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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED] FOR THE TRANSITION PERIOD FROM
TO .
COMMISSION FILE NO. 1-10410
THE PROMUS COMPANIES INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE I.R.S. NO. 62-1411755
(State of Incorporation) (I.R.S. Employer Identification No.)
1023 CHERRY ROAD
MEMPHIS, TENNESSEE 38117
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (901) 762-8600
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
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Common Capital Stock, Par Value 1.50 per share* NEW YORK STOCK EXCHANGE
MIDWEST STOCK EXCHANGE
PACIFIC STOCK EXCHANGE
PHILADELPHIA STOCK EXCHANGE
10 1/2% Senior Notes due 1994 of Embassy NEW YORK STOCK EXCHANGE
Suites, Inc.**
11% Subordinated Debentures due 1999 of Embassy NEW YORK STOCK EXCHANGE
Suites, Inc.**
8 3/4% Senior Subordinated Notes due 2000 of NEW YORK STOCK EXCHANGE
Embassy Suites, Inc.**
10 7/8% Senior Subordinated Notes due 2002 of NEW YORK STOCK EXCHANGE
Embassy Suites, Inc.**
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* Common Capital Stock also has special stock purchase rights listed on each of
the same exchanges
** Securities guaranteed by Registrant
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X. No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant based upon the closing price of $47.50 for Common Stock as reported
on the New York Stock Exchange Composite Tape on March 4, 1994, is
$4,729,458,007.50.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of March 4, 1994.
Common Stock ................................................ 102,330,710 Shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the 1994 Annual Meeting of
Stockholders are incorporated by reference into Part III hereof and portions of
the Company's Annual Report to Stockholders for the fiscal year ended December
31, 1993, are incorporated by reference into Parts I and II hereof.
Portions of the definitive Proxy Statement-Prospectus dated December 13,
1989, for the Special Meeting of Stockholders of Holiday Corporation on January
17, 1990, which also constituted an Information Statement of the Company, are
incorporated by reference into Part I herein.
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DOCUMENTS INCORPORATED BY REFERENCE
Material from The Promus Companies Incorporated (referred to herein,
together with its subsidiaries where the context requires, as the "Company" or
"Promus") Annual Report to Stockholders for the fiscal year ended December 31,
1993 (the "Annual Report"), is incorporated by reference in Parts I and II
hereof where referred to herein. Material from the Company's Proxy Statement,
prepared and mailed to stockholders in accordance with Section 14 of the
Securities Exchange Act of 1934 (the "Exchange Act") and the rules and
regulations of the Securities and Exchange Commission (the "Commission")
thereunder, for the Annual Meeting of Stockholders of the Company to be held on
April 29, 1994 (the "Proxy Statement"), is incorporated by reference in Part III
hereof where referred to therein.
Material from the Holiday Corporation ("Holiday") Proxy
Statement-Prospectus dated December 13, 1989 (the "Special Proxy Statement"),
which also constituted an Information Statement of the Company, is incorporated
by reference in Part I hereof when and as referred to herein. The Special Proxy
Statement was prepared and mailed to Holiday stockholders in accordance with
Section 14 of the Exchange Act and the rules and regulations of the Commission
thereunder for the Special Meeting of Stockholders of Holiday held January 17,
1990.
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES.
The Company is one of the leading casino entertainment and hotel companies
in the United States. Its Harrah's casino entertainment division operates 12
casino properties in five states and has additional casino locations under
development. The Company's hotel division operates the Embassy Suites, Hampton
Inn and Homewood Suites hotel brands. Another hotel brand, Hampton Inn & Suites,
was introduced late in 1993.
Promus was formed in connection with the reorganization of Holiday in
February 1990, which involved the acquisition of the Holiday Inn hotel business
by Bass Public Limited Company ("Bass"), the transfer of the Harrah's casino
entertainment division, the Embassy Suites, Hampton Inn and Homewood Suites
hotel divisions and certain other assets to Promus and the distribution of
Promus' outstanding stock (the "Spin-off") to Holiday's stockholders (the
"Reorganization"). Following the Reorganization, the executive officers of
Holiday became the senior management of Promus.
Promus was incorporated on November 2, 1989, under Delaware law and
conducts its hotel and casino entertainment businesses through its wholly-owned
subsidiary, Embassy Suites, Inc. ("Embassy"), and Embassy's subsidiaries. The
principal asset of Promus is the stock of Embassy, which holds, directly or
indirectly through subsidiaries, substantially all of the assets of the
Company's businesses. The principal executive offices of Promus are located at
1023 Cherry Road, Memphis, Tennessee 38117, telephone (901) 762-8600.
Commencing with the fiscal year 1992, the Company changed to a calendar
year-end basis. For prior years, the Company's fiscal year ended on the Friday
nearest to December 31. Accordingly, fiscal years 1993, 1992 and 1991 ended on
December 31, 1993, December 31, 1992, and January 3, 1992, respectively.
Operating data for the three most recent fiscal years, together with
corporate expense, interest expense and other income, is set forth on page 11 of
Book Two of the Annual Report. Information as to operating data and identifiable
assets applicable to each of the Company's industry segments is set forth on the
inside front cover and page 22 of Book Two of the Annual Report. Information
regarding mortgages on properties of the Company is set forth on pages 16 and 17
of Book Two of the Annual Report. All of the foregoing pages of Book Two of the
Annual Report are incorporated herein by reference.
1
CASINO ENTERTAINMENT
For information on Casino Entertainment Segment operating results and a
discussion of those results, see "Management's Discussion and Analysis--Results
of Operations--Casino Entertainment" on pages 6 and 7 of Book Two of the Annual
Report and "Operating Results by Segment" on the inside front cover of Book Two
of the Annual Report. These pages of Book Two of the Annual Report are
incorporated herein by reference.
