreement -- Certain
Transactions -- Joint Venture" and "Executive Compensation."
 
  Indemnification and Insurance
 
     Pursuant to the Merger Agreement, Crescent has agreed that all rights to
indemnification and exculpation from liabilities for acts or omissions occurring
prior to the Effective Time existing on January 16, 1998 in favor of the current
or former directors or officers of Station and its Subsidiaries as provided in
their respective articles or certificates of incorporation or by-laws (or
comparable organizational documents) and any indemnification agreements of
Station will survive the Merger and will continue in full force and effect in
accordance with their terms for a period of not less than five years from the
Effective Time and the obligations of Station in connection therewith will be
assumed by Crescent. Crescent has agreed to provide, or to cause the Surviving
Entity to provide, Station's current directors and officers D&O Insurance that
is substantially similar to Station's existing policies or, if substantially
equivalent insurance coverage is unavailable, the best available coverage;
provided, however, that the Surviving Entity will not be required to pay an
annual premium for the D&O Insurance in excess of 120 percent of the last annual
premium paid prior to January 16, 1998, but if such annual premium would but for
this proviso exceed such amount, then Crescent has agreed to purchase as much
coverage as possible for such amount.
 
  Benefits to Insiders Regarding Crescent Operating, Inc.
 
     In connection with the Merger, Crescent Operating is expected to be offered
the opportunity to, directly or indirectly, own a 50% interest in the Operating
Joint Venture which is the lessee of the Casino Properties. Richard E. Rainwater
and John C. Goff are, respectively, the Chairman of the Board and the Vice
Chairman of the Board of both the Crescent Board of Trust Managers and the Board
of Directors of Crescent Operating; Gerald W. Haddock also serves as President,
Chief Executive Officer and a director of Crescent Operating, and serves as
President, Chief Executive Officer and a trust manager of Crescent; and Frank J.
Fertitta III and Lorenzo J. Fertitta will both have rights to be trust managers
of Crescent and directors of the JV Parent, which may be Crescent Operating. As
of April 9, 1998, senior management and the trust managers of Crescent
beneficially owned approximately 15.1% of Crescent's common equity (consisting
of Crescent Common Shares and Units, including vested options to purchase
Crescent Common Shares and Units) and approximately 15% of the outstanding
common stock of Crescent Operating. Following the Merger, the percentage of
Crescent's common equity beneficially owned by senior management and the trust
managers of Crescent will increase to approximately 16.3% due to the Common
Shares and options that Mr. Frank J.
 
                                       43
<PAGE>   56
 
Fertitta III and Mr. Lorenzo J. Fertitta will receive in the Merger. The common
management and ownership among these entities may lead to conflicts of interest
in connection with transactions between Crescent or the Operating Partnership
and Crescent Operating or the Operating Joint Venture.
 
ACCOUNTING TREATMENT
 
     The Merger will be accounted for as a "purchase" in accordance with
generally accepted accounting principles. As a result, the aggregate
consideration paid by Crescent in connection with the Merger will be allocated
to Station's assets and liabilities based upon their fair values. The assets and
liabilities and results of operation of Station will be consolidated into the
assets and liabilities and results of operations of Crescent upon consummation
of the Merger.
 
REGULATORY APPROVALS
 
  Nevada Gaming Regulations
 
     The ownership and operation of casino gaming facilities, the operation of
gaming device routes and the manufacture, selling and distribution of gaming
devices for use or play in Nevada or for distribution outside of Nevada are
subject to the Nevada Gaming Control Act and regulations promulgated thereunder
(the "Nevada Act") and various local ordinances and regulations, and to the
licensing and regulatory control of the Nevada Commission, the Nevada Board, and
various other local city and county regulatory agencies (collectively, the
"Nevada Gaming Authorities").
 
     The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and
fraudulent practices; and (v) providing a source of state and local revenues
through taxation and licensing fees. Change in such laws, regulations and
procedures could have an adverse effect on the Operating Joint Venture's gaming
operations and Crescent's ability to participate in the lease.
 
     Station is currently registered and found suitable to own the stock of its
subsidiaries that conduct gaming operations (the "Station Gaming Subsidiaries")
at its Nevada hotel/casino properties (the "Initial Nevada Casino Properties").
Crescent must receive approval to acquire control of Station through the Merger.
In addition, financing transactions relating to the Merger may require prior
approval or administrative rulings that approval is not required. In Nevada, the
Company and the Operating Partnership, which will have an interest in earnings
from gaming operations through the lease with the Operating Joint Venture (a
"Gaming Interest") in Nevada are required to be registered and found suitable,
or to be licensed by, the Nevada Gaming Authorities. Station is, and Crescent,
the Operating Partnership and the JV Parent will each be, required to be
registered by the Nevada Commission as a "publicly traded corporation" as such
term is defined in the Nevada Act (a "Registered Corporation") (assuming that
the JV Parent is a "publicly traded corporation"). The Operating Partnership
will also be required to be registered and found suitable to own the stock of
the Decontrolled Subsidiary which will be required to be registered and found
suitable to own the stock of certain Station Gaming Subsidiaries that are
expected to be acquired in the Merger, including Southwest Gaming Services, Inc.
and Green Valley Station, Inc., which owns approximately 50% of a casino and
brew pub located in southeast Las Vegas, and a subsidiary formed to own certain
furniture, fixtures and equipment transferred by Station (collectively, the
"Gaming Subsidiaries"). CREE Ltd. will be required to be registered and licensed
as a general partner of the Operating Partnership and the limited partners of
the Operating Partnership may be required to be licensed or found suitable as
limited partners in the discretion of the Nevada Gaming Authorities. The JV
Parent will also be required to be registered by the Nevada Commission as a
Registered Corporation and to be registered or licensed as a limited partner of
the Operating Joint Venture. The JV Parent will also be required to be found
suitable to own the stock of any subsidiary (the "JV Parent Subsidiary") which
will be required to be registered or licensed as a general partner of the
 
                                       44
<PAGE>   57
 
Operating Joint Venture. A limited liability company to be owned by Frank J.
Fertitta III, Lorenzo J. Fertitta and Blake L. Sartini (the "Management Entity")
and a limited liability company to be owned by other members of Station
management (the "Secondary Management Entity") will be required to be registered
or licensed as a general partner and limited partner, respectively, of the
Operating Joint Venture. The Operating Joint Venture will be required to be
registered and licensed to own the interests of its limited liability company
gaming subsidiaries (individually, an "Operating Joint Venture Gaming
Subsidiary" and collectively, the "Operating Joint Venture Gaming Subsidiaries")
under the terms of the Nevada Act. The Operating Joint Venture Gaming
Subsidiaries will be required to be licensed to conduct certain gaming
operations at the Initial Nevada Casino Properties. All registrations,
approvals, findings of suitability and licenses required to conduct gaming
operations or receive a Gaming Interest are collectively referred to hereinafter
as "Gaming Licenses." Crescent, the Operating Partnership, CREE Ltd., the
Decontrolled Subsidiary, the JV Parent, JV Parent Subsidiary, the Management
Entity and the Secondary Management Entity are individually referred to
hereinafter as a "Station Party" and collectively referred to hereinafter as the
"Station Parties."
 
     As a Registered Corporation, Station is, and Crescent, the Operating
Partnership and the JV Parent will be required to periodically submit detailed
financial and operating reports to the Nevada Commission and the Nevada Board
and furnish any other information which the Nevada Commission or the Nevada
Board may require. No person may become a member or holder of an interest of, or
receive any percentage of profits from JV Parent Subsidiary, the Decontrolled
Subsidiary, the Gaming Subsidiaries, the Management Entity, the Secondary
Management Entity, the Operating Joint Venture or the Operating Joint Venture
Gaming Subsidiaries without first obtaining Gaming Licenses and approvals from
the Nevada Gaming Authorities. The Station Parties, the Operating Joint Venture
and the Operating Joint Venture Gaming Subsidiaries will apply for Gaming
Licenses required in order to engage in gaming activities in Nevada or to have a
Gaming Interest, as applicable. The following regulatory requirements are
currently applicable to Station and the Station Gaming Subsidiaries, and will be
applicable to the Station Parties, the Gaming Subsidiaries, the Operating Joint
Venture and the Operating Joint Venture Gaming Subsidiaries upon their receipt
of all necessary Gaming Licenses and approvals from the Nevada Gaming
Authorities to conduct gaming operations at the Operating Joint Venture Casino
Properties in Nevada or to have a Gaming Interest, as applicable. The Station
Parties, the Operating Joint Venture and the Operating Joint Venture Gaming
Subsidiaries have not yet obtained Gaming Licenses necessary to conduct gaming
operations in Nevada or receive a Gaming Interest, as applicable, and no
assurances can be given that such Gaming Licenses will be obtained, or that they
will be obtained on a timely basis. Individual and company gaming license
applications have been submitted to the Nevada Board.
 
     The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, a Registered Corporation
or a company which holds a Gaming License, in order to determine whether such
individual is suitable or should be licensed as a business associate of a
Registered Corporation or a gaming licensee. Officers, directors and certain key
employees of the Station Parties, the Operating Joint Venture, the Gaming
Subsidiaries and the Operating Joint Venture Gaming Subsidiaries must file
applications with the Nevada Gaming Authorities and will be required to be
licensed or found suitable by the Nevada Gaming Authorities in connection with
the Merger. Following consummation of the Merger, officers, directors, trust
managers and key employees of the Station Parties and the Operating Joint
Venture who are actively and directly involved in gaming activities of the
Gaming Subsidiaries and the Operating Joint Venture Gaming Subsidiaries may be
required to be licensed or found suitable by the Nevada Gaming Authorities. The
Nevada Gaming Authorities may deny an application for licensing for any cause
which they deem reasonable. A finding of suitability is comparable to licensing,
and both require submission of detailed personal and financial information
followed by a thorough investigation. The applicant for licensing or a finding
of suitability must pay all the costs of the investigation. Changes in licensed
positions must be reported to the Nevada Gaming Authorities and, in addition to
their authority to deny an application for a finding of suitability or
licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a
change in a corporate or company position.
 
     If the Nevada Gaming Authorities were to find an officer, director, trust
manager or key employee unsuitable for licensing or unsuitable to continue
having a relationship with the Station Parties, the Operating
 
                                       45
<PAGE>   58
 
Joint Venture, the Gaming Subsidiaries or the Operating Joint Venture Gaming
Subsidiaries, the companies involved would have to sever all relationships with
such person. In addition, the Nevada Commission may require the Station Parties,
the Operating Joint Venture, the Gaming Subsidiaries or the Operating Joint
Venture Gaming Subsidiaries to terminate the employment of any person who
refuses to file appropriate applications. Determinations of suitability or of
questions pertaining to licensing are not subject to judicial review in Nevada.
 
     Station and the Station Gaming Subsidiaries are, and the Station Parties,
the Gaming Subsidiaries, the Operating Joint Venture and the Operating Joint
Venture Gaming Subsidiaries will be, required, to submit detailed financial and
operating reports to the Nevada Commission. Substantially all material loans,
leases, sales of securities and similar financing transactions by the Station
Parties, the Operating Joint Venture, the Gaming Subsidiaries and the Operating
Joint Venture Gaming Subsidiaries will be, required to be reported to or
approved by the Nevada Commission.
 
     If it were determined that the Nevada Act was violated by the Station
Parties, the Operating Joint Venture, a Gaming Subsidiary or an Operating Joint
Venture Gaming Subsidiary, the Gaming Licenses it holds could be limited,
conditioned, suspended or revoked, subject to compliance with certain statutory
and regulatory procedures. In addition, the Station Parties, the Operating Joint
Venture, the Gaming Subsidiaries, the Operating Joint Venture Gaming
Subsidiaries and the persons involved could be subject to substantial fines for
each separate violation of the Nevada Act at the discretion of the Nevada
Commission. Limitation, conditioning or suspension of the Gaming Licenses of the
Station Parties, the Operating Joint Venture, the Gaming Subsidiaries or the
Operating Joint Venture Gaming Subsidiaries or the appointment of a supervisor
could (and revocation of any Gaming License would) materially adversely affect
the business operations of Crescent and its ability to have a Gaming Interest
and the gaming operations of the Operating Joint Venture.
 
     Any beneficial holder of Station's voting securities, regardless of the
number of shares owned, may be, and at any time following consummation of the
Merger, any beneficial owner of the Voting Securities of Crescent or the JV
Parent or the limited partnership interests of the Operating Partnership may be,
required to file an application, be investigated, and have his suitability as a
beneficial holder of such voting securities or limited partnership interests
determined if the Nevada Commission has reason to believe that such ownership
would otherwise be inconsistent with the declared policies of the State of
Nevada. The applicant must pay all costs of investigation incurred by the Nevada
Gaming Authorities in conducting any such investigation.
 
     The Nevada Act requires any person who acquires beneficial ownership of
more than 5% of a Registered Corporation's voting securities to report the
acquisition to the Nevada Commission. The Nevada Act requires that beneficial
owners of more than 10% of a Registered Corporation's voting securities apply to
the Nevada Commission for a finding of suitability within thirty days after the
Chairman of the Nevada Board mails the written notice requiring such filing.
Under certain circumstances, an "institutional investor," as defined in the
Nevada Act, which acquires more than 10%, but not more than 15%, of a Registered
Corporation's voting securities may apply to the Nevada Commission for a waiver
of such finding of suitability if such institutional investor holds the voting
securities for investment purposes only. An institutional investor shall not be
deemed to hold voting securities for investment purposes unless the voting
securities were acquired and are held in the ordinary course of business as an
institutional investor and not for the purpose of causing, directly or
indirectly, the election of a majority of the members of the board of directors
of the Registered Corporation, any change in the Registered Corporation's
corporate charter, bylaws, management or policies or in operations of the
Registered Corporation, or any of its gaming affiliates, or any other action
which the Nevada Commission finds to be inconsistent with holding the Registered
Corporation's voting securities for investment purposes only. Activities which
are not deemed to be inconsistent with holding voting securities for investment
purposes only include: (i) voting on all matters voted on by stockholders; (ii)
making financial and other inquiries of management of the type normally made by
securities analysts for informational purposes and not to cause a change in its
management, policies or operations; and (iii) such other activities as the
Nevada Commission may determine to be consistent with such investment intent. If
the beneficial holder of voting securities who must be found suitable is a
corporation, partnership or trust, it must submit detailed business and
financial information including a list of beneficial owners. The applicant is
required to pay all costs of investigation.
 
                                       46
<PAGE>   59
 
     Any person who fails or refuses to apply for a finding of suitability or a
license within thirty days after being ordered to do so by the Nevada Commission
or the Chairman of the Nevada Board, may be found unsuitable. The same
restrictions apply to a record owner if the record owner, after request, fails
to identify the beneficial owner. Any stockholder found unsuitable and who
holds, directly or indirectly, any beneficial ownership of the voting securities
beyond such period of time as may be prescribed by the Nevada Commission may be
guilty of a criminal offense. Station is and, following consummation of the
Merger, Crescent, the Operating Partnership and the JV Parent will be subject to
disciplinary action if, after receipt of notice that a person is unsuitable to
be a stockholder or to have any other relationship with Station, Crescent, the
Operating Partnership or the JV Parent, respectively, (i) pays that person any
dividend or interest upon voting securities of such Registered Corporation or
any share of the profits or interest upon any limited partnership interest, (ii)
allows that person, directly or indirectly, any voting right conferred through
securities held by that person, (iii) pays remuneration in any form to that
person for services rendered or otherwise, or (iv) fails to pursue all lawful
efforts to require such unsuitable person to relinquish such holder's voting
securities including, the immediate purchase of said voting securities for cash
at fair market value.
 
     The Nevada Commission may, in its discretion, require the holder of any
debt security or other security of a Registered Corporation, including, but not
limited to, the Redeemable Preferred Stock, to file applications, be
investigated and be found suitable to own the debt security of a Registered
Corporation. If the Nevada Commission determines that a person is unsuitable to
own such security, then pursuant to the Nevada Act, the Registered Corporation
can be sanctioned, including the loss of its approvals, if without the prior
approval of the Nevada Commission, it: (i) pays to the unsuitable person any
dividend, interest, or any distribution whatsoever; (ii) recognizes any voting
right by such unsuitable person in connection with such securities; (iii) pays
the unsuitable person remuneration in any form; or (iv) makes any payment to the
unsuitable person by way of principal, redemption, conversion, exchange,
liquidation, or similar transaction.
 
     Station is, and, following consummation of the Merger, Crescent, the
Operating Partnership and the JV Parent will be, required to maintain a current
stock ledger in Nevada which may be examined by the Nevada Gaming Authorities at
any time. If any securities are held in trust by an agent or by a nominee, the
record holder may be required to disclose the identity of the beneficial owner
to the Nevada Gaming Authorities. A failure to make such disclosure may be
grounds for finding the record holder unsuitable. Station is, and, following
consummation of the Merger, Crescent, the Operating Partnership, the JV Parent
and the Operating Joint Venture will be, required to render maximum assistance
in determining the identity of the beneficial owner. The Nevada Commission has
the power to require Crescent's, the Operating Partnership's and the JV Parent's
share and limited partnership certificates to bear a legend indicating that the
securities are subject to the Nevada Act. To date, however, the Nevada
Commission has not imposed such a requirement on Station and it is unknown
whether such a requirement will be imposed on Crescent, the Operating
Partnership or the JV Parent.
 
     Station is not and, following consummation of the Merger, Crescent, the
Operating Partnership and the JV Parent will not be, permitted to make a public
offering of their securities without the prior approval of the Nevada Commission
if the securities or proceeds therefrom are intended to be used to construct,
acquire or finance gaming facilities in Nevada, or to retire or extend
obligations incurred for such purposes. On May 22, 1997, the Nevada Commission
granted Station prior approval to make public offerings for a period of twenty-
two months, subject to certain conditions ("Shelf Approval") and Crescent, the
Operating Partnership and the JV Parent are expected to seek a similar approval.
A Shelf Approval may, however, be rescinded for good cause without prior notice
upon the issuance of an interlocutory stop order by the Chairman of the Nevada
Board and must be renewed at the end of the twenty-two month approval period. A
Shelf Approval also typically applies to any wholly-owned affiliated company (an
"Affiliate") which is a publicly traded corporation or would thereby become a
publicly traded corporation pursuant to a public offering. A Shelf Approval also
typically includes approval to place restrictions upon and enter into agreements
not to encumber equity securities of the Gaming Subsidiaries, and for the Gaming
Subsidiaries to guarantee any security issued by, or to hypothecate their assets
to secure the payment or performance of any obligations issued by, the holder or
an Affiliate in a public offering under the Shelf Approval. A Shelf Approval
does not constitute a finding, recommendation or approval by the Nevada
Commission or the Nevada Board as to the accuracy or
 
                                       47
<PAGE>   60
 
adequacy of the prospectus or the investment merits of the securities offered.
Any representation to the contrary is unlawful.
 
     Changes in control of Station through merger, consolidation, stock or asset
acquisitions, management or consulting agreements, or any act or conduct by a
person whereby such person obtains control, including the Merger, may not, and
following consummation of the Merger in the case of Crescent, the Operating
Partnership and the JV Parent. will not be permitted to, occur without the prior
approval of the Nevada Commission. Entities seeking to acquire control of a
Registered Corporation must satisfy the Nevada Board and Nevada Commission and
meet a variety of stringent standards prior to assuming control of such
Registered Corporation. The Nevada Commission may also require controlling
stockholders, officers, directors and other persons having a material
relationship or involvement with the entity proposing to acquire control, to be
investigated and licensed as part of the approval process relating to the
transaction.
 
     The Nevada legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and corporate defense
tactics affecting Nevada corporate gaming licensees, and Registered Corporations
that are affiliated with those operations, may be injurious to stable and
productive corporate gaming. The Nevada Commission has established a regulatory
scheme to ameliorate the potentially adverse effects of these business practices
upon Nevada's gaming industry and to further Nevada's policy to: (i) assure the
financial stability of corporate gaming licensees and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and (iii) promote a neutral environment for the orderly governance of corporate
affairs. Approvals are, in certain circumstances, required from the Nevada
Commission before the Registered Corporation can make exceptional repurchases of
voting securities above the current market price thereof and before a corporate
acquisition opposed by management can be consummated. The Nevada Act also
requires prior approval of a plan of recapitalization proposed by the Registered
Corporation's board of directors in response to a tender offer made directly to
the Registered Corporation's stockholders for the purposes of acquiring control
of the Registered Corporation.
 
     License fees and taxes, computed in various ways depending upon the type of
gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the Nevada licensee's operations are conducted.
Depending upon the fee or tax involved, these fees and taxes are payable either
monthly, quarterly or annually and are based upon either (i) a percentage of the
gross revenues received, (ii) the number of gaming devices operated or (iii) the
number of table games operated. A casino entertainment tax is also required to
be paid in connection with casino operations where certain entertainment is
furnished in a cabaret, nightclub, cocktail lounge or casino showroom in
connection with the serving or selling of food or refreshments, or the selling
of any merchandise.
 
     Any person who is licensed, required to be licensed, registered, required
to be registered, or is under common control with such persons (collectively,
"Licensees"), and who proposes to become involved in a gaming venture outside of
Nevada, is required to deposit with the Nevada Board, and thereafter maintain, a
revolving fund in the amount of $10,000 to pay the expenses of investigation by
the Nevada Board of their participation in such foreign gaming. The revolving
fund is subject to increase or decrease in the discretion of the Nevada
Commission. Thereafter, Licensees are required to comply with certain reporting
requirements imposed by the Nevada Act. Licensees are also subject to
disciplinary action by the Nevada Commission if they knowingly violate any laws
of a foreign jurisdiction pertaining to foreign gaming operations, fail to
conduct foreign gaming operations in accordance with the standards of honesty
and integrity required of Nevada gaming operations, engage in activities or
enter into associations that are harmful to the State of Nevada or its ability
to collect gaming taxes and fees, or employ, contract with or associate with a
person in foreign operations who has been denied a license or finding of
suitability in Nevada on the ground of personal unsuitability.
 
  Nevada Liquor Regulations
 
     The sale of alcoholic beverages at Palace Station and Boulder Station is
subject to licensing, control and regulation by the City of Las Vegas and the
Clark County Board, respectively. Texas Station is subject to licensing control
and regulation of the City of North Las Vegas. Sunset Station is subject to the
licensing,
 
                                       48
<PAGE>   61
 
control and regulation of the City of Henderson. All licenses are revocable and
are not transferable. The agencies involved have full power to limit, condition,
suspend or revoke any such license, and any such disciplinary action could (and
revocation would) have a material adverse effect on the operations of the
Operating Joint Venture and the Gaming Subsidiaries and therefore, impact the
ability of the Operating Joint Venture to make Lease payments.
 
  Missouri Gaming Regulations
 
     Gaming was originally authorized in the State of Missouri and the City of
St. Charles on November 3, 1992, although no governmental action was taken to
enforce or implement the original law. On April 29, 1993, Missouri enacted the
Missouri Gaming Law which replaced the original law and established the Missouri
Commission, which is responsible for the licensing and regulation of riverboat
gaming in Missouri. The Missouri Commission has discretion to approve gaming
license applications for both permanently moored ("dockside") riverboat casinos
and powered ("excursion") riverboat casinos. On September 20, 1993, Station
filed its initial application with the Missouri Commission for either a dockside
or a cruising gaming license in St. Charles, Missouri, which license was issued
on May 27, 1994, thereby making Station one of the first two entrants in the
Missouri riverboat gaming market.
 
     However, due to both a January 25, 1994, ruling by the Missouri Supreme
Court which held that games of chance, including certain games authorized under
the Missouri Gaming Law such as bingo and keno, constitute "lotteries" and were
therefore prohibited under the Missouri Constitution and the failure of a state
wide election on April 5, 1994, to adopt a constitutional amendment that would
have exempted excursion boats and floating facilities from such constitutional
prohibition on lotteries, Station commenced operations only with those games
which involve some element of skill ("limited gaming"), such as poker and
blackjack, that would be constitutionally permissible. The authorization of both
games of skill and games of chance ("full-scale gaming") occurred on November 9,
1994 with passage by Missouri voters of a constitutional amendment virtually
identical to the measure which was defeated on April 5, 1994. Full-scale gaming
became effective on December 9, 1994, and by the end of December 1994, Station
was conducting full-scale gaming on both its excursion and dockside casinos in
St. Charles, Missouri.
 
     Opponents of gaming in Missouri have brought several legal challenges to
gaming in the past and may possibly bring similar challenges in the future.
There can be no assurances that any future challenges, if brought, would not
further interfere with full-scale gaming operations in Missouri, including the
operations of Station and its subsidiaries and, following consummation of the
Merger, the operations of the Station Parties. The Supreme Court of Missouri has
recently ruled, in a case, involving certain operators who compete with Station
Casino St. Charles in Maryland Heights, Missouri, that gaming may occur only in
artificial spaces that are contiguous to the surface stream of the Missouri and
Mississippi rivers. The effect this ruling may have on operations at Station
Casino Kansas City cannot be predicted.
 
     On January 16, 1997, the Missouri Commission granted Station Casino Kansas
City a Class A and Class B Excursion Gambling Boat license to own and operate
the River King and River Queen floating gaming facilities.
 
     Under the Missouri Gaming Law, the ownership and operation of riverboat
gaming facilities in Missouri are subject to extensive state and local
regulation. Upon obtaining Gaming Licenses in Missouri, Crescent, the Operating
Joint Venture and subsidiaries it has or may form and certain of its officers
and employees will be subject to the laws and regulations of the Missouri
Commission. Individual and corporate Class A gaming licenses applications have
been submitted to the Missouri Commission. Additional applications may be
required.
 
     As part of the application and licensing process for a gaming license, the
applicant must submit detailed financial, operating and other reports to the
Missouri Commission. Each applicant has an ongoing duty to update the
information provided to the Missouri Commission in the application. In addition
to the information required of the applicant, directors, officers and other key
persons must submit Personal Disclosure Forms which include detailed personal
financial information and are subject to thorough investigations. All gaming
employees must obtain an occupational license issued by the Missouri Commission.
Operators' licenses are
 
                                       49
<PAGE>   62
 
issued through application to the Missouri Commission, which requires, among
other things, (a) investigations into an applicant's character, financial
responsibility and experience and (b) that applicants furnish (i) an affirmative
action plan for the hiring and training of minorities and women and (ii) an
economic development or impact report. License fees are a minimum of $50,000 for
the initial application and $25,000 annually thereafter.
 
     The Missouri Commission may revoke or suspend gaming licenses and impose
other penalties for violation of the Missouri Gaming Law and the rules and
regulations which may be promulgated thereunder, including, without limitation,
forfeiture of all gaming equipment used for improper gaming and fines of up to
three times an operator's highest daily gross adjusted receipts during the
preceding twelve months. The gaming licenses may not be transferred or pledged
as collateral, and the Missouri Gaming Law regulations bar a licensee from
taking any of the following actions without 15 days' prior notice to, and
approval by, the Missouri Commission: any issuance of an ownership interest of
five percent or more of the licensee's issued and outstanding ownership
interests, any private incurrence of debt by the licensee or any holding company
of $1,000,000 or more, and any public issuance of debt by a licensee or its
holding company. The Missouri Commission may reopen the licensing hearing of the
applicable gaming licensee prior to or following the consummation date to
consider the effect of the transaction on the gaming licensee's suitability. In
addition, the licensee must notify the Missouri Commission of other
transactions, including the transfer of five percent or more of an ownership
interest in the licensee or holding company, the pledge of five percent or more
of the ownership interest in a licensee or holding company, and any transaction
of at least $1,000,000. The restrictions on transfer of ownership apply to
Station and its subsidiaries and, following consummation of the Merger, will
apply to Crescent, the Operating Partnership and the JV Parent.
 
     The Missouri Gaming Law imposes operational requirements on riverboat
operators, including a charge of two dollars per gaming customer that licensees
must pay to the Missouri Commission, certain minimum payout requirements, a 20%
tax on adjusted gross receipts, prohibitions against providing credit to gaming
customers (except for the use of credit cards and cashing checks) and a
requirement that each licensee reimburse the Missouri Commission for all costs
of any Missouri Commission staff necessary to protect the public on the
licensee's riverboat. Licensees must also submit audited quarterly financial
reports to the Missouri Commission and pay the associated auditing fees. The
Missouri Gaming Law provides for a loss limit of $500 per person per excursion
and requires licensees to maintain scheduled excursions with boarding and
disembarking times regardless of whether the riverboat cruises. Although the
Missouri Gaming Law provides no limit on the amount of riverboat space that may
be used for gaming, the Missouri Commission is empowered to impose such space
limitations through the adoption of rules and regulations. Additionally, United
States Coast Guard safety regulations could affect the amount of riverboat space
that may be devoted to gaming. The Missouri Gaming Law also includes
requirements as to the form of riverboats, which must resemble Missouri's
riverboat history to the extent practicable and include certain non-gaming
amenities. All eleven licensees in Missouri are authorized to conduct all or a
portion of their operations on a dockside basis.
 
     With respect to the availability of dockside gaming, which may be more
profitable than excursion gaming, the Missouri Commission is empowered to
determine on a site-by-site basis where such gaming is appropriate and shall be
permitted.
 
  General Gaming Regulations in Other Jurisdictions
 
     If Station or Crescent becomes involved in gaming operations in any other
jurisdictions, such gaming operations will subject Station or Crescent or
certain of their respective officers, directors, key employees, stockholders and
other affiliates ("Regulated Persons") to strict legal and regulatory
requirements, including mandatory licensing and approval requirements,
suitability requirements, and ongoing regulatory oversight with respect to such
gaming operations. Such legal and regulatory requirements and oversight will be
administered and exercised by the relevant regulatory agency or agencies in each
jurisdiction (the "Regulatory Authorities"). Station or Crescent, the Operating
Joint Venture and the Regulated Persons will need to satisfy the licensing,
approval and suitability requirements of each jurisdiction in which Station or
Crescent seeks to become involved in gaming operations. These requirements vary
from jurisdiction to jurisdiction, but generally concern the responsibility,
financial stability and character of the owners and managers of gaming
operations
 
                                       50
<PAGE>   63
 
as well as persons financially interested or involved in gaming operations. In
general, the procedures for gaming licensing, approval and finding of
suitability will require Station or Crescent and each Regulated Person to submit
detailed personal history information and financial information to demonstrate
that the proposed gaming operation has adequate financial resources generated
from suitable sources and adequate procedures to comply with the operating
controls and requirements imposed by law and regulation in each jurisdiction,
followed by a thorough investigation by such Regulatory Authorities. In general,
Station or Crescent and each Regulated Person will be required to pay the costs
of such investigation. An application for any Gaming License or approval may be
denied for any cause that the Regulatory Authorities deem reasonable. Once
obtained, Gaming Licenses and approvals may be subject to periodic renewal and
generally are not transferable. The Regulatory Authorities may at any time
revoke, suspend, condition, limit or restrict a Gaming License or approval for
any cause they deem reasonable. Fines for violations may be levied against the
holder of a Gaming License or approval and in certain jurisdictions, gaming
operation revenues can be forfeited to the state under certain circumstances.
There can be no assurance that Station or Crescent will obtain all of the
necessary Gaming Licenses and approvals or that their respective officers,
directors, key employees, other affiliates and certain other stockholders will
satisfy the suitability requirements in one or more of such jurisdictions, or
that such Gaming Licenses or approvals, if obtained, will not be revoked,
limited, suspended or not renewed in the future.
 
     Failure by Station or Crescent to obtain, or the loss or suspension of, any
necessary Gaming Licenses or approval would prevent Station or Crescent from
having an interest in gaming operations in such jurisdiction and possibly in
other jurisdictions. Station or Crescent may be required to submit detailed
financial and operating reports to Regulatory Authorities.
 
     The laws, regulations and procedures pertaining to gaming are subject to
the interpretation of the Regulatory Authorities and may be amended. Any changes
in such laws, regulations, or their interpretations could have a material
adverse effect on Station or Crescent.
 
     Crescent has announced its intent to contribute, following consummation of
the Merger, substantially all of the real estate assets acquired in the Merger
to a new partnership that will invest principally in casinos, other gaming
properties and other real estate property in Las Vegas, Nevada. Such partnership
and its owners will be subject to strict regulatory requirements similar to
those that will be applicable to Crescent as discussed in this section. See
"Recent Developments."
 
ANTITRUST
 
     The Antitrust Division and the FTC have jurisdiction to review certain
aspects of the Merger under the HSR Act. Station and the JV Parent are expected
to make filings required under the HSR Act sufficiently in advance of the Merger
to allow normal waiting periods thereunder to expire without early termination.
 
     The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Merger. At any time before or
after the Effective Time, the Antitrust Division or FTC could take such action
under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the Merger or seeking the divestiture of
shares of Station Common Stock or Station Convertible Preferred Stock or the
divestiture of substantial assets of Crescent or its subsidiaries, or Station or
its subsidiaries. Private parties may also bring legal action under the
antitrust laws under certain circumstances. There can be no assurance that a
challenge to the Merger on antitrust grounds will not be made or, if such a
challenge is made, of the results thereof.
 
FEDERAL SECURITIES LAWS CONSEQUENCES
 
     This Proxy Statement/Prospectus does not cover any resales of Crescent
Common Shares or Crescent Convertible Preferred Shares to be received by the
stockholders of Station upon consummation of the Merger, and no person is
authorized to make any use of this Proxy Statement/Prospectus in connection with
any such resale.
 
                                       51
<PAGE>   64
 
     All Crescent Common Shares and Crescent Convertible Preferred Shares
received by Station stockholders in the Merger will be freely transferable,
except that Crescent Common Shares and Crescent Convertible Preferred Shares
received by persons who are deemed to be "affiliates" of Station under the
Securities Act at the time of the Meeting may be resold by them only in
transactions permitted by Rule 145 or as otherwise permitted under the
Securities Act. Persons who may be deemed to be affiliates of Station for such
purposes generally include individuals or entities that control, are controlled
by, or are under common control with, Station and may include certain officers,
directors and principal stockholders of Station. The Merger Agreement requires
Station to use all reasonable efforts to cause each person, who in Station's
reasonable judgement (subject to Crescent's counsel's reasonable satisfaction)
may be deemed to be an affiliate, to execute a written agreement to the effect
that such persons will not offer or sell or otherwise dispose of any of the
Crescent Common Shares or Crescent Convertible Preferred Shares issued to such
persons in the Merger in violation of the Securities Act or the rules and
regulations promulgated by the Commission thereunder.
 
RECENT DEVELOPMENTS
 
     On June 15, 1998, Crescent filed a registration statement on Form S-3 (No.
333-56809) with the Commission relating to a planned rights offering to be made
upon consummation of the Merger to holders of the Crescent Common Shares
(including holders of Crescent Common Shares as a result of the conversion of
Station Common Stock in the Merger). It is expected that Crescent will
distribute one Crescent Right for each Crescent Common Share held. In addition,
it is expected that every five Crescent Rights will entitle the holder thereof
to purchase one Crescent Common Share at an exercise price of $31 1/8 per share.
At the same time, Crescent announced that the Crescent Board of Trust Managers
had approved, subject to consummation of the Merger, an increase in its
quarterly dividend from $0.38 per Crescent Common Share to $0.63 per share.
Crescent also announced its intent to contribute, following consummation of the
Merger, substantially all of the real estate assets acquired in the Merger to a
new partnership that will invest principally in casinos, other gaming properties
and other real estate property in Las Vegas, Nevada. Crescent expects to offer
holders of Crescent Common Shares the Gaming Rights to permit holders to acquire
common or preferred equity interests in such partnership or in a REIT which
would hold interests in such partnership. Such Gaming Rights are expected to be
taxable to the holders of Common Shares upon issuance of such Gaming Rights.
Crescent does not believe distribution of the Crescent Rights will be taxable to
holders of Crescent Common Shares, however, no assurances can be made in this
regard. Tax information will be provided to such shareholders at the time of
such distribution. The record date for either such offering will occur after the
Effective Time. The conversion price for Crescent Convertible Preferred Shares
received in the Merger in exchange for Station Convertible Preferred Stock will
be adjusted in accordance with the Statement of Designations. See Annex D. The
conversion price will be adjusted to equal the price determined by multiplying
the conversion price in effect immediately prior to the record date of the
distribution of the Crescent Rights or the Gaming Rights, as the case may be, by
a fraction of which the numerator will be the current market price per Crescent
Common Shares less the fair market value of the Crescent Rights or the Gaming
Rights, as the case may be, distributable with respect to each Crescent Common
Share (as determined by the Crescent Board of Trust Managers, whose
determination will be conclusive) and the denominator will be the current market
price per Crescent Common Share. Holders of options to purchase Station Common
Stock converted to options to purchase Crescent Common Shares pursuant to the
Merger will receive the same adjustments to their options, if any, as other
holders of options to purchase Crescent Common Shares.
 
                                       52
<PAGE>   65
 
                              THE MERGER AGREEMENT
 
     The description of the Merger Agreement contained in this Proxy
Statement/Prospectus does not purport to be complete and is qualified in its
entirety by reference to the Merger Agreement, a copy of which is attached
hereto as Annex B and is incorporated herein by reference. Capitalized terms
used in this section but not defined in this Proxy Statement/Prospectus have the
meanings assigned to them in the Merger Agreement. All stockholders are urged to
read carefully the Merger Agreement in its entirety.
 
GENERAL
 
     The Merger Agreement provides for the merger of Station with and into
Crescent at the Effective Time, the separate corporate existence of Station will
cease and Crescent will continue as the Surviving Corporation. The Merger will
be accomplished through consummation of the Reincorporation Merger followed by
the merger of Delaware Station with and into Crescent. As a result of the
Merger, Crescent will succeed to and assume all the rights and obligations of
Station.
 
EFFECTIVE TIME
 
     As soon as practicable after all of the conditions set forth in the Merger
Agreement have been satisfied or waived, but not more than 30 days prior to the
contemplated date of Closing (the "Closing Date"), certificates and/or articles
of merger (the "Articles of Merger") will be duly prepared and executed by
Crescent and Station and delivered to the appropriate state regulatory
authorities, for filing in Nevada, Delaware and Texas. The Merger will become
effective when the Articles of Merger, executed in accordance with the relevant
provisions of applicable law, are filed with the appropriate state regulatory
authorities; provided, however, that, upon mutual consent of the Constituent
Entities, the Articles of Merger may provide for a later date of effectiveness
of the Merger not more than 30 days after the date the Articles of Merger are
filed. When used herein, the term "Effective Time" shall mean the later of the
date and time at which the Articles of Merger are accepted for record with the
appropriate state regulatory authorities or such later time established by the
Articles of Merger.
 
     The Closing and all actions contemplated by the Merger Agreement to occur
at the Closing will take place on a date to be specified by the parties, which
(subject to fulfillment or waiver of the conditions set forth in the Merger
Agreement) shall be within the first 15 days of the calendar quarter following
the calendar quarter in which the last of the conditions set forth in the Merger
Agreement shall have been fulfilled or waived, or at such other time and place
as Crescent and Station shall agree.
 
CONVERSION OF SHARES
 
     As of the Effective Time, by virtue of the Merger and without any action on
the part of Crescent, Station or the holders of any securities of the
Constituent Entities:
 
          (i) Subject to the provisions of the Merger Agreement, each share of
     Station Common Stock (including restricted shares of Station Common Stock
     issued under the Station Plans (as defined below)) issued and outstanding
     immediately prior to the Effective Time (other than shares to be canceled
     as provided below) together with the associated Right shall as of the
     Effective Time be converted into the right to receive 0.466 (the "Exchange
     Ratio") validly issued, fully paid and nonassessable Crescent Common
     Shares. All such shares of Station Common Stock (and the associated
     Rights), when so converted, shall no longer be outstanding and shall
     automatically be canceled and retired and shall cease to exist and each
     holder of a certificate representing any such shares (and the associated
     Rights) shall cease to have any rights with respect thereto, except the
     right to receive (A) any dividends and other distributions in accordance
     with the Merger Agreement, (B) certificates representing the Crescent
     Common Shares into which such shares (and the associated Rights) are
     converted and (C) any cash, without interest, in lieu of fractional
     Crescent Common Shares to be issued or paid in consideration therefor upon
     the surrender of such Certificate in accordance with the provisions of the
     Merger Agreement.
 
                                       53
<PAGE>   66
 
          (ii) Subject to the provisions of the Merger Agreement, each share of
     Station Convertible Preferred Stock issued and outstanding immediately
     prior to the Effective Time shall as of the Effective Time be converted
     into the right to receive one validly issued, fully paid and nonassessable
     Crescent Convertible Preferred Shares. All such shares of Station
     Convertible Preferred Stock, when so converted into Crescent Convertible
     Preferred Shares, shall no longer be outstanding and shall automatically be
     canceled and retired and shall cease to exist and each holder of a
     certificate representing any such shares of Station Convertible Preferred
     Stock shall cease to have any rights with respect thereto, except the right
     to receive (A) any dividends and other distributions in accordance with the
     provisions of the Merger Agreement and (B) certificates representing the
     Crescent Convertible Preferred Shares into which such shares of Station
     Convertible Preferred Stock are converted to be issued in consideration
     therefor upon the surrender of such Certificate in accordance with the
     provisions of the Merger Agreement.
 
          (iii) Subject to the provisions of the Merger Agreement, each share of
     the Redeemable Preferred Stock (as defined herein) issued and outstanding
     immediately prior to the Effective Time shall as of the Effective Time be
     canceled and no cash, capital stock of Crescent or other consideration
     shall be delivered in exchange therefor.
 
          (iv) All shares of Station Common Stock that are held in the treasury
     of Station and shares of Station Common Stock owned by Crescent (together,
     in each case, with the associated Right) shall be canceled and no cash,
     capital stock of Crescent or other consideration shall be delivered in
     exchange therefor. Subject to the provisions of the Merger Agreement, each
     share of Station Common Stock that is held by any wholly owned Subsidiary
     (as defined herein) of Station or Crescent (together, in each case, with
     the associated Right) shall be converted into the number of validly issued,
     fully paid and nonassessable Crescent Common Shares equal to the Exchange
     Ratio. "Subsidiary" means any corporation, partnership, limited liability
     company, joint venture or other legal entity of which Crescent or Station,
     as the case may be (either alone or through or together with any other
     Subsidiary), (i) owns, directly or indirectly, more than 50% of the stock
     or other equity interests the holders of which are generally entitled to
     vote for the election of the board of directors or other governing body of
     such corporation, partnership, limited liability company, joint venture or
     other legal entity or (ii) is a general partner, trustee or other entity
     performing similar functions.
 
     STOCKHOLDERS OF STATION SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR
PROXIES. STATION COMMON STOCK CERTIFICATES WILL BE EXCHANGED FOR THE
CONSIDERATION PAYABLE IN THE MERGER FOLLOWING CONSUMMATION OF THE MERGER IN
ACCORDANCE WITH THE TERMS OF THE MERGER AGREEMENT.
 
EXCHANGE OF CERTIFICATES
 
     As soon as practicable after the Effective Time, Crescent shall deposit
with the exchange agent for the Merger (the "Exchange Agent"), in trust for the
holders of shares of Station Common Stock and Station Convertible Preferred
Stock converted in the Merger, certificates representing the Crescent Common
Shares or Crescent Convertible Preferred Shares, as the case may be, issuable in
exchange for outstanding shares of Station Common Stock or Convertible Preferred
Stock, as the case may be, cash required to make payments in lieu of any
fractional shares and cash or other property to pay or make any dividends or
distributions (such cash and Crescent Common Shares or Crescent Convertible
Preferred Shares, as the case may be, together with any dividends or
distributions with respect thereto, being hereinafter referred to as the
"Exchange Fund"). The Exchange Agent shall invest any cash included in the
Exchange Fund as directed by Crescent, on a daily basis. Any interest or other
income resulting from such investments shall be paid to Crescent. The Exchange
Agent shall deliver the Crescent Common Shares and the Crescent Convertible
Preferred Shares contemplated to be issued and cash or other property
distributable pursuant to the Merger Agreement out of the Exchange Fund.
 
     As soon as practicable after the Effective Time, the Exchange Agent shall
mail to each record holder of a certificate or certificates that immediately
prior to the Effective Time represented outstanding shares of Station Common
Stock or Station Convertible Preferred Stock, as the case may be, converted in
the Merger
 
                                       54
<PAGE>   67
 
(the "Certificates"), a letter of transmittal in form reasonably acceptable to
Station (which shall specify that delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon actual delivery of the
Certificates to the Exchange Agent, and shall contain instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing Crescent Common Shares or Crescent Convertible Preferred Shares, as
the case may be, and cash or other property distributable pursuant to the Merger
Agreement). Upon surrender for cancellation to the Exchange Agent of a
Certificate, together with such letter of transmittal, duly executed, the holder
of such Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole Crescent Common Shares or Crescent
Convertible Preferred Shares and cash into which the Station Common Stock (and
the associated Rights) or the Convertible Preferred Stock, as the case may be,
represented by the surrendered Certificate shall have been converted at the
Effective Time pursuant to the Merger Agreement, cash in lieu of any fractional
Crescent Common Shares in accordance with the Merger Agreement and any dividends
or other distributions in accordance with the Merger Agreement, and any
Certificate so surrendered shall forthwith be canceled.
 
     After the Effective Time, there will be no further transfers of Station
Common Stock on the stock transfer books of Station. If a certificate
representing Station Common Stock is presented for transfer, it will be canceled
and a certificate representing the appropriate number of whole Crescent Common
Shares and cash in lieu of fractional shares and any dividends and distributions
and/or the appropriate amount of in cash per share will be issued in exchange
therefor. After the Effective Time and until surrendered, shares of Station
Common Stock will be deemed for all corporate purposes, other than the payment
of any dividends and distributions, to evidence only the right to receive the
Merger Consideration.
 
DIVIDENDS
 
     No dividends or other distributions that are declared on or after the
Effective Time on the Crescent Common Shares or Crescent Convertible Preferred
Shares, as the case may be, or are payable to the holders of record thereof on
or after the Effective Time, will be paid to any person entitled by reason of
the Merger to receive a certificate representing Crescent Common Shares or
Crescent Convertible Preferred Shares, as the case may be, until such person
surrenders the related Certificate or Certificates, as provided in the Merger
Agreement, and no cash payment will be paid to any such person until such person
shall so surrender the related Certificate or Certificates. Subject to the
effect of applicable law, there shall be paid to each record holder of a new
certificate representing such Crescent Common Shares or Crescent Convertible
Preferred Shares, as the case may be: (i) at the time of such surrender or as
promptly as practicable thereafter, the amount, if any, of any dividends or
other distributions theretofore paid with respect to the Crescent Common Shares
or Crescent Convertible Preferred Shares, as the case may be, represented by
such new certificate and having a record date on or after the Effective Time and
a payment date prior to such surrender; (ii) at the appropriate payment date or
as promptly as practicable thereafter, the amount, if any, of any dividends or
other distributions payable with respect to such Crescent Common Shares or
Crescent Convertible Preferred Shares, as the case may be, and having a record
date on or after the Effective Time but prior to such surrender and a payment
date on or subsequent to such surrender; and (iii) at the time of such surrender
or as promptly as practicable thereafter, the amount of any cash payable in lieu
of fractional shares to which such holder is entitled pursuant to the Merger
Agreement. In no event shall the person entitled to receive such dividends or
other distributions or cash be entitled to receive interest on such dividends or
other distributions or cash. If any certificate representing Crescent Common
Shares or Crescent Convertible Preferred Shares, as the case may be, or cash or
other property is to be issued or delivered in a name other than that in which
the Certificate surrendered in exchange therefor is registered, it shall be a
condition of such exchange that the Certificate so surrendered shall be properly
endorsed and otherwise in proper form for transfer and that the person
requesting such exchange shall pay to the Exchange Agent any transfer or other
taxes required by reason of the issuance of certificates for such Crescent
Common Shares or Crescent Convertible Preferred Shares, as the case may be, in a
name other than that of the registered holder of the Certificate surrendered, or
shall establish to the satisfaction of the Exchange Agent that such tax has been
paid or is not applicable. Crescent or the Exchange Agent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to the
Merger Agreement to any holder of shares of Station Common Stock or Station
Convertible Preferred Stock, as the case may be, such amounts as Crescent or the
Exchange Agent is required to deduct
 
                                       55
<PAGE>   68
 
and withhold with respect to the making of such payment under the Code, or under
any provision of state, local or foreign tax law. To the extent that amounts are
so withheld by Crescent or the Exchange Agent, such withheld amounts shall be
treated for all purposes of the Merger Agreement as having been paid to the
holder of the shares of Station Common Stock or Station Convertible Preferred
Stock, as the case may be, in respect of which such deduction and withholding
was made by Crescent or the Exchange Agent.
 
NO FRACTIONAL SECURITIES
 
     No certificates or scrip representing fractional Crescent Common Shares
shall be issued upon the surrender for exchange of Certificates, and no Crescent
dividend or other distribution or stock split shall relate to any fractional
share, and no fractional share shall entitle the owner thereof to vote or to any
other rights of a security holder of Crescent. In lieu of any such fractional
share, each holder of Station Common Stock who would otherwise have been
entitled to a fraction of a Crescent Common Share upon surrender of Certificates
for exchange will be paid an amount of cash (without interest), rounded to the
nearest cent, determined by multiplying (i) the Market Price (as defined herein)
of a Crescent Common Share on the second NYSE trading day prior to the Meeting
by (ii) the fractional interest to which such holder would otherwise be
entitled.
 
     The "Market Price" of a Crescent Common Share or a share of Station Common
Stock, as applicable, on any date means the average of the daily closing prices
per Crescent Common Share (or share of Station Common Stock, as applicable) as
reported on the NYSE Composite Transactions reporting system (as published in
The Wall Street Journal or, if not published therein, in another authoritative
source mutually selected by Station and Crescent) for the 20 consecutive NYSE
trading days (the "Averaging Period") immediately preceding such date. As
promptly as practicable after the determination of the amount of cash to be paid
to holders of fractional share interests, the Exchange Agent shall so notify
Crescent, and Crescent shall deposit such amount with the Exchange Agent and
shall cause the Exchange Agent to forward payments to such holders of fractional
share interests subject to and in accordance with the terms of the Merger
Agreement. For purposes of paying such cash in lieu of fractional shares, all
Certificates surrendered for exchange by a Station stockholder shall be
aggregated, and no such Station stockholder will receive cash in lieu of
fractional shares in an amount equal to or greater than the value of one full
Crescent Common Share with respect to such Certificates surrendered.
 
RETURN OF EXCHANGE FUND
 
     Any portion of the Exchange Fund which remains undistributed to the former
stockholders of Station for one year after the Effective Time shall be delivered
to Crescent and any such former stockholders who have not theretofore complied
with the provisions of the Merger Agreement shall thereafter look only to
Crescent for payment of their claim for Crescent Common Shares, any cash payable
pursuant in lieu of fractional shares and any dividends or distributions with
respect to Crescent Common Shares. Crescent shall not be liable to any former
holder of Station Common Stock for any such Crescent Common Shares, cash and
dividends and distributions held in the Exchange Fund which is delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
 
STATION STOCK OPTIONS
 
     As of the Effective Time, each Station Stock Option that is outstanding
immediately prior to the Effective Time pursuant to the Stock Plans will be
assumed by Crescent and become and represent a fully exercisable (on the same
vesting schedule as applicable prior to the Merger) Substitute Option (decreased
to the nearest full share) determined by multiplying (i) the number of shares of
Station Common Stock subject to such Station Stock Option immediately prior to
the Effective Time by (ii) the Exchange Ratio, at an exercise price per Crescent
Common Share (rounded up to the nearest tenth of a cent) equal to the exercise
price per share of Station Common Stock immediately prior to the Effective Time
divided by the Exchange Ratio. Crescent shall pay cash to holders of Station
Stock Options in lieu of issuing fractional Crescent Common Shares upon the
exercise of Substitute Options. As of the Effective Time, each Substitute Option
shall be subject to the same terms and conditions as were applicable immediately
prior to the Effective Time
 
                                       56
<PAGE>   69
 
under the related Station Stock Option and Stock Plan under which it was
granted, including those providing for the accelerated exercisability and other
special rights arising upon an "Acceleration Event" (such as the Merger) in
accordance with the terms of such Stock Plan. The accelerated lapse of
restrictions and other special rights with respect to any shares of restricted
Station Common Stock issued under the Stock Plans shall also be preserved
following the Effective Time in accordance with the terms of the Stock Plans.
 
REPRESENTATIONS AND WARRANTIES
 
     The Merger Agreement includes representations and warranties by Crescent as
to, among other things: (i) the organization, qualification, standing and power
of Crescent and each of its subsidiaries; (ii) the capital structure of Crescent
and its Subsidiaries; (iii) the authorization, execution, delivery, performance
and enforceability of the Merger Agreement and related matters; (iv) the Merger
Agreement's noncontravention of (a) the Declaration of Trust or Crescent Bylaws,
as applicable; (b) any provision of the comparable charter or organizational
documents of any Subsidiary of Crescent, (c) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to Crescent or any of its
Subsidiaries or (d) any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to Crescent or any of its Subsidiaries or any of their
respective properties, assets or operations; (v) the absence of the need for
governmental or other filings or actions with respect to the Merger Agreement
and the transactions contemplated thereby; (vi) documents filed by Crescent with
the Commission and Crescent's financial statements and the accuracy of
information contained therein; (vii) the accuracy of information supplied by
Crescent for inclusion in the Registration Statement and this Proxy Statement/
Prospectus; (viii) the absence of certain changes or events since December 31,
1996; (ix) the possession of all necessary franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders for ownership, lease and operation of the property, or
carrying on the business, of Crescent and its Subsidiaries and the absence of
violations of Crescent's and its Subsidiaries' organizational documents,
applicable laws, ordinances, administrative or governmental rules or
regulations, or orders, decrees or judgements, the absence of undisclosed
material agreements and the absence of defaults under certain agreements; (x)
the timely filing and the accuracy of information of all material Crescent tax
returns and certain other tax matters; (xi) the absence of any actions or
proceedings against Crescent that have had or would reasonably be expected to
have a Material Adverse Effect (as defined herein) on Crescent or related to the
Merger Agreement; (xii) compliance with worker safety and environmental laws;
(xiii) the absence of liabilities of Crescent and its Subsidiaries; (xiv)
certain intellectual property rights; (xv) that no approval of shareholders is
required in connection with the Merger or the transactions contemplated by the
Merger Agreement; (xvi) the REIT status of Crescent; (xviii) brokers' and
finders' fees and expenses; and (xix) certain Employee Retirement Income
Security Act of 1974, as amended ("ERISA") matters.
 
     The Merger Agreement also includes representations and warranties by
Station as to, among other things: (i) the organization, standing, power and
qualification of Station and each Subsidiary of Station; (ii) the capital
structure of Station and its Subsidiaries; (iii) the authorization, execution,
delivery, performance and enforceability of the Merger Agreement and related
matters; (iv) the Merger Agreement's noncontravention of (a) the Station
Articles or the Station Bylaws, (b) any provision of the comparable charter or
organization documents of any Subsidiary of Station, (c) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to Station or
any of its Subsidiaries or (d) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Station or any of its Subsidiaries
or any of their respective properties, assets or operations; (v) the absence of
the need for governmental or other filings or actions with respect to the Merger
Agreement and the transactions contemplated thereby; (vi) documents filed by
Station with the Commission and Station's financial statements and the accuracy
of information contained therein; (vii) the accuracy of information supplied by
Station for inclusion in the Registration Statement and this Proxy
Statement/Prospectus; (viii) the absence of certain changes or events since
March 31, 1997; (ix) the possession of all necessary franchises, grants,
authorizations, licenses, permits, easements, variances, exceptions, consents,
certificates, approvals and orders for ownership, lease and operation of the
property, or carrying on the business, of Crescent and its Subsidiaries and the
absence of violations of Crescents and its Subsidiaries' organizational
documents, applicable laws, ordinances, administrative or governmental rules or
regulations, or orders, decrees
 
                                       57
<PAGE>   70
 
or judgements, the absence of undisclosed material agreements and the absence of
defaults under certain agreements; (x) the timely filing and the accuracy of
information of all material Station tax returns and certain other tax matters;
(xi) the absence of any actions or proceedings against Station that would
reasonably be expected to have a Material Adverse Effect on Station; (xii) the
absence of changes in benefits plans; (xiii) the existence, operations,
liabilities and compliance with applicable laws of Station's benefit plans and
certain other matters relating to ERISA; (xiv) compliance with worker safety and
environmental laws; (xv) the absence of liabilities of Station and its
Subsidiaries; (xvi) certain intellectual property rights; (xvii) amendment of
the Rights Agreement; (xviii) certain parachute payments; (xix) state takeover
statutes; (xx) the requirement of stockholder approval of the Merger Agreement;
(xxi) broker's and finders' fees and expenses; (xxii) the absence of certain
labor matters; (xxiii) title to properties; and (xiv) validity and effectiveness
of leases.
 
BUSINESS OF STATION PENDING THE MERGER
 
     Station has agreed that from the date of the Merger Agreement to the
Effective Time, it will, and it will cause each of its Subsidiaries to, carry on
its business in the usual, regular and ordinary course in substantially the same
manner as previously conducted and, to the extent consistent therewith, use all
reasonable efforts to keep available the services of its current officers and
employees and preserve its relationships with customers, suppliers, licensors,
lessors and others having business dealings with it to the end that its goodwill
and ongoing business shall be unimpaired at the Effective Time; provided,
however, that Station will be permitted to terminate or modify the business and
operations of its hotel/casino facility located in Kansas City, Missouri in the
event that an order, judgment, injunction, award or decree of any Governmental
Entity against Station or its Subsidiaries is granted or issued which results in
the suspension, termination or revocation of the gaming licenses for such
hotel/casino facility. Except as otherwise expressly permitted by the Merger
Agreement, Station has agreed not to, and not to permit any of its Subsidiaries
to, without the prior written consent of Crescent:
 
          (a) (i) declare, set aside or pay any dividends on, or make any other
     actual, constructive or deemed distributions in respect of, any of its
     capital stock, or otherwise make any payments to its stockholders in their
     capacity as such (other than dividends declared and paid on Station
     Convertible Preferred Stock or the Redeemable Preferred Stock in the
     ordinary course of business and customary with past practice, and dividends
     and other distributions by direct or indirect wholly owned Subsidiaries),
     (ii) other than in the case of any direct or indirect wholly owned
     Subsidiary, split, combine or reclassify any of its capital stock or issue
     or authorize the issuance of any other securities in respect of, in lieu of
     or in substitution for shares of its capital stock or (iii) purchase,
     redeem or otherwise acquire any shares of capital stock of Station or any
     of its Subsidiaries or any other securities thereof or any rights, warrants
     or options to acquire any such shares or other securities;
 
          (b) except as set forth in the Merger Agreement, issue, deliver, sell,
     pledge, dispose of or otherwise encumber any shares of its capital stock,
     any other voting securities or equity equivalent or any securities
     convertible into, or any rights, warrants or options to acquire any such
     shares, voting securities, equity equivalent or convertible securities,
     other than (i) the issuance of shares of Station Common Stock (and
     associated Rights) upon the exercise of employee stock options pursuant to
     the Station Plans outstanding on the date of the Merger Agreement in
     accordance with their current terms and (ii) the issuance of Station Common
     Stock upon the conversion of shares of Station Convertible Preferred Stock
     or Redeemable Preferred Stock. "Station Plans" means pension plans, welfare
     plans, material bonus, profit sharing, deferred compensation, incentive
     compensation, stock ownership, stock purchase, stock option, phantom stock,
     vacation, severance, death benefit, insurance and other plans, arrangements
     or understandings of Station and certain affiliates;
 
          (c) except as set forth in the Merger Agreement, amend its articles or
     certificate of incorporation or by-laws or other comparable organizational
     documents;
 
          (d) except as set forth in the Merger Agreement, acquire or agree to
     acquire (i) by merging or consolidating with, or by purchasing a
     substantial portion of the assets of or equity in, or by any other
 
                                       58
<PAGE>   71
 
     manner, any business or any corporation, partnership, association or other
     business organization or division thereof or (ii) any assets that are,
     individually or in the aggregate material to Station and its Subsidiaries
     taken as a whole, other than transactions that are in the ordinary course
     of business consistent with past practice and not material to Station and
     its Subsidiaries taken as a whole;
 
          (e) except as disclosed to Crescent, sell, lease, license, mortgage,
     grant an interest in or easement in, or otherwise encumber or subject to
     any Lien (as defined in The Merger Agreement) or otherwise dispose of, or
     agree to sell, lease, license, mortgage, grant an interest in or easement
     in, or otherwise encumber or subject to any Lien or otherwise dispose of,
     any of its assets, other than transactions that are in the ordinary course
     of business consistent with past practice and not material to Station and
     its Subsidiaries taken as whole;
 
          (f) incur any indebtedness for borrowed money, guarantee any such
     indebtedness, issue or sell any debt securities or warrants or other rights
     to acquire any debt securities, guarantee any debt securities or make any
     loans, advances or capital contributions to, or other investments in, any
     other person, or enter into any arrangement having the economic effect of
     any of the foregoing, other than (i) indebtedness incurred in the ordinary
     course of business consistent with past practice and (ii) indebtedness,
     loans, advances, capital contributions and investments between Station and
     any of its wholly owned Subsidiaries or between any of such wholly owned
     Subsidiaries;
 
          (g) except as permitted by the Merger Agreement, alter (through
     merger, liquidation, reorganization, restructuring or in any other fashion)
     the corporate structure or ownership of Station or any Subsidiary;
 
          (h) except as provided in the Merger Agreement, enter into or adopt
     any new, or amend any existing severance plan, agreement or arrangement or
     enter into any new compensation or other welfare arrangement or plan, or
     amend any existing Company Plan (as defined in The Merger Agreement) or
     employment or consulting agreement, other than as required by law, except
     that Station or its Subsidiaries may enter into (a) employment agreements
     if such agreements (i) are no longer than one year in duration (ii) provide
     for an annual base salary of less than $150,000, and (iii) provide, in the
     aggregate, for annual base salaries of less than $1,000,000, and (b)
     consulting agreements in the ordinary course of business that are
     terminable on no more than 90 days' notice without penalty;
 
          (i) except (1) as permitted in the Merger Agreement or (2) to the
     extent required by written employment agreements existing on the date of
     the Merger Agreement, increase the compensation payable or to become
     payable to its officers or employees, except for (i) increases in the
     ordinary course of business consistent with past practice in salaries or
     wages of non-officer employees of Station or any of its Subsidiaries and
     (ii) except to the extent required under the terms of any applicable
     incentive plan;
 
          (j) grant or award any stock options, restricted stock, performance
     shares, stock appreciation rights or other equity-based incentive awards;
 
          (k) take any action, other than reasonable and usual actions in the
     ordinary course of business consistent with past practice, with respect to
     accounting policies or procedures (other than actions required to be taken
     by generally accepted accounting principles);
 
          (l) except as disclosed to Crescent in connection with execution of
     the Merger Agreement, make or agree to make any new capital expenditure or
     expenditures which, individually, is in excess of $1,000,000 or which, in
     the aggregate, are in excess of $10,000,000;
 
          (m) pay, discharge or satisfy any claims, liabilities or obligations
     (absolute, accrued, asserted or unasserted, contingent or otherwise), other
     than the payment, discharge or satisfaction, in the ordinary course of
     business (i) consistent with past practice, of liabilities reflected or
     reserved against in, or contemplated by, (a) the most recent consolidated
     financial statements (or the notes thereto) of Station included in the
     Station SEC Documents or (b) the condensed consolidated balance sheets of
     Station and its Subsidiaries as set forth in a disclosure letter making
     reference to this section, or (ii) incurred in the ordinary course of
     business consistent with past practice;
 
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<PAGE>   72
 
          (n) settle or compromise any material federal, state, local or foreign
     tax liability; or
 
          (o) authorize, recommend, propose or announce an intention to do any
     of the foregoing, or enter into any contract, agreement, commitment or
     arrangement to do any of the foregoing.
 
BUSINESS OF CRESCENT PENDING THE MERGER
 
     Crescent has agreed that from the date of the Merger Agreement to the
Effective Time, it will, and it will cause each of its Subsidiaries to, carry on
its or their respective businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and, to the extent
consistent therewith, use all reasonable efforts to keep available the services
of its or their respective current officers and employees and preserve their
respective relationships with customers, suppliers, licensors, lessors and
others having business dealings with them to the end that their goodwill and
ongoing business shall be unimpaired at the Effective Time. Except as otherwise
expressly permitted by the Merger Agreement, Crescent has agreed not to, and not
to permit any of its Subsidiaries to, without the prior written consent of
Station:
 
          (a) declare, set aside or pay any dividends on, or make any other
     actual, constructive or deemed distributions in respect of, any of its
     capital stock, or otherwise make any payments to its shareholders or
     stockholders, as applicable, in their capacity as such (other than (A) any
     extraordinary dividend paid or to be paid by Crescent which Crescent
     reasonably determines is sufficient, when considered together with all
     dividends anticipated to be paid within the tax year including the
     Effective Time, to equal all anticipated current and accumulated earnings
     and profits for such tax year of Station and Crescent, (B) distributions in
     the aggregate not to exceed the greater of (i) the amount of any quarterly
     dividend that may be paid by Crescent in the ordinary course and (ii)
     distributions of "real estate investment taxable income" (as such term is
     defined for purposes of the Code) without regard to any net capital gains
     or the deduction for dividends paid (provided that this provision shall not
     be deemed to restrict any increases in the dividend rate of Crescent in the
     ordinary course consistent with past practice) and (C) dividends and other
     distributions by direct, indirect or wholly owned Subsidiaries) or (ii)
     other than in the case of any Subsidiary, split, combine or reclassify any
     of its capital stock or issue or authorize the issuance of any other
     securities in respect of, in lieu of or in substitution for Crescent Common
     Shares;
 
          (b) in the case of Crescent only, amend its Declaration of Trust;
 
          (c) take or omit any action that would reasonably be expected to cause
     Crescent to cease to qualify as a "real estate investment trust" for
     federal income tax purposes; or
 
          (d) authorize, recommend, propose or announce an intention to do any
     of the foregoing, or enter into any contract, agreement, commitment or
     arrangement to do any of the foregoing.
 
     Crescent has obtained a written consent from Station with respect to the
Crescent Rights as set forth in the Second Amendment to the Merger Agreement.
 
ACQUISITION PROPOSALS
 
     The Merger Agreement provides that Station must not, nor may it permit any
of its Subsidiaries to, nor may it authorize or permit any officer, director or
employee of or any investment banker, attorney, accountant, agent or other
advisor or representative of Station or any of its Subsidiaries to, (i) solicit,
initiate, or encourage the submission of, any takeover proposal, (ii) except to
the extent permitted by paragraph (b), enter into any agreement with respect to
any takeover proposal or (iii) participate in any discussions or negotiations
regarding or furnish to any person any information with respect to Station's
business, properties or assets, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any takeover proposal; provided, however, that if prior to
the Meeting, Station shall have received an unsolicited written takeover
proposal from a reputable buyer which offer, in the written opinion of Salomon,
as Station's financial advisors, appears to be a "superior proposal" and which,
in the written opinion of legal counsel to Station reasonably acceptable to
Crescent, Station's Board of Directors is legally obligated to consider by
principles of fiduciary duty to stockholders under the Nevada General
Corporation Law, the foregoing restrictions shall not apply to such proposal.
Any violation of the foregoing
 
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<PAGE>   73
 
restrictions by any officer, director or employee, of or any investment banker,
attorney, accountant, agent or other advisor or representative of, Station or
any of its subsidiaries, whether or not such person is purporting to act on
behalf of Station or otherwise, shall be deemed to be a breach by Station.
Station immediately shall cease and cause to be terminated all existing
discussions or negotiations with any persons with respect to, or that could
reasonably be expected to lead to, any takeover proposal.
 
     The Merger Agreement also provides that neither the Station Board of
Directors nor any committee thereof may (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Crescent, the approval or
recommendation by the Station Board of Directors or any such committee of the
Merger Agreement, any of the transactions contemplated by the Merger Agreement,
or the Merger, (ii) approve or recommend, or propose to approve or recommend,
any takeover proposal, or (iii) take action to render the Rights inapplicable to
any takeover proposal. Notwithstanding the foregoing, the Station Board of
Directors, to the extent required by the fiduciary obligations thereof, as
determined by and set forth in the written opinion of legal counsel to Station
reasonably acceptable to Crescent, may approve or recommend (and, in connection
therewith, withdraw or modify its approval or recommendation of the Merger
Agreement or the Merger) a Superior Proposal, subject to the terms set forth in
the Merger Agreement. Prior to approving or recommending a Superior Proposal,
entering into a binding written agreement with respect to the transaction
contemplated by any such Superior Proposal or withdrawing or modifying its
approval or recommendation of the Merger Agreement, Station (i) must notify
Crescent in writing that it intends to accept a Superior Proposal and enter into
such a binding, written agreement with respect to the transaction contemplated
thereby, and (ii) attach the most current version of such agreement to such
notice. Crescent will have the opportunity, within ten business days of receipt
of Station's written notification of its intention to enter into a binding
agreement for a Superior Proposal, to make an offer that the Station Board of
Directors determines, in good faith after consultation with its financial
advisors, is at least as favorable, from a financial point of view, to the
stockholders of Station as the Superior Proposal. Station has agreed that it
will not enter into a binding agreement referred to in clause (i) above until at
least the eleventh business day after it has provided the notice to Crescent
required thereby and to notify Crescent promptly if its intention to enter into
a written agreement referred to in its notification shall change at any time
after giving such notification.
 
     Station has agreed to immediately advise Crescent orally and in writing of
any takeover proposal or any inquiry with respect to or which could reasonably
be expected to lead to any takeover proposal, the material terms and conditions
of such takeover proposal or inquiry and the identity of the person making any
such takeover proposal or inquiry. Station has agreed to keep Crescent fully
informed of the status and details of any such takeover proposal or inquiry.
 
     "Takeover proposal" means any proposal, other than a proposal by Crescent
or an affiliate of Crescent for a merger, consolidation, share exchange,
business combination or other similar transaction involving Station or any of
its "significant subsidiaries" within the meaning of Rule 1-02 of Regulation S-X
of the Commission or any proposal or offer (including, without limitation, any
proposal or offer to stockholders of Station), other than a proposal or offer by
Crescent or an affiliate of Crescent (i) to acquire in any manner, directly or
indirectly, an equity interest in or any voting securities of, Station or any of
its "significant subsidiaries" or (ii) to acquire or lease in any manner,
directly or indirectly, any property, business or other assets that,
individually or in the aggregate, would satisfy any of the tests for such a
"significant subsidiary".
 
     "Superior proposal" means a bona fide written proposal made by a third
party to acquire Station pursuant to a tender or exchange offer, a merger, a
share exchange, a sale of all or substantially all its assets or otherwise on
terms which, in the written opinion of Salomon, are financially superior to
those provided for in the Merger, and for which financing, to the extent
required, is then fully committed or which, in the good faith judgment of
Salomon is reasonably capable of being financed by such third party. If, to the
extent permitted by the Merger Agreement, the Station Board of Directors
approves or recommends a superior proposal, Station may take appropriate action
to render the Rights inapplicable to such superior proposal.
 
     Except to the extent reasonably required in connection with Station's
obligations under the Merger Agreement, during the period from the date of the
Merger Agreement through the Effective Time, Station has agreed not to
terminate, amend, modify or waive any provision of any confidentiality or
standstill or similar
 
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<PAGE>   74
 
agreement to which Station or any of its Subsidiaries is a party (other than any
involving Crescent) unless, in the written opinion of counsel to Station
reasonably acceptable to Crescent, failure to take such action would violate the
fiduciary obligations of the Station Board of Directors, under applicable law.
During such period, Station has agreed to enforce, to the fullest extent
permitted under applicable law, the provisions of any such agreements,
including, but not limited to, obtaining injunctions to prevent any breaches of
such agreements and to enforce specifically the terms and provisions thereof in
any court of the United States or any state thereof having jurisdiction.
 
AGREEMENT TO VOTE FOR THE MERGER
 
     Each of Frank J. Fertitta III, Lorenzo J. Fertitta and Blake L. Sartini,
has agreed to vote the shares of capital stock of Station owned by such
individual that have the power to vote in favor of the Merger; provided that
such individuals shall be free to vote their shares in their sole discretion if
the Station Board of Directors terminates the Merger Agreement in accordance
with the Merger Agreement.
 
CERTAIN TRANSACTIONS
 
  Preferred Stock Investment
 
     The Merger Agreement provides that, at the option of Station, Crescent will
purchase from Station up to an aggregate of 115,000 shares of Redeemable
Preferred Stock. Each share of Redeemable Preferred Stock will be purchased at a
price of $1,000 per share (plus accrued dividends from the previous regular
quarterly dividend payment date or, if there has not yet been a regular
quarterly dividend payment date, then as of January 16, 1998, based on a 365-day
year) in cash in increments of 5,000 shares. Subject to the conditions in the
Merger Agreement, Crescent must fund the purchase price for the purchase of
shares on the 10th business day following the date of a notice from Station to
Crescent (a "Draw Notice") stating the number of shares of Redeemable Preferred
Stock to be sold to Crescent on such 10th business day and the aggregate amount
to be paid for such shares; provided that for purchases of 25,000 shares or
more, the date of such purchase shall be the 20th business day following the
date of such Draw Notice. Notwithstanding the foregoing, Crescent will not be
required to purchase shares of Redeemable Preferred Stock (i) more than two
times in any 30-day period (ii) unless, on the purchase date set forth in a Draw
Notice (A) the representations and warranties of Station set forth in the Merger
Agreement are true and correct in all material respects and (B) Station has not
breached any of its covenants set forth in the Merger Agreement in any material
respect, and (iii) unless the number of shares to be purchased, plus the
aggregate number of shares then outstanding, does not exceed 115,000. Unless
written consent is received from Crescent, Station has agreed to use the net
proceeds from sales of shares of Redeemable Preferred Stock to repay
indebtedness under Station's Amended and Restated Reducing Revolving Loan
Agreement dated as of March 19, 1996, as amended, borrowings under which were
used for acquisitions and master-planned expansions. The parties have agreed
that the provisions relating to the sale of the Redeemable Preferred Stock set
forth in the Merger Agreement will survive any termination of the Merger
Agreement. Crescent has agreed to vote all shares of Station's equity securities
held by Crescent in favor of the Merger, and any transferee of the Redeemable
Preferred Stock will be subject to such agreement to vote in favor of the
Merger.
 
  Joint Venture
 
     The Merger Agreement provides that Crescent and Station anticipate that
Crescent Operating will serve as one of the parties to an Agreement of Limited
Partnership attached as an exhibit to the Merger Agreement (the "Agreement of
Limited Partnership") relating to the formation of the Operating Joint Venture
by and among (i) Crescent Operating and certain of its affiliates and (ii)
entities owned by certain members of Station's existing management. Pursuant to
the obligation of the Operating Partnership to offer the opportunity to
participate in the Operating Joint Venture to Crescent Operating under that
certain Intercompany Agreement to which they are parties, promptly following the
date of the Merger Agreement, Crescent has agreed to cause Operating Partnership
to make such offer. If Crescent Operating does not accept the offer to become a
party to the Operating Joint Venture, Crescent has agreed to promptly take all
necessary action to provide another entity to serve as the JV Parent. Frank J.
Fertitta III, Lorenzo J. Fertitta and
 
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<PAGE>   75
 
Blake L. Sartini (the "Ownership Group") have agreed to form an entity (the
"Company JV Parent") and cause such entity to enter into the Agreement of
Limited Partnership, and Station has agreed to cause an additional entity (i) to
be formed by other members of its management and (ii) to enter into the
Agreement of Limited Partnership.
 
     Station has agreed to sell, assign, transfer and convey, prior to the
Effective Time, to the Operating Joint Venture, as directed by Crescent and with
Crescent's approval, certain of Station's non-real estate assets pursuant to the
Bill of Sale attached to the Merger Agreement.
 
     At the Effective Time, Crescent has agreed to enter into, through the
Operating Partnership, and has agreed to cause the JV Parent and the Ownership
Group has agreed to cause the JV Parent to enter into, on behalf of the
Operating Joint Venture, a lease agreement, in the form attached to the Merger
Agreement (the "Master Lease Agreement"), with the Operating Joint Venture;
provided, however, that (i) Crescent has the option (on a lease-by-lease basis),
prior to the Effective Date, to include a provision in the Master Lease
Agreement that, as to any sublease that does not conform to the requirements of
the Master Lease Agreement as to subleases, the percentage rent provided for in
the Master Lease Agreement will be computed to exclude any revenues from such
sublease, and (ii) the parties will make such revisions to the definition of
"Gross Revenues" and "Gross Winnings" contained in the Master Lease Agreement as
shall be necessary to comply with the provisions of Section 856 of the Code
relating to rents from real property not based on profits. Crescent and the
Ownership Group have entered into a letter agreement regarding the terms upon
which the Master Lease Agreement will be executed.
 
     At or prior to the Effective Time, Station has agreed to assign, and
Crescent, Station and the Ownership Group have agreed to cause the Operating
Joint Venture to assume the employment agreements (the "Employment Agreements")
of each of Frank J. Fertitta III, Glenn C. Christenson, Blake L. Sartini, Scott
M. Nielson, and William W. Warner (the "Key Executives") and certain other
management employees (the "Management Employees") and the Station Plans other
than the Stock Plans. See "Executive Compensation -- Employment Agreements." At
such time, Crescent has agreed to cause the JV Parent to guarantee the
performance by the Operating Joint Venture of its obligations under such
Employment Agreements and Company Plans (the "JV Parent Guarantee"); provided
that the JV Parent Guarantee will be subordinate to all obligations of the JV
Parent to Crescent. In addition, Crescent has agreed to unconditionally
guarantee the performance by the JV Parent of its obligations under the JV
Parent Guarantee with respect only to the Key Executives (the "Crescent
Guarantee"), without regard to any such subordination. The obligations of the JV
Parent to execute the JV Parent Guarantee and Crescent to execute the Crescent
Guarantee as to any person are conditioned on such person accepting employment
with the Operating Joint Venture. Station has agreed to use its best efforts to
cause each of the Management Employees and the Key Executives to consent to the
assignment of such employee's employment agreement to the Operating Joint
Venture. The rights and benefits of the Management Employees and the Key
Executives under the employment agreements after the assignment to the Operating
Joint Venture will be at least as favorable to such persons as they were
immediately prior to such assignment: with the only changes being: (i) the
substitution of the Operating Joint Venture as the employer; (ii) the
substitution of the Operating Joint Venture as the primary obligor under such
Company Plans and (iii) an amendment to the Employment Agreement of Frank J.
Fertitta III to include a non-competition provision identical to that included
in the other Employment Agreements. Any such assignment and acceptance of
employment will not be deemed to imply in any way that the change-of-control
provisions of such agreements and plans have not been triggered with respect to
changes-of-control payments or terminations after a change-of-control. In
addition, the parties have agreed that all securities issuable, or any
compensation based on the market value of specified securities, under any of the
Station Plans other than the Stock Plans will be issued in the form of, and will
be based on the market value of, the common stock of the JV Parent.
 
