EXHIBIT 10.2
================================================================================
SECOND AMENDED AND RESTATED
OPERATING AGREEMENT
OF
EQUITYCO, L.L.C.
DATED AS OF AUGUST 31, 2004
================================================================================
TABLE OF CONTENTS
PAGE
I. DEFINED TERMS.......................................................................................... 1
1.01. Defined Terms................................................................................. 1
1.02. Other Defined Terms........................................................................... 1
II. ORGANIZATION........................................................................................... 1
2.01. Formation..................................................................................... 1
2.02. Name and Principal Place of Business.......................................................... 2
2.03. Term.......................................................................................... 2
2.04. Registered Agent and Registered Office........................................................ 2
2.05. Purpose....................................................................................... 2
2.06. Gaming Licenses............................................................................... 3
2.07. Capitalization................................................................................ 4
III. MEMBERS................................................................................................ 5
3.01. Admission of Members.......................................................................... 5
3.02. Limitation on Liability....................................................................... 5
IV. CAPITAL................................................................................................ 6
4.01. Initial Capital Contributions................................................................. 6
4.02. Additional Capital Contributions.............................................................. 7
4.03. Capital Accounts.............................................................................. 8
V. INTERESTS IN THE COMPANY............................................................................... 9
5.01. Percentage Interests.......................................................................... 9
5.02. Ownership..................................................................................... 9
5.03. Waiver of Partition........................................................................... 9
VI. ALLOCATIONS AND DISTRIBUTIONS.......................................................................... 10
6.01. Allocations................................................................................... 10
6.02. Special Allocations and Compliance with Section 704(b)........................................ 10
6.03. Distributions of Net Cash Flow................................................................ 11
6.04. Tax Liability Distributions................................................................... 11
6.05. Distributions in Liquidation.................................................................. 12
6.06. Reinvestment of Cash Flow..................................................................... 12
6.07. Tax Matters................................................................................... 12
6.08. Tax Matters Partner........................................................................... 12
(i)
TABLE OF CONTENTS
(CONTINUED)
PAGE
6.09. Section 704(c)................................................................................ 13
6.10. Withholding................................................................................... 13
VII. MANAGEMENT............................................................................................. 14
7.01. Management.................................................................................... 14
7.02. Members of the Board of Managers.............................................................. 14
7.03. Officers...................................................................................... 18
7.04. Duties And Conflicts.......................................................................... 19
7.05. Expenses...................................................................................... 20
7.06. Affiliate Transactions........................................................................ 21
VIII. BOOKS AND RECORDS...................................................................................... 21
8.01. Books and Records............................................................................. 21
8.02. Accounting and Fiscal Year.................................................................... 22
8.03. Reports....................................................................................... 22
8.04. The Company Accountant........................................................................ 24
8.05. Reserves...................................................................................... 24
8.06. The Renovation Capital Expenditure Budget..................................................... 24
IX. TRANSFER OF INTERESTS.................................................................................. 24
9.01. No Transfer................................................................................... 24
9.02. Tag-Along Rights.............................................................................. 25
9.03. Drag-Along Rights............................................................................. 26
9.04. Nontransferable Rights........................................................................ 27
9.05. Transferees................................................................................... 27
9.06. Section 754 Election.......................................................................... 28
9.07. Certain Preemptive Rights..................................................................... 28
9.08. Transfer of Equity in BH/RE................................................................... 29
9.09. Transfer of Rights under this Agreement....................................................... 29
9.10. Issuance of Additional Interests.............................................................. 30
9.11. Transfer of Entire Interests.................................................................. 30
9.12. Registration Rights Agreement................................................................. 30
X. EXCULPATION AND INDEMNIFICATION........................................................................ 30
(ii)
TABLE OF CONTENTS
(CONTINUED)
PAGE
10.01. Exculpation................................................................................... 30
10.02. Indemnification............................................................................... 31
XI. DISSOLUTION AND TERMINATION............................................................................ 32
11.01. Dissolution................................................................................... 32
11.02. Termination................................................................................... 33
11.03. Liquidating Member............................................................................ 33
XII. PUT-CAll PROVISIONS.................................................................................... 34
12.02. Put Right..................................................................................... 36
12.03. Determination of Breach of Hotel Management Agreement......................................... 38
12.04. Power of Attorney............................................................................. 40
XIII. MISCELLANEOUS.......................................................................................... 40
13.01. Representations and Warranties of the Members................................................. 40
13.02. Further Assurances............................................................................ 41
13.03. Notices....................................................................................... 41
13.04. Governing Law................................................................................. 42
13.05. Attorney Fees................................................................................. 42
13.06. Captions...................................................................................... 43
13.07. Pronouns...................................................................................... 43
13.08. Successors and Assigns........................................................................ 43
13.09. Extension Not a Waiver........................................................................ 43
13.10. Creditors and Third Parties not Benefited..................................................... 43
13.11. Recalculation of Interest..................................................................... 43
13.12. Severability.................................................................................. 43
13.13. Entire Agreement.............................................................................. 44
13.14. Publicity..................................................................................... 44
13.15. Counterparts.................................................................................. 44
13.16. Confidentiality............................................................................... 44
13.17. Venue......................................................................................... 45
13.18. Waiver of Jury Trial.......................................................................... 45
13.19. Enforceability of Power of Attorney........................................................... 45
(iii)
TABLE OF CONTENTS
(CONTINUED)
PAGE
13.20. Amendments.................................................................................... 46
13.21. Rapid Resolution Process Required............................................................. 46
Appendix A Defined Terms
(iv)
SECOND AMENDED AND RESTATED
OPERATING AGREEMENT
OF
EQUITYCO, L.L.C.
This SECOND AMENDED AND RESTATED OPERATING AGREEMENT of EquityCo,
L.L.C., a Nevada limited liability company (the "Company") is made and entered
into as of August 31, 2004, by and between (i) Starwood Nevada Holding, LLC, a
Delaware limited liability company formerly known as SH/SH Acquisition I, LLC
("Starwood"), and (ii) BH/RE, L.L.C., a Nevada limited liability company
("BH/RE"), and amends and restates in its entirety the Amended and Restated
Operating Agreement of the Company dated April 22, 2003 as amended by that
certain Agreement, dated August 9, 2004, among Starwood, BH/RE, Sheraton
Operating Company, the Company and OpBiz, L.L.C.
WHEREAS, the Members desire to amend and restate the operating
agreement of the Company as set forth herein;
NOW, THEREFORE, the parties hereto hereby agree as follows:
I. DEFINED TERMS
1.01. DEFINED TERMS. As used in this Agreement, capitalized terms used
in this Agreement will have the meanings set forth on Appendix A to this
Agreement, and by this reference Appendix A is incorporated herein as fully as
if the provisions thereof had been included in the body of this Agreement in
their entirety.
1.02. OTHER DEFINED TERMS. As used in this Agreement, unless otherwise
specified, (a) all references to Sections, Articles or Exhibits are to Sections,
Articles or Exhibits of this Agreement, (b) each accounting term has the meaning
assigned to it in accordance with United States generally accepted accounting
principles, (c) the terms "include" and "including" shall be construed as if
followed by the phrase "without limitation", (d) the term "third parties" means
a Person that is not a party to this Agreement and is independent from and
unrelated to any party to this Agreement and is not an Affiliate of any party to
this Agreement, and (e) all terms used in this Agreement which are not defined
in Appendix A shall have the meanings set forth elsewhere in this Agreement. The
use of any term defined in this Agreement in its uncapitalized form indicates
that the word has its usual, normal and general meaning.
II. ORGANIZATION
2.01. FORMATION. The Company has been formed as a limited liability
company under the Nevada Act, and hereafter shall operate upon the terms and
subject to the conditions set forth in this Agreement. The formation of the
Company by filing articles of organization of the Company (the "Articles of
Organization") in the Office of the Secretary of State of the State of Nevada is
hereby ratified. Any Person authorized by the Board of Managers is hereby
authorized to file and record any amendments to the Articles of Organization and
such other documents as may be required or appropriate under the Nevada Act or
the laws of any jurisdiction in which the Company may conduct business or own
property.
2.02. NAME AND PRINCIPAL PLACE OF BUSINESS.
(a) NAME. The name of the Company is set forth on the cover page to
this Agreement. The Board of Managers may change the name of the Company or
adopt such trade or fictitious names for use by the Company as the Board of
Managers may from time to time determine. All business of the Company shall be
conducted under such name, and title to all assets of the Company shall be held
in such name. In the event the Board of Managers changes the name of the Company
or adopts any other name for use by the Company, the Company shall promptly file
or record with the proper offices in each jurisdiction and political subdivision
in which the Company is conducting business such amendments or certificates,
applications or other documents as are required or permitted by any applicable
limited liability company, assumed or fictitious name statutes, or similar
statutes or laws in effect in each such jurisdiction or political subdivision
thereof.
(b) PRINCIPAL PLACE OF BUSINESS. The principal place of business and
office of the Company shall be located at such place as the Board of Managers
may from time to time designate (in each case, all the Members shall be provided
with notice of any change in the principal place of business and office of the
Company).
2.03. TERM. The term of the Company shall be perpetual.
2.04. REGISTERED AGENT AND REGISTERED OFFICE. The name of the Company's
registered agent for service of process is The Corporation Trust Company of
Nevada, and the address of the Company's registered agent and the address of the
Company's registered office in the State of Nevada is ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇. Such agent and such office may be changed from time to time
by the Board of Managers. Any Person authorized by the Board of Managers is
hereby authorized, for the purposes of authorizing or qualifying the Company to
do business in any state, territory, or dependency of the United States in which
it is necessary or expedient for the Company to transact business, to do any and
all acts and things necessary to obtain from such state, territory or dependency
any such authorization or qualification, including any filing or recording
deemed necessary by such Person authorized by the Board of Managers.
2.05. PURPOSE.
(a) GENERAL. The principal purposes and business of the Company are
(and the Members acknowledge and agree that each of the following is a part of
the ordinary business of the Company):
(i) to form a limited liability company ("MezzCo"), and to
manage and otherwise deal with the Company's interest in MezzCo,
including causing MezzCo to borrow or otherwise obtain $50 million (or
such greater or lesser amount as may be authorized from time to time by
the Board of Managers) of financing and to form a Nevada limited
liability company ("OpBiz");
(ii) to cause, directly or indirectly through MezzCo, OpBiz to
(A) acquire substantially all of the assets and assume certain
liabilities of Aladdin Gaming, L.L.C. ("Gaming") pursuant to (1) a sale
under Section 363 of the Bankruptcy Code and an
2
assumption and assignment of executory contracts under Section 365 of
the Bankruptcy Code or (2) a plan of reorganization under chapter 11 of
the Bankruptcy Code and in connection therewith, cause OpBiz to enter
into the Credit Agreement, (B) renovate the Aladdin Hotel and Casino
(the "Property") into a Planet Hollywood-themed hotel/casino (the
"Renovation"), (C) operate the casino, (D) enter into a management
agreement pursuant to which the hotel portion of the hotel/casino
initially will be managed by Sheraton Operating Corporation, a
wholly-owned subsidiary of Starwood (the "Hotel Manager") as a
"Sheraton" hotel (the "Hotel Management Agreement"), (E) enter into a
licensing and merchandising arrangement with Planet Hollywood
International, Inc. or one or more of its subsidiaries ("Planet
Hollywood"), pursuant to which OpBiz will obtain certain licenses to
use (x) the "Planet Hollywood" trademark and (y) certain items of
movie, television and Hollywood memorabilia, all in the furtherance of
the "theme" as described in clause (B) above, and (F) change or replace
any of the arrangements described in clauses (A) through (E) from time
to time as approved by the Board of Managers;
(iii) directly or indirectly through another entity, develop,
own an economic interest in or operate a time share facility on
property adjacent to the Property;
(iv) to manage and otherwise deal with the Company's direct
and indirect interest in MezzCo and OpBiz;
(v) to make capital contributions and/or loans to MezzCo to
enable MezzCo to make capital contributions and/or loans to OpBiz to
enable OpBiz to operate its business; and
(vi) to conduct all activities reasonably necessary or
desirable to accomplish the foregoing purposes, and to do anything
necessary or incidental to any of the foregoing.
The Company shall not engage in any other business or activity without the
unanimous approval of the Board of Managers.
(b) COOPERATION. Subject to the other terms and conditions of this
Agreement and without intending to compromise any party's other rights, duties
and obligations, the Members each agree to cooperate with each other in the
activities of the Company, including but not limited to, the execution and
delivery of documents approved by the Board of Managers which are necessary or
required in connection with any such activity, including any review and/or
approval process by any governmental bodies having jurisdiction over the
Company, any of the Subsidiaries or the Property.
2.06. GAMING LICENSES. The Members will, and will use their reasonable
best efforts to cause each other appropriate person to, obtain appropriate
gaming licenses with respect to the operation of the Property (including
negotiating in good faith to amend this Agreement if and as required by the
relevant gaming governmental authorities to the extent consistent with the
Members' general economic agreements represented by this Agreement).
3
2.07. CAPITALIZATION.
(a) MEMBERSHIP UNITS. Interests in the Company will be designated as
"Membership Units." The Company will have the following classes of Membership
Units: (i) "Class A Membership Units" and (ii) "Class B Membership Units." Each
of the Class A Membership Units and Class B Membership Units will have the
relative preferences, rights, limitations or restrictions as set forth in this
Agreement (which preferences, rights, limitations and restrictions shall, except
to the extent otherwise expressly provided in this Agreement, be identical as
between the Class A Membership Units and the Class B Membership Units). Each
Membership Unit will be represented solely by an entry in the books for
registration of Membership Units provided for in Section 8.01. All of the
provisions of this Agreement will apply to and include all the Membership Units
issued by the Company to any Member or acquired by any Person on and after the
date hereof.
(b) INITIAL ISSUANCES. Upon Starwood making the entire Starwood Initial
Capital Contribution and BH/RE making the entire BH/RE Initial Capital
Contribution, Starwood shall be the initial holder of 6,000,000 Class A
Membership Units issued in connection with the initial capitalization of the
Company and BH/RE shall be the initial holder of 34,000,000 Class B Membership
Units issued in connection with the initial capitalizations of the Company.
(c) SUBSEQUENT ISSUANCES. From and after the time that Starwood shall
have made the entire Starwood Initial Capital Contribution and BH/RE shall have
made the entire BH/RE Initial Capital Contribution, one Membership Unit shall be
issued in respect of each dollar of Additional Capital Contribution, Preemptive
Contribution or Reimbursement Shortfall Contribution made by any Member except
as may be otherwise approved by the Board of Managers.
(d) SAME CLASS FOR SUBSEQUENT ISSUANCES. The Membership Units issued to
any Member in connection with any Additional Capital Contribution or any
Preemptive Contributions shall be of the same class as the Membership Units held
by such Member at the time of such contribution (or, if such Member holds both
Class A Membership Units and Class B Membership Units, shall be allocated
between Class A Membership Units and Class B Membership Units in proportion to
the relative numbers of Class A Membership Units and Class B Membership Units
held by such Members at such time); provided, however, that if any Contributing
Member contributes a Non-Contributing Member's pro rata share of any requested
capital contribution pursuant to Section 4.02(b), there shall be issued to such
Non-Contributing Member in respect thereof the same class of Membership Units as
would have been issued to such Non-Contributing Member had it made such
requested capital contribution. The Membership Units issued to any Person that,
immediately prior to such issuance, is not a Member shall be of such class as
may be determined by the Board of Managers in accordance with Section 7.02(g).
(e) FRACTIONAL MEMBERSHIP UNITS. Any fractional Membership Unit
otherwise issuable hereunder shall be rounded down in each case to the nearest
whole Membership Unit.
4
III. MEMBERS
3.01. ADMISSION OF MEMBERS. Each of Starwood and BH/RE is hereby
admitted as a member of the Company and shall be shown as such on the books and
records of the Company.
3.02. LIMITATION ON LIABILITY.
(a) GENERAL. Except as otherwise expressly provided in the Nevada Act,
the debts, obligations and liabilities of the Company, whether arising in
contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of the Company, and no Member shall be obligated personally for any
such debt, obligation or liability of the Company solely by reason of being a
member of the Company. Except as otherwise expressly provided in the Nevada Act
or as provided in Section 10.02(b) hereof, the liability of each Member shall be
limited to the amount of capital contributions made or required to be made by
such Member in accordance with the provisions of this Agreement, but only when
and to the extent the same shall become due and payable pursuant to the
provisions of this Agreement. Further, except as otherwise expressly provided
herein to the contrary, no member of the Board of Managers, general or limited
partner of any Member, shareholder, member or other holder of an equity interest
in any Member, or any officer, director or employee of any of the foregoing or
any of their Affiliates shall be obligated personally for any debt, obligation
or other liability of the Company solely by reason of being a member of the
Board of Managers, general or limited partner of any Member, shareholder, member
or other holder of an equity interest of any Member, or officer, director, or
employee of any of the foregoing or any of their Affiliates. Further, failure of
the Company to observe any corporate or other formalities or requirements
relating to the exercise of its powers or the management of its business or
affairs under this Agreement or the Nevada Act shall not be grounds for any
Member, member of the Board of Managers, general or limited partner of any
Member, shareholder, member or other holder of an equity interest in any Member,
or any officer, director or employee of any of the foregoing or any of their
Affiliates to be held liable or obligated for any debt, obligation or other
liability of the Company.
(b) CAPITAL LIMITS. Except as expressly provided in this Agreement, no
Member shall be required to contribute any capital other than the contributions
specifically required by the provisions of Article IV hereof, nor shall any
Member be required to loan any funds to the Company. A negative or deficit
balance in any Member's Capital Account shall not be deemed to be an asset of
the Company and no Member with a negative or deficit balance in its Capital
Account shall have any obligation to the Company, any other Member, or any third
party or creditor to restore any negative or deficit balance in its Capital
Account (upon liquidation or dissolution of the Company or otherwise), except to
the extent expressly provided for in this Agreement. Other than as set forth in
Section 10.02(b) hereof, no Member shall be liable for the return of the Capital
Contributions, Capital Account or any portion thereof, of any other Member, it
being expressly understood and agreed that such return shall be made solely from
the assets of the Company and only in accordance with the provisions of this
Agreement. No Member shall be entitled to withdraw or receive a return of any
portion of its Capital Contributions or Capital Account, to receive interest on
its Capital Contributions or Capital Account or to receive any distributions
from the Company, except as expressly provided for in this Agreement or under
applicable law. No Member shall be entitled to demand property other than cash
in return for its Capital Contributions to the Company, its Capital Account, or
its
5
Interests in the Company. For purposes of this Section 3.02, the term "Capital
Account" shall be deemed to also include the capital account of any Member for
financial or book purposes or as set forth in the Nevada Act or under common
law.
(c) SURVIVAL. The provisions of this Section 3.02 will survive the
termination or expiration of this Agreement and the dissolution, liquidation and
winding up of the Company.