GENERAL
Harrah's, an indirect wholly-owned subsidiary of Promus, has been in
operation for more than 56 years and is unique among casino entertainment
companies in its broad geographic diversification. Harrah's or its subsidiaries
(hereinafter referred to as "Harrah's") operates casino hotels in the five
traditional U.S. gaming markets of Reno, Lake Tahoe, Las Vegas and Laughlin,
Nevada, and Atlantic City, New Jersey. It also operates riverboat casinos in
Joliet, Illinois; dockside casinos in Vicksburg and Tunica, Mississippi; and
limited stakes casinos in Central City and Black Hawk, Colorado. As of December
31, 1993, Harrah's casino properties had a total of approximately 436,400 square
feet of casino space, 12,504 slot machines, 641 table games, 5,348 hotel rooms
or suites, approximately 76,000 square feet of convention space, 40 restaurants,
four showrooms and three cabarets.
Harrah's marketing strategy is designed to appeal primarily to the broad
middle-market gaming customer segment. Harrah's strategic direction is focused
on establishing a well-defined brand identity that communicates a consistent
message.
HARRAH'S CASINO HOTEL DIVISION
ATLANTIC CITY
The Harrah's Atlantic City casino hotel ("Harrah's Atlantic City") has
approximately 64,000 square feet of casino space. During 1993, it had the
highest gaming revenues and operating profit of the Company's casinos.
Situated on 21.4 acres in the Marina area of Atlantic City, Harrah's
Atlantic City consists of dual 16-story hotel towers with 268 suites and 492
regular rooms and adjoining low rise buildings which house the casino space and
the 23,000 square foot convention center. The hotel has eight restaurants, an
850-seat showroom, a pool, health club, teen center with video games, child care
facilities and parking for 2,452 cars. The property also has a 107-slip marina.
Occupancy at the hotel has averaged over 87% for the past five years.
Harrah's Atlantic City seeks to provide a comfortable environment for
middle and upper middle income customers to enjoy gaming. Most of the casino's
customers arrive by car from within a 150-mile radius which includes
Philadelphia, New York and Northern New Jersey. Harrah's Atlantic City gears its
advertising and promotional campaigns to the "drive-in" market.
LAS VEGAS
Harrah's Las Vegas is located on approximately 16.4 acres of the Strip in
Las Vegas and consists of a 15-floor hotel tower with 488 rooms, a 23-floor
hotel tower with 491 rooms, a 32-floor hotel tower with 734 rooms, and adjacent
low-rise buildings which house the 15,000 square foot convention center and the
casino. The hotel has 1,713 total rooms including 34 suites. The size of the
property would permit the Company to expand its facilities if the Company
decided that additional capacity were economically desirable in the future.
The Harrah's Las Vegas complex has approximately 80,000 square feet of
casino space, five restaurants, the 525-seat Commander's Theatre, a health club
and a heated pool. There are 3,087
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parking spaces available, including a substantial portion in a self park garage.
Occupancy at the hotel has averaged over 91% for the past five years.
Harrah's Las Vegas caters to middle income customers. The casino has
marketing programs, such as a low-priced, high-volume buffet, which are
generally less expensive than the marketing programs at the Company's other
casino hotels. The casino's primary feeder markets are the Midwest, California
and Canada.
LAKE TAHOE
Harrah's Lake Tahoe is situated on 22.9 acres near Lake Tahoe and consists
of an 18-story tower and adjoining low-rise building which house a 16,500 square
foot convention center and approximately 63,200 square feet of casino space. The
casino hotel, with 62 suites and 472 luxury rooms, has seven restaurants, the
752-seat South Shore Showroom, a 197-seat cabaret, a health club, a retail shop,
heated pool and an arcade. The facility has customer parking for 791 cars in a
garage and 1,161 additional spaces in an adjoining lot. Occupancy at the hotel
has averaged over 80% for the past five years. A 400-suite Embassy Suites hotel,
which is owned by a franchisee and managed by Embassy, provides an additional
supply of high-quality guest rooms, conveniently located adjacent to Harrah's
Lake Tahoe.
Harrah's also operates Bill's Lake Tahoe Casino which is located on a 2.1
acre site adjacent to Harrah's Lake Tahoe casino hotel. The casino includes
approximately 18,000 square feet of casino space and two casual on-premise
restaurants, Bennigan's and McDonald's, operated by non-affiliated restaurant
companies.
Harrah's Lake Tahoe caters to middle and upper income customers and,
accordingly, the customer marketing programs, including use of the showroom, are
tailored to these segments. Bill's Casino appeals to those customers who enjoy a
more casual atmosphere. The primary feeder markets for both casinos are
California and the Pacific Northwest.
RENO
Harrah's Reno, situated on approximately 3.5 acres, consists of a casino
hotel complex with a 24-story structure, a 14,500 square foot convention center
and 64,300 square feet of casino space. The hotel, with eight suites and 558
rooms, has five restaurants, a snack bar, the 420-seat Sammy's Showroom, a pool,
a health club and an arcade. The complex can accommodate 587 cars in a valet
parking garage and another 377 cars in a self park garage. In addition to this
on-site parking, Harrah's Reno also leases approximately 646 spaces nearby that
are available for overflow valet parking. Occupancy at the hotel has averaged
approximately 88% for the past five years.
Harrah's Reno caters primarily to middle and upper income customers. The
primary feeder markets for Harrah's Reno are Northern California, the Pacific
Northwest and Canada.