  Additional Agreements
 
     Crescent has agreed to use all reasonable efforts to list on the NYSE, upon
official notice of issuance, the Crescent Common Shares and the Crescent
Convertible Preferred Shares to be issued in connection with the Merger.
 
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<PAGE>   76
 
     Crescent and each member of the Ownership Group have agreed to enter into
Registration Rights and Lock-Up Agreements in the form attached to the Merger
Agreement. The agreements provide for the registration under securities laws of
the sale of, among other securities, the Crescent Common Shares, the Crescent
Rights and the Gaming Rights owned by Messrs. Frank J. Fertitta III, Lorenzo J.
Fertitta and Blake L. Sartini.
 
     Crescent has agreed that, upon request by Frank J. Fertitta III and Lorenzo
J. Fertitta, delivered within three months after the Effective Time, such
persons shall have rights to become members of the Crescent Board of Trust
Managers and of the Board of Directors of JV Parent.
 
     Station has also agreed to merge all of its Subsidiaries with and into
itself, such that on the Closing Date Station will have no Subsidiaries.
 
     Station has agreed to take such further actions and engage in such further
transactions as determined by Crescent to be reasonably necessary, in the
opinion of counsel to Crescent, to preserve Crescent's status as a REIT under
the Code, so long as such actions have no adverse economic effect on Station and
its stockholders in the event the Merger is not consummated.
 
INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE
 
     Pursuant to the Merger Agreement, Crescent has agreed that all rights to
indemnification and exculpation from liabilities for acts or omissions occurring
prior to the Effective Time existing on January 16, 1998 in favor of the current
or former directors or officers of Station and its Subsidiaries as provided in
their respective articles or certificates of incorporation or by-laws (or
comparable organizational documents) and any indemnification agreements of
Station will survive the Merger and will continue in full force and effect in
accordance with their terms for a period of not less than five years from the
Effective Time and the obligations of Station in connection therewith will be
assumed by Crescent. Crescent has agreed to provide, or to cause the Surviving
Entity to provide, Station's current directors and officers D&O Insurance that
is substantially similar to Station's existing policies or, if substantially
equivalent insurance coverage is unavailable, the best available coverage;
provided, however, that the Surviving Entity will not be required to pay an
annual premium for the D&O Insurance in excess of 120 percent of the last annual
premium paid prior to January 16, 1998, but if such annual premium would but for
this proviso exceed such amount, then Crescent has agreed to purchase as much
coverage as possible for such amount.
 
     The foregoing indemnification and insurance provisions are intended to be
for the benefit of, and will be enforceable by, each person who is or has been a
director or officer of Station or a subsidiary of Station, and such director's
or officer's heirs and personal representatives and shall be binding on all
successors and assigns of Crescent.
 
CONDITIONS TO THE CONSUMMATION OF THE MERGER
 
     The respective obligations of Station, on the one hand, and Crescent, on
the other hand, to consummate the Merger are subject to the fulfillment (or
waiver by such party) at or prior to the Effective Time of the following
conditions:
 
          (a) the Merger Agreement shall have been duly approved by the
     requisite vote of stockholders of Station Common Stock and Convertible
     Preferred Stock in accordance with applicable law and the Articles of
     Incorporation and Bylaws of Station;
 
          (b) the Crescent Common Shares and the Crescent Convertible Preferred
     Shares issuable in the Merger and pursuant to the Substitute Options shall
     have been authorized for listing on the NYSE, subject to official notice of
     issuance;
 
          (c) (i) the waiting period (and any extension thereof) applicable to
     the consummation of the Merger under the HSR Act shall have expired or been
     terminated;
 
          (ii) all consents, approvals, orders or authorizations of or
     registrations, declarations or filings with any governmental entity, which
     the failure to obtain, make or occur would reasonably be expected to have
 
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<PAGE>   77
 
     a Material Adverse Effect on Station (assuming the Merger has taken place),
     shall have been obtained, shall have been made or shall have occurred, and
     shall be in full force and effect;
 
          (iii) all consents, approvals, findings of suitability, licenses,
     permits, orders or authorizations of and registrations, declarations or
     filings with any governmental entity, with jurisdiction in respect of
     gaming and liquor laws, in each case, required or necessary in connection
     with the Merger and the Merger Agreement and the transactions contemplated
     by the Merger Agreement (including, but not limited to, approval, licensing
     or registration of (i) Crescent and its officers, trust managers and
     shareholders, as necessary and (ii) the Operating Joint Venture and any of
     its subsidiaries) shall have been obtained and made and shall be in full
     force and effect;
 
          (d) the Registration Statement shall have become effective in
     accordance with the provisions of the Securities Act, no stop order
     suspending the effectiveness of the Registration Statement shall have been
     issued by the Commission and no proceedings for that purpose have been
     initiated or, to the knowledge of Crescent or Station, threatened by the
     Commission, and all necessary state securities or blue sky authorizations
     shall have been received;
 
          (e) no court or other governmental entity having jurisdiction over
     Station, Crescent, or any of their respective subsidiaries, shall have
     enacted, issued, promulgated, enforced or entered any law, rule,
     regulation, executive order, decree, injunction or other order (whether
     temporary, preliminary or permanent) (after the date of the Merger
     Agreement) which is then in effect and has the effect of making the Merger
     or any of the transactions contemplated thereby illegal; provided, however,
     that each of the parties shall have used all reasonable efforts to prevent
     and to appeal as promptly as possible any such law, rule, regulation,
     executive order, decree, injunction or other order; and
 
          (f) (i) no federal legislative or regulatory change shall have
     occurred that would cause Crescent to cease to qualify as a "real estate
     investment trust" for federal income tax purposes; and (ii) no federal
     legislative or regulatory change shall have occurred that would cause the
     Merger to be taxable to any of Crescent, Station, the shareholders of
     Crescent or the stockholders of Station; and
 
          (g) The Operating Joint Venture, the Company JV Parent and the
     Ownership Group shall have entered into a Right of First Refusal and
     Non-Competition Agreement.
 
     The obligation of Station to effect the Merger is subject to the
fulfillment (or waiver by Station) at or prior to the Effective Time of the
following additional conditions:
 
          (a) Crescent shall have performed each of its agreements contained in
     the Merger Agreement required to be performed at or prior to the Effective
     Time, each of the representations and warranties of Crescent contained in
     the Merger Agreement that is qualified as to materiality shall be true and
     correct at and as of the Effective Time as if made at and as of such time
     (other than representations and warranties which address matters only as of
     a certain date, which shall have been true and correct as of such certain
     date) and each of the representations and warranties that is not so
     qualified shall be true and correct in all material respects at and as of
     the Effective Time as if made on and as of such date (other than
     representations and warranties which address matters only as of a certain
     date, which shall have been true and correct in all material respects as of
     such certain date), in each case except as contemplated or permitted by the
     Merger Agreement, and Station shall have received certificates signed on
     behalf of Crescent by its Vice Chairman, President and Chief Executive
     Officer or Senior Vice President, Law and Secretary and its Senior Vice
     President, Chief Financial and Accounting Officer to such effect;
 
          (b) Crescent shall have obtained the consent or approval of each
     person that is not a governmental entity whose consent or approval shall be
     required in connection with the transactions contemplated thereby under any
     loan or credit agreement, note, mortgage, indenture, lease, hotel
     management agreement, joint venture agreement or other agreement or
     instrument to which Crescent or a Subsidiary is a party, except as to which
     the failure to obtain such consents and approvals, individually or in the
     aggregate, would not be expected, in the reasonable opinion Station, to
     have a Material Adverse Effect on Crescent or upon the consummation of the
     transactions contemplated in the Merger Agreement.
 
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<PAGE>   78
 
          (c) there shall not be pending or threatened any suit, action or
     proceeding by any governmental entity or any other person, or before any
     court or governmental authority, agency or tribunal, domestic or foreign,
     in each case that has a significant likelihood of success challenging the
     acquisition by Crescent of any shares of Station Common Stock, seeking to
     restrain or prohibit the consummation of the Merger or any of the other
     transactions contemplated by the Merger Agreement or seeking to obtain from
     Crescent any damages that are material in relation to Station, Crescent and
     their subsidiaries taken as a whole;
 
          (d) the opinion of Shaw Pittman, in form and substance reasonably
     satisfactory to Station, shall have been delivered to Station on the
     Closing Date stating that (i) Crescent is a "real estate investment trust"
     for federal income tax purposes, (ii) consummation of the transactions
     contemplated by the Merger Agreement will not cause Crescent to cease to
     qualify as a "real estate investment trust" for federal income tax
     purposes, and (iii) that the Merger will be treated for Federal income tax
     purposes as a reorganization within the meaning of section 368(a) of the
     Code, and that each of Crescent and Station will be a party to that
     reorganization within the meaning of section 368(b) of the Code. Such
     counsel shall not have unreasonably refused to deliver such opinion, and
     issues relating to the subsequent transfer of the assets from Crescent to
     the Operating Partnership shall not constitute a reasonable basis for
     refusal to render such opinion. In rendering such opinion, such counsel
     will be entitled to rely upon representations made in the Merger Agreement
     or requested by such counsel and made by Crescent and Crescent OP, and on
     representations requested by such counsel and made by Station;
 
          (e) the opinion of Shaw Pittman, dated the Closing Date, shall have
     been delivered to Station on the Closing Date substantially in the form
     attached to the Merger Agreement;
 
          (f) the "comfort" letter of Arthur Andersen L.L.P., Crescent's
     independent public accountants, shall have been delivered to Station in
     form and substance reasonably satisfactory to Station as described in the
     Merger Agreement;
 
          (g) Crescent shall have performed all of its obligations, if any, with
     respect to the purchase of Redeemable Preferred Stock, in all material
     respects; and
 
          (h) the Operating Joint Venture shall have assumed all obligations
     under and adopted the Station Plans as required by the Merger Agreement,
     without regard to materiality. The Operating Joint Venture shall have
     agreed to honor without modification or contest, and to make required
     payments when due under, all Company Plans (without regard to materiality)
     in accordance with their terms as of the date of the Merger Agreement (as
     modified to the extent permitted by the Merger Agreement). The Operating
     Joint Venture shall have agreed to employ at their current locations each
     person who is an employee of Station immediately prior to the Effective
     Time (the "Affected Employees") on terms no less favorable in the aggregate
     (including with respect to position, duties, responsibilities,
     compensation, incentives and location) than those provided on the date of
     the Merger Agreement to the Affected Employees. See "Executive Compensation
     -- Employment Agreements." The Operating Joint Venture shall have agreed to
     provide each Affected Employee with benefits that are at least equivalent
     in the aggregate to the benefits provided to each such Affected Employee
     immediately prior to the Effective Time. Crescent shall have agreed that,
     for purposes of all employee benefit plans (including, but not limited to,
     all "employee benefit plans" within the meaning of Section 3(3) of ERISA,
     and all policies and employee fringe benefit programs, including vacation
     policies) of the Operating Joint Venture (such plans, programs, policies
     and arrangements, each a "Buyer Plan") in which the Affected Employees may
     participate following the Effective Time under which an employee's
     eligibility or benefits depends, in whole or in part, on length of service,
     credit will be given to the Affected Employees for service previously
     credited with Station or any affiliates of Station prior to the Effective
     Time, provided, that such crediting of service does not result in
     duplication of benefits, and provided that such crediting of service shall
     not be given for benefit accrual purposes under any Buyer Plan that is a
     defined benefit plan. Affected Employees shall also be given credit for any
     deductible or co-payment amounts paid in respect of the plan year in which
     the Effective Time occurs, to the extent that, following the Effective
     Time, they participate in any Buyer Plan for which deductibles or
     co-payments are required. The Operating Joint Venture shall have caused
     each Buyer Plan to waive (i) any preexisting condition restriction or (ii)
     waiting period
 
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<PAGE>   79
 
     limitation which would otherwise be applicable to an Affected Employee on
     or after the Effective Time. On or prior to the Effective Time, the
     Operating Joint Venture shall have assumed all liabilities and obligations
     whatsoever for all accrued benefits under the Station 401(k) Plan in
     respect of the Affected Employees and Crescent shall be relieved of all
     such liabilities and obligations. Crescent and Station shall cooperate in
     the filing of documents required, if any, by the transfer of assets and
     liabilities described herein.
 
     The obligations of Crescent to effect the Merger are subject to the
fulfillment (or waiver by Crescent) at or prior to the Effective Time of the
following additional conditions:
 
          (a) Station shall have performed each of its agreements contained in
     the Merger Agreement required to be performed at or prior to the Effective
     Time, each member of the Ownership Group and each of William W. Warner,
     Glenn C. Christenson and Scott M Nielson shall have performed each of his
     agreements contained in the Merger Agreement required to be performed at or
     prior to the Effective Time, each of the representations and warranties of
     Station contained in the Merger Agreement that is qualified as to
     materiality shall be true and correct at and as of the Effective Time as if
     made at and as of such time (other than representations and warranties
     which address matters only as of a certain date, which shall have been true
     and correct as of such certain date) and each of the representations and
     warranties that is not so qualified shall be true and correct in all
     material respects at and as of the Effective Time as if made on and as of
     such date (other than representations and warranties which address matters
     only as of a certain date, which shall have been true and correct in all
     material respects as of such certain date), in each case except as
     contemplated or permitted by the Merger Agreement, and Crescent shall have
     received a certificate signed on behalf of Station by its Chief Executive
     Officer and its Chief Financial Officer to such effect;
 
          (b) Station shall have obtained any amendments, waivers, consents or
     approvals with respect to certain agreements and documents, as Crescent
     shall reasonably request;
 
          (c) Crescent shall have received from each person identified as
     affiliates of Station an executed copy of an agreement relating to the
     resale of Crescent Common Shares;
 
          (d) there shall not be pending or threatened any suit, action or
     proceeding by any governmental entity or any other person that has a
     significant likelihood of success (i) seeking to restrain or prohibit the
     consummation of the Merger or any of the other transactions contemplated by
     the Merger Agreement or seeking to obtain from Station any damages that are
     material in relation to Station, Crescent and their respective Subsidiaries
     taken as a whole, (ii) seeking to prohibit or limit the ownership or
     operation by Station, Crescent or any of its respective Subsidiaries of any
     material portion of the combined business or assets of Station, Crescent
     and their respective Subsidiaries, or to compel Station, Crescent or their
     respective Subsidiaries to dispose of or hold separate any material portion
     of the combined business or assets of Station, Crescent and their
     respective Subsidiaries, as a result of the Merger or any of the other
     transactions contemplated by the Merger Agreement, (iii) seeking to impose
     limitations on the ability of Crescent to acquire or hold, or exercise full
     rights of ownership of, any shares of Station Common Stock or Station
     Convertible Preferred Stock, including, without limitation, the right to
     vote any Station Common Stock or Station Convertible Preferred Stock
     purchased by it on all matters properly presented to the stockholders of
     Station, (iv) except as set forth in the Station SEC Documents, seeking to
     prohibit Crescent or any of its Subsidiaries from effectively controlling
     in any material respect the business or operations of Station or its
     Subsidiaries or (v) which otherwise would reasonably be expected to have a
     Material Adverse Effect on Station; other than any suit, action or
     proceedings against Station or its Subsidiaries seeking to revoke any
     gaming licenses or require any modification of Station's hotel/casino
     facility located in Kansas City, Missouri;
 
          (e) the Rights shall not have become nonredeemable, exercisable,
     distributed or triggered pursuant to the terms of the Rights Agreement;
 
          (f) the opinion of Shaw Pittman, shall have been delivered to Crescent
     on the Closing Date in form and substance reasonably satisfactory to
     Crescent stating that (i) Crescent is a "real estate investment trust" for
     federal income tax purposes, (ii) consummation of the transactions
     contemplated by the
 
                                       67
<PAGE>   80
 
     Merger Agreement will not cause Crescent to cease to qualify as a "real
     estate investment trust" for federal income tax purposes, and (iii) that
     the Merger will be treated for Federal income tax purposes as a
     reorganization within the meaning of section 368(a) of the Code, and that
     each of Crescent and Station will be a party to that reorganization within
     the meaning of section 368(b) of the Code. Also on the Closing Date, the
     opinion of Shaw Pittman, shall have been delivered to Crescent in form and
     substance reasonably satisfactory to Crescent stating that, except as
     disclosed in the Merger Agreement or in the SEC Documents, (i) the
     transactions contemplated in "Certain Transactions -- Joint Venture" comply
     in all respects with applicable law, (ii) to the extent applicable, such
     transactions shall have been effective to transfer the full and complete
     interest in and rights with respect to the disposed assets and (iii) such
     transactions are not the subject of any pending or threatened claim or
     challenge by any person. Such counsel shall not have unreasonably refused
     to deliver such opinions, and issues relating to the subsequent transfer of
     the assets from Crescent to the Operating Partnership shall not constitute
     a reasonable basis for refusal to render the opinions. In rendering such
     opinions, such counsel will be entitled to rely upon representations
     requested by such counsel and made by Crescent;
 
          (g) Crescent shall have received the resignations of each officer and
     director of Station and each of its Subsidiaries; and
 
          (h) Crescent shall have received, in form and substance reasonably
     satisfactory to Crescent, from Arthur Andersen L.L.P., Station's
     independent public accountants, the "comfort" letter described in Merger
     Agreement.
 
TERMINATION
 
     The Merger Agreement may be terminated at any time prior to the Effective
Time whether before or after the approval by the stockholders of Station:
 
          (a) by mutual written consent of Crescent and Station;
 
          (b) by either Crescent or Station if there has been a material breach
     of the representations, warranties, covenants and agreements on the part of
     the other set forth in the Merger Agreement, which breach has not been
     cured within ten business days following receipt by the breaching party of
     notice of such breach from the nonbreaching party;
 
          (c) by either Crescent or Station if any permanent order, decree,
     ruling or other action of a court or other competent authority restraining,
     enjoining or otherwise preventing the consummation of the Merger has become
     final and non-appealable;
 
          (d) by either Crescent or Station if the Merger has not been
     consummated before January 31, 1999 (except that either party, in its
     discretion, shall have the right to extend the date of consummation of the
     Merger from January 31, 1999, to a date not later than March 31, 1999),
     unless the failure to consummate the Merger is the result of a material
     breach of the Merger Agreement by the party seeking to terminate the Merger
     Agreement; provided, however, that the passage of such period will be
     tolled for any part thereof during which any party is subject to a nonfinal
     order, decree, ruling or other action restraining, enjoining or otherwise
     preventing the consummation of the Merger;
 
          (e) by either Crescent or the Station Board of Directors if any
     required approval of the Merger by the holders of each class of capital
     stock of Station has not been obtained by reason of the failure to obtain
     the required vote at a duly held meeting of such stockholders or at any
     adjournment thereof;
 
          (f) by Crescent if the Station Board of Directors shall or shall
     resolve to (i) not recommend, or withdraw its approval or recommendation
     of, the Merger, the Merger Agreement or any of the transactions
     contemplated by the Merger Agreement, (ii) modify such approval or
     recommendation in a manner adverse to Crescent, or (iii) approve or
     recommend a superior proposal in accordance with the terms of the Merger
     Agreement; and
 
          (g) by the Station Board of Directors if (i) to the extent permitted
     by the Merger Agreement, the Station Board of Directors authorizes Station
     to enter into a binding written agreement concerning a
 
                                       68
<PAGE>   81
 
     transaction that constitutes a Superior Proposal and Station provides
     notification to Crescent in accordance with the Merger Agreement, and (ii)
     Crescent does not make, within ten business days of receipt of Station's
     written notification of its intention to enter into a binding agreement for
     a Superior Proposal, an offer that the Station Board of Directors
     determines, in good faith after consultation with its financial advisors,
     is at least as favorable, from a financial point of view, to the
     stockholders of Station as the Superior Proposal, and (iii) Station, prior
     to such termination has paid to Crescent $54.0 million plus all Expenses as
     provided by the Merger Agreement.
 
CERTAIN FEES AND EXPENSES
 
     The Merger Agreement provides that, except as described below, whether or
not the Merger is consummated, all costs and expenses incurred in connection
with the Merger Agreement and the transactions contemplated thereby, including
the fees and disbursements of counsel, financial advisors and accountants, shall
be paid by the party incurring such costs and expenses, except that expenses
incurred in connection with printing and mailing this Proxy Statement/Prospectus
and the Registration Statement shall be borne equally by Crescent and Station.
 
     Provided that Crescent is not in material breach of its representations,
warranties and agreements under the Merger Agreement, (i) if the Merger
Agreement is terminated by either Crescent of the Station Board of Directors
pursuant to paragraph (e) under "-- Termination" above, (ii) if the Merger
Agreement is terminated by Crescent pursuant to paragraph (f) under
"-- Termination" above, (iii) if the Merger Agreement is terminated by the
Station Board of Directors pursuant to paragraph (g) under "-- Termination"
above, then Station must pay to Crescent $54.0 million in same-day funds, plus
(notwithstanding the first paragraph of this section) all the Expenses, on the
date of such termination or if Crescent elects, over a two-year period beginning
on the date of termination with payment amounts and dates to be determined by
Crescent.
 
     If the Merger Agreement is terminated and, as a result of such termination,
Crescent is entitled to the termination fee as provided above, then Station
shall, on the date of such termination, pay to Crescent the cash amount
necessary to permit Crescent fully to reimburse itself and its affiliates for
all out-of-pocket fees and expenses incurred at any time prior to such
termination by any of them or on their behalf in connection with the Merger, the
preparation of the Merger Agreement and the transactions contemplated by the
Merger Agreement (including any currency or interest rate hedging activities in
connection with the transactions contemplated thereby), including (x) all fees
and expenses of counsel, investment banking firms, financial advisors
(regardless of whether such financial advisors are affiliates of Crescent),
accountants, experts and consultants to Crescent or any of their affiliates and
(y) all fees and expenses payable to banks, investment banking firms and other
financial institutions and their respective counsel, accountants and agents in
connection with arranging or providing financing (the fees and expenses
contemplated by this paragraph, collectively, the "Expenses").
 
WAIVERS
 
     The Merger Agreement provides that, at any time prior to the Effective
Time, the parties thereto may (i) extend the time for performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained therein or in any
document delivered pursuant thereto and (iii) waive compliance with any of the
Agreements or conditions contained therein which may legally be waived. Any
agreement on the part of a party thereto to any such extension or waiver will be
valid only if set forth in an instrument in writing duly executed by such party.
The failure of any party to the Merger Agreement to assert any of its rights
under the Merger Agreement or otherwise will not constitute a waiver of such
rights.
 
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<PAGE>   82
 
                               TAX CONSIDERATIONS
 
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
 
     The following discussion is a general summary of the material United States
federal income tax consequences of the Merger. This discussion is based upon the
Code, regulations proposed or promulgated thereunder, judicial precedent
relating thereto, and current rulings and administrative practice of the
Internal Revenue Service (the "IRS"), in each case as in effect as of the date
hereof and all of which are subject to change at any time, possibly with
retroactive effect. It is assumed that shares of Station Common Stock and
Station Convertible Preferred Stock are held as "capital assets" within the
meaning of Section 1221 of the Code (i.e., property held for investment). This
discussion does not address all aspects of federal income taxation that might be
relevant to particular holders of Station Common Stock and Station Convertible
Preferred Stock in light of their status or personal investment circumstances;
nor does it discuss the consequences to such holders who are subject to special
treatment under the federal income tax laws, such as foreign persons, dealers in
securities, regulated investment companies, life insurance companies, other
financial institutions, tax-exempt organizations, pass-through entities,
taxpayers who hold Station Common Stock as part of a "straddle," "hedge" or
"conversion transaction" or who have a "functional currency" other than the
United States dollar. In addition, this discussion does not address the tax
consequences to holders of options issued under Station's stock option plans or
other persons who have received their Station Common Stock or Station
Convertible Preferred Stock as compensation. Neither Crescent nor Station has
requested or will receive a ruling from the IRS as to the tax consequences of
the Merger.
 
HOLDERS OF STATION COMMON STOCK AND STATION CONVERTIBLE PREFERRED STOCK SHOULD
CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE
MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN
INCOME AND OTHER TAX LAWS.
 
     The Merger is intended to qualify as a reorganization under the Section
368(a) of the Code. It is a condition to the obligation of Crescent and Station
to consummate the Merger that Crescent and Station shall have received an
opinion from Shaw Pittman stating that (i) Crescent is a REIT for federal income
tax purposes, (ii) consummation of the transactions contemplated by the Merger
Agreement will not cause Crescent to cease to qualify as a REIT and (iii) the
Merger will be treated for federal income tax purposes as a reorganization
within the meaning of Station 368(a) of the Code and that each of Crescent and
Station will be a party to the reorganization within the meaning of Station
368(b) of the Code. In rendering such opinions and the opinions set forth below,
Shaw Pittman will rely on upon certain representations made by Crescent and
Station. Set forth below is the opinion of Shaw Pittman as to the material tax
consequences of the Merger.
 
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
 
     The Merger is being effected in two stages, the Reincorporation Merger
followed by the merger of Delaware Station with and into Crescent. It is
possible that the IRS would view the Merger as two separate transactions rather
than a single transaction and determine that the Merger consists of a
reorganization under Section 368(a)(1)(F) of the Code followed by a
reorganization under Section 368(a)(1)(A). The consequences of viewing the
Merger as separate transactions are the same as viewing the Merger as a single
transaction. Because the Merger will be treated as a reorganization within the
meaning of Section 368(a) of the Code, no gain or loss will be recognized for
federal income tax purposes by Station or Crescent as a result of the Merger.
Crescent's basis in the assets it acquires from Station will equal Station's
basis in these assets. Subject to the discussion below, a holder of Station
Common Stock or Station Convertible Preferred Stock will not recognize gain or
loss on the exchange of shares of Station Common Stock for Crescent Common
Shares or of shares of Station Convertible Preferred Stock for Crescent
Convertible Preferred Shares, in each case, pursuant to the Merger. The
aggregate tax basis of the Crescent Common Shares or Crescent Convertible
Preferred Shares received by any such holder will be the same as the aggregate
tax basis of the Station Common Stock or Station Convertible Preferred Stock
surrendered therefor (reduced by the amount of such tax basis allocable to
fractional shares for which cash is received in the case of stockholders for
whom that receipt is treated as resulting in gain or loss). Subject to the
discussion below, the holding period of the
 
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<PAGE>   83
 
Crescent Common Shares and Crescent Convertible Preferred Shares, respectively,
will include the holding period of the Station Common Stock or Station
Convertible Preferred Stock surrendered therefor.
 
     Cash received by a holder of Station Common Stock in lieu of a fractional
share interest in Crescent Common Shares will be treated as received in exchange
for such fractional share interest, and in the case of a Station stockholder who
holds a small minority interest in Station and is not in a position to affect
Station or Crescent management, gain or loss will be recognized for federal
income tax purposes, measured by the difference between the amount of cash
received and the portion of the basis of the Station Common Stock allocable to
such fractional share interest. Such gain or loss will be capital gain or loss
and will be (i) long-term if the shares were held for more than eighteen (18)
months, (ii) mid-term if the shares were held for more than twelve (12) months
but not more than eighteen (18) months or (iii) short-term if the shares were
not held for more than twelve (12) months.
 
  Backup Withholding
 
     Under the Code, a holder of Station Common Stock or Station Convertible
Preferred Stock may be subject, under certain circumstances, to backup
withholding at a 31% rate unless such holder provides proof of an applicable
exemption or a correct taxpayer identification number, and otherwise complies
with applicable requirements of the backup withholding rules. Any amounts
withheld under the backup withholding rules are not an additional tax and may be
refunded or credited against the holder's federal income tax liability, provided
the required information is furnished to the IRS.
 
  State Transfer Tax Consequences
 
     The transactions could generate sales tax liability in Nevada and Missouri
to the extent that there are transfers of tangible personal property. First,
Station will sell, assign, transfer and convey to the Operating Joint Venture
certain of Station's non-real estate assets pursuant to a bill of sale. Second,
it is anticipated that the ownership of other tangible personal property
currently owned by subsidiaries of Station will be transferred by operation of
law or assigned pursuant to (i) a merger of such subsidiaries into Station, (ii)
the Reincorporation Merger, (iii) the merger of Delaware Station into Crescent,
(iv) the drop-down of such assets from Crescent to the Operating Partnership and
(v) the further drop-down of certain tangible personal property from the
Operating Partnership to the Decontrolled Subsidiary. The Nevada and Missouri
sales tax generated by these transactions is not expected to be significant.
 
TAXATION OF CRESCENT ENTITIES
 
     The following is a summary of the material federal income tax
considerations associated with an investment in the Crescent Common Shares and
the Crescent Convertible Preferred Shares prepared by Shaw Pittman. This
discussion is based upon the laws, regulations and reported rulings and
decisions in effect as of the date of this Prospectus, all of which are subject
to change, retroactively or prospectively, and to possibly differing
interpretations. This discussion does not purport to deal with the federal
income or other tax consequences applicable to all investors in light of their
particular investment circumstances or to all categories of investors, some of
whom may be subject to special rules (including, for example, insurance
companies, tax-exempt organizations, financial institutions, broker-dealers,
foreign corporations and persons who are not citizens or residents of the United
States). No ruling on the federal, state or local tax considerations relevant to
the operation of Crescent or the Operating Partnership or to the purchase,
ownership or disposition of the Crescent Common Shares or the Crescent
Convertible Preferred Shares is being requested from the IRS or from any other
tax authority. Shaw Pittman has rendered certain opinions discussed herein and
believes that if the IRS were to challenge such conclusions, such conclusions
would prevail in court. Opinions of counsel are not binding on the IRS or on the
courts, however, and no assurance can be given that the conclusions reached by
Shaw Pittman would be sustained in court.
 
     HOLDERS OF STATION COMMON STOCK AND STATION CONVERTIBLE PREFERRED STOCK
SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE SPECIFIC TAX CONSEQUENCES TO
THEM OF THE OWNERSHIP AND DISPOSITION OF SHARES IN AN ENTITY ELECTING TO BE
TAXED AS A REAL ESTATE INVESTMENT TRUST, INCLUDING
 
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<PAGE>   84
 
THE FEDERAL, STATE, LOCAL, FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF SUCH
OWNERSHIP, DISPOSITION AND ELECTION AND OF POTENTIAL CHANGES IN APPLICABLE TAX
LAWS.
 
     Crescent has made an election to be treated as a real estate investment
trust under Sections 856 through 860 of the Code (as used in this section, a
"REIT"), commencing with its taxable year ended December 31, 1994. Crescent
believes that it was organized and has operated in such a manner so as to
qualify as a REIT, and Crescent intends to continue to operate in such a manner,
but no assurance can be given that it has operated in a manner so as to qualify,
or will operate in a manner so as to continue to qualify as a REIT.
 
     The sections of the Code relating to qualification and operation as a REIT
are highly technical and complex. The following discussion sets forth the
material aspects of the Code sections that govern the federal income tax
treatment of a REIT and its shareholders. This summary is qualified in its
entirety by the applicable Code sections, rules and regulations promulgated
thereunder, and administrative and judicial interpretations thereof.
 
     In the opinion of Shaw Pittman, Crescent qualified as a REIT under the Code
with respect to its taxable years ending on or before December 31, 1997, and is
organized in conformity with the requirements for qualification as a REIT, its
manner of operation has enabled it to meet the requirements for qualification as
a REIT as of the date of this Prospectus, and its proposed manner of operation
will enable it to meet the requirements for qualification as a REIT in the
future. It must be emphasized that this opinion is based on various assumptions
relating to the organization and operation of Crescent and the Operating
Partnership and is conditioned upon certain representations made by Crescent and
the Operating Partnership as to certain relevant factual matters, including
matters related to the organization, expected operation, and assets of Crescent
and the Operating Partnership. Moreover, continued qualification as a REIT will
depend upon Crescent's ability to meet, through actual annual operating results,
the distribution levels, stock ownership requirements and the various
qualification tests and other requirements imposed under the Code, as discussed
below. Accordingly, no assurance can be given that the actual stock ownership of
Crescent, the mix of its assets, or the results of its operations for any
particular taxable year will satisfy such requirements. For a discussion of the
tax consequences of failing to qualify as a REIT, see "-- Taxation of
Crescent -- Failure to Qualify," below.
 
     If Crescent qualifies for taxation as a REIT, it generally will not be
subject to federal corporate income taxes on its net income that is currently
distributed to shareholders. This treatment substantially eliminates the "double
taxation" (at the corporate and shareholder levels) that generally results from
investments in a corporation. However, Crescent will be subject to federal
income tax in the following circumstances. First, Crescent will be taxed at
regular corporate rates on any undistributed "real estate investment trust
taxable income," including undistributed net capital gains. Second, under
certain circumstances, Crescent may be subject to the "alternative minimum tax"
on its items of tax preference. Third, if Crescent has "net income from
foreclosure property," it will be subject to tax on such income at the highest
corporate rate. "Foreclosure property" generally means real property and any
personal property incident to such real property which is acquired as a result
of a default either on a lease of such property or on indebtedness which such
property secured and with respect to which an appropriate election is made,
except that property ceases to be foreclosure property (i) after a three-year
period (which in certain cases may be extended by the IRS) or, if earlier, (ii)
when the REIT engages in construction on the property (other than for completion
of certain improvements) or for more than 90 days uses the property in a
business conducted other than through an independent contractor. "Net income
from foreclosure property" means (a) the net gain from disposition of
foreclosure property which is held primarily for sale to customers in the
ordinary course of business or (b) other net income from foreclosure property
which would not satisfy the 75% gross income test (discussed below). Property is
not eligible for the election to be treated as foreclosure property if the loan
or lease with respect to which the default occurs (or is imminent) was made,
entered into or acquired by the REIT with an intent to evict or foreclose or
when the REIT knew or had reason to know that default would occur. Fourth, if
Crescent has "net income derived from prohibited transactions," such income will
be subject to a 100% tax. The term "prohibited transaction" generally includes a
sale or other disposition of property (other than foreclosure property) that is
held primarily for sale to customers in the ordinary course of business. Fifth,
if
 
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<PAGE>   85
 
Crescent should fail to satisfy the 75% gross income test or the 95% gross
income test (as discussed below), but has nonetheless maintained its
qualification as a REIT because certain other requirements have been met, it
will be subject to a 100% tax on the net income attributable to the greater of
the amount by which Crescent fails the 75% or 95% test. Sixth, if, during each
calendar year, Crescent fails to distribute at least the sum of (i) 85% of its
"real estate investment trust ordinary income" for such year, (ii) 95% of its
"real estate investment trust capital gain net income" for such year, and (iii)
any undistributed taxable income from prior periods, Crescent will be subject to
a 4% excise tax on the excess of such required distribution over the amounts
actually distributed. Seventh, if Crescent acquires any asset from a C
corporation (i.e., a corporation generally subject to full corporate level tax)
in a transaction in which the basis of the asset in Crescent's hands is
determined by reference to the basis of the asset (or any other property) in the
hands of the corporation, and Crescent recognizes gain on the disposition of
such asset during the 10-year period beginning on the date on which such asset
was acquired by Crescent, then, to the extent of such property's "built-in" gain
(the excess of the fair market value of such property at the time of acquisition
by Crescent over the adjusted basis in such property at such time), such gain
will be subject to tax at the highest regular corporate rate applicable (as
provided in regulations promulgated by the United States Department of Treasury
under the Code ("Treasury Regulations") that have not yet been promulgated).
(The results described above with respect to the recognition of "built-in gain"
assume that Crescent will make an election pursuant to IRS Notice 88-19.)
 
  Requirements of Qualification
 
     The Code defines a REIT as a corporation, trust or association (1) which is
managed by one or more trustees or directors; (2) the beneficial ownership of
which is evidenced by transferable shares, or by transferable certificates of
beneficial interest; (3) which would be taxable as a domestic corporation, but
for Sections 856 through 860 of the Code; (4) which is neither a financial
institution nor an insurance company subject to certain provisions of the Code;
(5) the beneficial ownership of which is held (without reference to any rules of
attribution) by 100 or more persons; (6) during the last half of each taxable
year not more than 50% in value of the outstanding stock of which is owned,
directly or indirectly, by five or fewer individuals (as defined in the Code);
and (7) which meets certain other tests, described below, regarding certain
distributions and the nature of its income and assets and properly files an
election to be treated as a REIT. The Code provides that conditions (1) through
(4), inclusive, must be met during the entire taxable year and that condition
(5) must be met during at least 335 days of a taxable year of 12 months (or
during a proportionate part of a taxable year of less than 12 months).
 
     Crescent issued sufficient Crescent Common Shares pursuant to the initial
offering to satisfy the requirements described in (5) and (6) above. While the
existence of the right of the limited partners (the "Limited Partners") of the
Operating Partnership to exchange their Units for Crescent Common Shares or, at
Crescent's option, cash (the "Exchange Rights") may cause the Limited Partners
to be deemed to own the Crescent Common Shares they could acquire through the
Exchange Rights, the amount of Crescent Common Shares that can be acquired at
any time through the Exchange Rights is limited to an amount which, together
with any other Crescent Common Shares actually or constructively deemed, under
the Declaration of Trust, to be owned by any person, does not exceed the
Ownership Limit (as defined herein). See "Description of Capital Stock of
Crescent -- Description of Crescent Common Shares -- Ownership Limits and
Restrictions on Transfer." Moreover, the ownership of Crescent Common Shares
generally is limited under the Ownership Limit to no more than 8.0% of the
outstanding Crescent Common Shares. In addition, the Declaration of Trust
provides for restrictions regarding the ownership or transfer of Crescent Common
Shares in order to assist Crescent in continuing to satisfy the share ownership
requirements described in (5) and (6) above. See "Description of Capital Stock
of Crescent -- Description of Crescent Common Shares -- Ownership Limits and
Restrictions on Transfer."
 
     If a REIT owns a "qualified REIT subsidiary," the Code provides that the
qualified REIT subsidiary is disregarded for federal income tax purposes, and
all assets, liabilities and items of income, deduction and credit of the
qualified REIT subsidiary are treated as assets, liabilities and such items of
the REIT itself. A qualified REIT subsidiary is a corporation all of the capital
stock of which has been owned by the REIT from the commencement of such
corporation's existence. CREE Ltd., CRE Management I Corp. ("Manage-
 
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ment I"), CRE Management II Corp. ("Management II"), CRE Management III Corp.
("Management III"), CRE Management IV Corp. ("Management IV"), CRE Management V
Corp. ("Management V"), CRE Management VI Corp. ("Management VI"), CRE
Management VII Corp. ("Management VII"), CresCal Properties, Inc. and Crescent
Commercial Realty Corp. are qualified REIT subsidiaries, and thus all of the
assets (i.e., the respective partnership interests in the Operating Partnership,
Funding I, Funding II, Funding III, Funding IV, Funding V, Funding VI, Funding
VII, CresCal Properties, L.P. and Crescent Commercial Realty Holdings, L.P.),
liabilities and items of income, deduction and credit of CREE Ltd., Management
I, Management II, Management III, Management IV, Management V, Management VI,
Management VII, CresCal Properties, Inc. and Crescent Commercial Realty Corp.
are treated as assets and liabilities and items of income, deduction and credit
of Crescent. Unless otherwise required, all references to Crescent in this "Tax
Considerations" section refer to Crescent and its qualified REIT subsidiaries.
 
     In the case of a REIT which is a partner in a partnership, Treasury
Regulations provide that the REIT will be deemed to own its proportionate share
of the assets of the partnership and will be deemed to be entitled to the income
of the partnership attributable to such share. In addition, the assets and gross
income (as defined in the Code) of the partnership attributed to the REIT shall
retain the same character as in the hands of the partnership for purposes of
Section 856 of the Code, including satisfying the gross income tests and the
assets tests described below. Thus, Crescent's proportionate share of the
assets, liabilities and items of income of the Operating Partnership and its
subsidiary partnerships are treated as assets, liabilities and items of income
of Crescent for purposes of applying the requirements described herein.
 
  Income Tests
 
     In order for Crescent to achieve and maintain its qualification as a REIT,
there are currently two requirements relating to Crescent's gross income that
must be satisfied annually. First, at least 75% of Crescent's gross income
(excluding gross income from prohibited transactions) for each taxable year must
consist of temporary investment income or of certain defined categories of
income derived directly or indirectly from investments relating to real property
or mortgages on real property. These categories include, subject to various
limitations, rents from real property, interest on mortgages on real property,
gains from the sale or other disposition of real property (including interests
in real property and in mortgages on real property) not primarily held for sale
to customers in the ordinary course of business, income from foreclosure
property, and amounts received as consideration for entering into either loans
secured by real property or purchases or leases of real property. Second, at
least 95% of Crescent's gross income (excluding gross income from prohibited
transactions) for each taxable year must be derived from income qualifying under
the 75% test and from dividends, other types of interest and gain from the sale
or disposition of stock or securities, or from any combination of the foregoing.
In addition, for each taxable year before 1998, gain from the sale or other
disposition of stock or securities held for less than one year, gain from
prohibited transactions and gain on the sale or other disposition of real
property held for less than four years (apart from involuntary conversions and
sales of foreclosure property) must have represented less than 30% of Crescent's
gross income (including gross income from prohibited transactions) for such
taxable year. Crescent, through its partnership interests in the Operating
Partnership and all subsidiary partnerships, believes it satisfied all three of
these income tests for 1994, 1995, 1996 and 1997 and expects to satisfy the two
current tests for subsequent taxable years.
 
     The bulk of the Operating Partnership's income is currently derived from
rents with respect to the Office Properties, the Behavioral Healthcare
Facilities, the Hotel Properties and the Retail Properties. Rents received by
Crescent will qualify as "rents from real property" in satisfying the gross
income requirements for a REIT described above only if several conditions are
met. First, the amount of rent must not be based in whole or in part on the
income or profits of any person. An amount received or accrued generally will
not be excluded from the term "rents from real property" solely by reason of
being based on a fixed percentage or percentages of receipts or sales. Second,
the Code provides that rents received from a tenant will not qualify as "rents
from real property" if the REIT, or an owner of 10% or more of the REIT,
directly or constructively, owns 10% or more of such tenant (a "Related Party
Tenant"). Third, if rent attributable to personal property
 
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<PAGE>   87
 
leased in connection with a lease of real property is greater than 15% of the
total rent received under the lease, then the portion of rent attributable to
such personal property will not qualify as "rents from real property." Finally,
for rents to qualify as "rents from real property," a REIT generally must not
operate or manage the property or furnish or render services to the tenants of
such property, other than through an independent contractor from whom the REIT
derives no revenue, except that a REIT may directly perform services which are
"usually or customarily rendered" in connection with the rental of space for
occupancy, other than services which are considered to be rendered to the
occupant of the property. However, a REIT is currently permitted to earn up to
one percent of its gross income from tenants, determined on a
property-by-property basis, by furnishing services that are noncustomary or
provided directly to the tenants, without causing the rental income to fail to
qualify as rents from real property.
 
     Crescent, based in part upon opinions of Shaw Pittman as to whether various
tenants, including the lessee of the Behavioral Healthcare Facilities and the
lessees of the Hotel Properties, constitute Related Party Tenants, believes that
the income it received in 1994, 1995, 1996 and 1997 and will receive in
subsequent taxable years from (i) charging rent for any property that is based
in whole or in part on the income or profits of any person (except by reason of
being based on a percentage or percentages of receipts or sales, as described
above); (ii) charging rent for personal property in an amount greater than 15%
of the total rent received under the applicable lease; (iii) directly performing
services considered to be rendered to the occupant of property or which are not
usually or customarily furnished or rendered in connection with the rental of
real property; or (iv) entering into any lease with a Related Party Tenant, will
not cause Crescent to fail to meet the gross income tests. Opinions of counsel
are not binding upon the IRS or any court, and there can be no assurance that
the IRS will not assert a contrary position successfully.
 
     The Operating Partnership will also receive fixed and contingent interest
on certain mortgages relating to the Residential Development Properties (the
"Residential Development Property Mortgages"). Interest on mortgages secured by
real property satisfies the 75% and 95% gross income tests only if it does not
include any amount the determination of which depends in whole or in part on the
income of any person, except that (i) an amount is not excluded from the term
"interest" solely by reason of being based on a fixed percentage or percentages
of receipts or sales and (ii) income derived from a shared appreciation
provision in a mortgage is treated as gain recognized from the sale of the
secured property. Certain of the Residential Development Property Mortgages
contain provisions for contingent interest based upon property sales. In the
opinion of Shaw Pittman, each of the Residential Development Property Mortgages
constitutes debt for federal income tax purposes, any contingent interest
derived therefrom will be treated as being based on a fixed percentage of sales,
and therefore all interest derived therefrom will constitute interest received
from mortgages for purposes of the 75% and 95% gross income tests. If, however,
the contingent interest provisions were instead characterized as shared
appreciation provisions, any resulting income would, because the underlying
properties are primarily held for sale to customers in the ordinary course, be
subject to a 100% tax.
 
     In connection with the 1997 distribution by Crescent of the common stock of
Crescent Operating, Crescent was required to recognize gain equal to the excess,
if any, of the fair market value of the assets distributed over the basis of
Crescent in them. In the opinion of Shaw Pittman, such gain constituted gain on
the sale of stock or securities for purposes of the gross income tests. Opinions
of counsel are not binding upon the IRS or any court, and there can be no
assurance that the IRS will not assert a contrary position successfully.
 
     In applying the 95% and 75% gross income tests to Crescent, it is necessary
to consider the form in which certain of its assets are held, whether that form
will be respected for federal income tax purposes, and whether, in the future,
such form may change into a new form with different tax attributes (for example,
as a result of a foreclosure on debt held by the Operating Partnership). For
example, the Residential Development Properties are primarily held for sale to
customers in the ordinary course of business, and the income resulting from such
sales, if directly attributed to Crescent, would not qualify under the 75% and
95% gross income tests. In addition, such income would be considered "net income
from prohibited transactions" and thus would be subject to a 100% tax. The
income from such sales, however, will be earned by the Residential Development
Corporations rather than by the Operating Partnership and will be paid to the
Operating Partnership in the form of interest and principal payments on the
Residential Development Property Mortgages or distributions
 
                                       75
<PAGE>   88
 
with respect to the stock in the Residential Development Corporations held by
the Operating Partnership. In similar fashion, the income earned by the Hotel
Properties, if directly attributed to Crescent, would not qualify under the 75%
and 95% gross income tests because it would not constitute "rents from real
property." Such income is, however, earned by the lessees of these Hotel
Properties and what the Operating Partnership receives from the lessees of these
Hotel Properties is rent. Comparable issues are raised by the Operating
Partnership's acquisition of subordinated debt secured by a Florida hotel and by
the acquisition of an interest in the partnership which owns the hotel by
Crescent Development Management Corporation ("CDMC"), one of the Residential
Development Corporations. If such debt were recharacterized as equity, or if the
ownership of the partnership were attributed from CDMC to the Operating
Partnership, the Operating Partnership would be treated as receiving income from
hotel operations rather than interest income on the debt or dividend income from
CDMC. Furthermore, if Crescent Operating were treated for federal income tax
purposes as not separate from or an agent of either Crescent or the Operating
Partnership, or if Crescent and Crescent Operating were treated as a "stapled
entity," the income, assets and activities of Crescent Operating would be
considered to be the income, assets and activities of Crescent, with the result
that Crescent would fail to meet the 95% and 75% gross income tests or the asset
tests discussed below. A similar consequence might follow if the loan of
approximately $35.9 million from the Operating Partnership to Crescent Operating
does not constitute debt for federal income tax purposes.
 
     Shaw Pittman is of the opinion that (i) the Residential Development
Properties or any interest therein will be treated as owned by the Residential
Development Corporations, (ii) amounts derived by the Operating Partnership from
the Residential Development Corporations under the terms of the Residential
Development Property Mortgages will qualify as interest or principal, as the
case may be, paid on mortgages on real property for purposes of the 75% and 95%
gross income tests, (iii) amounts derived by the Operating Partnership with
respect to the stock of the Residential Development Corporations will be treated
as distributions on stock (i.e., as dividends, a return of capital, or capital
gain, depending upon the circumstances) for purposes of the 75% and 95% gross
income tests, (iv) the leases of the Hotel Properties will be treated as leases
for federal income tax purposes, and the rent payable thereunder will qualify as
"rents from real property," (v) the subordinated debt secured by the Florida
hotel will be treated as debt for federal income tax purposes, the income
payable thereunder will qualify as interest, and CDMC's ownership of the
partnership interest in the partnership which owns the hotel will not be
attributed to the Operating Partnership, (vi) Crescent Operating will be treated
for federal income tax purposes as a corporate entity separate from and not an
agent of either Crescent or the Operating Partnership, and Crescent Operating
and Crescent will not be treated as a stapled entity for federal income tax
purposes; and (vii) the loan of approximately $35.9 million from the Operating
Partnership to Crescent Operating will constitute debt for federal income tax
purposes. Shaw Pittman has provided opinions similar to those provided with
respect to the Operating Partnership's investment in the Residential Development
Corporations with respect to its investments in certain other entities through
non-voting securities and secured debt. Investors should be aware that there are
no controlling Treasury Regulations, published rulings, or judicial decisions
involving transactions with terms substantially the same as those with respect
to the Residential Development Corporations, the leases of the Hotel Properties
and the relationship among Crescent, the Operating Partnership and Crescent
Operating. Therefore, the opinions of Shaw Pittman with respect to these matters
are based upon all of the facts and circumstances and upon rulings and judicial
decisions involving situations that are considered to be analogous. Opinions of
counsel are not binding upon the IRS or any court, and there can be no assurance
that the IRS will not assert a contrary position successfully. If one or more of
the leases of the Hotel Properties is not a true lease, part or all of the
payments that the Operating Partnership receives from the respective lessee may
not satisfy the various requirements for qualification as "rents from real
property," or the Operating Partnership might be considered to operate the Hotel
Properties directly. In that case, Crescent likely would not be able to satisfy
either the 75% or 95% gross income tests and, as a result, likely would lose its
REIT status. Similarly, if the IRS were to challenge successfully the
arrangements with the Residential Development Corporations or Crescent
Operating, Crescent's qualification as a REIT could be jeopardized.
 
     If any of the Residential Development Properties were to be acquired by the
Operating Partnership as a result of foreclosure on any of the Residential
Development Property Mortgages, or if any of the Hotel Properties were to be
operated directly by the Operating Partnership or a subsidiary partnership as a
result of a
 
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<PAGE>   89
 
default by the lessee under the lease, such property would constitute
foreclosure property for three years following its acquisition (or for up to an
additional three years if an extension is granted by the IRS), provided that (i)
the Operating Partnership or its subsidiary partnership conducts sales or
operations through an independent contractor; (ii) the Operating Partnership or
its subsidiary partnership does not undertake any construction on the foreclosed
property other than completion of improvements which were more than 10% complete
before default became imminent; and (iii) foreclosure was not regarded as
foreseeable at the time Crescent acquired the Residential Development Property
Mortgages or leased the Hotel Properties. For so long as any of these properties
constitutes foreclosure property, the income from such sales would be subject to
tax at the maximum corporate rates and would qualify under the 75% and 95% gross
income tests. However, if any of these properties does not constitute
foreclosure property at any time in the future, income earned from the
disposition or operation of such property will not qualify under the 75% and 95%
gross income tests.
 
     With regard to the sale of Crescent Common Shares to an affiliate of Union
Bank of Switzerland as well as the sale of Crescent Common Shares to Merrill
Lynch International, it is possible that Crescent may receive certain payments
in Crescent Common Shares, depending on the market price of the Crescent Common
Shares upon settlement of the forward share purchase agreements. In the opinion
of Shaw Pittman, such payments will not constitute gross income and therefore
will not be taken into account in the application of gross income tests.
 
     Crescent anticipates that it will have certain income which will not
satisfy the 75% or the 95% gross income test. For example, income from dividends
on the stock of the Residential Development Corporations and any gain recognized
upon the distribution of the common stock of Crescent Operating will not satisfy
the 75% gross income test. Furthermore, the amount of gain Crescent recognized
upon this distribution depended upon the fair market value of the common stock
of Crescent Operating at the time of the distribution. Prior to the
distribution, the Crescent Board of Trust Managers determined that the value of
this stock was $0.99 per share, but there can be no assurance that the IRS will
agree with this determination in light of various factors including subsequent
trading prices. It is also possible that certain income resulting from the use
of creative financing or acquisition techniques would not satisfy the 75% or 95%
gross income tests. Crescent believes, however, that the aggregate amount of
nonqualifying income will not cause Crescent to exceed the limits on
nonqualifying income under the 75% or 95% gross income tests.
 
     If Crescent fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for such year
if it is entitled to relief under certain provisions of the Code. These relief
provisions generally will be available if Crescent's failure to meet such tests
is due to reasonable cause and not to willful neglect, Crescent attaches a
schedule of the sources of its income to its tax return, and any incorrect
information on the schedule is not due to fraud with intent to evade tax. It is
not possible, however, to state whether in all circumstances Crescent would be
entitled to the benefit of these relief provisions. As discussed above, even if
these relief provisions apply, a tax equal to approximately 100% of the
corresponding net income would be imposed with respect to the excess of 75% or
95% of Crescent's gross income over Crescent's qualifying income in the relevant
category, whichever is greater.
 
  Asset Tests
 
     Crescent, at the close of each quarter of its taxable year, must also
satisfy three tests relating to the nature of its assets. First, at least 75% of
the value of Crescent's total assets must be represented by real estate assets
(including (i) its allocable share of real estate assets held by the Operating
Partnership, any partnerships in which the Operating Partnership owns an
interest, or qualified REIT subsidiaries of Crescent and (ii) stock or debt
instruments held for not more than one year purchased with the proceeds of a
stock offering or long-term (at least five years) debt offering of Crescent),
cash, cash items and government securities. Second, not more than 25% of
Crescent's total assets may be represented by securities other than those in the
75% asset class. Third, of the investments included in the 25% asset class, the
value of any one issuer's securities owned by Crescent may not exceed 5% of the
value of Crescent's total assets, and Crescent may not own more than 10% of any
one issuer's outstanding voting securities. The 25% and 5% tests generally must
be met for any quarter in which Crescent acquires securities of an issuer. Thus,
this requirement must be satisfied not only on the
 
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<PAGE>   90
 
date Crescent first acquires corporate securities, but also each time Crescent
increases its ownership of corporate securities (including as a result of
increasing its interest in the Operating Partnership either with the proceeds of
the Offering or by acquiring Units from Limited Partners upon the exercise of
their Exchange Rights).
 
     The Operating Partnership owns 100% of the non-voting stock of each
Residential Development Corporation. In addition, the Operating Partnership owns
the Residential Development Property Mortgages. As stated above, in the opinion
of Shaw Pittman each of these mortgages will constitute debt for federal income
tax purposes and therefore will be treated as a real estate asset; however, the
IRS could assert that such mortgages should be treated as equity interests in
their respective issuers, which would not qualify as real estate assets. By
virtue of its ownership of partnership interests in the Operating Partnership,
Crescent will be considered to own its pro rata share of these assets. Neither
Crescent nor the Operating Partnership, however, will directly own more than 10%
of the voting securities of any Residential Development Corporation at the end
of any quarter of Crescent's taxable year, and, in the opinion of Shaw Pittman,
Crescent will not be considered to own any of such voting securities. In
addition, Crescent and its senior management believe that Crescent's pro rata
shares of the value of the securities of each Residential Development
Corporation do not separately exceed 5% of the total value of Crescent's total
assets. This belief is based in part upon its analysis of the estimated values
of the various securities owned by the Operating Partnership relative to the
estimated value of the total assets owned by the Operating Partnership. No
independent appraisals will be obtained to support this conclusion, and Shaw
Pittman, in rendering its opinion as to the qualification of Crescent as a REIT,
is relying on the conclusions of Crescent and its senior management as to the
value of the various securities and other assets. There can be no assurance,
however, that the IRS might not contend that the values of the various
securities held by Crescent through the Operating Partnership separately exceed
the 5% value limitation or, in the aggregate, exceed the 25% value limitation or
that the voting securities of the Residential Development Corporations should be
considered to be owned by Crescent. Finally, if the Operating Partnership were
treated for tax purposes as a corporation rather than as a partnership, Crescent
would violate the 10% of voting securities and 5% of value limitations, and the
treatment of any of the Operating Partnership's subsidiary partnerships as a
corporation rather than as a partnership could also violate one or the other, or
both, of these limitations. In the opinion of Shaw Pittman, for federal income
tax purposes the Operating Partnership and all the subsidiary partnerships will
be treated as partnerships and not as either associations taxable as
corporations or publicly traded partnerships. See "-- Tax Aspects of the
Operating Partnership and the Subsidiary Partnerships" below.
 
     As noted above, the 5% and 25% value requirements must be satisfied not
only on the date Crescent first acquires corporate securities, but also each
time Crescent increases its ownership of corporate securities (including as a
result of increasing its interest in the Operating Partnership either with the
proceeds of the Offering or by acquiring Units from Limited Partners upon the
exercise of their Exchange Rights). Although Crescent plans to take steps to
ensure that it satisfies the 5% and 25% value tests for any quarter with respect
to which retesting is to occur, there can be no assurance that such steps (i)
will always be successful; (ii) will not require a reduction in Crescent's
overall interest in the various corporations; or (iii) will not restrict the
ability of the Residential Development Corporations to increase the sizes of
their respective businesses, unless the value of the assets of Crescent is
increasing at a commensurate rate.
 
  Annual Distribution Requirements
 
     In order to qualify as a REIT, Crescent is required to distribute dividends
(other than capital gain dividends) to its shareholders in an amount at least
equal to (A) the sum of (i) 95% of the "real estate investment trust taxable
income" of Crescent (computed without regard to the dividends paid deduction and
Crescent's net capital gain) and (ii) 95% of the net income (after tax), if any,
from foreclosure property, minus (B) certain excess noncash income. Such
distributions must be paid in the taxable year to which they relate, or in the
following taxable year if declared before Crescent timely files its tax return
for such year, and if paid on or before the date of the first regular dividend
payment after such declaration. To the extent that Crescent does not distribute
all of its net capital gain or distributes at least 95%, but less than 100%, of
its "real estate investment trust taxable income," as adjusted, it will be
subject to tax thereon at regular capital gains
 
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and ordinary corporate tax rates. Furthermore, if Crescent should fail to
distribute, during each calendar year, at least the sum of (i) 85% of its "real
estate investment trust ordinary income" for such year; (ii) 95% of its "real
estate investment trust capital gain income" for such year; and (iii) any
undistributed taxable income from prior periods, Crescent would be subject to a
4% excise tax on the excess of such required distribution over the amounts
actually distributed.
 
     Crescent believes that it has made and intends to make timely distributions
sufficient to satisfy all annual distribution requirements. In this regard, the
limited partnership agreement of the Operating Partnership (the "Operating
Partnership Agreement") authorizes CREE Ltd., as general partner, to take such
steps as may be necessary to cause the Operating Partnership to distribute to
its partners an amount sufficient to permit Crescent to meet these distribution
requirements. It is possible, however, that, from time to time, Crescent may
experience timing differences between (i) the actual receipt of income and
actual payment of deductible expenses and (ii) the inclusion of such income and
deduction of such expenses in arriving at its "real estate investment trust
taxable income." Issues may also arise as to whether certain items should be
included in income. For example, Shaw Pittman has opined that the Operating
Partnership should include in income only its share of the interest income
actually paid on the two mortgage notes secured by two of Crescent's Office
Properties, Spectrum Center and Three Westlake Park, respectively, and the two
mortgage notes secured by Crescent's Trammell Crow Center Office Property, all
of which were acquired at a substantial discount, rather than its share of the
amount of interest accruing pursuant to the terms of these investments, but
opinions of counsel are not binding on the IRS or the courts. In this regard,
the IRS has taken a contrary view in a recent technical advice memorandum
concerning the accrual of original issue discount. Crescent believes, however,
that even if the Operating Partnership were to include in income the full amount
of interest income accrued on these notes, and the Operating Partnership were
not allowed any offsetting deduction for the amount of such interest to the
extent it is uncollectible, Crescent nonetheless would be able to satisfy the
95% distribution requirement without borrowing additional funds or distributing
stock dividends (as discussed below). In addition, it is possible that certain
creative financing or creative acquisition techniques used by the Operating
Partnership may result in income (such as income from cancellation of
indebtedness or gain upon the receipt of assets in foreclosure whose fair market
value exceeds the Operating Partnership's basis in the debt which was foreclosed
upon) which is not accompanied by cash proceeds. In this regard, the
modification of a debt can result in taxable gain equal to the difference
between the holder's basis in the debt and the principal amount of the modified
debt. Shaw Pittman has opined that the four mortgage notes secured by Spectrum
Center, Three Westlake Park and Trammell Crow Center, were not modified in the
hands of the Operating Partnership. Based on the foregoing, Crescent may have
less cash available for distribution in a particular year than is necessary to
meet its annual 95% distribution requirement or to avoid tax with respect to
capital gain or the excise tax imposed on certain undistributed income for such
year. To meet the 95% distribution requirement necessary to qualify as a REIT or
to avoid tax with respect to capital gain or the excise tax imposed on certain
undistributed income, Crescent may find it appropriate to arrange for borrowings
through the Operating Partnership or to pay distributions in the form of taxable
share dividends.
 
     Under certain circumstances, Crescent may be able to rectify a failure to
meet the distribution requirement for a year by paying "deficiency dividends" to
stockholders in a later year, which may be included in Crescent's deduction for
dividends paid for the earlier year. Thus, Crescent may be able to avoid being
taxed on amounts distributed as deficiency dividends; however, Crescent will be
required to pay interest based upon the amount of any deduction taken for
deficiency dividends.
 
  Ownership Information
 
     Pursuant to applicable Treasury Regulations, in order to be treated as a
REIT, Crescent must maintain certain records and request certain information
from its shareholders designed to disclose the actual ownership of its Equity
Shares (as defined herein). Crescent believes that it has complied and intends
to continue to comply with such requirements.
 
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<PAGE>   92
 
  Failure to Qualify
 
     If Crescent fails to qualify as a REIT in any taxable year and the relief
provisions do not apply, Crescent will be subject to tax (including any
applicable alternative minimum tax) on its taxable income at regular corporate
rates. Distributions to shareholders in any year in which Crescent fails to
qualify as a REIT will not be deductible by Crescent; nor will they be required
to be made. If Crescent fails to qualify as a REIT, then, to the extent of
Crescent's current and accumulated earnings and profits, all distributions to
shareholders will be taxable as ordinary income and, subject to certain
limitations of the Code, corporate distributees may be eligible for the
dividends received deduction. Unless entitled to relief under specific statutory
provisions, Crescent will also be disqualified from electing to be treated as a
REIT for the four taxable years following the year during which it ceased to
qualify as a REIT. It is not possible to state whether in all circumstances
Crescent would be entitled to such statutory relief.
 
     Pending Legislation. On February 2, 1998, President Clinton released a
proposed budget for fiscal year 1999. The budget proposal contained a variety of
proposed income tax changes, four of which pertain to REITs. First, a regular
corporation with a fair market value of more than $5,000,000 which elects REIT
status or merges into a REIT would be treated as if it had liquidated and
distributed all its assets to its shareholders, and its shareholders had then
contributed the assets to the electing or existing REIT. This deemed liquidation
would cause the regular corporation to be taxed as if it had sold its assets for
fair market value and would cause its shareholders to be taxed as if they had
sold their stock for fair market value. The proposal would be effective for
elections that are first effective for a taxable year beginning after January 1,
1999, and for mergers after December 31, 1998. Second, five REITs were allowed
to continue as with their stock stapled to regular corporations (i.e., the stock
of the REIT is traded together with the stock of the regular corporation)
despite the general prohibition of this structure under Section 269A of the
Code, enacted in 1984. For any properties acquired on or after the first date of
congressional committee action with respect to the budget proposal (the
"Committee Action Date"), where the stapled regular corporation undertakes
activities or services relating to the properties, the REITs would be made
subject to Section 269A. Third, under current law, REITs may not own more than
10% of the voting stock of a regular corporation. Under the proposal, they also
would not be permitted to own more than 10% of the value of all classes of stock
of a corporation. This prohibition would apply to stock acquired on or after the
Committee Action Date. REITs would continue to be allowed to own corporations
whose stock they owned prior to the Committee Action Date, but this
grandfathered status would terminate if, after the Committee Action Date, the
corporation engaged in a new trade or business or acquired substantial new
assets or the REIT acquired additional stock in a corporation. Fourth, a new
ownership restriction would be imposed on REITs, prohibiting any one person from
owning more than 50% of the total combined voting power of all voting stock or
more than 50% of the total value of shares of all classes of stock of the REIT.
Current law already contains ownership restrictions applicable to individuals;
this new limitation would affect owners other than individuals. It would be
effective for entities electing REIT status for taxable years beginning on or
after the Committee Action Date.
 
     The Chairmen of the House Ways and Means Committee and the Senate Finance
Committee have introduced legislation to enact the proposal concerning stapled
REITs effective March 26, 1998, and such legislation (but not any of the other
proposals) is currently part of the IRS restructuring legislation that was
passed by the Senate and the House of Representatives and is included in the
Conference Agreement between the House and the Senate. It is not clear whether
any of the other proposals will be introduced or enacted and, if they are, their
effective dates. Additional proposals affecting REITs may be made by the
President or his administration or by members of Congress. It is impossible to
predict the nature of those proposals, whether they would be enacted, and their
effect on Crescent. There can be no assurance, however, that changes in
legislation would not have a material adverse effect on Crescent.
 
TAXATION OF CRESCENT CONVERTIBLE PREFERRED SHARES
 
     Distributions to Holders of Crescent Convertible Preferred
Shares. Distributions with respect to the Crescent Convertible Preferred Shares
will be taxable as described below in "-- Taxation of Taxable Domestic
Shareholders," "-- Taxation of Tax-Exempt Shareholders" and "-- Taxation of
Foreign Shareholders."
 
                                       80
<PAGE>   93
 
     Redemption or Conversion of Crescent Convertible Preferred Shares to
Crescent Common Shares. Assuming that Crescent Convertible Preferred Shares will
not be redeemed or converted at a time when there are distributions in arrears,
in general, no gain or loss will be recognized for federal income tax purposes
upon the redemption or conversion of the Crescent Convertible Preferred Shares
at the option of the holder solely into Crescent Common Shares. The basis that a
holder will have for tax purposes in the Crescent Common Shares received will be
equal to the adjusted basis the holder had in the Crescent Convertible Preferred
Shares so redeemed or converted and, provided that the Crescent Convertible
Preferred Shares were held as a capital asset, the holding period for the
Crescent Common Shares received will include the holding period for the Crescent
Convertible Preferred Shares redeemed or converted. A holder, however, will
generally recognize gain or loss on the receipt of cash in lieu of a fractional
Crescent Common Share in an amount equal to the difference between the amount of
cash received and the holder's adjusted basis in such fractional share.
 
     If a redemption or conversion occurs when there is a dividend arrearage on
the Crescent Convertible Preferred Shares and the fair market value of the
Crescent Common Shares exceeds the issue price of the Crescent Convertible
Preferred Shares, a portion of the Crescent Common Shares received might be
treated as a dividend distribution taxable as ordinary income.
 
  Taxation of Taxable Domestic Shareholders
 
     For purposes of this summary, a "U.S. Shareholder" means a beneficial owner
of Crescent Common Shares or Crescent Convertible Preferred Shares who or that
is for U.S. federal income tax purposes (i) a citizen or resident of the United
States, (ii) a corporation created or organized in or under the laws of the
United States or any state or political subdivision thereof, (iii) an estate the
income of which is subject to United States federal income taxation regardless
of its source, (iv) a trust if a court within the United States is able to
exercise primary jurisdiction over administration of the trust and one or more
U.S. persons have authority to control all substantial decisions of the trust,
or (v) a partnership to the extent the interest therein is owned by any of the
persons described in clauses (i), (ii), (iii), or (iv) above. As used herein,
the term "Non-U.S. Shareholder" means a beneficial owner of Crescent Common
Shares or Crescent Convertible Preferred Shares that is not a U.S. Shareholder.
 
     Any distribution declared by Crescent in October, November or December of
any year payable to a shareholder of record on a specified date in any such
month shall be treated as both paid by Crescent and received by the shareholder
on December 31 of such year, provided that the distribution is actually paid by
Crescent during January of the following calendar year. As long as Crescent
qualifies as a REIT, distributions made to Crescent's taxable U.S. Shareholders
out of Crescent's current or accumulated earnings and profits (and not
designated as capital gain dividends) will be taken into account by such U.S.
Shareholders as ordinary income and, for corporate U.S. Shareholders, will not
be eligible for the dividends received deduction. Distributions that are
properly designated as capital gain dividends will be taxed as long-term capital
gains (to the extent they do not exceed Crescent's actual net capital gain for
the taxable year) without regard to the period for which the U.S. Shareholder
has held its Crescent Common Shares or Crescent Convertible Preferred Shares.
However, corporate U.S. Shareholders may be required to treat up to 20% of
certain capital gain dividends as ordinary income. In addition, Crescent may
elect to retain and pay income tax on its net long-term capital gains. If
Crescent so elects, each U.S. Shareholder will take into income the U.S.
Shareholder's share of the retained capital gain as long-term capital gain and
will receive a credit or refund for that U.S. Shareholder's share of the tax
paid by Crescent. The U.S. Shareholder will increase the basis of such U.S.
Shareholder's shares by an amount equal to the excess of the retained capital
gain included in the U.S. Shareholder's income over the tax deemed paid by such
U.S. Shareholder. Distributions in excess of current and accumulated earnings
and profits will not be taxable to a U.S. Shareholder to the extent that they do
not exceed the adjusted basis of the shareholder's Crescent Common Shares or
Crescent Convertible Preferred Shares, but rather will reduce the adjusted basis
of such shares. To the extent that distributions in excess of current and
accumulated earnings and profits exceed the adjusted basis of a U.S.
Shareholder's Crescent Common Shares or Crescent Convertible Preferred Shares,
such distributions will be included in income as long-term capital gain (or
short-term capital gain if the shares have been held for one year or less)
 
                                       81
<PAGE>   94
 
assuming the shares are a capital asset in the hands of the U.S. Shareholder.
U.S. Shareholders may not include any net operating losses or capital losses of
Crescent in their respective income tax returns.
 
     In general, any loss upon a sale or exchange of shares by a U.S.
Shareholder who has held such shares for six months or less (after applying
certain holding period rules) will be treated as a long-term capital loss to the
extent of distributions from Crescent required to be treated by such U.S.
Shareholder as long-term capital gain.
 
  Taxation of Tax-exempt Shareholders
 
     Most tax-exempt employees' pension trusts are not subject to federal income
tax except to the extent of their receipt of "unrelated business taxable income"
as defined in Section 512(a) of the Code ("UBTI"). Distributions by Crescent to
a shareholder that is a tax-exempt entity should not constitute UBTI, provided
that the tax-exempt entity has not financed the acquisition of its Crescent
Common Shares or Crescent Convertible Preferred Shares with "acquisition
indebtedness" within the meaning of the Code and the Crescent Common Shares or
Crescent Convertible Preferred Shares are not otherwise used in an unrelated
trade or business of the tax-exempt entity. In addition, certain pension trusts
that own more than 10% of a "pension-held REIT" must report a portion of the
dividends that they receive from such a REIT as UBTI. Crescent has not been and
does not expect to be treated as a pension-held REIT for purposes of this rule.
 
  Taxation of Foreign Shareholders
 
     The rules governing United States federal income taxation of Non-U.S.
Shareholders are complex, and no attempt will be made herein to provide more
than a summary of such rules. Prospective Non-U.S. Shareholders should consult
with their own tax advisors to determine the impact of federal, state and local
tax laws with regard to an investment in Crescent Common Shares or Crescent
Convertible Preferred Shares, including any reporting requirements.
 
     Distributions that are not attributable to gain from sales or exchanges by
Crescent of United States real property interests and not designated by Crescent
as capital gain dividends will be treated as dividends of ordinary income to the
extent that they are made out of current or accumulated earnings and profits of
Crescent. Such distributions ordinarily will be subject to a withholding tax
equal to 30% of the gross amount of the distribution, unless an applicable tax
treaty reduces that tax. A number of U.S. tax treaties that reduce the rate of
withholding tax on corporate dividends do not reduce, or reduce to a lesser
extent, the rate of withholding applied to dividends from a REIT. Crescent
expects to withhold U.S. income tax at the rate of 30% on the gross amount of
any such distribution made to a Non-U.S. Shareholder unless (i) a lower treaty
rate applies (and, with regard to payments on or after January 1, 1999, the
Non-U.S. Shareholder (1) files IRS Form W-8 with Crescent and, (2) if the
Crescent Common Shares or Crescent Convertible Preferred Shares are not traded
on an established securities market, acquires a taxpayer identification number
from the IRS) or (ii) the Non-U.S. Shareholder has filed an IRS Form 4224 (or,
with respect to payments on or after January 1, 1999, files IRS Form W-8) with
Crescent claiming that the distribution is effectively connected with the
Non-U.S. Shareholder's conduct of a U.S. trade or business. Distributions in
excess of Crescent's current and accumulated earnings and profits will be
treated as a return of capital to the extent of the adjusted basis of a Non-U.S.
Shareholder's shares and thereafter as capital gain, which will be taxable to
the extent that the Non-U.S. Shareholder would otherwise be subject to tax on
any gain from the sale or disposition of the Crescent Common Shares or Crescent
Convertible Preferred Shares, as described below. Distributions in excess of
current and accumulated earnings and profits are currently subject to
withholding at the same 30% or lower treaty rate applicable to ordinary income
dividends, but a Non-U.S. Shareholder may seek a refund of amounts of tax
withheld in excess of the Non-U.S. Shareholder's actual U.S. tax liability,
provided the required information is furnished to the IRS. Beginning with
payments made on or after January 1, 1999, Crescent will be permitted, but not
required, to make reasonable estimates of the extent to which distributions
exceed current and accumulated earnings and profits. Such distributions will
generally be subject to a 10% withholding tax, which may be refunded to the
extent it exceeds the shareholder's actual U.S. tax liability, provided the
required information is furnished to the IRS.
 
                                       82
<PAGE>   95
 
     For any year in which Crescent qualifies as a REIT, distributions that are
attributable to gain from sales or exchanges by Crescent of United States real
property interests will be taxed to a Non-U.S. Shareholder under the provisions
of the Foreign Investment in Real Property Tax Act of 1980, as amended
("FIRPTA"). Under FIRPTA, distributions attributable to gain from sales of
United States real property interests are taxed to a Non-U.S. Shareholder as if
such gain were effectively connected with a United States business. Non-U.S.
Shareholders would thus be taxed at the normal capital gain rates applicable to
U.S. Shareholders (subject to applicable alternative minimum tax and a special
alternative minimum tax in the case of nonresident alien individuals). Also,
distributions subject to FIRPTA may be subject to a 30% branch profits tax in
the hands of a foreign corporate shareholder, subject to possible exemption or
rate reduction under an applicable tax treaty. Crescent is required to withhold
35% of any distribution that could be designated by Crescent as a capital gain
dividend. This amount is creditable against the Non-U.S. Shareholder's FIRPTA
tax liability.
 
     Gain recognized by a Non-U.S. Shareholder upon a sale of Crescent Common
Shares or Crescent Convertible Preferred Shares generally will not be taxed
under FIRPTA if Crescent is a "domestically controlled REIT," defined generally
as a REIT in which at all times during a specified testing period less than 50%
in value of the shares was held directly or indirectly by foreign persons.
Crescent believes that it is, and currently expects to continue to be, a
"domestically controlled REIT," and in such case the sale of Crescent Common
Shares or Crescent Convertible Preferred Shares would not be subject to taxation
under FIRPTA. However, gain not subject to FIRPTA nonetheless will be taxable to
a Non-U.S. Shareholder if (i) investment in the Crescent Common Shares or
Crescent Convertible Preferred Shares is treated as effectively connected with
the Non-U.S. Shareholder's U.S. trade or business or (ii) the Non-U.S.
Shareholder is a nonresident alien individual who was present in the United
States for 183 days or more during the taxable year and certain other conditions
are met. Effectively connected gain realized by a foreign corporate shareholder
may be subject to an additional 30% branch profits tax, subject to possible
exemption or rate reduction under an applicable tax treaty. If the gain on the
sale of Crescent Common Shares or Crescent Convertible Preferred Shares is
subject to taxation under FIRPTA, the Non-U.S. Shareholder would be subject to
the same treatment as U.S. Shareholders with respect to such gain (subject to
the additional 30% branch profits tax and a special alternative minimum tax in
the case of nonresident alien individuals), and the purchaser of the Crescent
Common Shares or Crescent Convertible Preferred Shares would be required to
withhold and remit to the IRS 10% of the purchase price.
 
  Tax Aspects of the Operating Partnership and the Subsidiary Partnerships
 
     The following discussion summarizes certain federal income tax
considerations applicable solely to Crescent's investment in the Operating
Partnership and its subsidiary partnerships and represents the views of Shaw
Pittman. The discussion does not cover state or local tax laws or any federal
tax laws other than income tax laws.
 
     Classification of the Operating Partnership and its Subsidiary Partnerships
for Tax Purposes. In the opinion of Shaw Pittman, based on the provisions of the
Operating Partnership Agreement and the partnership agreements of the various
subsidiary partnerships, certain factual assumptions and certain representations
described in the opinion, the Operating Partnership and the subsidiary
partnerships will each be treated as a partnership and neither an association
taxable as a corporation for federal income tax purposes, nor a "publicly traded
partnership" taxable as a corporation. Unlike a ruling from the IRS, however, an
opinion of counsel is not binding on the IRS or the courts, and no assurance can
be given that the IRS will not challenge the status of the Operating Partnership
and its subsidiary partnerships as partnerships for federal income tax purposes.
If for any reason the Operating Partnership were taxable as a corporation rather
than as a partnership for federal income tax purposes, Crescent would fail to
qualify as a REIT because it would not be able to satisfy the income and asset
requirements. See "-- Taxation of Crescent," above. In addition, any change in
the Operating Partnership's status for tax purposes might be treated as a
taxable event, in which case Crescent might incur a tax liability without any
related cash distributions. See "-- Taxation of Crescent," above. Further, items
of income and deduction for the Operating Partnership would not pass through to
the respective partners, and the partners would be treated as shareholders for
tax purposes. The Operating Partnership would
 
                                       83
<PAGE>   96
 
be required to pay income tax at regular corporate tax rates on its net income,
and distributions to partners would constitute dividends that would not be
deductible in computing the Operating Partnership's taxable income. Similarly,
if any of the subsidiary partnerships were taxable as a corporation rather than
as a partnership for federal income tax purposes, such treatment might cause
Crescent to fail to qualify as a REIT, and in any event such partnership's items
of income and deduction would not pass through to its partners, and its net
income would be subject to income tax at regular corporate rates.
 
     Income Taxation of the Operating Partnership and its Subsidiary
Partnerships. A partnership is not a taxable entity for federal income tax
purposes. Rather, Crescent will be required to take into account its allocable
share of the Operating Partnership's income, gains, losses, deductions and
credits for any taxable year of such Partnership ending within or with the
taxable year of Crescent, without regard to whether Crescent has received or
will receive any cash distributions. The Operating Partnership's income, gains,
losses, deductions and credits for any taxable year will include its allocable
share of such items from its subsidiary partnerships.
 