IV. CAPITAL
4.01. INITIAL CAPITAL CONTRIBUTIONS. Contemporaneously with the
execution by OpBiz of the Purchase Agreement, BH/RE made a cash contribution to
the capital of the Company in the amount of $5 million. The Company used such
cash to make a $5 million capital contribution to MezzCo and caused MezzCo to
make a $5 million capital contribution to OpBiz so that OpBiz could make the
Initial ▇▇▇▇▇▇▇ Money Deposit under the Purchase Agreement. At such time as the
Second ▇▇▇▇▇▇▇ Money Deposit ($5 million) was required under the Purchase
Agreement, Starwood made a cash contribution to the capital of the Company in an
amount ($1.5 million) equal to 15% of the sum of the Initial ▇▇▇▇▇▇▇ Money
Deposit and the Second ▇▇▇▇▇▇▇ Money Deposit and BH/RE made a cash contribution
to the capital of the Company in an amount ($3.5 million) equal to the
difference between the amount of the Second ▇▇▇▇▇▇▇ Money Deposit and the amount
of the Starwood Contribution, which funds were contributed by the Company to the
capital of MezzCo, and immediately following the Company caused MezzCo to
contribute such funds to the capital of OpBiz to fund the Second ▇▇▇▇▇▇▇ Money
Deposit. Upon satisfaction (or waiver by Starwood and BH/RE) of the following
two conditions, (a) BH/RE, without offset, shall make a cash contribution to the
capital of the Company in the amount of (1) $70 million, less (2) $8.5 million
(the amount of prior capital contributions made by BH/RE pursuant to this
Section 4.01), less (3) the lesser of (A) the net amount of financing obtained
by MezzCo as contemplated by Section 2.05(a)(i) or (B) $50 million
(collectively, the "BH/RE Initial Capital Contribution") by directing the Escrow
Agent, as set forth below, to wire to a Company account designated by the Board
of Managers any portion of the BH/RE Initial Capital Contribution not already
made by BH/RE (provided, however, that if the Escrow Agent does not have funds
from BH/RE therefor, BH/RE shall itself make the cash contribution to the
Company) and (b) Starwood, without offset, shall make a cash contribution to the
capital of the Company in the amount of (1) $20 million, less (2) $1.5 million
(the amount of the prior capital contribution made by Starwood) and less (3) any
portion of the Extension ▇▇▇▇▇▇▇ Money Deposit (as defined in the Purchase
Agreement) funded by Starwood as contemplated by Section 7.05 (collectively, the
"Starwood Initial Capital Contribution"), by directing the Escrow Agent, as set
forth below, to wire transfer the Starwood Initial Capital Contribution to a
Company account designated by the Board of Managers (provided, however, that if
the Escrow Agent does not have funds from Starwood therefor, Starwood shall
itself make the cash contribution to the Company):
(i) the contemporaneous acquisition by OpBiz of the Property;
and
(ii) receipt of gaming licenses and approvals of Governmental
Authorities, or alternative arrangements thereto, necessary for OpBiz
to acquire the Property and operate the business conducted at the
Property, taken as a whole, materially consistent with past practices.
6
Each of Starwood and BH/RE shall use reasonable efforts to cause such conditions
to be satisfied as promptly as is practicable. Starwood shall use reasonable
efforts to transfer, prior to August 11, 2004, the Starwood Initial Capital
Contribution (other than the $1.5 million already funded by Starwood in
connection with the Initial ▇▇▇▇▇▇▇ Money Deposit and the Second ▇▇▇▇▇▇▇ Money
Deposit and other than any portion of the Extension ▇▇▇▇▇▇▇ Money Deposit funded
by Starwood as contemplated by Section 7.05) into a sole order escrow account
controlled solely by Starwood and held by Escrow Agent (as defined in the
Purchase Agreement) to be held by the Escrow Agent until the Closing Date or the
termination of the Purchase Agreement, as the case may be, or the earlier
instruction to the Escrow Agent by Starwood to deliver the funds to the Company.
BH/RE shall use reasonable efforts to transfer, prior to August 11, 2004, the
BH/RE Initial Capital Contribution (less the $8.5 million already funded by
BH/RE in connection with the Initial ▇▇▇▇▇▇▇ Money Deposit and the Second
▇▇▇▇▇▇▇ Money Deposit and any other part of the BH/RE Initial Capital
Contribution theretofore funded by BH/RE to the Company) into a sole order
escrow account controlled solely by BH/RE and held by the Escrow Agent to be
held by the Escrow Agent until the Closing Date or the termination of the
Purchase Agreement, as the case may be, or the earlier instruction to the Escrow
Agent by BH/RE to deliver the funds to the Company.
The parties intend for such Initial Capital Contributions to be used by the
Company to (A) capitalize the Subsidiaries, (B) fund the Subsidiaries to pay
costs related to the Renovation and other amounts permitted by the Credit
Agreement, (C) pay, or provide funds to the Subsidiaries to pay, expenses of the
types described in Section 7.05(a) in accordance with the terms thereof, and (D)
use any remaining amounts to pay obligations under the Credit Agreement.
It is recognized that either of Starwood or BH/RE may choose to fund to the
Company all or part of its Initial Capital Contribution earlier than otherwise
required hereby. It is agreed that if either BH/RE or Starwood funds to the
Company all or a portion of their respective Initial Capital Contributions
(other than the contributions made to fund the Initial ▇▇▇▇▇▇▇ Money Deposit and
the Second ▇▇▇▇▇▇▇ Money Deposit and the Extension ▇▇▇▇▇▇▇ Money Deposit) and
the Purchase Agreement is terminated, then immediately upon such termination
(and in priority to any other payment required by this Agreement and
notwithstanding anything in this Agreement (including Article VI and Section
7.05) to the contrary), the Company shall immediately refund to BH/RE and
Starwood an amount equal to their respective Initial Capital Contributions
(other than the contributions made to fund the Initial ▇▇▇▇▇▇▇ Money Deposit and
the Second ▇▇▇▇▇▇▇ Money Deposit and the Extension ▇▇▇▇▇▇▇ Money Deposit).
4.02. ADDITIONAL CAPITAL CONTRIBUTIONS. (a) If at any time or from time
to time the Board of Managers (or, with respect to a Credit Agreement Cure Call,
any Member holding a Percentage Interest of 10% or more) determines that
additional funds are necessary or desirable to meet the obligations or needs of
the Company or any Subsidiary, the Board of Managers may request that the
Members make Additional Capital Contributions on a pro rata basis in accordance
with their relative Percentage Interests. Any such request shall be in writing,
and shall state the aggregate amount of the funds requested, each Member's pro
rata share thereof (based upon Percentage Interests), and a brief description of
the proposed use of such Additional Capital Contributions. Each Member may, at
its option, contribute its pro rata share of the funds requested. Any Additional
Capital Contributions made pursuant to this Section 4.02(a) shall be
7
made by wire transfer of funds to a Company account designated by the Board of
Managers on or before a date designated by the Board of Managers in such notice
(the "Contribution Date").
(b) If any one or more Members (each a "Non-Contributing Member") does
not timely make its pro rata share of any capital contribution (or any portion
thereof) requested pursuant to Section 4.02(a) hereof, all the other Members
that have made their pro rata portion of such capital contribution (such other
Members, the "Contributing Members") may (i) contribute the Non-Contributing
Members' pro rata share of such requested capital contributions or (ii) in the
event of a Credit Agreement Cure Call, loan to the Company an amount equal to
the Non-Contributing Members' pro rata share of such requested capital
contributions, which loan will be evidenced by a promissory note issued by the
Company in the amount of such loan with interest at a rate of 15% per annum (or,
if lower, the maximum rate permitted by applicable law), a maturity date of ten
(10) years after the making of such loan, all principal and interest coming due
at maturity, mandatory prepayments (applied first to accrued but unpaid interest
and then to principal) from any amounts that otherwise would be available for
distribution to the Members under Sections 6.03 or 6.05 (but not Section 6.04),
and provision for prepayment at any time at the option of the Company (such
action to be taken by delivery, within five Business Days after the Contribution
Date, of notice to such effect to the Company and the Non-Contributing Members,
and any election hereunder shall be taken as determined by a
Majority-in-Interest of the Contributing Members and shall be consummated within
ten Business Days after the Contribution Date).
4.03. CAPITAL ACCOUNTS. A separate capital account ("Capital Account")
will be maintained for each Member in accordance with Treasury Regulation
Section 1.704-1(b)(2)(iv). Consistent therewith, the Capital Account of each
Member will be determined and adjusted as follows:
(a) Each Member's Capital Account will be credited with:
(i) Any contributions of cash made by such Member to
the capital of the Company plus the fair market value of any
property contributed by such Member to the capital of the
Company (net of any liabilities to which such property is
subject or which are assumed by the Company);
(ii) The Member's distributive share of Net Profit,
Profit and items thereof allocated to such Member hereunder;
and
(iii) Any other increases required by Treasury
Regulation Section 1.704-1(b)(2)(iv).
(b) Each Member's Capital Account will be debited with:
(i) Any distributions of cash made from the Company
to such Member plus the fair market value of any property
distributed in kind to such Member (net of any liabilities to
which such property is subject or which are assumed by such
Member);
8
(ii) The Member's distributive share of Net Loss,
Loss and items thereof allocated to such Member hereunder; and
(iii) Any other decreases required by Treasury
Regulation Section 1.704-1(b)(2)(iv).
(c) In determining the amount of any liability for purposes of
subparagraphs (a) and (b) above there shall be taken into account Code
Section 752(c) and any other applicable provisions of the Code and
Regulations.
(d) The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended
to comply with Regulations Section 1.704-1(b), and shall be interpreted
and applied in a manner consistent with such Regulations. In the event
the Board of Managers shall determine that it is prudent to modify the
manner in which the Capital Accounts, or any debits or credits thereto
(including, without limitation, debits or credits relating to
liabilities which are secured by contributed or distributed property or
which are assumed by the Company or any Members), are computed in order
to comply with such Regulations, the Board of Managers may make such
modification provided that it is not likely to have a material effect
on the amounts distributed to any person pursuant to Section 11.02
hereof upon the dissolution of the Company. The Board of Managers also
shall make any appropriate modifications in the event unanticipated
events might otherwise cause this Agreement not to comply with
Regulations Section 1.704-1(b).
(e) In the event that any Interest is transferred in
accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor Member to the extent
such Capital Account related to the transferred Interest.
V. INTERESTS IN THE COMPANY
5.01. PERCENTAGE INTERESTS. With regard to each Member separately, the
Percentage Interest of each Member will be calculated as set forth in the
definition of "Percentage Interest" in Appendix A attached hereto (in each case,
subject to adjustment as provided in this Agreement).
5.02. OWNERSHIP. Membership Units will constitute personal property and
no Member will have a claim to or interest in specific property of the Company.
5.03. WAIVER OF PARTITION. Except as otherwise expressly provided for
in this Agreement, each of the Members hereby irrevocably waives any right or
power that such Member might have:
(a) To cause the Company or any of its assets to be
partitioned;
(b) To cause the appointment of a receiver for all or any
portion of the assets of the Company;
9
(c) To compel any sale of all or any portion of the assets of
the Company pursuant to any applicable law; or
(d) To file a complaint, or to institute any proceeding at law
or in equity, to cause the termination, dissolution or liquidation of
the Company.
Each of the Members has been induced to enter into this Agreement in reliance
upon the waivers set forth in this Section 5.03, and without such waivers no
Member would have entered into this Agreement.
VI. ALLOCATIONS AND DISTRIBUTIONS
6.01. ALLOCATIONS.
(a) Except as provided in 6.01(b), for each Taxable Year of
the Company or part thereof, Net Profit or Net Loss shall be allocated
to the Members (after all allocations pursuant to Section 6.02 hereof
have been made) in such a manner so as to cause the Partially Adjusted
Capital Accounts of the Members to equal, as nearly as possible, their
respective Target Accounts.
(b) Items comprising Winding Up Profit and Loss shall be
allocated to make, as nearly as possible, the Adjusted Capital Accounts
of each Member equal the amount such Member would receive if the
aggregate positive balances in the Adjusted Capital Accounts was
distributed pursuant to Section 6.03 (taking the penultimate sentence
of Section 6.04 into account).
6.02. SPECIAL ALLOCATIONS AND COMPLIANCE WITH SECTION 704(b). The
following special allocations shall, except as otherwise provided, be made in
the following order prior to any allocations pursuant to Section 6.01:
(a) Notwithstanding anything to the contrary contained in this
Article VI, if there is a net decrease in Company Minimum Gain or in
any Member Minimum Gain during any Taxable Year or other period, prior
to any other allocation pursuant hereto, such Member shall be specially
allocated items of Company Profit for such year (and, if necessary,
subsequent years) in an amount and manner required by Treasury
Regulation Sections 1.704-2(f) or 1.704-2(i)(4). The items to be so
allocated shall be determined in accordance with Treasury Regulation
Section 1.704-2.
(b) Nonrecourse Deductions for any Taxable Year or other
period shall be allocated (as nearly as possible) under Treasury
Regulation Section 1.704-2 to the Members, pro rata in proportion to
their respective Percentage Interests at the time of such allocation.
(c) Any Member Nonrecourse Deductions for any Taxable Year or
other period shall be allocated to the Member that made or guaranteed
or is otherwise liable with respect to the loan to which such Member
Nonrecourse Deductions are attributable in accordance with the
principles set forth in Treasury Regulation Section 1.704-2(i).
10
(d) Any Member who unexpectedly receives an adjustment,
allocation or distribution described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) which causes or increases a
negative balance in his or its Capital Account shall be allocated items
of Profit sufficient to eliminate such increase or negative balance, as
quickly as possible, to the extent required by such Treasury
Regulation.
(e) No allocation of loss or deduction shall be made to any
Member if, as a result of such allocation, such Member would have an
Adjusted Capital Account Deficit. Any such disallowed allocation shall
be made to the Members entitled to receive such allocation under
Treasury Regulation Section 1.704-1 in proportion to their respective
Percentage Interests.
6.03. DISTRIBUTIONS OF NET CASH FLOW. Except as otherwise provided in
the last paragraph of Section 4.01 or in Sections 6.04 and 6.05 below, the
Company shall, to the extent and at times determined by the Board of Managers
(but subject to clause (ii) of Section 4.02(b)), make distributions of Net Cash
Flow (to the extent and if available) to the Members in the following manner:
(a) First, to the Class A Members, in proportion to their
respective Class A Percentage Interests, until the sooner of (i) the
Contribution Accounts of all Class A Members being reduced to zero or
(ii) the Class A Members in the aggregate having received distributions
equal to $20 million and then second to the Class B Members, in
proportion to their respective Class B Percentage Interests, until the
sooner of (i) the Contribution Accounts of all Class B Members being
reduced to zero or (ii) the Class B Members in the aggregate having
received distributions equal to $20 million and then third to the
Members in proportion to their respective Contribution Accounts until
their Contribution Accounts have been reduced to zero.
(b) Fourth to the Class B Members, in proportion to their
respective Class B Percentage Interests until the Class B Members in
the aggregate have received aggregate distributions pursuant to this
Section 6.03(b) and Section 6.03(a) in an amount equal to the total
Percentage Interests of all Class B Members in the aggregate multiplied
by the aggregate distributions theretofore made under Section 6.03(a)
and this Section 6.03(b).
(c) Fifth, to the Members in accordance with and in proportion
to their respective Percentage Interests.
6.04. TAX LIABILITY DISTRIBUTIONS. Notwithstanding Section 6.03, for
each quarter of the Taxable Year (other than during a Winding Up Year) ("Tax
Quarter"), the Company shall, to the extent it has cash available therefor, make
a cash distribution, no later than 10 days after the end of each Tax Quarter (a
"Tax Liability Distribution"), to each Member (to the extent of cash available
for distribution) in amounts intended to enable the Members to discharge their
"Tax Liability." For this purpose, the Tax Liability of a Member shall equal the
product of (a) the sum of the net income and net gain, as determined for federal
income tax purposes, reasonably expected by the Board of Managers to be
allocable to such Member as a result of the allocations under Article VI for
such Tax Quarter, and (b) the maximum combined United States and New York tax
rate applicable to individuals or corporations (whichever is higher) on
11
ordinary income and capital gain, and taking into account the deductibility of
state and local income taxes for United States federal income tax purposes and
the character of the income in question and the holding period of any asset
sold. Any Tax Liability Distributions shall be made to a Member only if and to
the extent the distributions made to such Member pursuant to Sections 6.03(a),
6.03(b) or 6.03(c) for the Tax Quarter are less than the Tax Liability of such
Member for the Tax Quarter, and any Tax Distributions made to a Member shall
reduce the amount of the next distribution(s) that such Member would or will
otherwise receive pursuant to Section 6.03. The Company shall make adjusting
distributions in subsequent Tax Quarters pursuant to this Section 6.04 to a
Member that received a Tax Liability Distribution(s) in previous Tax Quarter(s)
than was less than such Member's Tax Liability in such Tax Quarter(s).
6.05. DISTRIBUTIONS IN LIQUIDATION. Upon the dissolution and winding-up
of the Company, the proceeds of sale and other assets of the Company
distributable to the Members under Section 11.02(c)(iii) shall be distributed
not later than the latest time specified for such distributions pursuant to
Treasury Regulation Section 1.704-1(b)(2)(ii)(b)(2) to the Members in proportion
to and in accordance with their respective positive Capital Account balances
(after adjustment to reflect the allocations pursuant to Section 6.01 and
Section 6.02 hereof). With the approval of the Board of Members, a pro rata
portion of the distributions that would otherwise be made to the Members under
the preceding sentence may be distributed by the Company to a trust established
by the Board of Managers (for the benefit of the Members) for the purposes of
liquidating Company assets, collecting amounts owed to the Company, and paying
any contingent or unforeseen liabilities or obligations of the Company arising
out of or in connection with the Company. The assets of any trust established
under this Section 6.05 will be distributed to the Members (from time to time by
the trustee of the trust upon approval by the Board of Managers) in the same
proportions as the amount distributed to the trust by the Company would
otherwise have been distributed to the Members under this Agreement.
6.06. REINVESTMENT OF CASH FLOW. Notwithstanding the provisions of
Section 6.03 and subject to Section 6.04, at the discretion of the Board of
Managers, the Company may reserve reasonable amounts of Net Cash Flow of the
Company for any purpose (subject to Section 7.02(g)(viii)).
6.07. TAX MATTERS. The Members intend for (i) the Company to be treated
as a partnership for federal income tax purposes, (ii) MezzCo to be treated as a
corporation for U.S. federal income tax purposes and (iii) OpBiz to be treated,
as determined by the tax matters partner, as a corporation, partnership or an
entity that is to be disregarded as separate from its owners for U.S. federal
income tax purposes. No Member shall take any action contrary to the preceding
sentence. Subject to the foregoing, the Board of Managers has the right and
power and is authorized to make all applicable elections, determinations and
other decisions under the Code and applicable Treasury Regulations, and under
any tax code or act of a foreign jurisdiction which is applicable to the Company
or any similar election to be made by the Company in respect of any Subsidiary,
including, without limitation, the deductibility of a particular item of expense
and the positions to be taken on the Company's or any Subsidiary's tax return.
6.08. TAX MATTERS PARTNER. BH/RE is hereby designated as the tax
matters partner within the meaning of Section 6231(a)(7) of the Code and,
subject to Section 6.07 hereof, shall exercise all rights, obligations and
duties of a tax matters partner under the Code. The Board of
12
Managers may in its discretion designate any other Member as a substitute or
alternate tax matters partner by written notice thereof to all of the Members.
6.09. SECTION 704(c). In accordance with Section 704(c) of the Code and
the applicable Treasury Regulations thereunder, income, gain, loss, deduction
and tax depreciation with respect to any property contributed to the capital of
the Company, or with respect to any property which has a Book Basis different
than its adjusted tax basis, shall, solely for federal income tax purposes, be
allocated among the Members so as to take into account any variation between the
adjusted tax basis of such property to the Company and the Book Basis of such
property.
6.10. WITHHOLDING.
(a) AUTHORIZED WITHHOLDING. Each Member authorizes the Company to
withhold from or pay on behalf of or with respect to the Member any amount of
federal, state, local, or foreign taxes that the Board of Managers determines
the Company may be required to withhold or pay to any Governmental Authority
with respect to any amount distributable or allocable to the Member pursuant to
this Agreement. Except as otherwise provided in this Agreement to the contrary,
any amount withheld from any distribution otherwise payable to a Member will be
deemed to have been distributed to the Member for purposes of this Agreement and
paid by such Member to the relevant taxing authority. Any amount paid on behalf
of or with respect to a Member other than amounts withheld from distributions
otherwise payable to a Member shall constitute a loan by the Company to the
Member, which loan shall be due within fifteen (15) days after repayment is
demanded of the Member in question by the Board of Managers. Any amounts payable
by a Member hereunder shall bear interest at 18% per annum, such interest to
accrue from the date such amount is due (i.e., fifteen (15) days after demand by
the Board of Managers) until such amount is paid in full.