LAUGHLIN
Harrah's Laughlin is located in Laughlin, Nevada on a 44.9 acre site in a
natural cove on the Colorado River and features a hotel with 1,658 total rooms
including 23 suites, five restaurants and a 90-seat cabaret, all with a
south-of-the-border theme. It is the only property in Laughlin with a developed
beachfront on the river. Harrah's Laughlin has approximately 47,000 square feet
of casino space and approximately 7,000 square feet of convention center space.
The facility has customer parking for 2,789 cars and vans, including a covered
parking garage, and a park for recreational vehicles. Occupancy at Harrah's
Laughlin has averaged over 84% for the last five years. Harrah's Laughlin caters
primarily to middle income customers and targets its advertising and promotional
campaigns to the "drive-in" market. It is located within a four-hour drive from
both the Los Angeles and Phoenix metropolitan areas where a combined total of
approximately 15 million people reside.
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CENTRAL CITY AND BLACK HAWK
In December 1993, the Company purchased an approximate 17 percent interest
in Eagle Gaming, L.P. ("Eagle"). Eagle owns casinos in Central City and Black
Hawk, Colorado, that Harrah's began managing for a fee in December 1993. Both of
these casinos are approximately 45 minutes from downtown Denver and offer
limited stakes gaming pursuant to Colorado law.
Harrah's Central City is located in four historic buildings decorated in
authentic 1800's Victorian furnishings. The casino, with approximately 11,700
square feet of casino space, 490 slot machines and 13 table games, features the
100 year old Glory Hole Bar and the Gilded Garter Cabaret, with live
entertainment, two restaurants and a gift shop.
Harrah's Black Hawk is located in the historic mining town of Black Hawk,
and has approximately 16,100 square feet of casino space, 476 slot machines, 16
table games, a restaurant and a gift shop, on three levels and is decorated in
Victorian design reminiscent of the gold rush days in the late 1800's.
Complimentary shuttle service is available between Harrah's Black Hawk and
Harrah's Central City, a distance of approximately one mile.
The primary feeder market for both casinos is the Denver/Boulder
metropolitan area.
RIVERBOAT CASINO ENTERTAINMENT DIVISION
JOLIET
Harrah's Joliet, the Company's first riverboat casino, opened in May 1993,
in downtown Joliet, Illinois, on the Des Plaines River. The modern 210-foot
mega-yacht, Harrah's Northern Star, had 20,000 square feet of casino space with
50 table games and 606 slot machines at year end. The riverboat, which has three
levels, has the capacity to accommodate more than 1,000 guests per cruise. It
offers six cruises per day. Dockside facilities include a pavilion with two
restaurants, two lounges, including one with live entertainment, and a retail
shop. Parking is available for over 1,200 cars, including a 4-story parking
garage with 750 spaces.
In January 1994, a second riverboat casino, Harrah's Southern Star, was
placed into operation in Joliet. This 210-foot long riverboat is designed in the
spirit of a traditional 1880's sternwheeler and contains approximately 13,440
square feet of casino space. The tri-level riverboat features a banquet room on
its third level, has 365 slot machines, 31 table games, and can accommodate more
than 800 guests per cruise. It offers six cruises per day with a seventh cruise
offered on Fridays, Saturdays and on holidays. With both riverboats in
operation, on a typical weekday Harrah's can serve 10,800 customers each day
based on a combined total of 12 excursions. With the opening of the Southern
Star, the casino space on the Northern Star was reconfigured to have 31 table
games and 565 slot machines.
A joint venture in which an indirect subsidiary of the Company is the 80
percent general partner, developed and owns the dockside facilities and the
Harrah's Northern Star vessel. The Harrah's Southern Star vessel is owned by the
Company and is leased to the joint venture. Both of the Joliet riverboat
businesses are owned by the joint venture and are operated by Harrah's for a
fee.
The Chicago metropolitan area is the primary feeder market for Harrah's
Joliet, with Joliet being only 35 miles from downtown Chicago.
4
VICKSBURG
In November 1993, the Company opened a dockside casino entertainment
complex in Vicksburg, Mississippi. The complex, which is located in downtown
Vicksburg on the Yazoo Diversion Canal of the Mississippi River, includes a
297-foot long stationary riverboat casino designed in the spirit of a
traditional 1800's riverboat with approximately 20,000 square feet of casino
space, 600 slot machines and 44 table games. The casino is docked next to the
Company's shoreside entertainment complex which features a food court, a
restaurant/lounge and a retail outlet. Also adjacent to the riverboat is a 117
room Harrah's hotel owned and operated by the Company and two covered parking
garages with combined parking for 800 cars. The Company owns the riverboat and
holds long-term rights to all real property pertaining to the project.
The casino's primary feeder markets are western and central Mississippi and
eastern Louisiana.
TUNICA
In November 1993, the Company opened a dockside riverboat casino in Tunica,
Mississippi, which is located approximately 25 miles south of downtown Memphis,
Tennessee. The stationary riverboat, with a classic antebellum design, has
32,000 square feet of casino space on three levels, with 1,201 slot machines, 54
table games and an entertainment lounge. Adjacent to the riverboat casino is a
30,000 square foot pavilion that houses a 255-seat buffet restaurant, employee
facilities and executive offices. On-site parking is available for 1,336 cars
with valet parking available.
The Company owns the constructed facilities and the casino business. It is
anticipated that a limited partner will have a 25% minority interest subject to
its licensing by regulatory authorities. The underlying land, including
adjoining land used for a private access road and a sewage treatment facility,
is leased with options to purchase.
The primary feeder market for Harrah's Tunica is the Memphis metropolitan
area.