  Tax Allocations with Respect to Pre-Contribution Gains
 
     Pursuant to Section 704(c) of the Code, income, gain, loss and deduction
attributable to appreciated property that is contributed to a partnership in
exchange for an interest in the partnership must be allocated for federal income
tax purposes in a manner such that the contributor is charged with the
unrealized gain associated with the property at the time of the contribution.
The amount of such unrealized gain is generally equal to the difference between
the fair market value of the contributed property at the time of contribution
and the adjusted tax basis of such property at the time of contribution (the
"Book-Tax Difference"). In general, the fair market value of the properties
initially contributed to the Operating Partnership were substantially in excess
of their adjusted tax bases. The Operating Partnership Agreement requires that
allocations attributable to each item of initially contributed property be made
so as to allocate the tax depreciation available with respect to such property
first to the partners other than the partner that contributed the property, to
the extent of, and in proportion to, such partners' share of book depreciation,
and then, if any tax depreciation remains, to the partner that contributed the
property. Accordingly, the depreciation deductions allocable will not correspond
exactly to the percentage interests of the partners. Upon the disposition of any
item of initially contributed property, any gain attributable to an excess at
such time of basis for book purposes over basis for tax purposes will be
allocated for tax purposes to the contributing partner and, in addition, the
Operating Partnership Agreement provides that any remaining gain will be
allocated for tax purposes to the contributing partners to the extent that tax
depreciation previously allocated to the noncontributing partners was less than
the book depreciation allocated to them. These allocations are intended to be
consistent with Section 704(c) of the Code and with Treasury Regulations
thereunder. The tax treatment of properties contributed to the Operating
Partnership subsequent to its formation is expected generally to be consistent
with the foregoing.
 
     In general, the contributing partners will be allocated lower amounts of
depreciation deductions for tax purposes and increased taxable income and gain
on sale by the Operating Partnership of one or more of the contributed
properties. These tax allocations will tend to reduce or eliminate the Book-Tax
Difference over the life of the Operating Partnership. However, the special
allocation rules of Section 704(c) of the Code do not always entirely rectify
the Book-Tax Difference on an annual basis. Thus, the carryover basis of the
contributed assets in the hands of the Operating Partnership will cause Crescent
to be allocated lower depreciation and other deductions. This may cause Crescent
to recognize taxable income in excess of cash proceeds, which might adversely
affect Crescent's ability to comply with the REIT distribution requirements. See
"-- Taxation of Crescent," above.
 
  Sale of Property
 
     Generally, any gain realized by the Operating Partnership on the sale of
real property, if the property is held for more than one year, will be long-term
capital gain, except for any portion of such gain that is treated as
depreciation or cost recovery recapture.
 
                                       84
<PAGE>   97
 
     Crescent's share of any gain realized on the sale of any property held by
the Operating Partnership as inventory or other property held primarily for sale
to customers in the ordinary course of the Operating Partnership's business,
however, will be treated as income from a prohibited transaction that is subject
to a 100% penalty tax. See "-- Taxation of Crescent," above. Such prohibited
transaction income will also have an adverse effect upon Crescent's ability to
satisfy the income tests for status as a REIT for federal income tax purposes.
Under existing law, whether property is held as inventory or primarily for sale
to customers in the ordinary course of the Operating Partnership's business is a
question of fact that depends on all the facts and circumstances with respect to
the particular transaction. The Operating Partnership intends to hold its
properties for investment with a view to long-term appreciation, to engage in
the business of acquiring, developing, owning and operating the properties, and
to make such occasional sales of properties as are consistent with these
investment objectives.
 
  Taxation of the Residential Development Corporations
 
     A portion of the amounts to be used to fund distributions to shareholders
is expected to come from the Residential Development Corporations through
dividends on non-voting common stock thereof held by the Operating Partnership
and interest on the Residential Development Property Mortgages held by the
Operating Partnership. The Residential Development Corporations will not qualify
as REITs and will pay federal, state and local income taxes on their taxable
incomes at normal corporate rates, which taxes will reduce the cash available
for distribution by Crescent to its shareholders. Crescent anticipates that,
initially, deductions for interest and amortization will largely offset the
otherwise taxable income of the Residential Development Corporations, but there
can be no assurance that this will be the case or that the IRS will not
challenge such deductions. Any federal, state or local income taxes that the
Residential Development Corporations are required to pay will reduce the cash
available for distribution by Crescent to its shareholders.
 
  State and Local Taxes
 
     Crescent and its shareholders may be subject to state and local tax in
various states and localities, including those states and localities in which it
or they transact business, own property, or reside. The tax treatment of
Crescent and the shareholders in such jurisdictions may differ from the federal
income tax treatment described above. Consequently, prospective shareholders
should consult their own tax advisors regarding the effect of state and local
tax laws upon an investment in the Crescent Common Shares.
 
     In particular, the State of Texas imposes a franchise tax upon corporations
and limited liability companies that do business in Texas. The Texas franchise
tax is imposed on each such entity with respect to the entity's "net taxable
capital" and its "net taxable earned surplus" (generally, the entity's federal
taxable income, with certain adjustments). The franchise tax on net taxable
capital is imposed at the rate of 0.25% of an entity's net taxable capital. The
franchise tax rate on "net taxable earned surplus" is 4.5%. The Texas franchise
tax is generally equal to the greater of the tax on "net taxable capital" and
the tax on "net taxable earned surplus." The Texas franchise tax is not applied
on a consolidated group basis. Any Texas franchise tax that Crescent is
indirectly required to pay will reduce the cash available for distribution by
Crescent to shareholders. Even if an entity is doing business in Texas for Texas
franchise tax purposes, the entity is subject to the Texas franchise tax only on
the portion of the taxable capital or taxable earned surplus apportioned to
Texas.
 
     As a Texas real estate investment trust, Crescent will not be subject
directly to the Texas franchise tax. However, Crescent will be subject
indirectly to the Texas franchise tax as a result of its interests in CREE Ltd.,
Management I, Management II, Management III, Management IV, Management V and
Management VII, which will be subject to the Texas franchise tax because they
are general partners of the Operating Partnership, Funding I, Funding II,
Funding III, Funding IV, Funding V and Funding VII, and the Operating
Partnership, Funding I, Funding II, Funding III, Funding IV, Funding V and
Funding VII will be doing business in Texas.
 
     It is anticipated that Crescent's Texas franchise tax liability will not be
substantial because CREE Ltd., Management I, Management II, Management III,
Management IV, Management V and Management VII
 
                                       85
<PAGE>   98
 
are allocated only a small portion of the taxable income of the Operating
Partnership, Funding I, Funding II, Funding III, Funding IV, Funding V and
Funding VII. In addition, Management VI and Funding VI are not anticipated to be
subject to the Texas franchise tax.
 
     The Operating Partnership, Funding I, Funding II, Funding III, Funding IV,
Funding V and Funding VII will not be subject to the Texas franchise tax, under
the laws in existence at the time of this Prospectus because they are
partnerships instead of corporations. There is no assurance, however, that the
Texas legislature will not expand the scope of the Texas franchise tax to apply
to limited partnerships such as the Operating Partnership, Funding I, Funding
II, Funding III, Funding IV, Funding V and Funding VII or enact other
legislation which may result in subjecting Crescent to the Texas franchise tax.
Any statutory change by the Texas legislature may be applied retroactively.
 
     In addition, it should be noted that three of the Residential Development
Corporations will be doing business in Texas and will be subject to the Texas
franchise tax. Further, Crescent/301, L.L.C. will be subject to the Texas
franchise tax because it is doing business in Texas and limited liability
companies are subject to Texas franchise tax. However, this franchise tax should
not be substantial because Crescent/301, L.L.C. owns a 1% interest in 301
Congress Avenue, L.P. Other entities that will be subject to the Texas franchise
tax include CresTex Development, LLC and its member CresCal Properties, Inc. and
any other corporations or limited liability companies doing business in Texas
with Texas receipts. It is expected that the franchise tax liability of these
entities will not be substantial.
 
     The Texas legislature considered in its 1997 regular session proposals for
property tax relief in Texas. Such relief would have required increasing the
proportion of education funding costs paid by the State of Texas and reducing
the proportion paid by local property taxes. Alternatives for increasing State
of Texas revenues that have been considered include broadening the franchise tax
base to include other entities such as partnerships and real estate investment
trusts, enactment of a new gross receipts tax, enactment of a new business
activity tax, an increase in the sales tax and/or broadening the sales tax base.
The Texas House of Representatives and the Texas Senate both passed different
bills that would have broadened the franchise tax base to apply the franchise
tax to business trusts such as Crescent and partnerships such as the Operating
Partnership, Funding I, Funding II, Funding III, Funding IV, Funding V, and
Funding VII. However, the conference committee was not able to work out the
differences between these two bills and the Texas legislature adjourned the 1997
regular session without adopting such legislation. There can be no assurance
that the Texas legislature will not enact similar legislation in its next
regular session, beginning in 1999. A committee of the Texas House of
Representatives is currently studying alternative methods and formulas to fund
education in anticipation of the next regular session.
 
     Locke Purnell Rain Harrell (A Professional Corporation), special tax
counsel to Crescent ("Special Tax Counsel"), has reviewed the discussion in this
section with respect to Texas franchise tax matters and is of the opinion that,
based on the current structure of Crescent and based upon current law, it
accurately summarizes the Texas franchise tax matters expressly described
herein. Special Tax Counsel expresses no opinion on any other tax considerations
affecting Crescent or a holder of Crescent Common or Preferred Shares,
including, but not limited to, other Texas franchise tax matters not
specifically discussed above.
 
     Shaw Pittman has not reviewed the discussion in this subsection "State and
Local Taxes" with respect to Texas franchise tax matters and has expressed no
opinion with respect thereto. Milbank has not reviewed the discussion in this
section "Tax Considerations" and has expressed no opinion with respect thereto.
 
                                       86
<PAGE>   99
 
                       PRINCIPAL SHAREHOLDERS OF CRESCENT
 
     The following table sets forth the beneficial ownership of Crescent Common
Shares for (i) each shareholder of Crescent who beneficially owns more than 5%
of the Crescent Common Shares, (ii) each trust manager and named executive
officer of Crescent or CREE Ltd., the general partner of the Operating
Partnership, and (iii) the trust managers and executive officers of Crescent or
CREE Ltd. as a group. Unless otherwise indicated in the footnotes, all Crescent
Common Shares and all Units are owned directly by the listed beneficial owner.
 
                            BENEFICIAL OWNERSHIP(1)
 
<TABLE>
<CAPTION>
                                                 COMMON                                 PERCENT OF
  NAME AND ADDRESS OF BENEFICIAL OWNER(2)    SHARES(3)(4)(5)                         COMMON SHARES(6)
  ---------------------------------------    ---------------                         ----------------
<S>                                          <C>                                     <C>
Richard E. Rainwater.......................    13,883,418(7)                              11.0%
John C. Goff...............................     2,491,413(8)                               2.1%
Gerald W. Haddock..........................     1,881,291(9)                               1.6%
Dallas E. Lucas............................       106,312(10)                                 *
David M. Dean..............................        83,740(10)                                 *
James M. Eidson, Jr........................        87,652                                     *
Anthony M. Frank...........................        25,400                                     *
Morton H. Meyerson.........................       164,765(11)                                 *
William F. Quinn...........................        28,907                                     *
Paul E. Rowsey, III........................        40,307                                     *
Melvin Zuckerman...........................     1,009,658(12)                                 *
FMR Corp...................................    10,186,700(13)                              7.5%
  82 Devonshire Street
  Boston, Massachusetts 02109
Trust Managers and Executive Officers as a
  Group (18 persons).......................    19,989,015(7)(8)(9)(10)(11)(12)(14)        15.1%
</TABLE>
 
---------------
 
  *  Less than 1%
 
 (1) All information is as of April 9, 1998 unless otherwise indicated. The
     number of Crescent Common Shares beneficially owned is reported on the
     basis of regulations of the Commission governing the determination of
     beneficial ownership of securities. Accordingly, the number of Crescent
     Common Shares beneficially owned by a person includes (i) the number of
     Common Shares that such person has the right to acquire within 60 days of
     April 9, 1998 upon the exercise of options to purchase Crescent Common
     Shares ("Crescent Stock Options") granted pursuant to the 1994 Crescent
     Real Estate Equities, Inc. Stock Incentive Plan (the "1994 Crescent Plan")
     and the 1995 Crescent Real Estate Equities, Inc. Stock Incentive Plan (as
     amended, the "1995 Crescent Plan"), (ii) the number of Crescent Common
     Shares issuable upon exchange of Units owned by such person for Crescent
     Common Shares, with such exchange made on the basis of two Crescent Common
     Shares for each Unit exchanged (assuming Crescent elects to issue Crescent
     Common Shares rather than pay cash upon such exchange), and (iii) the
     number of Crescent Common Shares issuable upon exercise of options (the
     "Unit Option") granted under the 1996 Crescent Real Estate Equities Limited
     Partnership Unit Incentive Plan (the "Unit Plan") to purchase Units and the
     subsequent exchange of such Units for Crescent Common Shares, with such
     exchange made on the basis of two Crescent Common Shares for each Unit
     exchanged (assuming Crescent elects to issue Crescent Common Shares rather
     than pay cash upon such exchange.) In addition, the number of Crescent
     Common Shares beneficially owned by a person is deemed to include
     Crescent's Crescent Series A Preferred Shares, each of which is currently
     convertible into .6119 Crescent Common Shares. As of April 9, 1998, none of
     the persons listed in the table beneficially owned any Crescent Series A
     Preferred Shares.
 
 (2) Unless otherwise indicated, the address of each beneficial owner is 777
     Main Street, Suite 2100, Fort Worth, Texas 76102.
 
                                       87
<PAGE>   100
 
 (3) The number of Crescent Common Shares beneficially owned by the following
     persons includes the number of Crescent Common Shares indicated due to the
     vesting of Crescent Stock Options: Richard E. Rainwater -- 1,165,624; John
     C. Goff -- 891,904; Gerald W. Haddock -- 652,472; Dallas E. Lucas --
     87,800; David M. Dean -- 77,600; James M. Eidson, Jr. -- 66,000; Anthony M.
     Frank -- 5,600; Morton H. Meyerson -- 2,800; William F. Quinn -- 23,400;
     Paul E. Rowsey, III -- 5,600; Melvin Zuckerman -- 2,800; and Trust Managers
     and Executive Officers as a Group -- 3,139,150.
 
 (4) The number of Crescent Common Shares beneficially owned by the following
     persons includes the number of Crescent Common Shares indirectly owned
     through participation in the CREE Ltd.'s 401(k) Plan as of December 31,
     1997, as follows: John C. Goff -- 1,579; Gerald W. Haddock -- 1,695; Dallas
     E. Lucas -- 914; David M. Dean -- 1,028; James M. Eidson, Jr. -- 604; and
     Trust Managers and Executive Officers as a Group -- 12,401.
 
 (5) The number of Crescent Common Shares beneficially owned by the following
     persons includes Units that are exchangeable on a one-for-two basis for
     Crescent Common Shares or, at the option of Crescent, the cash equivalent
     thereof, as follows: Richard E. Rainwater -- 3,408,753 Units exchangeable
     for 6,817,506 Crescent Common Shares; John C. Goff -- 385,057 Units
     exchangeable for 770,114 Crescent Common Shares; Gerald W. Haddock --
     256,419 Units exchangeable for 512,838 Crescent Common Shares; Morton H.
     Meyerson -- 27,429 Units exchangeable for 54,858 Crescent Common Shares;
     and Melvin Zuckerman -- 503,429 Units exchangeable for 1,006,858 Crescent
     Common Shares. The total number of Units outstanding represents
     approximately 10% of the total Units; the remaining approximately 90% of
     the total Units is owned by Crescent. All information as to number of Units
     contained in the footnotes to this table reflects the number of Crescent
     Common Shares issuable upon the exchange of Units on the basis of two
     Crescent Common Shares for each Unit, assuming Crescent elects to issue
     Crescent Common Shares rather than pay cash upon such exchange.
 
 (6) The percentage of Crescent Common Shares beneficially owned by a person
     assumes that (i) as to any person listed in the table, all Crescent Stock
     Options exercisable within 60 days of April 9, 1998 are exercised, all Unit
     Options exercisable within 60 days of April 9, 1998 are exercised and the
     Units so acquired are subsequently exchanged for Crescent Common Shares,
     and all Units are exchanged for Crescent Common Shares, and (ii) as to all
     other persons, no Crescent Stock Options or Unit Options are exercised, and
     no Units are exchanged for Crescent Common Shares. Crescent Common Shares
     issuable upon conversion of the Crescent Series A Preferred Shares are not
     included because, as of April 9, 1998, none of the persons listed in the
     table was the beneficial owner of any Preferred Shares.
 
 (7) The number of Crescent Common Shares and Units beneficially owned by
     Richard E. Rainwater includes 1,200,000 Crescent Common Shares and 126,588
     Units owned by trusts established for the benefit of Mr. Rainwater's
     children, and 460,000 Crescent Common Shares and 1,652 Units owned by Darla
     Moore, who is Mr. Rainwater's spouse. Mr. Rainwater disclaims beneficial
     ownership as to all such 1,660,000 Crescent Common Shares and 128,240
     Units. In addition, the number of Crescent Common Shares and Units
     beneficially owned by Mr. Rainwater includes 2,206,374 Crescent Common
     Shares and 6,335,126 Units owned indirectly by Mr. Rainwater, including (i)
     12,346 Crescent Common Shares and 49,506 Units owned by Rainwater, Inc., a
     Texas corporation, of which Mr. Rainwater is the sole director and owner,
     (ii) 10,070 Units owned by Tower Holdings, Inc., a Texas corporation, of
     which Mr. Rainwater is the sole director and owner, (iii) 33,296 Units
     owned by 777 Main Street Corporation, a Texas corporation, of which Mr.
     Rainwater is the sole director and owner, (iv) 2,425,836 Units owned by
     Rainwater Investor Partners, Ltd., a Texas limited partnership, of which
     Rainwater, Inc. is the sole general partner, (v) 555,424 Units owned by
     Rainwater RainAm Investors, L.P., a Texas limited partnership, of which
     Rainwater, Inc. is the sole general partner, (vi) 3,260,994 Units owned by
     Office Towers LLC, a Nevada limited liability company, of which Mr.
     Rainwater and Rainwater, Inc. own an aggregate 100% interest, and (vii)
     2,194,028 Crescent Common Shares owned by the Richard E. Rainwater 1995
     Charitable Remainder Unitrust No. 1, of which Mr. Rainwater is the sole
     trustee.
 
 (8) The number of Units beneficially owned by John C. Goff includes 152,560
     Units owned by Goff Family L.P., a Delaware limited partnership, of which
     Mr. Goff is a general partner; and includes
 
                                       88
<PAGE>   101
 
     714,286 Units due to the vesting of Unit Options. Mr. Goff disclaims
     beneficial ownership of the Units owned by Goff Family, L.P. in excess of
     his pecuniary interest in such Units.
 
 (9) The number of Units beneficially owned by Gerald W. Haddock includes
     101,706 Units owned by Haddock Family L.P., a Delaware limited partnership,
     of which Mr. Haddock is a general partner; and includes 714,286 Units due
     to the vesting of Unit Options. Mr. Haddock disclaims beneficial ownership
     of the Units owned by Haddock Family, L.P. in excess of his pecuniary
     interest in such Units.
 
(10) The number of Crescent Common Shares beneficially owned by Dallas E. Lucas
     and David M. Dean includes 9,959 and 3,984 restricted shares, respectively,
     which will vest (i.e., the restrictions will lapse) in equal amounts during
     the next three years. Each of Messrs. Lucas and Dean has sole voting power
     with respect to all of his restricted shares.
 
(11) The number of Crescent Common Shares beneficially owned by Morton H.
     Meyerson includes 80,000 Crescent Common Shares owned by trusts established
     for the benefit of Mr. Meyerson's children: Mr. Meyerson disclaims
     beneficial ownership as to all such 80,000 Crescent Common Shares. The
     number of Units beneficially owned by Morton H. Meyerson includes 16,880
     Units owned by trusts established for the benefit of Mr. Meyerson's
     children: Mr. Meyerson disclaims beneficial ownership as to all of such
     Units.
 
(12) The number of Crescent Common Shares beneficially owned by Mr. Zuckerman
     includes 1,006,858 Crescent Common Shares owned by Canyon Ranch, Inc., of
     which Mr. Zuckerman is the sole shareholders.
 
(13) As reported in the Schedule 13G/A dated February 14, 1998, filed by FMR
     Corp., Fidelity Management & Research Company ("Fidelity"), a registered
     investment advisor and a wholly owned subsidiary of FMR Corp., is the
     beneficial owner of 9,780,000 Crescent Common Shares, none of which it has
     the power to vote. In addition to such 9,780,000 Crescent Common Shares,
     Fidelity Management Trust Company ("Fidelity Management"), a wholly owned
     subsidiary of FMR Corp., is the beneficial owner of 406,700 Crescent Common
     Shares, each of which it has the sole power to vote. Fidelity is the
     beneficial owner of 9,780,000 Crescent Common Shares as a result of its
     serving as investment advisor to various registered investment companies
     (the "Funds"). Each of Edward C. Johnson III, chairman of FMR Corp.,
     Abigail P. Johnson, a director of FMR Corp., through its control of
     Fidelity, and the Funds has sole power to dispose of such Crescent Common
     Shares owned by the Funds. Neither FMR Corp., nor Edward C. Johnson III nor
     Abigail Johnson has the sole power to vote or direct the voting of the
     Crescent Common Shares owned directly by the Funds, which power resides
     with the Funds' boards of trustees. Fidelity carries out the voting of the
     Crescent Common Shares under written guidelines established by the Funds'
     board of trustees. In addition to such 9,780,000 Crescent Common Shares,
     Fidelity Management is the beneficial owner of 406,700 Crescent Common
     Shares as a result of its serving as investment manager of the
     institutional account(s). Edward C. Johnson III, Abigail Johnson and FMR
     Corp., through their control of Fidelity Management, have sole voting and
     dispositive power over such 406,700 Crescent Common Shares owned by the
     institutional account(s) as reported above. All information presented
     herein relating to FMR Corp. and Fidelity is based solely on the Schedule
     13G/A filed by FMR Corp.
 
(14) The number of shares beneficially owned by the trust managers and executive
     officers as a group includes an aggregate of 4,183 restricted shares held
     by two executive officers other than Messrs. Lucas and Dean. Such
     restricted shares will vest (i.e. the restrictions will lapse) in equal
     amounts during the next three years. Each of such executive officer has
     sole voting power with respect to all of his restricted shares.
 
                                       89
<PAGE>   102
 
                   MANAGEMENT OF CRESCENT PRIOR TO THE MERGER
 
     Set forth below is information with respect to the eight trust managers,
all of whom joined Crescent as directors in 1994 (except Melvin Zuckerman who
became a trust manager in 1996), and the executive officers of Crescent.
 
<TABLE>
<CAPTION>
                                        TERM
NAME                                   EXPIRES    AGE     POSITION
----                                   -------   ------   --------
<S>                                    <C>       <C>      <C>
Richard E. Rainwater.................   2000       54     Chairman of the Board of Trust Managers
John C. Goff.........................   1999       42     Vice Chairman of the Board of Trust Managers
Gerald W. Haddock....................   2001       50     President and Chief Executive Officer of
                                                          Crescent and CREE Ltd., Trust Manager of
                                                            Crescent and Director of CREE Ltd.
Anthony M. Frank.....................   2000       67     Trust Manager
Morton H. Meyerson...................   2001       60     Trust Manager
William F. Quinn.....................   2000       50     Trust Manager
Paul E. Rowsey, III..................   1999       43     Trust Manager
Melvin Zuckerman.....................   1999       70     Trust Manager
Dallas E. Lucas......................    N/A       36     Senior Vice President, Chief Financial and
                                                            Accounting Officer of Crescent and CREE Ltd.
David M. Dean........................    N/A       37     Senior Vice President, Law and Secretary of
                                                          Crescent and CREE Ltd.
James M. Eidson, Jr..................    N/A       44     Senior Vice President, Acquisitions of CREE
                                                          Ltd.
Bruce A. Picker......................    N/A       34     Vice President and Treasurer of Crescent and
                                                            CREE Ltd.
William D. Miller....................    N/A       39     Vice President, Administration of Crescent and
                                                            Senior Vice President, Administration of CREE
                                                            Ltd.
Joseph D. Ambrose, III...............    N/A       47     Vice President, Administration of CREE Ltd.
Jerry R. Crenshaw, Jr................    N/A       34     Vice President and Controller of CREE Ltd.
Barry L. Gruebbel....................    N/A       43     Vice President, Property Management of CREE
                                                          Ltd.
Howard W. Lovett.....................    N/A       41     Vice President, Corporate Leasing of CREE Ltd.
John L. Zogg, Jr.....................    N/A       34     Vice President, Leasing and Marketing of CREE
                                                          Ltd.
</TABLE>
 
     In connection with the Merger, Mr. Frank J. Fertitta III and Mr. Lorenzo J.
Fertitta will have rights to be appointed to the Crescent Board of Trust
Managers. See "The Merger Agreement -- Additional Agreements."
 
                                       90
<PAGE>   103
 
                       NOMINEES FOR ELECTION OF DIRECTORS
 
     The Station Articles and Station Bylaws require that the number of
directors on the Station Board of Directors be not less than three (3) nor more
than fifteen (15). Currently, the Station Board of Directors has fixed the
number of directors at seven (7). The Station Board of Directors presently
consists of the following persons: Frank J. Fertitta III, Glenn C. Christenson,
Blake L. Sartini, R. Hal Dean, Lorenzo J. Fertitta, Lowell H. Lebermann, Jr. and
Delise F. Sartini. The Station Board of Directors is staggered into three
classes. Class I consists of R. Hal Dean and Lowell H. Lebermann, Jr., whose
terms expire in 2000. Class II consists of Glenn C. Christenson and Blake L.
Sartini, whose terms expire in 1998. Class III consists of Frank J. Fertitta
III, Lorenzo J. Fertitta, and Delise F. Sartini, whose terms expire in 1999. At
each annual meeting, the terms of one class of directors expire. Each director
nominee is elected to the Station Board of Directors for a term of three years.
 
     At the Meeting two directors are to be elected to serve until the earlier
of (i) consummation of the Merger and (ii) the 2001 annual meeting of Station
and until their successors are elected and qualified. Unless authority to vote
for directors is withheld in the proxy card, it is the intention of the persons
named in the enclosed form of proxy to vote FOR the re-election of the two
nominees listed below. The persons designated as proxies will have discretion to
cast votes for other persons in the event any nominee for director is unable to
serve. At present, it is not anticipated that any nominee will be unable to
serve.
 
     The names and certain information concerning the persons to be nominated as
directors by the Station Board of Directors at the Meeting are set forth below.
THE STATION BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE
NOMINEES LISTED BELOW.
 
     Glenn C. Christenson. Mr. Christenson was appointed Chief Administrative
Officer in March 1997 and has served as Executive Vice President of Station
since February 1994. From 1989 to 1993, he served as Vice President of Station.
He has served as Chief Financial Officer since 1989, as Treasurer since 1992 and
as a director of Station since 1993. Mr. Christenson is a Certified Public
Accountant. From 1983 to 1989, he was a partner of the international accounting
firm of Deloitte Haskins & Sells (now Deloitte & Touche), where he served as
partner-in-charge of audit services for the Nevada practice and National Audit
partner for the Hospitality Industry. Mr. Christenson has served on the Board of
Directors of the Nevada Resort Association and was Chairman of the Nevada Resort
Association's IRS Liaison Committee.
 
     Blake L. Sartini. Mr. Sartini was appointed Chief Operating Officer in
March 1997 and has served as Executive Vice President of Station since February
1994. From February 1994 to March 1997 he also served as President -- Nevada
Operations for Station. From 1991 to 1993, he served as Vice President of Gaming
Operations for Station. He has served as a director of Station since 1993 and
has over 14 years of experience in the hotel and casino industry. From 1985 to
1990, Mr. Sartini held various management positions at Station and has served as
President of Southwest Gaming Services, Inc., a subsidiary of Station since
January 1993. In 1992, he co-founded Station Casino St. Charles and serves as
its Vice President.
 
                                       91
<PAGE>   104
 
                        DIRECTORS AND EXECUTIVE OFFICERS
 
     The following table sets forth the directors, executive officers and
certain key management personnel of Station and certain of its subsidiaries. All
directors hold their positions until their terms expire and until their
respective successors are elected and qualified. Executive officers are elected
by and serve at the discretion of the Station Board of Directors until their
successors are duly chosen and qualified.
 
<TABLE>
<CAPTION>
NAME                                         AGE                    POSITION
----                                         ---                    --------
<S>                                          <C>   <C>
Frank J. Fertitta III(*)...................  36    Chairman of the Board, President, Chief
                                                   Executive Officer and Director
Glenn C. Christenson.......................  48    Executive Vice President, Chief Financial
                                                   Officer, Chief Administrative Officer,
                                                   Treasurer and Director
Scott M Nielson............................  40    Executive Vice President, General Counsel
                                                   and Secretary
Blake L. Sartini(*)........................  39    Executive Vice President, Chief Operating
                                                   Officer and Director
William W. Warner..........................  33    Vice President of Finance
R. Hal Dean................................  81    Director
Lorenzo J. Fertitta(*).....................  29    Director
Lowell H. Lebermann, Jr....................  59    Director
Delise F. Sartini(*).......................  38    Director
</TABLE>
 
---------------
 
(*) Frank J. Fertitta III and Lorenzo J. Fertitta are brothers and Delise F.
    Sartini is their sister. Delise F. Sartini is married to Blake L. Sartini.
 
     Set forth below are the Class I and Class III directors whose terms do not
expire this year and executive officers of Station, along with certain
information regarding these individuals.
 
     Frank J. Fertitta III. Mr. Fertitta has served as Chairman of the Board of
Station since February 1993, Chief Executive Officer since July 1992 and
President of Station since 1989. He has held senior management positions since
1985, when he was named General Manager of Palace Station. He was elected a
director of Station in 1986, at which time he was also appointed Executive Vice
President and Chief Operating Officer. In 1992, he co-founded Station Casino St.
Charles and has served as Chairman of the Board of Directors of that company
since that time.
 
     Scott M Nielson. Mr. Nielson was appointed Executive Vice President of
Station in June 1994. In 1991 he was appointed General Counsel and in 1992 he
was appointed Secretary of Station. From 1991 through June 1994, he served as
Vice President of Station. From 1986 to 1991, Mr. Nielson was in private legal
practice, most recently as a partner in the Las Vegas firm of Schreck, Jones,
Bernhard, Woloson & Godfrey, where he specialized in gaming law and land use
planning and zoning. Mr. Nielson is a member of the American Bar Association,
the Nevada Bar Association and the International Association of Gaming
Attorneys.
 
     William W. Warner. Mr. Warner has served as Vice President of Finance of
Station since January, 1996 and from August 1993 to January 1996 he served as
Director of Finance. Prior to his employment by Station, Mr. Warner served as
controller of Kentco Capital Corporation from 1991 to 1993 and from 1986 to 1991
he served with the international accounting firm of Arthur Andersen LLP, most
recently as an Audit Manager.
 
     Lorenzo J. Fertitta. Mr. Fertitta has served as a director of Station since
1991. He has served as President and Chief Executive Officer of Fertitta
Enterprises, Inc. since June 1993, where he is responsible for managing an
investment portfolio consisting of marketable securities and real property. From
time to time, the
 
                                       92
<PAGE>   105
 
investment portfolio contains investments in other gaming operations. Mr.
Fertitta was a co-founder of Southwest Gaming in 1990 and of Station Casino St.
Charles in 1992 and has served on their respective boards since their inception.
From 1991 to 1993, he served as Vice President of Station. Mr. Fertitta serves
as a commissioner on the Nevada State Athletic Commission.
 
     Delise F. Sartini. Ms. Sartini was appointed a director of Station on
August 30, 1995. She has served as Vice President of Community Affairs at Palace
Station in excess of five years. Ms. Sartini was a co-founder of Southwest
Gaming in 1990 and of Station Casino St. Charles in 1992. Ms. Sartini is
involved in various charitable organizations and serves on the Board of
Directors of St. Jude's Ranch for Children.
 
     R. Hal Dean. Mr. Dean has served as a director of Station since June 1993
and is chairman of the Human Resources Committee. Mr. Dean presently is a member
of the Board of Directors of LaBarge, Inc. (from 1984) in St. Louis. Mr. Dean
retired in 1982 from the Ralston Purina Company, having served 44 years in
various capacities including Chairman of the Board (1968-1982) and Chief
Executive Officer (1964-1982). Mr. Dean has served on several other Boards of
Directors including those of Gulf Oil Corp., Pittsburgh, Pennsylvania
(1970-1985), Chase Manhattan Bank International Advisory Group, New York, New
York (1965-1970), Mercantile Trust Co., St. Louis, Missouri (1969-1987), General
American Life Insurance Co., St. Louis, Missouri (1972-1987), Barnes Hospital,
St. Louis, Missouri (1979-1985) and Chevron Corp., San Francisco, California
(1985-1989).
 
     Lowell H. Lebermann, Jr. Mr. Lebermann has served as a director of Station
since October 1993 and is chairman of the Audit Committee. He is also a director
of Valero Energy Corporation, San Antonio, serving as a member of the executive
committee. He is a former director of Franklin Federal Bancorp, Austin (now
Norwest), and founding member of the Board of Directors of the Texas Workers'
Compensation Fund. He is president and CEO of Centex Beverage, Inc., wholesale
distributor of Miller beer and imported beverages. Since 1993, he has been a
member of the Board of Regents of The University of Texas System. He was a
Council Member on the Austin City Council from 1971-1977.
 
MEETINGS OF THE BOARD OF DIRECTORS
 
     The Station Board of Directors met five times during fiscal 1998. The
Station Board of Directors has standing Audit and Human Resources Committees.
The Station Board of Directors does not have a standing Nominations Committee.
None of the members of the Station Board of Directors attended less than 75% of
the meetings of the Station Board of Directors held or of the total number of
meetings held by all committees of the Station Board of Directors on which
various members served during the fiscal year ended March 31, 1998. The current
members of each of the Station Board of Directors' committees are listed below.
 
THE AUDIT COMMITTEE
 
     The current members of the Audit Committee are Lowell H. Lebermann, Jr.,
Chairman, and R. Hal Dean. During the 1998 fiscal year, the Audit Committee met
one time.
 
     The Audit Committee, comprised solely of outside directors, meets
periodically with Station's independent public accountants, management and
internal auditors to discuss accounting principles, financial and accounting
controls, the scope of the annual audit, internal controls, regulatory
compliance and other matters; advises the Station Board of Directors on matters
related to accounting and auditing; and reviews management's selection of
independent public accountants. The independent public accountants and the
internal auditors have complete access to the Audit Committee without management
present to discuss results of their audit and their opinions on adequacy of
internal controls, quality of financial reporting and other accounting and
auditing matters.
 
THE HUMAN RESOURCES COMMITTEE
 
     The Human Resources Committee, currently comprised solely of outside
directors, reviews and takes action regarding terms of compensation, employment
contracts and pension matters that concern officers and key employees of
Station. The Human Resources Committee also reviews and takes action regarding
grants of
 
                                       93
<PAGE>   106
 
options and restricted shares to employees that are issued under the Stock
Compensation Program other than awards under the Nonemployee Directors Plan. The
Human Resources Committee met four times during the 1998 fiscal year.
 
COMPENSATION OF DIRECTORS
 
     Directors who are not directly or indirectly affiliated with Station
received a fee of $1,500 for each board meeting attended, $1,000 for each
committee meeting attended, and a monthly fee of $3,000. All directors are
reimbursed for expenses connected with attendance at meetings of the Station
Board of Directors. All directors are eligible to participate in the Stock
Compensation Program. See "Executive Compensation -- Stock Compensation
Program."
 
HUMAN RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
     In fiscal year 1998, the Human Resources Committee consisted of R. Hal Dean
and Lowell H. Lebermann, Jr., both outside directors of Station.
 
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
 
     Section 16(a) of the Exchange Act requires Station's executive officers and
directors and persons who own more than 10% of the outstanding Station Common
Stock to file reports of ownership on Forms 3, 4 and 5 with the Commission.
Executive officers, directors and 10% stockholders are required by the
Commission to furnish Station with copies of all Forms 3, 4 and 5 they file.
 
     Based solely on Station's review of the copies of such forms it has
received, Station believes that all its executive officers, directors and
greater than 10% beneficial owners complied with all the filing requirements
applicable to them with respect to transactions during fiscal 1998.
 
LEGAL PROCEEDINGS INVOLVING DIRECTORS, OFFICERS, AFFILIATES OR BENEFICIAL OWNERS
 
     No director, officer, affiliate or beneficial owner of Station, or any
associate thereof, is a party adverse to Station or any of its subsidiaries in
any lawsuit nor has a material adverse interest to Station.
 
                                       94
<PAGE>   107
 
                       PRINCIPAL STOCKHOLDERS OF STATION
 
     The following table sets forth, as of May 31, 1998, certain information
regarding the shares of Station Common Stock beneficially owned by each
stockholder who is known by Station to beneficially own in excess of 5% of the
outstanding shares of Station Common Stock, by each director and named executive
officer and by all executive officers and directors as a group. Station is aware
of no person who owns in excess of 5% of the Station Convertible Preferred
Stock.
 
<TABLE>
<CAPTION>
                                                                 BENEFICIAL OWNERSHIP
                                                                      OF SHARES
                                                                ----------------------
                                                                              PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER(1)                         NUMBER(2)     OF CLASS
---------------------------------------                         ----------    --------
<S>                                                             <C>           <C>
Frank J. Fertitta III.......................................     5,782,020      16.0
Blake L. Sartini(3).........................................     4,887,665      13.8
Lorenzo J. Fertitta.........................................     4,788,477      13.5
Delise F. Sartini(3)........................................     4,732,855      13.4
The Capital Group Companies(4)..............................     3,572,060       9.8
Glenn C. Christenson........................................       215,341      *
Scott M Nielson.............................................       186,472      *
William W. Warner...........................................         5,807      *
R. Hal Dean.................................................        41,765      *
Lowell H. Lebermann, Jr.....................................        21,000      *
Executive Officers and Directors as a Group (8 persons).....    15,943,174      43.2
                                                                ==========      ====
</TABLE>
 
---------------
 
 *  Less than one percent
 
(1) Except as otherwise noted, excludes shares of Station Common Stock issuable
    upon conversion of Station Convertible Preferred Stock. Of the total number
    of shares reported in this table, the following are the approximate number
    of vested options beneficially owned by each individual in the table: Frank
    J. Fertitta III 913,615; Blake L. Sartini 169,437; Delise F. Sartini 14,627;
    Lorenzo J. Fertitta 99,000; Glenn C. Christenson 177,141; Scott M Nielson
    142,472; Mr. William W. Warner 0; R. Hal Dean 20,000 and Lowell H.
    Lebermann, Jr. 20,000. Of the total number of shares reported in this table,
    457 shares beneficially owned by Mr. Warner are held by the Station's 401(k)
    Plan which shares may be voted by the trustee thereof.
 
(2) Unless otherwise indicated in the footnotes to this table and subject to the
    community property laws where applicable, each of the stockholders named in
    this table has sole voting and investment power with respect to the shares
    shown as beneficially owned. The address of each of the stockholders named
    in this table other than the Capital Group Companies is: c/o Station
    Casinos, Inc., 2411 West Sahara Avenue, Las Vegas, Nevada 89102. The address
    of the Capital Group Companies is 333 South Hope Street, Los Angeles,
    California 90071.
 
(3) Reflects beneficial ownership shared by Blake and Delise Sartini. Blake and
    Delise Sartini do not, however, share beneficial ownership of the vested
    options reflected in note (1) and thus have different total ownership
    figures.
 
(4) As reported in a Schedule 13G dated February 14, 1997, filed with the
    Commission, as amended February 11, 1998. Beneficial ownership is
    disclaimed. The Capital Group Companies, Inc. reports that it is the parent
    holding company of a group of investment management companies which hold the
    reported stock and that Capital Research and Management Company, one of such
    subsidiaries, is the beneficial owner of 2,684,370 shares. Includes
    1,009,760 shares resulting from the assumed conversion of Station's
    Convertible Preferred Stock.
 
                                       95
<PAGE>   108
 
                             EXECUTIVE COMPENSATION
 
     The following table sets forth the compensation paid or accrued by Station
to the Chief Executive Officer of Station and to each of the four most highly
compensated executive officers of Station (other than the Chief Executive
Officer) (collectively, the "Executive Officers") for services rendered to
Station in all capacities during the fiscal years ended March 31, 1998, 1997 and
1996.
 
                           SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                                                                                 LONG-TERM COMPENSATION
                                                                 ANNUAL COMPENSATION                   AWARDS(4)
                                                          ----------------------------------   --------------------------
                                                                                OTHER ANNUAL   SECURITIES     ALL OTHER
                                                           SALARY      BONUS    COMPENSATION   UNDERLYING    COMPENSATION
NAME AND PRINCIPAL POSITION                        YEAR    ($)(1)     ($)(2)       ($)(3)      OPTIONS(#)       ($)(5)
---------------------------                        ----   ---------   -------   ------------   -----------   ------------
<S>                                                <C>    <C>         <C>       <C>            <C>           <C>
Frank J. Fertitta III............................  1998   1,000,000   750,000          --         160,000      293,313
  Chairman of the Board,                           1997     999,159   375,000          --       1,000,000      247,600
  President and                                    1996     959,423   365,000          --         106,027      227,681
  Chief Executive Officer
Glenn C. Christenson.............................  1998     472,885   321,000          --         180,000      284,861
  Executive Vice President,                        1997     449,062   135,000          --          65,000      271,234
  Chief Financial Officer,                         1996     392,312   130,000          --         174,713      110,938
  Chief Administrative
  Officer and Treasurer
Scott M Nielson..................................  1998     380,385   240,000          --         130,000      155,137
  Executive Vice President,                        1997     374,543    93,750          --          40,000      154,002
  General Counsel and                              1996     342,365    95,000          --         145,223      100,296
  Secretary
Blake L. Sartini.................................  1998     446,923   312,000          --         110,000      165,240
  Executive Vice President                         1997     419,159   126,000      96,990         400,000      149,448
  and Chief Operating Officer                      1996     367,038   115,000      73,416          39,063       77,539
William W. Warner................................  1998     206,250   150,000          --         100,000        8,205
  Vice President of Finance(6)                     1997     174,904    30,625          --          10,000        1,154
                                                   1996     132,692    23,200          --          10,000          705
</TABLE>
 
---------------
 
(1) For the fiscal years ended March 31, 1998, 1997 and 1996, amounts include
    salary deferred under Station's Deferred Compensation Plan of $34,615, $0
    and $70,369 for Mr. Fertitta, $75,298, $50,927 and $0 for Mr. Christenson,
    $25,961, $35,365 and $34,240 for Mr. Nielson and $12,596, $6,731 and $0 for
    Mr. Warner (also includes amounts deferred under Station's Deferred
    Compensation Plan for Management Employees, with respect to Mr. Warner).
 
(2) Each of Messrs. Fertitta, Christenson, Nielson and Sartini was entitled to a
    minimum annual bonus equal to 5% of his base salary under his employment
    agreement prior to amendment of such agreements as of December 22, 1997.
    Amounts shown are the amounts earned for the fiscal years without
    consideration as to the year of payment. For fiscal years ended March 31,
    1998, 1997 and 1996 amounts include bonuses deferred under the Station
    Deferred Compensation Plan of $0, $0 and $21,500 for Mr. Fertitta, $0,
    $117,449 and $100,000 for Mr. Christenson, $0, $9,375 and $9,000 for Mr.
    Nielson, $0, $0 and $0 for Mr. Sartini and $15,000, $0 and $0 for Mr.
    Warner.
 
(3) For the fiscal years ended March 31, 1998, 1997 and 1996, Other Annual
    Compensation did not exceed the lesser of $50,000 or 10% of the total annual
    salary and bonus reported, except for Blake L. Sartini during the fiscal
    years ended March 31, 1997 and 1996. Station provides certain perquisites,
    including certain personal services, to the named executive officers. For
    the fiscal years ended March 31, 1997 and 1996, the costs of providing these
    services were approximately $83,000 and $55,000 respectively, for Mr.
    Sartini.
 
(4) As of March 31, 1998, the total number of shares of restricted stock held by
    Messrs. Fertitta, Christenson, Nielson, Sartini and Warner, and the value of
    such shares as of the close of trading on such date, was 30,000, 7,200,
    6,000, 4,800 and 2,000, and $442,500, $106,200, $88,500, $70,800 and
    $29,500, respectively.
 
                                       96
<PAGE>   109
 
(5) These amounts represent premiums for life and disability insurance policies
    provided by Station and Station's matching contribution to the Executive
    Officers' Deferred Compensation Plan for the Executive's account, and for
    Mr. Warner, Station's matching contributions to Mr. Warner's 401(k) and
    Management Employee's Deferred Compensation Plan accounts. For the fiscal
    years ended 1998 and 1997 these amounts include "split dollar" life
    insurance premiums for Messrs. Fertitta, Christenson, Nielson and Sartini.
    The "split dollar" life insurance premiums for 1996 have been pro-rated from
    August 15, 1995, the date of the contract, through March 31, 1996. The
    policy premiums will be returned to Station through the cash surrender value
    upon termination of the agreement or in the form of death benefit proceeds.
 
(6) In September 1997, the Company replaced certain of outstanding options to
    purchase Station Common Stock, including those of Mr. Warner. The Company
    replaced 27,055 of Mr. Warner's options which carried exercise prices
    ranging from $12.00 to $14.625 with options carrying an exercise price of
    $7.50.
 
OPTIONS GRANTED IN FISCAL 1998
 
     The following table provides information related to options to purchase
Station's Common Stock granted to the Executive Officers during the fiscal year
ended March 31, 1998 and the number and value of such options held as of the end
of such fiscal year. For the last fiscal year Station did not grant any SARs.
 
                       OPTION GRANTS IN LAST FISCAL YEAR
 
<TABLE>
<CAPTION>
                                               INDIVIDUAL GRANTS
                               --------------------------------------------------    POTENTIAL REALIZABLE
                               NUMBER OF    % OF TOTAL                                 VALUE AT ASSUMED
                               SECURITIES    OPTIONS                                 ANNUAL RATE OF STOCK
                               UNDERLYING   GRANTED TO                              PRICE APPRECIATION FOR
                                OPTIONS     EMPLOYEES    EXERCISE OR                    OPTION TERM(2)
                                GRANTED     IN FISCAL    BASE PRICE    EXPIRATION   -----------------------
NAME                             (#)(1)      YEAR(4)      ($/SHARE)       DATE        5%($)       10%($)
----                           ----------   ----------   -----------   ----------   ---------   -----------
<S>                            <C>          <C>          <C>           <C>          <C>         <C>
Frank J. Fertitta III.......    160,000         9.0         7.50       9/12/2007     754,674     1,912,491
Glenn C. Christenson........    180,000        10.0         7.50       9/12/2007     849,008     2,151,552
Scott M Nielson.............    130,000         7.0         7.50       9/12/2007     613,172     1,553,899
Blake L. Sartini............    110,000         6.0         7.50       9/12/2007     518,838     1,314,838
William W. Warner(3)........    100,000         6.0         7.50       9/12/2007     471,671     1,195,307
</TABLE>
 
---------------
 
(1) Executive Officers receive options pursuant to the Stock Compensation
    Program described elsewhere in this Proxy Statement. The material terms of
    that program related to recipients, grant timing, number of options, option
    price and duration are determined by the Program Administrators (as defined
    herein), subject to certain limitations. See "The Merger -- Interests of
    Certain Persons in The Merger -- Stock Options" and "-- Stock Compensation
    Program."
 
(2) Assumptions make no adjustment for consummation of the Merger.
 
(3) Consists of replaced options to purchases 27,055 shares of Station Common
    Stock and the grant of options to purchase additional shares. See
    "-- Replacement of and Grant of Stock Options."
 
(4) Including options of all employees that were replaced during the fiscal
    year. See "-- Replacement of and Grant of Stock Options."
 
FISCAL YEAR END OPTION VALUES
 
     The following table provides information related to options to purchase
Station's Common Stock held by the Executive Officers at the end of the fiscal
year ended March 31, 1998. None of the Executive Officers exercised options to
purchase Station's Common Stock during the fiscal year ended March 31, 1998.
 
                                       97
<PAGE>   110
 
    AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
 
<TABLE>
<CAPTION>
                                                 NUMBER OF SECURITIES
                                                UNDERLYING UNEXERCISED           VALUE OF UNEXERCISED
                                                      OPTIONS AT               IN-THE-MONEY OPTIONS AT
                                                 FISCAL YEAR END (#)            FISCAL YEAR END($)(1)
                                             ----------------------------    ----------------------------
NAME                                         EXERCISABLE    UNEXERCISABLE    EXERCISABLE    UNEXERCISABLE
----                                         -----------    -------------    -----------    -------------
<S>                                          <C>            <C>              <C>            <C>
Frank J. Fertitta III....................      742,410        1,398,617         15,904        1,308,856
Glenn C. Christenson.....................      134,138          285,575        294,995        1,399,190
Scott M Nielson..........................      109,818          205,405        246,543        1,014,174
Blake L. Sartini.........................      137,125          564,438         13,734          861,539
William W. Warner........................           --          100,000             --          725,000
</TABLE>
 
---------------
 
(1) Options are "in-the-money" if, on March 31, 1998, the market price of the
    Station Common Stock ($14.750) exceeded the exercise price of such options.
    The value of such options is calculated by determining the difference
    between the aggregate market price of the Common Stock covered by the
    options on March 31, 1998, and the aggregate exercise price of such options.
 
REPLACEMENT OF AND GRANT OF STOCK OPTIONS
 
     In September 1997, the Human Resources committee authorized the
"replacement" of outstanding stock options of its management employees
(excluding all of the Executive Officers except Mr. Warner). Pursuant to the
replacement, options to purchase shares of Station Common Stock at exercise
prices ranging from $9.375 per share to $15.00 per share held by such employees
were cancelled and options to purchase an aggregate of 1,794,742 shares of
Station Common Stock at an exercise price of $7.50 per share (the market value
on the date of such grant and replacement) were issued and are outstanding as of
March 31, 1998, in lieu of the cancelled options and as an additional incentive
to such employees. The vesting periods and other terms of the replacement
options match those of the additional options. The Human Resources Committee
believes that the replacement and additional grant was necessary in light of
competitive conditions in the gaming industry to retain and provide incentives
to key management personnel. Of the 100,000 options Mr. Warner currently holds,
27,055 were replaced as shown in the following table.
 
                           10-YEAR OPTION REPRICINGS
 
<TABLE>
<CAPTION>
                                         NUMBER OF    NUMBER OF      MARKET                                     LENGTH OF
                                         SECURITIES   SECURITIES    PRICE OF                                 ORIGINAL OPTION
                                         UNDERLYING   UNDERLYING    STOCK AT        EXERCISE        NEW      TERM REMAINING
                             DATE OF      OPTIONS      REPLACED      TIME OF     PRICE AT TIME    EXERCISE     AT DATE OF
NAME                       REPLACEMENT   CANCELLED      OPTION     REPLACEMENT   OF REPLACEMENT    PRICE       REPLACEMENT
----                       -----------   ----------   ----------   -----------   --------------   --------   ---------------
<S>                        <C>           <C>          <C>          <C>           <C>              <C>        <C>
William W. Warner........    9/12/97        7,055        7,055        $7.50         $12.000        $7.50        5-6 years
                             9/12/97       10,000       10,000        $7.50         $14.375        $7.50          8 years
                             9/12/97       10,000       10,000        $7.50         $14.625        $7.50          9 years
</TABLE>
 
EMPLOYMENT AGREEMENTS
 
     Station and each of Frank J. Fertitta III, Glenn C. Christenson, Scott M
Nielson, Blake L. Sartini and William W. Warner are parties to Employment
Agreements pursuant to which Mr. Fertitta has agreed to serve as the President
and Chief Executive Officer, Mr. Christenson has agreed to serve as the
Executive Vice President, Chief Financial Officer, Chief Administrative Officer
and Treasurer, Mr. Nielson has agreed to serve as Executive Vice President,
General Counsel and Secretary of Station, Mr. Sartini has agreed to serve as
Chief Operating Officer and Executive Vice President and Mr. Warner has agreed
to serve as Vice President of Finance in each case through December 21, 2002
subject to automatic 5 year extensions unless the employer or employee otherwise
gives notice at least one year prior to the end of the then-current term. Each
of the Employment Agreements was amended and restated on December 22, 1997. The
Employment Agreements, as amended, provide that the Executive Officers shall
devote reasonable time and attention to the business and affairs of Station. Mr.
Fertitta's Employment Agreement does not prohibit Mr. Fertitta from engaging in
any business or assisting any other entity in competition with Station during
the term of his
 
                                       98
<PAGE>   111
 
employment and does not affect continuation of his health and welfare benefits
thereafter. In connection with the Merger, however, Mr. Fertitta will amend his
Employment Agreement to include a non-competition provision similar to that
currently in the other Employment Agreements. Each Employment Agreement provides
for a base salary (to be reviewed annually for increase but not decrease), an
annual cash bonus in an amount determined by whether the Executive Officer has
met predetermined goals set by the Human Resources Committee of Station, and the
inclusion of the Executive Officer in all plans and programs of Station made
available to Station's Executive Officers or salaried employees generally,
including group life insurance, accidental death and dismemberment insurance,
hospitalization, surgical and major medical coverage, long-term disability,
vacations and holidays. The Executive Officers' annual base salaries for fiscal
year 1999 are $1,050,000 for Mr. Fertitta, $562,000 for Mr. Christenson,
$414,000 for Mr. Nielson, $546,000 for Mr. Sartini and $275,000 for Mr. Warner.
The Executive Officers are also entitled to life insurance and certain other
benefits and perquisites in addition to those made available to Station
management generally. These other benefits include participation in the
Supplemental Executive Retirement Plan in the case of Mr. Fertitta, and
participation in the Supplemental Management Retirement Plan in the case of
Messrs. Christenson, Nielson, Sartini and Warner. Additionally, each of the
Executive Officers is a participant in Station's Special Long-Term Disability
Plan. Mr. Christenson, Mr. Nielson and Mr. Sartini also participate in Station's
Long-Term Stay-On Performance Incentive Plan. Each such plan will be assumed by
the Operating Joint Venture pursuant to the Merger and unconditionally
guaranteed, together with the Employment Agreements, by the JV Parent which
guarantee will be unconditionally guaranteed by Crescent. See "The Merger
Agreement -- Certain Transactions -- Joint Venture."
 
     In the event that an Executive Officer's employment is terminated as a
result of his death or Disability (as defined in his Employment Agreement), the
Executive Officer or his legal representative will receive, among other
payments, all amounts owed the Executive Officer under his Employment Agreement
as of the date of his death or Disability, including a pro-rated bonus, and his
then-current salary for 24 months, in the case of Mr. Fertitta, or 12 months, in
the case of the other Executive Officers, or until his disability insurance
payments begin. In the event an Executive Officer's employment is terminated
without Cause (as defined in his Employment Agreement) whether before or after a
Change of Control (as defined in the Employment Agreement) (including the
Merger), other than due to death or Disability, among other payments, the
Executive Officer will receive the amounts payable under his Employment
Agreement as of the date of termination, plus a lump sum payment equal to five
times his base salary, in the case of Mr. Fertitta, or a lump sum payment equal
to three times his base salary, in the case of the other Executive Officers, any
bonus awarded but not yet paid, any deferred bonus, expense reimbursement and
continuation of his health and welfare benefit, at the level in effect at the
time of his termination of employment through the end of the 60th month, in the
case of Mr. Fertitta, or the 36th month, in the case of the other Executive
Officers, following such termination, or the economic equivalent, in each case,
as if such Executive were employed during such period.
 
     Immediately upon a Change of Control, including pursuant to the Merger,
each Executive Officer will receive a payment equal to three times his base
amount (as defined in Section 280G of the Code) less one dollar. Additionally,
in the event an Executive Officer's employment is terminated following a Change
of Control, either without Cause or by the Executive Officer for Good Reason (as
defined in the Employment Agreement), the Executive Officer will be entitled,
among other payments, to an amount of cash equal to the greater of (x) five
times an amount equal to his annual base amount at the time of the Change of
Control or (y) five times his annual base amount at the time of termination of
his employment, immediate vesting of any restricted stock of Station held in the
Executive Officer's name or to his benefit, immediate vesting of any stock
options and/or stock appreciation rights granted by Station which stock options
and stock appreciation rights shall continue to be and shall remain exercisable
for the remaining term of such stock options and stock appreciation rights as
set forth in the agreement granting, or otherwise under the award of, such stock
option or stock appreciation right as if no termination had taken place,
immediate vesting and cash-out of any phantom stock units granted to the
Executive Officer, immediate vesting and pay out of incentive share units,
continuation of all employee benefits and perquisites for a period of 60 months,
in the case of Mr. Fertitta, or 36 months, in the case of the other Executive
Officers, following such termination of employment, or the economic equivalent
thereof as if such employee were an employee of Station during such period,
immediate
 
                                       99
<PAGE>   112
 
vesting of the Executive Officer's supplemental retirement benefit as set forth
in the Supplemental Executive Retirement Plan, in the case of Mr. Fertitta, and
the Supplemental Management Retirement Plan, in the case of the other
Executives, continued funding of the Executive Officer's split dollar insurance
as if the Executive Officer were employed by Station through the maturity date
of such policies or payment in full of all premium obligations under such
insurance, immediate cash-out, in the case of all Executive Officers other than
Mr. Fertitta and Mr. Warner, of Station's Long-Term Stay-On Performance Plan
and, in the case of Mr. Fertitta, an additional amount, grossed up for taxes,
equal to the positive difference, if any, of $20 million minus a tax-adjusted
amount received under the other provisions noted above.
 
     If any payment or benefit paid or payable, or received or to be received,
by or on behalf of the Executive Officer in connection with a Change of Control
or the termination of the Executive Officer's employment, will or would be
subject to the excise tax imposed by Section 4999 of the Code, Station will pay
the Executive Officer an additional amount such that, after payment by the
Executive of all taxes, the Executive retains an amount of such additional
payment equal to the excise tax imposed on such payments and benefits paid or
payable or received or to be received. Certain provisions of the Employment
Agreements could have the effect of delaying or preventing a change of control
of Crescent, or of Station if the Merger were not to occur. The Merger Agreement
provides that assignment and acceptance of employment by the Executive Officers
with the Operating Joint Venture will not be deemed to imply in any way that the
change of control provisions of the Employment Agreements and benefit plans have
not been triggered with respect to change-of-control payments or terminations
after a change-of-control. See "The Merger Agreement -- Certain Transactions --
Joint Venture."
 
STOCK COMPENSATION PROGRAM
 
     Station has adopted the Stock Compensation Program which includes: (i) an
Incentive Stock Option Plan providing for the grant of incentive stock options,
(ii) a Compensatory Stock Option Plan providing for the grant of nonqualified
stock options, (iii) a Restricted Shares Plan providing for the grant of
restricted shares of Station Common Stock and (iv) a Nonemployee Directors Stock
Option Plan under which directors who are not employees of Station are granted
nonqualified stock options. Officers, key employees, directors (whether
employees or non-employees) and independent contractors or consultants of
Station or its Subsidiaries are eligible to participate in the Compensatory
Stock Option Plan and the Restricted Shares Plan. Only employees of Station and
its Subsidiaries, however, are eligible to participate in the Incentive Stock
Option Plan. Only non-employee directors are eligible to participate in the
Nonemployee Directors Stock Option Plan.
 
     The Stock Compensation Program is administered by a committee of at least
two non-employee directors (as defined in Rule 16b-3 of the Exchange Act (the
"Program Administrators")) appointed by the Station Board of Directors. Subject
to the provisions of the Stock Compensation Program, the Program Administrators
have sole authority, in their absolute discretion to determine, except with
regard to awards under the Nonemployee Directors Plan: (a) the individuals to
whom options and restricted shares shall be granted under the Program; (b) the
time or times at which the options and restricted shares may be granted under
the Program; (c) the number of shares subject to each option and restricted
share, the option price and the duration of each option granted under the
Program; and (d) all of the other terms and conditions of options and restricted
shares granted under the Stock Compensation Program.
 
     Under the Nonemployee Directors Plan, each nonemployee director receives
options to acquire shares of the Station Common Stock pursuant to the following
formula: (a) 10,000 shares of Station Common Stock upon the effective date of
his or her initial appointment to serve as a member of the Station Board of
Directors and (b) an additional 2,500 shares of Station Common Stock upon each
anniversary of such date if the nonemployee director is a member of the Station
Board of Directors on such anniversary. The options are exercisable immediately
and will expire on the tenth anniversary of the grant. The exercise price of the
options is the fair market value of the shares at the time of the grant of the
option.
 
     A maximum of 6,307,000 shares of Station Common Stock have been reserved
for issuance under the Stock Compensation Program. As of March 31, 1998, options
to purchase an aggregate of 5,067,452 shares of
 
                                       100
<PAGE>   113
 
Station Common Stock under the Program were outstanding, 1,485,971 of which were
exercisable as of such date. All outstanding options will become fully
exercisable (on the same vesting schedule as applicable prior to the Merger) in
connection with the Merger. See "The Merger Agreement -- Station Stock Options."
The Stock Compensation Program will terminate on May 21, 2003, unless terminated
earlier by the Station Board of Directors, and no options or restricted shares
may be granted under the Stock Compensation Program after such date. The Stock
Compensation Program will be terminated in connection with the Merger and
options granted thereunder will become options to purchase Crescent Common
Shares. See "The Merger Agreement -- Station Stock Options."
 
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
 
     The following is a general summary of certain federal income tax
consequences applicable to the Stock Compensation Program. The summary does not
reflect any provisions of the income tax laws of any state or local taxing
jurisdiction. Because the tax consequences of events and transactions under the
Stock Compensation Program depend upon various factors, including an employee's
own tax status, each employee who receives a grant or award under the Stock
Compensation Program should consult his or her own tax advisor with respect
thereto.
 
  Incentive Stock Options
 
     Upon the grant of an incentive stock option, an optionee will not recognize
any income. No income will be recognized by an optionee upon the exercise of an
incentive stock option if the requirements of the Stock Compensation Program and
the Code are met, including, without limitation, the requirement that the
optionee remain an employee of Station during the period beginning on the date
of the grant of the incentive stock option and ending on the day three months
(up to one year in the discretion of the Program Administrators if the optionee
becomes disabled) before the date the incentive stock option is exercised.
 
     The federal income tax consequences of a subsequent disposition of shares
of Station Common Stock acquired upon the exercise of an incentive stock option
will depend upon when the disposition occurs and the type of disposition.
 
     If such shares are disposed of by the optionee more than two years after
the date of grant of the incentive stock option, and more than one year after
such shares are transferred to the optionee, any gain or loss realized upon such
disposition will be characterized as long-term capital gain or loss, and Station
will not be entitled to any income tax deduction in respect of the incentive
stock option or its exercise.
 
     If such shares are disposed of by the optionee within two years after the
date of grant of the incentive stock option, or within one year after such
shares are transferred to the optionee (a "disqualifying disposition") and the
disqualifying disposition is a taxable disposition, the excess, if any, of the
amount realized (up to the fair market value of such shares on the exercise
date) over the option price will be compensation taxable to the optionee as
ordinary income, and Station will be entitled to a deduction (subject to the
provisions of Section 162 (m) of the Code) equal to the amount of ordinary
income recognized by the optionee. If the amount realized by the optionee upon
such disqualifying disposition exceeds the fair market value of such shares on
the exercise date, the excess will be characterized as short-term capital gain.
If the option price exceeds the amount realized upon such disqualifying
disposition, the difference will be characterized as short-term capital loss.
 
     If the disqualifying disposition is a non-taxable disposition (for example,
a gift or a sale to a related person), the excess, if any, of the fair market
value of such shares on the exercise date over the option price will be
compensation taxable as ordinary income, and Station will a be entitled to a
deduction (subject to the provisions of Section 162 (m) of the Code) equal to
the amount of ordinary income recognized by the optionee.
 
     If an optionee has not remained an employee of Station during the period
beginning on the date of the grant of an incentive stock option and ending on
the day three months (up to one year in the discretion of the Program
Administrators if the optionee becomes disabled) before the date the incentive
stock option is
 
                                       101
<PAGE>   114
 
exercised, the exercise of such option will be treated as the exercise of a
non-qualified stock option with the tax consequences described below.
 
  Non-Qualified Stock Options
 
     Upon the grant of a non-qualified stock option, an optionee will not
recognize any income. At the time a non-qualified stock option is exercised, the
optionee will recognize compensation taxable as ordinary income, and Station
will be entitled to a deduction (subject to the provisions of Section 162(m) of
the Code) in an amount equal to the difference between the fair market value on
the exercise date of the shares of Station Common Stock acquired pursuant to
such exercise and the option price. Upon a subsequent disposition of such
shares, the optionee will realize long-term or short-term capital gain or loss,
depending on the holding period of such shares. For purposes of determining the
amount of such gain or loss, the optionee's tax basis in such shares will be the
sum of the option price and the amount of ordinary income recognized upon
exercise. In order for any such gain or loss to qualify as long-term capital
gain or loss, the shares must be held for more than one year measured from the
exercise date.
 
  Effect Of Share For Share Exercise
 
     If an optionee elects to tender shares of Station Common Stock in partial
or full payment of the option price for shares to be acquired upon the exercise
of a non-qualified stock option, the optionee will not recognize any gain or
loss on such tendered shares. The number of shares of Station Common Stock
received by the optionee upon any such exercise that are equal in number to the
number of tendered shares would retain the tax basis and the holding period of
the tendered shares for capital gain or loss purposes. The optionee will
recognize compensation taxable as ordinary income, and Station will be entitled
to a deduction (subject to the provisions of Section 162 (m) of the Code), in an
amount equal to the fair market value of the number of shares received by the
optionee upon such exercise that is in excess of the number of tendered shares,
less any cash paid by the optionee. The fair market value of such excess number
of shares would then become the tax basis for those shares and the holding
period of such shares for capital gain or loss purposes will begin on the
exercise date. If the tendered shares were previously acquired upon the exercise
of an incentive stock option, the shares of Station Common Stock received by the
optionee upon the exercise of the non-qualified stock option that are equal in
number to the number of tendered shares will be treated as shares of Station
Common Stock acquired upon the exercise of such incentive stock option.
 
     Except as discussed in the following paragraph, if an optionee elects to
tender shares of Station Common Stock in partial or full payment of the option
price for shares to be acquired upon the exercise of an incentive stock option,
the optionee will not recognize any gain or loss on such tendered shares. No
income will be recognized by the optionee in respect of the shares received by
the optionee upon the exercise of the incentive stock option if, as previously
stated, the requirements of the Stock Compensation Program and the Code are met.
The IRS has not yet issued final regulations with respect to a determination of
the basis and the holding period of the shares acquired upon such an exercise.
Regulations proposed by the IRS provide that for all shares of Station Common
Stock acquired upon such an exercise, the requisite two year and one year
holding periods for stock acquired upon exercise of an incentive stock option
(described above) must be satisfied, regardless of the holding period applicable
to the tendered shares. The tax basis (and holding period for all other federal
income tax purposes) of the tendered shares, however, will carry over to the
same number of shares acquired upon the exercise. The number of shares acquired
which is in excess of the number of tendered shares will have a tax basis of
zero and a holding period for all purposes beginning on the date of exercise.
Any subsequent disqualifying disposition will be deemed first to have been a
disposition of the shares with a tax basis of zero, and then to have been a
disposition of the shares with a carry over tax basis. For purposes of
determining the amount of compensation taxable to the optionee upon a subsequent
disqualifying disposition, the option price of the shares with a tax basis of
zero will be deemed to be zero, and the option price of the shares with a carry
over basis will be deemed to be the fair market value of the shares on the
exercise date.
 
     If an optionee elects to tender shares of Station Common Stock that were
previously acquired upon the exercise of an incentive stock option in partial or
full payment of the option price for shares to be acquired
 
                                       102
<PAGE>   115
 
upon the exercise of another incentive stock option, and such exercise occurs
within two years of the date of grant of such incentive stock option, or within
one year after such tendered shares were transferred to the optionee, the tender
of such shares will be a taxable disqualifying disposition with the tax
consequences described above regarding the disposition within two years of the
date of grant of an incentive stock option, or within one year after shares were
acquired upon the exercise of incentive stock options. The shares of Station
Common Stock acquired upon such exercise will be treated as shares of Station
Common Stock acquired upon the exercise of an incentive stock option and the
holding period of such shares for all purposes will begin on the exercise date.
 
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
 
     Table I below sets forth the total benefits payable to the Chief Executive
Officer as the sole participant in the Supplemental Executive Retirement Plan
(the "SERP"). Amounts shown in Table 1 represent the annual benefits to which
the Chief Executive Officer is entitled under the SERP.
 
                                    TABLE I*
 
<TABLE>
<CAPTION>
                                                    10 OR MORE
REMUNERATION($)                                  YEARS OF SERVICE
---------------                                  ----------------
<S>                                              <C>
1,000,000....................................        500,000
1,025,000....................................        512,500
1,075,000....................................        537,500
1,100,000....................................        550,000
1,125,000....................................        562,500
1,150,000....................................        575,000
1,175,000....................................        587,500
</TABLE>
 
---------------
 
* Assumes normal retirement
 
     The SERP, which went into effect on November 30, 1994, is a defined benefit
plan that covers only the Chief Executive Officer of Station. The SERP provides
a monthly supplemental retirement benefit (the "SERP SRB"), in addition to any
other qualified or non-qualified retirement plan of Station, equal to
one-twelfth of the product of (a) 50% and (b) the Chief Executive Officer's
final annual compensation, as determined under the SERP. Amounts shown in Table
I represent the annual benefits to which the Chief Executive Officer is entitled
under the SERP, reduced by monthly benefits payable under all qualified and
non-qualified defined benefit retirement plans of Station. The amounts listed in
Table I are not currently subject to any deductions for social security because
Station currently has no other defined benefit plans. The Chief Executive
Officer will become vested in accrued SERP SRBs, upon the latter of (a) the
attainment of age 45 and (b) the completion of ten years of service after the
effective date of the plan, or, if a Change of Control (as defined in the SERP)
occurs (such as the Merger), the Chief Executive Officer will become fully
vested in the SERP SRB.
 
     The SERP SRB is payable upon the later of the date on which the Chief
Executive Officer attains age 55 or the Chief Executive Officer's termination of
employment. Alternatively, the Chief Executive Officer may elect to commence
receiving the SERP SRB upon the later of the date on which the Chief Executive
Officer attains age 45 or the Chief Executive Officer's termination of
employment. In the event of such an early retirement election, the SERP SRB
shall be reduced by 6% of such otherwise payable benefit for each year that the
Chief Executive Officer is less than age 55.
 
     The SERP SRB payments shall be made for no less than 15 years after the
date on which the Chief Executive Officer begins to receive payments. If the
Chief Executive Officer dies after the Chief Executive Officer becomes vested
and prior to the date on which the Chief Executive Officer begins to receive
SERP SRB payments, Station shall pay a survivors benefit to the Chief Executive
Officer's spouse equal to the amount that would have been payable to such spouse
if the Chief Executive Officer had commenced receiving the SERP SRB at age 55 in
the form of a joint and 50% survivor annuity. Station has no duty to set aside
or
 
                                       103
<PAGE>   116
 
invest any amounts under or in respect of the SERP. As of June 15, 1998, Frank
J. Fertitta III has four years of credited service under the SERP. The SERP will
be assumed by the Operating Joint Venture in connection with the Merger and
performance by the Operating Joint Venture thereunder will be unconditionally
guaranteed by the JV Parent which guarantee will be unconditionally guaranteed
by Crescent. See "The Merger Agreement -- Certain Transactions -- Joint
Venture."
 
SUPPLEMENTAL MANAGEMENT RETIREMENT PLAN
 
     Table II below sets forth the total benefits payable to Executive Officers,
other than the Chief Executive Officer, selected by the Human Resources
Committee of the Station Board of Directors to participate in Station's
Supplemental Management Retirement Plan (the "SMRP"). Amounts shown in Table II
represent the annual benefits to which the covered Executive Officers are
entitled under the SMRP.
 
                                   TABLE II*
 
<TABLE>
<CAPTION>
                                                    10 OR MORE
REMUNERATION($)                                  YEARS OF SERVICE
---------------                                  ----------------
<S>                                              <C>
200,000......................................         80,000
250,000......................................        100,000
300,000......................................        120,000
350,000......................................        140,000
400,000......................................        160,000
450,000......................................        180,000
500,000......................................        200,000
550,000......................................        220,000
600,000......................................        240,000
</TABLE>
 
---------------
 
* Assumes normal retirement
 
     The SMRP, which went into effect on November 30, 1994, is a defined benefit
plan for the Executive Officers, other than the Chief Executive Officer,
selected by the Human Resources Committee of the Station Board of Directors. The
SMRP provides a monthly supplemental retirement benefit (the "SMRP SRB"), in
addition to any other qualified or non-qualified retirement plan of Station,
equal to one-twelfth of the product of (a) 40% and (b) the Executive Officer's
final annual compensation, as determined under the SMRP, reduced by monthly
benefits payable under all qualified and non-qualified defined benefit
retirement plans of Station. The amounts shown in Table II are not currently
subject to any deductions for social security or other offset amounts because
Station currently has no other defined benefit plans. The Executive Officer will
become vested in the accrued SMRP SRBs, upon the latter of (a) the attainment of
age 55 and (b) the completion of ten years of service after the effective date
of the plan, or, if a Change of Control (as defined in the SMRP) occurs (such as
the Merger), the Executive Officer will become fully vested in the SMRP SRB.
 
     The SMRP SRB is payable upon the later of the date on which the Executive
Officer attains age 60 or the Executive Officer's termination of employment.
Alternatively, the Executive Officer may elect to commence receiving the SMRP
SRB upon the later of the date on which the Executive Officer attains age 55 or
the Executive Officer's termination of employment. In the event of such an early
retirement election, the SMRP SRB shall be reduced by 6% of such otherwise
payable benefit for each year that the Executive Officer is less than age 60.
 
     The SMRP SRB payments shall be made for no less than 15 years after the
date on which the Executive Officer begins to receive payments. If the Executive
Officer dies after becoming vested and prior to the date on which the Executive
Officer begins to receive SMRP SRB payments, Station shall pay a survivor's
benefit to the Executive Officer's spouse equal to the amount that would have
been payable to such spouse if the Executive Officer had commenced receiving the
SMRP SRB at age 60 in the form of a joint and 50% survivor annuity. Station
shall have no duty whatsoever to set aside or invest any amounts under or in
respect to the SMRP. As of June 15, 1998, Messrs. Glenn C. Christenson, Scott M
Nielson and Blake L. Sartini have four
 
                                       104
<PAGE>   117
 
years of service credited under the SMRP and William W. Warner has two years of
credited service. The SMRP will be assumed by the Operating Joint Venture in
connection with the Merger and performance by the Operating Joint Venture
thereunder will be unconditionally guaranteed by the JV Parent which guarantee
will be unconditionally guaranteed by Crescent. See "The Merger
Agreement -- Certain Transactions -- Joint Venture."
 
DEFERRED COMPENSATION PLAN FOR EXECUTIVES
 
     The Deferred Compensation Plan For Executives (the "DCPE"), in effect as of
November 30, 1994, is a deferred compensation plan for Executive Officers whose
base salaries are at a rate in excess of the amount specified in Section
401(a)(17) of the Code, and who are selected for participation by the Human
Resources Committee of the Station Board of Directors. Executive Officers may
defer up to 50% of their regular base salary and 100% of any special and/or
discretionary bonuses. Station has agreed to match 100% of the first 10% of any
base salary and bonus deferred under the plan, pursuant to retroactive
modifications of the DCPE adopted by Station on March 15, 1996. Additionally,
Station may, in its sole discretion, credit supplemental contributions to an
Executive Officer's account. Earnings on deferrals shall equal the greater of
(i) the annual return on Station Common Stock or (ii) an instrument paying 4%
interest per annum. Each participant's deferred compensation account will be
adjusted at the end of the plan year to reflect earnings and the account balance
will be reinvested for the next plan year. An Executive Officer's accrued
balance in a deferred compensation account shall be fully vested at all times.
Matching and supplemental contributions shall vest 20% each year and shall be
fully vested after five years of continuous service. If a Change in Control (as
defined in the DCPE) occurs (such as the Merger), the Executive Officer's
accrued balance in the Matching Contributions Account and the Supplemental
Contributions Account (both as defined in the DCPE) become fully vested as of
the date of any such Change in Control. Vested accrued balances shall be paid in
cash in one lump sum payment within 15 days of the termination of employment. If
the Executive Officer is terminated for any reason (other than death) prior to
completion of five years of continuous service, any accrued balance existing
under the matching and supplemental accounts shall be paid in cash. Hardship
distributions are permitted under the plan in the event of an unforeseeable
emergency, and will be limited to the amount shown to be necessary to meet the
emergency. The DCPE will be assumed by the Operating Joint Venture in connection
with the Merger and performance by the Operating Joint Venture thereunder will
be unconditionally guaranteed by the JV Parent which guarantee will be
unconditionally guaranteed by Crescent. See "The Merger Agreement -- Certain
Transactions -- Joint Venture." Certain obligations under the DCPE have been met
through the purchase of 4,000 shares of Station Convertible Preferred Stock as
to which Station has voting rights.
 
SPECIAL LONG-TERM DISABILITY PLAN
 
     The Special Long-Term Disability Plan provides disability benefits to equal
a combined monthly benefit amount of 66% of the average of base salary plus
bonus for the two plan years immediately preceding (but not including) the plan
year in which the participant's employment is terminated due to disability
divided by twelve; provided, however, that the monthly benefit will be reduced
by any benefit the participant receives from all other Station sponsored
disability plans, if any. Benefits begin on the first day of the second month
succeeding the month in which the participant's termination of employment due to
disability occurs. Individuals eligible to participate in the plan consist of
the Executive Officers as chosen by the Human Resources Committee of the Station
Board of Directors from key executives nominated by the Chief Executive Officer.
The Human Resources Committee may, in its sole discretion, terminate the
participation of any participant prior to the disability of such participant.
Each of the Executive Officers is a participant in this plan. Station is
currently self-insured as to these long-term disability benefits. The Special
Long-Term Disability Plan will be assumed by the Operating Joint Venture in
connection with the Merger and performance by the Operating Joint Venture
thereunder will be unconditionally guaranteed by the JV Parent which guarantee
will be unconditionally guaranteed by Crescent. See "The Merger
Agreement -- Certain Transactions -- Joint Venture."
 
