Crescent Operating, Inc.

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International Guild of Hospitality & Restaurant Managers

Crescent Operating, Inc. (COPI.OB)

Crescent Operating, Inc., formed on April 1, 1997 by Crescent Equities and its subsidiary Crescent Partnership, is the lessee and operator of certain assets owned or to be acquired by Crescent Partnership, but which Crescent Partnership cannot operate due to Crescent Equities' status as a real estate investment trust. As of December 31, 2001 , Crescent Operating, through various subsidiaries and affiliates, had assets and operations comprising four business segments: Equipment Sales and Leasing; Hospitality; Temperature Controlled Logistics; and Land Development.

The Equipment Sales and Leasing Segment consisted of a 100% interest in Crescent Machinery Company (Crescent Machinery) and its subsidiary, a construction equipment sales, leasing and service company that had as many as 18 locations in seven states.

The Hospitality Segment consisted of the Company's lessee interests in three Upscale Business Class Hotels owned by Crescent Partnership, which included the Denver Marriott City Center, the Hyatt Regency Albuquerque, and the Renaissance Hotel in Houston, Texas; lessee interests in three Destination Resort Properties owned by Crescent Partnership, which included the Hyatt Regency Beaver Creek, the Ventana Inn and Spa and the Sonoma Mission Inn and Spa (including the Sonoma Mission Inn Golf and Country Club); lessee interests in two destination fitness resort and spa properties, including Canyon Ranch-Tucson and Canyon Ranch-Lenox (collectively, the Hospitality Properties); and a 5% economic interest in CRL Investments, Inc. (CRL), which has an investment in the Canyon Ranch Day Spa in the Venetian Hotel in Las Vegas, Nevada and participates in the future use of the Canyon Ranch name. Crescent Partnership owned the remaining 95% economic interest in CRL.

The Temperature Controlled Logistics Segment consisted of a 40% interest in the operations of Vornado Crescent Logistics Operating Partnership (AmeriCold Logistics), which operated 100 refrigerated storage properties with an aggregate storage capacity of approximately 525 million cubic feet. Crescent Partnership had a 40% interest in AmeriCold Corp., which owned 89 of the 100 properties.

The Land Development Segment consisted of a 4.65% economic interest in Desert Mountain, a master planned, luxury residential and recreational community in northern Scottsdale, Arizona (Crescent Partnership owned a 88.35% economic interest in Desert Mountain); a 52.5% general partner interest in The Woodlands Operating Co., L.P. (Woodlands Operating); a 2.625% economic interest in The Woodlands Land Development Co. L.P. (Landevco) (2.475% through November 2001) (Crescent Partnership owned a 49.875% economic interest in this entity); and a 60% economic interest in COPI Colorado, L.P. (COPI Colorado), a company that has a 10% economic interest in Crescent Resort Development Inc. (CRDI), formerly Crescent Development Management Corp. (CDMC). Crescent Partnership owned the remaining 90% economic interest in CRDI.

On February 6, 2002, Crescent Machinery Company (comprising the Company's Equipment Sales and Leasing segment) filed a voluntary petition in bankruptcy. On February 14, 2002 , Crescent Operating entered into the Settlement Agreement with Crescent Real Estate, pursuant to which the Company's interests in the Land Development and Hospitality segments were transferred to Crescent Partnership in partial satisfaction of the indebtedness owing from Crescent Operating. The Company agreed to transfer the assets of its Temperature Controlled Logistics segment in the future in connection with the satisfaction of its indebtedness to Bank of America . The Settlement Agreement also requires the filing of a prepackaged bankruptcy plan for Crescent Operating. This bankruptcy plan effects the orderly termination of Crescent Operating's business. Substantially all of Crescent Operating's assets are encumbered by liens in favor of Crescent Partnership. Crescent Operating is in default in its obligations to Crescent Real Estate. The Settlement Agreement also provides Crescent Operating with funds to satisfy its creditors' claims and gives Crescent Operating stockholders the opportunity to receive common shares of Crescent Real Estate.

On June 28, 2001 , Crescent Operating and Crescent Equities entered into an asset and stock purchase agreement (the Purchase Agreement) in which Crescent Real Estate agreed to acquire the Company's hotel operations, land development interests and other assets. Crescent Real Estate also entered into an agreement, subsequently amended and restated as of October 31, 2001 (the Capital Agreement), to make a $10 million investment in Crescent Machinery, which, along with capital from a third-party investment firm, was expected to put Crescent Machinery on solid financial footing. The transactions contemplated by the Purchase Agreement and Capital Agreement, called the Restructuring Proposal, also included the future sale of the Company's 40% interest in AmeriCold Logistics.

On February 14, 2002 , Crescent Operating entered into a Settlement Agreement with Crescent Real Estate. The Settlement Agreement also provided the basis for Crescent Operating to file a prepackaged bankruptcy plan that the Company believes will provide for a limited recovery to its stockholders. Pursuant to the Settlement Agreement, Crescent Operating has transferred the following assets to Crescent Real Estate: all of its hotel operations, in lieu of foreclosure, on February 14, 2002 ; and all of its land development interests, through a strict foreclosure, on February 14, 2002 , and March 22, 2002 .

Disclaimer:
The data included within the Financial section is solely for information and does not construe a recommendation and/or endorsement by IGHRM or its members to invest funds with any of the companies listed. You are strongly advised to obtain professional advice with qualified individuals or corporations for any investments of funds.

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