(b) INDEMNIFICATION. None of the Company, any Subsidiary, any Member or
any member of the Board of Managers, general or limited partner of any Member,
member, shareholder or other holder of an equity interest of any Member, or any
officer, director or employee of any of the foregoing or any of their Affiliates
(each an "Indemnified Party"), shall be liable for any U.S. federal, state,
local or foreign taxes with respect to, on account of, or on behalf of any other
Member's interest in the Company or any Subsidiary or in any way attributable to
such other Member, such other Member's status, the status of any direct or
indirect partner, shareholder or other beneficial owner of such other Member or
any of its Affiliates. Each Member (the "Indemnifying Party") agrees to
indemnify and hold harmless the other Indemnified Parties from and against any
U.S. federal, state, local or foreign taxes that any Indemnified Party may be
required to withhold or pay to any governmental authority on account of, on
behalf of, or with respect to such Indemnifying Party's interest in the Company
or any Subsidiary or in any way attributable to such Indemnifying Party, such
Indemnifying Party's status or the status of any direct or indirect partner,
shareholder or other beneficial owner of such Indemnifying Party or any of its
or their Affiliates.
13
VII. MANAGEMENT
7.01. MANAGEMENT.
(a) BOARD OF MANAGERS. Except as otherwise expressly provided in this
Agreement, the business and affairs of the Company shall be vested in and
controlled by managers acting exclusively by means of and through a committee of
persons appointed in writing pursuant to Section 7.02 (the "Board of Managers").
Each person appointed by a Member to the Board of Managers pursuant to Section
7.02(a) shall act at the exclusive direction of, be the agent for and shall be
free to represent the views and positions of such appointing Member; provided,
however, each member of the Board of Managers shall be required to act in
accordance with the Standard of Care. The Board of Managers shall have
responsibility for establishing the policies and operating procedures with
respect to the business and affairs of the Company and for making all decisions
as to all matters which the Company has authority to perform, as fully as if all
the Members were themselves making such decisions in lieu thereof. Without
limiting the generality or effect of the preceding sentence, the Board of
Managers may make such rules and regulations, not inconsistent with this
Agreement, as it may deem expedient with respect to the issue, transfer and
recordation of ownership of the Membership Units. All decisions made with
respect to the management and control of the Company and approved by the Board
of Managers (except for such decisions which by the express terms of this
Agreement require the approval of all the Members) shall be binding on the
Company and all Members. The Board of Managers may, unless otherwise determined
by the Board of Managers, delegate certain administrative functions to the
officers, agents or representatives of the Company. No Member has the authority
to bind the Company.
(b) PROFESSIONAL ADVISORS. Subject to Section 7.02(g) and Section 7.06,
the Board of Managers may, on behalf of the Company or any Subsidiary, employ,
engage or retain any Persons (including any Affiliate of any Member) to act as
brokers, accountants, attorneys, engineers, investment bankers or in such other
capacities as the Board of Managers may determine are necessary or desirable in
connection with the Company's or any Subsidiary's business, and the Members and
the members of the Board of Managers shall be entitled to rely in good faith
upon the recommendations, reports and advice given them by any such Persons in
the course of their professional engagement.
7.02. MEMBERS OF THE BOARD OF MANAGERS.
(a) BOARD OF MANAGERS. Subject to change pursuant to Section 7.02(b),
the Board of Managers shall consist of six (6) members. Subject to applicable
Gaming Laws, four (4) members of the Board of Managers shall be appointed by
BH/RE and two (2) shall be appointed by Starwood; provided, however, that any
party with a right to appoint more than one member to the Board of Managers may
appoint fewer than such number and allocate the votes associated with the vacant
position(s) to one or more of the positions filled by such party (so that, for
example, BH/RE could appoint two members of the Board of Managers with two votes
each, in which case, for the quorum, voting and other provisions of this
Agreement, each such member of the Board of Managers shall count as two members
of the Board of Managers). The initial members of the Board of Managers
appointed by BH/RE will be ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇ (having two votes
each), and the initial member of the Board of Managers appointed by
14
Starwood shall be ▇▇▇ ▇▇▇▇ (having two votes). In addition, each Member may
designate one or more alternative members to act in the absence of its
representative. Each appointing Member may, by written notice to the others,
remove any person appointed by such Member and appoint a substitute therefor.
(b) CHANGE IN NUMBER. The number of members of the Board of Managers
may be decreased (but not below the aggregate number of members of the Board of
Managers that BH/RE and Starwood are entitled to appoint pursuant to Section
7.02(a)) or increased from time to time by vote of the Board of Managers. In
connection with any increase, the Board of Managers shall specify the means by
which the newly-created vacancies shall be filled
(c) MEETINGS. Regular meetings of the Board of Managers shall be held
at such times and places as shall be designated from time to time by resolution
of the Board of Managers, provided the Board of Managers shall meet no less
frequently than quarterly and provided such regular meetings of the Board of
Managers shall be as often as necessary or desirable to carry out its management
functions. Special meetings of the Board of Managers may be called by or at the
request of the Chief Executive Officer of OpBiz or any member of the Board of
Managers. The person or persons authorized to call the special meeting of the
Board of Managers may fix either New York, New York, Las Vegas, Nevada or such
other place within the continental United States as shall be agreed to by at
least one member of the Board of Managers appointed by each Member as the place
for holding the special meeting of the Board of Managers. The members of the
Board of Managers appointed by Starwood may be excluded from a meeting of the
Board of Managers for the portion of such meeting during which the alleged
defaults by the Hotel Manager under the Hotel Management Agreement will be
discussed.
(d) NOTICE OF MEETINGS. Notice of any meeting of the Board of Managers
shall be given no fewer than five (5) Business Days and no more than twenty (20)
Business Days prior to the date of the meeting. Notices shall be delivered in
the manner set forth in Section 13.03 hereof. The attendance of a member of the
Board of Managers at a meeting of the Board of Managers shall constitute a
waiver of notice of such meeting, except where a member of the Board of Managers
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting is not properly called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the Board of Managers need be specified in the notice or waiver of notice of
such meeting.
(e) QUORUM. A majority (in number of votes) of the members of the Board
of Managers shall constitute a quorum for transaction of business at any meeting
of the Board of Managers, provided such majority includes at least one (1)
member appointed by Starwood (unless Starwood's rights have terminated as
contemplated by Section 9.04) and two (2) members appointed by BH/RE; provided,
however, that if there is a failure of a quorum at a duly called meeting because
no member of the Board of Managers appointed by Starwood was present and a
second meeting is called on notice as provided in Section 7.02(d), a quorum for
that second meeting shall be a majority (in number of votes) of the members of
the Board of Managers. If less than a majority (in number of votes) of the
members of the Board of Managers are present at said meeting, a majority of the
members of the Board of Managers present may adjourn the meeting at any time
without further notice.
15
(f) MAJORITY VOTE. Except as provided in Section 7.02(g) below, the act
of a majority (in number of votes) of the members of the Board of Managers
present at a meeting at which a quorum is present shall be the act of the Board
of Managers.
(g) UNANIMOUS DECISIONS. The Board of Managers will not have any
authority to authorize or approve or take any material action with regard to any
of the following matters ("Unanimous Decisions"), unless the same has been
approved by at least three (3) members (in number of votes) of the Board of
Managers appointed by BH/RE (or any Person to whom it has transferred all of its
rights under Section 7.02(a) of this Agreement) and, unless Starwood's rights
have terminated as contemplated by Section 9.04, one (1) member of the Board of
Managers appointed by Starwood:
(i) terminating the Chief Executive Officer of OpBiz initially
appointed by OpBiz and replacing such officer if he is terminated by
OpBiz (such initial Chief Executive Officer and any successors thereto
being referred to as the "OpBiz CEO");
(ii) setting or modifying the compensation of the OpBiz CEO
(it being agreed that the offer presently outstanding to ▇▇▇▇▇▇▇ ▇▇▇▇▇
shall not require action other than majority action as contemplated by
Section 7.02(f)) or the Chief Operating Officer, Chief Financial
Officer or President of OpBiz;
(iii) approving any management equity incentive plan of the
Company or any Subsidiary;
(iv) approving an agreement with a third party to manage the
casino;
(v) approving the scope of and plans for the Renovation and
Renovation Capital Expenditure Budget;
(vi) approving any transaction with any Affiliate of a Member
that is not Arms Length (other than the Hotel Management Agreement, the
License Agreement or as permitted thereunder or any transaction
contemplated by the Time Share Plan as described in the Credit
Agreement);
(vii) engaging in any other business or activity other than as
contemplated in this Agreement on the date hereof;
(viii) issuing any Class A Membership Units to any Person
that, immediately prior to such issuance, is not a Member; or
(ix) amending this Agreement in any manner that would result
in the respective preferences, rights, limitations or restrictions
associated with or applicable to the Class A Membership Units and the
Class B Membership Units not being identical (except to the extent that
such preferences, rights, limitations or restrictions are not identical
by virtue of the express provisions of this Agreement in effect
immediately prior to such amendment).
16
Starwood will cause the members of the Board of Managers appointed by it to
approve any item within the scope of clause (ii) or (iii) if the proposed
compensation or equity plan is reasonably comparable to those provided to
similar officers or management by analogous private, single asset business
reorganizations that are not part of a larger reorganization.
Starwood will cause the members of the Board of Managers appointed by
it to not unreasonably withhold their approval of any item within the scope of
clause (i) above. There will be a rebuttable presumption that the members of the
Board of Managers appointed by Starwood unreasonably withheld their approval if
the members fail to approve three consecutive OpBiz CEO candidates having
qualifications reasonably comparable to persons hired within the past five (5)
years to be executives holding similar positions for similar properties on the
Las Vegas strip. Members of the Board of Managers appointed by Starwood may
withhold in their sole discretion their approval of any item within the scope of
clause (ix) above.
Notwithstanding anything to the contrary contained in this Section
7.02(g), the approval of the members of the Board of Managers appointed by
Starwood shall not be required with respect to any Unanimous Decisions if: (i)
the Hotel Manager has performed or failed to perform an act and that act or
failure to act constitutes an Event of Default under the Hotel Management
Agreement and (ii) OpBiz shall have established that it is entitled to terminate
the Hotel Management Agreement upon the conclusion of the dispute resolution
procedures pursuant to Section 10 of the Hotel Management Agreement, as modified
by the provisions of Section 12.03 of this Agreement, or the Hotel Manager shall
not have commenced such dispute resolution procedures within five (5) Business
Days of OpBiz delivering notice of the Event of Default to the Hotel Manager.
With respect to any matter that is both (i) requiring a Unanimous
Decision or otherwise requiring the approval of Starwood or the Starwood
Designee, and (ii) put to a vote by one or more members of the Board of Managers
appointed by BH/RE (the "BH/RE Designees"), such BH/RE Designees shall provide
the member or members of the Board of Managers appointed by Starwood (the
"Starwood Designee") a written notice specifying the action to be taken and a
brief narrative statement supporting the recommended action as being in the best
interest of EquityCo. For matters with respect to which the Starwood Designee
has received the written notice described above, Starwood agrees that it will
not, and it will cause the Starwood Designee to not, exercise its approval
rights to delay or prevent the authorization or approval (or fail to take an
action necessary or appropriate to permit the immediate approval), unless
Starwood reasonably determines that such matter is not in the best interest of
EquityCo (in which case Starwood and the Starwood Designee shall promptly
deliver to the BH/RE Designees a written notice specifying why they believe such
matter is not in the best interest of EquityCo). If after receipt and review of
the notice from the Starwood Designee, the BH/RE Designees still desire to take
such course of action, the dispute resolution process described in Section 13.21
hereof (the "Rapid Resolution Process") shall be used to determine whether
Starwood or the Starwood Designee properly exercised the approval rights in
accordance with the reasonableness standard set forth herein. If Starwood does
not deliver such notice to the BH/RE Designees within ten (10) business days
after the initial written notice provided by the BH/RE Designees (which notice
shall be delivered in the same manner as contemplated for notices to Starwood
under Section 13.03 or by email) is given to the Starwood Designee, then the
Starwood Designee shall be deemed to have approved the action in the initial
notice provided by the BH/RE Designees.
17
Starwood and BH/RE agree that the right to approve the amount, terms
and structure of any current or future financing of OpBiz, MezzCo or EquityCo
(mezzanine, senior or otherwise) and obtaining waivers or consents under, or
amendments or changes to, the Credit Agreement or other financing documents
shall not constitute a Unanimous Decision and no such financings, waivers,
consents, amendments or changes will constitute a failure of a condition to
Starwood's obligation to make the Starwood Initial Capital Contribution. It
shall be a proper purpose and consistent with the Standard of Care to approve
such financings and obtain such waivers, consents, amendments or changes to
obtain funds to pay Fees and Expenses.
(h) ACTION BY WRITTEN CONSENT. Any action required to be taken at a
meeting of the Board of Managers or any other action which may be taken at a
meeting of the Board of Managers may be taken without a meeting if a consent in
writing, setting forth the actions so taken, shall be signed by the number (in
number of votes) of the members of the Board of Managers required to approve
such action at a properly called and constituted meeting of the Board of
Managers at which all members of the Board of Managers entitled to vote with
respect to the subject matter thereof were present and voting. Any such consent
signed by members of the Board of Managers indicated above shall have the same
effect as an act of the number of the members of the Board of Managers indicated
above at a properly called and constituted meeting of the Board of Managers at
which all of the members of the Board of Managers were present and voting.
(i) CONFERENCE TELEPHONE MEETINGS. The members of the Board of Managers
may participate in and act at all meetings of the Board of Managers through the
use of a conference telephone or other communications equipment by means of
which all persons participating in the meeting can hear each other.
Participation in such meetings shall constitute attendance in person at the
meeting of the person or persons so participating.
(j) NO REMUNERATION. Except as otherwise determined by the Board of
Managers, no member thereof shall be entitled to receive any salary or any
remuneration or expense reimbursement from the Company for his services as a
member of the Board of Managers.
(k) MINUTES. A written record of all meetings of the Board of Managers
and all decisions made by it shall be made by the Secretary of the Company, and
kept in the records of the Company.
7.03. OFFICERS.
(a) ELECTION OF OFFICERS: TITLES AND TERM OF OFFICE. Subject to
applicable Gaming Laws, the Board of Managers may appoint such officers of the
Company as it may desire each of whom shall have authority and perform such
duties as the Board of Managers may from time to time specify, and shall hold
office until he or she shall resign or die or shall be removed or otherwise
disqualified to serve. One person may hold more than one office.
(b) REMOVAL AND RESIGNATION. Any officer may be removed, either with or
without cause, by the Board of Managers at any regular or special meeting, but
such removal shall be without prejudice to the contract rights, if any, of the
person so removed. Any officer may resign at any time upon written notice to the
Company.
18
(c) VACANCIES. A vacancy in the office of any officer, whether as a
result of death, resignation, removal, disqualification or any other cause, may
be filled by the Board of Managers at any regular or special meeting.
(d) COMPENSATION. Officers and other employees of the Company shall
receive such compensation as shall be determined by the Board of Managers,
adopted in advance or after the rendering of the services, or by employment
contracts entered into by the Board of Managers. Election or appointment of any
officer or any other employee shall not of itself create contract rights or any
rights to compensation hereunder.
(e) OPBIZ CEO. The Board of Managers shall cause the Hotel General
Manager, the Casino General Manager and the Chief Financial Officer to report to
the OpBiz CEO. The OpBiz CEO shall, subject to the control of the Board of
Managers and the terms of the Hotel Management Agreement, have general
supervision, direction and control of the business and affairs of OpBiz,
including the right to hire and fire employees and agents, the Director of Hotel
Operations, the Director of Casino Operations and the Chief Financial Officer of
OpBiz, and the OpBiz CEO shall have the authority, subject to the Hotel
Management Agreement and any agreement described in Section 7.02(g)(iv), to
resolve disputes among Property personnel (including those among the Hotel
General Manager, the Casino General Manager and the Chief Financial Officer of
OpBiz) and give direction to such persons. The OpBiz CEO shall have such other
powers and duties as may be prescribed by the Board of Managers or this
Agreement.
7.04. DUTIES AND CONFLICTS.
(a) GENERAL. The Members and their respective officers, employees,
appointed members of the Board of Managers and Affiliates shall devote such time
to the Company business as they deem to be necessary or desirable in connection
with their respective duties and responsibilities hereunder. Except as provided
hereunder or as otherwise approved by the Board of Managers, no Member nor any
member, partner, shareholder, officer, director, employee, agent or
representative of any Member shall receive any salary or other remuneration for
its services rendered pursuant to this Agreement. The officers of the Company
shall be required to act in accordance with the Standard of Care.
(b) CONFLICTS AND COMPETITION. Each of the Members recognizes that each
of the other Members and its members, partners, shareholders, officers,
directors, employees, agents, representatives, appointed members of the Board of
Managers and Affiliates, have or may have in the future other business
interests, activities and investments, some of which may be in conflict or
competition with the business of the Company and/or one or more of the
Subsidiaries and that each of the other Members and its members, partners,
shareholders, officers and directors, employees, agents, representatives,
appointed members of the Board of Managers and Affiliates are entitled to carry
on such other business interests, activities and investments. Except as provided
in Section 2.16.2 of the Hotel Management Agreement or otherwise agreed to in
writing by such Member or such Member's partners, shareholders, officers and
directors, employees, agents, representatives, appointed members of the Board of
Managers and Affiliates, (i) each of the Members and their partners,
shareholders, officers and directors, employees, agents, representatives,
appointed members of the Board of Managers and Affiliates may engage in or
possess an interest in any other business or venture of any kind, independently
or with
19
others, and (ii) each of the Members and their partners, shareholders, officers
and directors, employees, agents, representatives, appointed members of the
Board of Managers and Affiliates may engage in any such activities, whether or
not in competition with the Company or any Subsidiary without any obligation to
offer any interest in such activities to the Company or to the other Members.
Neither the Company nor the other Members nor their partners, shareholders,
officers and directors, employees, agents, representatives, appointed members of
the Board of Managers and Affiliates will have any right, by virtue of this
Agreement, in or to such activities, or the income or profits derived therefrom,
and the pursuit of such activities, even if competitive with the business of the
Company or any Subsidiary, will not be deemed wrongful or improper.
Notwithstanding the provisions of this Section 7.04(b), no Member nor any
Affiliate of any Member shall acquire, directly or indirectly, any debt, whether
secured or unsecured, of OpBiz or, without (i) the prior written notice to the
other Members at least three (3) days prior to such acquisition and (ii) an
offer to the other Members to participate in the acquisition of such debt in
proportion to their respective Percentage Interests, of MezzCo.