UNDER DEVELOPMENT
SHREVEPORT
In March 1993, a partnership in which an indirect subsidiary of the Company
is the general partner and Louisiana developers are limited partners, entered
into agreements with the City of Shreveport, Louisiana, to develop and operate a
casino entertainment complex in that city. The project, which will be managed by
Harrah's, will include a 210-foot long riverboat with 19,600 square feet of
casino space, an anticipated 760 slot machines and 40 table games, and dockside
facilities. The project, when completed and assuming the exercise of the option
discussed in the next paragraph, is expected to involve an investment by the
Company of approximately $71 million. Construction commenced in third quarter
1993, with opening expected in April 1994.
The Company is currently a 85.72% partner in the venture which is
developing the Shreveport riverboat casino. However, an option agreement has
been entered into which could increase the Company's ownership interest in the
venture to 96%.
NORTH KANSAS CITY
The Company entered into agreements with the City of North Kansas City,
Missouri, in February 1993 to develop and operate a riverboat casino
entertainment center in that city. It is anticipated that the Company will
invest approximately $83 million to develop the project, which is currently
expected to include a 295-foot long riverboat with 31,600 square feet of casino
space with an anticipated 1,225 slot machines and 55 table games, and related
shoreside facilities. Construction commenced in
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1993 with opening expected in third quarter 1994, subject to receipt of
necessary regulatory approvals. The project will be owned and operated by the
Company.
A state-wide referendum is scheduled in Missouri on April 5, 1994, to
address the constitutional uncertainty of certain forms of gaming in that state.
Local referenda are being held at the same time in the municipalities where the
Company's planned riverboats will be located. If the results of the
state-wide referendum or either of the local referenda are unfavorable, this
could adversely affect the Company's planned riverboat operations in Missouri.
ST. LOUIS RIVERPORT
Construction is expected to commence in second quarter 1994 on a riverboat
casino project along the Missouri River in Maryland Heights, Missouri, in
northwest St. Louis County, 16 miles from downtown St. Louis. The 254-foot long
19th-century-design Missouri paddlewheeler riverboat is expected to include
approximately 30,000 square feet of casino space with 1,000 slot machines and 55
table games. Completion of the riverboat is projected for fourth quarter 1994
with total project costs estimated at $82 million. Opening of the project is
subject to various regulatory approvals. The Company will own and operate the
riverboat casino project.
See "North Kansas City" above concerning a state-wide referendum and
local referenda in Missouri to be held on April 5, 1994.
INDIAN GAMING DIVISION
SODAK GAMING, INC.
The Company owns a 13.8% ownership interest in Sodak Gaming, Inc.
("Sodak"). Under terms of an agreement with International Game Technology
("IGT") expiring in May 1998, Sodak is the exclusive distributor for IGT of its
gaming equipment in the states of North Dakota, South Dakota and Wyoming, and on
Native American Reservations within the 48 contiguous states, excluding Nevada
and New Jersey. The distribution agreement continues from year to year after May
1998, until it is cancelled.
JACKPOT JUNCTION
The Company currently provides consulting services to the Lower Sioux
Indian Nation, the owner of Jackpot Junction Casino, near Morton, Minnesota.
UNDER DEVELOPMENT
AK-CHIN
In August 1993, the Company entered into management and development
agreements with the Ak-Chin Indian Community for a planned $24.7 million casino
entertainment facility on the Community's land approximately 25 miles south of
Phoenix, Arizona. The planned approximate 72,000 square-foot facility will
feature 29,500 square feet of casino space with 475 slot machines, 40 gaming
tables, bingo, keno, a simulcast/off-track betting operation, food and beverage
outlets, meeting space and retail shops.
Construction will commence upon receipt of approval by the National Indian
Gaming Commission and the Bureau of Indian Affairs, as appropriate, of the
management, development and other agreements. The U.S. Department of the
Interior has approved the Community's Tribal/State Compact with the State of
Arizona. Opening of the project is subject to various regulatory approvals.
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The Company expects to guarantee repayment of bank financing equal to 100
percent of the project cost for the Ak-Chin facility with Sodak providing a
guarantee to Promus for one-half of this financing.
LAND-BASED CASINOS UNDER DEVELOPMENT
NEW ORLEANS
Harrah's New Orleans Investment Company (an indirect wholly-owned
subsidiary of the Company) ("Harrah's Investment") is a partner in a two-party
partnership that was selected to exclusively negotiate for a contract to own and
operate the only land-based casino entertainment facility in New Orleans.
Subsequent to such selection, Harrah's Investment and its partner added a third
partner to the project and formed a new three-party general partnership under
the name Harrah's Jazz Company. Harrah's Investment is a one-third partner in
Harrah's Jazz Company. Harrah's Jazz Company plans to construct a new facility
called "Harrah's Casino New Orleans" on the site of the present Rivergate
Convention Center in downtown New Orleans (the "Rivergate site"), featuring
approximately 200,000 square feet of casino space, approximately 6,000 slot
machines and 200 table games (the "Permanent Casino").
Pending the opening of the Permanent Casino, Harrah's Jazz Company plans to
open an approximate 76,000 square foot temporary casino in the New Orleans
Municipal Auditorium, with approximately 3,000 slot machines and 85 table games
(the "Temporary Casino"). It is anticipated that the Temporary Casino will open
in the third quarter 1994, and the Permanent Casino is expected to open
approximately one year after the opening of the Temporary Casino. (The Temporary
Casino and the Permanent Casino are sometimes referred to herein as the "New
Orleans Gaming Facilities".) The sites for the New Orleans Gaming Facilities
have been leased from the City of New Orleans. The construction and opening of
both casinos are subject to the securing of financing and receipt of necessary
regulatory and other governmental approvals, including execution of a casino
operating contract, or license, from the State of Louisiana.