                                       105
<PAGE>   118
 
LONG-TERM STAY-ON PERFORMANCE INCENTIVE PLAN
 
     The Long-Term Stay-On Performance Incentive Plan, as amended as of June 19,
1997, will pay $1,000,000 to each of Messrs. Christenson, Nielson and Sartini
for continuous employment by all three Executive Officers through March 31,
2001. Failure by any such Executive Officer, for any reason, to complete the
length of service specified will result in the forfeiture of such Executive
Officers' award and will reduce each of the remaining two Executive Officers'
awards by 25%. The award will be issued on April 1, 2001 in shares of Station
Common Stock (or, upon consummation of the Merger, JV Parent common stock),
valued at the award date, if available, or otherwise in cash. The award will be
restricted from April 1, 2001 through April 1, 2004 (the "Restriction Period").
Each Executive Officer must continue in employment during the Restriction Period
to receive the full amount of his award. The award becomes unrestricted as
follows: (1) 50% of the total number of shares on April 1, 2003 and (2) 50% of
the total number of shares on April 1, 2004. Termination of employment, for any
reason during the Restriction Period, will result in forfeiture of any remaining
restricted shares of Station. The Long-Term Stay-On Performance Incentive
Program will be assumed by the Operating Joint Venture in connection with the
Merger and performance by the Operating Joint Venture thereunder will be
unconditionally guaranteed by the JV Parent which guarantee will be
unconditionally guaranteed by Crescent. See "The Merger Agreement -- Certain
Transactions -- Joint Venture."
 
SPLIT-DOLLAR INSURANCE PROGRAM
 
     In August 1995, split-dollar life insurance agreements were entered into
for the Chief Executive Officer and the Executive Officers whereby Station will
pay the premiums for such life insurance policies and Station will have an
interest in the insurance benefits equal to the amount of unreimbursed premiums
it has paid, with the balance payable to the beneficiary as named by the
Executive Officer. The face value of each Executive Officer's individual policy
and second-to-die policy is as follows: $10 million and $30 million for Mr.
Fertitta, $7 million and $0 for Mr. Christenson, $7 million and $0 for Mr.
Nielson, $5 million and $10 million for Mr. Sartini and $3.5 million and $0 for
Mr. Warner. The split-dollar life insurance agreements will be assumed by the
Operating Joint Venture in connection with the Merger and performance by the
Operating Joint Venture thereunder will be unconditionally guaranteed by the JV
Parent which guarantee will be unconditionally guaranteed by Crescent. See "The
Merger Agreement -- Certain Transactions -- Joint Venture."
 
LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
     The Station Articles eliminate liability of its directors and officers for
breach of fiduciary duty as directors and officers, except to the extent
otherwise required by the NRS and in cases in which the breach involves
intentional misconduct, fraud or a knowing violation of the law.
 
     Sections 78.7502 and 78.751 of Chapter 78 of the NRS and the Station Bylaws
contain provisions for indemnification of officers and directors of Station and,
in certain cases, employees and other persons. The Station Bylaws require
Station to indemnify such persons to the full extent permitted by Nevada law.
Each such person will be indemnified in any proceeding if such person acted in
good faith and in a manner which such person reasonably believed to be in, or
not opposed to, the best interest of Station. Indemnification would cover
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement.
 
     The Station Bylaws also provide that the Station Board of Directors may
cause Station to purchase and maintain insurance on behalf of any present or
past director or officer insuring against any liability asserted against such
person incurred in the capacity of director or officer or arising out of such
status, whether or not Station would have the power to indemnify such person.
Station maintains directors' and officers' liability insurance.
 
     Station has entered into indemnification agreements (the "Indemnification
Agreements") with each director and certain officers, employees and agents of
Station. Each Indemnification Agreement provides for, among other things: (i)
indemnification to the fullest extent permitted by law for an indemnified party
(the "Indemnitee") unless it is determined, as provided in the Indemnification
Agreement, that indemnification is
 
                                       106
<PAGE>   119
 
not permitted under law; and (ii) prompt advancement of expenses to any
Indemnitee in connection with his or her defense against any claim. Pursuant to
the Merger Agreement, Crescent has agreed that all rights to indemnification and
exculpation from liabilities for acts or omissions occurring prior to the
Effective Time existing in favor of the current or former directors or officers
of Station and its subsidiaries as provided in their respective articles or
certificates of incorporation or by-laws (or comparable organizational
documents) shall survive the Merger and shall continue in full force and effect
in accordance with their terms for a period of not less than five years from the
Effective Time and the obligations of Station in connection therewith shall be
assumed by Crescent. In addition, Crescent has agreed to provide Station's
current officers and directors an insurance and indemnification policy that
provides coverage against claims made within the five years following the
Effective Time. See "The Merger Agreement -- Indemnification; Directors and
Officers Insurance."
 
                        REPORT ON EXECUTIVE COMPENSATION
 
     This report is provided by the Human Resources Committee of the Station
Board of Directors to assist stockholders in understanding Station's objectives
and procedures in establishing the compensation of Station's Chief Executive
Officer and other executive officers. The Human Resources Committee is
responsible for (i) reviewing and approving all elements of the total
compensation program for Station, (ii) aligning the total compensation program
with Station's business strategy and (iii) assuring stockholders that the pay
delivery programs are effective, responsible, and competitive when compared to
similarly situated organizations.
 
EXECUTIVE COMPENSATION PROGRAM PHILOSOPHY AND OBJECTIVES(1)
 
     The Human Resources Committee's primary objectives in setting compensation
policies are to develop a program designed to retain the current management
team, reward them for outstanding performance, and attract those individuals
needed to implement its strategy. The Human Resources Committee set compensation
policies to account for continued significant growth and to retain highly
talented, motivated individuals with a long-term vision for Station. The Human
Resources Committee also sought to align the financial interest of Station's
executives with that of its stockholders. The Human Resources Committee believes
to achieve this goal a significant portion of Station's executives' compensation
should be "at risk" and tied to the achievement of annual and long-term
corporate performance criteria. The Human Resources Committee retained an
outside consultant to assist with the design, implementation, and communication
of its compensation program.
 
BASE SALARY
 
     Base salaries are reviewed annually and may be adjusted (for increase but
not decrease) based on an evaluation of the executive's performance in
conjunction with a review of compensation normally received by other individuals
holding similar positions at other organizations with similar revenues and scope
of business. For fiscal year 1998 the Human Resources Committee identified a
group of fifteen similar casino and gaming companies that it believes are
Station's competition for executive level employees. Due to the limited
availability of information, the group of fifteen similar casino and gaming
companies identified by the Human Resources Committee is a different group of
companies from that used to create the stock performance graph. As part of its
strategy to attract and retain high quality executive employees, the Human
Resources Committee has established a policy to pay executive base salaries
between the 50th and 75th percentile of the range of the base salaries paid by
the fifteen similar casino and gaming companies. Actual salaries are determined
based upon an assessment of the individual's contribution and value to the
organization and the
 
---------------
 
(1) Notwithstanding anything to the contrary set forth in any of the Company's
     previous or future filings under the Securities Act or the Exchange Act,
     the Report on Executive Compensation shall not be incorporated by reference
     in any such filings.
 
                                       107
<PAGE>   120
 
competitive market for that position as reflected by the base salaries paid by
the fifteen similar casino and gaming companies.
 
ANNUAL INCENTIVES
 
     The Human Resources Committee also sets executive compensation in a manner
designed to make it dependent upon the performance of Station. To create
incentives for superior performance and to allow executives to share in the
success of Station, the Human Resources Committee has made a portion of an
executive's compensation dependent upon the annual and long-term performance of
Station.
 
     Annual incentive awards for fiscal year 1998 performance were based upon
Station's performance and assessments of the individual executive's contribution
to the success of Station during fiscal year 1998. The Human Resources Committee
targeted total cash compensation paid to Station's executives to be between the
50th and 75th percentile of that paid by its competitors for executive level
employees. Actual annual incentive payouts were adjusted for Station's
performance and the individual's contribution during the performance period.
 
     Executives participate in an annual incentive plan administered by the
Human Resources Committee that was implemented on April 1, 1994. This plan makes
a portion of the participant's compensation dependent upon the annual
performance of Station and also has a component to reward the individual for
superior performance in the event targets are not met, but the individual's
performance has been exemplary. The purpose of this plan is to focus each
executive on the attainment of financial objectives that the Human Resources
Committee believes are primary determinants of Station's share price over time.
Each year, specific cash flow and earnings per share goals are approved by the
Human Resources Committee under the plan. To ensure that the award amounts under
the plan are competitive, target award amounts are set at the beginning of each
performance period for each executive based upon the 50th percentile of
comparable award amounts paid by Station's competitors for executive employees.
The amount of the target award is determined by comparison of actual cash flow
and earnings per share versus the goal cash flow and earnings per share. The
actual award amount may vary from zero to one and a half times the targeted
award amount. The Human Resources Committee has retained discretion to change
the actual award by up to 50% of the executive's target, positively or
negatively, based on individual performance.
 
LONG-TERM INCENTIVES
 
     Station has provided stock-based incentives to its officers since its
inception. The Human Resources Committee attempts to give Station's executives a
stake in the long-term success of the business, and to pay a considerable
portion of Station's executives total compensation in stock, to give the
executive a long-term stake in the business and to align the executive's
interests with those of Station's stockholders. These grants of stock options
and restricted stock align the executive's interests with the stockholder's
interests as the size of the executive's reward is dependent on Station's stock
performance. Grants made to Station's executives approximate the 75th percentile
of expected grant values for those companies that the Human Resources Committee
has identified as Station's competition for executive level employees, with the
value of any awards estimated using the Black-Scholes valuation model. Awards
have generally been granted with a vesting schedule of 20% of the award each
anniversary from the date of grant until fully vested.
 
OTHER EXECUTIVE PROGRAMS
 
     Station also maintains certain executive benefits and perquisites that are
considered necessary to offer fully competitive opportunities to its executives.
These include, but are not limited to, supplemental retirement arrangements,
employment agreements, and change in control contracts. The details of these
programs are explained under the "Executive Compensation" section of this proxy
statement.
 
                                       108
<PAGE>   121
 
1998 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
 
     These same philosophies described above for each executive position were
used by the Human Resources Committee to determine the compensation for the
Chairman of the Board, President, and Chief Executive Officer, Mr. Frank J.
Fertitta III.
 
THE CHIEF EXECUTIVE OFFICER'S 1998 BASE SALARY
 
     The Human Resources Committee established Mr. Fertitta's annual base salary
for the fiscal year 1998 based upon a review of compensation by those fifteen
casino and gaming companies identified as having similar revenues and scope of
operations together with an evaluation of Station's results in fiscal year 1997.
Although the survey data for fiscal year 1998 showed an increase in base salary,
Mr. Fertitta's base salary was not adjusted for fiscal year 1998. His base
salary remained at $1,000,000.
 
THE CHIEF EXECUTIVE OFFICER'S 1998 ANNUAL INCENTIVE
 
     The annual incentive earned by the Chief Executive Officer for fiscal year
1998 performance was $750,000. This annual incentive award reflects Station's
performance and the Chief Executive Officer's individual contribution to Station
as evaluated by the Human Resources Committee for the year.
 
CERTAIN EXECUTIVE OFFICERS' 1998 LONG-TERM INCENTIVES
 
     The committee granted options to Messrs. Fertitta and Sartini in fiscal
year 1997 with the expectation that long-term incentives would not be granted
during fiscal year 1998.
 
LIMITATION OF TAX DEDUCTION FOR EXECUTIVE COMPENSATION
 
     The Omnibus Budget Reconciliation Act of 1993 prevents publicly traded
companies from receiving a tax deduction on compensation paid to proxy-named
executive officers in excess of $1 million annually, effective for compensation
paid after 1993. The Human Resources Committee believes that there will be
little if any impact from this limitation to Station in fiscal 1998 due to
various exceptions to the $1 million limitation.
 
     The Human Resources Committee believes that Station's other compensation
programs which will result in amounts of compensation in fiscal year 1998 will
either qualify for exceptions to the $1 million limit or that in the aggregate
such amounts of compensation will not significantly exceed $1 million for each
executive.
 
                                            Respectfully Submitted,
 
                                            Station Casinos, Inc.
                                            Human Resources Committee
 
                                            R. Hal Dean, Chairman
                                            Lowell H. Lebermann, Jr.
 
                                       109
<PAGE>   122
 
STOCK PERFORMANCE GRAPH(2)
 
     The graph below compares the cumulative total stockholder return of
Station, with the cumulative total return of the Standard & Poor's 500 Stock
Index ("S&P 500") and the cumulative total return of a peer group with
comparable market capitalization consisting of Ameristar Casinos Inc., Argosy
Gaming Corp., Aztar Corp., Boomtown, Inc., Boyd Gaming Corp., Casino America,
Inc., Casino Magic Corp., Circus Circus Enterprises, Grand Casinos, Inc.,
Hollywood Casino Corp., Jackpot Enterprises, Inc., President Casinos, Inc.,
Primadonna Resorts, Inc., Rio Hotel & Casino, Inc. and Showboat, Inc. The
performance graph assumes that $100 was invested on May 25, 1993 (the date of
Station's initial public offering) in each of the Station Common Stock, common
stock of the selected peer group, and the S&P 500. The stock price performance
shown in this graph is neither necessarily indicative of nor intended to suggest
future stock price performance.
 
               COMPARISON OF 58 MONTH CUMULATIVE TOTAL RETURN(*)
        AMONG STATION CASINOS, INC., THE S&P 500 INDEX AND A PEER GROUP
 
<TABLE>
<CAPTION>
                                                      STATION
               Measurement Period                     CASINOS             PEER
             (Fiscal Year Covered)                      INC.             GROUP           S & P 500
<S>                                               <C>               <C>               <C>
5/93                                                           100               100               100
3/94                                                            87                80               102
3/95                                                            58                66               117
3/96                                                            58                65               155
3/97                                                            41                46               186
3/98                                                            74                49               275
</TABLE>
 
---------------
 
*  $100 INVESTED ON 5/25/93 IN STOCK OR INDEX. INCLUDING REINVESTMENT OF
   DIVIDENDS. FISCAL YEAR ENDING MARCH 31.
 
(2) Notwithstanding anything to the contrary set forth in any of Station's
    previous or future filings under the Securities Act or the Exchange Act,
    this Performance Graph shall not be incorporated by reference in any such
    filings.
 
                                       110
<PAGE>   123
 
                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
BOULDER STATION LEASE
 
     Boulder Station is situated on 45 acres located on the east side of Las
Vegas, Nevada. Station owns 18 acres and leases the remaining 27 acres from a
trust pursuant to a long-term ground lease. The trustee of such trust is Bank of
America NT&SA and the beneficiary is KB Enterprises, an affiliated company owned
by Frank J. Fertitta, Jr. and Victoria K. Fertitta (the "Related Lessor"), the
parents of Frank J. Fertitta III, Chairman of the Board and Chief Executive
Officer of Station. The lease has a maximum term of 65 years, ending in June
2058. The lease provides for monthly payments of $125,000 until June 1998. In
July 1998, and every ten years thereafter, the rent will be adjusted by a cost
of living factor. In July 2003, and every ten years thereafter, the rent will be
adjusted to the product of the fair market value of the land and the greater of
(i) the then-prevailing annual rate of return for comparably situated property
or (ii) 8% per year. In no event will the rent for any period be less than the
immediately preceding period. Pursuant to the ground lease, Station has an
option, exercisable at five-year intervals beginning in June 1998, to purchase
the land at fair market value. Boulder Station did not exercise its June 1998
option. Station believes that the terms of the ground lease are as fair to
Station as could be obtained from an independent third party.
 
TEXAS STATION LEASE
 
     Texas Station is situated on 47 acres located in North Las Vegas, Nevada.
Station leases the land from a trust pursuant to a long-term ground lease. The
trustee of such trust is Bank of America NT&SA and the beneficiary is Texas
Gambling Hall & Hotel, an affiliate company of the Related Lessor. The lease has
a maximum term of 65 years, ending in May 2060. The lease provides for monthly
rental payments of $150,000 until July 2000. In July 2000, and every ten years
thereafter, the rent will be adjusted to the product of the fair market value of
the land and the greater of (i) the then-prevailing annual rate of return being
realized by owners of comparable land in Clark County or (ii) 8% per year. The
rent will be further adjusted by a cost of living factor after the first ten
years and every ten years thereafter. In no event will the rent for any period
be less than the immediately preceding period. Pursuant to the ground lease,
Station has an option, exercisable at five-year intervals beginning in May 2000,
to purchase the land at fair market value. Pursuant to the ground lease, the
lessor will have a right to put the land to Station, exercisable no later than
one year after the first to occur of (a) a change of control (as defined in the
lease), including the Merger, or (b) delivery of written notice that such a
change of control is anticipated, at a purchase price equal to fair market value
as determined by negotiation. Station believes that the terms of the ground
lease are as fair to Station as could be obtained from an independent third
party.
 
MCNABB/MCNABB/DESOTO/SALTER & CO.
 
     Station formerly employed McNabb/McNabb/DeSoto/Salter & Co. ("MMDS") to
provide advertising and marketing research services. Frank J. Fertitta III,
Blake L. and Delise F. Sartini and Lorenzo J. Fertitta collectively owned a 50%
interest in MMDS. In April 1997, Station purchased the assets of MMDS for
approximately $800,000. Station believes that the terms of the transactions with
MMDS were as fair to Station as could have been obtained from an independent
third party.
 
GORDON BIERSCH BREWING COMPANY
 
     Station owns a 50% interest in Town Center Amusements, Inc., a Limited
Liability Company, a Nevada limited liability company, doing business as
Barley's Casino & Brewing Company ("Barley's"), which operates a casino and brew
pub located in southeast Las Vegas. Barley's commenced operations in January
1996. Barley's has entered into a consulting agreement with Gordon Biersch
Brewing Company ("Gordon Biersch"). Frank J. Fertitta III, Blake L. and Delise
F. Sartini and Lorenzo J. Fertitta collectively own a 16.2% interest in Gordon
Biersch. The Fertitta Trust owns another 21.6% interest and trusts for the
children of the above named individuals collectively own a 7.4% interest in
Gordon Biersch. The consulting agreement requires Barley's to pay Gordon Biersch
$25 for each barrel of beer brewed, and to reimburse Gordon Biersch for the
brewer's salary and other related costs. Barley's paid Gordon Biersch
approximately
 
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$62,000 during the fiscal year ended March 31, 1998. In connection with the
Merger, it is anticipated that Crescent will assume an indirect interest in
Barley's through the Decontrolled Subsidiary. In addition Gordon Biersch was a
tenant at Sunset Station until March 1998. Gordon Biersch paid monthly rental
amounts of $13,395 under the lease at Sunset Station.
 
MERGER RELATED TRANSACTIONS
 
     As part of the transactions associated with the Merger, but immediately
prior to the Merger, certain operating assets and the employment of Station's
employees will be transferred to the Operating Joint Venture which will be owned
50% by the JV Parent and 50% by the Management Group (the "Management Portion").
The Management Portion will be owned approximately 49.8% by Frank J. Fertitta
III, Blake L. Sartini and Lorenzo J. Fertitta with the remainder owned by other
members of Station's management prior to the Merger including Glenn C.
Christenson and Scott M Nielson. Initially, Frank J. Fertitta III and Blake L.
Sartini will participate in management of the Management Entity and Mr. Lorenzo
J. Fertitta and Mr. Glenn C. Christenson will participate in management of the
Secondary Management Entity.
 
     In connection with the Merger, Crescent and the Operating Partnership will
enter into a Right of First Refusal and Noncompetition Agreement with the
Operating Joint Venture. Under the agreement, the Operating Joint Venture will
be granted a right of first refusal as to any lease arrangement (a "master
lease") for a casino/hotel property (defined as real estate on which hotel and
casino or other gaming-related operations are conducted) in which the operators
of the business conducted at the property prior to the date the property is
owned or acquired by the Operating Partnership will cease to operate the
business. The Operating Joint Venture will grant the Operating Partnership a
right of first refusal to invest, directly or indirectly, (i) in casino/hotel
properties (including the opportunity to provide services related to real estate
or to invest in a hotel property), real estate mortgages, real estate
derivatives, or entities that invest primarily in or have a substantial portion
of their assets in such types of real estate assets or (ii) any other casino/
hotel-related investments that can be structured as REIT-suitable investments.
In addition, without the prior written consent of the Management Entity,
Crescent, the Operating Partnership, Crescent Operating and their affiliates may
not own, operate or otherwise engage in activities related to any casino/hotel
properties other than casino/hotel properties operated and leased by the
Operating Joint Venture or an entity under its control, provided that the
Operating Partnership may own a casino/hotel property if a master lease
arrangement already exists at the property, if casino/hotel activities conducted
at the property are incidental to the primary business operations at the
property or if the sellers or operators desire to enter into a master lease
arrangement with the Operating Partnership. Under the agreement, without the
prior written consent of the Operating Partnership, the Management Group and
their affiliates, may not own, operate or otherwise engage in any activities
related to casino/hotel properties that are not operated and leased by the
Operating Joint Venture or an entity under its control.
 
                  SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
 
     The Station Board of Directors has selected Arthur Andersen L.L.P. ("AA")
to serve as Station's independent public accountants to audit the financial
statements of Station for the 1999 fiscal year or until consummation of the
Merger, whichever is shorter. AA has served as Station's independent public
accountants since fiscal year 1991. A representative of AA will attend the
Meeting, will be given an opportunity to make a statement and will be available
to answer appropriate questions.
 
     THE STATION BOARD OF DIRECTORS RECOMMENDS, ON THE ADVICE OF ITS AUDIT
COMMITTEE, THAT THE STOCKHOLDERS VOTE FOR RATIFICATION OF THE APPOINTMENT OF
ARTHUR ANDERSEN L.L.P. AS STATION'S INDEPENDENT PUBLIC ACCOUNTANTS FOR FISCAL
1999 OR UNTIL CONSUMMATION OF THE MERGER.
 
     Unless a contrary indication is made on the enclosed proxy card, it is the
intention of the persons named in the enclosed form of proxy to vote FOR the
selected accountants.
 
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              COMPARISON OF RIGHTS OF STOCKHOLDERS OF STATION AND
                            SHAREHOLDERS OF CRESCENT
 
GENERAL
 
     Crescent is organized under the laws of the State of Texas and Station is
incorporated under the laws of the State of Nevada. If the Merger is
consummated, the holders of Station Common Stock, whose rights as stockholders
are currently governed by the Nevada General Corporation Law, the Station
Articles and the Station Bylaws, will, at the Effective Time, become holders of
Crescent Common Shares and their rights as such will be governed by the
Declaration of Trust, the Crescent Bylaws, the TRA and, to the extent not
addressed by the TRA, by the TCBA. The material differences between the rights
of holders of Station Common Stock and the rights of holders of Crescent Common
Shares, resulting from the differences in their governing documents and the
application of the Nevada General Corporation Law or the TBCA and the TRA
thereto, are summarized below.
 
     The following summary does not purport to be a complete statement of the
rights of holders of Crescent Common Shares under applicable Texas law, the
Declaration of Trust and the Crescent Bylaws or a comprehensive comparison with
the rights of the holders of Station Common Stock under applicable Nevada law,
the Station Articles and the Station Bylaws, or a complete description of the
specific provisions referred to herein. This summary contains a list of the
material differences but is not meant to be relied upon as an exhaustive list or
a detailed description of the provisions discussed and is qualified in its
entirety by reference to the TBCA, the TRA and the governing corporate
instruments of Crescent and to the Nevada General Corporation Law and the
governing corporate instruments of Station, to all of which the holders of
Station Common Stock are referred. Copies of such governing corporate
instruments of Crescent and Station are available without charge, by following
the instructions listed under "Incorporation of Certain Documents by Reference."
 
SPECIAL MEETINGS OF SHAREHOLDERS AND STOCKHOLDERS
 
  Station
 
     Under the Nevada General Corporation Law, special stockholder meetings of a
corporation may be called by its board of directors and by any person or persons
authorized to do so by its articles of incorporation or by-laws. Under the
Station Bylaws and the Station Articles, a special meeting of stockholders may
only be called by the Chairman of the Station Board of Directors, the Station
Chief Executive Officer, the Station President or by a vote of a majority of the
entire Station Board of Directors.
 
  Crescent
 
     Under the TRA, special meetings of shareholders of a Texas real estate
investment trust may be called by or at the direction of the trust managers or
any officer or other person as provided in the declaration of trust or by-laws.
Under the Crescent Bylaws, the Chairman of the Board, the Vice Chairman of the
Board, the Chief Executive Officer, the President, the Secretary, the Crescent
Board of Trust Managers (by resolution adopted by a majority of the total number
of trust managers) or, subject to certain conditions, the holders of not less
than 25% of all of the shares then outstanding and entitled to vote at the
proposed special meeting, may call a special meeting of shareholders. Meetings
may be held without notice if all shareholders entitled to vote at the meeting
are present or if those not present waive notice either before or after the
shareholders' meeting. The Crescent Bylaws also contain provisions limiting the
rights of shareholders to nominate trust managers or propose other business for
consideration at a special meeting of shareholders, as described under
"Description of Capital Stock of Crescent -- Certain Provisions of the
Declaration of Trust, Crescent Bylaws and Texas Law -- Advance Notice Provisions
for Shareholder Nominations and Shareholder Proposals."
 
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<PAGE>   126
 
STOCKHOLDER ACTION BY WRITTEN CONSENT
 
  Station
 
     Under the Nevada General Corporation Law, unless otherwise provided in the
articles of incorporation, any action which may be taken at an annual or special
meeting of stockholders may be taken without a meeting if written consent
thereto is signed by stockholders holding at least a majority of the voting
power. The Station Articles provide that stockholders may not act by written
consent other than written consent at a meeting of stockholders.
 
  Crescent
 
     Under the TRA, unless otherwise provided by the declaration of trust or
bylaws, any action required or permitted to be taken at a meeting of the
shareholders of a real estate investment trust may be taken without a meeting if
a consent in writing, setting forth the action so taken, shall be signed by all
of the shareholders entitled to vote with respect to the subject matter thereof.
The Crescent Bylaws permit shareholder action by unanimous written consent if a
written waiver of any right to dissent is signed by each shareholder, if any,
entitled to notice of the meeting but not entitled to vote at the meeting.
 
STOCKHOLDER NOMINATIONS AND PROPOSALS FOR BUSINESS
 
  Station
 
     The Station Articles and the Station Bylaws establish procedures that must
be followed for stockholders to nominate individuals to the Station Board of
Directors or to propose business at the annual meeting of stockholders. The
notice of any nomination for election as a director must set forth the name and
address of the stockholder who intends to make the nomination and of the person
or persons to be nominated; a representation that the stockholder is a holder of
record of stock of Station entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; the class and number of shares of Station that are
beneficially owned by such stockholder and also which are owned of record by
such stockholder; as to the beneficial owner, if any, on whose behalf the
nomination is made (i) the name and address of such person and (ii) the class
and number of shares of Station that are beneficially owned by such person; a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; such other information regarding each nominee proposed by such
stockholder as would have been required to be included in a proxy statement
filed pursuant to the proxy rules of the Commission had such nominee been
nominated, or intended to be nominated, by the Station Board of Directors; and
the written consent of each nominee to serve as a director if so elected. The
notice of business proposed to be brought before a meeting must include a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting; the name and address, as
they appear on Station's books, of the stockholder proposing such business, and
the name and address of the beneficial owner, if any, on whose behalf the
proposal is made; the class and number of shares of Station that are owned
beneficially and of record by such stockholder of record and by the beneficial
owner, if any, on whose behalf the proposal is made; and, any material interest
of such stockholder of record and the beneficial owner, if any, on whose behalf
the proposal is made, in such business.
 
     To be timely, nominations of candidates for election as Station directors
must be delivered to or mailed and received by the Secretary of Station not
later than 90 days in advance of the anniversary date for the immediately
preceding annual meeting of Station (or, if the date of the annual meeting is
changed by more than 30 days from such anniversary date, not more than 10 days
after the first public disclosure of the date on which notice of the date of the
meeting was mailed, whichever is earlier). Similarly, notice of business to be
brought before a meeting must be delivered to or mailed and received at the
principal executive office of Station not less than 35 days prior to the meeting
(or, in the event less than 45 days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders, not later than five days
after the date of the first public disclosure or the date on which notice of the
date of the meeting was mailed).
 
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<PAGE>   127
 
  Crescent
 
     The Crescent Bylaws provide for an advance notice procedure for
shareholders to make nominations of candidates for trust manager or bring other
business before an annual meeting of shareholders of Crescent (the "Shareholder
Notice Procedure"). Pursuant to the Shareholder Notice Procedure (i) only
persons who are nominated by, or at the direction of, the Crescent Board of
Trust Managers, or by a shareholder who has given timely written notice
containing specified information to the Secretary of Crescent prior to the
meeting at which trust managers are to be elected, will be eligible for election
as trust managers of Crescent and (ii) at an annual meeting, only such business
may be conducted as has been brought before the meeting by, or at the direction
of, the Chairman or the Crescent Board of Trust Managers or by a shareholder who
has given timely written notice to the Secretary of Crescent of such
shareholder's intention to bring such business before such meeting. In general,
for notice of shareholder nominations or proposed business to be conducted at an
annual meeting to be timely, such notice must be received by Crescent not less
than 70 days nor more than 90 days prior to the first anniversary of the
previous year's annual meeting.
 
LIMITATION ON OWNERSHIP OF SHARES OF STOCK AND BENEFICIAL INTEREST
 
  Station
 
     The Station Articles provide that (i) no stock or securities issued by
Station and no interest, claim or charge therein or thereto shall be transferred
in any manner, except in accordance with the provisions of the Nevada Gaming
Control Act and the regulations thereunder and that violative transfers shall be
ineffective until Station ceases to be subject to the jurisdiction of the Nevada
Gaming Commission or the commission shall, by affirmative action, validate such
transfer or waive any defect therein, (ii) if the commission at any time
determines that a holder of stock or other securities of Station is unsuitable
to hold such securities, then until such securities are owned by persons found
to be suitable to own them, (a) Station shall not be required or permitted to
pay any dividend or interest with regard to the securities, (b) the holder of
such securities shall not be entitled to vote on any matter as the holder of the
securities, and such securities shall not be included in the securities of
Station entitled to vote, and (c) Station shall not pay any remuneration to the
holder of the securities.
 
     In addition, the Station Articles and the Station Bylaws limit the
ownership of shares of Station Common Stock by person who are not "citizens of
the United States" as that term is used in the Shipping Act of 1916, as amended
and the Merchant Marine Act of 1936, as amended, to less than 24.9% of the
shares of Station Common Stock issued and outstanding from time to time.
 
  Crescent
 
     For Crescent to qualify as a REIT under the Code (i) not more than 50% in
value of outstanding equity securities of all classes ("Equity Shares") may be
owned, directly or indirectly, by five or fewer individuals (as defined in the
Code to include certain entities) during the last half of a taxable year; (ii)
the Equity Shares must be beneficially owned by 100 or more persons during at
least 335 days of a taxable year of 12 months or during a proportionate part of
a shorter taxable year; and (iii) certain percentages of Crescent's gross income
must come from certain activities.
 
     To ensure that five or fewer individuals do not own more than 50% in value
of the outstanding Equity Shares, the Declaration of Trust provides generally
that no holder may own, or be deemed to own by virtue of certain attribution
provisions of the Code, more than 8.0% of the issued and outstanding Crescent
Common Shares (the "Common Share Ownership Limit") or more than 9.9% (the
"Preferred Shares Ownership Limit") of the issued and outstanding shares of any
series of preferred shares of beneficial interest, par value $0.01 per share
(the "Preferred Shares"). In addition, the Declaration of Trust separately
provides that Mr. Rainwater, the Chairman of the Crescent Board of Trust
Managers, and certain related persons together may own, or be deemed to own, by
virtue of certain attribution provisions of the Code, up to 8.0% (the "Rainwater
Ownership Limit") of the issued and outstanding Crescent Common Shares
(collectively, the "Ownership Limit"). The Crescent Board of Trust Managers,
upon receipt of a ruling from the IRS, an opinion of counsel, or other evidence
satisfactory to the Crescent Board of Trust Managers, in its sole discretion,
may waive or change, in whole or in part, the application of the Ownership Limit
with respect to
 
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<PAGE>   128
 
any person that is not an individual (as defined in Section 542(a)(2) of the
Code). In connection with any such waiver or change, the Crescent Board of Trust
Managers may require such representations and undertakings from such person or
affiliates and may impose such other conditions, as the Crescent Board of Trust
Managers deems necessary, advisable or prudent, in its sole discretion, to
determine the effect, if any, of the proposed transaction or ownership of Equity
Shares on Crescent's status as a REIT for federal income tax purposes.
 
     In addition, the Crescent Board of Trust Managers, from time to time, may
increase the Crescent Common Shares Ownership Limit, except that (i) the
Crescent Common Shares Ownership Limit may not be increased and no additional
limitations may be created if, after giving effect thereto, Crescent would be
"closely held" within the meaning of Section 856(h) of the Code and (ii) the
Crescent Common Shares Ownership Limit may not be increased to a percentage that
is greater than 9.9%. Under the Declaration of Trust, neither the Preferred
Shares Ownership Limit nor the Rainwater Ownership Limit may be increased. The
Crescent Board of Trust Managers may reduce the Rainwater Ownership Limit, with
the written consent of Mr. Rainwater, after any transfer permitted by the
Declaration of Trust.
 
     Under the Declaration of Trust, the Ownership Limit will not be
automatically removed even if the REIT provisions of the Code are changed so as
to no longer contain any ownership concentration limitation or if the ownership
concentration limit is increased.
 
     The Declaration of Trust of Crescent also provides that if an issuance,
transfer or acquisition of Equity Shares (i) would result in a holder exceeding
the Ownership Limit, (ii) would cause Crescent to be beneficially owned by less
than 100 persons, (iii) would result in Crescent being "closely held" within the
meaning of Section 856(h) of the Code or (iv) would otherwise result in Crescent
failing to qualify as a REIT for federal income tax purposes, such issuance,
transfer or acquisition shall be null and void to the intended transferee or
holder, and the intended transferee or holder will acquire no rights to the
shares. Pursuant to the Declaration of Trust, Equity Shares owned, transferred
or proposed to be transferred in excess of the Ownership Limit or which would
otherwise jeopardize Crescent's status as a REIT under the Code will
automatically be converted to Excess Shares. A holder of Excess Shares is not
entitled to distributions, voting rights and other benefits with respect to such
shares except the right to payment of the purchase price for the shares and the
right to certain distributions upon liquidation. Any dividend or distribution
paid to a proposed transferee on Excess Shares pursuant to Crescent's
Declaration of Trust will be required to be repaid to Crescent upon demand.
Excess Shares will be subject to repurchase by Crescent at its election. The
purchase price of any Excess Shares will be set in the manner set forth in the
Declaration of Trust. See "Description of Capital Stock of
Crescent -- Description of Crescent Common Shares -- Ownership Limits and
Restrictions on Transfer". The Declaration of Trust also establishes certain
restrictions relating to transfers of any Excess Shares that may be issued. If
such transfer restrictions are determined to be void or invalid by virtue of any
legal decision, statute, rule or regulation, then Crescent will have the option
to deem the intended transferee of any Excess Shares to have acted as an agent
on behalf of Crescent in acquiring such Excess Shares and to hold such Excess
Shares on behalf of Crescent. Under the Declaration of Trust, Crescent has the
authority at any time to waive the requirement that Excess Shares be issued or
be deemed outstanding in accordance with the provisions of the Declaration of
Trust if the issuance of such Excess Shares or the fact that such Excess Shares
is deemed to be outstanding would, in the opinion of nationally recognized tax
counsel, jeopardize the status of Crescent as a REIT for federal income tax
purposes.
 
     The Declaration of Trust of Crescent also provides that all persons who
own, directly or by virtue of the attribution provisions of the Code, more than
5.0% of the outstanding Equity Shares (or such lower percentage as may be set by
the Crescent Board of Trust Managers), must file an affidavit with Crescent
containing information specified in the Declaration of Trust no later than
January 31 of each year. In addition, each shareholder, upon demand, shall be
required to disclose to Crescent in writing such information with respect to the
direct, indirect and constructive ownership of shares as the trust managers deem
necessary to comply with the provisions of the Code, as applicable to a REIT, or
to comply with the requirements of an authority or governmental agency.
 
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<PAGE>   129
 
CERTAIN EXTRAORDINARY TRANSACTIONS
 
  Station
 
     The Nevada General Corporation Law generally requires approval of any
merger, consolidation or sale of all the assets of a corporation at a meeting of
stockholders by vote of the holders of a majority of all outstanding shares
entitled to vote thereon. The Station Articles provide that the affirmative vote
of the holders of 66 2/3% of the voting power of all shares of Station entitled
to vote is required for, among other things, any merger, exchange or
consolidation to which Station is a party and which requires approval under the
NRS and any sale or other disposition by Station of all or substantially all of
its assets.
 
  Crescent
 
     The Declaration of Trust does not have similar general voting requirements
with respect to extraordinary transactions but does include specific provisions
related to business combinations with certain shareholders and certain share
acquisitions. See "-- Business Combinations Involving Interested Stockholders
and Shareholders" and "Control Share Acquisitions."
 
BUSINESS COMBINATIONS INVOLVING INTERESTED STOCKHOLDERS AND SHAREHOLDERS
 
  Station
 
     The Nevada General Corporation Law restricts the ability of a resident
domestic corporation to engage in any combination with an interested stockholder
for three years after the interested stockholder's date of acquiring the shares
that cause such stockholder to become an interested stockholder unless the
combination or the purchase of shares by the interested stockholder on the
interested stockholder's date of acquiring the shares that cause such
stockholder to become an interested stockholder is approved by the board of
directors of the resident domestic corporation before that date. If the
combination was not previously approved, the interested stockholder may effect a
combination after the three-year period only if such stockholder receives
approval from a majority of the disinterested shares or the offer meets certain
fair price criteria. For purposes of the foregoing provisions, "resident
domestic corporation" means a Nevada public corporation that has 200 or more
stockholders and "interested stockholder" means any person, other than the
resident domestic corporation or its subsidiaries, who is (a) the beneficial
owner, directly or indirectly, of 10% or more of the voting power of the
outstanding voting shares of the resident domestic corporation or (b) an
affiliate or associate of the resident domestic corporation and at any time
within three years immediately before the date in question was the beneficial
owner, directly or indirectly, of 10% or more of the voting power of the
outstanding shares of the resident domestic corporation. The above provisions do
not apply to corporations that so elect in a charter amendment approved by a
majority of the disinterested shares. Such a charter amendment, however, would
not become effective for 18 months after its passage and would apply only to
stock acquisitions occurring after its effective date. The Station Articles do
not exempt Station from the restrictions imposed by such provisions of the
Nevada General Corporation Law.
 
  Crescent
 
     The Declaration of Trust establishes special requirements with respect to
"business combinations" (including a merger, consolidation, share exchange, or,
in certain circumstances, an asset transfer or issuance or reclassification of
equity securities) between Crescent and any person who beneficially owns,
directly or indirectly, 10% or more of the voting power of Crescent's shares (an
"Interested Shareholder"), subject to certain exemptions. In general, the
Declaration of Trust provides that an Interested Shareholder or any affiliate
thereof may not engage in a "business combination" with Crescent for a period of
five years following the date such person becomes an Interested Shareholder.
Thereafter, pursuant to the Declaration of Trust, such transactions must be (i)
approved by the Crescent Board of Trust Managers and (ii) approved by the
affirmative vote of at least 80% of the votes entitled to be cast by holders of
voting shares other than voting shares held by the Interested Shareholder with
whom the business combination is to be effected, unless, among other things, the
holders of Equity Shares receive a minimum price (as defined in the Declaration
of Trust) for their shares and the consideration is received in cash or in the
same form as previously paid by the
 
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<PAGE>   130
 
Interested Shareholder for such person's shares. These provisions of the
Declaration of Trust do not apply, however, to business combinations that are
approved or exempted by the Crescent Board of Trust Managers prior to the time
that the Interested Shareholder becomes an Interested Shareholder.
 
CONTROL SHARE ACQUISITIONS
 
  Station
 
     Under the Nevada General Corporation Law, an "acquiring person" who
acquires a "controlling interest" in an "issuing corporation" may not exercise
voting rights on any "control shares" unless such voting rights are conferred by
a majority vote of the disinterested stockholders of the issuing corporation at
a special meeting of such stockholders held upon the request and at the expense
of the acquiring person. In the event that the control shares are accorded full
voting rights and the acquiring person acquires control shares with a majority
or more of all the voting power, any stockholder, other than the acquiring
person, who does not vote in favor of authorizing voting rights for the control
shares is entitled to demand payment for the fair value of such person's shares,
and the corporation must comply with the demand. For purposes of the above
provisions, "acquiring person" means (subject to certain exceptions) any person
who, individually or in association with others, acquires or offers to acquire,
directly or indirectly, a controlling interest in an issuing corporation.
"Controlling interest" means the ownership of outstanding voting shares of an
issuing corporation sufficient to enable the acquiring person, individually or
in association with others, directly or indirectly, to exercise (i) one-fifth or
more but less than one-third, (ii) one-third or more but less than a majority,
(iii) a majority or more of the voting power of the issuing corporation in the
election of directors, and voting rights must be conferred by a majority of the
disinterested stockholders as each threshold is reached and/or exceeded.
"Control Shares" means those outstanding voting shares of an issuing corporation
that an acquiring person acquires or offers to acquire in an acquisition or
within 90 days immediately preceding the date when the acquiring person became
an acquiring person. "Issuing corporation" means a corporation that is organized
in Nevada, has 200 or more stockholders, at least 100 of whom are stockholders
of record and residents of Nevada, and does business in Nevada directly or
through an affiliated corporation. The above provisions do not apply if the
articles of incorporation or by-laws of the corporation in effect on the 10th
day following the acquisition of a controlling interest by an acquiring person
provide that such provisions do not apply. The Station Articles and the Station
Bylaws do not exclude Station from the restrictions imposed by such provisions.
 
  Crescent
 
     The Declaration of Trust provides that "control shares" of Crescent
acquired in a control share acquisition have no voting rights except to the
extent approved by a vote of two-thirds of the votes entitled to be cast by the
holders of Equity Shares, excluding shares as to which the acquiror, officers of
Crescent and employees of Crescent who are also trust managers have the right to
vote or direct the vote. "Control Shares" are Equity Shares which, if aggregated
with all other Equity Shares previously acquired which the person is entitled to
vote, would entitle the acquiror to vote (i) 20% or more but less than
one-third; (ii) one-third or more but less than a majority; or (iii) a majority
of the outstanding voting shares of Crescent. Control shares do not include
Equity Shares that the acquiring person is entitled to vote on the basis of
prior shareholder approval. A "control share acquisition" is defined as the
acquisition of control shares, subject to certain exemptions enumerated in the
Declaration of Trust.
 
     The Declaration of Trust provides that a person who has made or proposed to
make a control share acquisition and who has obtained a definitive financing
agreement with a responsible financial institution providing for any amount of
financing not to be provided by the acquiring person may compel the Board of
Trust Managers of Crescent to call a special meeting of shareholders to be held
within 50 days of demand to consider the voting rights of the Equity Shares. If
no request for a meeting is made, the Declaration of Trust permits Crescent
itself to present the question at any shareholders' meeting.
 
     Pursuant to the Declaration of Trust, if voting rights are not approved at
a shareholders' meeting or if the acquiring person does not deliver an acquiring
person statement as required by the Declaration of Trust, then,
 
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<PAGE>   131
 
subject to certain conditions and limitations set forth in the Declaration of
Trust, Crescent will have the right to redeem any or all of the control shares,
except those for which voting rights have previously been approved, for fair
value determined, without regard to the absence of voting rights of the control
shares, as of the date of the last control share acquisition or of any meeting
of shareholders at which the voting rights of such shares are considered and not
approved. Under the Declaration of Trust, if voting rights for control shares
are approved at a shareholders' meeting and, as a result, the acquiror would be
entitled to vote a majority of the Equity Shares entitled to vote, all other
shareholders will have the rights of dissenting shareholders under the TRA. The
Declaration of Trust provides that the fair value of the Equity Shares for
purposes of such appraisal rights may not be less than the highest price per
share paid by the acquiror in the control share acquisition, and that certain
limitations and restrictions of the TRA otherwise applicable to the exercise of
dissenters' rights do not apply.
 
     These provisions of the Declaration of Trust do not apply to Equity Shares
acquired in a merger, consolidation or share exchange if Crescent is a party to
the transaction, or if the acquisition is approved or excepted by the
Declaration of Trust or Crescent Bylaws prior to a control share acquisition.
 
REMOVAL OF DIRECTORS OR TRUSTEES
 
  Station.
 
     Under the Nevada General Corporation Law, directors may be removed from
office by a two-thirds stockholder vote, or by the vote of such larger
percentage of shares as may be provided in the articles of incorporation. A
director elected by a voting group, unless otherwise provided in the articles of
incorporation, may only be removed by a vote of two-thirds of the members of the
group or by the vote of such larger percentage of the group as may be provided
in the articles of incorporation for the removal of directors. The Station
Articles and Station Bylaws provide that, subject to the rights of holders of
Station preferred stock, any director or directors may be removed from office at
any time but only for cause and only upon the affirmative vote of the holders of
at least 66 2/3% of the voting power of the then outstanding shares of capital
stock of Station entitled to vote generally in the election of directors, voting
together as a single class.
 
  Crescent.
 
     The Declaration of Trust and the Crescent Bylaws provide that, subject to
any rights of holders of Crescent preferred shares, trust managers may be
removed only for cause upon the affirmative vote of holders of at least 80% of
the entire voting power of all the then-outstanding shares entitled to vote
generally in the election of trust managers, voting together as a single class.
 
STANDARDS OF CONDUCT FOR DIRECTORS AND TRUSTEES
 
  Station.
 
     Under the Nevada General Corporation Law, directors generally have full
control over the affairs of the corporation, and they must exercise their powers
in good faith and with a view to the best interests of the corporation. The
Nevada General Corporation Law allows directors and officers, in discharging
their duties to the corporation and exercising their respective powers to
further the interests of the corporation, to consider a variety of
nonstockholder interests, including, without limitation, the interests of the
corporation's employees, suppliers, creditors and customers. They can also
consider the economy of the state and the nation, the interests of the community
and of society, and the long and short-term interests of the corporation and its
stockholders, including the possibility that these interests may be best served
by the continued independence of the corporation. Directors may resist a change
or potential change in control if the directors, by a majority vote of a quorum,
determine that the change or potential change is opposed to or not in the best
interest of the corporation. In so determining, the Station Board of Directors
may consider the interests described above or whether they have reasonable
grounds to believe that, within a reasonable time, the debt created as a result
of the change in control would cause the assets of the corporation or any
successor to be less than the liabilities or would render the corporation or any
successor insolvent or lead to bankruptcy proceedings.
 
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<PAGE>   132
 
  Crescent
 
     The Declaration of Trust provides that, in determining what is in the best
interest of Crescent in evaluating a "business combination," "change in control"
or other transaction, a trust manager of Crescent shall consider all of the
relevant factors. These factors may include (i) the immediate and long-term
effects of the transaction on Crescent's shareholders, including shareholders,
if any, who do not participate in the transaction; (ii) the social and economic
effects of the transaction on Crescent's employees, suppliers, creditors and
customers and others dealing with Crescent and on the communities in which
Crescent operates and is located; (iii) whether the transaction is acceptable,
based on the historical and current operating results and financial condition of
Crescent; (iv) whether a more favorable price would be obtained for Crescent's
stock or other securities in the future; (v) the reputation and business
practices of the other party or parties to the proposed transaction, including
its or their management and affiliates, as they would affect employees of
Crescent; (vi) the future value of Crescent's securities; (vii) any legal or
regulatory issues raised by the transaction; and (viii) the business and
financial condition and earnings prospects of the other party or parties to the
proposed transaction including, without limitation, debt service and other
existing financial obligations, financial obligations to be incurred in
connection with the transaction, and other foreseeable financial obligations of
such other party or parties. Pursuant to this provision, the Crescent Board of
Trust Managers may consider subjective factors affecting a proposal, including
certain nonfinancial matters, and, on the basis of these considerations, may
oppose a business combination or other transaction which, evaluated only in
terms of its financial merits, might be attractive to some, or a majority, of
Crescent's shareholders.
 
LIMITATION OF LIABILITY OF DIRECTORS, TRUSTEES AND OFFICERS
 
  Station
 
     The Nevada General Corporation Law allows a corporation to limit or
eliminate the personal liability of directors and officers to the corporation
and its stockholders for damages for breach of fiduciary duty if that person
acted in good faith and in a manner which that person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe that
person's conduct was unlawful. The Station Articles adopt the Nevada General
Corporation Law limitations on liability and further exclude limitation on
liability for (i) acts or omissions that involve intentional misconduct, fraud
or a knowing violation of law or (ii) the payment of distributions in violation
of the Nevada General Corporation Law.
 
  Crescent
 
     The TRA provides that a trust manager shall not be liable for any claims or
damages that result from the trust manager's acts in the discharge of any duty
imposed or power conferred upon him by the REIT if, in the exercise of ordinary
care, the trust manager acted in good faith and in reliance upon information,
opinions, reports, or statements, including financial statements and other
financial data concerning the REIT or another person that were prepared or
presented by specified persons, generally including officers or employees of the
REIT, counsel, accountants, investment bankers and other experts; and committees
of the board of trust managers. In addition, the TRA and the Declaration of
Trust provide that no trust manager shall be liable to Crescent for any act,
omission, loss, damage, or expense arising the performance of the trust
manager's duty except in the case of the trust manager's own willful misfeasance
or gross negligence.
 
INDEMNIFICATION OF DIRECTORS, TRUSTEES AND OFFICERS
 
  Station
 
     The Station Bylaws provide that Station shall indemnify, to the fullest
extent permitted by law, each current and past director or officer of Station in
such capacity or in the capacity of director, officer, employee, agent, partner
or fiduciary of another entity at the request of Station, against expenses,
liabilities and losses (including attorneys' fees, judgments, fines, taxes,
penalties and amounts paid or to be paid in settlement) in connection with
specified actions, suits or proceedings, whether civil, criminal, administrative
or investigative (including any action by or in the right of the corporation in
a derivative action). The Nevada General
 
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<PAGE>   133
 
Corporation Law permits such indemnification provided the indemnitee acted in
good faith and in a manner they reasonably believed to be in, or not opposed to,
the best interests of the corporation, and, with respect to any criminal action,
suit or proceeding, if they had no reasonable cause to believe their conduct was
unlawful. Expenses incurred by an officer or director (or other employees or
agents as deemed appropriate by the board of directors) in defending civil or
criminal proceedings may be paid by the corporation in advance of the final
disposition of such proceeding upon a receipt of an undertaking by or on behalf
of such person to repay such amount if it is ultimately determined that such
person is not entitled to be indemnified by the corporation. To indemnify a
party, the corporation must determine that the party met the applicable
standards of conduct. The Station Articles provide that such expenses must be
paid by Station or through insurance or other financial arrangements as they are
incurred and in advance of the final disposition of the action, suit or
proceeding upon receipt of the required undertaking.
 
  Crescent
 
     The Declaration of Trust provides that no trust manager shall be liable to
Crescent for any act, omission, loss, damage, or expense arising from the
performance of such trust manager's duties to Crescent save only for such trust
manager's own willful misfeasance or willful malfeasance or gross negligence. In
addition to, but in no respect whatsoever in limitation of the foregoing, the
liability of each trust manager for monetary damages shall be eliminated to the
fullest extent permitted by applicable law. The Declaration of Trust also
provides that no amendment thereto may limit or eliminate this limitation of
liability with respect to events occurring prior to the effective date of such
amendment.
 
     The Declaration of Trust provides that the trust managers and officers
shall be indemnified to the maximum extent permitted by Texas law. Under current
Texas law, the trust will indemnify a person who was, is, or is threatened to be
made a named defendant or respondent in a proceeding because the person is or
was a trust manager or officer if it is determined that (i) the person's conduct
was in good faith; (ii) the person reasonably believed: (a) in the case of
conduct in the persons's official capacity as a trust manager or officer of the
REIT, that the person's conduct was in the REIT's best interests; and (b) in all
other cases, that the person's conduct was at least not opposed to the REIT's
best interests; and (iii) in the case of any criminal proceeding, the person had
no reasonable cause to believe that the person's conduct was unlawful. Except to
the extent provided in the following sentence, a trust manager or officer may
not be indemnified (i) in respect of a proceeding in which the person is found
liable on the basis that personal benefit was improperly received by the person,
whether or not the benefit resulted from an action taken in the person's
official capacity; or (ii) in which the person is found liable to Crescent.
Notwithstanding the foregoing, a person may be indemnified against judgments,
penalties (including excise and similar taxes), fines, settlements, and
reasonable expenses actually incurred by the person in connection with the
proceeding; provided that if the person is found liable to the REIT or is found
liable on the basis that personal benefit was improperly received by the person,
the indemnification (i) is limited to reasonable expenses actually incurred by
the person in connection with the proceeding, and (ii) shall not be made in
respect of any proceeding in which the person shall have been found liable for
willful or intentional misconduct in the performance of the person's duty to the
REIT. In addition, the Declaration of Trust and Crescent Bylaws require it to
pay or reimburse, in advance of the final disposition of a proceeding,
reasonable expenses incurred by a present or former trust manager or officer
made a party to a proceeding by reason of the person's status as a trust manager
or officer, provided that Crescent shall have received (i) a written affirmation
by the trust manager or officer of the person's good faith belief that the
person has met the standard of conduct necessary for indemnification by Crescent
as authorized by the Crescent Bylaws and (ii) a written undertaking by or on the
person's behalf to repay the amount paid or reimbursed by Crescent if it shall
ultimately be determined that the standard of conduct was not met. The
Declaration of Trust and Crescent Bylaws also permit Crescent to provide
indemnification, payment or reimbursement of expenses to any employee or agent
of Crescent in such capacity. The Declaration of Trust and Crescent Bylaws also
permit Crescent to indemnify a person who was or who agreed to appear as a
witness or other participant in a proceeding at a time when the person is not
named a defendant or respondent in the proceeding. Any indemnification, payment
or reimbursement of the expenses permitted by the Declaration of Trust and
Crescent Bylaws shall be furnished in accordance with the procedures provided
for indemnification and payment or reimbursement of expenses under TRA for trust
managers.
 
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<PAGE>   134
 
     Crescent carries insurance that purports to insure officers and trust
managers of Crescent against certain liabilities incurred by them in the
discharge of their official functions.
 
AMENDMENT TO GOVERNING DOCUMENTS
 
  Station
 
     The Nevada General Corporation Law permits a corporation to amend its
articles of incorporation in any respect provided the amendment contains only
provisions that would be lawful in an original articles of incorporation filed
at the time of amendment. To amend articles of incorporation, the board must
adopt a resolution presenting the proposed amendment. In addition, a majority of
the shares entitled to vote must approve the amendment to make it effective.
When the substantial rights of a class of shares will be affected by an
amendment, the holders of those shares are entitled to vote as a class even if
the shares are nonvoting shares and a majority vote of the class must approve
the amendment to make it effective. When only one or more series in a class of
shares, and not the entire class, will be adversely affected by an amendment,
only the affected series may vote as a class. The Station Articles provide that
amendments thereto and to the Station Bylaws require the affirmative vote of
66 2/3% of the voting power of all shares of Station entitled to vote, except
that the Station Board of Directors may at any time amend or repeal, or adopt
any provision inconsistent with any bylaw of Station, other than that relating
to the number of directors, by the affirmative vote of a majority of the Station
Board of Directors.
 
  Crescent
 
     The Declaration of Trust provides that it may be amended only by the
affirmative vote of the holders of not less than two-thirds of the votes
entitled to be cast, except that the provisions of the Declaration of Trust
relating to "business combinations" or "control shares" (as described below
under "-- Business Combinations" and "-- Control Share Acquisitions") may be
amended only with the affirmative vote of 80% of the votes entitled to be cast,
voting together as a single class.
 
RIGHTS PLAN
 
  Station
 
     On October 6, 1997, Station Board of Directors declared a dividend of one
Right for each outstanding share of Station Common Stock to stockholders of
Station. Each Right represents a right to buy one one-hundredth of a share of
Station preferred stock. The Rights will cause substantial dilution to a person
or group that attempts to acquire control of Station in a manner which causes
the Rights to become exercisable. Station has executed an amendment to the
Rights Agreement exempting the Merger from the dilutive effects of the Rights
Agreement and the Rights.
 
  Crescent
 
     Crescent does not currently have a shareholders rights plan, however, the
Declaration of Trust permits the issuance of share purchase rights entitling
holders to purchase from Crescent securities or property.
 
APPRAISAL AND DISSENTERS' RIGHTS
 
  Station
 
     The Nevada General Corporation Law provides that stockholders have the
right, in some circumstances, to dissent from certain corporate reorganizations
and to instead demand payment of the fair cash value of their shares. Unless a
corporation's articles of incorporation provide otherwise, dissenters do not
have rights of appraisal with respect to (i) a merger or consolidation by a
corporation, the shares of which are either listed on a national securities
exchange, designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers or held by
more than 2,000 stockholders, if the stockholders receive cash, shares in the
surviving corporation, shares of another corporation that are publicly listed or
held by more than 2,000 stockholders, cash in lieu of fractional shares or any
combination of the
 
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<PAGE>   135
 
above or (ii) stockholders of a corporation surviving a merger if no vote of the
stockholders of the surviving corporation is required to approve the merger. The
Station Articles have no provisions regarding appraisal or dissenters' rights
and Station's stockholders will not have appraisal or dissenters' rights in
connection with the Merger.
 
  Crescent
 
     The TRA provides that shareholders of a REIT have the right, in certain
circumstances, to dissent from certain reorganization transactions affecting the
real estate investment trust and instead demand payment of the fair value of
their shares in cash, together with interest commencing 91 days after the date
on which the action from which the shareholder dissented was taken. A
shareholder may not dissent from any plan of merger in which there is a single
surviving or new domestic or foreign entity or from any plan of exchange, if (i)
the shares held by the shareholder are part of a class or series listed on a
national securities exchange, designated as a national market system security on
an interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by not less than 2,000 holders, and (ii) the
consideration to be paid to the shareholders is in the form of shares of a class
or series listed on a national securities exchange, designated as a national
market system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by not less than 2,000
holders, cash in lieu of fractional shares, or a combination of the securities
and cash described above. Neither the Declaration of Trust nor the Crescent
Bylaws contain provisions regarding appraisal or dissenters' rights.
 
DIVIDENDS AND DISTRIBUTIONS
 
  Station
 
     The Nevada General Corporation Law allows a board of directors to authorize
the corporation to make distributions to stockholders, unless otherwise provided
in the articles of incorporation. No distribution may be made, however, if it
would cause (i) the corporation to be unable to pay its debts as they become due
in the usual course of business or (ii) except as otherwise specifically allowed
by the articles of incorporation, the corporation's total assets to be less than
the sum of its total liabilities plus the amount that would be needed, if the
corporation were to be dissolved at the time of the distribution, to satisfy the
preferential rights upon dissolution of stockholders whose preferential rights
are superior to those receiving the distribution.
 
  Crescent
 
     In order to qualify as a REIT, Crescent is required to distribute dividends
(other than capital gain dividends) to its shareholders in an amount at least
equal to (A) the sum of (i) 95% of the "real estate investment trust taxable
income" of Crescent (computed without regard to the dividends paid deduction and
Crescent's net capital gain) and (ii) 95% of the net income (after tax), if any,
from foreclosure property, minus (B) certain excess noncash income. Such
distributions must be paid in the taxable year to which they relate, or in the
following taxable year if declared before Crescent timely files its tax return
for such year, and if paid on or before the date of the first regular dividend
payment after such declaration. To the extent that Crescent does not distribute
all of its net capital gain or distributes at least 95%, but less than 100%, of
its "real estate investment trust taxable income," as adjusted, it will be
subject to tax thereon at regular capital gains and ordinary corporate tax
rates. Furthermore, if Crescent should fail to distribute, during each calendar
year, at least the sum of (i) 85% of its "real estate investment trust ordinary
income" for such year; (ii) 95% of its "real estate investment trust capital
gain income" for such year; and (iii) any undistributed taxable income from
prior periods, Crescent would be subject to a 4% excise tax on the excess of
such required distribution over the amounts actually distributed.
 
STOCKHOLDER AND SHAREHOLDER INSPECTION RIGHTS
 
  Station
 
     The Nevada General Corporation Law entitles any person who has been a
stockholder of record of a corporation for at least six months immediately
preceding the demand, or any person holding or representing
 
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<PAGE>   136
 
at least 5% of its outstanding shares, upon at least five days' written demand,
to inspect, in person or by an agent, during usual business hours, the stock
ledger of the corporation and to make extracts therefrom. Pursuant to the Nevada
General Corporation Law, only persons who are stockholders of record who own or
represent at least 15% of a corporation's issued and outstanding shares, or
persons who have been authorized in writing by such stockholders, however, have
the right, upon a least five days' written demand, to inspect, in person or by
an agent, during normal business hours, the books of account and financial
records of the corporation, to make extracts therefrom and to conduct an audit
of such records. The provisions of this section of the Nevada General
Corporation Law with respect to inspection of books of account and financial
records of the corporation, and rights to conduct audits in connection
therewith, do not apply to any corporation that is listed and traded on any
recognized stock exchange nor do they apply to any corporation that furnishes to
its stockholders a detailed, annual financial statement. Station is listed and
traded on the NYSE, and is therefore not subject to such provisions.
 
  Crescent
 
     The TRA provides that any person who has been a shareholder of record for
at least six months or who owns at least 5% of the outstanding shares of a REIT,
upon written demand stating the purpose thereof, has the right to examine, in
person or by agent or attorney, at any reasonable time or times, for any proper
purpose, the books and records of the REIT, as well as the minutes and record of
shareholders, and to make extracts thereof.
 
CLASSIFIED BOARD
 
  Station
 
     The Station Articles provide for the Station Board of Directors to be
divided into three classes of directors serving staggered three-year terms. As a
result, approximately one-third of the Station Board of Directors will be
elected each year. Currently, the size of the Station Board of Directors is
fixed at seven members.
 
  Crescent
 
     The Declaration of Trust and the Crescent Bylaws provide that the Crescent
Board of Trust Managers will be divided into three classes of trust managers,
each class constituting approximately one-third of the total number of trust
managers, with the classes serving staggered three-year terms.
 
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<PAGE>   137
 
                    DESCRIPTION OF CAPITAL STOCK OF CRESCENT
 
DESCRIPTION OF CRESCENT COMMON SHARES
 
  General
 
     The Declaration of Trust authorizes the Crescent Board of Trust Managers to
issue up to 250,000,000 Crescent Common Shares, as well as 250,000,000 Excess
Shares, par value $0.01 per share, issuable in exchange for Crescent Common
Shares as described below at "-- Ownership Limits and Restrictions on Transfer."
The Crescent Common Shares are listed on the NYSE under the symbol "CEI."
Subject to such preferential rights as may be granted by the Crescent Board of
Trust Managers in connection with the future issuance of Preferred Shares,
holders of Crescent Common Shares are entitled to one vote per share on all
matters to be voted on by shareholders and are entitled to receive ratably such
distributions as may be declared on the Crescent Common Shares by the Crescent
Board of Trust Managers in its discretion from funds legally available therefor.
In the event of the liquidation, dissolution or winding up of Crescent, holders
of Crescent Common Shares are entitled to share ratably in all assets remaining
after payment of all debts and other liabilities and any liquidation preference
of the holders of Preferred Shares. Holders of Crescent Common Shares have no
subscription, redemption, conversion or preemptive rights. Matters submitted for
shareholder approval generally require a majority vote of the shares present and
voting thereon.
 
  Ownership Limits and Restrictions on Transfer
 
     For Crescent to qualify as a REIT under the Code (i) not more than 50% in
value of outstanding Equity Shares may be owned, directly or indirectly, by five
or fewer individuals (as defined in the Code to include certain entities) during
the last half of a taxable year; (ii) the Equity Shares must be beneficially
owned by 100 or more persons during at least 335 days of a taxable year of 12
months or during a proportionate part of a shorter taxable year; and (iii)
certain percentages of Crescent's gross income must come from certain
activities.
 
     To ensure that five or fewer individuals do not own more than 50% in value
of the outstanding Equity Shares, the Declaration of Trust provides generally
that no holder may own, or be deemed to own by virtue of certain attribution
provisions of the Code, more than the Common Share Ownership Limit or more than
the Preferred Shares Ownership Limit. In addition, the Declaration of Trust
separately provides that Mr. Rainwater, the Chairman of the Crescent Board of
Trust Managers, and certain related persons together may own, or be deemed to
own, by virtue of certain attribution provisions of the Code, up to the
Rainwater Ownership Limit. The Crescent Board of Trust Managers, upon receipt of
a ruling from the IRS, an opinion of counsel, or other evidence satisfactory to
the Crescent Board of Trust Managers, in its sole discretion, may waive or
change, in whole or in part, the application of the Ownership Limit with respect
to any person that is not an individual (as defined in Section 542(a)(2) of the
Code). In connection with any such waiver or change, the Crescent Board of Trust
Managers may require such representations and undertakings from such person or
affiliates and may impose such other conditions, as the Crescent Board of Trust
Managers deems necessary, advisable or prudent, in its sole discretion, to
determine the effect, if any, of the proposed transaction or ownership of Equity
Shares on Crescent's status as a REIT for federal income tax purposes.
 
     In addition, the Crescent Board of Trust Managers, from time to time, may
increase the Common Shares Ownership Limit, except that (i) the Common Shares
Ownership Limit may not be increased and no additional limitations may be
created if, after giving effect thereto, Crescent would be "closely held" within
the meaning of Section 856(h) of the Code and (ii) the Common Shares Ownership
Limit may not be increased to a percentage that is greater than 9.9%. Under the
Declaration of Trust, neither the Preferred Shares Ownership Limit nor the
Rainwater Ownership Limit may be increased. The Crescent Board of Trust Managers
may reduce the Rainwater Ownership Limit, with the written consent of Mr.
Rainwater, after any transfer permitted by the Declaration of Trust. Prior to
any modification of the Ownership Limit or the Rainwater Ownership Limit, the
Crescent Board of Trust Managers will have the right to require such opinions of
counsel, affidavits, undertakings or agreements as it may deem necessary,
advisable or prudent, in its sole discretion, in order to determine or ensure
Crescent's status as a REIT.
 
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<PAGE>   138
 
     Under the Declaration of Trust, the Ownership Limit will not be
automatically removed even if the REIT provisions of the Code are changed so as
to no longer contain any ownership concentration limitation or if the ownership
concentration limit is increased.
 
     In addition to preserving Crescent's status as a REIT for federal income
tax purposes, the Ownership Limit may prevent any person or small group of
persons from acquiring control of Crescent.
 
     The Declaration of Trust of Crescent also provides that if an issuance,
transfer or acquisition of Equity Shares (i) would result in a holder exceeding
the Ownership Limit, (ii) would cause Crescent to be beneficially owned by less
than 100 persons, (iii) would result in Crescent being "closely held" within the
meaning of Section 856(h) of the Code or (iv) would otherwise result in Crescent
failing to qualify as a REIT for federal income tax purposes, such issuance,
transfer or acquisition shall be null and void to the intended transferee or
holder, and the intended transferee or holder will acquire no rights to the
shares. Pursuant to the Declaration of Trust, Equity Shares owned, transferred
or proposed to be transferred in excess of the Ownership Limit or which would
otherwise jeopardize Crescent's status as a REIT under the Code will
automatically be converted to Excess Shares. A holder of Excess Shares is not
entitled to distributions, voting rights and other benefits with respect to such
shares except the right to payment of the purchase price for the shares and the
right to certain distributions upon liquidation. Any dividend or distribution
paid to a proposed transferee on Excess Shares pursuant to Crescent's
Declaration of Trust will be required to be repaid to Crescent upon demand.
Excess Shares will be subject to repurchase by Crescent at its election. The
purchase price of any Excess Shares will be equal to the lesser of (i) the price
in such proposed transaction or (ii) either (a) if the shares are then listed on
the NYSE, the fair market value of such shares reflected in the average closing
sales prices for the shares on the 10 trading days immediately preceding the
date on which Crescent or its designee determines to exercise its repurchase
right; or (b) if the shares are not then so listed, such price for the shares on
the principal exchange (including the Nasdaq National Market) on which such
shares are listed; or (c) if the shares are not then listed on a national
securities exchange, the latest quoted price for the shares; or (d) if not
quoted, the average of the high bid and low asked prices if the shares are then
traded over-the-counter, as reported by the Nasdaq Stock Market; or (e) if such
system is no longer in use, the principal automated quotation system then in
use; or (f) if the shares are not quoted on such system, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the shares; or (g) if there is no such market maker or such closing
prices otherwise are unavailable, the fair market value, as determined by the
Crescent Board of Trust Managers in good faith, on the last trading day
immediately preceding the day on which notice of such proposed purchase is sent
by Crescent. The Declaration of Trust also establishes certain restrictions
relating to transfers of any Exchange Shares that may be issued. If such
transfer restrictions are determined to be void or invalid by virtue of any
legal decision, statute, rule or regulation, then Crescent will have the option
to deem the intended transferee of any Excess Shares to have acted as an agent
on behalf of Crescent in acquiring such Excess Shares and to hold such Excess
Shares on behalf of Crescent. Under the Declaration of Trust, Crescent has the
authority at any time to waive the requirement that Excess Shares be issued or
be deemed outstanding in accordance with the provisions of the Declaration of
Trust if the issuance of such Excess Shares or the fact that such Excess Shares
is deemed to be outstanding would, in the opinion of nationally recognized tax
counsel, jeopardize the status of Crescent as a REIT for federal income tax
purposes.
 
     All certificates issued by Crescent representing Equity Shares will bear a
legend referring to the restrictions described above.
 
     The Declaration of Trust of Crescent also provides that all persons who
own, directly or by virtue of the attribution provisions of the Code, more than
5.0% of the outstanding Equity Shares (or such lower percentage as may be set by
the Crescent Board of Trust Managers), must file an affidavit with Crescent
containing information specified in the Declaration of Trust no later than
January 31 of each year. In addition, each shareholder, upon demand, shall be
required to disclose to Crescent in writing such information with respect to the
direct, indirect and constructive ownership of shares as the trust managers deem
necessary to comply with the provisions of the Code, as applicable to a REIT, or
to comply with the requirements of an authority or governmental agency.
 
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<PAGE>   139
 
     The ownership limitations described above may have the effect of precluding
acquisitions of control of Crescent by a third party. See "Certain Provisions of
the Declaration of Trust, Crescent Bylaws and Texas Law."
 
  Registrar and Transfer Agent
 
     The Registrar and Transfer Agent for the Crescent Common Shares is
BankBoston, N.A.
 
DESCRIPTION OF PREFERRED SHARES
 
  General
 
     The Declaration of Trust of Crescent authorizes the Crescent Board of Trust
Managers to issue up to 100,000,000 Preferred Shares. See "-- Certain Provisions
of the Declaration of Trust, Crescent Bylaws and Texas Law -- Preferred Shares."
The Declaration of Trust also authorizes the issuance of up to an aggregate of
100,000,000 Excess Shares issuable in exchange for Preferred Shares. See
"-- Description of Crescent Common Shares -- Ownership Limits and Restrictions
on Transfer."
 
     Under Crescent's Declaration of Trust, the Crescent Board of Trust Managers
may from time to time establish and issue one or more series of Preferred Shares
without shareholder approval. The Crescent Board of Trust Managers may classify
or reclassify any unissued Preferred Shares by setting or changing the number,
designation, preference, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms or
conditions of redemption of such series. Because the Crescent Board of Trust
Managers has the power to establish the preferences and rights of each series of
Preferred Shares, it may afford the holders of any series of Preferred Shares
preferences, powers and rights, voting or otherwise, senior to the rights of
holders of Crescent Common Shares. Preferred Shares will, when issued, be fully
paid and nonassessable.
 
     The following description of Preferred Shares sets forth certain general
terms and provisions of Preferred Shares. The statements below describing
Preferred Shares are in all respects subject to and qualified in their entirety
by reference to the applicable provisions of Crescent's Declaration of Trust and
the Crescent Bylaws.
 
  Rank
 
     Unless otherwise specified in a Statement of Designation for any series of
Preferred Shares, Preferred Shares will, with respect to dividend rights and
rights upon liquidation, dissolution or winding up of Crescent, rank (i) senior
to all classes or series of Crescent Common Shares, and to all equity securities
ranking junior to Preferred Shares, (ii) on a parity with all equity securities
issued by Crescent the terms of which specifically provide that such equity
securities rank on a parity with Preferred Shares; and (iii) junior to all
equity securities issued by Crescent the terms of which specifically provide
that such equity securities rank senior to Preferred Shares. The term "equity
securities" does not include convertible debt securities.
 
  Dividends
 
     Holders of Preferred Shares of each series will be entitled to receive,
when, as and if declared by the Crescent Board of Trust Managers, out of assets
of Crescent legally available for payment, cash dividends (or dividends in kind
or in other property if expressly permitted and described in the applicable
Statement of Designation for such Preferred Shares) at such rates and on such
dates as will be set forth in the applicable Statement of Designation for such
Preferred Shares. Each such dividend shall be payable to holders of record as
they appear on the share transfer books of Crescent on such record dates as
shall be fixed by the Crescent Board of Trust Managers.
 
     Dividends on any series of Preferred Shares may be cumulative or
non-cumulative, as provided in the applicable Statement of Designation for such
Preferred Shares. Dividends, if cumulative, will be cumulative from and after
the date set forth in the applicable Statement of Designation for such Preferred
Shares. If the Crescent Board of Trust Managers fails to declare a dividend
payable on a dividend payment date on any series of Preferred Shares for which
dividends are noncumulative, then the holders of such series of Preferred
 
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Shares will have no right to receive a dividend in respect of the dividend
period ending on such dividend payment date, and Crescent will have no
obligation to pay the dividend accrued for such period, whether or not dividends
on such series are declared payable on any future dividend payment date.
 
     Unless otherwise specified in the applicable Statement of Designation for
such Preferred Shares, if any Preferred Shares of any series are outstanding, no
full dividends shall be declared or paid or set apart for payment on any capital
shares of Crescent of any other series ranking, as to dividends, on a parity
with or junior to the Preferred Shares of such series for any period unless (i)
if such series of Preferred Shares has a cumulative dividend, full cumulative
dividends have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart for such payment on the
Preferred Shares of such series for all past dividend periods and the
then-current dividend period or (ii) if such series of Preferred Shares does not
have a cumulative dividend, full dividends for the then-current dividend period
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment on the Preferred
Shares of such series. When dividends are not paid in full (or a sum sufficient
for such full payment is not so set apart) upon Preferred Shares of any series
and the shares of any other series of Preferred Shares ranking on a parity as to
dividends with the Preferred Shares of such series, all dividends declared upon
Preferred Shares of such series and any other series of Preferred Shares ranking
on a parity as to dividends with such Preferred Shares shall be declared pro
rata so that the amount of dividends declared per Preferred Share of such series
and such other series of Preferred Shares shall in all cases bear to each other
the same ratio that accrued dividends per share on the Preferred Shares of such
series (which shall not include any accumulation in respect of unpaid dividends
for prior dividend periods if such Preferred Shares do not have a cumulative
dividend) and such other series of Preferred Shares bear to each other. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on Preferred Shares of such series which may be
in arrears.
 
     Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Shares has a cumulative dividend, full cumulative
dividends on the Preferred Shares of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for all past dividend periods and the then-current
dividend period, and (ii) if such series of Preferred Shares does not have a
cumulative dividend, full dividends on the Preferred Shares of such series have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for payment for the then-current dividend
period, no dividends (other than in Crescent Common Shares or other capital
shares ranking junior to the Preferred Shares of such series as to dividends and
upon liquidation) shall be declared or paid or set aside for payment or other
distribution upon the Crescent Common Shares, or any other capital shares of
Crescent ranking junior to or on a parity with the Preferred Shares of such
series as to dividends or upon liquidation, nor shall any Crescent Common
Shares, or any other capital shares of Crescent ranking junior to or on a parity
with the Preferred Shares of such series as to dividends or upon liquidation be
redeemed, purchased or otherwise acquired for any consideration (or any moneys
be paid to or made available for a sinking fund for the redemption of any such
shares) by Crescent (except by conversion into or exchange for other capital
shares of Crescent ranking junior to the Preferred Shares of such series as to
dividends and upon liquidation).
 
  Redemption
 
     If so provided in the applicable Statement of Designation for such
Preferred Shares, any series of Preferred Shares will be subject to mandatory
redemption or redemption at the option of Crescent, in whole or in part, in each
case upon the terms, at the times and at the redemption prices set forth in such
Statement of Designation for such Preferred Shares.
 
     The Statement of Designation relating to a series of Preferred Shares that
is subject to mandatory redemption will specify the number of such Preferred
Shares that shall be redeemed by Crescent in each year commencing after a date
to be specified, at a redemption price per share to be specified, together with
an amount equal to all accrued and unpaid dividends thereon (which shall not, if
such Preferred Shares do not have a cumulative dividend, include any
accumulation in respect of unpaid dividends for prior dividend periods) to the
date of redemption. The redemption price may be payable in cash or other
property, as
 
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specified in the applicable Statement of Designation for such Preferred Shares.
If the redemption price for Preferred Shares of any series is payable only from
the net proceeds of the issuance of capital shares of Crescent, the terms of
such Preferred Shares may provide that, if no such capital shares shall have
been issued or to the extent the net proceeds from any issuance are insufficient
to pay in full the aggregate redemption price then due, such Preferred Shares
shall automatically and mandatorily be converted into the applicable capital
shares of Crescent pursuant to conversion provisions specified in the applicable
Statement of Designation for such Preferred Shares.
 
     Notwithstanding the foregoing, unless (i) if such series of Preferred
Shares has a cumulative dividend, full cumulative dividends on all Preferred
Shares of any series shall have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof set apart for payment
for all past dividend periods and the current dividend period and (ii) if such
series of Preferred Shares does not have a cumulative dividend, full dividends
of the Preferred Shares of any series have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for payment for the then-current dividend period, no Preferred Shares of
any series shall be redeemed unless all outstanding Preferred Shares of such
series are simultaneously redeemed; provided, however, that the foregoing shall
not prevent the purchase or acquisition of Preferred Shares of such series to
preserve the REIT status of Crescent or pursuant to a purchase or exchange offer
made on the same terms to holders of all outstanding Preferred Shares of such
series. In addition, unless (i) if such series of Preferred Shares has a
cumulative dividend, full cumulative dividends on all outstanding Preferred
Shares of any series have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment for
all past dividends periods and the then-current dividend period, and (ii) if
such series of Preferred Shares does not have a cumulative dividend, full
dividends on the Preferred Shares of any series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for the then-current dividend period, Crescent shall not
purchase or otherwise acquire directly or indirectly any Preferred Shares of
such series (except by conversion into or exchange for capital shares of
Crescent ranking junior to the Preferred Shares of such series as to dividends
and upon liquidation); provided, however, that the foregoing shall not prevent
the purchase or acquisition of Preferred Shares of such series to preserve the
REIT status of Crescent or pursuant to a purchase or exchange offer made on the
same terms to holders of all outstanding Preferred Shares of such series.
 
     If fewer than all of the outstanding Preferred Shares of any series are to
be redeemed, the number of shares to be redeemed will be determined by Crescent,
and such shares may be redeemed pro rata from the holders of record of such
shares in proportion to the number of such shares held or for which redemption
is requested by such holder (with adjustments to avoid redemption of fractional
shares) or by lot in a manner determined by Crescent.
 
     Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Shares of
any series to be redeemed at the address shown on the share transfer books of
Crescent. Each notice shall state: (i) the redemption date; (ii) the number of
shares and the series of Preferred Shares to be redeemed; (iii) the redemption
to be surrendered for payment of the redemption price; (iv) that dividends on
the shares to be redeemed will cease to accrue on such redemption date; and (v)
the date upon which the holder's conversion rights, if any, as to such shares
shall terminate. If fewer than all of the Preferred Shares of any series are to
be redeemed, the notice mailed to each such holder thereof shall also specify
the number of Preferred Shares to be redeemed from each such holder. If notice
of redemption of any Preferred Shares has been given and if the funds necessary
for such redemption have been set aside by Crescent in trust for the benefit of
the holders of any Preferred Shares so called for redemption, then from and
after the redemption date dividends will cease to accrue on such Preferred
Shares, and all rights of the holders of such shares will terminate, except the
right to receive the redemption price.
 
  Liquidation Preference
 
     Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of Crescent, then, before any distribution or payment shall be made
to the holders of any Crescent Common Shares or any other class or series of
capital shares of Crescent ranking junior to the Preferred Shares in the
distribution of assets
 
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<PAGE>   142
 
upon any liquidation, dissolution or winding up of Crescent, the holders of each
series of Preferred Shares shall be entitled to receive out of assets of
Crescent legally available for distribution to shareholders liquidating
distributions in the amount of the liquidation preference per share (set forth
in the applicable Statement of Designation for such Preferred Shares), plus an
amount equal to all dividends accrued and unpaid thereon (which shall not
include any accumulation in respect of unpaid dividends for prior dividend
periods if such Preferred Shares do not have a cumulative dividend). After
payment of the full amount of the liquidating distributions to which they are
entitled, the holders of Preferred Shares will have no right or claim to any of
the remaining assets of Crescent. In the event that, upon any such voluntary or
involuntary liquidation, dissolution or winding up, the available assets of
Crescent are insufficient to pay the amount of the liquidating distributions on
all outstanding Preferred Shares and the corresponding amounts payable on all
shares of other classes or series of capital shares of Crescent ranking on a
parity with the Preferred Shares in the distribution of assets, then the holders
of the Preferred Shares and all other such classes or series of capital shares
shall share ratably in any such distribution of assets in proportion to the full
liquidating distributions to which they would otherwise be respectively
entitled.
 
     If liquidating distributions shall have been made in full to all holders of
Preferred Shares, the remaining assets of Crescent shall be distributed among
the holders of any other classes or series of capital shares ranking junior to
the Preferred Shares upon liquidation, dissolution or winding up, according to
their respective rights and preferences and in each case according to their
respective number of shares. For such purposes, the consolidation or merger of
Crescent with or into any other corporation, trust or entity, or the sale, lease
or conveyance of all or substantially all of the property or business of
Crescent, shall not be deemed to constitute a liquidation, dissolution or
winding up of Crescent.
 
  Voting Rights
 
     Holders of Preferred Shares will not have any voting rights, except as set
forth below or as otherwise from time to time required by law or as indicated in
the applicable Statement of Designation for such Preferred Shares.
 
     Unless provided otherwise for any series of Preferred Shares, so long as
any Preferred Shares remain outstanding, Crescent will not, without the
affirmative vote or consent of the holders of at least two-thirds of each series
of Preferred Shares outstanding at the time, given in person or by proxy, either
in writing or at a meeting (such series voting separately as a class), (i)
authorize or create, or increase the authorized or issued amount of, any class
or series of capital shares ranking senior to such series of Preferred Shares
with respect to the payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up or reclassify any authorized capital
shares of Crescent into such shares, or create, authorize or issue any
obligation or security convertible into or evidencing the right to purchase any
such shares; or (ii) amend, alter or repeal the provisions of the Declaration of
Trust or the designating amendment for such series of Preferred Shares, whether
by merger, consolidation or otherwise (an "Event"), so as to materially and
adversely affect any right, preference, privilege or voting power of such series
of Preferred Shares or the holders thereof, provided, however, with respect to
the occurrence of any of the Events set forth in (ii) above, so long as the
Preferred Shares remain outstanding with the terms thereof materially unchanged,
taking into account that upon the occurrence of an Event, Crescent may not be
the surviving entity, the occurrence of any such Event shall not be deemed to
materially and adversely affect such rights, preferences, privileges or voting
power of holders of Preferred Shares and provided further that (x) any increase
in the amount of the authorized Preferred Shares or the creation or issuance of
any other series of Preferred Shares, or (y) any increase in the amount of
authorized shares of such series or any other series of Preferred Shares, in
each case ranking on a parity with or junior to the Preferred Shares of such
series with respect to payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up, shall not be deemed to materially and
adversely affect such rights, preferences, privileges or voting powers.
 
     The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding Preferred Shares of such series shall have been
redeemed or called for redemption and sufficient funds shall have been deposited
in trust to effect such redemption.
 
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<PAGE>   143
 
  Conversion Rights
 
     The terms and conditions, if any, upon which any series of Preferred Shares
is convertible into Crescent Common Shares will be set forth in the applicable
Statement of Designation for such Preferred Shares relating thereto. Such terms
will include the number of Crescent Common Shares into which the Preferred
Shares are convertible, the conversion price (or manner of calculation thereof),
the conversion period, provisions as to whether conversion will be at the option
of the holders of Preferred Shares or Crescent, the events requiring an
adjustment of the conversion price and provisions affecting conversion in the
event of the redemption of such series of Preferred Shares.
 
  Shareholder Liability
 
     Under Texas law, no shareholder, including holders of Preferred Shares,
shall be personally liable for any contractual obligation of Crescent on the
basis (i) that the person is or was the alter ego of Crescent, or (ii) of actual
or constructive fraud, a sham to perpetrate a fraud, or similar theory, unless
the obligee demonstrates that the shareholder caused Crescent to be used for the
purpose of perpetrating and did perpetrate an actual fraud on the obligee
primarily for the direct personal benefit of the shareholder.
 
  Restrictions on Ownership
 
     As discussed under "-- Description of Crescent Common Shares -- Ownership
Limits and Restrictions on Transfer," for Crescent to qualify as a REIT under
the Code, not more than 50% in value of its outstanding equity securities of all
classes may be owned, directly or indirectly, by five or fewer individuals (as
defined in the Code to include certain entities) during the last half of a
taxable year. To assist Crescent in meeting this requirement, Crescent may take
certain actions to limit the beneficial ownership, directly or indirectly, by a
single person of Crescent's outstanding equity securities, including any
Preferred Shares of Crescent. Therefore, the designating amendment for each
series of Preferred Shares may contain provisions restricting the ownership and
transfer of Preferred Shares.
 
DESCRIPTION OF COMMON SHARE WARRANTS
 
     Crescent may issue Common Share Warrants for the purchase of Crescent
Common Shares. Common Share Warrants may be issued independently or together
with any other Securities and may be attached to or separate from such
Securities. Each series of Common Share Warrants will be issued under a separate
warrant agreement (each, a "Warrant Agreement") to be entered into between
Crescent and a specified warrant agent (the "Warrant Agent"). The Warrant Agent
will act solely as an agent of Crescent in connection with the Common Share
Warrants of such series and will not assume any obligation or relationship of
agency or trust for or with any holders or beneficial owners of Common Share
Warrants. The following sets forth certain general terms and provisions of the
Common Share Warrants. Further terms of the Common Share Warrants will be set
forth in the applicable Warrant Agreements.
 
     The applicable Warrant Agreement will describe the terms of the Common
Share Warrants, including, where applicable, the following: (i) the title of
such Common Share Warrants; (ii) the aggregate number of such Common Share
Warrants; (iii) the price or prices at which such Common Share Warrants will be
issued; (iv) the number of shares of Crescent Common Shares purchasable upon
exercise of such Common Share Warrants; (v) the designation and terms of any
other Securities offered thereby with which such Common Share Warrants are to be
issued and the number of such Common Share Warrants issued with each such
Security offered thereby; (vi) the date, if any, on and after which such Common
Share Warrants and the related Crescent Common Shares will be separately
transferable; (vii) the price at which the Crescent Common Shares purchasable
upon exercise of such Common Share Warrants may be purchased; (viii) the date on
which the right to exercise such Common Share Warrants shall commence and the
date on which such right shall expire; (ix) the minimum or maximum number of
such Common Share Warrants which may be exercised at any one time; (x)
information with respect to book entry procedures, if any; (xi) any limitations
on the acquisition or ownership of such Common Share Warrants which may be
required in order to maintain the status of Crescent as a REIT; (xii) a
discussion of certain federal income tax considerations;
 
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and (xiii) any other terms of such Common Share Warrants, including terms,
procedures and limitations relating to the exchange and exercise of such Common
Share Warrants.
 
     Reference is made to the section captioned "-- Description of Crescent
Common Shares" for a general description of the Crescent Common Shares to be
acquired upon the exercise of the Common Share Warrants, including a description
of certain restrictions on the ownership of Crescent Common Shares.
 
CERTAIN PROVISIONS OF THE DECLARATION OF TRUST, CRESCENT BYLAWS AND TEXAS LAW
 
     The Declaration of Trust and the Crescent Bylaws contain certain provisions
that may inhibit or impede acquisition or attempted acquisition of control of
Crescent by means of a tender offer, a proxy contest or otherwise. These
provisions are expected to discourage certain types of coercive takeover
practices and inadequate takeover bids and to encourage persons seeking to
acquire control of Crescent to negotiate first with the Crescent Board of Trust
Managers. Crescent believes that these provisions increase the likelihood that
proposals initially will be on more attractive terms than would be the case in
their absence and increase the likelihood of negotiations, which might outweigh
the potential disadvantages of discouraging such proposals because, among other
things, negotiation of such proposals might result in improvement of terms. The
description set forth below is only a summary of the terms of the Declaration of
Trust and Crescent Bylaws (copies of which have been incorporated by reference
as exhibits to the Registration Statement of which this Prospectus forms a
part). See "-- Description of Crescent Common Shares -- Ownership Limits and
Restrictions on Transfer."
 
  Staggered Board of Trust Managers
 
     The Declaration of Trust and the Crescent Bylaws provide that the Crescent
Board of Trust Managers will be divided into three classes of trust managers,
each class constituting approximately one-third of the total number of trust
managers, with the classes serving staggered three-year terms. The
classification of the Crescent Board of Trust Managers will have the effect of
making it more difficult for shareholders to change the composition of the
Crescent Board of Trust Managers, because only a minority of the trust managers
are up for election, and may be replaced by vote of the shareholders, at any one
time.
 
     The classification provisions also could have the effect of discouraging a
third party from accumulating a large block of Crescent's capital shares or
attempting to obtain control of Crescent, even though such an attempt might be
beneficial to Crescent and some, or a majority, of its shareholders.
Accordingly, under certain circumstances shareholders could be deprived of
opportunities to sell their shares of Crescent Common Shares at a higher price
than might otherwise be available.
 
  Number of Trust Managers; Removal; Filling Vacancies
 
     Subject to any rights of holders of Preferred Shares to elect additional
trust managers under specified circumstances ("Preferred Holders' Rights"), the
Declaration of Trust provides that the number of trust managers will be fixed
by, or in the manner provided in, the Crescent Bylaws, but must not be more than
25 nor less than one. See "-- Description of Preferred Shares -- Voting Rights."
The Crescent Bylaws also provide that, subject to any Preferred Holders' Rights,
the number of trust managers will be fixed by the Crescent Board of Trust
Managers, but must not be more than 25 or less than three. The Crescent Bylaws
also provide that, subject to any Preferred Holders' Rights, and unless the
Crescent Board of Trust Managers otherwise determines, any vacancies (other than
vacancies created by an increase in the total number of trust managers) will be
filled by the affirmative vote of a majority of the remaining trust managers,
although less than a quorum, and any vacancies created by an increase in the
total number of trust managers may be filled by a majority of the entire
Crescent Board of Trust Managers. Accordingly, the Crescent Board of Trust
Managers could temporarily prevent any shareholder from enlarging the Crescent
Board of Trust Managers and then filling the new trust manager position with
such shareholder's own nominees.
 
     The Declaration of Trust and the Crescent Bylaws provide that, subject to
any Preferred Holders' Rights, trust managers may be removed only for cause upon
the affirmative vote of holders of at least 80% of the entire
 
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voting power of all the then-outstanding shares entitled to vote generally in
the election of trust managers, voting together as a single class.
 
  Relevant Factors to be Considered by the Crescent Board of Trust Managers
 
     The Declaration of Trust provides that, in determining what is in the best
interest of Crescent in evaluating a "business combination," "change in control"
or other transaction, a trust manager of Crescent shall consider all of the
relevant factors. These factors may include (i) the immediate and long-term
effects of the transaction on Crescent's shareholders, including shareholders,
if any, who do not participate in the transaction; (ii) the social and economic
effects of the transaction on Crescent's employees, suppliers, creditors and
customers and others dealing with Crescent and on the communities in which
Crescent operates and is located; (iii) whether the transaction is acceptable,
based on the historical and current operating results and financial condition of
Crescent; (iv) whether a more favorable price would be obtained for Crescent's
stock or other securities in the future; (v) the reputation and business
practices of the other party or parties to the proposed transaction, including
its or their management and affiliates, as they would affect employees of
Crescent; (vi) the future value of Crescent's securities; (vii) any legal or
regulatory issues raised by the transaction; and (viii) the business and
financial condition and earnings prospects of the other party or parties to the
proposed transaction including, without limitation, debt service and other
existing financial obligations, financial obligations to be incurred in
connection with the transaction, and other foreseeable financial obligations of
such other party or parties. Pursuant to this provision, the Crescent Board of
Trust Managers may consider subjective factors affecting a proposal, including
certain nonfinancial matters, and, on the basis of these considerations, may
oppose a business combination or other transaction which, evaluated only in
terms of its financial merits, might be attractive to some, or a majority, of
Crescent's shareholders.
 
  Advance Notice Provisions for Shareholder Nominations and Shareholder
Proposals
 
     The Crescent Bylaws provide for the Shareholder Notice Procedure. Pursuant
to the Shareholder Notice Procedure (i) only persons who are nominated by, or at
the direction of, the Crescent Board of Trust Managers, or by a shareholder who
has given timely written notice containing specified information to the
Secretary of Crescent prior to the meeting at which trust managers are to be
elected, will be eligible for election as trust managers of Crescent and (ii) at
an annual meeting, only such business may be conducted as has been brought
before the meeting by, or at the direction of, the Chairman of the Crescent
Board of Trust Managers or by a shareholder who has given timely written notice
to the Secretary of Crescent of such shareholder's intention to bring such
business before such meeting. In general, for notice of shareholder nominations
or proposed business to be conducted at an annual meeting to be timely, such
notice must be received by Crescent not less than 70 days nor more than 90 days
prior to the first anniversary of the previous year's annual meeting.
 
     Although the Crescent Bylaws do not give the Crescent Board of Trust
Managers power to block shareholder nominations for the election of trust
managers or proposal for action, the Shareholder Notice Procedure may have the
effect of discouraging a shareholder from proposing nominees or business,
precluding a contest for the election of trust managers or the consideration of
shareholder proposals if procedural requirements are not met, and deterring
third parties from soliciting proxies for a non-management proposal or slate of
trust managers, without regard to the merits of such proposal or slate.
 
  Preferred Shares
 
     The Declaration of Trust authorizes the Crescent Board of Trust Managers to
establish one or more series of Preferred Shares and to determine, with respect
to any series of Preferred Shares, the preferences, rights and other terms of
such series. See "-- Description of Preferred Shares." The authorized Preferred
Shares are available for issuance without further action by Crescent's
shareholders, unless such action is required by applicable law or the rules of
any stock exchange or automated quotation system on which Crescent's securities
may be listed or traded at the time of issuance or proposed issuance. The
Crescent Board of Trust Managers could issue a series of Preferred Shares which,
due to its terms, could impede a merger, tender offer or other transaction that
some, or a majority, of Crescent's shareholders might believe to be in their
best
 
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interests or in which shareholders might receive a premium over then-prevailing
market prices for their Crescent Common Shares.
 
  Amendment of Declaration of Trust
 
     The Declaration of Trust provides that it may be amended only by the
affirmative vote of the holders of not less than two-thirds of the votes
entitled to be cast, except that the provisions of the Declaration of Trust
relating to "business combinations" or "control shares" (see "-- Business
Combinations" and "-- Control Share Acquisitions") may be amended only with the
affirmative vote of 80% of the votes entitled to be cast, voting together as a
single class.
 
  Rights to Purchase Securities and Other Property
 
     The Declaration of Trust authorizes the Crescent Board of Trust Managers,
subject to any rights of holders of any series of Preferred Shares, to create
and issue rights entitling the holders thereof to purchase from Crescent Equity
Shares or other securities or property. The times at which and terms upon which
such rights are to be issued are within the discretion of the Crescent Board of
Trust Managers. This provision is intended to confirm the authority of the
Crescent Board of Trust Managers to issue share purchase rights which could have
terms that would impede a merger, tender offer or other takeover attempt, or
other rights to purchase securities of Crescent or any other entity.
 
  Business Combinations
 
     The Declaration of Trust establishes special requirements with respect to
"business combinations" (including a merger, consolidation, share exchange, or,
in certain circumstances, an asset transfer or issuance or reclassification of
equity securities) between Crescent and an Interested Shareholder. In general,
the Declaration of Trust provides that an Interested Shareholder or any
affiliate thereof may not engage in a "business combination" with Crescent for a
period of five years following the date he becomes an Interested Shareholder.
Thereafter, pursuant to the Declaration of Trust, such transactions must be (i)
approved by the Crescent Board of Trust Managers and (ii) approved by the
affirmative vote of at least 80% of the votes entitled to be cast by holders of
voting shares other than voting shares held by the Interested Shareholder with
whom the business combination is to be effected, unless, among other things, the
holders of Equity Shares receive a minimum price (as defined in the Declaration
of Trust) for their shares and the consideration is received in cash or in the
same form as previously paid by the Interested Shareholder for such person's
shares. These provisions of the Declaration of Trust do not apply, however, to
business combinations that are approved or exempted by the Crescent Board of
Trust Managers prior to the time that the Interested Shareholder becomes an
Interested Shareholder.
 
  Control Share Acquisitions
 
     The Declaration of Trust provides that "control shares" of Crescent
acquired in a control share acquisition have no voting rights except to the
extent approved by a vote of two-thirds of the votes entitled to be cast by the
holders of Equity Shares, excluding shares as to which the acquiror, officers of
Crescent and employees of Crescent who are also trust managers have the right to
vote or direct the vote. "Control shares" are Equity Shares which, if aggregated
with all other Equity Shares previously acquired which the person is entitled to
vote, would entitle the acquiror to vote (i) 20% or more but less than
one-third; (ii) one-third or more but less than a majority; or (iii) a majority
of the outstanding voting shares of Crescent. Control shares do not include
Equity Shares that the acquiring person is entitled to vote on the basis of
prior shareholder approval. A "control share acquisition" is defined as the
acquisition of control shares, subject to certain exemptions enumerated in the
Declaration of Trust.
 
     The Declaration of Trust provides that a person who has made or proposed to
make a control share acquisition and who has obtained a definitive financing
agreement with a responsible financial institution providing for any amount of
financing not to be provided by the acquiring person may compel the Crescent
Board of Trust Managers to call a special meeting of shareholders to be held
within 50 days of demand to
 
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consider the voting rights of the Equity Shares. If no request for a meeting is
made, the Declaration of Trust permits Crescent itself to present the question
at any shareholders' meeting.
 
     Pursuant to the Declaration of Trust, if voting rights are not approved at
a shareholders' meeting or if the acquiring person does not deliver an acquiring
person statement as required by the Declaration of Trust, then, subject to
certain conditions and limitations set forth in the Declaration of Trust,
Crescent will have the right to redeem any or all of the control shares, except
those for which voting rights have previously been approved, for fair value
determined, without regard to the absence of voting rights of the control
shares, as of the date of the last control share acquisition or of any meeting
of shareholders at which the voting rights of such shares are considered and not
approved. Under the Declaration of Trust, if voting rights for control shares
are approved at a shareholders' meeting and, as a result, the acquiror would be
entitled to vote a majority of the Equity Shares entitled to vote, all other
shareholders will have the rights of dissenting shareholders under the TRA. The
Declaration of Trust provides that the fair value of the Equity Shares for
purposes of such appraisal rights may not be less than the highest price per
share paid by the acquiror in the control share acquisition, and that certain
limitations and restrictions of the TRA otherwise applicable to the exercise of
dissenters' rights do not apply.
 
     These provisions of the Declaration of Trust do not apply to Equity Shares
acquired in a merger, consolidation or share exchange if Crescent is a party to
the transaction, or if the acquisition is approved or excepted by the
Declaration of Trust or Crescent Bylaws prior to a control share acquisition.
 
  Ownership Limit
 
     The limitation on ownership of shares of Crescent Common Shares set forth
in Crescent's Declaration of Trust, as well as the provisions of the TRA, could
have the effect of discouraging offers to acquire Crescent and of increasing the
difficulty of consummating any such offer. See "-- Description of Crescent
Common Shares -- Ownership Limits and Restrictions on Transfer."
 
DESCRIPTION OF $3.50 CONVERTIBLE PREFERRED SHARES OF CRESCENT
 
     This description of the particular terms of the Crescent Convertible
Preferred Shares offered hereby supplements, and to the extent inconsistent
therewith replaces, the description of the general terms and provisions of the
preferred shares set forth in "-- Description of Preferred Shares."
 
  General
 
     The Crescent Board of Trust Managers is authorized to issue up to
100,000,000 preferred shares, in one or more series, with such designations,
powers, preferences and rights of the shares of such series and the
qualifications, limitations or restrictions thereon, including, but not limited
to, the fixing of the distribution rights, distribution rate or rates,
conversion rights, voting rights and terms of redemption (including sinking fund
provisions), the redemption price or prices, and the liquidation preferences, in
each case, if any, as the Crescent Board of Trust Managers may determine,
without any further vote or action by the shareholders.
 
     The Crescent Convertible Preferred Shares will be issued, upon consummation
of the Merger, pursuant to the Statement of Designation which sets forth the
terms of a series of preferred shares consisting of up to 2,070,000 shares,
designated $3.50 Convertible Preferred Shares. When issued, the Crescent
Convertible Preferred Shares will be validly issued, fully paid and
nonassessable.
 
     The following summary of the terms and provisions of the Crescent
Convertible Preferred Shares does not purport to be complete and is qualified in
its entirety by reference to the pertinent sections of the Restated Declaration
of Trust of Crescent (which is available from Crescent) and the Statement of
Designation. See Annex D.
 
     The registrar, transfer agent and distributions disbursing agent for the
Crescent Convertible Preferred Shares will be BankBoston, N.A. (the "Transfer
Agent").
 
                                       135
<PAGE>   148
 
     Application will be made to list the Crescent Convertible Preferred Shares,
upon issuance, on the NYSE, and application will also be made to list the
Crescent Common Shares issuable upon conversion of the Crescent Convertible
Preferred Shares on the NYSE. The issued and outstanding Crescent Common Shares
are listed on the NYSE under the symbol "CEI."
 
  Ranking
 
     The Crescent Convertible Preferred Shares will rank senior to the Crescent
Common Shares as to rights to receive distributions and to participate in
distributions or payments upon any liquidation, dissolution or winding up of
Crescent. The Crescent Convertible Preferred Shares will rank pari passu with
the 6 3/4% Series A Convertible Cumulative Preferred Shares and may rank pari
passu with other series of Crescent's preferred shares as to rights to receive
distributions and to participate in distributions or payments upon any
liquidation, dissolution or winding up of Crescent.
 
  Distributions
 
     Holders of the Crescent Convertible Preferred Shares shall be entitled to
receive, when and as and if declared by the Crescent Board of Trust Managers,
out of funds legally available for the payment of distributions, cumulative cash
distributions at the rate of 7% of the liquidation preference per annum
(equivalent to $50 per annum per Crescent Convertible Preferred Share).
Distributions on the Crescent Convertible Preferred Shares offered hereby shall
accrue and be cumulative from the date of first issuance and shall be payable
quarterly in arrears on March 15, June 15, September 15 and December 15 of each
year or, if not a business day, the next succeeding business day (each, a
"Distribution Payment Date"). The first distribution on the Crescent Convertible
Preferred Shares offered hereby will be computed by dividing the annual amount
by four. Any distribution payable on the Crescent Convertible Preferred Shares
for any partial distribution period (other than such initial distribution) will
be computed on the basis of a 360-day year consisting of twelve 30-day months.
Distributions will be payable to holders of record as they appear in the share
records of Crescent at the close of business on the applicable record date,
which shall be such date designated by the Crescent Board of Trust Managers for
the payment of distributions that is not more than 60 nor less than 10 days
prior to such Distribution Payment Date (each, a "Distribution Payment Record
Date").
 
     Notwithstanding the foregoing, distributions on the Crescent Convertible
Preferred Shares will accrue whether or not there are funds legally available
for the payment of such distributions. Accrued but unpaid distributions on the
Crescent Convertible Preferred Shares will not bear interest, and holders of the
Crescent Convertible Preferred Shares will not be entitled to any distributions
in excess of full cumulative distributions as described above.
 
     No distributions, other than distributions payable solely in Crescent
Common Shares or other shares of beneficial interest of Crescent ranking junior
as to distributions and as to liquidation rights to the Crescent Convertible
Preferred Shares which are neither convertible into, nor exchangeable or
exercisable for, any securities of Crescent other than Crescent Common Shares or
other shares of beneficial interest of Crescent ranking junior as to
distributions and as to liquidation rights to the Crescent Convertible Preferred
Shares, shall be paid, or declared and set apart for payment, and no purchase,
redemption or other acquisition shall be made by Crescent of, any Crescent
Common Shares or other shares of beneficial interest of Crescent ranking junior
as to distributions or as to liquidation rights to the Crescent Convertible
Preferred Shares unless and until all accrued and unpaid distributions on the
Crescent Convertible Preferred Shares, including the full distribution for the
then current distribution period, shall have been paid or declared and set apart
for payment and Crescent is not in default in respect of the optional redemption
of any Crescent Convertible Preferred Shares.
 
     For further information regarding the rights of the holders of the Crescent
Convertible Preferred Shares to receive distributions, see "-- Description of
Preferred Shares -- Dividends."
 
                                       136
<PAGE>   149
 
  Liquidation Preference
 
     In the event of any liquidation, dissolution or winding up of the affairs
of Crescent, the holders of the Crescent Convertible Preferred Shares are
entitled to be paid out of the assets of Crescent legally available for
distribution to its shareholders liquidating distributions in the amount of a
liquidation preference of $50.00 per Crescent Convertible Preferred Share, plus
an amount equal to any accrued and unpaid distributions to the date of such
liquidation, dissolution or winding up, before any distribution of assets is
made to holders of Crescent Common Shares or any other shares of beneficial
interest that rank junior to the Crescent Convertible Preferred Shares as to
liquidation rights. After payment of the full amount of the liquidating
distributions to which they are entitled, the holders of Crescent Convertible
Preferred Shares will have no right or claim to any of the remaining assets of
Crescent. The consolidation or merger of Crescent with or into any other entity
or the sale, lease, transfer or conveyance of all or substantially all of the
property or business of Crescent shall not be deemed to constitute a
liquidation, dissolution or winding up of Crescent. The Crescent Convertible
Preferred Shares will rank senior to the Crescent Common Shares as to priority
for receiving liquidating distributions.
 
     For further information regarding the rights of the holders of the Crescent
Convertible Preferred Shares upon the liquidation, dissolution or winding up of
Crescent, see "-- Description of Preferred Shares -- Liquidation Preference."
 
  Redemption
 
     The Crescent Convertible Preferred Shares are not redeemable prior to March
15, 1999, except under the circumstances described below. On and after March 15,
1999, the Crescent Convertible Preferred Shares may be redeemed at the option of
Crescent, in whole or in part, from time to time, at the redemption prices set
forth below, if redeemed during the twelve-month period beginning March 15 of
the year specified below:
 
<TABLE>
<CAPTION>
YEAR                                             PRICE PER SHARE
----                                             ---------------
<S>                                              <C>
1999...........................................      $52.45
2000...........................................      $52.10
2001...........................................      $51.75
2002...........................................      $51.40
2003...........................................      $51.05
2004...........................................      $50.70
2005...........................................      $50.35
</TABLE>
 
and thereafter at $50.00 per share, plus, in each case, an amount equal to all
distributions on the Crescent Convertible Preferred Shares accrued and unpaid
thereon, whether or not declared or due, to the date fixed for redemption. Such
sum being hereinafter referred to as the "Redemption Price."
 
     At no time shall the Crescent Convertible Preferred Shares be redeemable
for cash (except in connection with redemptions required by gaming regulations).
Crescent shall issue in payment of the Redemption Price for each share of
Crescent Convertible Preferred Shares to be redeemed such number of Crescent
Common Shares as equals (x) the then-current Redemption Price of the Crescent
Convertible Preferred Shares, divided by (y) the market price (the "Market
Price") of the Crescent Common Shares. The Market Price shall be equal to the
lower of (i) the average of the daily closing prices of the Crescent Common
Shares for the 20 consecutive trading days immediately preceding the first
business day immediately preceding the date of the applicable redemption notice,
or (ii) the closing price of the Crescent Common Shares on the trading day
immediately preceding the first business day immediately preceding the date of
the applicable redemption notice. The "closing price" for each day shall be the
last reported sales price on the NYSE. In lieu of any fractional Crescent Common
Share which would otherwise be issued upon any redemption of Crescent
Convertible Preferred Shares, Crescent shall pay a cash adjustment in respect of
such fractional interest in an amount in cash (computed to the nearest cent)
equal to the Market Price multiplied by the fractional interest that otherwise
would have been deliverable upon such redemption of such Crescent Convertible
Preferred Shares.
 
                                       137
<PAGE>   150
 
     If fewer than all of the outstanding Crescent Convertible Preferred Shares
are to be redeemed, the shares to be redeemed shall be determined pro rata or by
lot or in such other manner as prescribed by the Crescent Board of Trust
Managers. In the event that such redemption is to be by lot, if as a result of
such redemption any holder of Crescent Convertible Preferred Shares would own or
be deemed by virtue of certain attribution provisions of the Code. to own in
excess of 9.9% of the issued and outstanding Crescent Convertible Preferred
Shares because such holder's Crescent Convertible Preferred Shares were not
redeemed, or were only redeemed in part, then, except in certain instances,
Crescent shall redeem the requisite number of Crescent Convertible Preferred
Shares of such shareholder such that such shareholder shall not own or be deemed
by virtue of certain attribution provisions of the Code to own in excess of 9.9%
of the Crescent Convertible Preferred Shares issued and outstanding subsequent
to such redemption.
 
     Notice of redemption shall be mailed, not less than 30 nor more than 60
days prior to the date fixed for redemption, to each holder of record of
Crescent Convertible Preferred Shares to be redeemed, notifying such holder of
Crescent's election to redeem such shares, stating at least the date fixed for
redemption thereof (the "Crescent Convertible Preferred Shares Redemption
Date"), the redemption price, the number of shares to be redeemed (and, if fewer
than all the Crescent Convertible Preferred Shares are to be redeemed, the
number of shares to be redeemed from such holder), the place(s) where the
certificates representing the Crescent Convertible Preferred Shares are to be
surrendered for payment, that on and after the redemption date distributions
will cease to accrue on such shares, the then effective conversion price and
that the right of holders to convert shall terminate at the close of business on
the date immediately prior to the redemption date.
 
     Any notice that is mailed as herein provided shall be conclusively presumed
to have been duly given, whether or not the holder of the Crescent Convertible
Preferred Shares receives such notice; and failure to give such notice by mail,
or any defect in such notice, to the holders of any shares designated for
redemption shall not affect the validity of the proceedings for the redemption
of any other Crescent Convertible Preferred Shares. On or after the date fixed
for redemption as stated in such notice, each holder of the shares called for
redemption shall surrender the certificate evidencing such shares to Crescent at
the place designated in such notice and shall thereupon be entitled to receive
payment of the Redemption Price as herein provided. If less than all the shares
represented by any such surrendered certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares. If, on the date fixed for
redemption, Common Shares and funds necessary for the redemption shall be
available therefor and shall have been irrevocably deposited or set aside, then,
notwithstanding that the certificates evidencing any shares so called for
redemption shall not have been surrendered the distributions with respect to the
shares so called shall cease to accrue after the date fixed for redemption, the
shares shall no longer be deemed outstanding, the holders thereof shall cease to
be holders of Crescent Convertible Preferred Shares, and all rights whatsoever
with respect to the shares so called for redemption (except the right of the
holders to receive payment of the Redemption Price as herein provided without
interest upon surrender of their certificates therefor) shall terminate. At the
close of business on the redemption date, each holder of Crescent Convertible
Preferred Shares so redeemed (unless Crescent defaults on its obligations to
deliver Crescent Common Shares or cash) shall be, without any further action,
deemed a holder of the number of Crescent Common Shares for which such Crescent
Convertible Preferred Shares is redeemable.
 
     The holder of any Crescent Convertible Preferred Shares redeemed upon any
exercise of Crescent's redemption right shall not be entitled to receive payment
of the Redemption Price for such shares until such holder shall cause to be
delivered to the place specified in the notice given with respect to such
redemption (i) the certificate(s) representing such Crescent Convertible
Preferred Shares redeemed and (ii) transfer instrument(s) satisfactory to
Crescent and sufficient to transfer such Crescent Convertible Preferred Shares
to Crescent free of any adverse interest. No interest shall accrue on the
Redemption Price of any Crescent Convertible Preferred Share after its
redemption date.
 
     Notwithstanding any other provision relating to redemption of the Crescent
Convertible Preferred Shares, Crescent may redeem Crescent Convertible Preferred
Shares at any time, whether or not prior to March 15, 1999, if the Crescent
Board of Trust Managers determines that such redemption (i) is necessary or
advisable to preserve Crescent's status as a REIT or (ii) is desirable and the
holder of such Crescent Convertible
 
                                       138
<PAGE>   151
 
Preferred Shares is required by gaming authorities to be found suitable to hold
such Crescent Convertible Preferred Shares and is not found suitable. The
redemption price for such a redemption will be $52.80 plus an amount equal to
all distributions on the Crescent Convertible Preferred Shares to be redeemed
that have accrued and remain unpaid, whether or not declared or due, to the date
fixed for redemption.
 
     The Crescent Convertible Preferred Shares will have no stated maturity date
and will not be subject to any sinking fund or mandatory redemption provisions.
See also "-- Description of Preferred Shares -- Redemption."
 
  Voting Rights
 
     So long as the Crescent Convertible Preferred Shares are outstanding,
Crescent shall not, without the affirmative vote or consent of the holders of at
least 66 2/3 percent of all outstanding Crescent Convertible Preferred Shares
(unless the vote or consent of a greater percentage is required by applicable
law or the Restated Declaration of Trust of Crescent), voting separately as a
class, (i) amend, alter or repeal (by merger, consolidation or otherwise) any
provision of the Restated Declaration of Trust or the Amended and Restated
Bylaws of Crescent, as amended, so as to affect adversely the relative rights,
preferences, qualifications, limitations or restrictions of the Crescent
Convertible Preferred Shares, (ii) authorize or issue, or increase the
authorized amount of, any additional class or series of shares, or any security
convertible into shares of such class or series, ranking prior to the Crescent
Convertible Preferred Shares in respect of the payment of distributions or upon
liquidation, dissolution or winding-up of the Company, or (iii) effect any
reclassification of the Crescent Convertible Preferred Shares. A class vote on
the part of the Crescent Convertible Preferred Shares shall, without limitation,
specifically not be deemed to be required (except as otherwise required by law
or resolution of Crescent's Board of Trust Managers) in connection with: (a) the
authorization, issuance or increase in the authorized amount of any shares of
any other class or series of shares that ranks junior to, or on a parity with,
the Crescent Convertible Preferred Shares in respect of the payment of
distributions and upon liquidation, dissolution or winding-up of Crescent; or
(b) the authorization, issuance or increase in the amount of any notes, bonds,
mortgages, debentures or other obligations of Crescent not convertible into or
exchangeable, directly or indirectly, for shares ranking prior to the Crescent
Convertible Preferred Shares in respect of the payment of distributions or upon
liquidation, dissolution or winding-up of Crescent. Whenever dividends on the
Crescent Convertible Preferred Shares shall be in arrears in an amount equal to
at least six quarterly dividends, holders will have exclusive rights, with all
other affected holders of shares that are on a parity as to dividends with a
similar right, to elect two additional directors.
 
     For further information regarding the voting rights of the holders of the
Crescent Convertible Preferred Shares, see "-- Description of Preferred
Shares -- Voting Rights."
 
  Conversion Rights
 
     Subject to the restrictions on transfer and ownership described below in
"-- Ownership Limits and Restrictions on Transfer" and in "-- Description of
Crescent Common Shares -- Ownership Limits and Restrictions on Transfer," each
Crescent Convertible Preferred Share will be convertible at any time, at the
option of the holders thereof, into that number of Crescent Common Shares
obtained by dividing $50.00 by the Conversion Price (as defined below) in effect
at such time and by surrender of such share so to be converted in the manner
provided herein. The right to convert Crescent Convertible Preferred Shares
called for redemption will terminate at the close of business on the date
immediately prior to the applicable Crescent Convertible Preferred Shares
Redemption Date.
 
     In order to exercise the conversion privilege, a holder of Crescent
Convertible Preferred Shares to be converted shall surrender such shares at any
of the offices or agencies to be maintained for such purpose by Crescent and
shall give written notice of conversion in the form provided on such Crescent
Convertible Preferred Shares (or such other notice as is acceptable to Crescent)
to Crescent at such office or agency that the holder elects to convert the
Crescent Convertible Preferred Shares specified in said notice. Such notice
shall also state the name or names, together with address or addresses, in which
the certificate or certificates for Crescent Common Shares which shall be
issuable in such conversion shall be issued. As promptly as
 
                                       139
<PAGE>   152
 
practicable after the surrender of such Crescent Convertible Preferred Shares
and the receipt of such notice, instruments of transfer and funds, if any, as
aforesaid, Crescent shall issue and shall deliver at such office or agency to
such holder, or on his written order a certificate or certificates for the
number of full Crescent Common Shares issuable upon the conversion of such
Crescent Convertible Preferred Shares and a check or cash in respect of any
fractional interest in a Crescent Common Share arising upon such conversion.
 
     Each conversion shall be deemed to have been effected immediately prior to
the close of business on the date on which such Crescent Convertible Preferred
Shares shall have been surrendered and such notice (and any applicable
instruments of transfer and any required taxes) received by Crescent as
aforesaid, and the person or persons in whose name or names any certificate or
certificates for Crescent Common Shares shall be issuable upon such conversion
shall be deemed to have become the holder or holders of record of the shares
represented thereby at such time on such date, and such conversion shall be at
the Conversion Price in effect at such time on such date, unless the share
transfer books of Crescent shall be closed on that date, in which event such
person or persons shall be deemed to have become such holder or holders of
record at the close of business on the next succeeding day on which such share
transfer books are open, but such conversion shall be at the Conversion Price in
effect on the date upon which such Crescent Convertible Preferred Shares shall
have been surrendered and such notice received by Crescent.
 
     Any Crescent Convertible Preferred Shares surrendered for conversion during
the period from the close of business on the record date for any distribution
payment to the opening of business on the related distribution payment date
shall (unless such Crescent Convertible Preferred Shares shall have been called
for redemption on a date in such period) be accompanied by payment, in funds
acceptable to Crescent, of an amount equal to the distribution otherwise payable
on such distribution payment date; provided, however, that no such payment need
be made if there shall exist at the time of conversion a default in the payment
of distributions on the Crescent Convertible Preferred Shares. An amount equal
to such payment shall be paid by Crescent on such distribution payment date to
the holder of such Crescent Convertible Preferred Shares at the close of
business on such record date; provided, however, that if Crescent shall default
in the payment of distributions on such distribution payment date, such amount
shall be paid to the person who made such required payment.
 
     No fractional shares or scrip representing fractions of Crescent Common
Shares shall be issued upon conversion of Crescent Convertible Preferred Shares.
If more than one Crescent Convertible Preferred Share shall be surrendered for
conversion at one time by the same holder, the number of full Crescent Common
Shares issuable upon conversion thereof shall be computed on the basis of the
aggregate of $50.00 for each such share so surrendered. In lieu of any
fractional interest in a Crescent Common Share which would otherwise be
deliverable upon the conversion of any Crescent Convertible Preferred Share,
Crescent shall pay to the holder of such shares an amount in cash (computed to
the nearest cent) equal to the closing price on the business day next preceding
the day of conversion multiplied by the fractional interest that otherwise would
have been deliverable upon conversion of such share. For a further discussion of
the Crescent Common Shares to be received upon conversion of Crescent
Convertible Preferred Shares, see "-- Description of Crescent Common Shares."
 
  Conversion Price Adjustments
 
     The Conversion Price is $32.94 and is subject to adjustment upon certain
events, including (i) the payment of distributions payable on Crescent Common
Shares in Crescent Common Shares, (ii) the issuance to all holders of Crescent
Common Shares of certain rights, options or warrants entitling holders of such
Crescent Common Shares to subscribe for or purchase Crescent Common Shares at a
price per share less than the fair market value per share of Crescent Common
Shares, (iii) the distribution to all holders of Crescent Common Shares of
evidences of Crescent's indebtedness or assets, or rights or warrants entitling
holders of such Crescent Common Shares to subscribe for or purchase securities
of Crescent (including the planned distribution of the Crescent Rights and the
Gaming Rights following the Merger), (iv) subdivisions, combinations and
reclassifications of Crescent Common Shares, and (v) distributions to all
holders of Crescent Common Shares or shares of beneficial interest of Crescent
(other than Crescent Common Shares) or of evidences of indebtedness of Crescent
or assets (excluding those rights, options, warrants and
 
                                       140
<PAGE>   153
 
distributions referred to above and dividends and distributions paid in cash out
of equity, including revaluation equity, applicable to Crescent Common Shares
less stated capital attributable to Crescent Common Shares). In addition to the
foregoing adjustments, Crescent will be permitted to make such reductions in the
Conversion Price as it considers to be advisable in order that any event treated
for federal income tax purposes as a dividend of stock or stock rights will not
be taxable to the holders of the Crescent Common Shares.
 
     Notwithstanding any other provision herein to the contrary, in case of any
merger or consolidation to which Crescent is a party (other than a merger or
consolidation in which Crescent is the continuing company and in which the
Crescent Common Shares outstanding immediately prior to the merger or
consolidation are not exchanged for cash, or the securities or other property of
another company), or in case of any sale or transfer to another company of the
property of Crescent as an entirety or substantially as an entirety, or in the
case of any statutory exchange of securities with another company (other than in
connection with a merger or acquisition), then lawful provision shall be made by
the company formed by such consolidation or the company whose securities, cash
or other property will immediately after the merger or consolidation be owned,
by virtue of the merger or consolidation, by the holders of Crescent Common
Shares immediately prior to the merger or consolidation, or the company which
shall have acquired such assets or securities of Crescent (collectively the
"Formed, Surviving or Acquiring Company"), as the case may be, providing that
the holder of each Crescent Convertible Preferred Share then outstanding shall
have the right thereafter to convert such share into the kind and amount of
securities, cash or other property receivable upon such merger, consolidation,
sale, transfer or statutory exchange by a holder of the number of Crescent
Common Shares into which such Crescent Convertible Preferred Share might have
been converted immediately prior to such merger, consolidation, sale, transfer
or statutory exchange assuming such holder of Crescent Common Shares did not
exercise his rights of election, if any, as to the kind or amount of securities,
cash or other property receivable upon such merger, consolidation, sale,
transfer or statutory exchange (provided that, if the kind or amount of
securities, cash or other property receivable upon such merger, consolidation,
sale, transfer or statutory exchange is not the same for each Crescent Common
Share in respect of which such rights of election shall not have been exercised
("non-electing share"), then the kind and amount of securities, cash or other
property receivable upon such merger, consolidation, sale, transfer or statutory
exchange for each non-electing share shall be deemed to be the kind and amount
so receivable per share by a plurality of the non-electing shares). The Formed,
Surviving or Acquiring Company, as the case may be, shall make provision in its
certificate or articles of incorporation or other constituent documents to the
end that the provisions set forth herein shall thereafter correspondingly be
made applicable, as nearly as may reasonably be, in relation to any shares of
beneficial interest or other securities or property thereafter deliverable on
the conversion of the Crescent Convertible Preferred Shares.
 
     No adjustment of the Conversion Price is required to be made in any case
until cumulative adjustments amount to 1% or more of the Conversion Price. Any
adjustments not so required to be made will be carried forward and taken into
account in subsequent adjustments.
 
  Ownership Limits and Restrictions on Transfer
 
     In order to maintain Crescent's qualification as a REIT for federal income
tax purposes, ownership by any person of Crescent's outstanding shares of
beneficial interest is restricted in the Restated Declaration of Trust. For
further information regarding restrictions on ownership and transfer of the
Crescent Convertible Preferred Shares, see "-- Description of Preferred
Shares -- Restrictions on Ownership." Crescent's Restated Declaration of Trust
also provides certain restrictions on the ownership and transfer of the shares
of beneficial interest of Crescent which will apply to conversions of the
Crescent Convertible Preferred Shares, as well as the ownership and transfer of
Crescent Convertible Preferred Shares. See "-- Description of Crescent Common
Shares -- Ownership Limits and Restrictions on Transfer."
 
                                       141
<PAGE>   154
 
DESCRIPTION OF TRANSFERABLE SUBSCRIPTION RIGHTS PROPOSED FOR ISSUANCE BY
CRESCENT
 
  General
 
     Upon completion of the Merger, Crescent is planning to distribute (the
"Rights Offering") Crescent Rights directly to the record holders of the
outstanding Crescent Common Shares as of the close of business on a date to be
determined, which will be subsequent to the Effective Time of the Merger (the
"Record Date"). It is expected that Crescent will distribute, at no cost to such
record holders, one Crescent Right for each Crescent Common Share held on the
Record Date. The Crescent Rights will be evidenced by transferable subscription
certificates ("Subscription Certificates").
 
     The Crescent Rights will have no dividend, voting or liquidation rights
and, following exercise, will be irrevocable.
 
  Expiration Date
 
     It is expected that the Crescent Rights will expire at 5:00 p.m., Eastern
time, on the 60th day following the Record Date, unless earlier terminated or
extended by Crescent (the "Expiration Date"). After the Expiration Date,
unexercised Crescent Rights will be null and void. Crescent will not be
obligated to honor any purported exercise of Crescent Rights received by the
subscription agent after the Expiration Date.
 
  Subscription Privilege
 
     It is expected that every five Crescent Rights held by a holder of Crescent
Rights (a "Rights Holder") will entitle such holder to receive, upon payment of
the Subscription Price (as defined below), one Crescent Common Share (the
"Subscription Privilege").
 
  Subscription Price
 
     The subscription price will be $31.125, in cash, per Crescent Common Share
purchased pursuant to the Subscription Privilege.
 
  Methods of Transferring Crescent Rights
 
     The Crescent Rights will not be subject to transfer restrictions. Crescent
intends to make application to list the Crescent Rights on the NYSE, but there
is no assurance that such listing will occur.
 
  Amendment and Termination
 
     Crescent reserves the right to extend the Expiration Date and to amend the
terms and conditions of the Rights Offering, regardless of whether the amended
terms are more or less favorable to Rights Holders. Crescent also reserves the
right to terminate the Rights Offering prior to the Expiration Date for the
following reasons: (i) a suspension of trading in Crescent's Common Shares by
the NYSE or suspension of trading of securities generally on the NYSE, (ii) a
"stop order" issued by the Securities and Exchange Commission (the "Commission")
suspending the effectiveness of Crescent's Registration Statement covering the
Crescent Common Shares, (iii) entry of a judgment or order by a court or other
governmental authority restraining, prohibiting or materially interfering with
the Rights Offering and (iv) subject to compliance with NYSE policies,
Crescent's determination (upon approval by the NYSE) that continuation of the
Rights Offering would not be in Crescent's best interest. Neither Crescent nor
any selling Rights Holder will have any obligation to a purchaser of Crescent
Rights, whether such purchase was made through the subscription agent or
otherwise, in the event that the Rights Offering is terminated.
 
                                       142
<PAGE>   155
 
                                 LEGAL OPINIONS
 
     Certain matters relating to the Merger and tax matters with respect to
Crescent and the Merger will be passed upon by Shaw Pittman, counsel to
Crescent.
 
                                    EXPERTS
 
     The consolidated financial statements incorporated by reference in this
Proxy Statement/Prospectus by reference of (i) Station and its subsidiaries
included in Station's Annual Report on Form 10-K for the fiscal year ended March
31, 1998, and (ii) Crescent and its subsidiaries included in Crescent's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997, as amended on
May 15, 1998 and its Current Reports on Form 8-K (a) dated October 15, 1997 and
filed June 24, 1997, (b) dated January 29, 1997 and filed March 24, 1997, as
amended on April 9, 1997, April 24, 1997, May 23, 1997 and July 2, 1997, (c)
dated December 22, 1997 and filed March 4, 1998 and (d) dated January 16, 1998
and filed on January 27, 1998, as amended on February 13, 1998, April 27, 1998
and June 10, 1998, respectively, have been audited by AA, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
such reports. A representative of AA will attend the Meeting, will be given an
opportunity to make a statement and will be available to answer appropriate
questions.
 
                                 OTHER MATTERS
 
     The Station Board of Directors is not aware of any other matters to be
presented at the meeting. If any other matters should properly come before the
meeting, the persons named in the proxy will vote the proxies according to their
best judgment.
 
                             STOCKHOLDER PROPOSALS
 
     Stockholder proposals, if any, that may be considered for inclusion in
Station's proxy materials for the 1999 annual meeting of Station, if the Merger
is not consummated, must be received by Station at its offices at 2411 West
Sahara Avenue, Las Vegas, Nevada 89102 not later than May 29, 1999.
 
                                       143
<PAGE>   156
 
     Any questions or request for assistance may be directed to the Information
Agent at the telephone number set forth below. Requests for additional proxy
cards or copies of this Proxy Statement/Prospectus may be directed to the
Information Agent and such additional materials will be provided promptly at
Station's expense. Stockholders may also contact their local broker, dealer,
commercial bank or trust company for assistance concerning the matters set forth
herein.
 
                           The Information Agent is:
 
                              D.F. KING & CO., INC
                                77 Water Street
                            New York, New York 10005
                           (800) 669-5550 (Toll Free)
<PAGE>   157
 
                                                                         ANNEX A
 
                                FAIRNESS OPINION
 
January 16, 1998
 
Board of Directors
Station Casinos, Inc.
2411 West Sahara Avenue
Las Vegas, NV 89102
 
Members of the Board:
 
     You have requested our opinion as to the fairness, from a financial point
of view, to the holders of common stock, par value $.01 per share ("Company
Common Stock"), of Station Casinos, Inc. (the "Company") and the holders of
$3.50 convertible preferred stock ("Company Convertible Preferred Stock") of the
Company, of the consideration to be received by such holders in connection with
the proposed merger (the "Merger") of the Company with Crescent Real Estate
Equities Company ("Crescent"), pursuant to an Agreement and Plan of Merger,
dated as of January 16, 1998 (the "Merger Agreement"), between the Company and
Crescent. Upon the effectiveness of the Merger, (a) each issued and outstanding
share of Company Common Stock (other than shares owned by Crescent or the
Company) will be converted into and represent the right to receive .466 common
shares of beneficial interest, par value $.01 per share ("Crescent Common
Shares"), of Crescent, and (b) each issued and outstanding share of Company
Convertible Preferred Stock will be converted into and represent the right to
receive one $3.50 Convertible Preferred Share of Crescent having the terms
required in Section 7(h) of the Certificate of Designation (as defined in the
Merger Agreement) ("Crescent Convertible Preferred Shares").
 
     In connection with rendering our opinion, we have reviewed certain publicly
available information concerning the Company and Crescent and certain other
financial information concerning the Company and Crescent, including financial
forecasts that were provided to us by the Company and Crescent, respectively. We
have discussed the past and current business operations, financial condition and
prospects of the Company and Crescent with certain officers and employees of the
Company and Crescent, respectively. We have also considered such other
information, financial studies, analyses, investigations and financial, economic
and market criteria that we deemed relevant. We were not asked to, and did not,
solicit other proposals to acquire the Company.
 
     In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of the information reviewed by us
for the purpose of this opinion and we have not assumed any responsibility for
independent verification of such information. With respect to the financial
forecasts of the Company and Crescent, we have assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the respective managements of the Company or Crescent, and we
express no opinion with respect to such forecasts or the assumptions on which
they are based. We have not assumed any responsibility for any independent
evaluation or appraisal of any of the assets (including properties and
facilities) or liabilities of the Company or Crescent.
 
     Our opinion is necessarily based upon conditions as they exist and can be
evaluated on the date hereof. Our opinion as expressed below does not imply any
conclusion as to the likely trading range for Crescent Common Shares or Crescent
Convertible Preferred Shares following the consummation of the Merger, which may
vary depending upon, among other factors, changes in interest rates, dividend
rates, market conditions, general economic conditions and other factors that
generally influence the price of securities. Our opinion does not address the
Company's underlying business decision to effect the Merger, and we express no
view on the effect on the Company of the Merger and related transactions. Our
opinion is directed only to the fairness, from a financial point of view, of the
consideration to be received by holders of Company Common Stock and Company
Convertible Preferred Stock in connection with the Merger and does not
constitute a recommenda-
                                       A-1
<PAGE>   158
 
tion concerning how holders of Company Common Stock or Company Convertible
Preferred Stock should vote with respect to the Merger Agreement or the Merger.
 
     We have acted as financial advisor to the Board of Directors of the Company
in connection with the Merger and will receive a fee for our services which is
payable upon consummation of the Merger. In the ordinary course of business, we
and our affiliates may actively trade the securities of the Company and Crescent
for our own account and for the accounts of customers and, accordingly, may at
any time hold a long or short position in such securities. In addition, we and
our affiliates have previously rendered certain investment banking and financial
advisory services to the Company and Crescent for which we have received
customary compensation. We and our affiliates (including Travelers Group Inc.)
may have other business relationships with the Company or Crescent in the
ordinary course of their businesses.
 
     Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the consideration to be received by the holders of Company Common
Stock and Company Convertible Preferred Stock in connection with the Merger is
fair from a financial point of view.
 
                                            Very Truly Yours,
 
                                            SALOMON SMITH BARNEY
 
                                       A-2
<PAGE>   159
 
                                                                         ANNEX B
 
                                MERGER AGREEMENT
 
     THIS AGREEMENT AND PLAN OF MERGER, dated as of January 16, 1998 (this
"Agreement"), is entered into by and among Crescent Real Estate Equities
Company, a Texas real estate investment trust ("Crescent") and Station Casinos,
Inc., a Nevada corporation (the "Company") (Crescent and the Company being
hereinafter collectively referred to as the "Constituent Entities").
 
                                  WITNESSETH:
 
     WHEREAS, Crescent and the Company contemplate the merger of the Company
with and into Crescent (the "Merger"), upon the terms and subject to the
conditions set forth herein, whereby each issued and outstanding share of Common
Stock, $.01 par value, of the Company ("Company Common Stock"), not owned by
Crescent, the Company or their respective wholly owned subsidiaries will be
converted into common shares of beneficial interest, par value $.01 per share,
of Crescent ("Common Shares");
 
     WHEREAS, the Board of Trust Managers of Crescent and the Board of Directors
of the Company each has determined that the Merger is in furtherance of and
consistent with their respective long-term business strategies and is fair to
and in the best interest of their respective shareholders or stockholders, as
the case may be; and
 
     WHEREAS, the parties to this Agreement intend that the Merger shall be
treated as a nontaxable merger of the Company with and into Crescent;
 
     NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows.
 
                                   ARTICLE I
 
                                   THE MERGER
 
     Section 1.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the Nevada Revised Statutes chapters 78 and 92A,
collectively known as the Nevada General Corporation Law, as amended (the
"NGCL") and Sections 23.10 through 23.60 of the Texas Real Estate Investment
Trust Act, as amended (the "REIT Act"), the Company shall be merged with and
into Crescent as of the Effective Time (as defined in Section 1.2). Following
the Merger, the separate corporate existence of the Company shall cease and
Crescent shall continue as the surviving corporation (the "Surviving
Corporation") and shall succeed to and assume all the rights and obligations of
the Company in accordance with the NGCL and the REIT Act.
 
     To facilitate the combination of the businesses of the Company and
Crescent, the parties to this Agreement will (i) reincorporate the Company in
any other state that would permit the merger of the Company with and into
Crescent and, at the request of either party to this Agreement, each of the
reincorporation of the Company and the merger of the Company with and into
Crescent will be authorized by separate vote of the Company's stockholders with
respect to each of such reincorporation and the merger, or (ii) merge the
Company with and into a wholly owned subsidiary of Crescent.
 
     Section 1.2 Effective Time. As soon as practicable after all of the
conditions set forth in Article VI have been satisfied or waived, but not more
than 30 days prior to the contemplated date of Closing (as hereinafter defined)
pursuant to Section 1.15, Articles of Merger (the "Articles of Merger") shall be
duly prepared and executed by Crescent and the Company and delivered to the
Secretary of State of the State of Nevada and the County Clerk of Tarrant
County, Texas, for filing. The Merger shall become effective when the Articles
of Merger, executed in accordance with the relevant provisions of the NGCL and
the REIT Act, are filed with the Secretary of State of the State of Nevada and
the County Clerk of Tarrant County, Texas; provided, however, that, upon mutual
consent of the Constituent Entities, the Articles of Merger may provide for a
later
                                       B-1
<PAGE>   160
 
date of effectiveness of the Merger not more than 30 days after the date the
Articles of Merger are filed. When used in this Agreement, the term "Effective
Time" shall mean the later of the date and time at which the Articles of Merger
are accepted for record in Nevada and in Texas or such later time established by
the Articles of Merger.
 
     Section 1.3 Effects of the Merger. The Merger shall have the effects set
forth in Section 92A.250 of the NGCL and in Section 23.60 of the REIT Act.
 
     Section 1.4 Declaration of Trust and Bylaws; Trust Managers.
 
     (a) At the Effective Time, the Declaration of Trust of Crescent, as in
effect immediately prior to the Effective Time, shall be the Declaration of
Trust of the Surviving Entity until thereafter changed or amended as provided
therein or by applicable law. At the Effective Time, the Bylaws of Crescent, as
in effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Entity until thereafter changed or amended as provided therein or in
the Declaration of Trust.
 
     (b) The trust managers of Crescent at the Effective Time shall be the trust
managers of the Surviving Entity until the earlier of their resignation or
removal or until their respective successors are duly elected and qualified, as
the case may be.
 
     (c) Crescent shall use all reasonable efforts to cause the Board of Trust
Managers of Crescent to be increased in size, effective at the Effective Time,
by two members, with such new members being Mr. Frank J. Fertitta III and Mr.
Lorenzo J. Fertitta.
 
     Section 1.5 Conversion of Securities. As of the Effective Time, by virtue
of the Merger and without any action on the part of Crescent, the Company or the
holders of any securities of the Constituent Entities:
 
          (a) (i) Subject to the provisions of Sections 1.8 and 1.10 hereof,
     each share of Company Common Stock (including restricted shares of Company
     Common Stock issued under the Company Plans (as defined below)) issued and
     outstanding immediately prior to the Effective Time (other than shares to
     be canceled in accordance with Section 1.5(d)) together with the associated
     Right shall as of the Effective Time be converted into the right to receive
     the number of validly issued, fully paid and nonassessable Common Shares
     equal to the Exchange Ratio (as defined below). All such shares of Company
     Common Stock (and the associated Rights), when so converted, shall no
     longer be outstanding and shall automatically be canceled and retired and
     shall cease to exist and each holder of a certificate representing any such
     shares (and the associated Rights) shall cease to have any rights with
     respect thereto, except the right to receive (A) any dividends and other
     distributions in accordance with Section 1.7, (B) certificates representing
     the Common Shares into which such shares (and the associated Rights) are
     converted and (C) any cash, without interest, in lieu of fractional Common
     Shares to be issued or paid in consideration therefor upon the surrender of
     such Certificate in accordance with Sections 1.6 and 1.8.
 
          (ii) The Exchange Ratio shall be .466.
 
          (b) Subject to the provisions of Sections 1.8 and 1.10 hereof, each
     share of the Company's $3.50 Convertible Preferred Stock (the "Convertible
     Preferred Stock") issued and outstanding immediately prior to the Effective
     Time shall as of the Effective Time be converted into the right to receive
     one validly issued, fully paid and nonassessable $3.50 Convertible
     Preferred Share of Crescent (the "Crescent Convertible Preferred Shares")
     having the terms required in Section 7(h) of the Certificate of Resolutions
     Establishing Designation, Preferences and Rights of $3.50 Convertible
     Preferred Stock of the Company dated March 25, 1996 (the "Certificate of
     Designation"). All such shares of Convertible Preferred Stock, when so
     converted into Crescent Convertible Preferred Shares, shall no longer be
     outstanding and shall automatically be canceled and retired and shall cease
     to exist and each holder of a certificate representing any such shares of
     Convertible Preferred Stock shall cease to have any rights with respect
     thereto, except the right to receive (A) any dividends and other
     distributions in accordance with Section 1.7 and (B) certificates
     representing the Crescent Convertible Preferred Shares into which such
     shares of Convertible Preferred Stock are converted to be issued in
     consideration therefor upon the surrender of such Certificate in accordance
     with Section 1.6.
 
                                       B-2
<PAGE>   161
 
          (c) Subject to the provisions of Sections 1.8 and 1.10 hereof, each
     share of the Company's Redeemable Preferred Stock (as hereinafter defined)
     issued and outstanding immediately prior to the Effective Time shall as of
     the Effective Time be canceled and no cash, capital stock of Crescent or
     other consideration shall be delivered in exchange therefor.
 
          (d) All shares of Company Common Stock that are held in the treasury
     of the Company and shares of Company Common Stock owned by Crescent
     (together, in each case, with the associated Right (as defined in Section
     3.2)) shall be canceled and no cash, capital stock of Crescent or other
     consideration shall be delivered in exchange therefor. All shares of
     Company Common Stock that are held by any wholly owned Subsidiary (as
     defined in Section 2.1) of the Company or Crescent (together, in each case,
     with the associated Right (as defined in Section 3.2)) shall be converted
     into validly issued, fully paid and nonassessable Common Shares, par value
     $.01 per share, of the Surviving Entity.
 
     Section 1.6 Crescent to Make Certificates Available.
 
     (a) Exchange of Certificates. Crescent shall authorize BankBoston, N.A. (or
such other person or persons as shall be acceptable to Crescent and the Company)
to act as the Exchange Agent hereunder (the "Exchange Agent"). As soon as
practicable after the Effective Time, Crescent shall deposit with the Exchange
Agent, in trust for the holders of shares of Company Common Stock and
Convertible Preferred Stock converted in the Merger, certificates representing
the Common Shares or Crescent Convertible Preferred Shares, as the case may be,
issuable in exchange for outstanding shares of Company Common Stock or
Convertible Preferred Stock, as the case may be, cash required to make payments
in lieu of any fractional shares pursuant to Section 1.8 and cash or other
property to pay or make any dividends or distributions pursuant to Section 1.7
(such cash and Common Shares or Crescent Convertible Preferred Shares, as the
case may be, together with any dividends or distributions with respect thereto,
being hereinafter referred to as the "Exchange Fund"). The Exchange Agent shall
invest any cash included in the Exchange Fund as directed by Crescent, on a
daily basis. Any interest or other income resulting from such investments shall
be paid to Crescent. The Exchange Agent shall deliver the Common Shares and the
Crescent Convertible Preferred Shares contemplated to be issued and cash or
other property distributable pursuant to Section 1.7 out of the Exchange Fund.
 
     (b) Exchange Procedures. As soon as practicable after the Effective Time,
the Exchange Agent shall mail to each record holder of a certificate or
certificates that immediately prior to the Effective Time represented
outstanding shares of Company Common Stock or Convertible Preferred Stock, as
the case may be, converted in the Merger (the "Certificates"), a letter of
transmittal in form reasonably acceptable to the Company (which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon actual delivery of the Certificates to the Exchange Agent,
and shall contain instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing Common Shares or Crescent
Convertible Preferred Shares, as the case may be, and cash or other property
distributable pursuant to Sections 1.7 and 1.8). Upon surrender for cancellation
to the Exchange Agent of a Certificate, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing that number of whole
Common Shares or Crescent Convertible Preferred Shares and cash into which the
Company Common Stock (and the associated Rights) or the Convertible Preferred
Stock, as the case may be, represented by the surrendered Certificate shall have
been converted at the Effective Time pursuant to this Article I, cash in lieu of
any fractional Common Shares in accordance with Section 1.8 and any dividends or
other distributions in accordance with Section 1.7, and any Certificate so
surrendered shall forthwith be canceled.
 
     Section 1.7 Dividends; Transfer Taxes; Withholding. No dividends or other
distributions that are declared on or after the Effective Time on the Common
Shares or Crescent Convertible Preferred Shares, as the case may be, or are
payable to the holders of record thereof on or after the Effective Time, will be
paid to any person entitled by reason of the Merger to receive a certificate
representing Common Shares or Crescent Convertible Preferred Shares, as the case
may be, until such person surrenders the related Certificate or Certificates, as
provided in Section 1.6, and no cash payment pursuant to Section 1.8 will be
paid to any such person until such person shall so surrender the related
Certificate or Certificates. Subject to the effect of
 
                                       B-3
<PAGE>   162
 
applicable law, there shall be paid to each record holder of a new certificate
representing such Common Shares or Crescent Convertible Preferred Shares, as the
case may be: (i) at the time of such surrender or as promptly as practicable
thereafter, the amount, if any, of any dividends or other distributions
theretofore paid with respect to the Common Shares or Crescent Convertible
Preferred Shares, as the case may be, represented by such new certificate and
having a record date on or after the Effective Time and a payment date prior to
such surrender; (ii) at the appropriate payment date or as promptly as
practicable thereafter, the amount, if any, of any dividends or other
distributions payable with respect to such Common Shares or Crescent Convertible
Preferred Shares, as the case may be, and having a record date on or after the
Effective Time but prior to such surrender and a payment date on or subsequent
to such surrender; and (iii) at the time of such surrender or as promptly as
practicable thereafter, the amount of any cash payable pursuant to Section 1.8
to which such holder is entitled pursuant to Section 1.8. In no event shall the
person entitled to receive such dividends or other distributions or cash be
entitled to receive interest on such dividends or other distributions or cash.
If any certificate representing Common Shares or Crescent Convertible Preferred
Shares, as the case may be, or cash or other property is to be issued or
delivered in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of such exchange that
the Certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer and that the person requesting such exchange shall pay
to the Exchange Agent any transfer or other taxes required by reason of the
issuance of certificates for such Common Shares or Crescent Convertible
Preferred Shares, as the case may be, in a name other than that of the
registered holder of the Certificate surrendered, or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. Crescent or the Exchange Agent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any holder of shares of Company Common Stock or Convertible Preferred Stock, as
the case may be, such amounts as Crescent or the Exchange Agent is required to
deduct and withhold with respect to the making of such payment under the
Internal Revenue Code of 1986, as amended (the "Code"), or under any provision
of state, local or foreign tax law. To the extent that amounts are so withheld
by Crescent or the Exchange Agent, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the holder of the shares
of Company Common Stock or Convertible Preferred Stock, as the case may be, in
respect of which such deduction and withholding was made by Crescent or the
Exchange Agent.
 
     Section 1.8 No Fractional Securities. No certificates or scrip representing
fractional Common Shares shall be issued upon the surrender for exchange of
Certificates pursuant to this Article I, and no Crescent dividend or other
distribution or stock split shall relate to any fractional share, and no
fractional share shall entitle the owner thereof to vote or to any other rights
of a security holder of Crescent. In lieu of any such fractional share, each
holder of Company Common Stock who would otherwise have been entitled to a
fraction of a Common Share upon surrender of Certificates for exchange pursuant
to this Article I will be paid an amount of cash (without interest), rounded to
the nearest cent, determined by multiplying (i) the Market Price of a Common
Share on the second NYSE trading day prior to the Company Stockholder Meeting
(as defined in Section 5.1) by (ii) the fractional interest to which such holder
would otherwise be entitled. The "Market Price" of a Common Share or a share of
Company Common Stock, as applicable, on any date means the average of the daily
closing prices per Common Share (or share of Company Common Stock, as
applicable) as reported on the NYSE Composite Transactions reporting system (as
published in The Wall Street Journal or, if not published therein, in another
authoritative source mutually selected by the Company and Crescent) for the 20
consecutive NYSE trading days (the "Averaging Period") immediately preceding
such date. As promptly as practicable after the determination of the amount of
cash to be paid to holders of fractional share interests, the Exchange Agent
shall so notify Crescent, and Crescent shall deposit such amount with the
Exchange Agent and shall cause the Exchange Agent to forward payments to such
holders of fractional share interests subject to and in accordance with the
terms of Section 1.6, Section 1.7 and this Section 1.8. For purposes of paying
such cash in lieu of fractional shares, all Certificates surrendered for
exchange by a Company stockholder shall be aggregated, and no such Company
stockholder will receive cash in lieu of fractional shares in an amount equal to
or greater than the value of one full Common Share with respect to such
Certificates surrendered.
 
                                       B-4
<PAGE>   163
 
     Section 1.9 Return of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the former stockholders of the Company for one year
after the Effective Time shall be delivered to Crescent and any such former
stockholders who have not theretofore complied with this Article I shall
thereafter look only to Crescent for payment of their claim for Common Shares,
any cash payable pursuant to Section 1.8 and any dividends or distributions with
respect to Common Shares. Crescent shall not be liable to any former holder of
Company Common Stock for any such Common Shares, cash and dividends and
distributions held in the Exchange Fund which is delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
 
     Section 1.10 Adjustment of Exchange Ratio. In the event that, prior to the
Effective Time, Crescent effects any reclassification, stock split or stock
dividend or other distribution of rights, assets or securities with respect to
Common Shares, any change or conversion of Common Shares into other securities
or any other dividend or distribution with respect to the Common Shares, other
than:
 
          (a) any extraordinary dividend paid or to be paid by Crescent which
     Crescent reasonably determines is or are in the aggregate sufficient, when
     considered together with all dividends anticipated to be paid within the
     tax year including the Effective Time, to equal all anticipated current and
     accumulated earnings and profits for such tax year of the Company and
     Crescent, in which case, Crescent shall give prior written notice to the
     Company which shall contain the basis for, and computations and
     calculations of, the extraordinary dividend; or
 
          (b) distributions in the aggregate not to exceed the greater of (i)
     the amount of any quarterly dividend that may be paid by Crescent in the
     ordinary course, including customary increases thereof, and (ii)
     distributions of "real estate investment taxable income" (as such term is
     defined for purposes of the Code) without regard to any net capital gains
     or the deduction for dividends paid,
 
then appropriate and proportionate adjustments, if any, shall be made to the
Exchange Ratio, and all references to the Exchange Ratio in this Agreement shall
be deemed to be to the Exchange Ratio as so adjusted.
 
     Section 1.11 No Further Ownership Rights in Company Capital Stock. All
Common Shares or Crescent Convertible Preferred Shares, as the case may be, and
cash issued or paid upon the surrender for exchange of Certificates in
accordance with the terms hereof (including any cash or other property paid
pursuant to Section 1.8) shall be deemed to have been issued in full
satisfaction of all rights pertaining to the shares of Company Common Stock (and
associated Rights) or Convertible Preferred Stock, as the case may be,
represented by such Certificates subject, however, to the Surviving Entity's
obligation to pay any dividends or make any other distributions with a record
date prior to the Effective Time which may have been declared or made by the
Company on such shares of Company Common Stock or Convertible Preferred Stock,
as the case may be, prior to the date of this Agreement and which remain unpaid
at the Effective Time.
 
     Section 1.12 Closing of Company Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of shares of
Company Common Stock shall thereafter be made on the records of the Company. If,
after the Effective Time, Certificates are presented to the Exchange Agent or
Crescent, such Certificates shall be canceled and exchanged as provided in this
Article I.
 
     Section 1.13 Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Crescent or the Exchange Agent, the posting by such person of a bond in such
reasonable amount as Crescent or the Exchange Agent may direct (but consistent
with the practices Crescent applies to its own shareholders) as indemnity
against any claim that may be made against them with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the Common Shares, any cash payable pursuant to Section
1.8 to which the holders thereof are entitled and any dividends or other
distributions to which the holders thereof are entitled pursuant to Section 1.7.
 
     Section 1.14 Further Assurances. Each party hereto will, prior to the
Effective Time, execute such further deeds, bills of sale, assignments or
assurances or any other acts or things as are reasonably requested by the other
to consummate the Merger, to vest the Surviving Entity with full title to all
assets, properties,
                                       B-5
<PAGE>   164
 
privileges, rights, approvals and franchises of either of the Constituent
Entities or to effect the other purposes of this Agreement. If at any time after
the Effective Time the Surviving Entity shall consider or be advised that any
deeds, bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (a) to vest, perfect or confirm, of record or
otherwise, in the Surviving Entity its right, title or interest in, to or under
any of the rights, privileges, powers, franchises, properties or assets of
either of the Constituent Entities, or (b) otherwise to carry out the purposes
of this Agreement, the Surviving Entity and its proper officers or trustees or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either of the Constituent Entities, all such deeds, bills of sale,
assignments and assurances and to do, in the name and on behalf of either
Constituent Entity, all such other acts and things as may be necessary,
desirable or proper to vest, perfect or confirm the Surviving Entity's right,
title or interest in, to or under any of the rights, privileges, powers,
franchises, properties or assets of such Constituent Entity and otherwise to
carry out the purposes of this Agreement.
 
     Section 1.15 Closing. The closing of the Merger (the "Closing") and all
actions contemplated by this Agreement to occur at the Closing shall take place
at the offices of Shaw Pittman Potts & Trowbridge, 2300 N Street N.W.,
Washington, D.C. 20037, at 10:00 a.m., local time, on a date to be specified by
the parties, which (subject to fulfillment or waiver of the conditions set forth
in Article VI) shall be within the first 15 days of the calendar quarter
following the calendar quarter in which the last of the conditions set forth in
Article VI shall have been fulfilled or waived, or at such other time and place
as Crescent and the Company shall agree.
 
                                   ARTICLE II
 
                   REPRESENTATIONS AND WARRANTIES OF CRESCENT
 
     Crescent represents and warrants to the Company as follows:
 
     Section 2.1 Organization, Standing and Power. Crescent has been formed as a
real estate investment trust under the laws of the State of Texas in accordance
with the REIT Act. The County Clerk of Tarrant County, Texas, has certified in
writing that the Restated Declaration of Trust of the Company (the "Declaration
of Trust") is recorded in Volume 12645, beginning at Page 1811, in the records
of the County Clerk. The Declaration of Trust is in effect, and no dissolution,
revocation or forfeiture proceedings regarding the Company have been commenced.
The Company has power and authority under its Declaration of Trust, Amended and
Restated Bylaws, as amended (the "Crescent Bylaws") and the REIT Act to own,
lease and operate its properties and to conduct the business in which it is
engaged. Each Subsidiary of Crescent is duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is organized and
has the requisite corporate (in the case of a Subsidiary that is a corporation)
or other power and authority to carry on its business as now being conducted,
except where the failure to be so organized, existing or in good standing or to
have such power or authority, individually or in the aggregate, has not had, and
would not reasonably be expected to have, a Material Adverse Effect (as
hereinafter defined) on Crescent. Crescent and each of its Subsidiaries are duly
qualified to do business, and are in good standing, in each jurisdiction where
the character of their properties owned or held under lease or the nature of
their activities makes such qualification necessary, except where the failure to
be so qualified, individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect on Crescent.
 
     For all purposes of this Agreement, any reference to any state of facts,
event, change or effect having a "Material Adverse Effect" on or with respect to
Crescent or the Company, as the case may be, means such state of facts, event,
change or effect which has had, or would reasonably be expected to have, a
material adverse effect on the business, properties, results of operations or
financial condition of Crescent and its Subsidiaries, taken as a whole, or the
Company and its Subsidiaries, taken as a whole, as the case may be; provided,
however that a "Material Adverse Effect" shall not include any state of facts,
event, change or effect (i) disclosed on or prior to the date of this Agreement
in (a) any of the Company SEC Documents (as hereinafter defined) or the Crescent
SEC Documents (as hereinafter defined), other than as disclosed in any forward
looking statement disclaimer or general or economic risk factors contained in
such Crescent SEC Documents or Company SEC Documents, (b) in this Agreement, or
(c) in any schedule, exhibit or related
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document furnished to the other party in connection herewith, (ii) generally
affecting companies in the industries in which the Company or Crescent operates
or (iii) relating to Missouri gaming laws, regulations and licenses to the
extent that they affect the Company's property or operations in Kansas City,
Missouri. For all purposes of this Agreement, "Subsidiary" means any
corporation, partnership, limited liability company, joint venture or other
legal entity of which Crescent or the Company, as the case may be (either alone
or through or together with any other Subsidiary), (i) owns, directly or
indirectly, more than 50% of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or other governing body of such corporation, partnership, limited liability
company, joint venture or other legal entity or (ii) is a general partner,
trustee or other entity performing similar functions. Any reference in this
Agreement to disclosure letters shall be deemed to include matters described in
the Crescent SEC Documents or the Company SEC Documents, provided, however, that
Crescent and the Company shall use their reasonable best efforts to include in
any disclosure letter relevant matters described in the Crescent SEC Documents
or the Company SEC Documents, respectively.
 