7.05. EXPENSES. (a) Except as otherwise provided in this Agreement or
in any of the agreements described in and approved in accordance with the terms
of this Agreement and except for any costs to be borne by any third party under
any agreement with the Company or its subsidiaries, the Company shall be
responsible for paying, and shall pay, all Fees and Expenses. "Fees and
Expenses" shall mean all costs and expenses (i) related to the business of the
Company or its subsidiaries or the transactions contemplated by the Purchase
Agreement, Credit Agreement or any other financing by the Company or its
subsidiaries and paid, owed or owing to an unaffiliated third party with respect
to BH/RE or Starwood (or any Affiliate of either of them), including, without
limitation, costs, fees, expenses and amounts (1) of the type described in
Section 2.09(b) of the Purchase Agreement, (2) of attorneys, financial advisors,
and accountants relating to the financing, business and operations of the
Company (including, without limitation, the formation of OpBiz, the Company,
EquityCo, Starwood and BH/RE) and its subsidiaries, (3) relating to obtaining
and maintaining gaming licenses for and of the Company and its subsidiaries and
their Affiliates and controlling persons and compliance with Nevada gaming laws
and liquor licensing laws, (4) relating to the registration of BH/RE's voting
membership interests under the Securities Exchange Act of 1934, (5) relating to
the planned renovation of the Property into the "Planet Hollywood Hotel &
Casino," or the operation of, or the preparation for assuming responsibility for
the operation of, the Property (including but not limited to salary and other
payments to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ or other employees of OpBiz and marketing,
promotional and renovation planning costs) and (6) paid by BH/RE to fund any
Extension ▇▇▇▇▇▇▇ Money Deposit (as defined in the Purchase Agreement) as
described below or (ii) with respect to costs and expenses incurred by BH/RE or
Starwood (or any Affiliate of either of them) and paid, owed or owing to an
unaffiliated third party, as otherwise approved by the Board of Managers (which
approval, notwithstanding anything in this Agreement to the contrary (including
Sections 7.02(g)(vi) and 7.06), may be given by a majority of the members of the
Board of Managers, but, in which case, the categories of expenses so approved
shall apply to all of the Members). BH/RE shall advance to OpBiz (or to the
escrow account into which OpBiz is to deposit the Extension ▇▇▇▇▇▇▇ Money
Deposit) 85% of the amount of each Extension ▇▇▇▇▇▇▇ Money Deposit, so that
OpBiz can make payment of such Extension ▇▇▇▇▇▇▇ Money Deposit. (Starwood shall
fund, or shall cause to be funded out of its sole order escrow account
contemplated by Section 4.01, the other 15% of the amount of each Extension
▇▇▇▇▇▇▇ Money Deposit so that each Extension ▇▇▇▇▇▇▇ Money Deposit may be timely
made, but those funds
20
shall not be considered Fees and Expenses but, instead, shall be part of the
Starwood Initial Capital Contribution as contemplated in Section 4.01.) If any
of the Fees and Expenses described in this Section 7.05(a) are or have been paid
by BH/RE or Starwood (or the sponsors of either of them), such Member shall be
entitled to be reimbursed by the Company for such payment provided such Member
has made its Initial Capital Contribution and the reimbursement of such Fees and
Expenses has been approved by the Board of Managers (which approval,
notwithstanding anything in this Agreement to the contrary (including Sections
7.02(g)(vi) and 7.06), may be given by a majority of the members of the Board of
Managers). If the Company does not have sufficient funds to reimburse all of the
reimbursable Fees and Expenses incurred by all of the Members as of Closing Date
(after making such capital contributions to MezzCo as may be (i) contemplated
under any financing agreement entered into by MezzCo or (ii) required to provide
MezzCo with sufficient funds to make any capital contribution to OpBiz that may
be contemplated by the Credit Agreement), then (1) Starwood shall bear 15% and
BH/RE shall bear 85% of the shortfall, and (2) promptly following the Closing
Date, Starwood and BH/RE shall contribute to the capital of the Company 15% and
85%, respectively, of the amount of such reimbursement shortfall (any such
contribution being a "Reimbursement Shortfall Contribution").
(b) If the Company receives the Expense Reimbursement under the
Purchase Agreement, then Starwood shall be entitled to reimbursement of the
lesser of $500,000 or its actual out-of-pocket costs and expenses for the costs
described in Section 2.09(b) of the Purchase Agreement, and BH/RE shall be
entitled to the remainder.
(c) If the Company receives the Breakup Fee under the Purchase
Agreement, such Breakup Fee shall be paid to BH/RE and Starwood pro rata, based
upon the amount of the ▇▇▇▇▇▇▇ Money Deposit (as defined in the Purchase
Agreement) funded by each of them through contributions to the capital of the
Company.
7.06. AFFILIATE TRANSACTIONS. The Company shall not, and shall not
permit any Subsidiary to, enter into any transaction with an Affiliate of any
Member (other than the Hotel Management Agreement, the License Agreement or as
permitted thereby or as contemplated by the Time Share Plan described in the
Credit Agreement) unless the material terms of the transaction, including any
payments, fees, commissions, reimbursements or other forms of consideration paid
or payable to such Member, are disclosed in writing to and approved by the Board
of Managers (subject, if applicable, to the provisions of Section 7.02(g)).
VIII. BOOKS AND RECORDS
8.01. BOOKS AND RECORDS. The Company shall maintain, or cause to be
maintained, in a manner customary and consistent with good accounting
principles, practices and procedures, a comprehensive system of office records,
books and accounts in which shall be entered fully and accurately each and every
financial transaction with respect to the operations of the Company and
ownership and operation of any property. The Company will keep or cause to be
kept, at the principal office of the Company or its agent designated for such
purpose, books for registration and transfer of the Membership Units. Such books
will show the names and last known addresses of the respective holders of the
Membership Units and the number of Membership Units held by each of them. The
Company and its agent will be entitled to treat the
21
registered holder of any Membership Units as the sole owner of such Membership
Unit for all purposes and will not be bound to recognize any equitable or other
claim or interest in such Membership Units on the part of any other Person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the Nevada Act. The Company will be entitled to establish
such record dates as it deems appropriate from time to time for purposes of
determining the Members entitled to receive distributions or notices or to
exercise voting rights and for such other purposes as the Company deems
expedient. In addition, the Company agrees to recognize on its books any
Transfer of Membership Units which occur by operation of law as a result of the
merger or consolidation of a Member into another Person or the liquidation and
dissolution of a Member. The Company shall maintain a copy of the filed Articles
of Organization and all amendments thereto, together with executed copies of any
powers of attorney pursuant to which any document has been executed, and a copy
of this Agreement. Bills, receipts and vouchers shall be maintained on file by
the Company. The Company shall maintain said books and accounts in a safe manner
and separate from any records not having to do directly with the Company or any
property of the Company. The Company shall cause audits to be performed and
audited statements and income tax returns to be prepared as required by Section
8.03. Such books and records of account shall be prepared and maintained at the
principal place of business of the Company or such other place or places as may
from time to time be determined by the Board of Managers. Each Member or its
duly authorized representative shall have the right to inspect, examine and copy
such books and records of account at the Company's office during reasonable
business hours. A reasonable charge for copying books and records may be charged
by the Company.
8.02. ACCOUNTING AND FISCAL YEAR. The books of the Company shall be
kept on the accrual basis in accordance with United States generally accepted
accounting principles, practices and procedures ("GAAP") and on a tax basis and
the Company shall report its operations for tax purposes on the accrual method.
The fiscal year and the Taxable Year of the Company shall end on December 31 of
each year, unless a different Taxable Year shall be required by the Code or
established by the Board of Managers.
8.03. REPORTS.
(a) QUARTERLY REPORTS. The Company will prepare or use its reasonable
best efforts to cause to be prepared and furnish to each Member within 45
calendar days after the end of each fiscal quarter of the Company, (i) unless
such fiscal quarter is the last fiscal quarter of any fiscal year of the
Company, (A) an unaudited balance sheet of the Company dated as of the end of
such fiscal quarter, (B) an unaudited related income statement of the Company
for such fiscal quarter, (C) an unaudited statement of cash flows of the Company
for such fiscal quarter, (D) an unaudited statement of changes in each Member's
capital for such fiscal quarter and information for the fiscal quarter as to the
balance in each Member's Capital Account for such fiscal quarter, and (E) the
Quarterly Financial Report required under the Hotel Management Agreement and
(ii) a status report of the Company's activities during such fiscal quarter.
Each of the foregoing shall be prepared in accordance with GAAP.
(b) ANNUAL REPORTS. The Company will prepare or use its reasonable best
efforts to cause to be prepared, on an accrual basis in accordance with GAAP,
and furnish to each Member no later than 90 days after the end of each fiscal
year of the Company, an unaudited income
22
statement of the Company and its Subsidiaries for such fiscal year, accompanied
by a letter from the Company Accountant stating that, to the best of its
knowledge, the said income statement is true and correct in all material
respects. In addition, the Company will prepare or use its reasonable best
efforts to cause to be prepared, and furnish to each Member no later than 90
days after the end of each fiscal year of the Company, (i) an audited balance
sheet of the Company and its Subsidiaries dated as of the end of such fiscal
year, (ii) an audited related income statement of the Company and its
Subsidiaries for such fiscal year, (iii) an audited statement of cash flows for
such fiscal year, (iv) an audited statement of each Member's Capital Account for
such fiscal year, all of which shall be certified in the customary manner by the
Company Accountant (which firm shall provide such balance sheet, income
statement and statement of Capital Accounts in draft form to the Members for
review prior to finalization and certification thereof) and (v) the Operating
Year Financial Statement required under the Hotel Management Agreement.
(c) OTHER REPORTS. The Company will furnish to each Member copies of
all reports required to be furnished to any lender of the Company or any
Subsidiary and any reports furnished to OpBiz, MezzCo or the Company under the
Hotel Management Agreement.
(d) TAX REPORTS. The Company will furnish or use its reasonable best
efforts to cause to be furnished to each Member, or its tax advisors, not later
than March 15 after the end of each fiscal year of the Company, sufficient
information on the consolidated profit and loss of the Company that will enable
the tax advisors of each Member to prepare all required tax and other reports
needed to meet such Member's own reporting requirements. All schedules of book
income shall be prepared on a GAAP basis. Promptly after the end of each fiscal
year, if requested by any Member, the Company will use its reasonable best
efforts to cause the Company Accountant to prepare and deliver to each Member a
report setting forth in sufficient detail all such additional information and
data with respect to business transactions effected by or involving the Company
during the fiscal year as will enable the Company and each Member to timely
prepare its U.S. federal, state and local income tax returns in accordance with
applicable laws, rules and regulations.
(e) TAX RETURNS. Subject to the terms and conditions of the Hotel
Management Agreement, the Company will use its reasonable best efforts to cause
the Company Accountant to prepare all U.S. and Non-U.S. federal, state and local
tax returns required of the Company with respect to each Taxable Year and to
submit those returns to the Board of Managers for their approval not later than
the first day of the third month after the end of the Taxable Year of the year
following such Taxable Year, and if requested, the Company shall make such
changes as are reasonably requested. After such returns have been approved by
the Board of Managers, the Company shall file the tax returns. If the Board of
Managers shall not have approved any such tax return prior to the date required
for the filing thereof (including any extensions granted), the Company will
timely obtain an extension of such date to the extent such an extension is
available.
(f) OTHER. The Company shall prepare or use its reasonable best efforts
to cause to be prepared such additional financial reports, statements and other
information as the Board of Managers may determine are appropriate. All
decisions as to accounting principles shall be made by the Board of Managers
subject to the provisions of this Agreement.
23
8.04. THE COMPANY ACCOUNTANT. The Company shall retain as the regular
accountant and auditor for the Company (the "Company Accountant") any
nationally-recognized U.S. accounting firm approved by the Board of Managers.
8.05. RESERVES. The Board of Managers may, in its discretion and
subject to Section 6.04 and such other conditions as it shall determine,
establish reasonable reserves for the purposes and requirements as it may deem
appropriate.
8.06. THE RENOVATION CAPITAL EXPENDITURE BUDGET. No later than December
1 of each year, the Company shall prepare and submit to the members of the Board
of Managers for their approval a proposed updated Renovation Capital Expenditure
Budget each year until the Renovations are complete. Each Renovation Capital
Expenditure Budget shall set forth for the applicable year all anticipated
capital expenditures for the Renovation.
IX. TRANSFER OF INTERESTS
9.01. NO TRANSFER. Except as expressly permitted or contemplated by
this Agreement,
(a) Until one year following the Closing Date, no Member may sell,
assign, give, hypothecate, pledge, encumber or otherwise transfer ("Transfer")
all or any portion of its Interest, whether directly or indirectly, to any
Person other than another Member or an Affiliate of the transferring Member
without the written consent of Members having at least two thirds of the
Percentage Interests held by the Members other than the transferring Member.
(b) No Member may at any time Transfer all or any portion of its
Interest, whether directly or indirectly, to any Company Competitor without the
written consent of the other Members.
(c) Notwithstanding anything to the contrary contained in this
Agreement, no direct or indirect Transfer of all or any part of any Interest
shall be made if, as a result thereof, an Event of Default (or an event that,
with the giving of notice or the passage of time, or both, would constitute an
Event of Default) under the Mezzanine Loan Agreement (or any replacement
facility therefor) or the Credit Agreement (or any replacement facility
therefor) would occur.
(d) If any equity securities of the Company are to be sold in an
underwritten public offering, the Members will enter into an agreement to
refrain from effecting any sale or distribution of any securities of the Company
(other than as part of such offering) for a period of time equal to the lesser
of (i) such period of time as agreed between the managing underwriter for such
offering and the Company and (ii) 180 days.
(e) No permitted Transfer shall relieve the transferor of any of its
obligations prior to such Transfer.
Notwithstanding anything to the contrary contained in Section 9.01(a)
and (b), BH/RE and its transferees may Transfer their Interests to any Person
without the consent of Starwood if the Hotel Manager has performed or failed to
perform an act and that act or failure to act constitutes an Event of Default
under the Hotel Management Agreement and either OpBiz shall
24
have established its right to termination of the Hotel Management Agreement upon
the conclusion of the dispute resolution procedures pursuant to Section 10 of
the Hotel Management Agreement, as modified by the provisions of Section 12.03
of this Agreement, or the Hotel Manager shall not have commenced such dispute
resolution procedures within five (5) Business Days of OpBiz delivering written
notice of the Event of Default to the Hotel Manager.
Notwithstanding anything in this 9.01 to the contrary, BH/RE may issue
the Warrant and Transfer its Interest (or the relevant portion thereof) upon any
exercise (including an exchange) of the Warrant in accordance with its terms and
the Interests Transferred upon any such exercise (including an exchange) of the
Warrant may thereafter be transferred in accordance with the terms of the
Warrant.
9.02. TAG-ALONG RIGHTS.
(a) Subject to the other provisions of this Article IX, if, after the
period described in Section 9.01(a) and prior to the occurrence of a Qualified
Public Offering, any Member ("Selling Member") proposes to sell, exchange or
otherwise dispose, directly or indirectly, of any of its Interests in the
Company (a "Sale"), to any Person other than a then-existing Member or an
Affiliate of a Member, the other Members ("Tag-Along Members") may require the
Selling Member to sell, exchange or otherwise dispose of pursuant to such Sale
an amount of such Tag-Along Member's Interest in the Company (and the Selling
Member will, to the extent necessary, reduce the amount of the Selling Member's
Interest in the Company subject to the Sale by a corresponding amount) equal to
the product of (i) the Percentage Interest that corresponds to the Interest to
be sold, exchanged or otherwise disposed of pursuant to the Sale and (ii) the
Percentage Interest of the applicable Tag-Along Member for the same
consideration and otherwise on the same terms and conditions upon which the
Selling Member proposes to sell, exchange or otherwise dispose of its Interest.
The consideration received in connection with such sale shall be allocated
between the Members in the ratio that each Member's transferred Percentage
Interest bears to the total Percentage Interests transferred by all Members.
(b) In connection with any proposed Sale, the Selling Member shall
deliver a written notice to the Tag-Along Member (i) setting forth the terms of
any Sale and (ii) offering each Tag-Along Member the right (the "Tag-Along
Right") to have such Tag-Along Member's Interest included in such Sale in
accordance with Section 9.02(a), together with all documents required to be
executed by such Tag-Along Member in order to include the Tag-Along Member's
Interest in such Sale. If a Tag-Along Member exercises its Tag-Along Rights in
connection with any Sale, such Tag-Along Member shall execute and deliver to the
Selling Member, within 10 calendar days from and including the date of the
Selling Member's notice, the documents previously furnished to the Tag-Along
Member for execution in connection with the Sale. Delivery by the Tag-Along
Member of such documents shall constitute an irrevocable exercise by the
Tag-Along Member of its Tag-Along Rights with respect to the Sale.
(c) The Selling Member shall have 180 days from the date of its notice
referred to in Section 9.02(b) to consummate any Sale and, promptly after such
consummation, shall notify the Tag-Along Member to that effect, shall furnish
evidence of such Sale (including the date and the time of sale) and of the terms
thereof as the Tag-Along Member may reasonably request and shall promptly (and
in any event within 15 days following the consummation of such Sale) cause
25
to be remitted to the Tag-Along Member the proceeds attributable to the sale of
the Tag-Along Member's Interest. If such Sale is not completed within such time
period, then all of the restrictions on sale or other disposition contained
herein with respect to the Interests shall again be in effect.
(d) Notwithstanding anything in this Section 9.02 to the contrary,
there shall be no liability on the part of any Member to any other Member if any
sale of Interests pursuant to this Section 9.02 is not consummated for whatever
reason other than a failure to comply with the foregoing provisions. It is
understood that the Selling Member, in its sole discretion, shall determine
whether to effect a Sale to any third party pursuant to this Section 9.02.
(e) Notwithstanding anything in this Section 9.02 to the contrary, (i)
the provisions of this Section 9.02 shall not apply to the issuance of the
Warrant or any Sale pursuant to any exercise of the Warrant in accordance with
its terms, (ii) no Member holding a Percentage Interest of less than 5% shall
have any rights or obligations under this Section 9.02 and (iii) no Member who
is or was a lender or agent under the Credit Agreement shall have any rights or
obligations under this Section 9.02 with respect to any Interests acquired
directly or indirectly pursuant to any exercise of the Warrant in accordance
with its terms.
9.03. DRAG-ALONG RIGHTS. (a) Subject to the other provisions of this
Article IX, if after the period described in Section 9.01(a) a Majority in
Interest of BH/RE and any Persons to whom it has transferred its rights (in
whole or in part) under this Section 9.03 pursuant to Section 9.09 (also the
"Selling Members") propose to sell, exchange or otherwise dispose, directly or
indirectly, any of their Interests in the Company (also a "Sale"), to any Person
other than a then-existing Member or an Affiliate thereof (the "Purchaser"),
then in such circumstances the Selling Members may, at their option, require
each other Member (the "Drag-Along Members") to sell or assign the same
proportionate part of their Interests in the Company to such Purchaser, for the
same consideration or otherwise on the same terms and conditions upon which the
Selling Members sell, exchange or otherwise dispose of their Interests. The
consideration received in connection with such sale shall be allocated between
the Members in the ratio that each Member's transferred Percentage Interest
bears to the total Percentage Interests transferred by all Members.
(b) The Drag-Along Members shall be given written notice stating that
the Selling Members are exercising their rights under this Section 9.03 and
setting forth the total consideration to be paid by the Purchaser, and the other
terms and conditions of the proposed purchase by the Purchaser. Simultaneously
with or reasonably promptly after receipt of such notice, the Drag-Along Members
will be provided with such documents reasonably necessary to transfer the
Interests of the Drag-Along Members to the Purchaser (the "Transfer Documents").
Within ten (10) calendar days following the delivery of the Transfer Documents,
the Drag-Along Members shall deliver to the Selling Members the Transfer
Documents duly executed, together with all other documents required to be
executed in connection with the proposed purchase. In the event that the
Drag-Along Members have failed to deliver the Transfer Documents to the Selling
Members as required by the foregoing sentence, the Company shall cause its books
and records to show that the Purchaser, upon payment of the consideration, has
succeeded to the appropriate portion of the Capital Accounts and Interests of
the Drag-Along Members in the Company.
26
(c) If the consideration received pursuant to the Sale consists of
equity securities, (i) the Drag-Along Members shall receive substantially the
same registration rights, tag-along rights or other similar liquidity rights
with respect to those equity securities as are granted to the Selling Members,
(ii) Starwood shall receive from BH/RE the same tag-along rights with respect to
the transfer by BH/RE of any such equity securities received by BH/RE or any of
its Affiliates as provided for in Section 9.02 hereof with respect to BH/RE's
Interest in the Company (provided, however, that this clause (ii) shall not
apply to any such equity securities with respect to which a registration
statement has been declared effective by the United States Securities and
Exchange Commission or that may be sold without registration or volume
restriction pursuant to Rule 144 (promulgated under the Securities Act of 1933,
as amended), as amended) and (iii) if the Selling Members are granted approval
rights with respect to any matters that are Unanimous Decisions hereunder, the
Selling Members will enter into an agreement with the Drag-Along Members whereby
the Selling Members will agree that they will not fail to exercise any such
right to prevent the action that is the subject of the Unanimous Decision
without the prior consent of a person designated by a Majority in Interest of
the Drag-Along Members. The failure by such person to deliver a response to a
request for consent within five days after receipt shall be deemed to constitute
the consent requested.