The total project cost is expected to be $720 million, which is expected to
be financed through a combination of partner capital contributions, public debt
securities and bank debt. Promus' total capital contribution to this project is
expected to be approximately $23.3 million. An indirect wholly-owned subsidiary
of the Company will manage the operations for a fee. In exchange for a fee to be
paid by Harrah's Jazz Company, the Company will agree to guarantee the
completion of the New Orleans Gaming Facilities, subject to certain exceptions
and qualifications.
Harrah's Jazz Company has filed a Form S-1 Registration Statement with the
Commission to register $425 million of public debt securities to finance a
significant portion of the development of the New Orleans Gaming Facilities. The
Form S-1 Registration Statement, which includes a description of various risk
factors that could affect the development and operations of the New Orleans
Gaming Facilities, has not yet been declared effective.
Litigation was instituted in the Civil District Court for the Parish of New
Orleans in 1993 styled Henry George McCall vs. Harry McCall, Jr. et. al (the
"McCall Litigation"). The plaintiffs asserted an ownership interest in certain
land underlying the Rivergate site and sought, among other things, certain
injunctive relief with respect to the Rivergate site. On February 22, 1994, the
Civil District Court granted summary judgment against the plaintiffs regarding
all of their claims, which was a favorable result for Harrah's Jazz Company.
However, the plaintiffs may appeal such judgment. If the McCall Litigation were
ultimately decided unfavorably, it could delay or prevent the opening of the
Temporary Casino and/or the Permanent Casino or adversely affect their
operations. If the Rivergate site is, for any reason, not available for the
Permanent Casino, current law would not allow the Permanent Casino to be located
at another site. Harrah's Jazz Company will procure title insurance to cover,
subject to certain limits, the losses that may result from
7
loss of the sites for the Permanent Casino or the Temporary Casino. There can be
no assurance that the title insurance will be sufficient to cover losses
incurred by Harrah's Jazz Company as a result of an inability to use these sites
or that the title insurers will be able to fulfill their financial obligations
under the title policy.
NEW ZEALAND
The Company and its venture partner have been granted a license by the New
Zealand Casino Control Authority for a casino entertainment facility currently
under construction in Auckland, New Zealand. The Company is a 20% partner in the
joint venture developing and constructing the casino, which will be managed by
the Company for a fee. The Company anticipates making an investment of up to $15
million in the joint venture. The proposed facility will feature 60,000 square
feet of casino space, a 344-room hotel, four major restaurants and two food
buffets, three lounges, a conference center, bus terminal, and a 2,770 car
parking garage. A special attraction of the facility will be a 1,076-foot Sky
Tower. Construction of the project currently budgeted at $150 million, to be
financed through a combination of partner contributions and non-recourse debt,
began in first quarter 1994. Opening of the project, which is expected in first
quarter 1996, is subject to receipt of necessary regulatory approvals.
CASINO ENTERTAINMENT-OTHER
In addition to the above, the Company is actively pursuing numerous casino
entertainment opportunities in various jurisdictions both domestically and
abroad, including riverboat casino and Indian gaming projects in the United
States. A number of these projects, if they go forward, would require
significant capital investments by the Company.
HOTELS
For information on Hotel Segment operating results and a discussion of
those results, see "Management's Discussion and Analysis--Results of
Operations--Hotel" on pages 7 and 8 of Book Two of the Annual Report and
"Operating Results by Segment" on the inside front cover of Book Two of the
Annual Report, which pages are incorporated herein by reference.
GENERAL
The Company's hotel business consists of the Embassy Suites, Hampton Inn
and Homewood Suites hotel brands. Each brand is targeted to a specific market
segment. In December 1993, the Company announced a new brand, Hampton Inn &
Suites.
Embassy Suites hotels, of which there were 107 on December 31, 1993, appeal
to the traveler who has a need or desire for greater space and more focused
services than are available in traditional upscale hotels. Embassy Suites hotels
comprise the largest all-suite upscale hotel system in the United States by
number of suites and system revenues.
Hampton Inn hotels are moderately priced hotels designed to attract the
business and leisure traveler desiring quality accommodations at affordable
prices. Since 1984, when the brand was introduced, the system has grown to 372
hotels as of December 31, 1993.
Homewood Suites hotels, of which there were 24 on December 31, 1993,
represent the Company's entry in the extended stay market and target the
traveler who stays five or more consecutive nights, as well as the traditional
business and leisure traveler.
8
The Hampton Inn & Suites brand now under development will incorporate the
best features of the Hampton Inn and Homewood Suites brands, offering both
traditional hotel room accommodations and apartment-style suites.
As of December 31, 1993, the Company's hotel brands included 401 properties
that are licensed by the Company, 70 properties that are managed by the Company,
and 32 properties that are owned and operated by the Company. These properties
total 72,950 rooms and suites.
In October 1993, the senior management of the Company's hotel brands were
combined into a single management team responsible for all hotel brands.
The Company pursues a strategy of growing its hotel brands more rapidly by
minimizing its ownership of hotel real estate and concentrating on obtaining new
franchise or management contracts. As a part of this strategy, owned or leased
hotels are sold thereby realizing the value of the underlying assets for its
stockholders and increasing returns on investment. Following the sale, the
hotels are operated either by the Company under a management contract or by the
purchaser under license from the Company. In 1993, the Company transferred
ownership of six Embassy Suites hotels, all of which remained in the system as
franchises and five of which are being managed by Embassy Suites under
management contracts.