     Section 2.2 Capital Structure. At the date hereof, the authorized capital
stock of Crescent solely consists of 250,000,000 Common Shares, 250,000,000
excess shares issuable in exchange for Common Shares ("Excess Common Shares"),
100,000,000 preferred shares of beneficial interest, par value $.01 per share
(the "Preferred Shares"), and 100,000,000 excess shares issuable in exchange for
Preferred Shares ("Excess Preferred Shares"). At the close of business on
January 16, 1998, 118,151,909 Common Shares were issued and outstanding. At the
close of business on January 16, 1998, Crescent had no shares reserved for
issuance, except (i) 12,620,870 Common Shares reserved for issuance upon the
exchange of 6,310,435 units of ownership interest (the "Units") of Crescent Real
Estate Equities Limited Partnership, a Delaware limited partnership (the
"Operating Partnership"), (ii) 15,704,163 Common Shares reserved for issuance
pursuant to the 1994 Crescent Real Estate Equities, Inc. Stock Incentive Plan,
the Second Amended and Restated 1995 Crescent Real Estate Equities Company Stock
Incentive Plan, the 1995 Crescent Real Estate Equities Limited Partnership Unit
Incentive Plan and the 1996 Crescent Real Estate Equities Limited Partnership
Unit Incentive Plan (collectively with the Crescent Real Estate Equities, Ltd.
401(k) Plan, as amended, the "Crescent Stock Plans"), (iii) the possible
issuance of up to 664,294 Common Shares upon the exchange of a portion of a
partnership interest in Desert Mountain Properties Limited Partnership, and (iv)
an outstanding option to acquire 217,530 Common Shares. Except as set forth
above, at the close of business on January 16, 1998, no shares of capital stock
or other voting securities of Crescent were issued, reserved for issuance or
outstanding. All the outstanding Common Shares are validly issued, fully paid
and nonassessable and free of preemptive rights. All Common Shares issuable in
exchange for Company Common Stock at the Effective Time in accordance with this
Agreement will be, when so issued, duly authorized, validly issued, fully paid
and nonassessable and free of preemptive rights. As of the date of this
Agreement, except as identified in this paragraph and except for (a) this
Agreement, (b) stock options issued and unexercised pursuant to the Crescent
Stock Plans covering not in excess of 8,938,000 Common Shares (collectively, the
"Crescent Stock Options"), (c) 12,620,870 Common Shares issuable upon the
exchange of 6,310,435 Units, (d) Common Shares issuable pursuant to the Forward
Stock Purchase Contract agreement dated as of August 12, 1997 (the "UBS Forward
Purchase Contract") with an affiliate of Union Bank of Switzerland, and (e)
Common Shares issuable pursuant to the Swap Agreement dated as of December 12,
1997 (the "Merrill Lynch Swap Agreement") with an affiliate of Merrill Lynch &
Co., Inc., there are no options, warrants, calls, rights or agreements to which
Crescent or any of its Subsidiaries is a party or by which any of them is bound
obligating Crescent or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock of
Crescent or any of its Subsidiaries or obligating Crescent or any of its
Subsidiaries to grant, extend or enter into any such option, warrant, call,
right or agreement. Each outstanding share of capital stock of each Subsidiary
of Crescent that is a corporation is duly authorized, validly issued, fully paid
and nonassessable and, except as disclosed in the Crescent SEC Documents (as
defined in Section 2.5) filed prior to the date of this Agreement, each such
share that is owned by Crescent or another Subsidiary of Crescent, is owned free
and clear of all security interests, liens, claims, pledges, mortgages, options,
rights of first refusal, agreements, limitations on voting rights, charges and
other encumbrances of any nature whatsoever (each, a "Lien"). As of the date of
this Agreement, none of Crescent or any Subsidiary has outstanding any bonds,
debentures, notes or other indebtedness of Crescent having the right to vote (or
convertible into, or
 
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exchangeable for, securities having the right to vote) on any matters on which
shareholders of Crescent may vote. As of the date of this Agreement, there are
no outstanding contractual obligations of Crescent or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of Crescent
or any of its Subsidiaries, except those pursuant to the UBS Forward Purchase
Agreement and the Merrill Lynch Swap Agreement. Exhibit 21 to the Annual Report
on Form 10-K of Crescent for the year ended December 31, 1996 (the "Crescent
Annual Report"), as filed with the Securities and Exchange Commission (the
"SEC"), is a true, accurate and correct statement in all material respects of
all the information that was required to be set forth therein by the rules and
regulations of the SEC.
 
     Section 2.3 Authority. The Board of Trust Managers of Crescent has approved
and adopted this Agreement, and (i) has authorized the filing of a registration
statement on Form S-4 with the SEC by Crescent under the Securities Act of 1933,
as amended (together with the rules and regulations promulgated thereunder, the
"Securities Act"), for the purpose of registering the Common Shares to be issued
in connection with the Merger as contemplated by this Agreement (together with
any amendments or supplements thereto, whether prior to or after the effective
date thereof, the "Registration Statement"), and (ii) has authorized the
purchase of Redeemable Preferred Stock of the Company in an amount not to exceed
$115,000,000. Crescent has all requisite power and authority to enter into this
Agreement and, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Crescent and the consummation by Crescent of
the transactions contemplated hereby have been duly authorized by all necessary
action on the part of Crescent. This Agreement has been duly executed and
delivered by Crescent and (assuming the valid authorization, execution and
delivery of this Agreement by the Company and the validity and binding effect of
this Agreement on the Company) constitutes the valid and binding obligation of
Crescent enforceable against it in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar law affecting the enforcement of creditors' rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
 
     Section 2.4 Consents and Approvals; No Violation. Assuming that all
consents, approvals, authorizations and other actions described in this Section
2.4 have been obtained and all filings and obligations described in this Section
2.4 have been made, the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, result in any violation of, or default or loss of a
material benefit (with or without notice or lapse of time, or both) under, or
give to others a right of termination, cancellation or acceleration of any
obligation under, or result in the creation of any lien upon any of the
properties, assets or operations of Crescent or any of its Subsidiaries under,
any provision of (i) the Declaration of Trust or Crescent Bylaws, as applicable,
(ii) any provision of the comparable charter or organizational documents of any
Subsidiary of Crescent, (iii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to Crescent or any of its Subsidiaries or (iv)
any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Crescent or any of its Subsidiaries or any of their respective
properties, assets or operations, other than, in the case of clauses (ii), (iii)
or (iv), any such violations, defaults, losses, rights or liens that,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Crescent, materially impair the ability of Crescent
to perform its obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby. No filing or registration with, or
authorization, consent or approval of, any domestic (federal or state), foreign
or supranational court, commission, governmental body, regulatory agency,
authority or tribunal (a "Governmental Entity") is required by or with respect
to Crescent or any of its Subsidiaries in connection with the execution and
delivery of this Agreement by Crescent or is necessary for the consummation of
the Merger and the other transactions contemplated by this Agreement, except (i)
in connection, or in compliance, with the provisions of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the Securities
Act and the Securities Exchange Act of 1934, as amended (together with the rules
and regulations promulgated thereunder, the "Exchange Act"), including, but not
limited to, the filing of any registration statements on Forms S-4 and S-8, (ii)
the filing of the Articles of Merger with the Secretary of State of the State of
Nevada and with the County Clerk of Tarrant County, Texas and appropriate
documents with the relevant authorities of other states in which Crescent or any
of its Subsidiaries are qualified to do business,
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(iii) such filings and consents as may be required under any environmental,
health or public or work safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or by the
transactions contemplated by this Agreement, (iv) such filings as may be
required in connection with the taxes described in Section 5.11, (v) applicable
requirements, if any, of, or filings with, state securities or "blue sky" laws
("Blue Sky Laws") and the NYSE, (vi) as may be required under foreign laws,
(vii) filings with and approvals by any regulatory authority with jurisdiction
over the Company's gaming operations required under any federal, state, local or
foreign statute, ordinance, rule, regulation, permit, consent, approval,
license, judgment, order, decree, injunction or other authorization governing or
relating to the current or contemplated casino and gaming and/or liquor
activities and operations of the Company, including the Nevada Gaming Control
Act and the rules and regulations promulgated thereunder, the Missouri Gaming
Law and the Missouri Riverboat Gambling Act and the respective rules and
regulations promulgated thereunder, and the Louisiana Video Draw Poker Devices
Control Act and the rules and regulations promulgated thereunder (collectively,
the "Gaming Laws"), (viii) such other consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
the laws of any foreign country in which the Company or any of its subsidiaries
conducts any business or owns any property or assets, and (ix) such other
consents, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect on Crescent,
materially impair the ability of Crescent to perform its respective obligations
hereunder or prevent the consummation of any of the transactions contemplated
hereby.
 
     Section 2.5 SEC Documents and Other Reports. Crescent has filed all
required documents with the SEC since January 1, 1996 (together with all other
filings by Crescent with the SEC since January 1, 1996, the "Crescent SEC
Documents"). As of their respective dates, the Crescent SEC Documents complied
in all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and, at the respective times they were filed,
none of the Crescent SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The consolidated financial statements
(including, in each case, any notes thereto) of Crescent included in the
Crescent SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto as of their respective dates of filing, were
prepared in accordance with generally accepted accounting principles (except, in
the case of the unaudited statements, as permitted by Regulation S-X of the SEC)
applied on a consistent basis during the period involved (except as may be
indicated therein or in the notes thereto) and fairly presented the consolidated
financial position of Crescent and its consolidated Subsidiaries as of the
respective dates thereof and the consolidated results of their operations and
their consolidated cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments and to any other
adjustments described therein). Except as disclosed in the Crescent SEC
Documents or as required by generally accepted accounting principles, Crescent
has not, since December 31, 1996, made any change in the accounting practices or
policies applied in the preparation of its financial statements.
 
     Section 2.6 Registration Statement and Proxy Statement. None of the
information to be supplied by Crescent for inclusion or incorporation by
reference in the Registration Statement or the proxy statement/prospectus
included therein (together with any amendments or supplements thereto, the
"Proxy Statement") relating to the Company Stockholder Meeting (as defined in
Section 5.1) will (i) in the case of the Registration Statement, at the time it
becomes effective and at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading or (ii) in
the case of the Proxy Statement, at the time of the mailing of the Proxy
Statement and at the time of the Stockholder Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. If at any time
prior to the Effective Time any event with respect to Crescent, its officers and
trust managers or any of its Subsidiaries shall occur that is required to be
described in the Proxy Statement or the Registration Statement, such event shall
be so described, and an appropriate amendment or supplement shall be promptly
filed with the SEC and, as required by law, disseminated to the stockholders of
the Company.
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     Section 2.7 Absence of Certain Changes or Events. Except as disclosed in
the Crescent SEC Documents filed prior to the date of this Agreement, since
December 31, 1996, (a) Crescent and its Subsidiaries have not sustained any loss
or interference with their business or properties from fire, flood, windstorm,
accident or other calamity (whether or not covered by insurance) that,
individually or in the aggregate, has had, or would reasonably be expected to
have, a Material Adverse Effect on Crescent, (b) there have not been any events,
changes or developments that, individually or in the aggregate, have had or
would reasonably be expected to have, a Material Adverse Effect on Crescent and
(c) there has not been any split, combination or reclassification of any of the
capital stock of Crescent or any issuance or the authorization of any issuance
of any other securities in respect of, in lieu of or in substitution for shares
of such capital stock, except as contemplated by this Agreement.
 
     Section 2.8 Permits and Compliance. Each of Crescent and its respective
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary for Crescent or any of
its Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "Crescent Permits"), except where the
failure to have any of the Crescent Permits, individually or in the aggregate,
has not had, and would not reasonably be expected to have, a Material Adverse
Effect on Crescent, and, as of the date of this Agreement, no suspension or
cancellation of any of the Crescent Permits is pending or, to the Knowledge of
Crescent (as hereinafter defined), threatened, except where the suspension or
cancellation of any of the Crescent Permits, individually or in the aggregate,
has not had, and would not reasonably be expected to have, a Material Adverse
Effect on Crescent. None of Crescent or any of its Subsidiaries is in violation
of (A) its respective declaration of trust, charter, by-laws or other
organizational documents, (B) any applicable law, ordinance, administrative or
governmental rule or regulation or (C) any order, decree or judgment of any
Governmental Entity having jurisdiction over Crescent or any of its
Subsidiaries, except, in the case of clauses (A), (B) and (C), for any
violations that, individually or in the aggregate, have not had, and would not
reasonably be expected to have a Material Adverse Effect on Crescent. Except as
disclosed in the Crescent SEC Documents filed prior to the date of this
Agreement, as of the date hereof, there is no contract or agreement that is
material to the business, properties, results of operations or financial
condition of Crescent and its Subsidiaries, taken as a whole. Except as set
forth in the Crescent SEC Documents, prior to the date of this Agreement, no
event of default or event that, but for the giving of notice or the lapse of
time or both, would constitute an event of default exists or, upon the
consummation by Crescent of the transactions contemplated by this Agreement,
will exist under any indenture, mortgage, loan agreement, note or other
agreement or instrument for borrowed money, any guarantee of any agreement or
instrument for borrowed money or any lease, license or other agreement or
instrument to which Crescent or any of its Subsidiaries is a party or by which
Crescent or any such Subsidiary is bound or to which any of the properties,
assets or operations of Crescent or any such Subsidiary is subject, other than
any defaults that, individually or in the aggregate, have not had, and would not
reasonably be expected to have, a Material Adverse Effect on Crescent. For
purposes of this Agreement, the term "Knowledge" when used with respect to
Crescent means the actual knowledge as of the date hereof and as of the
Effective Time of the individuals identified in Schedule 2.8.
 
     Section 2.9 Tax Matters. Except as otherwise set forth in a disclosure
letter making reference to this section, (i) Crescent and each of its
Subsidiaries have timely filed all federal, state, local, foreign and provincial
income and Franchise Tax Returns and all other material Tax Returns required to
have been filed or appropriate extensions therefor have been properly obtained,
and such Tax Returns are, true, correct and complete, except to the extent that
any failure to so file or any failure to be true, correct and complete,
individually or in the aggregate, has not had, and would not reasonably be
expected to have, a Material Adverse Effect on Crescent; (ii) all Taxes required
to have been paid by Crescent and each of its Subsidiaries have been timely paid
or extensions for payment have been property obtained, except to the extent that
any failure to pay any such Taxes or to properly obtain an extension for such
payment, individually or in the aggregate, has not held, and would not
reasonably be expected to have, a Material Adverse Effect on Crescent; (iii)
Crescent and each of its Subsidiaries have complied in all material respects
with all rules and regulations relating to the withholding of Taxes except to
the extent that any failure to comply with such rules and regulations,
individually or in the aggregate, has not had, and would not reasonably be
expected to have, a
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Material Adverse Effect on Crescent; (iv) none of Crescent or any of its
Subsidiaries has waived in writing any statute of limitations in respect of its
federal, state, local, foreign or provincial income or franchise Taxes and no
deficiency with respect to any Taxes has been proposed, asserted or assessed
against Crescent or any of its Subsidiaries, except to the extent that any such
waiver or deficiency, individually or in the aggregate, has not had, and would
not reasonably be expected to have, a Material Adverse Effect on Crescent; (v)
all Federal income Tax Returns referred to in clause (i) for all years through
1993 have been examined by and settled with the Internal Revenue Service or the
period for assessment of Taxes in respect of which such Tax returns were
required to be filed has expired; (vi) as of the date hereof and at the
Effective Time, no material issues that have been raised in writing by the
relevant taxing authority in connection with the examination of the Tax Returns
referred to in clause (i) are currently pending; (vii) all material deficiencies
asserted or material assessments made as a result of any examination of any Tax
Returns referred to in clause (i) by any taxing authority have been paid in
full; (viii) the most recent financial statements contained in the Crescent SEC
Documents reflect an adequate reserve for all Taxes payable by Crescent and its
Subsidiaries for all taxable periods and portions thereof through the date of
such financial statements; and (ix) there are no material liens for Taxes (other
than for current Taxes not yet due and payable) on the assets of Crescent or any
of its Subsidiaries. For purposes of this Agreement: (i) "Taxes" means any
federal, state, local, foreign or provincial income, gross receipts, property,
sales, use, license, excise, franchise, employment, payroll, withholding,
alternative or add on minimum, ad valorem, value-added, transfer or excise tax,
or other tax, custom, duty, governmental fee or other like assessment or charge
of any kind whatsoever, together with any interest or penalty imposed by any
Governmental Entity, and (ii) "Tax Return" means any return, report or similar
statement (including the attached schedules) required to be filed with respect
to any Tax, including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax.
 
     Section 2.10 Actions and Proceedings. Except as set forth in the Crescent
SEC Documents filed prior to the date of this Agreement, there are no
outstanding orders, judgments, injunctions, awards or decrees of any
Governmental Entity against or involving Crescent or any of its Subsidiaries, or
against or involving any of the trust managers, directors, officers or employees
of Crescent or any of its Subsidiaries, as such, any of its or their properties,
assets or business or any of the Crescent Stock Plans that, individually or in
the aggregate, have had, or would reasonably be expected to have, a Material
Adverse Effect on Crescent. As of the date of this Agreement, there are no
actions, suits or claims or legal, administrative or arbitrative proceedings or
investigations pending or, to the Knowledge of Crescent, threatened against or
involving Crescent or any of its Subsidiaries or any of its or their trust
managers, directors, officers or employees, as such, or any of its or their
properties, assets or business or any Crescent Stock Plan that, individually or
in the aggregate, have had, or would reasonably be expected to have, a Material
Adverse Effect on Crescent. As of the date hereof, there are no actions, suits,
labor disputes or other litigation, legal or administrative proceedings or
governmental investigations pending or, to the Knowledge of Crescent, threatened
against or affecting Crescent or any of its Subsidiaries or any of its or their
trust managers, directors, officers or employees, as such, or any of its or
their properties, assets or business relating to the transactions contemplated
by this Agreement.
 
     Section 2.11 Compliance with Worker Safety and Environmental Laws.
 
     (a) Except as otherwise set forth in a disclosure letter making reference
to this section, (i) the properties, assets and operations of Crescent and its
Subsidiaries are in compliance with all applicable federal, state, local,
regional and foreign laws, rules and regulations, orders, decrees, common law
judgments, permits and licenses relating to public and worker health and safety
(collectively, "Worker Safety Laws") and the protection, regulation and clean-up
of the indoor and outdoor environment and activities or conditions related
thereto, including, without limitation, those relating to the generation,
handling, disposal, transportation or release of hazardous or toxic materials,
substances, wastes, pollutants and contaminants including, without limitation,
asbestos, petroleum, radon and polychlorinated biphenyls (collectively,
"Environmental Laws"), except for any violation that, individually or in the
aggregate, has not had, or would not reasonably be expected to have, a Material
Adverse Effect on Crescent; and (ii) with respect to such properties, assets and
operations, including any previously owned, leased or operated properties,
assets or operations, as of the date hereof and at the Effective Time, there are
no past, present or reasonably anticipated future events, conditions,
circumstances, activities, practices, incidents, actions or plans of Crescent or
any of its Subsidiaries that may interfere with or
 
                                      B-11
<PAGE>   170
 
prevent compliance or continued compliance with applicable Worker Safety Laws
and Environmental Laws, other than any such interference or prevention that,
individually or in the aggregate, has not had, or would not reasonably be
expected to have, a Material Adverse Effect on Crescent.
 
     (b) (i) Crescent and its Subsidiaries have not caused or permitted any
property, asset, operation, including any previously owned property, asset or
operation, to use generate, manufacture, refine, transport, treat, store,
handle, dispose, transfer or process hazardous or toxic materials, substances,
wastes, pollutants or contaminants, except in material compliance with all
Environmental Laws and Worker Safety Laws, other than any such activity that,
individually or in the aggregate, has not had, and would not reasonably be
expected to have, a Material Adverse Effect on Crescent; (ii) Crescent and its
Subsidiaries have not reported to any Governmental Entity any material violation
of an Environmental Law or any release, discharge or emission of any hazardous
or toxic materials, substances, wastes, pollutants or contaminants, other than
any such violation, release, discharge or emission that, individually or in the
aggregate, has not had, and would not reasonably be expected to have, a Material
Adverse Effect on Crescent, and (iii) as of the date hereof and at the Effective
Time, Crescent has no Knowledge of any pending, threatened or anticipated claims
or liabilities under CERCLA, 42 U.S.C. sec. 9601 et seq., RCRA, 42 U.S.C. sec.
6901 et seq., or equivalent state law provisions and no Knowledge that any
current or former property, asset or operation is identified or currently
proposed for the National Priorities List at 40 CFR sec. 300, Appendix B, or the
CERCLIS or equivalent state lists or hazardous substances release sites, other
than with respect to Crescent's Poydras property.
 
     Section 2.12 Liabilities. Except as set forth in the Crescent SEC Documents
filed prior to the date hereof, Crescent and its Subsidiaries have no
liabilities, absolute or contingent, other than liabilities that, individually
or in the aggregate, have not had, and would not reasonably be expected to have,
a Material Adverse Effect on Crescent.
 
     Section 2.13 Intellectual Property. Crescent and its Subsidiaries own or
have the right to use all patents, patent rights, trademarks, trade names,
service marks, trade secrets, copyrights and other proprietary intellectual
property rights (collectively, "Intellectual Property Rights") as are necessary
in connection with the business of Crescent and its Subsidiaries, taken as a
whole, except where the failure to have such Intellectual Property Rights,
individually or in the aggregate, has not had, and would not reasonably be
expected to have, a Material Adverse Effect on Crescent. Neither Crescent nor
any of its Subsidiaries has infringed any Intellectual Property Rights of any
third party other than any infringements that, individually or in the aggregate,
have not had, and would not reasonably be expected to have, a Material Adverse
Effect on Crescent.
 
     Section 2.14 No Required Vote of Crescent Shareholders. No vote of the
shareholders of Crescent is required by law, the organizational documents of
Crescent or otherwise in order for Crescent to consummate the Merger and the
transactions contemplated hereby.
 
     Section 2.15 REIT Status. Crescent is a "real estate investment trust" for
federal income tax purposes. The consummation of the transactions contemplated
by this Agreement will not cause Crescent to cease to qualify as a "real estate
investment trust" for federal income tax purposes.
 
     Section 2.16 Brokers. No broker, investment banker or other person is
entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Crescent.
 
     Section 2.17 ERISA.
 
     (a) Except as would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Crescent, nor any of its ERISA
Affiliates (as hereinafter defined) has withdrawn from any Company Multiemployer
Plan (as hereinafter defined) at any time within the past six years or
instituted, or is currently considering taking, any action to do so.
 
     (b) There has been no failure to make any contribution or pay any amount
due to any Crescent Plan as required by Section 412 of the Code, Section 302 of
ERISA, or the terms of any such Plan, and no Crescent
 
                                      B-12
<PAGE>   171
 
Plan, nor any trust created thereunder, has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not waived.
 
     (c) As of the date hereof and at the Effective Time, neither Crescent nor
any of its ERISA Affiliates has been notified by any Crescent Multiemployer Plan
that such Crescent Multiemployer Plan is currently in reorganization or
insolvency under and within the meaning of Section 4241 or 4245 of ERISA or that
such Crescent Multiemployer Plan intends to terminate or has been terminated
under Section 4041A of ERISA. As of the date hereof and at the Effective Time,
neither the Company nor any of its ERISA Affiliates has any liability or
obligation under any welfare plan to provide life insurance or medical benefits
after termination of employment to any employee or dependent other than as
required by (i) Part 6 of Title I of ERISA or (ii) the laws of a jurisdiction
outside the United States.
 
     (d) As used herein, (i) "Crescent Plan" means a "pension plan" (as defined
in Section 3(2) of ERISA (other than a Crescent Multiemployer Plan)), a "welfare
plan" (as defined in Section 3(1) of ERISA), or any material bonus, profit
sharing, deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, vacation, severance, death benefit,
insurance or other plan, arrangement or understanding, in each case established
or maintained or contributed to by Crescent or any of its ERISA Affiliates or as
to which Crescent or any of its ERISA Affiliates otherwise may have any
liability, (ii) "Crescent Multiemployer Plan" means a "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA) to which Crescent or any of its ERISA
Affiliates is or has been obligated to contribute or otherwise may have any
liability.
 
                                  ARTICLE III
 
                 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
 
     The Company represents and warrants to Crescent as follows:
 
     Section 3.1 Organization, Standing and Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada and has the requisite corporate power and authority to carry on
its business as now being conducted. Each Subsidiary of the Company is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate (in the
case of a Subsidiary that is a corporation) or other power and authority to
carry on its business as now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power or authority,
individually or in the aggregate, has not had, and would not reasonably be
expected to have, a Material Adverse Effect on the Company. The Company and each
of its Subsidiaries are duly qualified to do business, and are in good standing,
in each jurisdiction where the character of their properties owned or held under
lease or the nature of their activities makes such qualification necessary,
except where the failure to be so qualified, individually or in the aggregate,
has not had, and would not reasonably be expected to have, a Material Adverse
Effect on the Company.
 
     Section 3.2 Capital Structure. At the date hereof, the authorized capital
stock of the Company consists of 90,000,000 shares of Company Common Stock, and
5,000,000 shares of Preferred Stock, $.01 par value per share ("Company
Preferred Stock"). At the close of business on January 16, 1998, (i) 35,306,657
shares of Company Common Stock (and associated Rights) were issued and
outstanding, (ii) 2,070,000 shares of Convertible Preferred Stock were issued
and outstanding, (iii) no shares of Company Common Stock were held in the
treasury of the Company or by its Subsidiaries, (iv) 6,307,000 shares of Company
Common Stock were reserved for issuance pursuant to the Company Stock
Compensation Program, as amended, options to purchase 5,485,743 shares of
Company Common Stock had been issued and were outstanding pursuant to such Stock
Compensation Program, (v) 1,000,000 shares of Company Common Stock were reserved
for issuance pursuant to the Company's 401(k) Plan, dated as of October 14,
1993, as amended, and as of December 31, 1997, no shares of Company Common Stock
had been issued and were outstanding pursuant to such 401(k) Plan, (vi)
6,742,671 shares of Company Common Stock were reserved for issuance pursuant to
the Certificate of Designation, and (vi) no shares of Company Common Stock were
reserved in connection with the Rights Agreement dated October 6, 1997 (the
"Rights Agreement") between the Company and
 
                                      B-13
<PAGE>   172
 
Continental Stock Transfer & Trust Company pursuant to which the Company
declared a dividend on October 6, 1997 of one preferred share purchase right (a
"Right") for each outstanding share of Company Common Stock. Except as set forth
above, at the close of business on January 16, 1998, no shares of capital stock
or other voting securities of the Company were issued, reserved for issuance or
outstanding. All the outstanding shares of Company Common Stock were validly
issued, fully paid and nonassessable and free of preemptive rights. Except as
otherwise set forth in a disclosure letter making reference to this section,
there are no options, warrants, calls, rights or agreements to which the Company
or any of its Subsidiaries is a party or by which any of them is bound
obligating the Company or any of its Subsidiaries to issue, deliver, or sell, or
cause to be issued, delivered or sold, additional shares of capital stock of the
Company or any of its Subsidiaries or obligating the Company or any of its
Subsidiaries to grant, extend or enter into any such option, warrant, call,
right or agreement. Except as otherwise set forth in a disclosure letter making
reference to this section, each outstanding share of capital stock of each
Subsidiary of the Company that is a corporation is duly authorized, validly
issued, fully paid and nonassessable and, except as disclosed in the Company SEC
Documents (as defined in Section 3.5) filed prior to the date of this Agreement,
each such share that is owned by the Company or another Subsidiary of the
Company, is owned free and clear of all Liens. As of the date of this Agreement,
the Company does not have outstanding any bonds, debentures, notes or other
indebtedness of the Company having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
stockholders of the Company may vote. Except as otherwise set forth in a
disclosure letter making reference to this section, there are no outstanding
contractual obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock of the Company or any of
its Subsidiaries. Exhibit 21 to the Company's Annual Report on Form 10-K for the
year ended March 31, 1997, as filed with the SEC (the "Company Annual Report"),
is a true, accurate and correct statement in all material respects of all the
information required to be set forth therein by the rules and regulations of the
SEC.
 
     Section 3.3 Authority. The Board of Directors of the Company (i) has
unanimously approved and adopted this Agreement, (ii) has resolved to recommend
the approval of this Agreement by the Company's stockholders and has directed
that this Agreement be submitted to the Company's stockholders for approval,
(iii) has adopted amendments to the Company's Stock Compensation Program
providing that a Company employee's options shall not terminate if, in
connection with the Merger, the employee becomes employed by an entity other
than the Company, (iv) has approved the modification of the vesting schedule for
the options granted under the Company's Stock Compensation Program on September
29, 1997 to provide that such options will vest in equal installment amounts
over five years; and (v) has directed the filing of the Proxy Statement with the
SEC. The Company has all requisite corporate power and authority to enter into
this Agreement and, subject to approval by the stockholders of the Company of
this Agreement, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of the Company, subject to approval
of this Agreement by the stockholders of the Company. This Agreement has been
duly executed and delivered by the Company and (assuming the valid
authorization, execution and delivery of this Agreement by Crescent and the
validity and binding effect of this Agreement on Crescent) constitutes the valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar law
affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law.
 
     Section 3.4 Consents and Approvals; No Violation. Assuming that all
consents, approvals, authorizations and other actions described in this Section
3.4 or set forth in a disclosure letter making reference to this section, have
been obtained and all filings and obligations described in this Section 3.4 have
been made, the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, result in any violation of, or default or the loss
of a material benefit (with or without notice or lapse of time, or both) under,
or give to others a right of termination, cancellation or acceleration of any
obligation under, or result in the creation of any Lien, upon any of the
properties, assets or operations of the Company or any of its Subsidiaries under
any provision of
                                      B-14
<PAGE>   173
 
(i) the Amended and Restated Articles of Incorporation of the Company (the
"Articles of Incorporation"), or the Restated Bylaws of the Company, as amended
(the "Company Bylaws"), (ii) any provision of the comparable charter or
organization documents of any Subsidiary of the Company, (iii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to the Company
or any of its Subsidiaries or (iv) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries or any of their respective properties, assets or operations, other
than, in the case of clauses (ii), (iii) or (iv), any such violations, defaults,
losses, rights or liens that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on the Company,
materially impair the ability of the Company to perform its obligations
hereunder or prevent the consummation of any of the transactions contemplated
hereby. Except as set forth in a disclosure letter making reference to this
section, no filing or registration with, or authorization, consent or approval
of, any Governmental Entity or any other person is required by or with respect
to the Company or any of its Subsidiaries in connection with the execution and
delivery of this Agreement by the Company or is necessary for the consummation
of the Merger and the other transactions contemplated by this Agreement, except
(i) in connection, or in compliance, with the provisions of the HSR Act, the
Securities Act and the Exchange Act, (ii) in connection, or in compliance, with
the provisions of the Articles of Merger with the Secretary of State of the
State of Nevada and with the County Clerk of Tarrant County, Texas and
appropriate documents with the relevant authorities of other states in which the
Company or any of its Subsidiaries is qualified to do business, (iii) such
filings and consents as may be required under any environmental, health or
public or worker safety law or regulation pertaining to any notification,
disclosure or required approval triggered by the Merger or by the transactions
contemplated by this Agreement, (iv) such filings as may be required in
connection with the taxes described in Section 5.11, (v) applicable
requirements, if any, of Blue Sky Laws and the NYSE, (vi) as may be required
under foreign laws, (vii) filings with and approvals, consents, findings of
suitability, registrations, licenses, permits, orders and authorizations in
respect of the Gaming Laws, (viii) for the requisite approval by the vote of the
holders of the Company Common Stock and Convertible Preferred Stock in
accordance with applicable law and the Articles of Incorporation and Bylaws of
the Company, and (viii) such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made, individually or in the aggregate, would not reasonably be expected to have
a Material Adverse Effect on the Company, materially impair the ability of the
Company to perform its obligations hereunder or prevent the consummation of any
of the transactions contemplated hereby.
 
     Section 3.5 SEC Documents and Other Reports. The Company has filed all
required documents with the SEC since March 31, 1996 (together with all other
filings by the Company with the SEC since March 31, 1996, the "Company SEC
Document"). As of their respective dates, the Company SEC Documents complied in
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and, at the respective times they were filed,
none of the Company SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The consolidated financial statements
(including, in each case, any notes thereto) of the Company included in the
Company SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto as of their respective dates of filing, were
prepared in accordance with generally accepted accounting principles (except, in
the case of the unaudited statements, as permitted by Regulation S-X of the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto) and fairly presented the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
respective dates thereof and the consolidated results of operations and their
consolidated cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments and to any other
adjustments described therein). Except as disclosed in the Company SEC Documents
or as required by generally accepted accounting principles, the Company has not,
since March 31, 1997, made any change in the accounting practices or policies
applied in the preparation of its financial statements.
 
     Section 3.6 Registration Statement and Proxy Statement. Except as
contemplated by the next sentence, none of the information to be supplied by the
Company for inclusion or incorporation by reference in the
                                      B-15
<PAGE>   174
 
Registration Statement or the Proxy Statement will (i) in the case of the
Registration Statement, at the time it becomes effective and at the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading or (ii) in the case of the Proxy Statement, at
the time of the mailing of the Proxy Statement and at the time of the Company
Stockholder Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. If at any time prior to the Effective Time any event with
respect to the Company, its officers and directors or any of its Subsidiaries
shall occur that is required to be described in the Proxy Statement or the
Registration Statement, such event shall be so described, and an appropriate
amendment or supplement shall be promptly filed with the SEC and, as required by
law.
 
     Section 3.7 Absence of Certain Changes or Events. Except as disclosed in
this Agreement, as set forth in a disclosure letter making reference to this
section or in the Company SEC Documents filed prior to the date of this
Agreement, since March 31, 1997, (a) the Company and its Subsidiaries have not
sustained any loss or interference with their business or properties from fire,
flood, windstorm, accident or other calamity (whether or not covered by
insurance) that, individually or in the aggregate, has had, or would reasonably
be expected to have, a Material Adverse Effect on the Company and (b)(i) there
has been no change in the capital stock of the Company (except for the issuance
of shares of the Company Common Stock pursuant to Company Plans) and no dividend
or distribution of any kind declared, paid or made by the Company on any class
of its stock (except for dividends declared and paid on the Convertible
Preferred Stock or the Redeemable Preferred Stock in the ordinary course of
business and consistent with past practice) and (ii) there have not been any
events, changes or developments that, individually or in the aggregate, have had
or would reasonably be expected to have a Material Adverse Effect on the
Company. The aggregate amount of indebtedness of the Company and its
Subsidiaries as of September 30, 1997, is set forth in Schedule 3.7.
 
     Section 3.8 Permits and Compliance. Except as set forth in a disclosure
letter making reference to this section, each of the Company and its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary for the Company or any
of its Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "Company Permits"), except where the
failure to have any of the Company Permits, individually or in the aggregate,
has not had, and would not reasonably be expected to have, a Material Adverse
Effect on the Company, and, as of the date of this Agreement, no suspension or
cancellation of any of the Company Permits is pending or, to the Knowledge of
the Company (as hereinafter defined), threatened, except where the suspension or
cancellation of any of the Company Permits, individually or in the aggregate,
has not had, and would not reasonably be expected to have, a Material Adverse
Effect on the Company. Neither the Company nor any of its Subsidiaries is in
violation of (A) its charter, by-laws or other organizational documents, (B) any
applicable law, ordinance, administrative or governmental rule or regulation or
(C) any order, decree or judgment of any Governmental Entity having jurisdiction
over the Company or any of its Subsidiaries, except, in the case of clauses (A),
(B) and (C), for any violations that, individually or in the aggregate, has not
had, and would not reasonably be expected to have, a Material Adverse Effect on
the Company. Except as disclosed in the Company SEC Documents filed prior to the
date of this Agreement or as set forth in a disclosure letter making reference
to this section, as of the date hereof, there is no contract or agreement that
is material to the business, properties, results of operations or financial
condition of the Company and its Subsidiaries, taken as a whole. Except as set
forth in the Company SEC Documents or in a disclosure letter making reference to
this section, prior to the date of this Agreement, no event of default or event
that, but for the giving of notice or the lapse of time or both, would
constitute an event of default exists or, upon the consummation by the Company
of the transactions contemplated by this Agreement, will exist under any
indenture, mortgage, loan agreement, note or other agreement or instrument for
borrowed money, any guarantee of any agreement or instrument for borrowed money
or any lease, license or other agreement or instrument to which the Company or
any of its Subsidiaries is a party or by which the Company or any such
Subsidiary is bound or to which any of the properties, assets or operations of
the Company or any such Subsidiary is subject, other than any defaults that,
individually or in the aggregate, have not had, and would not reasonably be
expected to have, a Material
                                      B-16
<PAGE>   175
 
Adverse Effect on the Company. For purposes of this Agreement, the term
"Knowledge" when used with respect to the Company means the actual knowledge as
of the date hereof and at the Effective Time of the individuals identified in
Schedule 3.8.
 
     Section 3.9 Tax Matters. Except as otherwise set forth in a disclosure
letter making reference to this section, (i) the Company and each of its
Subsidiaries have timely filed all federal, state, local, foreign and provincial
income and franchise Tax Returns and all other material Tax Returns required to
have been filed or appropriate extensions therefor have been properly obtained,
and such Tax Returns are true, correct and complete, except to the extent that
any failure to so file or any failure to be true, correct and complete,
individually or in the aggregate, has not had, and would not reasonably be
expected to have, a Material Adverse Effect on the Company; (ii) all Taxes
required to have been paid by the Company and each of its Subsidiaries have been
timely paid or extensions for payment have been properly obtained, except to the
extent that any failure to pay any such Taxes or to properly obtain an extension
for such payment, individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect on the Company; (iii)
the Company and each of its Subsidiaries have complied in all material respects
with all rules and regulations relating to the withholding of Taxes except to
the extent that any failure to comply with such rules and regulations,
individually or in the aggregate, has not had, and would not reasonably be
expected to have, a Material Adverse Effect on the Company; (iv) neither the
Company nor any of its Subsidiaries has waived in writing any statute of
limitations in respect of its federal, state, local, foreign or provincial
income or franchise Taxes and no deficiency with respect to any Taxes has been
proposed, asserted or assessed against the Company or any of its Subsidiaries,
except the extent that any such waiver or deficiency, individually or in the
aggregate has not had, and would not reasonably be expected to have, a Material
Adverse Effect on the Company; (v) all federal income Tax Returns referred to in
clause (i) for all years through May 31, 1993 have been examined by and settled
with the Internal Revenue Service or the period for assessment of the Taxes in
respect of which such Tax Returns were required to be filed has expired; (vi) as
of the date hereof and at the Effective Time, no material issues that have been
raised in writing by the relevant taxing authority in connection with the
examination of the Tax Returns referred to in clause (i) are currently pending;
and (vii) all material deficiencies asserted or material assessments made as a
result of any examination of any Tax Returns referred to in clause (i) by any
taxing authority have been paid in full; (viii) the most recent financial
statements contained in the Company SEC Documents reflect an adequate reserve
for all Taxes payable by the Company and its Subsidiaries for all taxable
periods and portions thereof through the date of such financial statements; and
(ix) there are no material liens for Taxes (other than for current Taxes not yet
due and payable) on the assets of the Company or any of its Subsidiaries.
 
     Section 3.10 Actions and Proceedings. Except as set forth in the Company
SEC Documents filed prior to the date of this Agreement or as set forth in a
disclosure letter making reference to this section, there are no outstanding
orders, judgments, injunctions, awards or decrees of any Governmental Entity
against or involving the Company or any of its Subsidiaries, or against or
involving any of the directors, officers or employees of the Company or any of
its Subsidiaries, as such, any of its or their properties, assets for business
or any Company Plan (as hereinafter defined) that, individually or in the
aggregate, have had, or would reasonably be expected to have, a Material Adverse
Effect on the Company. Except as otherwise set forth in a disclosure letter
making reference to this section, as of the date of this Agreement, there are no
actions, suits, labor disputes or claims or legal, administrative or arbitrative
proceedings or investigations pending or, to the Knowledge of the Company,
threatened against or involving the Company or any of its Subsidiaries or any of
its or their directors, officers or employees as such, or any of its or their
properties, assets or business or any Company Plan that, individually or in the
aggregate, have had, or would reasonably be expected to have, a Material Adverse
Effect on the Company. Except as otherwise set forth in a disclosure letter
making reference to this section, as of the date hereof, there are no actions,
suits, labor disputes or other litigation, legal or administrative proceedings
or governmental investigations pending or, to the Knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries or any of
its or their officers, directors or employees, as such, or any of its or their
properties, assets or business relating to the transactions contemplated by this
Agreement.
 
                                      B-17
<PAGE>   176
 
     Section 3.11 Certain Agreements. Except as otherwise set forth in a
disclosure letter making reference to this section, neither the Company nor any
of its Subsidiaries is a party to any oral or written agreement or plan,
including any stock option plan, stock appreciation rights plan, restricted
stock plan or stock purchase plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. Subject to Section 5.8 and except as set forth
in a disclosure letter making reference to this section, no holder of any option
to purchase shares of Company Common Stock or Company Preferred Stock, or shares
of Company Common Stock or Company Preferred Stock granted in connection with
the performance of services for the Company or its Subsidiaries, is or will be
entitled to receive cash from the Company or any Subsidiary in lieu of or in
exchange for such option or shares as a result of the transactions contemplated
by this Agreement.
 
     Section 3.12 ERISA.
 
     (a) Schedule 3.12(a) contains a list of each Company Plan (as hereinafter
defined) maintained by the Company and each material Company Plan maintained by
a Subsidiary of the Company. To the extent applicable, with respect to each
Company Plan, the Company has made, or will as soon as practicable after the
date hereof, make available to Crescent a true and correct copy of (i) the most
recent annual report (Form 5500) filed with the IRS, (ii) such Company Plan and
all amendments thereto, (iii) each trust agreement, insurance contract or
administration agreement relating to such Company Plan, (iv) the most recent
summary plan description for each Company Plan for which a summary plan
description is required, (v) the most recent actuarial report or valuation
relating to a Company Plan subject to Title IV of ERISA, (vi) the most recent
determination letter, if any, issued by the IRS with respect to any Company Plan
intended to be qualified under section 401(a) of the Code, (vii) any request for
a determination currently pending before the IRS and (viii) all correspondence
with the IRS, the Department of Labor or the Pension Benefit Guaranty
Corporation relating to any outstanding controversy. Except as would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company, (i) each Company Plan complies with ERISA, the
Code and all other applicable statutes and governmental rules and regulations,
(ii) no "reportable event" (within the meaning of Section 4043 of ERISA) has
occurred within the past three years with respect to any Company Plan which is
likely to result in liability to the Company, (iii) neither the Company nor any
of its ERISA Affiliates (as hereinafter defined) has withdrawn from any Company
Multiemployer Plan (as hereinafter defined) at any time within the past six
years or instituted, or is currently considering taking, any action to do so,
and (iv) no action has been taken, or is currently being considered, to
terminate any Company Plan subject to Title IV of ERISA.
 
     (b) There has been no failure to make any contribution or pay any amount
due to any Company Plan as required by Section 412 of the Code, Section 302 of
ERISA, or the terms of any such Plan, and no Company Plan, nor any trust created
thereunder, has incurred any "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived.
 
     (c) As of the date hereof and at the Effective Time, with respect to the
Company Plans, no event has occurred and, to the Knowledge of the Company, there
exists no condition or set of circumstances in connection with which the Company
or any ERISA Affiliate would be subject to any liability under the terms of such
Company Plans, ERISA, the Code or any other applicable law which has had, or
would reasonably be expected to have, a Material Adverse Effect on the Company.
All Company Plans that are intended to be qualified under Section 401(a) of the
Code have been determined by the IRS to be so qualified, or a timely application
for such determination is now pending or will be filed on a timely basis and, to
the Knowledge of the Company, there is no reason why any Company Plan is not so
qualified in operation. As of the date hereof and at the Effective Time, neither
the Company nor any of its ERISA Affiliates has been notified by any Company
Multiemployer Plan that such Company Multiemployer Plan is currently in
reorganization or insolvency under and within the meaning of Section 4241 or
4245 of ERISA or that such Company Multiemployer Plan intends to terminate or
has been terminated under Section 4041A of ERISA. As of the date hereof and at
the Effective Time, neither the Company nor any of its ERISA Affiliates has any
liability or
                                      B-18
<PAGE>   177
 
obligation under any welfare plan to provide life insurance or medical benefits
after termination of employment to any employee or dependent other than as
required by (i) Part 6 of Title I of ERISA or (ii) the laws of a jurisdiction
outside the United States.
 
     (d) As used herein, (i) "Company Plan" means a "pension plan" (as defined
in Section 3(2) of ERISA (other than a Company Multiemployer Plan)), a "welfare
plan" (as defined in Section 3(1) of ERISA), or any material bonus, profit
sharing, deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, vacation, severance, death benefit,
insurance or other plan, arrangement or understanding, in each case established
or maintained or contributed to by the Company or any of its ERISA Affiliates or
as to which the Company or any of its ERISA Affiliates otherwise may have any
liability, (ii) "Company Multiemployer Plan" means a "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA) to which the Company or any of its ERISA
Affiliates is or has been obligated to contribute or otherwise may have any
liability, and (iii) with respect to any person, "ERISA Affiliate" means any
trade or business (whether or not incorporated) which is under common control or
would be considered a single employer with such person pursuant to Section
414(b), (c), (m) or (o) of the Code and the regulations promulgated under those
sections or pursuant to Section 4001(b) of ERISA and the regulations promulgated
thereunder.
 
     (e) Schedule 3.12(e) contains a list, as of the date of this Agreement, of
all (i) severance and employment agreements with officers of the Company and
each ERISA Affiliate, (ii) severance programs and related formal policies of the
Company with or relating to its employees and (iii) plans, programs, agreements
and other arrangements of the Company with or relating to its employees which
contain change of control or similar provisions, in each case involving a
severance or employment agreement or arrangement with an individual officer or
employee, only to the extent such agreement or arrangement provides for minimum
annual payments in excess of $150,000. The Company has provided to Crescent a
true and complete copy of each of the foregoing.
 
     (f) Except as otherwise set forth in a disclosure letter making reference
to this section, all compensation issued pursuant to the Stock Plans is
"qualified performance based compensation" and is deductible under section
162(m) of the Code.
 
     Section 3.13 Compliance with Worker Safety and Environmental Laws.
 
     (a) Except as otherwise set forth in a disclosure letter making reference
to this section, (i) the properties, assets and operations of the Company and
its Subsidiaries are in compliance with all applicable federal, state, local,
regional and foreign laws, rules and regulations, orders, decrees, common law,
judgments, permits and licenses relating to public and worker health and safety
(collectively, "Worker Safety Laws") and the protection, regulation and clean-up
of the indoor and outdoor environment and activities or conditions related
thereto, including, without limitation, those relating to the generation,
handling, disposal, transportation or release of hazardous or toxic materials,
substances, wastes, pollutants and contaminants including, without limitation,
asbestos, petroleum, radon and polychlorinated biphenyls (collectively,
"Environmental Laws"), except for any violations that, individually or in the
aggregate, have not had, and would not reasonably be expected to have, a
Material Adverse Effect on the Company; and (ii) with respect to such
properties, assets and operations, including any previously owned, leased or
operated properties, assets or operations, as of the date hereof and at the
Effective Time, there are no past, present or reasonably anticipated future
events, conditions, circumstances, activities, practices, incidents, actions or
plans of the Company or any of its Subsidiaries that may interfere with or
prevent compliance or continued compliance with applicable Worker Safety Laws
and Environmental Laws, other than any such interference or prevention that,
individually or in the aggregate, has not had, and would not reasonably be
expected to have, a Material Adverse Effect on the Company.
 
     (b) Except as set forth in a disclosure letter making reference to this
section, (i) the Company and its Subsidiaries have not caused or permitted any
property, asset, operation, including any previously owned property, asset or
operation, to use, generate, manufacture, refine, transport, treat, store,
handle, dispose, transfer or process hazardous or toxic materials, substances,
wastes, pollutants or contaminants, except in material compliance with all
Environmental Laws and Worker Safety Laws, other than any such activity that,
                                      B-19
<PAGE>   178
 
individually or in the aggregate, has not had, and would not reasonably be
expected to have, a Material Adverse Effect on the Company; (ii) the Company and
its Subsidiaries have not reported to any Governmental Entity any material
violation of an Environmental Law or any release, discharge or emission of any
hazardous or toxic materials, substances, wastes, pollutants or contaminants,
other than any such violation, release, discharge or emission that, individually
or in the aggregate, has not had, and would not reasonably be expected to have,
a Material Adverse Effect on the Company, and (iii) as of the date hereof and at
the Effective Time, the Company has no knowledge of any pending, threatened or
anticipated claims or liabilities under CERCLA, 42 U.S.C. sec. 9601 et seq.,
RCRA, 42 U.S.C. sec. 6901 et seq., or equivalent state law provisions and no
knowledge that any current or former property, asset or operation is identified
or currently proposed for the National Priorities List at 40 CFR sec. 300,
appendix B, or the CERCLIS or equivalent state lists or hazardous substances
release sites.
 
     Section 3.14 Liabilities. Except as otherwise set forth in a disclosure
letter making reference to this section or reserved against in the balance sheet
of the Company set forth in its Annual Report on Form 10-K for the fiscal year
ended March 31, 1997, as of the date hereof and as of the Effective Time, the
Company and its Subsidiaries have no liabilities, absolute or contingent, other
than liabilities that, individually or in the aggregate, have not had, and would
not reasonably be expected to have, a Material Adverse Effect on the Company.
 
     Section 3.15 Intellectual Property. Except as set forth in a disclosure
letter making reference to this section, the Company and its Subsidiaries own or
have the right to use all Intellectual Property Rights as are necessary in
connection with the business of the Company and its Subsidiaries, taken as a
whole, except where the failure to have such Intellectual Property Rights,
individually or in the aggregate, has not had, and would not reasonably be
expected to have, a Material Adverse Effect on the Company. Neither the Company
nor any of its Subsidiaries has infringed any Intellectual Property Rights of
any third party other than any infringements that, individually or in the
aggregate, have not had, and would not reasonably be expected to have, a
Material Adverse Effect on the Company. The Company has provided to Crescent in
a disclosure letter making reference to this section a list of all of its
Intellectual Property Rights material to the conduct of its business.
 
     Section 3.16 Rights Agreement. The Company has taken all necessary action
to (i) render the Rights inapplicable to the Merger and the other transactions
contemplated by this Agreement and (ii) ensure that (y) neither Crescent nor any
of its affiliates is an Acquiring Person (as defined in the Rights Agreement)
and (z) a Distribution Date (as defined in the Rights Agreement) does not occur
by reason of the announcement or consummation of the Merger or the consummation
of any of the other transactions contemplated by this Agreement.
 
     Section 3.17 Parachute Payments to Disqualified Individuals. Except as set
forth in a disclosure letter making reference to this section, there will be no
"excess parachute payments" (as such term is defined in Section 280G(a) of the
Code) payable to employees of the Company and its Subsidiaries who are
"disqualified individuals" under Section 280G of the Code, whether or not such
employee's employment is terminated in connection with the transactions
contemplated under this Agreement.
 
     Section 3.18 State Takeover Statutes. The Board of Directors of the Company
has, to the extent such statutes are applicable, taken (or, with respect to
Sections 78.378 to 78.3793 and Sections 78.411 to 78.444 of the NGCL, will take
prior to the Effective Time) all action necessary to exempt Crescent, its
Subsidiaries and affiliates, the Merger, this Agreement and the transactions
contemplated hereby from Sections 78.378 to 78.3793 and Sections 78.411 to
78.444 of the NGCL, or to satisfy the requirements thereof. To the Knowledge of
the Company, no other state takeover statutes are applicable to the Merger, this
Agreement or the transactions contemplated hereby.
 
     Section 3.19 Required Vote of Company Stockholders. The affirmative vote of
the holders of 66 2/3% of the outstanding shares of Company Common Stock and
66 2/3% of the outstanding shares of Company Preferred Stock is required to
approve this Agreement. No other vote of the stockholders of the Company is
required by law, the Articles of Incorporation or the Company Bylaws or
otherwise in order for the Company to consummate the Merger and the transactions
contemplated hereby.
                                      B-20
<PAGE>   179
 
     Section 3.20 Brokers. No broker, investment banker or other person, other
than Salomon Smith Barney, the fees and expenses of which will be paid by the
Company (as reflected in agreements between such firms and the Company, copies
of which have been furnished to Crescent), is entitled to any broker's finder's
or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company.
 
     Section 3.21 Labor Matters.
 
     (a) As of the date hereof and at the Effective Time, neither the Company
nor any of its Subsidiaries is a party to or otherwise bound by any collective
bargaining agreement, contract or other agreement or understanding with a labor
union or labor organization, nor is the Company or any of its Subsidiaries the
subject of any material proceeding asserting that the Company or any of its
Subsidiaries has committed an unfair labor practice or seeking to compel it to
bargain with any labor union or labor organization.
 
     (b) As of the date hereof and at the Effective Time, there are no pending
or, to the Knowledge of the Company, threatened, nor has there been for the past
five years, any labor strike, dispute, walk-out, work stoppage, slow-down or
lockout involving the Company or any of its Subsidiaries that, individually or
in the aggregate, have not had, and would not reasonably be expected to have, a
Material Adverse Effect on the Company.
 
     Section 3.22 Title. The Company and its Subsidiaries have good and valid
title to or, in the case of leased properties, a good and valid leasehold
interest in, all of the assets which they purports to own or lease, including
all assets (real, personal or mixed, tangible or intangible) reflected in the
September 30, 1997 consolidated financial statements of the Company, or acquired
by the Company thereafter, except those assets disposed of in the ordinary
course of business after September 30, 1997, and the title to each such property
and asset is free and clear of any title defects, objections, liens, mortgages,
security interests, pledges, charges and encumbrances, adverse claims, equities
or other adverse interests of any kind including without limitation, leases,
chattel mortgages, conditional sales contracts, collateral security arrangements
and other title or interest retention arrangements (collectively,
"Encumbrances"), except (i) any lien for taxes or other governmental charges not
yet delinquent, or the validity of which is being contested in good faith by
appropriate proceedings and as to which adequate reserves have been established
by the Company, (ii) any Encumbrances reflected on the financial statements
contained in the Company SEC Documents, with such changes in the amount thereof
as may have occurred since September 30, 1997 in the ordinary course of business
and which changes will not materially reduce the aggregate value of the property
and assets held by the Company or its Subsidiaries, (iii) such other
imperfections of title or Encumbrances which, as of the Effective Time, will not
materially reduce the aggregate value of the property and assets of the Company
or its Subsidiaries, and (iv) any Encumbrances or other matters identified in a
disclosure letter delivered to Crescent pursuant to this Agreement.
 
     Section 3.23 Leases. All leases of real or personal property having a term
of one year or more and with aggregate remaining lease payments due of $50,000
or more to which the Company and/or its Subsidiaries are a party are in good
standing, valid and effective in accordance with their respective terms, and
there is not under any of such leases any existing default or event of default
(or event which with notice or lapse of time, or both, would constitute a
default and in respect of which the Company has not taken adequate steps to
prevent a default from occurring) that would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company,
materially impair the ability of the Company to perform its obligations
hereunder or prevent the consummation of any of the transactions contemplated
hereby.
 
                                      B-21
<PAGE>   180
 
                                   ARTICLE IV
 
                   COVENANTS RELATING TO CONDUCT OF BUSINESS
 
     Section 4.1 Conduct of Business by the Company Pending the Merger. Except
as contemplated by Section 6.3, during the period from the date of this
Agreement to the Effective Time, the Company shall, and shall cause each of its
Subsidiaries to, carry on its business in the usual, regular and ordinary course
in substantially the same manner as heretofore conducted and, to the extent
consistent therewith, use all reasonable efforts to keep available the services
of its current officers and employees and preserve its relationships with
customers, suppliers, licensors, lessors and others having business dealings
with it to the end that its goodwill and ongoing business shall be unimpaired at
the Effective Time; provided, however, that the Company shall be permitted to
terminate or modify the business and operations of the Company's hotel/casino
facility located in Kansas City, Missouri in the event that an order, judgment,
injunction, award or decree of any Governmental Entity against the Company or
its Subsidiaries is granted or issued which results in the suspension,
termination or revocation of the gaming licenses for such hotel/casino facility.
Except as otherwise expressly permitted by this Agreement, the Company shall
not, and shall not permit any of its Subsidiaries to, without the prior written
consent of Crescent:
 
          (a) (i) declare, set aside or pay any dividends on, or make any other
     actual, constructive or deemed distributions in respect of, any of its
     capital stock, or otherwise make any payments to its stockholders in their
     capacity as such (other than dividends declared and paid on the Company
     Preferred Stock or the Redeemable Preferred Stock in the ordinary course of
     business and customary with past practice, and dividends and other
     distributions by direct or indirect wholly owned Subsidiaries), (ii) other
     than in the case of any direct or indirect wholly owned Subsidiary, split,
     combine or reclassify any of its capital stock or issue or authorize the
     issuance of any other securities in respect of, in lieu of or in
     substitution for shares of its capital stock or (iii) purchase, redeem or
     otherwise acquire any shares of capital stock of the Company or any of its
     Subsidiaries or any other securities thereof or any rights, warrants or
     options to acquire any such shares or other securities;
 
          (b) except as set forth in Section 5.17, issue, deliver, sell, pledge,
     dispose of or otherwise encumber any shares of its capital stock, any other
     voting securities or equity equivalent or any securities convertible into,
     or any rights, warrants or options to acquire any such shares, voting
     securities, equity equivalent or convertible securities, other than (i) the
     issuance of shares of Company Common Stock (and associated Rights) upon the
     exercise of employee stock options pursuant to the Company Plans
     outstanding on the date of this Agreement in accordance with their current
     terms and (ii) the issuance of Company Common Stock upon the conversion of
     shares of Company Preferred Stock or Redeemable Preferred Stock;
 
          (c) amend its articles or certificate of incorporation or by-laws or
     other comparable organizational documents;
 
          (d) except as set forth in Section 5.23, acquire or agree to acquire
     (i) by merging or consolidating with, or by purchasing a substantial
     portion of the assets of or equity in, or by any other manner, any business
     or any corporation, partnership, association or other business organization
     or division thereof or (ii) any assets that are, individually or in the
     aggregate material to the Company and its Subsidiaries taken as a whole,
     other than transactions that are in the ordinary course of business
     consistent with past practice and not material to the Company and its
     Subsidiaries taken as a whole;
 
          (e) except as set forth in a disclosure letter making reference to
     this section, sell, lease, license, mortgage, grant an interest in or
     easement in, or otherwise encumber or subject to any Lien or otherwise
     dispose of, or agree to sell, lease, license, mortgage, grant an interest
     in or easement in, or otherwise encumber or subject to any Lien or
     otherwise dispose of, any of its assets, other than transactions that are
     in the ordinary course of business consistent with past practice and not
     material to the Company and its Subsidiaries taken as whole;
 
          (f) incur any indebtedness for borrowed money, guarantee any such
     indebtedness, issue or sell any debt securities or warrants or other rights
     to acquire any debt securities, guarantee any debt securities or
                                      B-22
<PAGE>   181
 
     make any loans, advances or capital contributions to, or other investments
     in, any other person, or enter into any arrangement having the economic
     effect of any of the foregoing, other than (i) indebtedness incurred in the
     ordinary course of business consistent with past practice and (ii)
     indebtedness, loans, advances, capital contributions and investments
     between the Company and any of its wholly owned Subsidiaries or between any
     of such wholly owned Subsidiaries;
 
          (g) except as set forth in Section 5.23, alter (through merger,
     liquidation, reorganization, restructuring or in any other fashion) the
     corporate structure or ownership of the Company or any Subsidiary;
 
          (h) except as provided in Sections 5.8 and 5.18, enter into or adopt
     any new, or amend any existing severance plan, agreement or arrangement or
     enter into any new compensation or other welfare arrangement or plan, or
     amend any existing Company Plan or employment or consulting agreement,
     other than as required by law, except that the Company or its Subsidiaries
     may enter into (a) employment agreements if such agreements (i) are no
     longer than one year in duration (ii) provide for an annual base salary of
     less than $150,000, and (iii) provide, in the aggregate, for annual base
     salaries of less than $1,000,000, and (b) consulting agreements in the
     ordinary course of business that are terminable on no more than 90 days'
     notice without penalty;
 
          (i) except (1) as permitted under Section 4.1(h), or (2) to the extent
     required by written employment agreements existing on the date of this
     Agreement, increase the compensation payable or to become payable to its
     officers or employees, except for (i) increases in the ordinary course of
     business consistent with past practice in salaries or wages of non-officer
     employees of the Company or any of its Subsidiaries and (ii) except to the
     extent required under the terms of any applicable incentive plan;
 
          (j) grant or award any stock options, restricted stock, performance
     shares, stock appreciation rights or other equity-based incentive awards;
 
          (k) take any action, other than reasonable and usual actions in the
     ordinary course of business consistent with past practice, with respect to
     accounting policies or procedures (other than actions required to be taken
     by generally accepted accounting principles);
 
          (l) except as set forth in a disclosure letter making reference to
     this section, make or agree to make any new capital expenditure or
     expenditures which, individually, is in excess of $1,000,000 or which, in
     the aggregate, are in excess of $10,000,000;
 
          (m) pay, discharge or satisfy any claims, liabilities or obligations
     (absolute, accrued, asserted or unasserted, contingent or otherwise), other
     than the payment, discharge or satisfaction, in the ordinary course of
     business (i) consistent with past practice, of liabilities reflected or
     reserved against in, or contemplated by, (a) the most recent consolidated
     financial statements (or the notes thereto) of the Company included in the
     Company SEC Documents or (b) the condensed consolidated balance sheets of
     the Company and its Subsidiaries as set forth in a disclosure letter making
     reference to this section, or (ii) incurred in the ordinary course of
     business consistent with past practice;
 
          (n) settle or compromise any material federal, state, local or foreign
     tax liability; or
 
          (o) authorize, recommend, propose or announce an intention to do any
     of the foregoing, or enter into any contract, agreement, commitment or
     arrangement to do any of the foregoing.
 
     Section 4.2  Conduct of Business by Crescent Pending the Merger. Except as
contemplated by Section 6.3, during the period from the date of this Agreement
to the Effective Time, Crescent shall, and shall cause each of its Subsidiaries
to, carry on its or their respective businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and, to
the extent consistent therewith, use all reasonable efforts to keep available
the services of its or their respective current officers and employees and
preserve their respective relationships with customers, suppliers, licensors,
lessors and others having business dealings with them to the end that their
goodwill and ongoing business shall be unimpaired at the Effective
 
                                      B-23
<PAGE>   182
 
Time. Except as otherwise expressly permitted by this Agreement, Crescent shall
not, and shall not permit any of its Subsidiaries to, without the prior written
consent of the Company:
 
          (a)(i) declare, set aside or pay any dividends on, or make any other
     actual, constructive or deemed distributions in respect of, any of its
     capital stock, or otherwise make any payments to its shareholders or
     stockholders, as applicable, in their capacity as such (other than (A) any
     extraordinary dividend paid or to be paid by Crescent which Crescent
     reasonably determines is sufficient, when considered together with all
     dividends anticipated to be paid within the tax year including the
     Effective Time, to equal all anticipated current and accumulated earnings
     and profits for such tax year of the Company and Crescent, (B)
     distributions in the aggregate not to exceed the greater of (i) the amount
     of any quarterly dividend that may be paid by Crescent in the ordinary
     course and (ii) distributions of "real estate investment taxable income"
     (as such term is defined for purposes of the Code) without regard to any
     net capital gains or the deduction for dividends paid (provided that this
     Section 4.2(a) shall not be deemed to restrict any increases in the
     dividend rate of Crescent in the ordinary course consistent with past
     practice) and (C) dividends and other distributions by direct, indirect or
     wholly owned Subsidiaries) or (ii) other than in the case of any
     Subsidiary, split, combine or reclassify any of its capital stock or issue
     or authorize the issuance of any other securities in respect of, in lieu of
     or in substitution for Common Shares;
 
          (b) in the case of Crescent only, amend its Declaration of Trust;
 
          (c) take or omit any action that would reasonably be expected to cause
     Crescent to cease to qualify as a "real estate investment trust" for
     federal income tax purposes; or
 
          (d) authorize, recommend, propose or announce an intention to do any
     of the foregoing, or enter into any contract, agreement, commitment or
     arrangement to do any of the foregoing.
 
     Section 4.3 No Solicitation.
 
     (a) Except as may be required pursuant to this Agreement, the Company shall
not, nor shall it permit any of its Subsidiaries to, nor shall it authorize or
permit any officer, director or employee of or any investment banker, attorney,
accountant, agent or other advisor or representative of the Company or any of
its Subsidiaries to, (i) solicit, initiate, or encourage the submission of, any
takeover proposal, (ii) except to the extent permitted by paragraph (b), enter
into any agreement with respect to any takeover proposal or (iii) participate in
any discussions or negotiations regarding or furnish to any person any
information with respect to the Company's business, properties or assets, or
take any other action to facilitate any inquiries or the making of any proposal
that constitutes, or may reasonably be expected to lead to, any takeover
proposal; provided, however, that if prior to the Company Stockholder Meeting
(as defined in Section 5.1), the Company shall have received an unsolicited
written takeover proposal from a reputable buyer which offer, in the written
opinion of Salomon Smith Barney, as the Company's financial advisors, appears to
be a "superior proposal" (as defined below) and which, in the written opinion of
legal counsel to the Company reasonably acceptable to Crescent, the Company's
Board of Directors is legally obligated to consider by principles of fiduciary
duty to stockholders under the NGCL, the foregoing restrictions shall not apply
to such proposal. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding sentence by any
officer, director or employee of or any investment banker, attorney, accountant,
agent or other advisor or representative of the Company or any of its
Subsidiaries, whether or not such person is purporting to act on behalf of the
Company or otherwise, shall be deemed to be a breach of this paragraph by the
Company. For all purposes of this Agreement, "takeover proposal" means any
proposal, other than a proposal by Crescent or an affiliate of Crescent for a
merger, consolidation, share exchange, business combination or other similar
transaction involving the Company or any of its Significant Subsidiaries or any
proposal or offer (including, without limitation, any proposal or offer to
stockholders of the Company), other than a proposal or offer by Crescent or an
affiliate of Crescent (i) to acquire in any manner, directly or indirectly, an
equity interest in or any voting securities of, the Company or any of its
Significant Subsidiaries or (ii) to acquire or lease in any manner, directly or
indirectly, any property, business or other assets that, individually or in the
aggregate, would satisfy any of the tests for a "significant subsidiary" within
the meaning of Rule 1-02 of Regulation S-X of the SEC. The Company immediately
shall cease and cause to be terminated all existing discussions or negotiations
with any persons conducted heretofore with respect to, or that could reasonably
be
                                      B-24
<PAGE>   183
 
expected to lead to, any takeover proposal. As used herein, a "Significant
Subsidiary" means any Subsidiary that would constitute a "significant
subsidiary" within the meaning of Rule 1-02 of Regulation S-X of the SEC.
 
     (b) Neither the Board of Directors of the Company nor any committee thereof
shall (i) withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Crescent, the approval or recommendation by the Board of Directors of
the Company or any such committee of this Agreement, any of the transactions
contemplated by this Agreement, or the Merger, (ii) approve or recommend, or
propose to approve or recommend, any takeover proposal, or (iii) take action to
render the Rights inapplicable to any takeover proposal. Notwithstanding the
foregoing, the Board of Directors of the Company, to the extent required by the
fiduciary obligations thereof, as determined by and set forth in the written
opinion of legal counsel to the Company reasonably acceptable to Crescent, may
approve or recommend (and, in connection therewith, withdraw or modify its
approval or recommendation of this Agreement or the Merger) a Superior Proposal
(as defined below), subject to the terms set forth in this Section 4.3(b). Prior
to approving or recommending a Superior Proposal, entering into a binding
written agreement with respect to the transaction contemplated by any such
Superior Proposal or withdrawing or modifying its approval or recommendation of
this Agreement, the Company (i) shall notify Crescent in writing that it intends
to accept a Superior Proposal and enter into such a binding, written agreement
with respect to the transaction contemplated thereby, and (ii) attach the most
current version of such agreement to such notice. Crescent shall have the
opportunity, within ten business days of receipt of the Company's written
notification of its intention to enter into a binding agreement for a Superior
Proposal, to make an offer that the Board of Directors of the Company
determines, in good faith after consultation with its financial advisors, is at
least as favorable, from a financial point of view, to the shareholders of the
Company as the Superior Proposal. The Company agrees that it will not enter into
a binding agreement referred to in clause (i) above until at least the eleventh
business day after it has provided the notice to Crescent required thereby and
to notify Crescent promptly if its intention to enter into a written agreement
referred to in its notification shall change at any time after giving such
notification. For all purposes of this Agreement, "superior proposal" means a
bona fide written proposal made by a third party to acquire the Company pursuant
to a tender or exchange offer, a merger, a share exchange, a sale of all or
substantially all its assets or otherwise on terms which, in the written opinion
of Salomon Smith Barney, are financially superior to those provided for in the
Merger, and for which financing, to the extent required, is then fully committed
or which, in the good faith judgment of Salomon Smith Barney is reasonably
capable of being financed by such third party. If, to the extent permitted by
this Section 4.3(b), the Board of Directors of the Company approves or
recommends a superior proposal, the Company may take appropriate action to
render the Rights inapplicable to such superior proposal.
 
     (c) Each of Frank J. Fertitta III, Lorenzo J. Fertitta III and Blake L.
Sartini, by such individual's execution of this Agreement, agrees to vote the
shares of capital stock of the Company owned by such individual that have the
power to vote in favor of the Merger; provided that such individuals shall be
free to vote their shares in their sole discretion if the Board of Directors of
the Company terminates this Agreement in accordance with Section 7.1(g) hereof.
 
     (d) The Company promptly shall immediately advise Crescent orally and in
writing of any takeover proposal or any inquiry with respect to or which could
reasonably be expected to lead to any takeover proposal, the material terms and
conditions of such takeover proposal or inquiry and the identity of the person
making any such takeover proposal or inquiry. The Company will keep Crescent
fully informed of the status and details of any such takeover proposal or
inquiry.
 
     Section 4.4 Third Party Standstill Agreements. Except to the extent
reasonably required in connection with the Company's obligations under this
Agreement, during the period from the date of this Agreement through the
Effective Time, the Company shall not terminate, amend, modify or waive any
provision of any confidentiality or standstill or similar agreement to which the
Company or any of its Subsidiaries is a party (other than any involving
Crescent) unless, in the written opinion of counsel to the Company reasonably
acceptable to Crescent, failure to take such action would violate the fiduciary
obligations of the Board of Directors of the Company, under applicable law.
During such period, the Company agrees to enforce, to the fullest extent
permitted under applicable law, the provisions of any such agreements,
including, but not limited
                                      B-25
<PAGE>   184
 
to, obtaining injunctions to prevent any breaches of such agreements and to
enforce specifically the terms and provisions thereof in any court of the United
States or any state thereof having jurisdiction.
 
                                   ARTICLE V
 
                             ADDITIONAL AGREEMENTS
 
     Section 5.1 Stockholders Meeting. The Company shall, as soon as practicable
following the date of this Agreement, duly call, give notice of, convene and
hold, a meeting of its stockholders, (the "Company Stockholder Meeting") for the
purpose of considering the approval of this Agreement. The Company will, through
its Board of Directors, recommend to its stockholders, approval of such matters
and shall not withdraw such recommendation except to the extent that the Board
of Directors of the Company shall have withdrawn or modified its approval or
recommendation of this Agreement of the Merger as permitted by Section 4.3(b).
Without limiting the generality of the foregoing, the Company agrees that its
obligations pursuant to the first sentence of this Section 5.1 shall not be
affected by the commencement, public proposal, public disclosure or
communication to the Company of any takeover proposal. The Company and Crescent
shall coordinate and cooperate with respect to the timing of such meeting.
 
     Section 5.2 Filings; Other Actions.
 
     (a) The Company and Crescent shall promptly prepare and file with the SEC
the Proxy Statement and Crescent shall prepare and file with the SEC the
Registration Statement, in which the Proxy Statement will be included as a
prospectus. Each of Crescent and the Company shall use all reasonable efforts to
have the Registration Statement declared effective under the Securities Act as
promptly as practicable after such filing. As promptly as practicable after the
Registration Statement shall have become effective, the Company shall mail the
Proxy Statement to its stockholders. Crescent shall also take any action (other
than qualifying to do business in any jurisdiction in which they are currently
not so qualified) required to be taken under any applicable state securities
laws in connection with the issuance of Common Shares and Crescent Convertible
Preferred Shares in the Merger and upon the exercise of the Substitute Options
(as defined in Section 5.8), and the Company shall furnish all information
concerning the Company and the holders of Company Common Stock as may be
reasonably requested in connection with any such action, including information
relating to the number of Common Shares and Crescent Convertible Preferred
Shares required to be registered.
 
     (b) Each party hereto agrees, subject to applicable laws relating to the
exchange of information, promptly to furnish the other parties hereto with
copies of written communications (and memoranda setting forth the substance of
all oral communications) received by such party, or any of its subsidiaries,
affiliates or associates (as such terms are defined in Rule 12b-2 under the
Exchange Act as in effect on the date hereof), from, or delivered by any of the
foregoing to, any Governmental Entity in respect of the transactions
contemplated hereby; provided, however, that neither party shall be required to
provide the other with copies of individuals' gaming applications and other
information provided to gaming regulators with respect thereto.
 
     (c) Each of the Company and Crescent will promptly, and in any event within
twenty business days after execution and delivery of this Agreement, make all
filings or submissions as are required under the HSR Act. Each of the Company
and Crescent will promptly furnish to the other such necessary information and
reasonable assistance as the other may request in connection with its
preparation of any filing or submissions necessary under the HSR Act. Without
limiting the generality of the foregoing, each of the Company and Crescent will
promptly notify the other of the receipt and content of any inquiries or
requests for additional information made by any Governmental Entity in
connection therewith and will promptly (i) comply with any such inquiry or
request and (ii) provide the other with a description of the information
provided to any Governmental Entity with respect to any such inquiry or request.
In addition, each of the Company and Crescent will keep the other apprised of
the status of any such inquiry or request.
 
                                      B-26
<PAGE>   185
 
     Section 5.3 Comfort Letters.
 
     (a) The Company shall use all reasonable efforts to cause to be delivered
to Crescent "comfort" letters of Arthur Andersen LLP, the Company's independent
public accountants, dated the date on which the Registration Statement shall
become effective and as of the Effective Time, and addressed to Crescent and the
Company, in form and substance reasonably satisfactory to Crescent and
reasonably customary in scope and substance for letters delivered by independent
public accountants in connection with transactions such as those contemplated by
this Agreement.
 
     (b) Crescent shall use all reasonable efforts to cause to be delivered to
the Company "comfort" letters of Arthur Andersen LLP, Crescent's independent
public accountants, dated the date on which the Registration Statement shall
become effective and as of the Effective Time, and addressed to the Company and
Crescent, in form and substance reasonably satisfactory to the Company and
reasonably customary in scope and substance for letters delivered by independent
public accountants in connection with transactions such as those contemplated by
this Agreement.
 
     Section 5.4 Access to Information. Subject to currently existing
contractual and legal restrictions applicable to Crescent or to the Company or
any of its Subsidiaries, each of Crescent and the Company shall, and shall cause
each of its Subsidiaries to, afford to the accountants, counsel, financial
advisors and other representatives of the other party hereto reasonable access
to, and permit them to make such inspections as they may reasonably require,
during normal business hours during the period from the date of this Agreement
through the Effective Time, all their respective properties, books, tax returns,
contracts, commitments and records (including, without limitation, the work
papers of independent accountants, if available and subject to the consent of
such independent accountants) and, during such period, each of Crescent and the
Company shall, and each shall cause each of its Subsidiaries to, furnish
promptly to the other (i) a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of federal or state securities laws and (ii) all other information
concerning its business, properties and personnel as the other may reasonably
request. No investigation pursuant to this Section 5.4 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
 
     Section 5.5 Compliance with the Securities Act. Within 30 days following
the date of this Agreement, the Company shall cause to be prepared and delivered
to Crescent a list (reasonably satisfactory to counsel for Crescent) identifying
all persons who, at the time of the Company Stockholder Meeting, in the
Company's reasonable judgment may be deemed "affiliates" of the Company as that
term is used in paragraphs (c) and (d) of Rule 145 under the Securities Act (the
"Rule 145 Affiliates"). The Company shall use all reasonable efforts to cause
each person who is identified as a Rule 145 Affiliate in such list to deliver to
Crescent on or prior to the Effective Time a written agreement in substantially
the form of Schedule 5.5 hereto, executed by such person.
 
     Section 5.6 Stock Exchange Listings. Crescent shall use all reasonable
efforts to list on the NYSE, upon official notice of issuance, the Common Shares
and the Crescent Convertible Preferred Shares to be issued in connection with
the Merger.
 
     Section 5.7 Fees and Expenses.
 
     (a) Except as provided in Section 5.7(b) and (c), whether or not the Merger
is consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby, including the fees and
disbursements of counsel, financial advisors and accountants, shall be paid by
the party incurring such costs and expenses, except that expenses incurred in
connection with printing and mailing the Proxy Statement and the Registration
Statement shall be borne equally by Crescent and the Company.
 
     (b) Provided that Crescent is not in material breach of its
representations, warranties and agreements under this Agreement, (i) if this
Agreement is terminated by either Crescent or the Board of Directors of the
Company pursuant to Section 7.1(e), (ii) if this Agreement is terminated by
Crescent pursuant to Section 7.1(f), or (iii) if this Agreement is terminated by
the Board of Directors of the Company pursuant to Section 7.1(g), then the
Company shall pay to Crescent $54,000,000 (the "Crescent Termination Fee") in
same-day funds, plus (notwithstanding paragraph (a) of this Section 5.7) all the
expenses (as defined below),
                                      B-27
<PAGE>   186
 
on the date of such termination or if Crescent elects, over a two-year period
beginning on the date of termination with payment amounts and dates to be
determined by Crescent. For purposes of this Section 5.7, the "transaction
value" shall mean the aggregate value of the consideration to be paid by
Crescent for the Company's equity securities, plus aggregate liabilities of the
Company as shown on its most recent financial statement.
 
     (c) If this Agreement is terminated and, as a result of such termination,
Crescent is entitled to the Crescent Termination Fee as provided in Section
5.7(b) above, then the Company shall (notwithstanding paragraph (a) of this
Section 5.7), on the date of such termination, pay to Crescent the cash amount
necessary to permit Crescent fully to reimburse itself and its affiliates for
all out-of-pocket fees and expenses incurred at any time prior to such
termination by any of them or on their behalf in connection with the Merger, the
preparation of this Agreement and the transactions contemplated by this
Agreement (including any currency or interest rate hedging activities in
connection with the transactions contemplated hereby), including (x) all fees
and expenses of counsel, investment banking firms, financial advisors
(regardless of whether such financial advisors are affiliates of Crescent),
accountants, experts and consultants to Crescent or any of their affiliates and
(y) all fees and expenses payable to banks, investment banking firms and other
financial institutions and their respective counsel, accountants and agents in
connection with arranging or providing financing) (fees and expenses under
clause (y) collectively, "Financing Fees," and the fees and expenses
contemplated by this paragraph (c), collectively, the "Expenses").
 
     (d) The parties acknowledges that the agreements contained in paragraphs
(b) and (c) of this Section 5.7 are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, neither
would enter into this Agreement; accordingly, if any person fails to pay
promptly any amount due pursuant to this Section 5.7 and, in order to obtain
such payment, another party commences a suit that results in a judgment for any
such amount, the party against whom the judgment is rendered shall pay to the
complaining party its cost and expenses (including attorneys' fees) in
connection with such suit together with interest on the amount of the fee at the
prime or base rate of Citibank, N.A. from the date such payment was due under
this Agreement.
 
     Section 5.8 Stock Options.
 