(d) If, within 180 days, after receipt by the Drag-Along Members of the
notice from the Selling Members provided for above in Section 9.03(b), the
Selling Members have not completed the sale of the Interest in the Company of
the Drag-Along Members, the Selling Members shall return to the Drag-Along
Members all Transfer Documents and all other documents delivered pursuant
thereto by the Drag-Along Members and all of their restrictions on sale or other
disposition contained herein with respect to the Interests shall again be in
effect.
(e) Promptly after the consummation of the sale of the Interest
pursuant to this Section 9.03, the Selling Members, shall (i) give notice
thereof to the Drag-Along Members, (ii) remit to the Drag-Along Members the
aggregate consideration with respect to the respective Interests sold pursuant
hereto (determined as provided in Section 9.03(a) hereof), and (iii) shall
furnish such other evidence of the completion and time of completion of such
sale or other disposition and the terms thereof as may be reasonably requested
by the Drag-Along Members.
(f) Notwithstanding anything contained in this Section 9.03, there
shall be no liability on the part of the Selling Members to the Drag-Along
Members in the event that the sale of any Interest contemplated by this Section
9.03 is not consummated for whatever reason. Whether to effect a sale of part or
all of any Interests contemplated by this Section 9.03 by the Selling Members is
in the sole and absolute discretion of the Selling Members.
Notwithstanding anything contained in this Section 9.03 to the contrary, no
Member who is or was a lender or agent under the Credit Agreement shall have any
rights or obligations under this Section 9.03 with respect to any Interests
acquired directly or indirectly pursuant to any exercise of the Warrant in
accordance with its terms.
9.04. NONTRANSFERABLE RIGHTS. Starwood's rights under Sections 7.02(a),
(e) and (g) shall not be transferable and shall terminate if the aggregate
(direct or indirect) interest of Starwood represents a Percentage Interest of
less than 7.5%.
27
9.05. TRANSFEREES.
(a) Any Person who at any time becomes the holder of record of a
Membership Unit will, upon becoming such and upon compliance with the provisions
of this Section 9.05(a), be admitted to the Company as a Member and will be
bound by the provisions of this Agreement with the same force and effect as
though such Person were a signatory hereto. Notwithstanding anything to the
contrary contained in this Agreement, no transferee of all or any portion of any
Interest shall be admitted as a Member unless (i) such Interest is transferred
in compliance with the applicable provisions of this Agreement, (ii) the
transferor shall have provided each of the other Members with written notice of
any transfer of any Interest in the Company (with sufficient details to give
effect to the provisions of this Agreement, including the Percentage Interest
transferred), (iii) if required by Section 9.01, such Transfer shall have been
approved in writing by the requisite Members (which consent may be withheld in
their sole and absolute discretion), and (iv) such transferee shall have
executed and delivered to the Company such instruments as the Board of Managers
reasonably deems necessary or desirable to effectuate the admission of such
transferee as a Member and to confirm the agreement of such transferee to be
bound by all of the terms, provisions and obligations of this Agreement with
respect to such Interest. At the request of the Company, each such transferee
shall also cause to be delivered to the Company, at the transferee's sole cost
and expense, a favorable opinion of legal counsel reasonably acceptable to the
Company, to the effect that (1) such transferee has the legal right, power and
capacity to own the Interest proposed to be transferred, (2) such Transfer does
not violate any provision of any loan agreement of the Company or any of its
Subsidiaries or any mortgage, deed of trust or other security instrument
encumbering all or any portion of the Property, and (3) such Transfer does not
violate any U.S. federal or state security laws and will not cause the Company
to become subject to the Investment Company Act of 1940, as amended or cause
the Company to be taxable as a corporation under the Code. The provisions of
clauses (i) and (ii) of the second sentence of this Section 9.05(a) and clause
(2) of the third sentence of this Section 9.05(a) shall not apply to any
transferee in respect of any Membership Unit Transferred upon any exercise of
the Warrant in accordance with its terms or to any Transfer of any Interest
acquired directly or indirectly pursuant to any such exercise of the Warrant to
a Person who is or was a lender or agent under the Credit Agreement. As promptly
as practicable after the admission of any Person as a Member, the books and
records of the Company shall be changed to reflect such admission. All
reasonable costs and expenses incurred by the Company in connection with any
Transfer of any Interest and, if applicable, the admission of any transferee as
a Member shall be paid by such transferee.
(b) In the event of a Transfer of an Interest in accordance with the
terms of this Agreement to a Person that is not admitted as Member on the date
that the Transfer becomes effective, pending admission as a Member (including if
such admission never occurs), the non-Member transferee shall be entitled to
receive the income, gains, losses, deductions, credits, distributions and other
economic rights to which the transferor would have been entitled in respect of
the Interest so transferred had such Transfer not occurred.
9.06. SECTION 754 ELECTION. In the event of a Transfer of all or part
of the Interest of a Member, at the request of the transferee or if in the best
interests of the Company (as determined by the Board of Managers), the Company
shall elect pursuant to Section 754 of the Code to adjust the basis of any
property of the Company as provided by Sections 734 and 743 of
28
the Code, and any cost of such election or cost of administering or accounting
for such election shall be at the sole cost and expense of the requesting
transferee.
9.07. CERTAIN PREEMPTIVE RIGHTS. (a) If at any time prior to the
consummation of a Qualified Public Offering the Company proposes to accept a
capital contribution from any Person other than pursuant to Section 4.01(a) (a
"Preemptive Interest"), the Company shall give each Member notice thereof at
least 45 days before the proposed contribution and each Member shall have the
right to participate in such contribution for a portion of such contribution
allocated as set forth below on the same terms and conditions as such Person.
The Members shall have 30 days to exercise such right by delivering written
notice thereof to the Company. Such notice will specify the amount of the
contribution the Member is willing to make and shall constitute a binding
contract by the Member to make such contribution. Any contribution made pursuant
to this Section 9.07 shall be referred to as a "Preemptive Contribution."
(b) If any of the Members elect to participate in the contribution
pursuant to Section 9.07(a), the amount of the contribution that such Member may
make shall be determined as follows (i) if a Member has elected to make a
contribution in an amount that, as a percentage of the aggregate amount of the
Preemptive Interest, is equal to or less than its Percentage Interest, it shall
be entitled to make the contribution that it has elected to make, (ii) if a
Member has elected to make a contribution in an amount that, as a percentage of
the aggregate amount of the Preemptive Interest, is greater than its Percentage
Interest, it shall be initially be entitled to make a contribution in an amount
equal to the product of its Percentage Interest and the aggregate amount of the
Preemptive Interest, (iii) if any amount of the Preemptive Interest has not been
subscribed for after the allocations set forth in clauses (i) and (ii) above,
each Member that has elected to contribute a percentage of the Preemptive
Interest in excess of its Percentage Interest shall be entitled to contribute
from such remaining Preemptive Interest an amount equal to the lesser of (A) the
amount of Preemptive Interest it has elected to contribute in excess of the
amount allocated to it in clause (ii) above and (B) an amount of the Preemptive
Interest equal to the product of its Percentage Interest and the aggregate
amount of the remaining Preemptive Interest. The Preemptive Interest will be
allocated pursuant to the provisions of clause (iii) of the preceding sentence
until the entire Preemptive Interest is allocated to the Members or until each
Member has been allocated the right to purchase all of the contribution it
elected to contribute pursuant to Section 9.07(a).
(c) If the Members fail to exercise fully the preemptive right pursuant
to this Section 9.07 within the 30-day period, the Company shall have 90 days
thereafter to accept the Preemptive Contribution at a price and on terms no more
favorable to the purchasers thereof specified in the Company's notice pursuant
to Section 9.07.
9.08. TRANSFER OF EQUITY IN BH/RE. Nothing contained in Sections
9.01(a) or 9.01(b) hereof shall restrict or apply to any Transfers of, or
issuances of equity interests or other securities in, BH/RE so long as the
combination of any Bay Harbour Management, LC, or ▇▇▇▇▇▇ ▇▇▇▇ and their
respective Affiliates maintain voting control over BH/RE. Subject to the
preceding sentence, the provisions of Section 9.02 hereof shall not apply to
transfers of equity interests or other securities in BH/RE made, or for which a
binding contract is entered into, prior to the Closing Date.
29
9.09. TRANSFER OF RIGHTS UNDER THIS AGREEMENT. Subject to Section 9.04,
in connection with the Transfer of all or any portion of its Interests in
accordance with the terms of this Agreement, a Member may transfer, in whole or
in part, to the transferee of such Interests, its rights under the provisions of
this Agreement, including under Sections 7.02(a), 9.03, 12.01 and 12.02, by
delivering written notice of the transfer of such rights to the other Members
and the Company. No such transfer will release any Member from its obligations
under this Agreement unless the Member has Transferred all of its Interests in
accordance with the terms of this Agreement (and then such release shall be
applicable only to the extent contemplated by this Agreement).
9.10. ISSUANCE OF ADDITIONAL INTERESTS. Subject to the consent of the
Board of Managers and the provisions of Section 9.07, the Company is authorized,
in its sole discretion, to cause the Company to issue, for any Company purpose,
at any time or from time to time, additional Interests to the Members or to
other Persons for such consideration and on such terms and conditions as
established by the Board of Managers and as otherwise set forth herein. The
Board of Managers is authorized and directed to take all actions that it deems
necessary or appropriate in connection with each issuance of Interests pursuant
to this Section 9.10 and to amend this Agreement in any manner that it deems
necessary or appropriate for each such issuance, to admit additional Members in
connection therewith and specify the relative rights, powers and duties of the
holders of the Interests so issued.
9.11. TRANSFER OF ENTIRE INTERESTS. A Member may withdraw as a Member
if it Transfers its entire Interest to another Person in accordance with the
terms of this Agreement and that Person is or has been admitted as a Member.
Upon such withdrawal, the transferring Member will not receive any distribution
or other consideration from the Company with respect to its Interest. The
withdrawal of any Member pursuant to this Section 9.11 shall not affect any of
such Member's rights or obligations under Section 6.10(b), Article X, Section
13.01(b) or Section 13.16.
9.12. REGISTRATION RIGHTS AGREEMENT. The Company will grant both
Starwood and BH/RE customary piggyback registration rights, which registration
rights shall (i) grant each of them registration rights in connection with sales
of equity securities of the Company by the Company or any other Member to the
public pursuant to an effective registration statement (other than a
registration statement on Form S-4 or S-8 or any similar or successor form)
filed under the Securities Act of 1933 (a "Public Offering") after the Company
has previously sold shares of its equity securities to the public in an
underwritten Public Offering and (ii) be subject to customary terms, conditions,
and exceptions, including a so-called "underwriters' cut-backs" and general
priority in registration for securities to be sold by the Company. The form of
such registration rights agreement will be prepared by legal counsel to
Starwood, subject to the reasonable comments and approval of legal counsel to
BH/RE.
X. EXCULPATION AND INDEMNIFICATION
10.01. EXCULPATION. No Member, member of the Board of Managers, general
or limited partner of any Member, shareholder or member or other holder of an
equity interest of any Member or officer, director or employee of any of the
foregoing or any of their Affiliates, shall be liable to the Company or to any
other Member for monetary damages for any losses,
30
claims, damages or liabilities arising from any act or omission performed or
omitted by it and arising out of or in connection with this Agreement or the
Company's business or affairs, including any action or omission constituting a
breach of any fiduciary duty; provided, however, such act or omission was taken
in good faith, was reasonably believed to be in the best interests of the
Company and was within the scope of authority granted to such Person, and was
not attributable in whole or in part to such Member's or Person's fraud, bad
faith, willful misconduct or gross negligence and, with respect to any criminal
action or proceeding, such Person had reasonable cause to believe that their
conduct was not unlawful (the "Standard of Care"). No general or limited partner
of any Member, shareholder, member or other holder of an equity interest in such
Member or officer, director or employee of any of the foregoing or any of their
Affiliates shall be personally liable for the performance of any such Member's
obligations under this Agreement, but the foregoing shall not relieve any
partner or member of any Member from its obligations to such Member.
10.02. INDEMNIFICATION. (a) The Company shall, to the full extent
permitted by applicable law, indemnify, defend and hold harmless any Member, any
member of the Board of Managers and any officer of the Company (and any of their
respective officers, directors, managers, employees and agents) who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that he, she or it is or was a Member,
member of the Board of Managers or employee of the Company, or is or was serving
at the request of the Company as a manager, member, employee or agent of another
corporation, limited liability company, partnership, joint venture, trust or
other enterprise (collectively, the "Indemnitee"), from and against expenses
(including attorneys' fees and expenses), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such Person in connection with
such claim, action, suit or proceeding if such Person acted in good faith and in
a manner such Person reasonably believed to be in, or not opposed to, the best
interests of the Company, and, with respect to any criminal sanction or
proceeding, had no reasonable cause to believe that his, her or its conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the Person did not act in good
faith and in a manner which he, she or it reasonably believed to be in, or not
opposed to, the best interests of the Company, and with respect to any criminal
action or proceeding, had reasonable cause to believe that his, her or its
conduct was unlawful. Expenses incurred in defending a civil or criminal action,
suit or proceeding shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the Indemnitee to repay such amount if it shall be ultimately
determined by a court of competent jurisdiction from which no further appeal may
be taken or the time for appeal has lapsed that such Person is not entitled to
be indemnified by the Company pursuant to the terms and conditions of this
Section 10.02. If for any reason (other than the gross negligence or willful
misconduct of such Indemnitee) the foregoing indemnification is unavailable to
such Indemnitee, or insufficient to hold it harmless, then the Company shall
contribute to the amount paid or payable by such Indemnitee as a result of such
loss, claim, damage, liability or expense in such proportion as is appropriate
to reflect the relative benefits received by the Company on the one hand and
such Indemnitee on the other hand or, if such allocation is not permitted by
applicable law, to reflect not only the relative benefits referred to above but
also any other relevant equitable considerations. Any indemnity under this
Section 10.02 shall be paid solely out of and
31
to the extent of Company assets and shall not be a personal obligation of any
Member (including any member of the Board of Managers). Unless indemnification
is ordered by a court of competent jurisdiction, the determination whether an
Indemnitee met the standard set forth in this Section 10.02 shall be made by the
Board of Managers.
(b) The Company and the other Members shall be indemnified and held
harmless by each Member from and against any and all claims, demands,
liabilities, costs, damages, expenses and causes of action of any nature
whatsoever arising out of (i) any act performed by or on behalf of any such
Member or its designated Board of Managers member which is not performed in good
faith or is not reasonably believed by such Member or its designated Board of
Managers member to be in the best interest of the Company and within the scope
of authority conferred upon such Member or its designated Board of Managers
member under this Agreement, (ii) the fraud, bad faith, willful misconduct or
gross negligence of such Member or its designated Board of Managers member, or
(iii) the breach by the Company of any of its representations and warranties
made under any purchase, loan or other agreement entered into by the Company,
which breach was the result of information or matters relating to such Member.
(c) The Board of Managers may purchase and maintain insurance or make
other financial arrangements on behalf of any current or former member, Member
of the Board of Managers, officer of the Company or any other employee or agent
of the Company who was serving at the request of the Company as a manager,
member, employee or agent of another corporation, limited liability company,
partnership, joint venture, trust or other enterprise for any liability asserted
against him or it and liability and expenses incurred by him or it in his or its
capacity as manager, member, employee or agent, or arising out of his or it
status as such, whether or not the Company has the authority to indemnify him or
it against such liability and expenses.
(d) The provisions of this Section 10.02 shall survive the dissolution
of the Company.
(e) Notwithstanding anything to the contrary contained in this
Agreement, the obligations of the Company or any Member under this Section 10.02
shall inure to the benefit of such Indemnitee, its Affiliates and their
respective members, directors, officers, employees, agents and Affiliates and
any successors, assigns, heirs and personal representatives of such Persons.
XI. DISSOLUTION AND TERMINATION
11.01. DISSOLUTION. The Company shall be dissolved and its business
wound up upon the earliest to occur of any of the following events:
(a) The sale, condemnation or other disposition of all or
substantially all of the assets of the Company and the receipt of all
cash consideration therefor;
(b) The entry of a decree of judicial dissolution pursuant to
Section 86.495 of the Nevada Act;
(c) The unanimous written determination of the Board of
Managers to terminate the Company; or
32
(d) The termination of the Purchase Agreement before the
Closing Date.
Without limitation on, but subject to, the other provisions hereof, the
assignment of all or any part of a Member's Interest permitted hereunder will
not result in the dissolution of the Company. Except as otherwise specifically
provided in this Agreement, each Member agrees that, without the consent of the
other Members, no Member may withdraw from or cause a voluntary dissolution of
the Company. In the event any Member withdraws from or causes a voluntary
dissolution of the Company in contravention of this Agreement, such withdrawal
or the causing of a voluntary dissolution shall not affect such Member's
liability for obligations of or to the Company.
11.02. TERMINATION. In all cases of dissolution of the Company, the
business of the Company shall be wound up and the Company terminated as promptly
as practicable thereafter, and each of the following shall be accomplished:
(a) The Liquidating Member shall cause to be prepared a
statement setting forth the assets and liabilities of the Company as of
the date of dissolution, a copy of which statement shall be furnished
to all of the Members.
(b) The Company's assets shall be liquidated by the
Liquidating Member as promptly as possible, but in an orderly and
businesslike and commercially reasonable manner and subject to Section
11.01(c), in accordance with any liquidating plan approved by the Board
of Managers. The Liquidating Member may cause the property of the
Company to be distributed in kind only with the consent of the Members.
(c) The proceeds of sale and all other assets of the Company
shall be applied and distributed as follows and in the following order
of priority:
(i) To the payment of (A) the debts and liabilities
of the Company, including debts and liabilities to any Member
and (B) the expenses of liquidation.
(ii) To the setting up of any reserves which the
Liquidating Member and the Board of Managers shall determine
to be reasonably necessary for contingent, unliquidated or
unforeseen liabilities or obligations of the Company or any
Member arising out of or in connection with the Company. Such
reserves may, in the discretion of the Liquidating Member, be
paid over to a national bank or national title company
selected by it and authorized to conduct business as an escrow
agent to be held by such bank or title company as escrow agent
for the purposes of disbursing such reserves to satisfy the
liabilities and obligations described above, and at the
expiration of such period as the Liquidating Member may
reasonably deem advisable, distributing any remaining balance
as provided in Section 11.02(c)(iii); provided, however, that,
to the extent that it shall have been necessary, by reason
of applicable law or regulation, to create any reserves prior
to any and all payments which would otherwise have been made
under Section 11.02(c)(i) and, by reason thereof a payment
under Section 11.02(c)(i) has not been made, then any balance
remaining shall first be paid pursuant to Section 11.02(c)(i).
33
(iii) The balance, if any, to the Members in
accordance with Section 6.05 hereof.
11.03. LIQUIDATING MEMBER. The Liquidating Member is hereby irrevocably
appointed as the true and lawful attorney in the name, place and stead of each
of the Members, such appointment being coupled with an interest, to make,
execute, sign, acknowledge and file with respect to the Company all papers which
shall be necessary or desirable to effect the dissolution and termination of the
Company in accordance with the provisions of this Article XI. Notwithstanding
the foregoing, each Member, upon the request of the Liquidating Member or the
Board of Managers, shall promptly execute, acknowledge and deliver all such
documents, certificates and other instruments as the Liquidating Member or the
Board of Managers shall reasonably request to effectuate the proper dissolution
and termination of the Company, including the winding up of the business of the
Company.