Each of the Company's hotel brands uses a centralized business system,
which includes access to reservation services, performance support or training,
operations management and revenue management. This network of business systems
is one of the most sophisticated systems in the hotel industry. The Embassy
Suites, Hampton Inn and Homewood Suites business systems' reservation module
receives reservation requests entered on terminals located at all of their
respective hotels and reservations centers, and major domestic airlines. The
systems immediately confirm reservations or indicate accommodations available at
alternate system hotels. Confirmations are transmitted automatically to the
hotel for which the reservation is made. The Company's computer center in
Memphis, Tennessee, houses the computers and satellite communications equipment
necessary for its reservations system, which is currently operational, and for
its new property management system, which is currently under development.
Each of the Company's hotel brands now offers an unconditional money-back
guarantee of service satisfaction. The Hampton Inn "100% Satisfaction Guarantee"
and Homewood Suites "Suite Assurance" guarantee have been in place since 1989
and the Embassy Suites "The Embassy Suites Way" was initiated in 1991 and
expanded system-wide in second quarter 1992. All of the Company's hotel brands
offer suites/rooms exclusively for non-smoking guests.
EMBASSY SUITES HOTELS
Embassy Suites hotels are all-suite hotels targeted at the traveler who has
a need or desire for greater space and more focused services than are available
in most traditional hotels. The following table sets forth information regarding
all Embassy Suites hotels, including company-owned hotels,
9
hotels operated by Embassy under management contracts or joint venture
arrangements and hotels operated by licensees:
MANAGEMENT CONTRACTS/
LICENSED OWNED JOINT VENTURES
------------------------ ------------------------ ------------------------
NUMBER NUMBER NUMBER NUMBER NUMBER NUMBER
OF OF OF OF OF OF
HOTELS SUITES HOTELS SUITES HOTELS SUITES
------------- --------- ------------- --------- ------------- ---------
Fiscal Year-End 1990........................ 42 9,824 8 1,716 50 12,788
1991 Activity:
Additions................................. 2 476 6 1,519 4 1,254
Conversions, net(a)....................... 2 677 1 215 (3) (892)
Sales/Terminations........................ (4)(b) (1,171) - - (7)(b) (1,698)
-- --------- -- --------- -- ---------
Fiscal Year-End 1991........................ 42 9,806 15 3,450 44 11,452
1992 Activity:
Additions................................. 2 685 - - - (3)
Conversions, net(a)....................... 1 221 - - (1) (221)
-- --------- -- --------- -- ---------
Fiscal Year-End 1992........................ 45 10,712 15 3,450 43 11,228
1993 Activity:
Additions................................. 5 938 - - - (3)
Conversions, net(a)....................... 3 900 (6) (1,423) 3 523
Sales/Terminations........................ (1) (196) - - - -
-- --------- -- --------- -- ---------
Fiscal/Year-End 1993........................ 52 12,354 9(c) 2,027 46(d) 11,748
-- --------- -- --------- -- ---------
-- --------- -- --------- -- ---------
- ---------------
(a) Conversions consist of transfers of properties among the licensed, managed
and owned categories.
(b) The decrease in number of hotels was due to litigation with an
owner-licensee which was settled in 1991.
(c) Includes one property in which the Company owns more than a 50% interest.
(This property is under a license agreement to a third party and is managed
by Embassy.)
(d) Includes 44 hotels that are also licensed to third parties.
On December 31, 1993, five Embassy Suites hotels were under construction,
all of which will be licensee-operated.
Embassy Suites hotels are located in 31 states and the District of Columbia
in the United States and two hotels are located in Canada. One hotel is under
construction in Thailand. Embassy Suites hotels generally have between 142 and
460 suites. Each guest suite has a separate living room and dining/work area,
with a color television, refrigerator and wet bar, as well as a traditional
bedroom where most feature a remote-controlled television. Most Embassy Suites
hotels are built around an atrium lobby. All hotels offer a free breakfast and
complimentary evening cocktails.
The following table sets forth information concerning system occupancy,
average daily rate per occupied suite and revenue per available suite for all
Embassy Suites hotels:
AVERAGE DAILY
OCCUPANCY RATE PER REVENUE PER
FISCAL YEAR RATE OCCUPIED SUITE AVAILABLE SUITE
- ---------------------------------------------------------- ------------- --------------- ---------------
1993...................................................... 73.0% $ 93.91 $ 68.58
1992...................................................... 71.7% $ 90.97 $ 65.26
1991...................................................... 69.4% $ 88.19 $ 61.19
10
HAMPTON INN HOTELS
Hampton Inn hotels are moderately priced hotels designed to attract
business and leisure travelers desiring quality accommodations at affordable
prices. The following table sets forth information regarding all Hampton Inn
hotels, including company-owned hotels, hotels operated by Hampton Inns under
management contracts or joint venture arrangements and hotels operated by
licensees:
MANAGEMENT CONTRACTS/
LICENSED OWNED JOINT VENTURES
---------------------- -------------------------- --------------------------
NUMBER NUMBER NUMBER NUMBER NUMBER NUMBER
OF OF OF OF OF OF
HOTELS ROOMS HOTELS ROOMS HOTELS ROOMS
----------- --------- ------------- ----------- ------------- -----------
Fiscal Year-End 1990................. 216 27,180 13 1,756 19 2,376
1991 Activity:
Additions....................... 45 5,362 2 293 2 242
Terminations.................... (2) (239) - - - -
----- --------- -- ----------- -- -----------
Fiscal Year-End 1991................. 259 32,303 15 2,049 21 2,618
1992 Activity:
Additions....................... 32 3,216 - (1) 2 292
Terminations.................... (2) (277) - - - -
----- --------- -- ----------- -- -----------
Fiscal Year-End 1992................. 289 35,242 15 2,048 23 2,910
1993 Activity:
Additions....................... 46 4,147 - - 1 51
Terminations.................... (2) (236) - - - -
----- --------- -- ----------- -- -----------
Fiscal Year-End 1993................. 333(a) 39,153 15 2,048 24(b) 2,961
----- --------- -- ----------- -- -----------
----- --------- -- ----------- -- -----------
- ---------------
(a) Includes one property open only on a seasonal basis.