     (a) As of the Effective Time, each Company Stock Option that is outstanding
immediately prior to the Effective Time pursuant to the stock option plans that
are part of the Company's Stock Compensation Program (and excluding any "stock
purchase plan" within the meaning of Section 423 of the Code) in effect on the
date hereof (the "Stock Plans") shall be assumed by Crescent and become and
represent a fully exercisable option to purchase the number of Common Shares (a
"Substitute Option") (decreased to the nearest full share) determined by
multiplying (i) the number of shares of Company Common Stock subject to such
Company Stock Option immediately prior to the Effective Time by (ii) the
Exchange Ratio, at an exercise price per Common Share (rounded up to the nearest
tenth of a percent) equal to the exercise price per share of Company Common
Stock immediately prior to the Effective Time. Crescent shall pay cash to
holders of Company Stock Options in lieu of issuing fractional Common Shares
upon the exercise of Substitute Options. As of the Effective Time, each
Substitute Option shall be subject to the same terms and conditions as were
applicable immediately prior to the Effective Time under the related Company
Stock Option and Stock Plan under which it was granted, including those
providing for the accelerated exercisability and other special rights arising
upon an "Acceleration Event" in accordance with the terms of such Stock Plan.
The Company agrees to use all reasonable efforts to obtain any necessary
consents of holders of Company Stock Options and take such other actions as may
be necessary to effect this Section 5.8. The accelerated lapse of restrictions
and other special rights with respect to any shares of restricted Company Common
Stock issued under the Stock Plans shall also be preserved following the
Effective Time in accordance with the terms of the Stock Plans.
 
     (b) In respect of each Company Stock Option as converted into a Substitute
Option pursuant to Section 5.8(a) and assumed by Crescent, and the Common Shares
underlying such option, Crescent shall file and keep current a registration
statement on Form S-8 (or a post-effective amendment to a Registration
 
                                      B-28
<PAGE>   187
 
Statement on Form S-8) or other appropriate form for as long as such options
remain outstanding and shall reserve sufficient Common Shares for issuance upon
exercise of such Substitute Options.
 
     (c) The provisions of this Section 5.8 are intended to be for the benefit
of, and shall be enforceable by, each person who is or has been an employee of
the Company or any of its Subsidiaries and is a holder of Company Stock Options
under the Stock Plans, and such employee's heirs and personal representatives
and shall be binding on all successors and assigns of Crescent.
 
     Section 5.9 Reasonable Efforts.
 
     (a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including, but not limited to: (i) obtaining all necessary actions or
non-actions, waivers, consents and approvals from all Governmental Entities and
making all necessary applications, registrations and filings (including filings
with Governmental Entities) and taking all reasonable steps as may be necessary
to obtain an approval or waiver from, or to avoid an action or proceeding by,
any Governmental Entity (including those in connection with the HSR Act, state
takeover statutes and Gaming Laws), (ii) obtaining all necessary consents,
approvals or waivers from third parties, (iii) defending any lawsuits or other
legal proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of the transactions contemplated hereby, including
seeking to have any stay or temporary restraining order entered by any court or
other Governmental Entity with respect to the Merger or this Agreement vacated
or reversed, (iv) taking any and all actions necessary to satisfy all of the
conditions applicable to such party as set forth in Article VI of this
Agreement, and (v) executing and delivering any additional instruments necessary
to consummate the transactions contemplated by this Agreement.
 
     (b) Each of the Company and Crescent shall use all reasonable efforts not
to take any action that, in any such case, might reasonably be expected to (i)
cause any of the representations or warranties made by it in this Agreement that
is qualified as to materiality to be untrue, (ii) cause any of the
representations or warranties made by it contained in this Agreement that is not
so qualified to be untrue in any material respect, (iii) result in a breach of
any covenant made by it in this Agreement, (iv) result directly or indirectly in
any of the conditions to the Merger set forth in Article VI not being satisfied
or (v) impair the ability of the parties to consummate the Merger at the
earliest practicable time (regardless of whether such action would otherwise be
permitted or not prohibited hereunder).
 
     (c) The Company shall use its reasonable best efforts to restructure its
existing leases prior to the Effective Time so that the terms thereof shall
conform to the provisions of Section 22.3 of the Master Lease Agreement (as
hereinafter defined).
 
     Section 5.10 Public Announcements. Crescent and the Company will not issue
any press release with respect to the transactions contemplated by this
Agreement or otherwise issue any written public statements with respect to such
transactions (i) prior to ten business days from the date hereof, unless
otherwise agreed, and (ii) without prior consultation with each other party,
except as may be required by applicable law.
 
     Section 5.11 Transfer and Gains Tax. Crescent will pay any federal, state,
local, foreign or provincial tax which is attributable to the transfer of the
beneficial ownership of the Company's or its Subsidiaries' real and personal
property, if any (collectively, the "Gains Taxes"), any penalties or interest
with respect to the Gains Taxes, payable in connection with the consummation of
the Merger (except as otherwise provided in Section 1.7), any federal, state,
local, foreign or provincial tax which is attributable to the transfer of
Company Common Stock or Common Shares pursuant to the terms of this Agreement
(collectively, "Stock Transfer Taxes") and any penalties or interest with
respect to any such Stock Transfer Taxes. The Company and Crescent agree to
cooperate with the other in the filing of any returns with respect to the Gains
Taxes, including supplying in a timely manner a complete list of all real
property interests held by the Company and its Subsidiaries and any information
with respect to such property that is reasonably necessary to complete such
returns. The portion of the consideration allocable to the real property of the
Company and its
 
                                      B-29
<PAGE>   188
 
Subsidiaries shall be agreed to between Crescent and the Company. The
stockholders of the Company shall be deemed to have agreed to be bound by the
allocation established pursuant to this Section 5.11 in the preparation of any
return with respect to the Gains Taxes.
 
     Section 5.12 State Takeover Laws. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation shall become applicable to the transactions contemplated hereby,
Crescent and the Company and their respective Boards of Trust Managers or
Directors, as the case may be, shall use all reasonable efforts to grant such
approvals and take such actions as are necessary so that the transactions
contemplated hereby may be consummated as promptly as practicable on the terms
contemplated hereby and shall otherwise act to minimize the effects of any such
statute or regulation on the transactions contemplated hereby.
 
     Section 5.13 Indemnification; Directors and Officers Insurance.
 
     (a) Crescent agrees that all rights to indemnification and exculpation from
liabilities for acts or omissions occurring prior to the Effective Time now
existing in favor of the current or former directors or officers of the Company
and its Subsidiaries as provided in their respective articles or certificates of
incorporation or by-laws (or comparable organizational documents) and any
indemnification agreements of the Company shall survive the Merger and shall
continue in full force and effect in accordance with their terms for a period of
not less than five years from the Effective Time and the obligations of the
Company in connection therewith shall be assumed by Crescent. Crescent shall
provide, or shall cause the Surviving Entity to provide, the Company's current
directors and officers an insurance and indemnification policy (including any
fiduciary liability policy) that provides coverage with respect to any claims
made during the five-year period following the Effective Time for events
occurring prior to the Effective Time (the "D&O Insurance") that is
substantially similar to the Company's existing policies or, if substantially
equivalent insurance coverage is unavailable, the best available coverage;
provided, however, that the Surviving Entity shall not be required to pay an
annual premium for the D&O insurance in excess of 120 percent of the last annual
premium paid prior to the date hereof (which premium the Company represents and
warrants to be approximately $540,000 in the aggregate), but if such annual
premium would but for this proviso exceed such amount, then Crescent shall
purchase as much coverage as possible for such amount.
 
     (b) The provisions of this Section 5.13 are intended to be for the benefit
of, and shall be enforceable by, each person who is or has been a director or
officer of the Company or a subsidiary of the Company, and such director's or
officer's heirs and personal representatives and shall be binding on all
successors and assigns of Crescent.
 
     Section 5.14 Notification of Certain Matters. Crescent shall use all
reasonable efforts to give prompt notice to the Company, and the Company shall
use all reasonable efforts to give prompt notice to Crescent, of: (i) the
occurrence, or nonoccurrence, of any event the occurrence, or nonoccurrence, of
which it is aware and which would be reasonably likely to cause (x) any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect or (y) any covenant, condition or agreement
contained in this Agreement not to be complied with or satisfied in all material
respects, (ii) any failure of either Crescent or the Company, as the case may
be, to comply in a timely manner with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder or (iii) any event,
change or development that, individually or in the aggregate, has had, or would
reasonably be expected to have, a Material Adverse Effect on Crescent or the
Company, as the case may be; provided, however, that the delivery of any notice
pursuant to this Section 5.14 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
 
     Section 5.15 Rights Agreement. The Board of Directors of the Company shall
take all further action (in addition to that referred to in Section 3.16)
requested in writing by Crescent (including redeeming the Rights immediately
prior to the Effective Time of the Merger or amending the Rights Agreement) in
order to render the Rights inapplicable to the Merger and the other transactions
contemplated by this Agreement. Except as requested in writing by Crescent,
prior to the Company Stockholder Meeting, the Board of Directors of the Company
shall not (i) amend the Rights Agreement or (ii) take any action with respect
to, or make any determination under, the Rights Agreement (including a
redemption of the Rights).
                                      B-30
<PAGE>   189
 
     Section 5.16 Schedules, Exhibits and Disclosure Letters. Whenever, in this
Agreement, reference is made to a schedule, exhibit or disclosure letter (or
other similar provision for information to be made available), such schedule,
exhibit or disclosure letter (or other similar provision of information) must be
provided in writing and by the appropriate party on the date of execution of
this Agreement, and actually received by the other parties hereto, and no such
schedule, exhibit or disclosure letter (or other similar provision of
information) shall be effective if provided after such date.
 
     Section 5.17 Preferred Stock Investment. At the option of the Company,
Crescent agrees to purchase from the Company up to an aggregate of 115,000
shares of a new series of preferred stock of the Company with the designations,
rights, preferences and other terms set forth in the Certificate of Resolution
attached hereto as Schedule 5.17 (the "Redeemable Preferred Stock"). Each share
of Redeemable Preferred Stock shall be purchased at a price of $1,000 per share
(plus accrued dividends from the previous regular quarterly dividend payment
date or, if there has not yet been a regular quarterly dividend payment date,
then as of the date hereof, based on a 365-day year) in cash in increments of
5,000 shares. Subject to the conditions below, Crescent must fund the purchase
price for the purchase of shares on the 10th business day following the date of
a notice from the Company to Crescent (a "Draw Notice") stating the number of
shares of Redeemable Preferred Stock to be sold to Crescent on such 10th
business day and the aggregate amount to be paid for such shares; provided that
for purchases of 25,000 shares or more, the date of such purchase shall be the
20th business day following the date of such Draw Notice. Notwithstanding the
foregoing, Crescent shall not be required to purchase shares of Redeemable
Preferred Stock (i) more than two times in any 30-day period (ii) unless, on the
purchase date set forth in a Draw Notice (A) the representations and warranties
of the Company set forth in Article II are true and correct in all material
respects and (B) the Company has not breached any of its covenants set forth in
this Agreement in any material respect, and (iii) unless the number of shares to
be purchased, plus the aggregate number of shares then outstanding, does not
exceed 115,000. Unless written consent is received from Crescent, the Company
agrees to use the net proceeds from sales of shares of Redeemable Preferred
Stock to repay indebtedness under the Company's Amended and Restated Reducing
Revolving Loan Agreement dated as of March 19, 1996, as amended, borrowings
under which were used for acquisitions and master-planned expansions. The
parties agree that the provisions of this Section 5.17 shall survive any
termination of this Agreement. Crescent agrees to vote all shares of the
Company's equity securities held by Crescent in favor of the Merger, and any
transferee of the Redeemable Preferred Stock shall be subject to such agreement
to vote in favor of the Merger.
 
     Section 5.18 Joint Venture. The parties anticipate that Crescent Operating,
Inc. ("COI") will serve as one of the parties to an Agreement of Limited
Partnership by and among (i) COI and certain of its affiliates and (ii) entities
owned by certain members of the Company's existing management (the "Operating
Joint Venture"). Pursuant to the obligation of Crescent Real Estate Equities
Limited Partnership ("Crescent OP") to offer the opportunity to participate in
the Operating Joint Venture to COI under that certain Intercompany Agreement to
which they are parties, promptly following the date of this Agreement, Crescent
will cause Crescent OP to make such offer. In the event that COI does not accept
the offer to become a party to the Operating Joint Venture, Crescent shall
promptly take all necessary action to provide another entity to serve in that
capacity at the Effective Time (COI or the entity serving in such capacity being
referred to herein as the "JV Parent"). Frank J. Fertitta III, Lorenzo J.
Fertitta and Blake L. Sartini (the "Ownership Group") shall form an entity (the
"Company JV Parent") and cause such entity to enter into the Agreement of
Limited Partnership, and the Company shall cause an additional entity (i) to be
formed by other members of its management and (ii) to enter into the Agreement
of Limited Partnership. A form of the Agreement of Limited Partnership is
attached hereto as Schedule 5.18(i).
 
     The Company shall sell, assign, transfer and convey, prior to the Effective
Time, to the Operating Joint Venture, as directed by Crescent and with
Crescent's approval, certain of the Company's non-real estate assets pursuant to
the Bill of Sale attached hereto as Schedule 5.18(ii).
 
     At the Effective Time, Crescent shall enter into, through Crescent OP, and
shall cause the JV Parent and the Ownership Group shall cause the Company JV
Parent to enter into, on behalf of the Operating Joint Venture, one or more
master lease agreements, in the form of Schedule 5.18(iii) attached hereto (the
"Master Lease Agreement"), with the Operating Joint Venture; provided, however,
that (i) Crescent shall
                                      B-31
<PAGE>   190
 
have the option (on a lease-by-lease basis), prior to the Effective Date, to
include a provision in the Master Lease Agreement that, as to any sublease that
does not conform to the requirements of the Master Lease Agreement as to
subleases, the percentage rent provided for in the Master Lease Agreement will
be computed to exclude any revenues from such sublease, and (ii) the parties
shall make such revisions to the definition of "Gross Revenues" and "Gross
Winnings" contained in the Master Lease Agreement as shall be necessary to
comply with the provisions of Section 856 of the Code relating to rents from
real property not based on profits. The parties acknowledge that Crescent and
the Ownership Group have entered into a letter agreement of even date herewith
regarding the terms upon which the Master Lease Agreement will be executed.
 
     At or prior to the Effective Time, the Company shall assign, and Crescent,
the Company and the Ownership Group shall cause the Operating Joint Venture to
assume the employment agreements (the "Employment Agreements") of each of Frank
J. Fertitta III, Glenn C. Christenson, Blake L. Sartini, Scott M. Nielson, and
William W. Warner (the "Key Executives") and the other management employees
listed on Schedule 5.18(iv) hereto (the "Management Employees") and the Company
Plans other than the Stock Plans. At such time, Crescent shall cause the JV
Parent to guarantee, in the form of Schedule 5.18(v), the performance by the
Operating Joint Venture of its obligations under such Employment Agreements and
Company Plans (the "JV Parent Guarantee"); provided that the JV Parent Guarantee
shall be subordinate to all obligations of the JV Parent to Crescent. In
addition, Crescent shall unconditionally guarantee, in the form of Schedule
5.18(vi), the performance by the JV Parent of its obligations under the JV
Parent Guarantee with respect only to the Key Executives (the "Crescent
Guarantee"), without regard to any such subordination. The obligations of the JV
Parent to execute the JV Parent Guarantee and Crescent to execute the Crescent
Guarantee as to any person shall be conditioned on such person accepting
employment with the Operating Joint Venture. The Company shall use its best
efforts to cause each of the Management Employees and the Key Executives to
consent to the assignment of such employee's employment agreement to the
Operating Joint Venture. The rights and benefits of the Management Employees and
the Key Executives under the employment agreements after the assignment to the
Operating Joint Venture shall be at least as favorable to such persons as they
were immediately prior to such assignment: with the only changes being: (i) the
substitution of the Operating Joint Venture as the employer; (ii) the
substitution of the Operating Joint Venture as the primary obligor under such
Company Plans and (iii) an amendment to the Employment Agreement of Frank J.
Fertitta III to include a non-competition provision identical to that included
in the other Employment Agreements in the form of Schedule 5.18(vii). Any such
assignment and acceptance of employment shall not be deemed to imply in any way
that the change-of-control provisions of such agreements and plans have not been
triggered with respect to changes-of-control payments or terminations after a
change-of-control. In addition, the parties agree that all securities issuable,
or any compensation based on the market value of specified securities, under any
of the Company Plans other than the Stock Plans shall be issued in the form of,
and shall be based on the market value of, the common stock of the JV Parent.
 
     Section 5.19 Intentionally omitted.
 
     Section 5.20 Third Party Beneficiary. Crescent's obligations under (i)
Section 5.18 with respect to the employment of the Key Executives, (ii) Section
6.2(i) with respect to the appointment of Frank J. Fertitta III and Lorenzo J.
Fertitta to the Crescent Board of Trust Managers, and (iii) Section 5.22 with
respect to the Registration Rights and Lock-Up Agreements shall be deemed to be
for the benefit of each of those individuals, and the Ownership Group,
respectively, as well as the Company, and each of those individuals,
respectively, shall have a direct right of action, as a third party beneficiary
or otherwise, against Crescent for any breach thereof. Neither the Company nor
Crescent shall amend, modify or waive any of the aforementioned provisions,
without the express written consent of each of the aforementioned individuals
affected thereby.
 
     Section 5.21  Liability of Crescent under Company Plans and Employment
Agreements. Except for the Stock Plans referred to in Section 5.8 and the
obligations of Crescent described in Section 5.18, Crescent shall not have, and
the Company shall take all steps within its control to assure that Crescent
shall not have, any obligation or liability under any of the Company Plans or
any employment agreement to which the Company is a party that is now or
hereafter in effect.
 
                                      B-32
<PAGE>   191
 
     Section 5.22  Agreement with Management. Crescent and each member of the
Ownership Group shall enter into Registration Rights and Lock-Up Agreements in
the form of Schedule 5.22 attached hereto.
 
     Section 5.23  ARTICLE V.23  Corporate Restructuring. The Company shall
merge all of its Subsidiaries with and into itself, such that on the Closing
Date the Company shall have no Subsidiaries.
 
     Section 5.24  REIT-Related Transactions. The Company shall take such
further actions and engage in such further transactions as determined by
Crescent to be reasonably necessary, in the opinion of counsel to Crescent, to
preserve Crescent's status as a "real estate investment trust" under the Code,
so long as such actions have no adverse economic effect on the Company and its
stockholders in the event the Merger is not consummated.
 
                                   ARTICLE VI
 
                       CONDITIONS PRECEDENT TO THE MERGER
 
     Section 6.1  Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of the parties to effect the Merger shall be subject
to the fulfillment (or waiver by such party) at or prior to the Effective Time
of the following conditions:
 
          (a) Stockholder Approval. At or prior to the Effective Time, this
     Agreement shall have been duly approved by the requisite vote of holders of
     the Company Common Stock and Convertible Preferred Stock in accordance with
     applicable law and the Articles of Incorporation and Bylaws of the Company.
 
          (b) Stock Exchange Listings. The Common Shares and the Crescent
     Convertible Preferred Shares issuable in the Merger and pursuant to the
     Substitute Options shall have been authorized for listing on the NYSE,
     subject to official notice of issuance.
 
          (c) HSR and Other Approvals.
 
             (i) The waiting period (and any extension thereof) applicable to
        the consummation of the Merger under the HSR Act shall have expired or
        been earlier terminated.
 
             (ii) All consents, approvals, orders or authorizations of or
        registrations, declarations or filings with any Governmental Entity,
        which the failure to obtain, make or occur would reasonably be expected
        to have a Material Adverse Effect on the Company (assuming the Merger
        had taken place), shall have been obtained, shall have been made or
        shall have occurred, and shall be in full force and effect.
 
             (iii) All consents, approvals, findings of suitability, licenses,
        permits, orders or authorizations of and registrations, declarations or
        filings with any Governmental Entity with jurisdiction in respect of
        Gaming Laws, in each case, required or necessary in connection with the
        Merger and this Agreement and the transactions contemplated by this
        Agreement (including, but not limited to, approval, licensing or
        registration of (i) Crescent and its officers, trust managers and
        shareholders, as necessary and (ii) the Operating Joint Venture and any
        of its subsidiaries) shall have been obtained and made and shall be in
        full force and effect.
 
          (d) Registration Statement. The Registration Statement shall have
     become effective in accordance with the provisions of the Securities Act.
     No stop order suspending the effectiveness of the Registration Statement
     shall have been issued by the SEC and no proceedings for that purposes
     shall have been initiated or, to the knowledge of Crescent or the Company,
     threatened by the SEC. All necessary state securities or blue sky
     authorizations shall have been received.
 
          (e) No Order. No court or other Governmental Entity having
     jurisdiction over the Company or Crescent, or any of its respective
     Subsidiaries, shall (after the date of this Agreement) have enacted,
     issued, promulgated, enforced or entered any law, rule, regulation,
     executive order, decree, injunction or other order (whether temporary,
     preliminary or permanent) which is then in effect and has the effect of
     making the Merger or any of the transactions contemplated hereby illegal;
     provided, however, that each
                                      B-33
<PAGE>   192
 
     of the parties shall have used all reasonable efforts to prevent and to
     appeal as promptly as possible any such law, rule, regulation, executive
     order, decree, injunction or other order.
 
          (f) Change in Tax Laws.
 
             (i) There shall not have been any federal legislative or regulatory
        change that would cause Crescent to cease to qualify as a "real estate
        investment trust" for federal income tax purposes.
 
             (ii) There shall not have been any federal legislative or
        regulatory change that would cause the Merger to be taxable to any of
        Crescent, the Company, the shareholders of Crescent or the stockholders
        of the Company.
 
          (g) Agreements with Management. The Operating Joint Venture, the
     Company JV Parent and the Ownership Group shall have entered into a Right
     of First Refusal and Non-Competition Agreement in the form of Schedule
     6.1(g).
 
     Section 6.2  Conditions to Obligation of the Company to Effect the Merger.
The obligation of the Company to effect the Merger shall be subject to the
fulfillment (or waiver by the Company) at or prior to the Effective Time of the
following additional conditions:
 
          (a) Performance of Obligations; Representations and Warranties.
     Crescent shall have performed each of its agreements contained in this
     Agreement required to be performed at or prior to the Effective Time, each
     of the representations and warranties of Crescent contained in this
     Agreement that is qualified as to materiality shall be true and correct at
     and as of the Effective Time as if made at and as of such time (other than
     representations and warranties which address matters only as of a certain
     date, which shall be true and correct as of such certain date) and each of
     the representations and warranties that is not so qualified shall be true
     and correct in all material respects at and as of the Effective Time as if
     made on and as of such date (other than representations and warranties
     which address matters only as of a certain date, which shall be true and
     correct in all material respects as of such certain date), in each case
     except as contemplated or permitted by this Agreement, and the Company
     shall have received certificates signed on behalf of each of Crescent by
     its Vice Chairman, President and Chief Executive Officer or Senior Vice
     President, Law and Secretary and its Senior Vice President, Chief Financial
     and Accounting Officer to such effect.
 
          (b) Consents Under Agreements. Crescent shall have obtained the
     consent or approval of each person that is not a Governmental Entity whose
     consent or approval shall be required in connection with the transactions
     contemplated hereby under any loan or credit agreement, note, mortgage,
     indenture, lease, hotel management agreement, joint venture agreement or
     other agreement or instrument to which Crescent or a Subsidiary is a party,
     except as to which the failure to obtain such consents and approvals,
     individually or in the aggregate, would not be expected, in the reasonable
     opinion of Company, to have a Material Adverse Effect on the Crescent or
     upon the consummation of the transactions contemplated in this Agreement.
 
          (c) No Litigation. There shall not be pending or threatened any suit,
     action or proceeding by any Governmental Entity or any other person, or
     before any court or governmental authority, agency or tribunal, domestic or
     foreign, in each case that has a significant likelihood of success
     challenging the acquisition by Crescent of any shares of Company Common
     Stock, seeking to restrain or prohibit the consummation of the Merger or
     any of the other transactions contemplated by this Agreement or seeking to
     obtain from Crescent any damages that are material in relation to the
     Company, Crescent and its Subsidiaries taken as a whole.
 
          (d) Tax Opinion. On the Closing Date, the opinion of Shaw, Pittman,
     Potts & Trowbridge, counsel to Crescent, shall have been delivered to the
     Company in form and substance reasonably satisfactory to the Company
     stating (i) that Crescent is a "real estate investment trust" for federal
     income tax purposes, (ii) that consummation of the transactions
     contemplated by this Agreement will not cause Crescent to cease to qualify
     as a "real estate investment trust" for federal income tax purposes, and
     (iii) that the Merger will be treated for Federal income tax purposes as a
     reorganization within the meaning of
                                      B-34
<PAGE>   193
 
     section 368(a) of the Code, and that each of Crescent and the Company will
     be a party to that reorganization within the meaning of section 368(b) of
     the Code. Such counsel shall not unreasonably refuse to deliver such
     opinion, and issues relating to the subsequent transfer of the assets from
     Crescent to the Crescent OP shall not constitute a reasonable basis for
     refusal to render such opinion. In rendering such opinion, such counsel
     shall be entitled to rely upon representations made in this Agreement or
     requested by such counsel and made by Crescent and the Crescent OP, and on
     representations requested by such counsel and made by the Company.
 
          (e) Legal Opinion. The Company shall have received an opinion of Shaw,
     Pittman, Potts & Trowbridge, counsel to Crescent, dated the Closing Date,
     substantially in the form attached as Schedule 6.2(e).
 
          (f) Comfort Letter. The Company shall have received, in form and
     substance reasonably satisfactory to the Company, from Arthur Anderson LLP,
     Crescent's independent public accountants, the "comfort" letter described
     in Section 5.3(b).
 
          (g) Preferred Stock Investment. Crescent shall have performed all of
     its obligations, if any, pursuant to Section 5.17 hereof, in all material
     respects.
 
          (h) Company Plans. The Operating Joint Venture shall have assumed all
     obligations under and adopted the Company Plans (other than the Stock Plans
     referred to in Section 5.8), without regard to materiality. The Operating
     Joint Venture shall have agreed to honor without modification or contest,
     and to make required payments when due under, all Company Plans (as defined
     herein, but without regard to materiality) in accordance with their terms
     as of the date of this Agreement (as modified to the extent permitted by
     this Agreement). The Operating Joint Venture shall have agreed to employ at
     their current locations each person who is an employee of the Company
     immediately prior to the Effective Time (the "Affected Employees") on terms
     no less favorable in the aggregate (including with respect to position,
     duties, responsibilities, compensation, incentives and location) than those
     provided on the date hereof to the Affected Employees. The Operating Joint
     Venture shall have agreed to provide each Affected Employee with benefits
     that are at least equivalent in the aggregate to the benefits provided to
     each such Affected Employee immediately prior to the Effective Time.
     Crescent agrees that, for purposes of all employee benefit plans
     (including, but not limited to, all "employee benefit plans" within the
     meaning of Section 3(3) of ERISA, and all policies and employee fringe
     benefit programs, including vacation policies) of the Operating Joint
     Venture (such plans, programs, policies and arrangements, the "Buyer
     Plans") in which the Affected Employees may participate following the
     Effective Time under which an employee's eligibility or benefits depends,
     in whole or in part, on length of service, credit will be given to the
     Affected Employees for service previously credited with the Company or any
     affiliates of the Company prior to the Effective Time, provided, that such
     crediting of service does not result in duplication of benefits, and
     provided that such crediting of service shall not be given for benefit
     accrual purposes under any Buyer Plan that is a defined benefit plan.
     Affected Employees shall also be given credit for any deductible or
     co-payment amounts paid in respect of the plan year in which the Effective
     Time occurs, to the extent that, following the Effective Time, they
     participate in any Buyer Plan for which deductibles or co-payments are
     required. The Operating Joint Venture shall have caused each Buyer Plan to
     waive (i) any preexisting condition restriction or (ii) waiting period
     limitation which would otherwise be applicable to an Affected Employee on
     or after the Effective Time. On or prior to the Effective Time, the
     Operating Joint Venture shall have assumed all liabilities and obligations
     whatsoever for all accrued benefits under the Company 401(k) Plan in
     respect of the Affected Employees and Crescent shall be relieved of all
     such liabilities and obligations. Crescent and the Company shall cooperate
     in the filing of documents required, if any, by the transfer of assets and
     liabilities described herein.
 
          (i) Additional Directors. Frank J. Fertitta III and Lorenzo J.
     Fertitta shall have become members of the Boards of Trust Managers of
     Crescent and the Board of Directors of the JV Parent.
 
                                      B-35
<PAGE>   194
 
     Section 6.3  Conditions to Obligations of Crescent to Effect the Merger.
The obligations of Crescent to effect the Merger shall be subject to the
fulfillment (or waiver by Crescent) at or prior to the Effective Time of the
following additional conditions:
 
          (a) Performance of Obligations; Representations and Warranties. The
     Company shall have performed each of its agreements contained in this
     Agreement required to be performed at or prior to the Effective Time, each
     of the representations and warranties of the Company contained in this
     Agreement that is qualified as to materiality shall be true and correct at
     and as of the Effective Time as if made at and as of such time (other than
     representations and warranties which address matters only as of a certain
     date, which shall be true and correct as of such certain date) and each of
     the representations and warranties that is not so qualified shall be true
     and correct in all material respects at and as of the Effective Time as if
     made on and as of such date (other than representations and warranties
     which address matters only as of a certain date, which shall be true and
     correct in all material respects as of such certain date), in each case
     except as contemplated or permitted by this Agreement, and Crescent shall
     have received a certificate signed on behalf of the Company by its Chief
     Executive Officer and its Chief Financial Officer to such effect.
 
          (b) Consents Under Agreements. The Company shall have obtained any
     amendments, waivers, consents or approvals with respect to the agreements
     and documents listed on Schedule 6.3(b) attached hereto, as Crescent shall
     reasonably request.
 
          (c) Letters from Company Affiliates. Crescent shall have received from
     each person named in the list referred to in Section 5.5 an executed copy
     of an agreement substantially in the form of Schedule 6.3(c) hereto.
 
          (d) No Litigation. There shall not be pending or threatened any suit,
     action or proceeding by any Governmental Entity or any other person that
     has a significant likelihood of success (i) seeking to restrain or prohibit
     the consummation of the Merger or any of the other transactions
     contemplated by this Agreement or seeking to obtain from the Company any
     damages that are material in relation to the Company, Crescent and their
     respective Subsidiaries taken as a whole, (ii) seeking to prohibit or limit
     the ownership or operation by the Company, Crescent or any of its
     respective Subsidiaries of any material portion of the combined business or
     assets of the Company, Crescent and their respective Subsidiaries, or to
     compel the Company, Crescent or their respective Subsidiaries to dispose of
     or hold separate any material portion of the combined business or assets of
     the Company, Crescent and their respective Subsidiaries, as a result of the
     Merger or any of the other transactions contemplated by this Agreement,
     (iii) seeking to impose limitations on the ability of Crescent to acquire
     or hold, or exercise full rights of ownership of, any shares of Company
     Common Stock or Convertible Preferred Stock, including, without limitation,
     the right to vote any Company Common Stock or Convertible Preferred Stock
     purchased by it on all matters properly presented to the stockholders of
     the Company, (iv) except as set forth in the Company SEC Documents, seeking
     to prohibit Crescent or any of its Subsidiaries from effectively
     controlling in any material respect the business or operations of the
     Company or its Subsidiaries or (v) which otherwise would reasonably be
     expected to have a Material Adverse Effect on the Company; other than any
     suit, action or proceedings against the Company or its Subsidiaries seeking
     to revoke any gaming licenses or require any modification of the Company's
     hotel/casino facility located in Kansas City, Missouri.
 
          (e) Rights Agreement. The Rights shall not have become nonredeemable,
     exercisable, distributed or triggered pursuant to the terms of the Rights
     Agreement.
 
          (f) Tax Opinion. On the Closing Date, the opinion of Shaw, Pittman,
     Potts & Trowbridge, counsel to Crescent, shall have been delivered to
     Crescent in form and substance reasonably satisfactory to Crescent stating
     (i) that Crescent is a "real estate investment trust" for federal income
     tax purposes, (ii) that consummation of the transactions contemplated by
     this Agreement will not cause Crescent to cease to qualify as a "real
     estate investment trust" for federal income tax purposes, and (iii) that
     the Merger will be treated for Federal income tax purposes as a
     reorganization within the meaning of section 368(a) of the Code, and that
     each of Crescent and the Company will be a party to that
                                      B-36
<PAGE>   195
 
     reorganization within the meaning of section 368(b) of the Code. Also on
     the Closing Date, the opinion of Shaw, Pittman, Potts & Trowbridge shall
     have been delivered to Crescent in form and substance reasonably
     satisfactory to Crescent stating that, except as disclosed in this
     Agreement or in the SEC Documents, (i) the transactions contemplated by
     Section 5.18 shall have complied in all respects with applicable law, (ii)
     to the extent applicable, such transactions shall have been effective to
     transfer the full and complete interest in and rights with respect to the
     disposed assets and (iii) such transactions are not the subject of any
     pending or threatened claim or challenge by any person. Such counsel shall
     not unreasonably refuse to deliver such opinions, and issues relating to
     the subsequent transfer of the assets from Crescent to Crescent OP shall
     not constitute a reasonable basis for refusal to render the opinions. In
     rendering such opinions, such counsel shall be entitled to rely upon
     representations requested by such counsel and made by Crescent.
 
          (g) Resignations. Crescent shall have received the resignations of
     each officer and director of the Company and each of its Subsidiaries.
 
          (h) Comfort Letter. Crescent shall have received, in form and
     substance reasonably satisfactory to Crescent, from Arthur Andersen LLP,
     the Company's independent public accountants, the "comfort" letter
     described in Section 5.3(a).
 
                                  ARTICLE VII
 
                       TERMINATION, AMENDMENT AND WAIVER
 
     Section 7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval of any matters presented
in connection with the Merger by the stockholders of the Company:
 
          (a) by mutual written consent of Crescent and the Company;
 
          (b) by either Crescent or the Company if there has been a material
     breach of the representations, warranties, covenants and agreements on the
     part of the other set forth in this Agreement, which breach has not been
     cured within ten business days following receipt by the breaching party of
     notice of such breach from the nonbreaching party;
 
          (c) by either Crescent or the Company if any permanent order, decree,
     ruling or other action of a court or other competent authority restraining,
     enjoining or otherwise preventing the consummation of the Merger shall have
     become final and non-appealable;
 
          (d) by either Crescent or the Company if the Merger shall not have
     been consummated before January 31, 1999, unless the failure to consummate
     the Merger is the result of a material breach of this Agreement by the
     party seeking to terminate this Agreement; provided, however, that the
     passage of such period shall be tolled for any part thereof during which
     any party shall be subject to a nonfinal order, decree, ruling or other
     action restraining, enjoining or otherwise preventing the consummation of
     Merger;
 
          (e) by either Crescent or the Board of Directors of the Company if any
     required approval of the Merger by the holders of each class of capital
     stock of the Company shall not have been obtained by reason of the failure
     to obtain the required vote upon a vote held at a duly held meeting of such
     stockholders or at any adjournment thereof;
 
          (f) by Crescent if the Board of Directors of the Company shall or
     shall resolve to (i) not recommend, or withdraw its approval or
     recommendation of, the Merger, this Agreement or any of the transactions
     contemplated hereby, (ii) modify such approval or recommendation in a
     manner adverse to Crescent or (iii) approve or recommend a superior
     proposal pursuant to Section 4.3(b); or
 
          (g) by the Board of Directors of the Company if (i) to the extent
     permitted by Section 4.3(b), the Board of Directors of the Company
     authorizes the Company to enter into a binding written agreement concerning
     a transaction that constitutes a Superior Proposal and the Company provides
     notification to Crescent in accordance with Section 4.3(b), and (ii)
     Crescent does not make, within ten business days of
                                      B-37
<PAGE>   196
 
     receipt of the Company's written notification of its intention to enter
     into a binding agreement for a Superior Proposal, an offer that the Board
     of Directors of the Company determines, in good faith after consultation
     with its financial advisors, is at least as favorable, from a financial
     point of view, to the shareholders of the Company as the Superior Proposal,
     and (iii) the Company, prior to such termination has paid to Crescent an
     amount in cash equal to the sum of the Crescent Termination Fee plus all
     Expenses as provided by Section 5.7.
 
     Section 7.2 Effect of Termination. In the event of termination of this
Agreement by either Crescent or the Company, as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability hereunder
on the part of the Company, Crescent or their respective officers, directors or
trust managers (except for Sections 2.16, 3.20 and 5.7, this Section 7.2 and
Article VIII, which shall survive the termination); provided, however, that
nothing contained in this Section 7.2 shall relieve any party hereto from any
liability for any breach of this Agreement and the obligations under Section
5.17 shall survive the termination.
 
     Section 7.3 Amendment. This Agreement may be amended by the parties hereto,
by or pursuant to action taken by their respective Boards of Directors or Trust
Managers, as the case may be, at any time before or after approval of the
matters presented in connection with the Merger by the stockholders of the
Company, but, after any such approval, no amendment shall be made which by law
requires further approval by such stockholders without such further approval.
This Agreement may not be amended except by an instrument in writing duly
executed by each of the parties hereto.
 
     Section 7.4 Waiver. At any time prior to the Effective Time, the parties
hereto may (i) extend the time for performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the Agreements or
conditions contained herein which may legally be waived. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing duly executed by such party. The failure
of any party to this Agreement to assert any of its rights under this Agreement
or otherwise shall not constitute a waiver of such rights.
 
                                  ARTICLE VIII
 
                               GENERAL PROVISIONS
 
     Section 8.1  Non-Survival of Representations and Warranties. The
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall terminate at the Effective Time.
 
     Section 8.2  Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given when delivered personally, one day after
being delivered to a nationally recognized overnight courier or when telecopied
(with a confirmatory copy sent by such overnight courier) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
 
     (a) if to Crescent, to
 
           Crescent Real Estate Equities Company
           777 Main Street
           Suite 2100
           Fort Worth, TX 76102
           Attention: Gerald W. Haddock
           President and Chief Executive Officer
           Facsimile No.: (817) 878-0429
 
                                      B-38
<PAGE>   197
 
          with copies to:
 
           Crescent Real Estate Equities Company
           777 Main Street
           Suite 2100
           Fort Worth, TX 76102
           Attention: David M. Dean
           Senior Vice President, Law
           Facsimile No.: (817) 878-0429
 
           Robert B. Robbins
           Shaw, Pittman, Potts & Trowbridge
           2300 N Street, N.W.
           Washington, D.C. 20037
           Facsimile No.: (202) 663-8007
 
     (b) if to the Company, to
 
           Station Casinos, Inc.
           2411 W. Sahara Avenue
           Las Vegas, NV 89120
           Attention: Scott M Nielson
           Facsimile No.: (702) 367-2424
 
          with a copy to:
 
           Milbank, Tweed, Hadley & McCloy
           601 South Figueroa Street
           Thirtieth Floor
           Los Angeles, CA 90017
           Attention: Kenneth J. Baronsky
                      Eric H. Schunk
           Facsimile No.: (213) 629-5063
 
     Section 8.3  Interpretation. When a reference is made in this Agreement to
a Section or Article, such reference shall be to a Section or Article of this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation".
 
     Section 8.4  Counterparts. This Agreement may be executed in counterparts,
all of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
 
     Section 8.5  Entire Agreement; No Third-Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, except that the confidentiality and standstill agreement
between the parties shall remain in full force and effect, provided, further,
however, that the Company agrees that such agreement shall not prohibit
Crescent's purchases of the Convertible Preferred Stock. Any shares so purchased
shall be voted in favor of the Merger and any subsequent transferee from
Crescent of the Convertible Preferred Stock shall be bound by the foregoing
voting agreement. Except as set forth in Section 5.20, this Agreement is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
 
     Section 8.6  Governing Law. Except to the extent that the laws of the
States of Nevada, Missouri and Louisiana are mandatorily applicable to the
Merger, including, without limitation, the Gaming Laws, this Agreement shall be
governed by, and construed in accordance with, the laws of the State of
Delaware, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
 
                                      B-39
<PAGE>   198
 
     Section 8.7  Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties.
 
     Section 8.8  Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other terms, conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually accepted manner in
order that the transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.
 
     Section 8.9  Enforcement of this Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific wording or were
otherwise breached. It is accordingly agreed that the parties hereto shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to obtain specific performance of the terms and provisions hereof in any
court of the United States or any state having jurisdiction, such remedy being
in addition to any other remedy to which any party is entitled at law or in
equity. In any arbitration, suit or other proceeding that may be initiated to
enforce any of the rights or obligations created hereunder, the prevailing party
shall be entitled to the award of its costs and expenses, including attorneys'
fees in connection with such arbitration, suit or other proceeding, together
with interest on any damages or other amounts awarded, from the dates on which
such damages, costs or expenses were incurred and until paid, at the prime or
base rate of Citibank, N.A.
 
     Section 8.10 Limited Liability of Shareholders. All persons dealing with
Crescent must look solely to Crescent's property for the enforcement of any
claims against Crescent, as the trust managers, officers, agents and
shareholders of Crescent assume no personal obligations of Crescent, and their
respective properties shall not be subject to claims of any person relating to
such obligation.
 
                                      B-40
<PAGE>   199
 
     IN WITNESS WHEREOF, Crescent and the Company have caused this Agreement to
be signed by their respective officers thereunto duly authorized, and the
members of the Ownership Group have signed this Agreement, all as of the date
first written above.
 
                                            CRESCENT REAL ESTATE EQUITIES
                                              COMPANY
 
                                            By:      /s/ DAVID M. DEAN
 
                                              ----------------------------------
                                              Name: David M. Dean
                                              Title: SVP, Law
 
                                            STATION CASINOS, INC.
 
                                            By:  /s/ FRANK J. FERTITTA III
 
                                              ----------------------------------
                                              Name: Frank J. Fertitta III
                                              Title: Chairman of the Board and
                                                President
 
                                            SOLELY FOR PURPOSES OF
                                              SECTIONS 4.3(c) AND 5.18:
 
                                                /s/ FRANK J. FERTITTA III
 
                                            ------------------------------------
                                                   Frank J. Fertitta III
 
                                                 /s/ LORENZO J. FERTITTA
 
                                            ------------------------------------
                                                    Lorenzo J. Fertitta
 
                                                  /s/ BLAKE L. SARTINI
 
                                            ------------------------------------
                                                      Blake L. Sartini
 
                                      B-41
<PAGE>   200
 
                                FIRST AMENDMENT
                        TO AGREEMENT AND PLAN OF MERGER
 
     This FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this "Amendment") is
dated as of February 17, 1998 and entered into by and between Station Casinos,
Inc., a Nevada corporation (the "Company") and Crescent Real Estate Equities
Company, a Texas real estate investment trust ("Crescent") with reference to
that certain Agreement and Plan of Merger, dated as of January 16, 1998 by and
between the Company and Crescent ("Merger Agreement"). Capitalized terms used in
this Amendment without definition shall have the meanings set forth in the
Merger Agreement.
 
                         AMENDMENTS TO MERGER AGREEMENT
 
     1.1  Amendment to Subsection 5.2(c). Subsection 5.2(c) of the Merger
Agreement is hereby amended by deleting such subsection in its entirety and
substituting for such subsection the following:
 
          "(c) Each of the Company and Crescent will, or will cause the
     appropriate party to, as soon as practicable after execution and delivery
     of this Agreement and in a manner designed not to delay the Closing, make
     all filings or submissions that may be required under the HSR Act. Each of
     the Company and Crescent will, or will cause the appropriate party to,
     promptly furnish to the other such necessary information and reasonable
     assistance as the other may request in connection with the preparation of
     any filing or submissions necessary under the HSR Act. Without limiting the
     generality of the foregoing, each of the Company and Crescent will promptly
     notify the other of the receipt and content of any inquiries or requests
     for additional information made by any Governmental Entity in connection
     therewith and will, or will cause the appropriate party to, promptly (i)
     comply with any such inquiry or request and (ii) provide the other with a
     description of the information provided to any Governmental Entity with
     respect to any such inquiry or request. In addition, each of the Company
     and Crescent will keep the other apprised of the status of any such inquiry
     or request."
 
                                 MISCELLANEOUS
 
     2.1  Effect on Merger Agreement. On and after the date of this Amendment,
each reference in the Merger Agreement to "this Agreement," "hereunder,"
"hereof," "herein," or words of like import referring to the Merger Agreement
shall mean and be a reference to the Merger Agreement as amended by this
Amendment. Except as specifically amended by this Amendment, the Merger
Agreement shall remain in full force and effect and is hereby ratified and
confirmed.
 
     2.2  Applicable Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts made
and to be performed entirely within such State.
 
                                      B-42
<PAGE>   201
 
     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto authorized as
of the date first written above.
 
                                            STATION CASINOS, INC.
 
                                            By: /s/ GLENN C. CHRISTENSON
                                              ----------------------------------
                                              Glenn C. Christenson
                                              Executive Vice President, Chief
                                                Administrative Officer and Chief
                                                Financial Officer
 
                                            CRESCENT REAL ESTATE EQUITIES
                                              COMPANY
 
                                            By: /s/ DALLAS E. LUCAS
                                              ----------------------------------
                                              Dallas E. Lucas
                                              Senior Vice President and Chief
                                                Financial Officer
 
                                      B-43
<PAGE>   202
 
                                SECOND AMENDMENT
                        TO AGREEMENT AND PLAN OF MERGER
 
     This SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this "Amendment") is
dated as of June 15, 1998 and entered into by and between Station Casinos, Inc.,
a Nevada corporation (the "Company") and Crescent Real Estate Equities Company,
a Texas real estate investment trust ("Crescent"), with reference to that
certain Agreement and Plan of Merger, dated as of January 16, 1998, as amended,
by and between the Company and Crescent (the "Merger Agreement"). Capitalized
terms used in this Amendment without definition shall have the meanings set
forth in the Merger Agreement.
 
                         AMENDMENTS TO MERGER AGREEMENT
 
     1.1 Amendment to Section 1.1. Section 1.1 of the Merger Agreement is hereby
amended by replacing the words "(the "Surviving Corporation")" in the second
line of the second sentence thereof with the words "(the "Surviving Entity")".
 
     1.2 Amendment to Section 1.5(d). Section 1.5(d) is hereby amended by
deleting the last sentence thereof in its entirety and substituting for such
sentence the following:
 
          Subject to the provisions of Sections 1.8 and 1.10 hereof, each share
     of Company Common Stock that is held by any wholly owned Subsidiary (as
     defined in Section 2.1) of the Company or Crescent (together, in each case,
     with the associated Right (as defined in Section 3.2)) shall be converted
     into the number of validly issued, fully paid and nonassessable Common
     Shares equal to the Exchange Ratio.
 
     1.3 Amendment to Section 2.1. Section 2.1 of the Merger Agreement is hereby
amended by replacing the word "Company" in the fourth sentence thereof with the
word "Crescent".
 
     1.4 Amendment to Section 2.17(a). Section 2.17(a) of the Merger Agreement
is hereby amended by inserting in the second line thereof, after the word
"Crescent," the words "neither Crescent" and by replacing the term "Company
Multiemployer Plan" in the third line thereof with the term "Crescent
Multiemployer Plan".
 
     1.5 Amendment to Section 3.6. Section 3.6 of the Merger Agreement is hereby
amended by adding at the end of the last sentence thereof, after the words "as
required by law", the words ", disseminated to the stockholders of the Company".
 
     1.6 Amendment to Section 5.8(a). Section 5.8(a) of the Merger Agreement is
hereby amended by replacing the words "Company Stock Option" in the first
sentence thereof with the words "option to purchase Company Common Stock (each a
"Company Stock Option")", by replacing the words "and represent a fully
exercisable" in the fifth line of the first sentence thereof with the word "an",
by replacing the word "percent" in the ninth line of the first sentence thereof
with the word "cent" and by adding at the end of the first sentence thereof,
after the words "Effective Time", the words "divided by the Exchange Ratio".
 
     1.7 Amendment to Section 5.17. Section 5.17 of the Merger Agreement is
hereby amended by replacing the reference to "Article II" in the fourth line of
the fourth sentence thereof with a reference to "Article III" and by inserting
in the sixth line of the fourth sentence thereof, immediately following
romanette (iii), the word "unless".
 
     1.8 Amendment to and Obligations under Section 5.22. Section 5.22 of the
Merger Agreement is hereby amended by adding at the end of such section, before
the period, the phrase ", except that such agreements shall be revised (i) to
add to the definition of 'Shares' set forth in Section 1 of such agreements, as
a new subsection (vi), the words 'and (vi) any rights described in Exhibits A or
B to the Merger Agreement and any securities underlying such rights, provided
that neither such rights nor any shares issued upon exercise of such rights
shall be subject to the Lock-Up Agreement provided in Section 2 of this
Agreement, and provided further, that the proviso in the definition of
Registrable Shares which limits the number of Shares that may be registered
shall not be deemed to apply to such rights or any such securities underlying
such rights, and provided further, that Crescent's covenants to register shares
contained in such agreements shall extend to
 
                                      B-44
<PAGE>   203
 
such rights and to any securities underlying such rights, whether issued by
Crescent or by a subsidiary of Crescent', (ii) to provide that the Lock-Up
Period provided in Section 2(a) of such agreements shall expire eighteen months
after January 16, 1998 and the Lock-Up Period provided in Section 2(b) of such
agreements shall expire twelve months after January 16, 1998, and (iii) to
replace the words 'Station Common Stock' in clause (i) of the definition of
'Shares' with the words 'Common Shares' and to insert, after the word 'date' in
the third line of said definition, the words 'one day after the date'." Each
member of the Ownership Group hereby confirms his obligations under and agrees
to be bound by Section 5.22 of the Merger Agreement.
 
     1.9 Amendment to Section 6.3(a). Section 6.3(a) of the Merger Agreement is
hereby amended by inserting in the third line thereof, after the words
"Effective Time," the words "each member of the Ownership Group and each of
William W. Warner and Scott M. Nielson shall have performed each of his
agreements contained in this Agreement required to be performed at or prior to
the Effective Time".
 
     1.10 Amendment to Section 7.1(d). Section 7.1(d) of the Merger Agreement is
hereby amended by adding, after the phrase "January 31, 1999," the phrase
"(except that either party, in its discretion, shall have the right to extend
the date of consummation of the Merger from January 31, 1999, to a date not
later than March 31, 1999)".
 
     1.11 Amendment to Section 8.5. Section 8.5 of the Merger Agreement is
hereby amended by adding at the end of the first sentence thereof, after the
words "Convertible Preferred Stock", the words " or Redeemable Preferred Stock".
 
     1.12 Amendment to Schedule 3.4 of the Company's Disclosure Letter. Schedule
3.4 to the Company's disclosure letter is hereby amended by replacing the words
"Merger Agreement" in the last sentence of the third item under "Loans, Credit
Agreements, Etc." with the words "Participation Agreement".
 
     1.13 Amendment to Schedule 3.13 of the Company's Disclosure
Letter. Schedule 3.13 to the Company's disclosure letter is hereby amended by
deleting the bracketed language in Item 1 under "Compliance with Environmental
Laws."
 
     1.14 Amendment to Section 6.2 and Addition of Section 5.25. Section 6.2 of
the Merger Agreement is hereby amended by deleting subsection (i). Article V of
the Merger Agreement is hereby amended by adding a new Section 5.25, as follows:
 
          "Section 5.25 Agreement to Name Directors. Upon written request by
     Frank J. Fertitta III and Lorenzo J. Fertitta, delivered within three
     months after the Effective Time, such persons shall become members of the
     Board of Trust Managers of Crescent and the Board of Directors of the JV
     Parent."
 
     1.15 Amendment to Section 5.20. Section 5.20 of the Merger Agreement is
hereby amended to replace the reference to "Section 6.2(i)" with a reference to
"Section 5.25".
 
                                 MISCELLANEOUS
 
     2.1 Effect on Merger Agreement. On and after the date of this Amendment,
each reference in the Merger Agreement to "this Agreement," "hereunder,"
"hereof," "herein," or words of like import referring to the Merger Agreement
shall mean and be a reference to the Merger Agreement as amended by this
Amendment. Except as specifically amended by this Amendment, the Merger
Agreement shall remain in full force and effect and is hereby ratified and
confirmed.
 
     2.2 Applicable Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts made
and to be performed entirely within such State.
 
     2.3 Consent to Press Release. Station hereby consents to the public
issuance of the press release attached hereto as Exhibit A and to the
declaration of the distribution of common stock purchase rights on the terms
attached hereto as Exhibit B, and confirms that such press release and
declaration may be given or made without the need for any further amendment of,
or consent pursuant to the Merger Agreement, so long as neither such press
release nor the terms of such declaration are modified, supplemented or amended
in a manner materially adverse to the holders of Company Common Stock or
Convertible Preferred Stock. The
                                      B-45
<PAGE>   204
 
parties hereto agree that the record dates for the distributions of the rights
described in Exhibits A and B shall be set so as to permit the Conversion Price
of the Convertible Preferred Stock to be adjusted pursuant to Section 7(d) of
the Certificate of Resolution Establishing Designation, Preferences and Rights
of $3.50 Convertible Preferred Stock of Station Casinos, Inc. to account for
such distributions.
 
     2.4 Adjustment of Stock Options. If, based on the issuance of the
subscription rights described in Exhibit B, any change or adjustment is made to
the options or the terms of any of the options granted under the Crescent Stock
Plans, or if any executive officer or director of Crescent shall be granted any
new options in lieu on an adjustment to such options, in each case to the extent
such change, adjustment or grant is based on the issuance of the subscription
rights described in Exhibits A or B, then an equivalent and proportional change,
adjustment or grant shall be made to the terms of each Substitute Option. No
other change or adjustment shall be made to the terms of any Substitute Option
based on the issuance of such subscription rights. Each member of the Ownership
Group and William W. Warner, Scott M. Nielson and Glenn C. Christenson agrees,
for himself, to execute the waiver attached hereto as Schedule 2.4.
 
     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
 
                                            STATION CASINOS, INC.
 
                                            By: /s/ FRANK J. FERTITTA III
                                            ------------------------------------
                                            Name: Frank J. Fertitta III
                                            Title: Chairman of the Board and
                                                   Chief
                                                 Executive Officer
 
                                            By:  /s/ LORENZO J. FERTITTA
                                            ------------------------------------
                                            Name: Lorenzo J. Fertitta
                                            Title: Director
 
                                            CRESCENT REAL ESTATE EQUITIES
                                              COMPANY
 
                                            By:      /s/ DAVID DEAN
                                            ------------------------------------
                                            Name: David Dean
                                            Title:
 
                                            SOLELY FOR PURPOSES OF SECTIONS 1.9
                                            (SECTION 5.22 OF THE MERGER
                                            AGREEMENT) AND THE LAST SENTENCE OF
                                            SECTION 2.4 OF THIS AMENDMENT:
 
                                                /s/ FRANK J. FERTITTA III
                                            ------------------------------------
                                                   Frank J. Fertitta III
 
                                                 /s/ LORENZO J. FERTITTA
                                            ------------------------------------
                                                    Lorenzo J. Fertitta
 
                                                  /s/ BLAKE L. SARTINI
                                            ------------------------------------
                                                      Blake L. Sartini
 
                                      B-46
<PAGE>   205
 
                                            SOLELY FOR PURPOSES OF THE LAST
                                            SENTENCE OF SECTION 2.4 OF THIS
                                            AMENDMENT:
 
                                                  /s/ WILLIAM W. WARNER
                                            ------------------------------------
                                                     William W. Warner
 
                                                   /s/ SCOTT M NIELSON
                                            ------------------------------------
                                                      Scott M Nielson
 
                                                /s/ GLENN C. CHRISTENSON
                                            ------------------------------------
                                                    Glenn C. Christenson
 
                                      B-47
<PAGE>   206
 
                                                                       EXHIBIT A
PRESS RELEASE  CRESCENT REAL ESTATE
                                                           EQUITIES COMPANY
 
FOR IMMEDIATE RELEASE
 
FORT WORTH, TEXAS
JUNE 15, 1998
 
                         CRESCENT REAL ESTATE EQUITIES
                      ANNOUNCES THAT 66% DIVIDEND INCREASE
                     WILL FOLLOW CLOSING OF STATION MERGER
 
     Crescent Real Estate Equities Company (NYSE:CEI), one of the country's
largest real estate investment trusts, today announced that the board of trust
managers has approved, upon completion of its pending merger with Station
Casinos, Inc. (NYSE:STN), an increase in the company's quarterly dividend to
$.63 per share from $.38 per share, representing an increase of approximately
66%. Crescent anticipates completion of the merger in the fourth quarter of
1998, subject to approval by Station's shareholders, gaming regulators in Nevada
and Missouri and satisfaction of other closing conditions.
 
     Gerald W. Haddock, Crescent's president and chief executive officer
commented, "In determining the new dividend amount, management and the board of
trust managers considered such factors as the Company's substantial cash flow
growth in the prior twelve months and near-term and long-term internal and
external growth prospects, including the accretion resulting from the Station
transaction. After initiating this dividend increase upon completion of the
Station merger, the Company will continue to maintain a conservative payout
ratio based on both funds from operations and funds available for distribution."
 
     Crescent also announced that, upon completion of the merger with Station,
it will commence a rights offering, pursuant to which Crescent's shareholders
(including the former shareholders of Station) will receive one right for each
share of common stock held. Every five rights will entitle the holder thereof to
purchase one share of Crescent common stock at an exercise price of $31 1/8 per
share, which was the closing price of the common stock on June 12, 1998, as
reported by the NYSE. Unitholders in Crescent's operating partnership will
receive corresponding rights. All of the rights will be exercisable until 60
days after the record date for the distribution. The record date for
distribution of the rights will follow the closing of the merger with Station.
Proceeds of the rights offering will be used to fund acquisitions or to prepay
outstanding borrowings. The rights offering will be made pursuant to a
registration statement filed today with the Securities and Exchange Commission,
following its effectiveness.
 
     Crescent also announced that it intends to contribute substantially all of
the real estate assets acquired from Station to a new partnership (the "Casino
Partnership") that will invest principally in casinos, other gaming properties
and other real estate properties in Las Vegas, Nevada. Crescent initially would
own all of the Casino Partnership, but expects to offer Crescent's shareholders
and unitholders rights to acquire common or preferred equity interests in the
Casino Partnership, or in a real estate investment trust which would hold
interests in the Casino Partnership. The record date for any such offering will
follow the closing of the merger with Station. Any proceeds raised through such
an offering would be used to prepay indebtedness assumed in connection with the
Station merger or to fund new acquisitions or developments. No decisions have
been made as to the terms of any such offering, or as to what securities might
be offered. The structuring of the Casino Partnership has not been finalized,
and its formation is contingent upon the closing of the merger transaction with
Station.
 
     "A rights offering currently represents the optimal manner in which to
raise new equity as it provides our shareholders the ability to maintain their
pro rata ownership interests in Crescent," stated Mr. Haddock. "Furthermore,
because of the opportunity we have to expand the Station gaming franchise, a
separately capitalized and focused gaming entity in which Crescent retains
control and the majority of the ownership is the ideal structure to execute our
game plan."
                                      B-48
<PAGE>   207
 
     Crescent will be conducting a conference call to discuss these
announcements on Monday, June 15, 1998 at 4:00 P.M. EST. To access the
conference call, please dial 800/779-1743 (Code: Crescent).
 
     Crescent is a fully integrated real estate company which, upon completion
of certain pending transactions, will own through its subsidiaries a portfolio
of real estate assets, consisting of 88 office properties and 7 retail
properties totaling 32 million square feet, a 38% interest in 94 refrigerated
warehouse facilities, 89 behavioral healthcare facilities, 6 hotel/casino
properties, 7 full-service hotels totaling 2,276 rooms, 2 destination health and
fitness resorts, and economic interests in 5 residential development
corporations. The office and retail properties are located primarily in 21
metropolitan submarkets in Texas and Colorado.
 
     For further information, please contact Dallas E. Lucas, Chief Financial
Officer, Crescent Real Estate Equities Company at (817) 321-1426. Crescent is
also online at www.cei-crescent.com.
 
                                      B-49
<PAGE>   208
 
                                                                       EXHIBIT B
 
TERMS OF DECLARATION OF STOCK PURCHASE RIGHTS
 
1. Crescent will declare a distribution, to its holders of record following the
   Effective Time of the Merger, of one common stock purchase right with respect
   to each share of Crescent Common Stock, and one unit purchase right with
   respect to each unit of Crescent Real Estate Limited Partnership then
   outstanding.
 
2. The rights shall have a term of 60 days commencing on the record date.
 
3. A fixed number of common stock purchase rights, which shall be not less than
   4.75 and not more than 5, will entitle a holder to purchase one share of
   Crescent common stock for $31 1/8. The same number of unit purchase rights
   will entitle a holder to purchase one unit of Crescent Real Estate Equities
   Limited Partnership for $66 1/4.
 
4. The rights will be freely transferable and will be listed for trading on the
   New York Stock Exchange.
 
5. The record date for the distribution of rights shall be established by the
   board of directors of Crescent, in its discretion, so long as the record date
   follows the Effective Time of the Merger.
 
                                      B-50
<PAGE>   209
 
                                                                    SCHEDULE 2.4
 
                                 June   , 1998
 
Crescent Real Estate Equities Company
777 Main Street
Suite 2100
Fort Worth, TX 76102-5325
 
Re:  Company Stock Options
 
Gentlemen:
 
     Pursuant to the Second Amendment to Agreement and Plan of Merger dated as
of June   , 1998, by and between Station Casinos, Inc., a Nevada corporation
(the "Company") and Crescent Real Estate Equities Company, a Texas real estate
investment trust ("Crescent"), with reference to that certain Agreement and Plan
of Merger, dated as of January 16, 1998, as amended, by and between the Company
and Crescent (the "Merger Agreement"), this letter will confirm that the
undersigned, as a holder of Company Stock Options, consents to the provisions of
Section 2.4 of such Second Amendment to Agreement and Plan of Merger, and will
assert no rights relating to the Company Stock Options or Substitute Options
held by the undersigned inconsistent with such amended provision.
 
     Capitalized terms used in this letter without definition shall have the
meanings set forth in the Merger Agreement.
 
                                            Very truly yours,
 
                                            ------------------------------------
 
                                      B-51
<PAGE>   210
 
                                THIRD AMENDMENT
                        TO AGREEMENT AND PLAN OF MERGER
 
     This THIRD AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this "Amendment") is
dated as of June 26, 1998 and entered into by and between Station Casinos, Inc.,
a Nevada corporation (the "Company") and Crescent Real Estate Equities Company,
a Texas real estate investment trust ("Crescent"), with reference to that
certain Agreement and Plan of Merger, dated as of January 16, 1998, as amended,
by and between the Company and Crescent (the "Merger Agreement"). Capitalized
terms used in this Amendment without definition shall have the meanings set
forth in the Merger Agreement.
 
                         AMENDMENTS TO MERGER AGREEMENT
 
     1.1  Amendment to Section 4.1(c). Section 4.1(c) of the Merger Agreement is
hereby amended by inserting the words "except as set forth in Section 1.1," at
the beginning of the first line thereof.
 
     1.2  Amendment to Section 4.1(g). Section 4.1(g) of the Merger Agreement is
hereby amended by replacing the words "except as set forth in Section 5.23" at
the beginning of the first line thereof, with the words "except as set forth in
Sections 1.1 and 5.23".
 
     1.3  Addition of Section 5.26. Article V of the Merger Agreement is hereby
amended by adding a new Section 5.26, as follows:
 
     Section 5.26  Agreement to Designate Additional Parties to Merger
     Agreement.
 
     At any time prior to the Effective Time, Crescent shall have the right, by
     written notice to the Company, to designate one or more corporations, a
     majority of the capital stock of which shall be owned by Crescent, as
     additional parties to this Agreement, for the limited purposes described in
     this paragraph, and to designate that the shares of certain subsidiaries of
     the Company shall be transferred by Crescent to such additional parties at
     the Effective Time. Such written notice shall be effective as an amendment
     to this Agreement for such limited purpose, shall be executed by such
     additional parties solely in order to become parties to this Agreement for
     such limited purpose, and shall grant to the additional parties the right
     to acquire from Crescent, upon the Effective Time, the shares of the
     subsidiaries so designated by Crescent.
 
     1.4  Amendment to Section 8.5. Section 8.5 of the Merger Agreement is
hereby amended by deleting the last sentence thereof in its entirety and
substituting for such sentence the following:
 
     Except as set forth in Sections 5.8, 5.13 and 5.20, this Agreement is not
     intended to confer upon any person other than the parties hereto any rights
     or remedies hereunder.
 
     1.5  Amendment to Section 8.7. Section 8.7 of the Merger Agreement is
hereby amended by deleting such section in its entirety and substituting for
such section the following:
 
     Neither this Agreement nor any of the rights, interests or obligations
     hereunder shall be assigned by any of the parties hereto (whether by
     operation of law or otherwise) without the prior written consent of the
     other parties; provided, that upon the merger of the Company into a wholly
     owned subsidiary to be formed as a Delaware corporation ("Delaware
     Station"), in accordance with Section 1.1 of this Agreement, Delaware
     Station, as successor-in-interest to the Company, automatically will become
     a party to this Agreement and succeed to all of the rights, interests and
     obligations of the Company hereunder; and further provided, that upon the
     merger of the Company into Delaware Station, (i) references herein and in
     the Company's disclosure letter delivered in connection herewith to the
     Company shall be deemed also to include a reference to Delaware Station,
     (ii) references herein to the State of Nevada shall be deemed to include,
     or be replaced with, as the context requires, a reference to the State of
     Delaware, and (iii) references herein to the NGCL and the provisions
     thereof shall be deemed to include, or be replaced with, as the context
     requires, a reference to the corresponding provision or provisions of the
     Delaware General Corporation Law, as amended; provided further, that the
     parties hereto agree that prior to the twentieth day prior to such merger
     of the Company and Delaware Station,
                                      B-52
<PAGE>   211
 
     the parties hereto shall have obtained resolutions from their respective
     governing boards and the board of directors and stockholders of Delaware
     Station approving, and the parties hereto and Delaware Station shall have
     executed and delivered, an assignment agreement assigning the rights and
     obligations of the Company hereunder to Delaware Station, in a form
     constituting a merger agreement between Delaware Station and Crescent for
     purposes of Delaware law.
 
     1.6  Amendment to Exhibit B. Exhibit B to the Merger Agreement (as first
included in Exhibit B to the Second Amendment to the Agreement and Plan of
Merger) is hereby amended by deleting the last sentence of Paragraph 3 of
Exhibit B in its entirety and substituting for such sentence with the following:
 
     The same number of unit purchase rights will entitle a holder to purchase
     one unit of Crescent Real Estate Equities Limited Partnership for $62 1/4.
 
                                 MISCELLANEOUS
 
     2.1  Effect on Merger Agreement. On and after the date of this Amendment,
each reference in the Merger Agreement to "this Agreement," "hereunder,"
"hereof," "herein," or words of like import referring to the Merger Agreement
shall mean and be a reference to the Merger Agreement as amended by this
Amendment. Except as specifically amended by this Amendment, the Merger
Agreement shall remain in full force and effect and is hereby ratified and
confirmed.
 
     2.2  Applicable Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts made
and to be performed entirely within such State.
 
     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
 
                                            STATION CASINOS, INC.
 
                                            By:  /s/ GLENN C. CHRISTENSON
 
                                              ----------------------------------
                                                     Glenn C. Christenson
                                                  Executive Vice President,
                                                   Chief Financial Officer
 
                                            CRESCENT REAL ESTATE EQUITIES
                                              COMPANY
 
                                            By:      /s/ DAVID M. DEAN
 
                                              ----------------------------------
                                                       David M. Dean
                                                          SVP, Law
 
                                      B-53
<PAGE>   212
 
                                                                         ANNEX C
                        REINCORPORATION MERGER AGREEMENT
 
                          AGREEMENT AND PLAN OF MERGER
 
                                       OF
 
                  STATION CASINOS, INC., A NEVADA CORPORATION
 
                                      AND
 
                 STATION CASINOS, INC., A DELAWARE CORPORATION
 
     This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
          , 1998, is between Station Casinos Inc., a Nevada corporation (the
"Company"), with its principal place of business at 2411 West Sahara Avenue, Las
Vegas, Nevada 89102, and Station Casinos, Inc., a Delaware corporation (the
"Subsidiary," and together with the Company, the "Constituent Corporations"),
with its principal place of business at 2411 West Sahara Avenue, Las Vegas,
Nevada 89102.
 
     WHEREAS, the Company has entered into a merger agreement dated as of
January 16, 1998 ("Crescent Merger Agreement"), with Crescent Real Estate
Equities Company, a Texas real estate investment trust ("Crescent"), whereby the
Company has agreed to merge with and into Crescent;
 
     WHEREAS, the Crescent Merger Agreement provides that to facilitate the
combination of the businesses of the Company and Crescent, the parties to the
Crescent Merger Agreement may reincorporate the Company in any state that would
permit the merger of the Company into Crescent;
 
     WHEREAS, the Delaware General Corporation Law (the "DGCL") and the Texas
Real Estate Investment Trust Act generally permit the merger of a Delaware
corporation with and into a Texas real estate investment trust; and
 
     WHEREAS, the respective boards of directors of the Constituent Corporations
have determined that it is desirable to merge the Company with and into the
Subsidiary to accomplish such a reincorporation (the "Merger");
 
     NOW, THEREFORE, in consideration of the foregoing and the agreements
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and intending to be legally bound by this
Agreement, the parties to this Agreement agree as follows:
 
                                   ARTICLE 1.
 
                                   THE MERGER
 
     1.1. The Merger. At the Effective Time (as hereafter defined) of the
Merger, the Company shall merge with and into the Subsidiary and the Subsidiary
shall be the surviving corporation (the "Surviving Corporation") and the
separate existence of the Company shall cease.
 
     1.2. Succession. At the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers, immunities and franchises, and shall
be subject to all the restrictions, disabilities and duties of the Constituent
Corporations, and all the property, real, personal and mixed of the Constituent
Corporations, and all debts due to any of the Constituent Corporations shall be
vested in the Surviving Corporation without the necessity for any separate
transfer. The Surviving Corporation shall thereafter be responsible and liable
for all debts, liabilities and duties of the Constituent Corporations, and
neither the rights of creditors nor any liens on the property of the Constituent
Corporations shall be impaired by the Merger.
 
     1.3. Effect of Merger on Stock of Constituent Corporations. At the
Effective Time, by virtue of the Merger, (i) each issued and outstanding share
of common stock of the Company, par value $.01 per share (the "Company Common
Stock") (including restricted shares of Company Common Stock issued under the
Company's Stock Compensation Program), together with the associated right issued
with respect to such
                                       C-1
<PAGE>   213
 
share of Company Common Stock under the Rights Agreement dated October 6, 1997
between the Company and Continental Stock Transfer & Trust Company, shall be
converted into and shall become one fully paid and nonassessable share of common
stock, par value $.01 per share of the Surviving Corporation ("Surviving
Corporation Common Stock"), (ii) each issued and outstanding share of the
Company's $3.50 Convertible Preferred Stock ("Company Convertible Preferred
Stock"), shall be converted into and shall become one fully paid and
nonassessable share of $3.50 Convertible Preferred Stock of the Surviving
Corporation ("Surviving Corporation Convertible Preferred Stock") and (iii) each
issued and outstanding share of the Company's $100 Redeemable Preferred Stock
("Company Redeemable Preferred Stock") shall be converted into and shall become
one fully paid and nonassessable share of $100 Redeemable Preferred Stock of the
Surviving Corporation ("Surviving Corporation Redeemable Preferred Stock"). At
the Effective Time, by virtue of the Merger each outstanding share of common
stock of the Subsidiary shall be cancelled.
 
     1.4. Stock Certificates. At the Effective Time, without further action by
the Constituent Corporations, each certificate representing shares of (i)
Company Common Stock shall thereafter represent the same number of shares of
Surviving Corporation Common Stock, (ii) Company Convertible Preferred Stock
shall thereafter represent the same number of shares of Surviving Corporation
Convertible Preferred Stock and (iii) Company Redeemable Preferred Stock shall
thereafter represent the same number of shares of Surviving Corporation
Redeemable Preferred Stock.
 
     1.5. Options. At the Effective Time, the Surviving Corporation will assume
the obligations and succeed to the rights of the Company under any employee or
director stock option plan (the "Plans"). At the Effective Time, by virtue of
the Merger, the outstanding and unexercised portion of each option to purchase
shares of the Company Common Stock outstanding under the Plans shall become an
option to purchase the same number of shares of Surviving Corporation Common
Stock with no other changes in the terms and conditions of such option,
including the exercise price thereunder.
 
     1.6. Acts, Plans, Policies, Agreements, Etc. All corporate acts, plans,
policies, agreements, arrangements, approvals, and authorizations of the
Company, its stockholders, board of directors and committees thereof, officers
and agents which were valid and effective immediately prior to the Effective
Time shall be taken for all purposes as the acts, plans, policies, agreements,
arrangements, approvals and authorizations of the Surviving Corporation and
shall be as effective and binding thereon as the same were with respect to the
Company.
 
                                   ARTICLE 2.
 
                                 EFFECTIVE TIME
 
     2.1. Stockholder Approval. Subsequent to the execution of this Agreement,
each of the Constituent Corporations shall submit this Agreement to their
respective stockholders for approval pursuant to the applicable provisions of
Chapters 78 and 92A of the Nevada Revised Statutes (the "NRS") and the DGCL. The
Company covenants and agrees that it will, as sole stockholder of Subsidiary,
exercise a written consent with respect to the Subsidiary Common Stock owned by
it to approve this Agreement as provided by law.
 
     2.2. Certificate/Articles of Merger. Following approval of this Agreement
in accordance with Section 2.1 above, and provided that:
 
          (a) the conditions specified in Section 5.1 hereof have been fulfilled
     or waived where applicable; and
 
          (b) this Agreement has not been terminated and abandoned pursuant to
     Section 5.4 hereof;
 
the Surviving Corporation shall cause a Certificate of Merger to be executed,
acknowledged and filed with the Secretary of State of Delaware in accordance
with the DGCL and shall cause Articles of Merger to be executed, acknowledged
and filed with the Secretary of State of Nevada in accordance with the NRS.
 
                                       C-2
<PAGE>   214
 
     2.3. Effective Time. The "Effective Time" shall be the later of the time a
Certificate of Merger is filed with the Delaware Secretary of State or the time
Articles of Merger are filed with the Nevada Secretary of State.
 
                                   ARTICLE 3.
 
                            COVENANTS AND AGREEMENTS
 
     3.1. Assumption by Subsidiary. Subsidiary covenants and agrees that as the
Surviving Corporation, it shall be liable for all the obligations of the
Constituent Corporations outstanding as of the Effective Time and hereby
expressly assumes all such obligations as of the Effective Time.
 
                                   ARTICLE 4.
 
                               CHARTER DOCUMENTS
 
     4.1. Certificate of Incorporation. The Certificate of Incorporation of the
Subsidiary as constituted at the Effective Time shall thereafter be the
Certificate of Incorporation of the Surviving Corporation.
 
     4.2. Bylaws. The bylaws of the Subsidiary shall be the bylaws of the
Surviving Corporation.
 
                                   ARTICLE 5.
 
                                 MISCELLANEOUS
 
     5.1. Conditions. The respective obligations of the Constituent Corporations
to consummate the Merger are subject to the following conditions, each of which
(other than paragraph (b) and (c) and the gaming approvals required in (d)) may
be waived by the Constituent Corporations:
 
          (a) All material third party consents which are required in order to
     consummate the Merger and to effectuate the contemplated transactions
     incidental or related thereto shall have been obtained;
 
          (b) Each of the Constituent Corporations shall have received the
     approval of its stockholders;
 
          (c) All conditions to the merger of Subsidiary with and into Crescent
     shall have been satisfied or waived in accordance with the terms of the
     Crescent Merger Agreement and in accordance with the Agreement and Plan of
     Merger of even date herewith by and between Crescent and Subsidiary; and
 
          (d) All approvals of the Merger required from the gaming authorities
     in all jurisdictions in which the Company does business shall have been
     obtained.
 
     5.2. Further Assurances. From time to time and when required by the
Subsidiary or by its successors and assigns, there shall be executed and
delivered on behalf of the Company such deeds and other instruments, and there
shall be taken or caused to be taken by it such further and other action, as
shall be appropriate and necessary in order to vest or perfect, or to confirm of
record or otherwise, in the Subsidiary the title in and possession of all the
property, interests, assets, rights, privileges, immunities, powers, franchises
and authority of the Company and otherwise to carry out the purposes of this
Agreement, and the directors and officers of the Company are fully authorized in
the name and on behalf of the Company or otherwise to take any and all such
action and to execute and deliver any and all such deeds and other instruments.
 
     5.3. Amendments. To the fullest extent permitted by applicable law, at any
time before or after approval by the stockholders of the Company or the
Subsidiary, this Agreement may be amended in any manner as may be determined in
the judgment of the respective boards of directors of the Constituent
Corporations to be necessary, desirable or expedient, whether or not the
stockholders of the Constituent corporations, or either of them, shall have
approved this Agreement.
 
     5.4. Abandonment. At any time before the Effective Time, this Agreement may
be terminated and the Merger may be abandoned by the board of directors of the
Company, notwithstanding the approval of this
 
                                       C-3
<PAGE>   215
 
Agreement by the stockholders of the Company, or the consummation of the Merger
may be deferred if, in the opinion of the board of directors of the Company,
such action would be in the best interests of the Constituent Corporations.
 
     5.5. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware and, to the extent applicable,
the NRS.
 
     IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective officers, all as of the day and year first above written.
 
                                            Station Casinos, Inc., a Nevada
                                            corporation
 
                                            By:
                                              ----------------------------------
 
                                              Name:
                                              ----------------------------------
 
                                              Title:
                                              ----------------------------------
 
                                            Station Casinos, Inc., a Delaware
                                            corporation
 
                                            By:
                                              ----------------------------------
 
                                              Name:
                                              ----------------------------------
 
                                              Title:
                                              ----------------------------------
 
                                       C-4
<PAGE>   216
 
                            STATEMENT OF DESIGNATION
                                       OF
                       $3.50 CONVERTIBLE PREFERRED SHARES
                                       OF
                     CRESCENT REAL ESTATE EQUITIES COMPANY
 
     The undersigned, the President and Chief Executive Officer of Crescent Real
Estate Equities Company, a real estate investment trust organized and existing
under the Texas Real Estate Investment Trust Act, as amended (the "Company"),
certifies that pursuant to the authority granted to and vested in the Board of
Trust Managers of the Company by the provisions of the Restated Declaration of
Trust of the Company, the Board of Trust Managers, acting through an authorized
committee thereof, has adopted the following resolution designating a new series
of preferred shares of beneficial interest of the Company.
 
     RESOLVED, that pursuant to the authority expressly granted to and vested in
the Board of Trust Managers of the Company by the provisions of the Restated
Declaration of Trust of the Company, the Board of Trust Managers, acting through
an authorized committee thereof, hereby designates 2,070,000 $3.50 Convertible
Preferred Shares of beneficial interest, $.01 par value per share (Liquidation
Preference $50.00 Per Share) (the "$3.50 Preferred Shares"), and authorizes the
issuance thereof, and hereby fixes the designation and number thereof and the
voting powers, preferences and relative, participating, optional and other
special rights of such shares, and the qualifications, limitations or
restrictions thereto as follows:
 
     SECTION 1. AMOUNT. The maximum number of $3.50 Preferred Shares shall be
2,070,000.
 