XII. PUT-CALL PROVISIONS
12.01. CALL RIGHT. (a) If the Hotel Management Agreement is terminated
because of an act or omission by the Hotel Manager that constitutes an Event of
Default under the Hotel Management Agreement and (i) OpBiz has established its
right to such termination upon the conclusion of the dispute resolution
procedures pursuant to Section 10 of the Hotel Management Agreement, as modified
by the provisions of Section 12.03 of this Agreement or (ii) the Hotel Manager
shall not have commenced such dispute resolution procedures within five (5)
Business Days of OpBiz delivering notice of the Event of Default to the Hotel
Manager, then BH/RE or any Person to whom it has transferred its rights under
this Section 12.01 (the "Call Purchaser") (or its designee) shall have an
irrevocable option (a "Call"), exercisable in its sole discretion, to purchase,
subject to the terms of this Section 12.01, all of the Starwood Members'
Starwood Interests.
(b) The Call may be exercised by the Call Purchaser (or its designee)
by delivering written notice (a "Call Notice") to Starwood and the Company at
any time after such termination but prior to 180 days after such termination.
Each Call Notice will set forth the aggregate consideration to be paid for such
Starwood Interests based on the determinations set forth in Section 12.01(d)
(and the calculation thereof), and the time and place for the closing of the
transaction which will be no later than (i) 120 days after the date on which the
Call Notice was given to Starwood or (ii) if the Starwood Members deliver a
Dispute Notice in accordance with Section 12.01(e), 120 days after the date on
which the matters subject to the Dispute Notice are finally and conclusively
determined pursuant to Section 12.01(e). At the closing, the Starwood Members
will convey the Starwood Interests to the Call Purchaser free and clear of all
liens, claims and encumbrances.
(c) The Call Purchaser will, in connection with such purchase, be
entitled to receive customary representations and warranties from the Starwood
Members regarding the ownership of and title to their Starwood Interests.
(d) The aggregate purchase price of the Starwood Interests applicable
to exercises of Call rights will be the lesser of (i) the amount the Starwood
Members would be entitled to receive pursuant to Sections 6.03(a), (b) and (c)
if OpBiz, MezzCo and the Company sold all of
34
their assets for cash equal to the current Fair Market Value of such assets and
all of the debts and obligations of OpBiz, MezzCo and the Company, including tax
liabilities, were paid or provided for and OpBiz, MezzCo and the Company were
dissolved and the proceeds received by the Company were distributed pursuant to
Section 6.03 (taking into account the penultimate sentence of Section 6.04) (the
"Deemed Liquidation Amount") and (ii) an amount equal to the aggregate amount of
the Starwood Members' Capital Contributions less the sum of (x) the aggregate
amount of Management Fees (exclusive of Centralized Services Fees and
Reimbursable Expenses) received by the Starwood Members pursuant to the Hotel
Management Agreement through the date in question, and (y) distributions
received by Starwood pursuant to Section 6.03, Section 6.04, and Section 6.05 of
this Agreement.
(e) If the Starwood Members disagree with the Call Purchaser's
determination of the Fair Market Value of the assets of OpBiz, MezzCo and the
Company or the amount of the debts and obligations of OpBiz, MezzCo or the
Company and, therefore, the aggregate consideration to be paid for the Starwood
Members' Starwood Interests pursuant to this Section 12.01, the Starwood Members
shall deliver notice (a "Dispute Notice") of such dispute within 20 days after
Starwood receives the Call Notice. If the Starwood Members fail to deliver a
Dispute Notice within such 20-day period, the Starwood Members will be deemed to
have irrevocably waived their right to deliver a Dispute Notice. Any Dispute
Notice must specify in reasonable detail those items or amounts as to which the
Starwood Members disagree and the basis for their disagreement. The Starwood
Members will be deemed to have agreed with all other items and amounts contained
in the Call Notice to which no objection has been made. The parties shall
negotiate in good faith to agree on the Fair Market Value or the amount of the
debts and obligations of OpBiz, MezzCo or the Company, as applicable.
If the parties are unable to agree on the Fair Market Value within ten
days after delivery of the Dispute Notice, each of the Starwood Members, on the
one hand, and the Call Purchaser, on the other hand, shall select an independent
appraiser experienced in valuing hotel and casino properties and shall give
written notice to the other of the appraiser so selected. The first of those
parties to receive such a notice (the "First Notice") shall have ten days after
receipt thereof to give the other of such parties written notice of its
selection of a second appraiser (the "Second Notice"). If the Second Notice is
not given within the requisite time, the Person or Persons delivering the First
Notice shall use that Person's or Persons' best efforts to cause the single
appraiser so selected to determine promptly the Fair Market Value of the assets
of OpBiz, MezzCo and the Company and to give written notice of its determination
to the Starwood Members, the Call Purchaser and the Company promptly thereafter.
The amount set forth in that notice shall be the final, conclusive determination
of the Fair Market Value of the assets of OpBiz, MezzCo and the Company. In the
event the Second Notice is properly given within the requisite time, the
Starwood Members and the Call Purchaser shall each use their best efforts to
cause the appraiser selected by them or it to determine promptly the Fair Market
Value of the assets of OpBiz, MezzCo and the Company and to give written notice
of its determination to the Starwood Members, the Call Purchaser and the Company
promptly thereafter. In the event the Fair Market Value of the assets of OpBiz
set forth in the notice given by one of the appraisers is the same as the amount
set forth in the notice given by the other appraiser, the amount set forth in
those notices shall be the final, conclusive determination of the Fair Market
Value of the assets of OpBiz, MezzCo and the Company. In the event the amounts
set forth in those notices differ but the higher of such amounts is no more than
110% of the lower of such amounts, an
35
average of the two shall be the final, conclusive determination of the Fair
Market Value of the assets of OpBiz, MezzCo and the Company. In all other
events, the Starwood Members and the Call Purchaser shall use their best efforts
to cause the two appraisers to select promptly a third appraiser and to cause
the third appraiser to determine promptly the Fair Market Value of the assets of
OpBiz, MezzCo and the Company and to give written notice of its determination to
the Starwood Members, the Call Purchaser and the Company promptly thereafter.
The amount set forth in that notice shall be the final, conclusive determination
of the Fair Market Value of the assets of OpBiz, MezzCo and the Company.
If the parties are unable to agree on the amount of debts and
obligations of any of OpBiz, MezzCo or the Company within ten days after
delivery of the Dispute Notice, the matters subject to dispute as described in
the Dispute Notice will be resolved by submission to KPMG LLP or, if it is
unable or unwilling to serve, another independent accounting firm of national
recognition reasonably acceptable to the parties (the "Accountants") for
determination of the amount or amounts in dispute. If the items in dispute are
submitted to the Accountants for resolution, (i) each party will furnish to the
Accountants such work papers and other documents and information relating to the
disputed issues as the Accountants may request and are available to that party
(or its independent public accountants), and will be afforded the opportunity to
present to the Accountants any material relating to the determination and to
discuss the determination with the Accountants; (ii) the determination by the
Accountants, as set forth in a notice delivered to the parties by the
Accountants will be binding and conclusive on the parties; and (iii) the fees of
the Accountants for such determination shall be allocated by the Accountant
between the Starwood Members, on the one hand, and the Call Purchaser, on the
other hand, as the Accountant may deem equitable based on the results of the
claims and defenses.
12.02. PUT RIGHT.
If the Hotel Management Agreement is terminated for any reason other
than (i) expiration by its terms or (ii) an action or omission by the Hotel
Manager that constitutes an Event of Default under the Hotel Management
Agreement as determined upon the conclusion of the dispute resolution procedures
pursuant to Section 10 of the Hotel Management Agreement (provided, however,
that such determination shall not be required if the Hotel Manager shall not
have commenced such dispute resolution procedures within five (5) Business Days
of OpBiz delivering notice of the Event of Default to the Hotel Manager), then
the Starwood Members shall have the right (the "Put Right"), subject to the
terms of this Section 12.02, to cause the Company to purchase all (but not less
than all) of the Starwood Members' Starwood Interests (the "Put Securities").
(a) The Put Right may be exercised by the Starwood Members by Starwood
delivering written notice (the "Put Notice") to the Company at any time after
such termination but prior to 180 days after such termination. Each Put Notice
will set forth the Starwood Members' calculation of the Put Price and the time
and place for the closing of the transaction which will be (i) no earlier than
60 days nor later than 120 days after the date on which the Company receives the
Put Notice or (ii) if the Company delivers a Dispute Notice in accordance with
Section 12.02(e), no later than 120 days after the date on which the matters
subject to the Dispute Notice are finally and conclusively determined pursuant
to Section 12.02(e). At the
36
closing, the Starwood Members will convey the Starwood Interests to the Company
free and clear of all liens, claims and encumbrances.
(b) The Company will, in connection with such purchase, be entitled to
receive customary representations and warranties from the Starwood Members
regarding the ownership of and title to their Starwood Interests.
(c) The aggregate purchase price for the Put Securities (the "Put
Price") shall equal the greater of (i) the Deemed Liquidation Amount and (ii) an
amount equal to the sum of the Starwood Members' Capital Contributions less any
amounts received by the Starwood Members pursuant to 6.03, Section 6.04 and
Section 6.05 of this Agreement. Until the Put Price is paid, the Put Securities
shall remain outstanding and the holders of the Put Securities shall retain all
rights associated therewith.
(d) If the Company disagrees with the Starwood Members' determination
of the Fair Market Value of the assets of OpBiz, MezzCo and the Company or the
amount of the debts and obligations of OpBiz, MezzCo or the Company and,
therefore, the Put Price, the Company shall deliver notice (also a "Dispute
Notice") of such dispute within 20 days after the Company receives the Put
Notice. If the Company fails to deliver a Dispute Notice within such 20-day
period, the Company will be deemed to have irrevocably waived its right to
deliver a Dispute Notice. Any Dispute Notice must specify in reasonable detail
those items or amounts as to which the Company disagrees and the basis for its
disagreement. The Company will be deemed to have agreed with all other items and
amounts contained in the Put Notice to which no objection has been made. The
parties shall negotiate in good faith to agree on the Fair Market Value or the
amount of the debts and obligations of OpBiz, MezzCo or the Company, as
applicable.
If the parties are unable to agree on the Fair Market Value within ten
days after delivery of the Dispute Notice, each of the Starwood Members, on the
one hand, and the Company on the other hand, shall select an independent
appraiser experienced in valuing hotel and casino properties and shall give
written notice to the other of the appraiser so selected. The first of those
parties to receive such a notice (also the "First Notice") shall have ten days
after receipt thereof to give the other of such parties written notice of its
selection of a second appraiser (also the "Second Notice"). If the Second Notice
is not given within the requisite time, the Person or Persons delivering the
First Notice shall use that Person's or Persons' best efforts to cause the
single appraiser to selected to determine promptly the Fair Market Value of the
assets of OpBiz, MezzCo and the Company and to give written notice of its
determination to the Starwood Members and the Company promptly thereafter. The
amount set forth in that notice shall be the final, conclusive determination of
the Fair Market Value of the assets of OpBiz, MezzCo and the Company. In the
event the Second Notice is properly given within the requisite time, the
Starwood Members and the Company shall each use their best efforts to cause the
appraiser selected by them or it to determine promptly the Fair Market Value of
the assets of OpBiz, MezzCo and the Company and to give written notice of its
determination to the Starwood Members and the Company promptly thereafter. In
the event the Fair Market Value of the assets
37
of OpBiz, MezzCo and the Company set forth in the notice given by one of the
appraisers is the same as the amount set forth in the notice given by the other
appraiser, the amount set forth in those notices shall be the final, conclusive
determination of the Fair Market Value of the assets of OpBiz, MezzCo and the
Company. In the event the amounts set forth in those notices differ but the
higher of such amounts is no more than 110% of the lower of such amounts, an
average of the two shall be the final, conclusive determination of the Fair
Market Value of the assets of OpBiz, MezzCo and the Company. In all other
events, the Starwood Members and the Company shall use their best efforts to
cause the two appraiser to select promptly a third appraiser and to cause the
third appraiser to determine promptly the Fair Market Value of the assets of
OpBiz, MezzCo and the Company and to give written notice of its determination to
the Starwood Members and the Company promptly thereafter. The amount set forth
in that notice shall be the final, conclusive determination of the Fair Market
Value of the assets of OpBiz, MezzCo and the Company.
If the parties are unable to agree on the amount of debts and
obligations of any of OpBiz, MezzCo or the Company within ten days after
delivery of the Dispute Notice, the matters subject to dispute as described in
the Dispute Notice will be resolved by submission to the Accountants for
determination of the amount or amounts in dispute. If the items in dispute are
submitted to the Accountants for resolution, (i) each party will furnish to the
Accountants such work papers and other documents and information relating to the
disputed issues as the Accountants may request and are available to that party
(or its independent public accountants), and will be afforded the opportunity to
present to the Accountants any material relating to the determination and to
discuss the determination with the Accountants; (ii) the determination by the
Accountants, as set forth in a notice delivered to the parties by the
Accountants will be binding and conclusive on the parties; and (iii) the fees of
the Accountants for such determination shall be allocated by the Accountant
between the Starwood Members, on the one hand, and the Company, on the other
hand, as the Accountant may deem equitable based on the results of the claims
and defenses.
(e) If the Company fails to perform its obligation to purchase the Put
Securities pursuant to this Section 12.02, the Starwood Members shall, for
purposes of calculating the Members' Percentage Interests, be deemed to have
contributed an amount of Additional Capital equal to three times the Put Price,
and the Percentage Interests of each Member shall be adjusted accordingly.
(f) If the Percentage Interests of BH/RE and its direct or indirect
transferees to fall below 34% in the aggregate (the "Minimum Percentage") (and,
for purposes of this calculation only, treating three times the principal amount
outstanding of any note described in Section 4.02(b) as being Additional Capital
contributed by the Member holding such note) then, during any period in which
both (i) the aggregate Percentage Interests of BH/RE and such transferees is
less than the Minimum Percentage and (ii) the Percentage Interest of Starwood is
more than two times the aggregate Percentage Interests of BH/RE and such
transferees, each reference in Sections 7.02(a), (e) and (g) (other than the
last paragraph thereof) to "Starwood" shall be deemed to be a reference to
"BH/RE" and each reference therein to "BH/RE" shall be deemed to be a reference
to "Starwood" (except that the phrases "unless Starwood's rights have terminated
as contemplated by Section 9.04" shall still apply to limit Starwood's rights
under those sections).
12.03. DETERMINATION OF BREACH OF HOTEL MANAGEMENT AGREEMENT. The
determination of whether an Event of Default has occurred under the Hotel
Management
38
Agreement shall be determined in accordance with terms and conditions of the
Hotel Management Agreement, as modified by the terms of this Section 12.03.
(a) Any Arbitration pursuant to this Section 12.03 shall be before one
neutral arbitrator who shall be selected in accordance with the procedure set
forth in section 12.03(b). The Call Purchaser and the Starwood Members waive any
right to challenge selection or appointment of the arbitrator made in accordance
with such process and who meets the independence criteria set forth in
subparagraph (c) below.
(b) The Person selected as the arbitrator hereunder shall have the
following minimum qualifications:
(i) Shall be impartial, disinterested and independent of the
Call Purchaser, the Starwood Members and the Hotel Manager and their
Affiliates and have a reputation of fairness; provided, however, that
this definition shall not exclude the employees of consulting firms
that have not performed consulting services having a value in excess of
$50,000 in the aggregate for any of the foregoing Persons within the 24
months preceding the commencement of the arbitration; and
(ii) Shall have recognized expertise in the hotel/casino
industry.
(c) Within five days of the appointment of the arbitrator, the Call
Purchaser shall submit a statement of claim. The Starwood Members shall have
five days after being served with the statement of claim to submit an answer.
Both the statement of claim and the answer shall concisely and with specificity
state the party's position and the basis for that position.
(d) The arbitration hearing shall begin within 20 days of submission of
the answer, unless the Call Purchaser and Starwood agree otherwise. The
arbitration hearing shall be concluded within 45 days of the appointment of the
arbitrator unless the Call Purchaser and Starwood agree otherwise.
(e) The arbitrator's authority shall be limited to the extent that the
arbitrator shall be bound by the laws of the State of New York, the facts and
issues, and by the New York Rules of Evidence to the same extent as a trial
court, and the arbitrator shall make no decision that is not in accordance with
applicable laws, this Section 12.03 and the terms of Article 10 of the Hotel
Management Agreement. Depositions may be admitted to the extent testimony would
be admissible but shall not prevent live testimony by and witness who was
deposed; and reasonable discovery limited to the issues to be arbitrated shall
be available, subject however to the time limitations in this Section 12.03. The
arbitrator shall not have the authority to extend the time limits unless the
Call Purchaser and Starwood agree.
(f) A stenographic transcript of the testimony of the record of such
proceedings shall be taken.
(g) The brief of the Call Purchaser shall be filed with the arbitrator
within five days after completion of the hearings, and the brief of the Starwood
Members shall be filed within five days after the receipt of the Call
Purchaser's brief. The arbitrator may designate the portion
39
or portions of the record which it requires for its decision, but nothing shall
prevent the Call Purchaser or the Starwood Members from presenting a complete
record, if it so desires.
(h) Each of the Call Purchaser and the Starwood Members shall pay for
the services and expenses of its respective witnesses and attorneys, and all
other costs incurred in connection with the arbitration, including the costs of
the arbitrator, shall be paid equally by Call Purchaser, on the one hand, and
the Starwood Members, on the other hand, in each case unless the award shall
specify a different division of costs.
(i) The award of the arbitrator shall be in writing setting forth the
arbitrator's reasoning based on the evidence admitted and rendered and served on
each of the Call Purchaser and the Starwood Members within 15 days of filing of
the last brief under this Section 12.03. The decision of the arbitrator shall be
final and binding and enforceable pursuant to the laws of the State of New York
by filing in any court having jurisdiction thereof.
12.04. POWER OF ATTORNEY. In the event that either the transferor or
the transferee under Section 12.01 or 12.02 as the selling Member or Members
shall have failed or refused to execute, acknowledge and deliver such documents,
or cause the same to be done, as shall be required to effectuate the provisions
of Sections 12.01 or 12.02, as applicable, then the Company or the purchasing
Members, as applicable, may execute, acknowledge and deliver such documents for,
on behalf of and in the stead of the selling Members, and such execution,
acknowledgment and delivery by the Company or the purchasing Members, as
applicable, shall be for all purposes effective against and binding upon the
selling Members as though such execution, acknowledgment and delivery had been
by the selling Members. Each such Member does hereby irrevocably constitute and
appoint each other Member and the Company as the true and lawful
attorney-in-fact of such Member and the successors and assigns thereof in the
name, place and stead of such Member or the successors or assigns thereof, as
the case may be, to execute, acknowledge and deliver such documents in the event
such Member shall be a selling Member under the circumstances contemplated by
this Article XII. It is expressly understood, intended and agreed by each
Member, for such Member and its successors and assigns, that the grant of the
power of attorney to the Company or any other Member pursuant to this Section
12.03 is coupled with an interest, is irrevocable and shall survive the death,
dissolution, termination or legal incompetency, as applicable, of such granting
Member, or the assignment of the Interest of such granting Member, or the
dissolution of the Company.
XIII. MISCELLANEOUS
13.01. REPRESENTATIONS AND WARRANTIES OF THE MEMBERS. (a) Each Member
represents and warrants to the other Members as follows:
(i) It is duly organized, validly existing and in good
standing under the laws of its jurisdiction of formation with all
requisite entity power and authority to enter into this Agreement and
to conduct the business of the Company.
(ii) This Agreement constitutes the legal, valid and binding
obligation of the Member enforceable in accordance with its terms.
40
(iii) Except for the gaming licenses, no consents or approvals
are required from any governmental authority or other person or entity
for the Member to enter into this Agreement and become a member of the
Company. All limited liability company, corporate or partnership action
on the part of the Member necessary for the authorization, execution
and delivery of this Agreement, and the consummation of the
transactions contemplated hereby, have been duly taken.