(b) These hotels are also licensed to third parties.
On December 31, 1993, 41 Hampton Inn hotels were under construction, all of
which will be licensee-operated.
Hampton Inn hotels are currently located in 43 states in the United States,
one hotel is in Canada, one hotel is in Mexico and one hotel is under
construction in Chile. An average Hampton Inn hotel has from 100 to 150 rooms.
The Hampton Inn hotel's standardized concept provides a guest room featuring a
color television, free in-room movies, free local telephone calls and
complimentary continental breakfast. Unlike full-service hotels, Hampton Inn
hotels do not feature restaurants, lounges or large public spaces. Room rates
typically are below those of traditional midscale hotels.
Hampton Inns also has a modified lodging property for use in communities
supporting hotels of fewer than 100 rooms. The building design for these smaller
communities has the same features as a standard Hampton Inn hotel, but with
fewer rooms and a smaller lobby. There are over 60 of these modified design
hotels open and 26 currently under construction.
Hampton Inn hotels compete in the segment of the lodging market that is
directed primarily to business and leisure travelers desiring quality
accommodations at reasonable prices. The following table sets forth information
concerning system occupancy, average daily rate per occupied room and revenue
per available room for all Hampton Inn hotels:
AVERAGE DAILY
OCCUPANCY RATE PER REVENUE PER
FISCAL YEAR RATE OCCUPIED ROOM AVAILABLE ROOM
- --------------------------------------------------------- ------------- --------------- ---------------
1993................................................... 73.0% $ 50.81 $ 37.10
1992................................................... 71.2% $ 48.91 $ 34.82
1991................................................... 68.6% $ 47.22 $ 32.39
11
In December 1993, the Company announced the Hampton Inn & Suites brand
which combines standard guest rooms with a significant block of two-room suites
in a single property. Development of this new brand is targeted for
commercial and suburban markets, as well as destination and resort markets. Each
property will contain a centrally located "Lodge" which will serve as an
expanded lobby and complimentary services area and will include an exercise
room, convenience shop, meeting/hospitality room and coin-laundry. An expanded
complimentary continental breakfast-buffet will be offered. The first Hampton
Inn & Suites hotel is expected to open during 1995.
HOMEWOOD SUITES HOTELS
The Homewood Suites brand is the Company's entry in the extended stay
market and is targeted for travelers who stay five or more consecutive nights,
but is also a unique alternative to traditional business and leisure travelers.
The following table sets forth information regarding all Homewood Suites hotels,
including company-owned hotels and hotels operated by licensees:
LICENSED OWNED
-------------------------- --------------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
HOTELS SUITES HOTELS SUITES
------------- ----------- ------------- -----------
Fiscal Year-End 1990...................................................... 9 851 7 820
1991 Activity:
Additions............................................................... 5 653 1 120
-- ----------- -- -----
Fiscal Year-End 1991...................................................... 14 1,504 8 940
1992 Activity:
Additions............................................................... 2 250 - (8)
-- ----------- -- -----
Fiscal Year-End 1992...................................................... 16 1,754 8 932
1993 Activity:
Additions............................................................... - 40 - -
-- ----------- -- -----
Fiscal Year-End 1993...................................................... 16 1,794 8 932
-- ----------- -- -----
-- ----------- -- -----
On December 31, 1993, four Homewood Suites hotels were under construction,
all of which will be licensee operated.
Homewood Suites hotels are currently located in 16 states and a hotel is
under construction in one additional state. Homewood Suites hotels feature
residential-style accommodations, which include a living room area (some with
fireplaces), separate bedroom (with a king size bed) and bath, and a fully-
equipped kitchen. The hotel buildings, generally two-or three-stories, are
centered around a central community building, called the Lodge, which affords
guests a high level of social interaction. Amenities include a limited
complimentary breakfast and a complimentary evening social hour, a convenience
store, shopping service, business center, outdoor pool, exercise center and
limited meeting facilities.
The Homewood Suites brand includes a smaller, modified prototype of its
standard hotel for use in suburban areas of major cities, as well as secondary
cities with active industrial or commercial areas. The modified prototype
reflects the signature design and amenities of a traditional Homewood Suites
hotel, but with fewer suites, a smaller Lodge and other construction
modifications that will require less land. There is currently one modified
prototype hotel under construction which will be licensee operated.
12
The following table sets forth information concerning system occupancy,
average daily rate per occupied suite and revenue per available suite for all
Homewood Suites hotels:
AVERAGE DAILY
OCCUPANCY RATE PER REVENUE PER
FISCAL YEAR RATE OCCUPIED SUITE AVAILABLE SUITE
- ---------------------------------------------------------- ------------- --------------- ---------------
1993.................................................... 75.8% $ 72.47 $ 54.91
1992.................................................... 71.9% $ 69.65 $ 50.10
1991.................................................... 65.2% $ 66.84 $ 43.56
LICENSING AND MANAGEMENT CONTRACT OPERATIONS
Revenues from licensing operations for all Embassy Suites, Hampton Inn and
Homewood Suites hotels operated under license from Embassy's hotel divisions
(referred to in this section as the "Company") consist of initial license
application fees and continuing royalties. The initial license agreement
application fee for an Embassy Suites license agreement is $500 per room, with a
minimum of $100,000, and $400 per room, with a minimum of $40,000, for each
Hampton Inn, Hampton Inn & Suites and Homewood Suites license agreement. The
license agreements provide for a four percent royalty based upon gross
rooms/suites revenues and also provide for a marketing and reservation
contribution.