     SECTION 2. RANK. All $3.50 Preferred Shares shall rank prior, both as to
payment of distributions and as to distributions of assets upon liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary, to
all of the Company's now or hereafter issued Common Shares. The term "Common
Shares" shall mean the common shares of beneficial interest, $.01 par value per
share, of the Company as the same exists at the date hereof or as such shares
may be constituted from time to time.
 
     SECTION 3. DISTRIBUTIONS. The holders of $3.50 Preferred Shares shall be
entitled to receive, when, as and if declared by the Board of Trust Managers of
the Company out of funds of the Company at the time legally available therefor,
distributions at the annual rate of $3.50 per share, or 7% of the liquidation
preference of $50.00 per share, and no more, which shall be fully cumulative,
shall accrue without interest from the date of first issuance and shall be
payable in cash quarterly in arrears on March 15, June 15, September 15 and
December 15 of each year, commencing                  (except that if any such
date is a Saturday, Sunday or legal holiday, then such distribution shall be
payable on the next succeeding day that is not a Saturday, Sunday or legal
holiday) to holders of record of $3.50 Preferred Shares on such record dates,
not more than 60 nor less than 10 days preceding the payment dates for such
distributions, as are fixed by the Board of Trust Managers. For purposes hereof,
the term "legal holiday" shall mean any day on which banking institutions are
authorized to close in New York, New York or in Dallas, Texas. Subject to the
next paragraph of this Section 3, distributions on account of arrears for any
past distribution period may be declared and paid at any time, without reference
to any regular distribution payment date. The amount of distributions payable
per $3.50 Preferred Share for each quarterly distribution period, including the
initial distribution period, shall be computed by dividing the annual amount by
four. The amount of distributions payable for any period shorter than a full
quarterly distribution period, other than the initial distribution period, shall
be computed on the basis of a 360-day year of twelve 30-day months. Holders of
$3.50 Preferred Shares shall not be entitled to any distribution, whether
payment in cash, property or shares, in excess of the full cumulative
distributions on such shares of $3.50 Preferred Shares.
 
     On each distribution payment date all distributions which shall have
accrued on each $3.50 Preferred Share outstanding on such distribution payment
date shall accumulate and be deemed to become "due" whether or not there shall
be funds legally available for the payment thereof. Any distribution which shall
not be paid on the distribution payment date on which it shall become due shall
be deemed to be "past due" until such distribution shall be paid or until the
$3.50 Preferred Share with respect to which such distribution became due shall
no longer be outstanding, whichever is the earlier to occur. No interest, sum of
money in lieu
 
                                       D-1
<PAGE>   217
 
of interest, or other property or securities shall be payable in respect of any
distribution payment or payments which are past due. Distributions paid on $3.50
Preferred Shares in an amount less than the total amount of such distributions
at the time accumulated and payable on such shares shall be allocated pro rata
on a share-by-share basis among all such shares at the time outstanding.
 
     No distributions, other than distributions payable solely in Common Shares
or other shares of beneficial interest of the Company ranking junior as to
distributions and as to liquidation rights to the $3.50 Preferred Shares which
is neither convertible into, nor exchangeable or exercisable for, any securities
of the Company other than Common Shares or other shares of beneficial interest
of the Company ranking junior as to distributions and as to liquidation rights
to the $3.50 Preferred Shares, shall be paid, or declared and set apart for
payment, and no purchase, redemption or other acquisition shall be made by the
Company of, any Common Shares or other shares of beneficial interest of the
Company ranking junior as to distributions or as to liquidation rights to the
$3.50 Preferred Shares (the "Junior Distribution Shares") unless and until all
accrued and unpaid distributions on the $3.50 Preferred Shares, including the
full distribution for the then current distribution period, shall have been paid
or declared and set apart for payment and the Company is not in default in
respect of the optional redemption of any $3.50 Preferred Shares.
 
     No full distributions shall be paid or declared and set apart for payment
on any class or series of the Company's shares of beneficial interest ranking,
as to distributions, on a parity with the $3.50 Preferred Shares (the "Parity
Distribution Shares") for any period unless full cumulative distributions have
been, or contemporaneously are, paid or declared and set apart for such payment
on the $3.50 Preferred Shares for all distribution payment periods terminating
on or prior to the date of payment of such full cumulative distributions. No
full distributions shall be paid or declared and set apart for payment on the
$3.50 Preferred Shares for any period unless full cumulative distributions have
been, or contemporaneously are, paid or declared and set apart for payment on
the Parity Distribution Shares for all distribution periods terminating on or
prior to the date of payment of such full cumulative distributions. When
distributions are not paid in full upon the $3.50 Preferred Shares and the
Parity Distribution Shares, all distributions paid or declared and set aside for
payment upon shares of $3.50 Preferred Shares and the Parity Distribution Shares
shall be paid or declared and set aside for payment pro rata so that the amount
of distributions paid or declared and set aside for payment per share on the
$3.50 Preferred Shares and the Parity Distribution Shares shall in all cases
bear to each other the same ratio that accrued and unpaid distributions per
share on the shares of $3.50 Preferred Shares and the Parity Distribution Shares
bear to each other.
 
     The Company shall not permit any subsidiary of the Company to purchase or
otherwise acquire for consideration any shares of the Company unless the Company
could, under this Section 3, purchase or otherwise acquire such shares at such
time and in such manner.
 
     Any reference to "distribution" contained in this Section 3 shall not be
deemed to include any distribution made in connection with any liquidation
dissolution or winding up of the Company, whether voluntary or involuntary.
 
                                       D-2
<PAGE>   218
 
     SECTION 4. LIQUIDATION PREFERENCE. In the event of any liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary, the
holders of $3.50 Preferred Shares shall be entitled to receive out of the assets
of the Company, whether such assets are stated capital or surplus of any nature,
an amount equal to the distributions accrued and unpaid thereon to the date of
final distribution to such holders, whether or not declared, without interest,
and a sum equal to $50.00 per share, and no more, before any payment shall be
made or any assets distributed to the holders of Common Shares or any other
class or series of the Company's shares of beneficial interest ranking junior as
to liquidation rights to the $3.50 Preferred Shares (the "Junior Liquidation
Shares"). In the event the assets of the Company available for distribution to
shareholders upon any liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, shall be insufficient to pay in full the
amounts payable with respect to the $3.50 Preferred Shares and any other class
or series of the Company's shares of beneficial interest having parity as to
liquidation rights with the $3.50 Preferred Shares (the "Parity Liquidation
Shares"), the holders of the $3.50 Preferred Shares and the holders of the
Parity Liquidation Shares shall share ratably in any distribution of assets of
the Company in proportion to the full respective preferential amounts to which
they are entitled (but only to the extent of such preferential amounts). After
payment in full of the liquidation preferences of the $3.50 Preferred Shares,
the holders of such shares shall not be entitled to any further participation in
any distribution of assets by the Company. Neither a merger, consolidation, or
other business combination of the Company with or into another company or other
entity nor a sale or transfer of all or part of the Company's assets for cash,
securities or other property shall be considered a liquidation, dissolution or
winding up of the Company for purposes of this Section 4 (unless in connection
therewith the liquidation of the Company is specifically approved).
 
     The holder of any $3.50 Preferred Shares shall not be entitled to receive
any payment owed for such shares under this Section 4 until such holder shall
cause to be delivered to the Company (i) the certificate(s) representing such
$3.50 Preferred Shares and (ii) transfer instrument(s) satisfactory to the
Company and sufficient to transfer such $3.50 Preferred Shares to the Company
free of any adverse interest. As in the case of the Redemption Price referred to
below, no interest shall accrue on any payment upon liquidation after the due
date thereof.
 
     SECTION 5. REDEMPTION AT OPTION OF THE COMPANY. Except as otherwise
provided in this Section 5, the Company may not redeem the $3.50 Preferred
Shares prior to March 15, 1999. The Company, at its option, may at any time on
and after March 15, 1999 redeem for Common Shares the $3.50 Preferred Shares, in
whole or from time to time in part, on any date set by the Board of Trust
Managers, at the following redemption prices if redeemed during the twelve-month
period beginning March 15 of the year specified below:
 
<TABLE>
<CAPTION>
YEAR                                                           PRICE PER SHARE
----                                                           ---------------
<S>                                                            <C>
1999........................................................       $52.45
2000........................................................       $52.10
2001........................................................       $51.75
2002........................................................       $51.40
2003........................................................       $51.05
2004........................................................       $50.70
2005........................................................       $50.35
</TABLE>
 
and thereafter at $50.00 per share, plus, in each case, an amount equal to all
distributions on such $3.50 Preferred Shares accrued and unpaid thereon, whether
or not declared or due, to the date fixed for redemption, such sum being
hereinafter referred to as the "Redemption Price" (subject to the right of the
holder of record of $3.50 Preferred Shares on a record date for the payment of a
distribution on the $3.50 Preferred Shares to receive the distribution due on
such $3.50 Preferred Shares on the corresponding distribution payment date).
Except as provided in Section 6 hereof, at no time shall the $3.50 Preferred
Shares be redeemable for cash.
 
     Prior to March 15, 1999, the $3.50 Preferred Shares may be redeemed at the
option of the Company, in whole or from time to time in part, at a redemption
price of $52.80 per $3.50 Preferred Share, plus an amount
 
                                       D-3
<PAGE>   219
 
equal to all distributions on such $3.50 Preferred Shares accrued and unpaid
thereon, whether or not declared or due, to the date fixed for redemption, if
the Crescent Board of Trust Managers determines that such a redemption is
necessary or advisable to preserve the status of the Company as a REIT for
federal income tax purposes, subject to the provisions below.
 
     The Company shall issue in payment of the Redemption Price for each share
of $3.50 Preferred Shares to be redeemed such number of Common Shares as equals
(x) the then-current Redemption Price of the $3.50 Preferred Shares, divided by
(y) the market price (the "Market Price") of the Common Shares. The Market Price
shall be equal to the lower of (i) the average of the daily closing prices of
the Common Shares for the 20 consecutive trading days immediately preceding the
first business day immediately preceding the date of the applicable redemption
notice, or (ii) the closing price of the Common Shares on the trading day
immediately preceding the first business day immediately preceding the date of
the applicable redemption notice. The "closing price" for each day shall be the
last reported sales price on the New York Stock Exchange (the "NYSE"). If the
Common Shares are not traded on the NYSE, the "closing price" for each day shall
be the last reported sales price or, in case no such reported sales take place
on such day, the average of the closing bid and asked prices for such day, in
each case as reported by the national exchange on which the Common Shares is
traded. If the shares of Common Shares are neither quoted by the Nasdaq National
Market nor listed on any national exchange, the determination of Market Price
shall be determined in good faith by the Crescent Board of Trust Managers or, if
such determination cannot be made, by a nationally recognized independent
investment banking firm selected in good faith by the Crescent Board of Trust
Managers. For the purposes of this Section 5, trading day shall mean a day on
which the securities exchange specified for purposes of this Section 5 shall be
open for business or, if the Common Shares shall not be listed on such exchange
for such period, a day with respect to which quotations of the character
referred to in the next preceding sentence shall be reported. In lieu of any
fractional Common Share which would otherwise be issued upon any redemption of
$3.50 Preferred Shares, the Company shall pay a cash adjustment in respect of
such fractional interest in an amount in cash (computed to the nearest cent)
equal to the Market Price multiplied by the fractional interest that otherwise
would have been deliverable upon such redemption of such $3.50 Preferred Shares.
 
     In case of the redemption of less than all of the then outstanding $3.50
Preferred Shares, the $3.50 Preferred Shares to be redeemed shall be redeemed
pro rata or by lot or in such other manner as the Crescent Board of Trust
Managers may determine. In the event that such redemption is to be by lot, if as
a result of such redemption any holder of $3.50 Preferred Shares would own, or
be deemed to own by virtue of certain attribution provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), as specified in the Restated
Declaration of Trust, in excess of 9.9% of the $3.50 Preferred Shares issued and
outstanding because such holder's $3.50 Preferred Shares were not redeemed, or
were only redeemed in part, then the Company will redeem the requisite number of
$3.50 Preferred Shares of such shareholder such that he will not own, or be
deemed to own by virtue of certain attribution provisions of the Code, as
specified in the Restated Declaration of Trust in excess of 9.9% of $3.50
Preferred Shares issued and outstanding subsequent to such redemption.
 
     Notwithstanding the foregoing, the Company shall not redeem less than all
of the $3.50 Preferred Shares at any time outstanding until all distributions
accrued and in arrears upon all $3.50 Preferred Shares then outstanding shall
have been paid for the current and all past distribution periods unless the
Crescent Board of Trust Managers determines that such redemption is necessary or
advisable to preserve the status of the Company as a REIT for federal income tax
purposes.
 
     Not more than 60 nor less than 30 days prior to the redemption date, notice
by first class mail, postage prepaid, shall be given to each holder of record of
the $3.50 Preferred Shares to be redeemed, at such holder's address as it shall
appear upon the stock transfer books of the Company. Each such notice of
redemption shall specify the date fixed for redemption, the Redemption Price,
the place or places of payment, that payment will be made upon presentation and
surrender of the certificate(s) evidencing the $3.50 Preferred Shares to be
redeemed, that on and after the redemption date, distributions will cease to
accrue on such shares, the then effective conversion price pursuant to Section 7
and that the right of holders to convert shall terminate at the
 
                                       D-4
<PAGE>   220
 
close of business on the date immediately prior to the redemption date (unless
the Company defaults in the payment of the Redemption Price).
 
     Any notice that is mailed as herein provided shall be conclusively presumed
to have been duly given, whether or not the holder of the $3.50 Preferred Shares
receives such notice; and failure to give such notice by mail, or any defect in
such notice, to the holders of any shares designated for redemption shall not
affect the validity of the proceedings for the redemption of any other $3.50
Preferred Shares. On or after the date fixed for redemption as stated in such
notice, each holder of the shares called for redemption shall surrender the
certificate evidencing such shares to the Company at the place designated in
such notice and shall thereupon be entitled to receive payment of the Redemption
Price as herein provided. If less than all the shares represented by any such
surrendered certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares. If, on the date fixed for redemption, Common
Shares and funds necessary for the redemption shall be available therefor and
shall have been irrevocably deposited or set aside, then, notwithstanding that
the certificates evidencing any shares so called for redemption shall not have
been surrendered the distributions with respect to the shares so called shall
cease to accrue after the date fixed for redemption, the shares shall no longer
be deemed outstanding, the holders thereof shall cease to be holders of $3.50
Preferred Shares, and all rights whatsoever with respect to the shares so called
for redemption (except the right of the holders to receive payment of the
Redemption Price as herein provided without interest upon surrender of their
certificates therefor) shall terminate. At the close of business on the
redemption date, each holder of $3.50 Preferred Shares so redeemed (unless the
Company defaults on its obligations to deliver shares of Common Shares or cash)
shall be, without any further action, deemed a holder of the number of Common
Shares for which such $3.50 Preferred Shares is redeemable.
 
     The $3.50 Preferred Shares shall not be subject to the operation of any
purchase, retirement, mandatory redemption or sinking fund.
 
     The holder of any $3.50 Preferred Shares redeemed upon any exercise of the
Company's redemption right shall not be entitled to receive payment of the
Redemption Price for such shares until such holder shall cause to be delivered
to the place specified in the notice given with respect to such redemption (i)
the certificate(s) representing such $3.50 Preferred Shares redeemed and (ii)
transfer instrument(s) satisfactory to the Company and sufficient to transfer
such $3.50 Preferred Shares to the Company free of any adverse interest. No
interest shall accrue on the Redemption Price of any $3.50 Preferred Share after
its redemption date.
 
     All Common Shares which may be delivered upon redemption of the $3.50
Preferred Shares will upon delivery be duly and validly issued and fully paid
and non-assessable, free of all liens and charges and not subject to any
preemptive rights, and prior to giving any notice of redemption the Company
shall take any corporate action necessary therefor.
 
     In the event that any $3.50 Preferred Shares shall be converted into Common
Shares pursuant to Section 7, then (i) the Company shall not have the right to
redeem such shares and (ii) Common Shares and any funds which shall have been
deposited for the payment of the Redemption Price for such $3.50 Preferred
Shares shall be returned to the Company immediately after such conversion
(subject to declared distributions payable to holders of $3.50 Preferred Shares
on the record date for such distributions being so payable, to the extent set
forth in Section 7 hereof, regardless of whether such shares are converted
subsequent to such record date and prior to the related distribution payment
date).
 
     SECTION 6. MANDATORY DISPOSITION PURSUANT TO GAMING LAWS. If a record or
beneficial owner of $3.50 Preferred Shares is required by the Nevada Gaming
Commission, the Nevada State Gaming Control Board or any agency of any state,
county, city or other political subdivision which has, or may at any time after
the date of this Statement of Designation have, any jurisdiction over all or any
portion of the gaming activities of the Company or any of its subsidiaries or
any successor to such authority ("Gaming Authority") to be found suitable, such
record or beneficial owner shall apply for a finding of suitability within 30
days after requests of such Gaming Authority. The applicant for a finding of
suitability must pay all costs of the investigation for such finding of
suitability. If a record or beneficial owner is required to be found suitable
and is not found suitable by such Gaming Authority, (i) the record or beneficial
owner shall, upon request of the Company, dispose of such owner's $3.50
Preferred Shares within 30 days or within that time prescribed by
                                       D-5
<PAGE>   221
 
such Gaming Authority, whichever is earlier, or (ii) the Company may, at its
option, redeem each of such owner's $3.50 Preferred Shares (or Common Shares
after conversion) at the lesser of (x) the amount per Common Share that would be
(or was) obtained upon conversion of the $3.50 Preferred Shares at the
Conversion Price (as defined in Section 7(d)) or (y) the price at which such
$3.50 Preferred Shares were acquired by such owner, together with, in either
case, accrued and unpaid distributions to the date of the finding of
unsuitability by such Gaming Authority. The Company shall have the right to pay
the Redemption Price for any redemption pursuant to this Section 6 in cash.
 
     SECTION 7. CONVERSION PRIVILEGE.
 
     (a) Right of Conversion. Subject to and upon compliance with the provisions
of this Section 7, each $3.50 Preferred Share shall, at the option of the holder
thereof, be convertible at any time (unless such share is called for redemption,
then to and including but not after the close of business on the date
immediately prior to the date fixed for such redemption, unless the Company
shall default in payment due upon redemption thereof), into that number of fully
paid and non-assessable Common Shares (calculated as to each conversion to the
nearest 1/100th of a share) obtained by dividing $50.00 by the Conversion Price
in effect at such time and by surrender of such share so to be converted in the
manner provided in Section 7(b).
 
     (b) Manner of Exercise of Conversion Privilege. In order to exercise the
conversion privilege, the holder of one or more $3.50 Preferred Shares to be
converted shall surrender such shares at any of the offices or agencies to be
maintained for such purpose by the Company accompanied by the funds, if any,
required by the last paragraph of this Section 7(b) and shall give written
notice of conversion in the form provided on such $3.50 Preferred Shares (or
such other notice as is acceptable to the Company) to the Company at such office
or agency that the holder elects to convert the $3.50 Preferred Shares specified
in said notice. Such notice shall also state the name or names, together with
address or addresses, in which the certificate or certificates for Common Shares
which shall be issuable in such conversion shall be issued. Each $3.50 Preferred
Share surrendered for conversion shall, unless the shares issuable on conversion
are to be issued in the same name as the name in which such share is registered,
be accompanied by instruments of transfer, in form satisfactory to the Company,
duly executed by the holder or his duly authorized attorney and an amount
sufficient to pay any transfer or similar tax. As promptly as practicable after
the surrender of such $3.50 Preferred Shares and the receipt of such notice,
instruments of transfer and funds, if any, as aforesaid, the Company shall issue
and shall deliver at such office or agency to such holder, or on his written
order a certificate or certificates for the number of full Common Shares
issuable upon the conversion of such $3.50 Preferred Share in accordance with
the provisions of this Section 7 and a check or cash in respect of any
fractional interest in a Common Share arising upon such conversion, as provided
in Section 7(c).
 
     Each conversion shall be deemed to have been effected immediately prior to
the close of business on the date on which such $3.50 Preferred Shares shall
have been surrendered and such notice (and any applicable instruments of
transfer and any required taxes) received by the Company as aforesaid, and the
person or persons in whose name or names any certificate or certificates for
Common Shares shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the shares represented thereby at such
time on such date, and such conversion shall be at the Conversion Price in
effect at such time on such date, unless the stock transfer books of the Company
shall be closed on that date, in which event such person or persons shall be
deemed to have become such holder or holders of record at the close of business
on the next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date upon which
such $3.50 Preferred Shares shall have been surrendered and such notice received
by the Company.
 
     Any $3.50 Preferred Shares surrendered for conversion during the period
from the close of business on the record date for any distribution payment to
the opening of business on the related distribution payment date shall (unless
such $3.50 Preferred Shares shall have been called for redemption on a date in
such period) be accompanied by payment, in funds acceptable to the Company, of
an amount equal to the distribution otherwise payable on such distribution
payment date; provided, however, that no such payment need be made if there
shall exist at the time of conversion a default in the payment of distributions
on the $3.50 Preferred Shares. An amount equal to such payment shall be paid by
the Company on such distribution payment date to
 
                                       D-6
<PAGE>   222
 
the holder of such $3.50 Preferred Shares at the close of business on such
record date; provided, however, that if the Company shall default in the payment
of distributions on such distribution payment date, such amount shall be paid to
the person who made such required payment. Except as provided for above in this
Section, no adjustment shall be made for distributions accrued on any $3.50
Preferred Shares converted or for distributions on any shares issued upon the
conversion of such shares as provided in this Section.
 
     (c) Cash Payments in Lieu of Fractional Shares. No fractional shares or
scrip representing fractions of Common Shares shall be issued upon conversion of
$3.50 Preferred Shares. If more than one share of $3.50 Preferred Shares shall
be surrendered for conversion at one time by the same holder, the number of full
shares of Common Shares issuable upon conversion thereof shall be computed on
the basis of the aggregate of $50.00 for each such share so surrendered. In lieu
of any fractional interest in a Common Share which would otherwise be
deliverable upon the conversion of any $3.50 Preferred Share, the Company shall
pay to the holder of such shares an amount in cash (computed to the nearest
cent) equal to the closing price (as defined in Section 5 hereof) on the
business day next preceding the day of conversion multiplied by the fractional
interest that otherwise would have been deliverable upon conversion of such
share.
 
     (d) Adjustment of Conversion Price. The Conversion Price shall mean and be
$32.94, subject to adjustment from time to time by the Company as follows:
 
          (i) In case the Company shall (A) make a distribution on its Common
     Shares in Common Shares, (B) subdivide its outstanding Common Shares into a
     greater number of shares, (C) combine its outstanding Common Shares into a
     smaller number of shares, or (D) issue by reclassification of its Common
     Shares any shares of beneficial interest of the Company, then in each such
     case the Conversion Price in effect immediately prior to such action shall
     be adjusted so that the holder of any $3.50 Preferred Share thereafter
     surrendered for conversion shall be entitled to receive the number of
     Common Shares or other shares of beneficial interest of the Company which
     he would have owned or been entitled to receive immediately following such
     action had such share been converted immediately prior to the occurrence of
     such event. An adjustment made pursuant to this subsection (i) shall become
     effective immediately after the record date, in the case of a distribution,
     or immediately after the effective date, in the case of a subdivision,
     combination or reclassification. If, as a result of an adjustment made
     pursuant to this subsection (i), the holder of any $3.50 Preferred Share
     thereafter surrendered for conversion shall become entitled to receive
     shares of two or more classes of shares of beneficial interest or Common
     Shares and other shares of beneficial interest of the Company, the Crescent
     Board of Trust Managers (whose determination shall be conclusive and shall
     be described in a statement filed by the Company with the stock transfer or
     conversion agent, as appropriate) shall determine the allocation of the
     adjusted Conversion Price between or among shares of such classes of shares
     of beneficial interest or Common Shares and other shares of beneficial
     interest.
 
          (ii) In case the Company shall issue rights or warrants to all holders
     of its outstanding Common Shares entitling them (for a period expiring
     within 45 days after the record date mentioned below) to subscribe for or
     purchase Common Shares at a price per share less than the current market
     price per share (as determined pursuant to subsection (iv) of this Section
     7(d)) of the Common Shares (other than pursuant to any stock option,
     restricted shares or other incentive or benefit plan or stock ownership or
     purchase plan for the benefit of employees, trust managers or officers or
     any distribution reinvestment plan of the Company in effect at the time
     hereof or any other similar plan adopted or implemented hereafter), then
     the Conversion Price in effect immediately prior thereto shall be adjusted
     so that it shall equal the price determined by multiplying the Conversion
     Price in effect immediately prior to the date of issuance of such rights or
     warrants by a fraction on which the numerator shall be the number of Common
     Shares outstanding on the date of issuance of such rights or warrants
     (immediately prior to such issuance) plus the number of shares which the
     aggregate offering price of the total number of shares so offered would
     purchase at such current market price, and of which the denominator shall
     be the number of Common Shares outstanding on the date of issuance of such
     rights or warrants (immediately prior to such issuance) plus the number of
     additional Common Shares offered for subscription or purchase. Such
     adjustment shall be made successively whenever any rights or warrants are
     issued, and shall become effective immediately after the record date for
     the determination of shareholders entitled to receive such
                                       D-7
<PAGE>   223
 
     rights or warrants; provided, however, in the event that all the Common
     Shares offered for subscription or purchase are not delivered upon the
     exercise of such rights or warrants, upon the expiration of such rights or
     warrants the Conversion Price shall be readjusted to the Conversion Price
     which would have been in effect had the numerator and the denominator of
     the foregoing fraction and the resulting adjustment been made based upon
     the number of Common Shares actually delivered upon the exercise of such
     rights or warrants rather than upon the number of Common Shares offered for
     subscription or purchase. In determining whether any rights or warrants
     entitle the holders to subscribe for or purchase Common Shares at less than
     such current market price, and in determining the aggregate offering price
     of such Common Shares, there shall be taken into account any consideration
     received by the Company for such rights or warrants, the value of such
     consideration, if other than cash, to be determined by the Crescent Board
     of Trust Managers (whose determination shall be conclusive and shall be
     described in a statement filed by the Company with the stock transfer or
     conversion agent, as appropriate).
 
          (iii) In case the Company shall, by distribution or otherwise,
     distribute to all holders of its outstanding Common Shares or shares of
     beneficial interest (other than Common Shares), evidences of its
     indebtedness or assets (including securities and cash, but excluding any
     regular periodic cash distribution of the Company and distributions payable
     in shares for which adjustment is made pursuant to subsection (i) of this
     Section 7(d)) or rights or warrants to subscribe for or purchase securities
     of the Company (excluding those referred to in subsection (ii) of this
     Section 7(d)), then in each such case the Conversion Price shall be
     adjusted so that the same shall equal the price determined by multiplying
     the Conversion Price in effect immediately prior to the record date of such
     distribution by a fraction of which the numerator shall be the current
     market price per share as determined pursuant to subsection (iv) of this
     Section 7(d) of the Common Shares less the fair market value on such record
     date (as determined by the Crescent Board of Trust Managers, whose
     determination shall be conclusive and shall be described in a statement
     filed by the Company with the stock transfer or conversion agent, as
     appropriate) of the portion of the capital stock or assets or the evidences
     of indebtedness or assets so distributed to the holder of one Common Share
     or of such subscription rights or warrants applicable to one Common Share,
     and of which the denominator shall be such current market price per Common
     Share. Such adjustment shall become effective immediately after the record
     date for the determination of shareholders entitled to receive such
     distribution.
 
          (iv) For the purpose of any computation under subsections (ii) and
     (iii) of this Section 7(d), the current market price per Common Share on
     any date shall be deemed to be the average of the closing price (as defined
     in Section 5) for the shorter of (A) 30 consecutive trading days (as
     defined in Section 5) ending on the last full trading day prior to the Time
     of Determination or (B) the period commencing on the date next succeeding
     the first public announcement of the issuance of such rights or warrants or
     such distribution through such last full trading day prior to the Time of
     Determination. For purposes of the foregoing, the term "Time of
     Determination" shall mean the time and date of the earlier of (I) the
     record date for determining shareholders entitled to receive the rights,
     warrants or distributions referred to in Section 7(d)(ii) and (iii) or (II)
     the commencement of "ex-dividend" trading on the exchange or market
     referred to in the definition of "closing price."
 
          (v) In any case in which this Section 7(d) shall require that an
     adjustment be made immediately following a record date or an effective date
     the Company may elect to defer (but only until the filing by the Company
     with the stock transfer or conversion agent, as the case may be, of the
     certificate required by subsection (vii) of this Section 7(d)) issuing to
     the holder of any $3.50 Preferred Share converted after such record date or
     effective date the Common Shares issuable upon such conversion over and
     above the Common Shares issuable upon such conversion on the basis of the
     Conversion Price prior to adjustment, and paying to such holder any amount
     of cash in lieu of a fractional share.
 
          (vi) No adjustment in the Conversion Price shall be required to be
     made unless such adjustment would require an increase or decrease of at
     least one percent of such price; provided, however, that any adjustments
     which by reason of this subsection (vi) are not required to be made shall
     be carried forward and taken into account in any subsequent adjustment. All
     calculations under this Section 7(d) shall be made to the nearest cent or
     to the nearest 1/1000th of a share, as the case may be. Anything in this
                                       D-8
<PAGE>   224
 
     Section 7(d) to the contrary notwithstanding, the Company shall be entitled
     to make such reduction in the Conversion Price, in addition to those
     required by this Section 7(d), as it in its discretion shall determine to
     be advisable in order that any shares distribution, subdivision of shares
     distribution of rights to purchase shares or securities, or distribution of
     securities convertible into or exchangeable for shares hereafter made by
     the Company to its shareholders shall not be taxable to the recipients.
     Except as set forth in subsections (i), (ii) and (iii) above, the
     Conversion Price shall not be adjusted for the issuance of Common Shares,
     or any securities convertible into or exchangeable for Common Shares or
     carrying the right to purchase any of the foregoing, in exchange for cash,
     property or services.
 
          (vii) Whenever the Conversion Price is adjusted as herein provided,
     (A) the Company shall promptly file with the stock transfer or conversion
     agent, as appropriate, a certificate setting forth the Conversion Price
     after such adjustment and a brief statement of the facts requiring such
     adjustment and the manner of computing the same, which certificate shall be
     conclusive evidence of the correctness of such adjustment, and (B) the
     Company shall also mail or cause to be mailed by first class mail, postage
     prepaid, as soon as practicable to each holder of record of $3.50 Preferred
     Shares a notice stating that the Conversion Price has been adjusted and
     setting forth the adjusted Conversion Price. The stock transfer or
     conversion agent, as the case may be, shall not be under any duty or
     responsibility with respect to the certificate required by this subsection
     (vii) except to exhibit the same to any holder of $3.50 Preferred Shares
     who requests to inspect it.
 
          (viii) In the event that at any time, as a result of an adjustment
     made pursuant to subsection (i) of this Section 7(d), the holder of any
     $3.50 Preferred Share thereafter surrendered for conversion shall become
     entitled to receive any shares of the Company other than Common Shares,
     thereafter the Conversion Price of such other shares so receivable upon
     conversion of any $3.50 Preferred Share shall be subject to adjustment from
     time to time in a manner and on terms as nearly equivalent as practicable
     to the provisions with respect to Common Shares contained in this Section.
 
          (ix) The Company from time to time may decrease the Conversion Price
     by any amount for any period of time if the period is at least 20 days and
     if the decrease is irrevocable during the period. Whenever the Conversion
     Price is so decreased, the Company shall mail to holders of record of $3.50
     Preferred Shares a notice of the decrease at least 15 days before the date
     the decreased Conversion Price takes effect, and such notice shall state
     the decreased Conversion Price and the period it will be in effect.
 
     (e) Notice to Holders Prior to Certain Company Actions. In Case:
 
          (i) the Company shall take any action which would require an
     adjustment in the Conversion Price pursuant to Section 7(d); or
 
          (ii) the Company shall authorize the granting to the holders of its
     Common Shares generally of rights or warrants to subscribe for or purchase
     any shares of any class or of any other rights; or
 
          (iii) there shall be any reorganization or reclassification of the
     Common Shares (other than a subdivision or combination of the outstanding
     Common Shares and other than a change in the par value of the Common
     Shares), or any merger or consolidation to which the Company is a party or
     any statutory exchange of securities with another company and for which
     approval of any shareholders of the Company is required, or any sale or
     transfer of all or substantially all of the assets of the Company; or
 
          (iv) there shall be a voluntary or involuntary dissolution,
     liquidation or winding-up of the Company;
 
then in each such case the Company shall cause to be given to the holders of
$3.50 Preferred Shares and the stock transfer or conversion agent, as
appropriate, as promptly as possible, but in any event at least 20 days prior to
the applicable date hereinafter specified, a notice stating (i) the date on
which a record is to be taken for the purchase of such action or granting of
rights or warrants, or, if a record is not to be taken, the date as of which the
holders of Common Shares of record to be entitled to such distribution, rights
or warrants are to be determined, or (ii) the date on which such reorganization,
reclassification, merger, consolidation, sale, transfer, statutory exchange,
dissolution, liquidation or winding-up is expected to become effective or occur,
and the date as of which it is expected that holders of Common Shares of record
shall be entitled to exchange
 
                                       D-9
<PAGE>   225
 
their Common Shares for securities, cash or other property deliverable upon such
reorganization, reclassification, merger, consolidation, sale, transfer,
statutory exchange, dissolution, liquidation or winding-up. Failure to give such
notice or any defect therein shall not affect the legality or validity or the
proceedings described in subsection (i), (ii), (iii) or (iv) of this Section
7(e).
 
     (f) Reservation of Common Shares. The Company covenants that it will at all
times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Shares or its issued Common
Shares held in its treasury, or both, for the purpose of effecting conversions
of $3.50 Preferred Shares, the full number of Common Shares deliverable upon the
conversion of all outstanding $3.50 Preferred Shares not theretofore converted
and on or before (and as a condition of) taking any action that would cause an
adjustment of the Conversion Price resulting in an increase in the number of
Common Shares deliverable upon conversion above the number thereof previously
reserved and available therefor, the Company shall take all such action so
required. For purposes of this Section 7(f), the number of Common Shares which
shall be deliverable upon the conversion of all outstanding $3.50 Preferred
Shares shall be computed as if at the time of computation all outstanding $3.50
Preferred Shares were held by a single holder.
 
     Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value (if any) of the Common Shares
deliverable upon conversion of the $3.50 Preferred Shares, the Company shall
take any action which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and non-assessable
Common Shares at such adjusted Conversion Price.
 
     (g) Transfer Taxes, Etc. The Company shall pay any and all documentary,
stamp, issue or transfer taxes, and any other similar taxes payable in respect
of the issue or delivery of Common Shares upon conversions of $3.50 Preferred
Shares pursuant hereto; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issue or delivery of Common Shares in a name other than that of the
holder of the $3.50 Preferred Shares to be converted and no such issue or
delivery shall be made unless and until the person requesting such issue or
delivery has paid to the Company the amount of any such tax or has established,
to the satisfaction of the Company, that such tax has been paid.
 
     (h) Merger or Consolidation or Sale of Assets. Notwithstanding any other
provision herein to the contrary, in case of any merger or consolidation to
which the Company is a party (other than a merger or consolidation in which the
Company is the continuing company and in which the Common Shares outstanding
immediately prior to the merger or consolidation are not exchanged for cash, or
the securities or other property of another company), or in case of any sale or
transfer to another company of the property of the Company as an entirety or
substantially as an entirety, or in the case of any statutory exchange of
securities with another company (other than in connection with a merger or
acquisition), then lawful provision shall be made by the company formed by such
consolidation or the company whose securities, cash or other property will
immediately after the merger or consolidation be owned, by virtue of the merger
or consolidation, by the holders of Common Shares immediately prior to the
merger or consolidation, or the company which shall have acquired such assets or
securities of the Company (collectively the "Formed, Surviving or Acquiring
Company"), as the case may be, providing that the holder of each $3.50 Preferred
Share then outstanding shall have the right thereafter to convert such share
into the kind and amount of securities, cash or other property receivable upon
such merger, consolidation, sale, transfer or statutory exchange by a holder of
the number of Common Shares into which such $3.50 Preferred Share might have
been converted immediately prior to such merger, consolidation, sale, transfer
or statutory exchange assuming such holder of Common Shares did not exercise his
rights of election, if any, as to the kind or amount of securities, cash or
other property receivable upon such merger, consolidation, sale, transfer or
statutory exchange (provided that, if the kind or amount of securities, cash or
other property receivable upon such merger, consolidation, sale, transfer or
statutory exchange is not the same for each Common Share in respect of which
such rights of election shall not have been exercised ("non-electing share"),
then for the purposes of this Section 7(h) the kind and amount of securities,
cash or other property receivable upon such merger, consolidation, sale,
transfer or statutory exchange for each non-electing share shall be deemed to be
the kind and amount so receivable per share by a plurality of the non-electing
shares). The Formed, Surviving or Acquiring Company, as the case
                                      D-10
<PAGE>   226
 
may be, shall make provision in its certificate or articles of incorporation or
other constituent documents to the end that the provisions set forth in this
Section 7(h) shall thereafter correspondingly be made applicable, as nearly as
may reasonably be, in relation to any shares of beneficial interest or other
securities or property thereafter deliverable on the conversion of the $3.50
Preferred Shares.
 
     The above provisions of this Section 7(h) shall similarly apply to
successive mergers, consolidations, sales, transfers or statutory exchanges.
 
     (i) Covenant as to Common Shares. The Company covenants that all Common
Shares which may be delivered upon conversions of $3.50 Preferred Shares will
upon delivery be duly and validly issued and fully paid and non-assessable, free
of all liens and charges and not subject to any preemptive rights.
 
     The Company covenants that if any Common Shares to be provided for the
purpose of conversion of $3.50 Preferred Shares hereunder require registration
with or approval of any governmental authority under any Federal or State law
before such shares may be validly issued upon conversion, the Company will in
good faith and as expeditiously as possible endeavor to secure such registration
or approval, as the case may be.
 
     The Company further covenants that if at any time the Common Shares shall
be listed on the New York Stock Exchange or any other national securities
exchange or the Nasdaq National Market, the Company will, if permitted by the
rules of such exchange or market, list and keep listed so long as the Common
Shares shall be so listed on such exchange or market, all Common Shares issuable
upon conversion of the $3.50 Preferred Shares.
 
     SECTION 8. VOTING RIGHTS.
 
     (a) General. The holders of $3.50 Preferred Shares shall not have any
voting rights except as set forth below or as otherwise from time to time
required by law. In connection with any right to vote, each holder of $3.50
Preferred Shares will have one vote for each share held. Any $3.50 Preferred
Shares held by the Company or any entity controlled by the Company shall not
have voting rights hereunder and shall not be counted in determining the
presence of a quorum.
 
     (b) Default Voting Rights. Whenever distributions on the $3.50 Preferred
Shares shall be in arrears in an amount equal to at least six quarterly
distributions (whether or not consecutive), (i) the number of members of the
Board of Trust Managers of that Company shall be increased by two, effective as
of the time of election of such trust managers as hereinafter provided, and (ii)
the holders of the $3.50 Preferred Shares (voting separately as a class with all
other affected classes or series of Parity Distribution Shares upon which like
voting rights have been conferred and are exercisable) will have the exclusive
right to vote for and elect such two additional trust managers of the Company at
any Meeting of shareholders of the Company at which trust managers are to be
elected held during the period such distributions remain in arrears. The right
of the holders of the $3.50 Preferred Shares to vote for such two additional
trust managers shall terminate when all accrued and unpaid distributions on the
$3.50 Preferred Shares have been declared and paid or set apart for payment. The
term of office of all trust managers so elected shall terminate immediately upon
the termination of the right of the holders of the $3.50 Preferred Shares and
such Parity Distribution Shares to vote for such two additional trust managers.
 
     The foregoing right of the holders of the $3.50 Preferred Shares with
respect to the election of two trust managers may be exercised at any annual
meeting of shareholders or at any special meeting of shareholders held for such
purpose. If the right to elect trust managers shall have accrued to the holders
of the $3.50 Preferred Shares more than 90 days preceding the date established
for the next annual meeting of shareholders, the President of the Company shall,
within 20 days after the delivery to the Company at its principal office of a
written request for a special meeting signed by the holders of at least ten
percent (10%) of the $3.50 Preferred Shares then outstanding, call a special
meeting of the holders of the $3.50 Preferred Shares to be held within 60 days
after the delivery of such request for the purpose of electing such additional
trust managers.
 
                                      D-11
<PAGE>   227
 
     The holders of the $3.50 Preferred Shares and any Parity Distribution
Shares referred to above voting as a class shall have the right to remove
without cause at any time and replace any trust managers such holders have
elected pursuant to this Section 8.
 
     (C) Class Voting Rights. So long as the $3.50 Preferred Shares are
outstanding, the Company shall not, without the affirmative vote or consent of
the holders of at least 66 2/3 percent of all outstanding $3.50 Preferred Shares
(unless the vote or consent of a greater percentage is required by applicable
law or the Restated Declaration of Trust of the Company), voting separately as a
class, (i) amend, alter or repeal (by merger, consolidation or otherwise) any
provision of the Restated Declaration of Trust or the Amended and Restated
Bylaws of the Company, as amended, so as to affect adversely the relative
rights, preferences, qualifications, limitations or restrictions of the $3.50
Preferred Shares, (ii) authorize or issue, or increase the authorized amount of,
any additional class or series of shares, or any security convertible into
shares of such class or series, ranking prior to the $3.50 Preferred Shares in
respect of the payment of distributions or upon liquidation, dissolution or
winding-up of the Company, or (iii) effect any reclassification of the $3.50
Preferred Shares. A class vote on the part of the $3.50 Preferred Shares shall,
without limitation, specifically not be deemed to be required (except as
otherwise required by law or resolution of Crescent's Board of Trust Managers)
in connection with: (a) the authorization, issuance or increase in the
authorized amount of any shares of any other class or series of shares that
ranks junior to, or on a parity with, the $3.50 Preferred Shares in respect of
the payment of distributions and upon liquidation, dissolution or winding-up of
the Company; or (b) the authorization, issuance or increase in the amount of any
notes, bonds, mortgages, debentures or other obligations of the Company not
convertible into or exchangeable, directly or indirectly, for shares ranking
prior to the $3.50 Preferred Shares in respect of the payment of distributions
or upon liquidation, dissolution or winding-up of the Company.
 
     SECTION 9. OUTSTANDING SHARES. For purposes of this Statement of
Designations, all $3.50 Preferred Shares shall be deemed outstanding except (i)
from the date fixed for redemption pursuant to Section 5, all $3.50 Preferred
Shares that have been so-called for redemption under Section 5 if Common Shares
and funds necessary for payment of the redemption price have been irrevocably
set apart, (ii) from the date of surrender of certificates representing $3.50
Preferred Shares, all $3.50 Preferred Shares converted into Common Shares; and
(iii) from the date of registration of transfer, all $3.50 Preferred Shares held
of record by the Company or any subsidiary of the Company.
 
     SECTION 10. STATUS OF ACQUIRED SHARES. $3.50 Preferred Shares redeemed by
the Company, received upon conversion pursuant to Section 7 or otherwise
acquired by the Company will be restored to the status of authorized and
unissued preferred shares, without designation as to series, and may thereafter
be issued, but not as $3.50 Preferred Shares.
 
     SECTION 11. PREEMPTIVE RIGHTS. The $3.50 Preferred Shares are not entitled
to any preemptive or subscription rights in respect of any securities of the
Company.
 
     SECTION 12. SEVERABILITY OF PROVISIONS. Whenever possible, each provision
hereof shall be interpreted in a manner as to be effective and valid under
applicable law, but if any provision hereof is held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or otherwise
adversely affecting the remaining provisions hereof. If a court of competent
jurisdiction should determine that a provision hereof would be valid or
enforceable if a period of time were extended or shortened or a particular
percentage were increased or decreased, then such court may make such change as
shall be necessary to render the provision in question effective and valid under
applicable law.
 
     SECTION 13. ADOPTION. This Statement of Designation was duly adopted by the
Crescent Board of Trust Managers. Shareholder action was not required.
 
                                     * * *
 
     IN WITNESS WHEREOF, I hereby certify that I, Gerald W. Haddock, am the
President and Chief Executive Officer of Crescent Real Estates Equities Company
(the "Company") and that as such, I am
 
                                      D-12
<PAGE>   228
 
authorized to execute and file with the County Clerk of Tarrant County, Texas
this Statement of Designation (the "Statement of Designation") on behalf of the
Company and I further certify on behalf of the Company that this Statement of
Designation was authorized by the Crescent Board of Trust Managers by unanimous
written consent dated as of             , 1998 and is still in full force and
effect as of the date hereof. I further certify that my signature to this
document is my free act and deed, that to the best of my knowledge, information
and belief, the matters and facts set forth herein are true in all material
respects and that this statement is made under penalty of perjury.
 
                                            CRESCENT REAL ESTATE EQUITIES
                                              COMPANY
 
                                            ------------------------------------
                                            Name: Gerald W. Haddock
                                            Title: President and Chief Executive
                                            Officer
 
     The undersigned, David M. Dean, the Senior Vice President, Law and
Secretary of the Company, hereby certifies that Gerald W. Haddock is the
President and Chief Executive Officer of the Company and that the signature set
forth above is his genuine signature.
 
     IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
day of June, 1998.
 
                                            ------------------------------------
                                            Name: David M. Dean
                                            Title: Senior Vice President, Law
                                            and Secretary
 
[Acknowledgment]
 
                                      D-13
<PAGE>   229
 
                                    PART II
 
               INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
 
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
 
     The Company's Restated Declaration of Trust (the "Declaration of Trust")
provides that no trust manager shall be liable to the Company for any act,
omission, loss, damage, or expense arising from the performance of his duties to
the Company save only for his own willful misfeasance or willful malfeasance or
gross negligence. In addition to, but in no respect whatsoever in limitation of
the foregoing, the liability of each trust manager for monetary damages shall be
eliminated to the fullest extent permitted by applicable law. The Declaration of
Trust also provides that no amendment thereto may limit or eliminate this
limitation of liability with respect to events occurring prior to the effective
date of such amendment.
 
     The Company's Declaration of Trust provides that the trust managers and
officers shall be indemnified to the maximum extent permitted by Texas law.
Under current Texas law, the trust will indemnify a person who was, is, or is
threatened to be made a named defendant or respondent in a proceeding because
the person is or was a trust manager or officer if it is determined that the
person (i) conducted himself in good faith; (ii) reasonably believed: (a) in the
case of conduct in his official capacity as a trust manager or officer of the
real estate investment trust, that his conduct was in the real estate investment
trust's best interests; and (b) in all other cases, that his conduct was at
least not opposed to the real estate investment trust's best interests; and
(iii) in the case of any criminal proceeding, had no reasonable cause to believe
that his conduct was unlawful. Except to the extent provided in the following
sentence, a trust manager or officer may not be indemnified (i) in respect of a
proceeding in which the person is found liable on the basis that personal
benefit was improperly received by him, whether or not the benefit resulted from
an action taken in the person's official capacity; or (ii) in which the person
is found liable to the real estate investment trust. Notwithstanding the
foregoing, a person may be indemnified against judgments, penalties (including
excise and similar taxes), fines, settlements, and reasonable expenses actually
incurred by the person in connection with the proceeding; provided that if the
person is found liable to the real estate investment trust or is found liable on
the basis that personal benefit was improperly received by the person, the
indemnification (i) is limited to reasonable expenses actually incurred by the
person in connection with the proceeding, and (ii) shall not be made in respect
of any proceeding in which the person shall have been found liable for willful
or intentional misconduct in the performance of his duty to the real estate
investment trust. In addition, the Company's Declaration of Trust and Bylaws
require it to pay or reimburse, in advance of the final disposition of a
proceeding, reasonable expenses incurred by a present or former trust manager or
officer made a party to a proceeding by reason of his status as a trust manager
or officer, provided that the Company shall have received (i) a written
affirmation by the trust manager or officer of his good faith belief that he has
met the standard of conduct necessary for indemnification by the Company as
authorized by the Bylaws and (ii) a written undertaking by or on his behalf to
repay the amount paid or reimbursed by the Company if it shall ultimately be
determined that the standard of conduct was not met. The Company's Declaration
of Trust and Bylaws also permit the Company to provide indemnification, payment
or reimbursement of expenses to any employee or agent of the Company in such
capacity. The Company's Declaration of Trust and Bylaws also permit the Company
to indemnify a person who was or who agreed to appear as a witness or other
participant in a proceeding at a time when he is not named a defendant or
respondent in the proceeding. Any indemnification, payment or reimbursement of
the expenses permitted by the Declaration of Trust and Bylaws shall be furnished
in accordance with the procedures provided for indemnification and payment or
reimbursement of expenses under Texas Real Estate Investment Trust Act for trust
managers.
 
     The limited partnership agreement of the Operating Partnership contains
indemnification provisions comparable to those contained in the Declaration of
Trust.
 
     The Company carries insurance that purports to insure officers and trust
managers of the Company against certain liabilities incurred by them in the
discharge of their official functions.
 
     The Company and the Operating Partnership have entered into indemnification
agreements with each of the Company's executive officers and trust managers. The
indemnification agreements require, among other
 
                                      II-1
<PAGE>   230
 
things, that the Company and the Operating Partnership indemnify such officers
and trust managers to the fullest extent permitted by law, and advance to the
officers and directors all related expenses, subject to reimbursement if it is
subsequently determined that indemnification is not permitted. The Company and
the Operating Partnership also must indemnify and advance expenses incurred by
officers and directors seeking to enforce their rights under the indemnification
agreements and cover officers and directors under the Company's and Operating
Partnership's directors' and officers' liability insurance, if any. Although the
indemnification agreements offer substantially the same scope of coverage
afforded by provisions in the Declaration of Trust, the Company's Bylaws and
Operating Partnership Agreement, they provide greater assurance to directors and
executive officers that indemnification will be available, because, as
contracts, they cannot be modified unilaterally in the future by the Crescent
Board of Trust Managers or by the stockholders to alter, limit or eliminate the
rights they provide.
 
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
 
     The following is a list of all exhibits and financial statement schedules
filed as a part of this Registration Statement on Form S-4, including those
incorporated herein by reference.
 
<TABLE>
<CAPTION>
        EXHIBIT
          NO.                               DESCRIPTION OF EXHIBIT
        -------                             ----------------------
<C>                      <S>
          2.01           -- Agreement and Plan of Merger, dated as of January 16,
                            1998, as amended, by and between the Registrant and
                            Station Casinos, Inc. (the "Merger Agreement") (filed as
                            Exhibit 2.01 to the Registrant's Annual Report on Form
                            10-K for the fiscal year ended December 31, 1997 (the
                            "1997 10-K") and incorporated herein by reference)
          2.02           -- First Amendment to the Merger Agreement, dated as of
                            February 17, 1998 (filed herewith)
          2.03           -- Second Amendment to the Merger Agreement, dated as of
                            June 15, 1998 (filed herewith)
          2.04           -- Third Amendment to the Merger Agreement, dated as of June
                            26, 1998 (filed herewith)
          3.01           -- Restated Declaration of Trust of the Registrant (filed as
                            Exhibit 4.01 to the Registrant's Registration Statement
                            on Form S-3 (File No. 333-21905) (the "1997 S-3") and
                            incorporated herein by reference)
          3.02           -- Amended and Restated Bylaws of the Registrant, as amended
                            (filed as Exhibit 4.02 to the Registrant's Registration
                            Statement on Form S-3) (File No. 333-56809)(the "1998
                            S-3") and incorporated herein by reference)
          4.01           -- Registration Rights Agreement, dated February 16, 1996,
                            by and among the Registrant, Crescent Real Estate
                            Equities Limited Partnership and certain of the limited
                            partners of Crescent Real Estate Equities Limited
                            Partnership named therein (filed as Exhibit 4.02 to the
                            Registrant's Annual Report on Form 10-K for the fiscal
                            year ended December 31, 1996 (the "1996 10-K") and
                            incorporated herein by reference)
          4.02           -- Registration Rights Agreement, dated January 20, 1997, by
                            and among the Registrant, Crescent Real Estate Equities
                            Limited Partnership and certain of the limited partners
                            of Crescent Real Estate Equities Limited Partnership
                            named therein (filed as Exhibit 4.03 to the 1996 10-K and
                            incorporated herein by reference)
          4.03           -- Form of Registration Agreement relating to the
                            acquisition of the Greenway Plaza Portfolio (filed as
                            Exhibit 4.01 to the Registrant's Current Report on Form
                            8-K dated and filed September 27, 1996 (the "1996 8-K")
                            and incorporated herein by reference)
</TABLE>
 
                                      II-2
<PAGE>   231
 
<TABLE>
<CAPTION>
        EXHIBIT
          NO.                               DESCRIPTION OF EXHIBIT
        -------                             ----------------------
<C>                      <S>
          4.04           -- Registration Rights Agreement, dated as of June 26, 1996,
                            relating to Canyon Ranch-Tucson (filed as Exhibit 4.02 to
                            the 1996 8-K and incorporated herein by reference)
          4.05           -- Form of Common Share Certificate (filed as Exhibit 4.03
                            to the 1997 S-3 and incorporated herein by reference)
          4.06           -- Statement of Designation of 6 3/4% Series A Convertible
                            Cumulative Preferred Shares of the Registrant (filed as
                            Exhibit 4.07 to the 1997 10-K and incorporated herein by
                            reference)
          4.07           -- Form of Certificate of 6 3/4% Series A Convertible
                            Cumulative Preferred Shares of the Registrant (filed as
                            Exhibit 4 to the Registrant's Registration Statement on
                            Form 8-A/A filed on February 18, 1998 and incorporated by
                            reference)
          4.08           -- Form of Statement of Designation of $3.50 Convertible
                            Preferred Shares of the Registrant (filed herewith)
          4.09           -- Form of Certificate of $3.50 Convertible Preferred Shares
                            of the Registrant (filed herewith)
          4.10           -- Indenture, dated as of September 22, 1997, between
                            Crescent Real Estate Equities Limited Partnership and
                            State Street Bank and Trust Company, of Missouri, N.A.
                            (filed as Exhibit 4.01 to the Registration Statement on
                            Form S-4 (File No. 333-42293) of Crescent Real Estate
                            Equities Limited Partnership (the "Form S-4") and
                            incorporated herein by reference)
          4.11           -- Form of 6 5/8% Note due 2002 (filed as Exhibit 4.04 to
                            the Form S-4 and incorporated herein by reference)
          4.12           -- Form of 7 1/8% Note due 2007 (filed as Exhibit 4.05 to
                            the Form S-4 and incorporated herein by reference)
          4.13           -- Registration Rights Agreement, dated as of September 22,
                            1997, among Crescent Real Estate Equities Limited
                            Partnership, Merrill Lynch & Co., Merrill Lynch, Pierce,
                            Fenner & Smith Incorporated and Salomon Brothers Inc.
                            (filed as Exhibit 4.06 to the Form S-4 and incorporated
                            herein by reference)
          4.14           -- Purchase Agreement, dated as of August 11, 1997, among
                            the Registrant, UBS Securities (Portfolio), LLC, and
                            Union Bank of Switzerland, London Branch (filed as
                            Exhibit 4.01 to the Registrant's Current Report on Form
                            8-K dated August 11, 1997 and filed August 13, 1997 and
                            incorporated herein by reference)
          4.15           -- Purchase Agreement, effective as of December 12, 1997,
                            among the Registrant, Crescent Real Estate Equities
                            Limited Partnership, Merrill Lynch International and
                            Merrill Lynch, Pierce, Fenner & Smith Incorporated (filed
                            as Exhibit 1.01 to the Registrant's Current Report on
                            Form 8-K/A dated December 12, 1997 and filed December 19,
                            1997 and incorporated herein by reference)
          4.16           -- Swap Agreement, effective as of December 12, 1997,
                            between the Registrant and Merrill Lynch International
                            (filed as Exhibit 1.02 to the Registrant's Current Report
                            on Form 8-K dated December 12, 1997 and filed December
                            18, 1997 and incorporated herein by reference)
          4.17           -- Registration Rights Agreement, dated as of March 2, 1998,
                            among the Registrant, Crescent Real Estate Equities
                            Limited Partnership and certain limited partners of
                            Crescent Real Estate Equities Limited Partnership (filed
                            as Exhibit 4.05 to the Registrant's Registration
                            Statement on Form S-3 (File No. 333-47563) and
                            incorporated herein by reference)
          5.01           -- Opinion of Shaw Pittman Potts & Trowbridge as to the
                            legality of the securities being registered by the
                            Registrant (filed herewith)
</TABLE>
 
                                      II-3
<PAGE>   232
 
<TABLE>
<CAPTION>
        EXHIBIT
          NO.                               DESCRIPTION OF EXHIBIT
        -------                             ----------------------
<C>                      <S>
          8.01           -- Opinion of Shaw Pittman Potts & Trowbridge regarding
                            certain material tax issues relating to the Registrant
                            (filed herewith)
          8.02           -- Opinion of Locke Purnell Rain Harrell regarding certain
                            material tax issues relating to the Registrant (filed
                            herewith)
         10.01           -- Second Amended and Restated Agreement of Limited
                            Partnership of Crescent Real Estate Equities Limited
                            Partnership dated as of November 1, 1997, as amended
                            (filed as Exhibit 4.04 to the 1998 S-3 and incorporated
                            herein by reference)
         10.02           -- Noncompetition Agreement (Rainwater) (filed as Exhibit
                            10.02 to the 1997 10-K and incorporated herein by
                            reference)
         10.03           -- Noncompetition Agreement (Goff) (filed as Exhibit 10.03
                            to the 1997 10-K and incorporated herein by reference)
         10.04           -- Noncompetition Agreement (Haddock) (filed as Exhibit
                            10.04 to the 1997 10-K and incorporated herein by
                            reference)
         10.05           -- Employment Agreement (Goff) (the "Goff Employment
                            Agreement") (filed as Exhibit 10.05 to the 1997 10-K and
                            incorporated herein by reference)
         10.06           -- Amendment No. 5 to the Goff Employment Agreement, dated
                            March 10, 1998 (filed as Exhibit 10.29 to the Form S-4
                            and incorporated herein by reference)
         10.07           -- Employment Agreement (Haddock) (the "Haddock Employment
                            Agreement") (filed as Exhibit 10.06 to the 1997 10-K and
                            incorporated herein by reference)
         10.08           -- Amendment No. 4 to the Haddock Employment Agreement,
                            dated March 10, 1998 (filed as Exhibit 10.30 to the Form
                            S-4 and incorporated herein by reference)
         10.09           -- Form of Registration Rights, Lock-Up and Pledge Agreement
                            (filed as Exhibit 10.05 to the Registration Statement on
                            Form S-11 (File No. 33-78188) (the "1994 S-11") of the
                            Registrant and incorporated herein by reference)
         10.10           -- Form of Officers' and Trust Managers' Indemnification
                            Agreement as entered into between the Registrant and each
                            of its executive officers and trust managers (filed as
                            Exhibit 10.07 to the Form S-4 and incorporated herein by
                            reference)
         10.11           -- Crescent Real Estate Equities Company 1994 Stock
                            Incentive Plan (filed as Exhibit 10.07 to the 1994 S-11
                            and incorporated herein by reference)
         10.12           -- Crescent Real Estate Equities, Ltd. First Amended and
                            Restated 401(k) Plan (filed as Exhibit 10.10 to the 1997
                            10-K and incorporated herein by reference)
         10.13           -- Real Estate Purchase and Sale Agreement, dated as of
                            January 29, 1997, between the Registrant, as purchaser,
                            and Magellan Health Services, Inc., as seller, relating
                            to the acquisition of 92 behavioral healthcare facilities
                            (the "Magellan Facilities"), as amended effective
                            February 28, 1997 and May 29, 1997 (filed as Exhibit
                            10.13 to the Registrant's Quarterly Report on Form 10-Q/A
                            for the quarter ended June 30, 1997 (the "1997 10-Q") and
                            incorporated herein by reference).
         10.14           -- Second Amended and Restated 1995 Crescent Real Estate
                            Equities Company Stock Incentive Plan (filed as Exhibit
                            10.13 to the Form S-4 and incorporated herein by
                            reference)
         10.15           -- 1995 Crescent Real Estate Equities Limited Partnership
                            Unit Incentive Plan (filed as Exhibit 99.01 to the
                            Registrant's Registration Statement on Form S-8 (File No.
                            333-3452) and incorporated herein by reference)
         10.16           -- 1996 Crescent Real Estate Equities Limited Partnership
                            Unit Incentive Plan (filed as Exhibit 10.01 to the 1996
                            Form 8-K and incorporated herein by reference)
</TABLE>
 
                                      II-4
<PAGE>   233
 
<TABLE>
<CAPTION>
        EXHIBIT
          NO.                               DESCRIPTION OF EXHIBIT
        -------                             ----------------------
<C>                      <S>
         10.17           -- Master Lease Agreement, dated June 16, 1997, as amended,
                            between Crescent Real Estate Funding VII, L.P. and
                            Charter Behavioral Health Systems, LLC and its
                            subsidiaries, relating to the Magellan Facilities (filed
                            as Exhibit 10.27 to the 1997 10-K and incorporated herein
                            by reference)
         10.18           -- Fourth Amended and Restated Revolving Credit Agreement,
                            dated December 19, 1997 among the Registrant, BankBoston,
                            N.A. and the other banks named therein (filed as Exhibit
                            10.25 to the Form S-4 and incorporated herein by
                            reference)
         10.19           -- Intercompany Agreement, dated June 3, 1997, between the
                            Registrant and Crescent Operating, Inc. (filed as Exhibit
                            10.2 to the Registration Statement on Form S-1 (File No.
                            333-25223) of Crescent Operating, Inc. and incorporated
                            herein by reference)
         21.01           -- Subsidiaries of the Registrant (filed as Exhibit 21.01 to
                            the Form S-4 and incorporated herein by reference)
         23.01           -- Consent of Arthur Andersen LLP (Dallas), Certified Public
                            Accountants, dated June 24, 1998 (filed herewith)
         23.02           -- Consent of Arthur Andersen LLP (Atlanta), Certified
                            Public Accountants, dated June 23, 1998 (filed herewith)
         23.03           -- Consent of Arthur Andersen LLP (Las Vegas), Certified
                            Public Accountants, dated June 24, 1998 (filed herewith)
         23.04           -- Consent of Shaw Pittman Potts & Trowbridge (included in
                            its opinion filed as Exhibit 5.01 to this Registration
                            Statement)
         23.05           -- Consent of Shaw Pittman Potts & Trowbridge (included in
                            its opinion filed as Exhibit 8.01 to this Registration
                            Statement)
         23.06           -- Consent of Salomon Smith Barney, dated June 25, 1998
                            (filed herewith)
         23.07           -- Consent of Locke Purnell Rain Harrell (included in its
                            opinion filed as Exhibit 8.02 to this Registration
                            Statement)
         24.01           -- Powers of Attorney (filed herewith)
</TABLE>
 
ITEM 22. UNDERTAKINGS.
 
     (a) The undersigned Registrant hereby undertakes that insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim of indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
 
     (b) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
 
     (c) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
 
                                      II-5
<PAGE>   234
 
     (d) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be determined to
be the initial bona fide offering thereof.
 
     (e) The undersigned Registrant hereby undertakes:
 
          (1) that prior to any public reoffering of the securities registered
     hereunder through use of a prospectus which is a part of this registration
     statement, by any person or party who is deemed to be an underwriter within
     the meaning of Rule 145(c), such reoffering prospectus will contain the
     information called for by the applicable registration form with respect to
     reofferings by persons who may be deemed underwriters, in addition to the
     information called for by the other items of the applicable form.
 
          (2) that every prospectus: (i) that is filed pursuant to paragraph (1)
     immediately preceding, or (ii) that purports to meet the requirements of
     Section 10(a)(3) of the Securities Act of 1933 and is used in connection
     with an offering of securities subject to Rule 415, will be filed as a part
     of an amendment to the registration statement and will not be used until
     such amendment is effective, and that, for purposes of determining any
     liability under the Securities Act of 1933, each such post-effective
     amendment shall be deemed to be a new registration statement relating to
     the securities offered therein, and the offering of such securities at that
     time shall be deemed to be the initial bona fide offering thereof.
 
                                      II-6
<PAGE>   235
 
                                   SIGNATURES
 
     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Fort Worth, State of
Texas, on the 29th day of June, 1998.
 
                                            CRESCENT REAL ESTATE
                                            EQUITIES COMPANY
 
                                            By:    /s/ GERALD W. HADDOCK
                                              ----------------------------------
                                                      Gerald W. Haddock
                                                President and Chief Executive
                                                            Officer
 
     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
 
<TABLE>
<CAPTION>
                     SIGNATURES                                        TITLE                        DATE
                     ----------                                        -----                        ----
<C>                                                      <S>                                <C>
 
              /s/ RICHARD E. RAINWATER                   Trust Manager and Chairman of the     June 29, 1998
-----------------------------------------------------      Board
                Richard E. Rainwater
 
                  /s/ JOHN C. GOFF                       Trust Manager and Vice Chairman of    June 29, 1998
-----------------------------------------------------      the Board
                    John C. Goff
 
                /s/ GERALD W. HADDOCK                    Trust Manager, President and Chief    June 29, 1998
-----------------------------------------------------      Executive Officer (Principal
                  Gerald W. Haddock                        Executive Officer)
 
                 /s/ DALLAS E. LUCAS                     Senior Vice President and Chief       June 29, 1998
-----------------------------------------------------      Financial and Accounting Officer
                   Dallas E. Lucas                         (Principal Financial and
                                                           Accounting Officer)
 
                /s/ ANTHONY M. FRANK                     Trust Manager                         June 29, 1998
-----------------------------------------------------
                  Anthony M. Frank
 
               /s/ MORTON H. MEYERSON                    Trust Manager                         June 29, 1998
-----------------------------------------------------
                 Morton H. Meyerson
 
                /s/ WILLIAM F. QUINN                     Trust Manager                         June 29, 1998
-----------------------------------------------------
                  William F. Quinn
 
               /s/ PAUL E. ROWSEY, III                   Trust Manager                         June 29, 1998
-----------------------------------------------------
                 Paul E. Rowsey, III
 
                /s/ MELVIN ZUCKERMAN                     Trust Manager                         June 29, 1998
-----------------------------------------------------
                  Melvin Zuckerman
</TABLE>
 
                                      II-7
<PAGE>   236
 
                               INDEX TO EXHIBITS
 
<TABLE>
<CAPTION>
                                                                          SEQUENTIALLY
  EXHIBIT                                                                   NUMBERED
    NO.                                EXHIBIT                                PAGE
  -------                              -------                            ------------
<C>          <S>                                                          <C>
 
    2.01     -- Agreement and Plan of Merger, dated as of January 16,
                1998, as amended, by and between the Registrant and
                Station Casinos, Inc. (the "Merger Agreement") (filed as
                Exhibit 2.01 to the Registrant's Annual Report on Form
                10-K for the fiscal year ended December 31, 1997 (the
                "1997 10-K") and incorporated herein by reference)
    2.02     -- First Amendment to the Merger Agreement, dated as of
                February 17, 1998 (filed herewith)
    2.03     -- Second Amendment to the Merger Agreement, dated as of
                June 15, 1998 (filed herewith)
    2.04     -- Third Amendment to the Merger Agreement, dated as of June
                26, 1998 (filed herewith)
    3.01     -- Restated Declaration of Trust of the Registrant (filed as
                Exhibit 4.01 to the Registrant's Registration Statement
                on Form S-3 (File No. 333-21905) (the "1997 S-3") and
                incorporated herein by reference)
    3.02     -- Amended and Restated Bylaws of the Registrant, as amended
                (filed as Exhibit 4.02 to the Registrant's Registration
                Statement on Form S-3) (File No. 333-56809)(the "1998
                S-3") and filed October 14, 1997 and incorporated herein
                by reference)
    4.01     -- Registration Rights Agreement, dated February 16, 1996,
                by and among the Registrant, Crescent Real Estate
                Equities Limited Partnership and certain of the limited
                partners of Crescent Real Estate Equities Limited
                Partnership named therein (filed as Exhibit 4.02 to the
                Registrant's Annual Report on Form 10-K for the fiscal
                year ended December 31, 1996 (the "1996 10-K") and
                incorporated herein by reference)
    4.02     -- Registration Rights Agreement, dated January 20, 1997, by
                and among the Registrant, Crescent Real Estate Equities
                Limited Partnership and certain of the limited partners
                of Crescent Real Estate Equities Limited Partnership
                named therein (filed as Exhibit 4.03 to the 1996 10-K and
                incorporated herein by reference)
    4.03     -- Form of Registration Agreement relating to the
                acquisition of the Greenway Plaza Portfolio (filed as
                Exhibit 4.01 to the Registrant's Current Report on Form
                8-K dated and filed September 27, 1996 (the "1996 8-K")
                and incorporated herein by reference)
    4.04     -- Registration Rights Agreement, dated as of June 26, 1996,
                relating to Canyon Ranch-Tucson (filed as Exhibit 4.02 to
                the 1996 8-K and incorporated herein by reference)
    4.05     -- Form of Common Share Certificate (filed as Exhibit 4.03
                to the 1997 S-3 and incorporated herein by reference)
    4.06     -- Statement of Designation of 6 3/4% Series A Convertible
                Cumulative Preferred Shares of the Registrant (filed as
                Exhibit 4.07 to the 1997 10-K and incorporated herein by
                reference)
    4.07     -- Form of Certificate of 6 3/4% Series A Convertible
                Cumulative Preferred Shares of the Registrant (filed as
                Exhibit 4 to the Registrant's Registration Statement on
                Form 8-A/A filed on February 18, 1998 and incorporated by
                reference)
    4.08     -- Form of Statement of Designation of $3.50 Convertible
                Preferred Shares of the Registrant (filed herewith)
</TABLE>
<PAGE>   237
 
<TABLE>
<CAPTION>
                                                                          SEQUENTIALLY
  EXHIBIT                                                                   NUMBERED
    NO.                                EXHIBIT                                PAGE
  -------                              -------                            ------------
<C>          <S>                                                          <C>
    4.09     -- Form of Certificate of $3.50 Convertible Preferred Shares
                of the Registrant (filed herewith)
    4.10     -- Indenture, dated as of September 22, 1997, between
                Crescent Real Estate Equities Limited Partnership and
                State Street Bank and Trust Company, of Missouri, N.A.
                (filed as Exhibit 4.01 to the Registration Statement on
                Form S-4 (File No. 333-42293) of Crescent Real Estate
                Equities Limited Partnership (the "Form S-4") and
                incorporated herein by reference)
    4.11     -- Form of 6 5/8% Note due 2002 (filed as Exhibit 4.04 to
                the Form S-4 and incorporated herein by reference)
    4.12     -- Form of 7 1/8% Note due 2007 (filed as Exhibit 4.05 to
                the Form S-4 and incorporated herein by reference)
    4.13     -- Registration Rights Agreement, dated as of September 22,
                1997, among Crescent Real Estate Equities Limited
                Partnership, Merrill Lynch & Co., Merrill Lynch, Pierce,
                Fenner & Smith Incorporated and Salomon Brothers Inc.
                (filed as Exhibit 4.06 to the Form S-4 and incorporated
                herein by reference)
    4.14     -- Purchase Agreement, dated as of August 11, 1997, among
                the Registrant, UBS Securities (Portfolio), LLC, and
                Union Bank of Switzerland, London Branch (filed as
                Exhibit 4.01 to the Registrant's Current Report on Form
                8-K dated August 11, 1997 and filed August 13, 1997 and
                incorporated herein by reference)
    4.15     -- Purchase Agreement, effective as of December 12, 1997,
                among the Registrant, Crescent Real Estate Equities
                Limited Partnership, Merrill Lynch International and
                Merrill Lynch, Pierce, Fenner & Smith Incorporated (filed
                as Exhibit 1.01 to the Registrant's Current Report on
                Form 8-K/A dated December 12, 1997 and filed December 19,
                1997 and incorporated herein by reference)
    4.16     -- Swap Agreement, effective as of December 12, 1997,
                between the Registrant and Merrill Lynch International
                (filed as Exhibit 1.02 to the Registrant's Current Report
                on Form 8-K dated December 12, 1997 and filed December
                18, 1997 and incorporated herein by reference)
    4.17     -- Registration Rights Agreement, dated as of March 2, 1998,
                among the Registrant, Crescent Real Estate Equities
                Limited Partnership and certain limited partners of
                Crescent Real Estate Equities Limited Partnership (filed
                as Exhibit 4.05 to the Registrant's Registration
                Statement on Form S-3 (File No. 333-47563) and
                incorporated herein by reference)
    5.01     -- Opinion of Shaw Pittman Potts & Trowbridge as to the
                legality of the securities being registered by the
                Registrant (filed herewith)
    8.01     -- Opinion of Shaw Pittman Potts & Trowbridge regarding
                certain material tax issues relating to the Registrant
                (filed herewith)
    8.02     -- Opinion of Locke Purnell Rain Harrell regarding certain
                material tax issues relating to the Registrant (filed
                herewith)
   10.01     -- Second Amended and Restated Agreement of Limited
                Partnership of Crescent Real Estate Equities Limited
                Partnership dated as of November 1, 1997, as amended
                (filed as Exhibit 4.04 to the 1998 S-3 and incorporated
                herein by reference)
   10.02     -- Noncompetition Agreement (Rainwater) (filed as Exhibit
                10.02 to the 1997 10-K and incorporated herein by
                reference)
   10.03     -- Noncompetition Agreement (Goff) (filed as Exhibit 10.03
                to the 1997 10-K and incorporated herein by reference)
</TABLE>
<PAGE>   238
 
<TABLE>
<CAPTION>
                                                                          SEQUENTIALLY
  EXHIBIT                                                                   NUMBERED
    NO.                                EXHIBIT                                PAGE
  -------                              -------                            ------------
<C>          <S>                                                          <C>
   10.04     -- Noncompetition Agreement (Haddock) (filed as Exhibit
                10.04 to the 1997 10-K and incorporated herein by
                reference)
   10.05     -- Employment Agreement (Goff) (the "Goff Employment
                Agreement") (filed as Exhibit 10.05 to the 1997 10-K and
                incorporated herein by reference)
   10.06     -- Amendment No. 5 to the Goff Employment Agreement, dated
                March 10, 1998 (filed as Exhibit 10.29 to the Form S-4
                and incorporated herein by reference)
   10.07     -- Employment Agreement (Haddock) (the "Haddock Employment
                Agreement") (filed as Exhibit 10.06 to the 1997 10-K and
                incorporated herein by reference)
   10.08     -- Amendment No. 4 to the Haddock Employment Agreement,
                dated March 10, 1998 (filed as Exhibit 10.30 to the Form
                S-4 and incorporated herein by reference)
   10.09     -- Form of Registration Rights, Lock-Up and Pledge Agreement
                (filed as Exhibit 10.05 to the Registration Statement on
                Form S-11 (File No. 33-78188) (the "1994 S-11") of the
                Registrant and incorporated herein by reference)
   10.10     -- Form of Officers' and Trust Managers' Indemnification
                Agreement as entered into between the Registrant and each
                of its executive officers and trust managers (filed as
                Exhibit 10.07 to the Form S-4 and incorporated herein by
                reference)
   10.11     -- Crescent Real Estate Equities Company 1994 Stock
                Incentive Plan (filed as Exhibit 10.07 to the 1994 S-11
                and incorporated herein by reference)
   10.12     -- Crescent Real Estate Equities, Ltd. First Amended and
                Restated 401(k) Plan (filed as Exhibit 10.10 to the 1997
                10-K and incorporated herein by reference)
   10.13     -- Real Estate Purchase and Sale Agreement, dated as of
                January 29, 1997, between the Registrant, as purchaser,
                and Magellan Health Services, Inc., as seller, relating
                to the acquisition of 92 behavioral healthcare facilities
                (the "Magellan Facilities"), as amended effective
                February 28, 1997 and May 29, 1997 (filed as Exhibit
                10.13 to the Registrant's Quarterly Report on Form 10-Q/A
                for the quarter ended June 30, 1997 (the "1997 10-Q") and
                incorporated herein by reference).
   10.14     -- Second Amended and Restated 1995 Crescent Real Estate
                Equities Company Stock Incentive Plan (filed as Exhibit
                10.13 to the Form S-4 and incorporated herein by
                reference)
   10.15     -- 1995 Crescent Real Estate Equities Limited Partnership
                Unit Incentive Plan (filed as Exhibit 99.01 to the
                Registrant's Registration Statement on Form S-8 (File No.
                333-3452) and incorporated herein by reference)
   10.16     -- 1996 Crescent Real Estate Equities Limited Partnership
                Unit Incentive Plan (filed as Exhibit 10.01 to the 1996
                Form 8-K and incorporated herein by reference)
   10.17     -- Master Lease Agreement, dated June 16, 1997, as amended,
                between Crescent Real Estate Funding VII, L.P. and
                Charter Behavioral Health Systems, LLC and its
                subsidiaries, relating to the Magellan Facilities (filed
                as Exhibit 10.27 to the 1997 10-K and incorporated herein
                by reference)
   10.18     -- Fourth Amended and Restated Revolving Credit Agreement,
                dated December 19, 1997 among the Registrant, BankBoston,
                N.A. and the other banks named therein (filed as Exhibit
                10.25 to the Form S-4 and incorporated herein by
                reference)
   10.19     -- Intercompany Agreement, dated June 3, 1997, between the
                Registrant and Crescent Operating, Inc. (filed as Exhibit
                10.2 to the Registration Statement on Form S-1 (File No.
                333-25223) of Crescent Operating, Inc. and incorporated
                herein by reference)
</TABLE>
<PAGE>   239
 
<TABLE>
<CAPTION>
                                                                          SEQUENTIALLY
  EXHIBIT                                                                   NUMBERED
    NO.                                EXHIBIT                                PAGE
  -------                              -------                            ------------
<C>          <S>                                                          <C>
   21.01     -- Subsidiaries of the Registrant (filed as Exhibit 21.01 to
                the Form S-4 and incorporated herein by reference)
   23.01     -- Consent of Arthur Andersen LLP (Dallas), Certified Public
                Accountants, dated June 24, 1998 (filed herewith)
   23.02     -- Consent of Arthur Andersen LLP (Atlanta), Certified
                Public Accountants, dated June 23, 1998 (filed herewith)
   23.03     -- Consent of Arthur Andersen LLP (Las Vegas), Certified
                Public Accountants, dated June 24, 1998 (filed herewith)
   23.04     -- Consent of Shaw Pittman Potts & Trowbridge (included in
                its opinion filed as Exhibit 5.01 to this Registration
                Statement)
   23.05     -- Consent of Shaw Pittman Potts & Trowbridge (included in
                its opinion filed as Exhibit 8.01 to this Registration
                Statement)
   23.06     -- Consent of Salomon Smith Barney, dated June 25, 1998
                (filed herewith)
   23.07     -- Consent of Locke Purnell Rain Harrell (included in its
                opinion filed as Exhibit 8.02 to this Registration
                Statement)
   24.01     -- Powers of Attorney (filed herewith)
</TABLE>