(iv) The execution and delivery of this Agreement by the
Member, and the consummation of the transactions contemplated hereby,
does not conflict with or contravene the provisions of its
organizational documents or any agreement or instrument by which it or
its properties are bound or any law, rule, regulation, order or decree
to which it or its properties are subject.
(v) The Member has not retained any broker, finder or other
commission or fee agent, and no such person has acted on its behalf in
connection with the acquisition of any Property or the execution and
delivery of this Agreement.
(vi) Each Member understands that (A) an investment in the
Company involves a substantial and high degree of risk and does hereby
represent that it has a net worth sufficient to bear the economic risk
of its investment in the Company, (B) no federal or state agency has
passed on the offer and sale of an Interest in the Company, (C) it must
bear the economic risk of an investment in the Company for an
indefinite period of time, since Interests in the Company have not been
registered for sale under the Securities Act of 1933, as amended (the
"Securities Act") and, therefore, cannot be sold or otherwise
transferred unless subsequently registered under the Securities Act of
1933 or an exemption from such registration is available, and any
Interests cannot be sold or otherwise transferred unless registered
under applicable state securities or blue sky laws or an exemption from
such registration is available, there is no established market for the
Interests and no public market will develop.
(vii) Each Member represents and warrants that it is an
"accredited investor" as defined in Regulation D of the Securities Act.
(b) Each Member agrees to indemnify and hold harmless the Company and
each other Member and their officers, directors, shareholders, partners,
members, employees, successors and assigns from and against any and all loss,
damage, liability or expense (including reasonable out of pocket costs and
attorneys' fees) which they may incur by reason, or in connection with, any
breach of the foregoing representations and warranties by such Member and all
such representations and warranties shall survive the execution and delivery of
this Agreement and the termination and dissolution of any Member and/or the
Company (nothing herein shall constitute a waiver or extension of any applicable
statute of limitations).
13.02. FURTHER ASSURANCES. Each Member agrees to execute, acknowledge,
deliver, file, record and publish such further instruments and documents, and do
all such other acts and things as may be required by law, or as may be required
to carry out the intent and purposes of this Agreement; provided the same does
not subject any Member to additional liability and the
41
same is consistent with and does not vary the terms and conditions of this
Agreement without the consent of the affected Member.
13.03. NOTICES. All notices, demands, consents, approvals, requests or
other communications which any of the parties to this Agreement may desire or be
required to give hereunder (collectively, "Notices") shall be in writing and
shall be given by personal delivery, facsimile transmission or a nationally
recognized overnight courier service, fees prepaid, addressed as follows:
If to BH/RE: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇
c/o Planet Hollywood International, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
Bay Harbour Management LC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇ Day
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Starwood: Starwood Hotels and Resorts Worldwide, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Starwood Hotels and Resorts Worldwide, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
- Real Estate
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Starwood Hotels and Resorts Worldwide, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Senior Vice
President - Real Estate
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
42
With a copy to: ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, P.C.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Any Member may designate another addressee (and/or change its address) for
Notice hereunder by a Notice given pursuant to this Section 13.03. A Notice sent
in compliance with the provisions of this Section 13.03 shall be deemed given on
the date of receipt, except if delivery is refused, such notice shall be given
on the date delivery is first attempted.
13.04. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Nevada applicable to agreements made
and to be performed wholly within that State, without regard to choice of law
principles.
13.05. ATTORNEY FEES. If the Company or any Member obtains a judgment
against any Member by reason of the breach of this Agreement or the failure to
comply with the terms hereof, reasonable attorney's fees and costs as fixed by
the court shall be included in such judgment.
13.06. CAPTIONS. All titles or captions contained in this Agreement are
inserted only as a matter of convenience and for reference and in no way define,
limit, extend, or describe the scope of this Agreement or the intent of any
provision in this Agreement.
13.07. PRONOUNS. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, and neuter, singular and plural, as
the identity of the party or parties may require.
13.08. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
parties hereto and their respective executors, administrators, legal
representatives, heirs, successors and assigns, and shall inure to the benefit
of the parties hereto and, except as otherwise provided herein, their respective
executors, administrators, legal representatives, heirs, successors and assigns.
13.09. EXTENSION NOT A WAIVER. No delay or omission in the exercise of
any power, remedy or right herein provided or otherwise available to a Member or
the Company shall impair or affect the right of such Member or the Company
thereafter to exercise the same. Any extension of time or other indulgence
granted to a Member hereunder shall not otherwise alter or affect any power,
remedy or right of any other Member or of the Company, or the obligations of the
Member to whom such extension or indulgence is granted.
13.10. CREDITORS AND THIRD PARTIES NOT BENEFITED. Nothing contained in
this Agreement is intended or shall be deemed to benefit any third party or
creditor of the Company or any Member, and no third party or creditor of the
Company shall be entitled to require the Company or the Members to solicit or
accept any additional capital contribution for the Company or to enforce any
right which the Company or any Member may have against any Member under this
Agreement or otherwise.
43
13.11. RECALCULATION OF INTEREST. If any applicable law is ever
judicially interpreted so as to deem any distribution, contribution, payment or
other amount received by any Member or the Company under this Agreement as
interest and so as to render any such amount in excess of the maximum rate or
amount of interest permitted by applicable law, then it is the express intent of
the Members and the Company that all amounts in excess of the highest lawful
rate or amount theretofore collected be credited against any other
distributions, contributions, payments or other amounts to be paid by the
recipient of the excess amount or refunded to the appropriate Person, and the
provisions of this Agreement immediately be deemed reformed, without the
necessity of the execution of any new document, so as to comply with the
applicable law, but so as to permit the payment of the fullest amount otherwise
required hereunder. All sums paid or agreed to be paid that are judicially
determined to be interest shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the term of such obligation
so that the rate or amount of interest on account of such obligation does not
exceed the maximum rate or amount of interest permitted, under applicable law.
13.12. SEVERABILITY. In case any one or more of the provisions
contained in this Agreement or any application thereof shall be invalid, illegal
or unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein and other application thereof shall
not in any way be affected or impaired thereby; provided, however, the
limitation of liability and exculpation provisions of this Agreement are an
integral part hereof.
13.13. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties relating to the subject matter hereof and all prior
agreements relative hereto which are not contained or referred to herein are
terminated. Amendments, variations, modifications or changes herein may be made
effective and binding upon the Members by, and only by, the setting forth of
same in a document duly executed by each Member, and any alleged amendment,
variation, modification or change herein which is not so documented shall not be
effective as to any Member.
13.14. PUBLICITY. The parties agree that no Member shall issue any
press release or otherwise publicize or disclose the terms of this Agreement or
the proposed terms of any acquisition of any Property, without the consent of
each of the other Members, except as such disclosure may be made pursuant to the
terms of the Hotel Management Agreement or in the course of normal reporting
practices by any Member to its members, shareholders or partners.
13.15. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be an original but all of which together shall
constitute but one and the same agreement.
13.16. CONFIDENTIALITY.
(a) The terms of this Agreement and the Subsidiary Operating
Agreements, the identity of any person with whom the Company may be holding
discussions with respect to any investment, acquisition, disposition or other
transaction, and all other business, financial or other information relating
directly to the conduct of the business and affairs of the Company or the
relative or absolute rights or interests of any of the Members (collectively,
the "Confidential
44
Information") that has not been publicly disclosed pursuant to authorization by
the Board of Managers is confidential and proprietary information of the
Company, the disclosure of which would cause irreparable harm to the Company and
the Members. Accordingly, except as permitted pursuant to Section 13.14 hereof,
each Member represents that it has not and agrees that it will not and will
direct its shareholders, partners, directors, officers, agents, advisors and
Affiliates not to, disclose to any Person any Confidential Information or
confirm any statement made by third Persons regarding Confidential Information
until the Company has publicly disclosed the Confidential Information pursuant
to authorization by the Board of Managers and has notified each Member that it
has done so; provided, however, that any Member (or its Affiliates) may disclose
such Confidential Information (i) if required by law or rule of any stock
exchange (it being specifically understood and agreed that anything set forth in
a registration statement or any other document filed pursuant to law will be
deemed required by law and provided that before making any disclosure of
confidential information required by law or rule of any stock exchange, the
disclosing Member will notify the other Members and provide them with a copy of
the proposed disclosure and an opportunity to comment thereon before the
disclosure is made), (ii) in connection with the offer to purchase or Transfer
any Interests or any Transfer of Interests or sale of any property of the
Company permitted hereunder, (iii) in connection with any offer to purchase or
Transfer any Interest or the Transfer of any interest of the direct or indirect
beneficial owners of any Members permitted hereunder, (iv) reasonably necessary
in connection with any other transaction authorized pursuant to the terms of
this Agreement, (v) to its directors, officers and employees, including the
directors, officers and employees of any partner, member, shareholder, trustee
or other beneficial owner of any Member and who is informed of the obligations
under this Section 13.16, (vi) to its accountants, attorneys or other advisors
who have a need to know such Confidential Information in connection with the
Member's ownership of its Interest and who are informed of the obligations under
this Section 13.16, (vii) in connection with required or routine reporting to
its potential or current investors, members, partners and lenders or other
financial or capital sources, or (viii) reasonably necessary for it to perform
any of its duties or obligations hereunder.
(b) Subject to the provisions of Section 13.16(a), each Member agrees
not to disclose any Confidential Information to any Person (other than a Person
agreeing to maintain all Confidential Information in strict confidence or a
judge, magistrate or referee in any action, suit or proceeding relating to or
arising out of this Agreement or otherwise), and to keep confidential all
documents (including, without limitation, responses to discovery requests)
containing any Confidential Information. Each Member hereby consents in advance
to any motion for any protective order brought by any other Member represented
as being intended by the movant to implement the purposes of this Section 13.16
provided that, if a Member receives a request to disclose any Confidential
Information under the terms of a valid and effective order issued by a court or
governmental agency and the order was not sought by or on behalf of or consented
to by such Member, then such Member may disclose the Confidential Information to
the extent required if the Member as promptly as practicable (i) notifies each
of the other Members of the existence, terms and circumstances of the order,
(ii) consults in good faith with each of the other Members on the advisability
of taking legally available steps to resist or to narrow the order, and (iii) if
disclosure of the Confidential Information is required, exercises its best
efforts to obtain a protective order or other reliable assurance that
confidential treatment will be accorded to the portion of the disclosed
Confidential Information that any other Member designates. The cost (including,
without limitation, attorneys' fees and expenses) of obtaining a protective
order
45
covering Confidential Information designated by such other Member will be borne
by the Company.
(c) The covenants contained in this Section 13.16 will survive the
Transfer of the Interest of any Member and the termination of the Company.
13.17. VENUE. Each of the Members consents to the jurisdiction of any
state or federal court sitting in the State of New York for any action arising
out of matters related to this Agreement. Each of the Members waives the right
to commence an action in connection with this Agreement in any court outside of
the State of New York. Each of the Members agrees that service of process on it
in the manner set forth in Section 13.03 hereof shall be deemed effective
service of process on such Member.
13.18. WAIVER OF JURY TRIAL. EACH OF THE MEMBERS HEREBY WAIVES TRIAL BY
JURY IN ANY ACTION ARISING OUT OF MATTERS RELATED TO THIS AGREEMENT, WHICH
WAIVER IS INFORMED AND VOLUNTARY.
13.19. ENFORCEABILITY OF POWER OF ATTORNEY. In the event it is
subsequently determined that any power of attorney provision in this Agreement
is unenforceable, the parties hereto agree to execute, acknowledge, deliver,
file, record and publish such other instruments and documents (including
separate powers of attorney), and do all such other acts and things as may be
required by law, or as may be required to carry out the intent and purposes of
such power of attorney provisions.
13.20. AMENDMENTS. Subject to the provisions of Section 9.10, this
Agreement may be amended with the approval of the Board of Managers by a
Majority in Interest of the Members at the time of such amendment; provided that
no amendment that has the effect of altering or changing the powers, preferences
or special rights of any Member so as to affect that Member adversely will be
binding on such Member unless that Member consents to such amendment.
13.21. RAPID RESOLUTION PROCESS REQUIRED.
The Members shall resolve any dispute that may arise in connection with
this Agreement (including disputes referenced in Section 7.02(g) but excluding
disputes covered by Section 12.03 of this Agreement (for which the dispute
resolution process is described therein)) through a process of final and binding
arbitration (without appeal or review) in the State of New York, administered by
an independent arbitration tribunal pursuant to the commercial arbitration rules
of the American Arbitration Association. Notwithstanding the foregoing, the
arbitrator's decision on any matter submitted for arbitration shall be based
upon what is commonly referred to as the "baseball arbitration" approach,
whereby the arbitrator must select the position presented to the arbitration
tribunal by one of the parties to the arbitration, and may not make a
ruling/determination other than in favor of one of the two positions presented.
If more than one issue shall be submitted to the same arbitrators for
resolution, each such issue shall be deemed a separate arbitration for all
purposes hereof, such issues to be identified separately by the parties in their
submission to arbitration, and each such issue shall be subject to a separate
decision by the arbitrators. All arbitrators appointed hereunder shall be
persons having not less than ten (10) years' experience in the area of expertise
on which the dispute is based.
46
Any arbitration of a dispute shall be initiated by a delivery of a
demand for arbitration with the American Arbitration Association and shall be
completed by the parties and arbitration tribunal, and a written decision shall
have been rendered, within forty-five (45) days of the delivery of such demand.
THE ARBITRATORS SHALL HAVE NO AUTHORITY TO AWARD ANY PUNITIVE OR
EXEMPLARY DAMAGES OR TO VARY OR IGNORE THE TERMS OF THIS AGREEMENT, AND SHALL BE
BOUND BY CONTROLLING LAW.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURES ON NEXT PAGE]
47
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth in the introductory paragraph hereof.
BH/RE, L.L.C., a Nevada limited liability company
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Manager
Starwood Nevada Holdings, LLC, a Delaware
limited liability company
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its sole member
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President Real Estate Group
Signature Page - Second Amended and
Restated Operating Agreement - EquityCo
APPENDIX A
DEFINED TERMS
As used in this Agreement, the following terms (including the singular
and plural thereof) have the meanings set forth below:
"AAA" has the meaning set forth in Section 12.03(b).
"ADDITIONAL CAPITAL CONTRIBUTION" means, with respect to any Member,
any amount contributed to the capital of the Company by such Member pursuant to
Section 4.02 hereof.
"ADJUSTED CAPITAL ACCOUNT" means, with respect to any Member for any
Taxable Year or other period, the balance in such Member's Capital Account as of
the end of such period after crediting to such Capital Account any amount such
Member is deemed obligated to restore as described in the penultimate sentence
of Treasury Regulation Section 1.704-2(g)(1) and in Treasury Regulation Section
1.704-2(i)(5).
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any Member
for any Taxable Year or other period, the deficit balance, if any, in such
Member's Capital Account as of the end of such year or other period, after
giving effect to the following adjustments:
(a) Credit to such Capital Account any amounts that such
Member is obligated to restore or is deemed obligated to restore as
described in the penultimate sentence of Treasury Regulation Section
1.704-2(g)(1) and in Treasury Regulation Section 1.704-2(i)(5); and
(b) Debit to such Capital Account the items described in
Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
"AFFILIATE" means, with respect to any Person, (a) any other Person
directly or indirectly, through one or more intermediaries, controlling,
controlled by, or under common control with such Person, or (b) any other Person
owning or controlling 10% or more of the outstanding voting interests of such
Person, or (c) any officer, director, general partner, managing member or
trustee of such Person, or (d) any other Person which is an officer, director,
general partner, managing member, trustee or holder of 10% or more of the voting
interests of any other Person described in clauses (a) through (c) of this
definition. As used in this definition, the term "control", "controlling",
"controlled by" or "under common control with" means the possession, directly or
indirectly, through one or more intermediaries, of the power to direct or cause
the direction of the management and policies of a Person, whether through voting
securities, by contract or otherwise.
"AGREEMENT" means this Second Amended and Restated Operating Agreement
of EquityCo, L.L.C., including exhibits, schedules or addenda attached hereto,
as amended and in effect from time to time pursuant to the terms of this
Operating Agreement.
"ARMS LENGTH" means that the cost of any goods or services purchased
and the terms of such purchase are comparable to the costs and terms required by
reputable and qualified
unrelated third parties on an arms-length basis for goods or services of
substantially identical scope and quality.
"ARTICLES OF ORGANIZATION" has the meaning set forth in Section 2.01 of
this Agreement.
"BREAK-UP FEE" has the meaning given in the Purchase Agreement.
"BANKRUPTCY CODE" means title 11 of the United States Code (as now in
effect or hereafter amended).
"BH/RE" has the meaning set forth in the introductory paragraph hereof.
"BH/RE INITIAL CAPITAL CONTRIBUTION" has the meaning given in Section
4.01.
"BOARD OF MANAGERS" means the committee formed and operated by the
Members pursuant to Sections 7.01 and 7.02 hereof.
"BOOK BASIS" means, with respect to any asset of the Company, the
asset's adjusted basis for federal income tax purposes, except as follows:
(a) The initial Book Basis of any asset contributed by a
Member to the Company shall be the gross fair market value of such
asset, as determined by the Board of Managers;
(b) The Book Basis of all Company assets shall be adjusted to
equal their respective gross fair market values (taking Code Section
7701(g) into account), as determined by the Board of Managers as of the
following times: (i) the acquisition of an additional interest in the
Company by any new or existing Member in exchange for more than a de
minimis Capital Contribution; (ii) the distribution by the Company to a
Member of more than a de minimis amount of Company property as
consideration for an interest in the Company; and (iii) the liquidation
of the Company within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), provided that an adjustment described in clauses
(i) and (ii) of this paragraph shall be made only if the Board of
Managers reasonably determines that such adjustment is necessary to
reflect the relative economic interests of the Members in the Company.
(c) The Book Basis of any item of Company assets distributed
to any Member shall be adjusted to equal the gross fair market value
(taking Code Section 7701(g) into account) of such asset on the date of
distribution as determined by the Board of Managers.
(d) The Book Basis of Company assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such
assets pursuant to Code Section 734(b) or Code Section 743(b), but only
to the extent that such adjustments are taken into account in
determining Capital Accounts pursuant to Regulations Section
1.704-1(b)(2)(iv)(m), provided, however, that Book Basis shall not be
adjusted pursuant to this subparagraph (d) to the extent that an
adjustment pursuant to subparagraph (b) is required in connection
2
with a transaction that would otherwise result in an adjustment
pursuant to this subparagraph (d).
If the Book Basis of an asset has been determined or adjusted pursuant
to subparagraph (a), (b) or (d), such Book Basis shall thereafter be adjusted by
the Depreciation taken into account with respect to such asset, for purposes of
computing Profits and Losses.
"BUSINESS DAYS" means any day during a calendar year which is not a
Saturday, Sunday or a day on which banks are required or permitted to be closed
in the State of New York.
"CALL" has the meaning set forth in Section 12.01(a) hereof.
"CALL NOTICE" has the meaning set forth in Section 12.01(b) hereof.
"CALL PURCHASER" has the meaning set forth in Section 12.01(a) hereof.
"CAPITAL ACCOUNT" means the separate account maintained for each Member
under Section 4.03 hereof.
"CAPITAL CONTRIBUTION" means, with respect to any Member, any Initial
Capital Contribution, Additional Contribution, Preemptive Contribution or
Reimbursement Shortfall Contribution made by such Member to the Company pursuant
to this Agreement.
"CASINO GENERAL MANAGER" means the individual, if any, hired to OpBiz
to manage the operations of the casino on the Property (other than the OpBiz
CEO).
"CLASS A MEMBERSHIP UNIT" has the meaning set forth in Section 2.07(a).
"CLASS A PERCENTAGE INTEREST" means, for each Member, a percentage
computed by dividing (x) the number of Class A Membership Units owned of record
by such Member by (y) the number of Class A Membership Units owned of record by
all Members.
"CLASS B MEMBERSHIP UNIT" has the meaning set forth in Section 2.07(a).
"CLASS B PERCENTAGE INTEREST" means, for each Member, a percentage
computed by dividing (x) the number of Class B Membership Units owned of record
by such member by (y) the number of Class B Membership Units owned of record by
all Members.
"CLOSING DATE" means the Closing Date under the Purchase Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended. Any
reference herein to any specific section or sections of the Code shall be deemed
to include a reference to any corresponding provision of future laws.
"COMPANY" means the limited liability company formed pursuant to the
Articles of Organization and operated pursuant to the terms of this Agreement.
"COMPANY ACCOUNTANT" has the meaning set forth in Section 8.04 hereof.
3
"COMPANY COMPETITOR" means a person in the business owning, operating,
licensing (as licensor), franchising or managing a nationally recognized brand
or system of hotels, motels or other transient lodging facilities.
"COMPANY MINIMUM GAIN" means "partnership minimum gain" as defined in
Treasury Regulation Section 1.704-2(d).
"CONFIDENTIAL INFORMATION" has the meaning set forth in Section
13.16(a) hereof.
"CONTRIBUTING MEMBERS" has the meaning set forth in Section 4.02(b)
hereof.
"CONTRIBUTION ACCOUNT" means an account maintained for each Member
which is increased by the amounts contributed by such Member pursuant to
Sections 4.01 and 4.02 and the last sentence of Section 7.05(a) and decreased by
amounts distributed to such Member pursuant to Section 6.03(a) (including
amounts deemed distributed pursuant to Section 6.03(a) as a result of the
penultimate sentence of Section 6.04).
"CONTRIBUTION DATE" has the meaning set forth in Section 4.02(a)
hereof.
"CREDIT AGREEMENT" means an Amended and Restated Loan and Facilities
Agreement by and among OpBiz, the lenders party thereto and The Bank of New
York, Asset Solutions Division as Administrative and Collateral Agent; provided,
however, that any reference herein to a specific provision or definition in the
Credit Agreement shall refer to such provision or definition as it existed in
the latest (as of the date of this Agreement) draft Credit Agreement circulated
to OpBiz.
"CREDIT AGREEMENT CURE CALL" means a determination by any Member
holding a Percentage Interest of 10% or more to request that Members make
Additional Capital Contributions on a pro rata basis in accordance with their
relative Percentage Interests so that the Company may directly or indirectly
make capital contributions to OpBiz for the purpose of providing the "EBITDA
Cure Amount" (as defined in the Credit Agreement) as contemplated by Section
8.13(b) of the Credit Agreement or for the purpose of curing any payment default
by OpBiz under the Credit Agreement (or any similar provisions of any
replacement credit facility); provided, however, that no Credit Agreement Cure
Call shall be for an aggregate amount in excess of the amount of capital
required by OpBiz for such EBITDA Cure Amount or to cure such payment default or
for such amounts to the extent the underlying default has been waived under the
Credit Agreement.
"DEEMED LIQUIDATION AMOUNT" has the meaning set forth in Section
12.01(d) hereof.
"DEPRECIATION" means, for each Taxable Year of the Company, an amount
equal to the depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such Taxable Year, except that if the
Book Basis of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such Taxable Year, Depreciation shall be an amount
which bears the same ratio to such beginning Book Basis as the federal income
tax depreciation, amortization, or other cost recovery deduction for such
Taxable Year bears to such beginning adjusted tax basis; provided, however, that
if the adjusted basis for federal income tax purposes of an asset at the
beginning of such Taxable Year is zero, Depreciation shall be
4
determined with reference to such beginning Book Basis using any reasonable
method selected by the Board of Managers.
"DIRECTOR OF CASINO OPERATIONS" has the meaning set forth in the Hotel
Management Agreement.
"DIRECTOR OF HOTEL OPERATIONS" has the meaning set forth in the Hotel
Management Agreement.
"DISPUTE NOTICE" has the meaning set forth in Section 12.01(e) and
Section 12.02(e) hereof.
"DRAG ALONG MEMBER" has the meaning set forth in Section 9.03(a).
"EXPENSE REIMBURSEMENT" has the meaning set forth in the Purchase
Agreement.
"EXPENSES" means, for any period, the sum of the total gross
expenditures of the Company during such period, including (a) all cash operating
expenses (including, without limitation, all fees, commissions, expenses and
allowances paid or reimbursed to any Member or any of its Affiliates pursuant to
agreements to operate or manage the Property or otherwise as permitted
hereunder), (b) all debt service payments, (c) all expenditures which are
treated as capital expenditures (as distinguished from expense deductions) under
generally accepted accounting principles, (d) all taxes, fees or charges, or
similar assessments or levies, including real estate taxes, personal property
taxes, sales taxes and non-U.S. income, capital gain or similar taxes or
withholding, (e) all deposits of Revenues to the Company's reserve accounts, (f)
all costs and expenditures related to any acquisition, sale, disposition,
financing, refinancing or securitization of any Property, and (g) all cash
contributions, loans or advances made directly or indirectly to any Subsidiary;
provided, however, that Expenses shall not include (i) any payment or
expenditure to the extent (A) the sources of funds used for such payment or
expenditure are not included in Revenues or (B) such payment or expenditure is
paid out of any Company reserve account, or (ii) any expenditure properly
attributable to the liquidation of the Company.
"FAIR MARKET VALUE" means the price agreed upon by a willing buyer and
a willing seller both in possession of reasonable knowledge of all relevant
facts, with neither party being under any compulsion to act or not to act.
"FIRST NOTICE" has the meaning set forth in Section 12.01(e) and
Section 12.02(e) hereof.
"GAAP" has the meaning set forth in Section 8.02 hereof.
"GAMING" has the meaning set forth in Section 2.05 hereof.
"GAMING LAWS" means those laws pursuant to which any Nevada Gaming
Authority possesses regulatory, licensing or permit authority over gaming within
any jurisdiction and, within the State of Nevada, specifically, the Nevada
Gaming Control Act, as codified in NRS Chapter 463, and the regulations of the
Nevada Commission promulgated thereunder, and the ▇▇▇▇▇ County Code.
5
"GOVERNMENTAL AUTHORITIES" means any federal, state, local or municipal
government, court, administrative agency or commission or other governmental or
regulatory authority or agency.
"HOTEL MANAGER" has the meaning set forth in Section 2.05 hereof.
"HOTEL MANAGEMENT AGREEMENT" has the meaning set forth in Section 2.05
hereof.
"HOTEL GENERAL MANAGER" means the person appointed as the "Director of
Hotel Operations" pursuant to the Hotel Management Agreement.
"INDEMNIFIED PARTY" has the meaning set forth in Section 6.10(b)
hereof.
"INDEMNIFYING PARTY" has the meaning set forth in Section 6.10(b)
hereof.
"INDEMNITEE" has the meaning set forth in Section 10.02(a) hereof.
"INITIAL CAPITAL CONTRIBUTION" means, with respect to any Member, any
amount contributed to the capital of the Company by such Member pursuant to
Section 4.01 hereof.
"INTEREST" means, with respect to any Member at any time, the interest
of such Member in the Company at such time, including the Membership Units held
by it and the right of such Member to any and all of the benefits to which such
Member may be entitled as provided in this Agreement, together with the
obligations of such Member to comply with all of the terms and provisions of
this Agreement.
"LIQUIDATING MEMBER" means the Member designated as such by the Board
of Managers.
"LOANS" means any loans by the Company to one or more Subsidiaries to
acquire, own, hold, manage, operate, lease and sell the Property.
"LOSS" means, for each Taxable Year or other period, an amount equal to
the Company's items of taxable deduction and loss for such Taxable Year or other
period, determined in accordance with Section 703(a) of the Code (including all
items of loss or deduction required to be stated separately under Section
703(a)(1) of the Code), with the following adjustments:
(a) Any expenditures of the Company described in Section
705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B)
expenditures under Treasury Regulation Section 1.704-1(b)(2)(iv)(i),
and not otherwise taken into account in computing Loss, will be
considered an item of Loss;
(b) Loss resulting from any disposition of property of the
Company with respect to which gain or loss is recognized for federal
income tax purposes will be computed by reference to the Book Basis of
such property, notwithstanding that the adjusted tax basis of such
property may differ from its Book Basis;
6
(c) In lieu of depreciation, amortization and other cost
recovery deductions taken into account in computing taxable income or
loss, there will be taken into account depreciation for the Taxable
Year or other period;
(d) Any items of deduction and loss specially allocated
pursuant to Section 6.09 hereof shall not be considered in determining
Loss; and
(e) Any decrease to Capital Accounts as a result of any
adjustment to the Book Basis of Company assets pursuant to Treasury
Regulation Section 1.704-1(b)(2)(iv)(f) shall constitute an item of
Loss.
"MAJORITY-IN-INTEREST" means, as to the class or group of Members
referred to, required or to be determined, such of those Members of that class
or group having more than 50% of the Percentage Interests of the Members of that
class or group.
"MEMBER" means each of BH/RE and Starwood, or any other Person who is
admitted as a member of the Company in accordance with this Agreement.
"MEMBER MINIMUM GAIN" means the Company's "partner nonrecourse debt
minimum gain" as defined in Treasury Regulation Section 1.704-2(i)(2).
"MEMBER NONRECOURSE DEDUCTIONS" means "partner nonrecourse deductions"
as defined in Treasury Regulation Section 1.704-2(i)(2).
"MEMBERSHIP UNIT" has the meaning set forth in Section 2.07(a).
"MEZZANINE LOAN AGREEMENT" means the agreement pursuant to which one or
more investors (other than the Company) lends or contributes funds to MezzCo.
"MEZZCO" has the meaning set forth in Section 2.05(a) hereof.
"MINIMUM PERCENTAGE" shall have the meaning given in Section 12.02(e).
"NET CASH FLOW" means, for any period, the excess of (a) Revenues for
such period over (b) Expenses for such period.
"NET LOSS" means, for any period, the excess of items of Loss over
items of Profit, if applicable, for such period determined without regard to any
items of Profit or Loss allocated pursuant to Section 6.02.
"NET PROFIT" means, for any period, the excess of items of Profit over
items of Loss, if applicable, for such period determined without regard to any
items of Profit or Loss allocated pursuant to Section 6.02.
"NEVADA ACT" means Chapter 86 of the Nevada Revised Statutes, as
amended from time to time.
7
"NEVADA GAMING AUTHORITIES" means state, local and other governmental,
regulatory and administrative authorities, agencies, boards and officials of the
State of Nevada responsible for or involved in the regulation of gaming
activities in any jurisdiction and within the State of Nevada, specifically, the
Nevada Commission, the Nevada State Gaming Control Board, and the ▇▇▇▇▇ County
Liquor and Gaming Licensing Board.
"NON-CONTRIBUTING MEMBER" has the meaning set forth in Section 4.02(b)
hereof.
"NONRECOURSE DEDUCTION" has the meaning set forth in Treasury
Regulation Section 1.704-2.
"NOTICES" has the meaning set forth in Section 13.03 hereof.
"OPBIZ" has the meaning set forth in Section 2.05 hereof.
"PARTIALLY ADJUSTED CAPITAL ACCOUNT" means, with respect to any Member
for any Taxable Year or other period of the Company, the Capital Account balance
of such Member at the beginning of such year or period, adjusted for all
contributions and distributions during such year or period and all special
allocations pursuant to Section 6.02 with respect to such year or period.
"PERCENTAGE INTEREST" means, with respect to any Member, a percentage,
reflecting a fraction, the numerator of which is the aggregate amount of the
Capital Contributions made or deemed to have been made by such Member and the
denominator of which is the aggregate amount of the Capital Contributions made
or deemed to have been made by all of the Members as of the date of
determination (in each case subject to adjustment as provided in this
Agreement); provided, however, that, from and after the time that Starwood shall
have made the entire Starwood Initial Capital Contribution and BH/RE shall have
made the entire BH/RE Initial Capital Contribution, for purposes of calculating
such Percentage Interests, BH/RE shall be deemed to have contributed 85% and
Starwood 15% of the sum of the Starwood Initial Capital Contribution and the
BH/RE Initial Capital Contribution; and provided further, however, that if a
Member transfers all or any portion of its Interest to another Person in
accordance with the terms of this Agreement, upon such Person's being admitted
as a Member, such Person shall be deemed to have made a Capital Contribution in
an amount equal to the product of the Percentage Interest Transferred and the
aggregate amount of Capital Contributions made or deemed to have been made by
all of the Members and there shall be a corresponding decrease in the amount of
Capital Contributions deemed to have been made by the transferring Member.
"PERSON" means any individual, partnership, corporation, limited
liability company, trust or other entity.
"PREEMPTIVE CONTRIBUTION" has the meaning set forth in Section 9.07
hereof.
"PREEMPTIVE INTEREST" has the meaning set forth in Section 9.07 hereof.
"PLANET HOLLYWOOD" has the meaning set forth in Section 2.05 hereof.
8
"PROFIT" means, for each Taxable Year or other period, an amount equal
to the Company's taxable income and gain for such year or other period,
determined in accordance with Section 703(a) of the Code (including all items of
income and gain required to be stated separately under Section 703(a)(1) of the
Code), with the following adjustments:
(a) Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profit or
Loss will be added to taxable income or loss;
(b) Gain resulting from any disposition of property of the
Company with respect to which gain or loss is recognized for federal
income tax purposes will be computed by reference to the Book Basis of
such property, notwithstanding that the adjusted tax basis of such
property may differ from its Book Basis;
(c) Any items specially allocated pursuant to Section 6.09
shall not be considered in determining Profit; and
(d) Any increase to Capital Accounts as a result of any
adjustment to the Book Basis of Company assets pursuant to Treasury
Regulation Section 1.704-1(b)(2)(iv)(f) shall constitute an item of
Profit.
"PROPERTY" means the Aladdin Hotel and Casino.
"PROPOSAL LETTER" means the letter, dated October 22, 2002, from Bay
Harbour Management, LC, ▇▇▇▇▇▇ ▇▇▇▇ and Starwood to Gaming.
"PURCHASE AGREEMENT" means the Purchase Agreement executed by OpBiz for
the acquisition of the Property and related assets.
"PURCHASER" has the meaning set forth in Section 9.03(a) hereof.
"PUT NOTICE" has the meaning set forth in Section 12.02(b) hereof.
"PUT PRICE" has the meaning set forth in Section 12.02(d) hereof.
"PUT RIGHT" has the meaning set forth in Section 12.02(a) hereof.
"PUT SECURITIES" has the meaning set forth in Section 12.02(a) hereof.
"QUALIFIED PUBLIC OFFERING" means the sale of any class of equity
securities of the Company to the public pursuant to an effective registration
statement (other than a registration statement on Form S-4 or Form S-8 or any
similar or successor form) filed under the Securities Act and through which the
Company realizes gross proceeds of at least $100 million.
"REIMBURSEMENT SHORTFALL CONTRIBUTION" has the meaning set forth in
Section 7.05(a) hereof.
"RENOVATION" has the meaning set forth in Section 2.05(a) hereof.
9
"RENOVATION CAPITAL EXPENDITURE BUDGET" means the budget covering the
anticipated capital expenditures for the Renovation approved by the Board of
Managers and in effect from time to time pursuant to Section 8.06 hereof.
"REVENUES" means, for any period, the sum of the total gross revenues
received by the Company during such period, including all receipts of the
Company from (a) distributions from any Subsidiary, (b) proceeds from Capital
Contributions or the sale or other disposition of all or any portion of the
Property, or any interest therein, including an interest in any Subsidiary, (c)
rent, additional rent and percentage rent paid to the Company (including for
parking facilities), (d) concessions, (e) rent or business interruption
insurance, if any, (f) funds made available to the extent such funds are
withdrawn from the Company's reserve accounts and deposited into the Company's
operating accounts, (g) proceeds from the financing, refinancing or
securitization of any interest in the Property or any Subsidiary, (h) the
payment of principal and interest on the Loans, and (i) all other revenues and
receipts realized by the Company. Notwithstanding the foregoing, Revenues does
not include proceeds incident to the liquidation of the Company, the Break-Up
Fee or the Expense Reimbursement.
"RENOVATION" has the meaning set forth in Section 2.05 hereof.
"SALE" has the meaning set forth in Section 9.02(a) and 9.03(a) hereof.
"SECOND NOTICE" has the meaning set forth in Section 12.01(e) and
Section 12.02(e) hereof.
"SECURITIES ACT" has the meaning set forth in Section 13.01(a) hereof.
"SELLING MEMBER" has the meaning set forth in Section 9.02(a) hereof.
"SELLING MEMBERS" has the meaning set forth in Section 9.03(a) hereof.
"STANDARD OF CARE" has the meaning set forth in Section 10.01.
"STARWOOD" has the meaning set forth in the introductory paragraph
hereof.
"STARWOOD INITIAL CAPITAL CONTRIBUTION" shall have the meaning given in
Section 4.01.
"STARWOOD INTERESTS" means any Interests issued by the Company to
Starwood, whether such Interests are held by Starwood or another Starwood
Member.
"STARWOOD MEMBERS" means Starwood and its transferees (other than
BH/RE).
"SUBSIDIARY" means MezzCo, OpBiz or any other direct or indirect
subsidiary of the Company.
"SUBSIDIARY OPERATING AGREEMENT" means the organizational documents and
operating agreements governing any Subsidiary.
"TAG-ALONG MEMBER" has the meaning set forth in Section 9.02(a) hereof.
10
"TAG-ALONG RIGHT" has the meaning set forth in Section 9.02(b) hereof.
"TARGET ACCOUNT" means, with respect to any Member for any Taxable Year
of the Company or other period, the excess of (a) an amount (which may be either
a positive balance or a negative balance) equal to the hypothetical distribution
(or contribution) such Member would receive (or contribute) if all assets of the
Company, including cash, were sold for cash equal to their Book Basis (taking
into account any adjustments to Book Basis for such year), all liabilities of
the Company were then satisfied according to their terms (limited, with respect
to each nonrecourse liability, to the Book Basis of the assets securing such
liability) and all remaining proceeds from such sale were distributed pursuant
to Section 6.03 (taking account of the penultimate sentence of Section 6.04)
over (b) the amount of Company Minimum Gain and Member Minimum Gain that would
be charged back to such Member as determined pursuant to Treasury Regulation
Section 1.704-2 immediately prior to such sale.
"TAX LIABILITY DISTRIBUTION" has the meaning set forth in Section 6.04
hereof.
"TAXABLE YEAR" means the taxable year of the Company for federal income
tax purposes.
"TIME SHARE PREMISES" has the meaning set forth in the Credit
Agreement.
"TRANSFER" has the meaning set forth in Section 9.01(a) hereof.
"TRANSFER DOCUMENTS" has the meaning set forth in Section 9.03(b)
hereof.
"TREASURY REGULATION" or "REGULATION" means, with respect to any
referenced provision, such provision of the regulations of the United States
Department of the Treasury or any successor provision.
"UNANIMOUS DECISIONS" has the meaning set forth in Section 7.01(g)
hereof.
"WARRANT" means the Warrant to Purchase Membership Interests of
EquityCo, L.L.C. dated as of August 31, 2004, issued by BH/RE to The Bank of New
York, Asset Solutions Division, as the same may from time to time be transferred
or reissued in whole or in part in accordance with its terms.
"WINDING UP PROFIT AND LOSS" means all items comprising Net Profit or
Net Loss in the Winding Up Year.
"WINDING UP YEAR" means the Taxable Year of the Company in which any of
the events specified in Section 11.01 occur or any other event which causes the
Company to be subject to Section 11.02 and each succeeding Taxable Year;
provided however, if such disposition or liquidation occurs before the date on
which the federal tax return of the Company must be filed for the previous tax
year (without regard to extensions), the Winding Up Year shall, at the election
of BH/RE, also include the immediately prior Taxable Year of the Company.
[END OF APPENDIX A]
11