In screening applicants for license agreements, the Company evaluates the
character, operations ability, experience and financial responsibility of each
applicant; the Company's prior business dealings, if any, with the applicant;
market feasibility of the proposed hotel location and other factors. The license
agreement establishes general requirements for service and quality of
accommodations. The Company provides certain training for licensee management
and makes regular inspections of licensed hotels.
License agreements for new hotels generally have a 20-year term. The
Company may terminate a license agreement if the licensee fails to timely cure a
breach of the license agreement. In certain instances, a license agreement may
be terminated by the licensee, but such termination generally requires a payment
to the Company.
Revenues from management contracts consist primarily of management fees
which typically are five percent of adjusted gross revenues of the hotel. The
contract terms governing management fees can vary depending on the size and
location of the hotel and other factors relative to the property.
Under the Company's management contracts, the Company, as the manager,
operates or supervises all aspects of the hotel's operations. The hotel owner is
generally responsible for all costs, expenses and liabilities incurred in
connection with operating the hotel including the expenses and salaries of all
hotel employees. The hotel owner also enters into a license agreement with the
Company and pays the royalty and marketing and reservation contributions as
provided in the license agreement. In addition, the hotel owner is often
required to set aside a certain percentage of hotel revenues for capital
replacement. The Company's management contracts typically have a term of 20
years and most give the Company specified renewal rights. The management
contract may be terminated by either party due to an uncured default by the
other party.
See the inside front cover of Book Two of the Annual Report, which page is
incorporated herein by reference, for revenues from licensing and management
contract operations.
13
TRADEMARKS
The following trademarks used herein are owned by the Company: Promus (R);
Harrah's (R); Bill's (R); Embassy Suites (R); The Embassy Suites Way(SM);
Hampton Inn (R); Hampton Inn & Suites(SM), Homewood Suites (R); Suite
Assurance (R); Harrah's Northern Star(SM); Harrah's Southern Star(SM); A Great
Time, Every Time(SM); and Harrah's Jazz Company(SM). The names "Harrah's",
"Embassy Suites", "Hampton Inn" and "Homewood Suites" are registered as service
marks in the United States and in certain foreign countries. The Company
considers all of these marks, and the associated name recognition, to be
valuable to its business.
The Company acquired the name "Embassy" (as used in connection with hotels)
in eleven countries in western Europe in 1991. The Company paid an initial fee
to acquire the name and will pay an additional fee for each hotel opened under
the name.
OTHER
TENNESSEE RESTAURANT COMPANY
The Company owns approximately 33% of the outstanding common stock of
Tennessee Restaurant Company ("TRC"), which owns Perkins Restaurants, Inc.
("Perkins"). Perkins owns a 50% limited partner's interest in Perkins Family
Restaurants, L.P., which operates a chain of free-standing restaurants offering
a family style menu. Pursuant to an agreement with the other principal owners of
TRC, Embassy does not maintain day-to-day operational control of TRC or any of
its affiliates. TRC also owns, on a fully diluted basis, approximately 76.3% of
the outstanding stock of Friendly Ice Cream Corporation ("Friendly"). The
trademarks Perkins (R) and Friendly's (R) are owned by Perkins and Friendly,
respectively.
COMPETITION
CASINO ENTERTAINMENT
Competitors within the casino entertainment industry generally compete on
the basis of facility features such as theme/decor, location within a market,
service or promotional activity. Harrah's competes throughout the casino
entertainment industry by providing high levels of service to guests and a high
level of interaction among employees and guests. In addition to creating this
people-oriented entertainment experience, each Harrah's property identifies
additional strategies and tactics based upon the customers and competitors that
are unique to each specific operating market. Comfortable, high quality and fun
surroundings are featured at every Harrah's operation. Harrah's targets the
broad middle-market gaming customer segment and does not actively seek to
attract the very high-end segment or the very low-end segment.
Harrah's competes with numerous casinos and casino hotels of varying
quality and size in the market areas where its properties are located, with
other resort and vacation areas, and with various other casino gaming businesses
such as riverboat casinos, Indian reservation casinos and limited stakes
casinos. In 1993, the Company estimates that Harrah's accounted for
approximately 7% of the total U.S. casino gaming industry's revenues, 8% of
gaming revenue in Nevada and 8.5% of Atlantic City's gaming revenues.
The Las Vegas market has seen the introduction of three mega-properties
adding approximately 10,000 new hotel rooms and well over 350,000 square feet of
gaming space in 1993. These new mega-properties, along with other existing
properties, offer many attractions in addition to casino gaming to bring
customers to their property, such as entertainment, shopping malls and theme
parks.
The Laughlin gaming market has changed significantly over the past three
years with the virtual doubling of available rooms. Harrah's competes with nine
other casinos in Laughlin. In 1993, approximately 1,100 rooms were added to the
market, with other competitors planning possible expansions in
14
the future. Historically, the Laughlin market has been served primarily by road
(car, bus and recreational vehicle) travel from either Arizona or California
residents. Competition in Laughlin centers largely on price of rooms and food
and beverage as few properties there offer any alternative entertainment
options.
Harrah's Atlantic City competes directly with 11 other casinos in Atlantic
City, and to some extent also competes with a large Indian casino in Ledyard,
Connecticut. Poker and simulcasting were legalized in 1993 in Atlantic City
resulting in limited expansion and casino floor reconfigurations within the
market by both competitors and Harrah's. The soft regional economy continued to
make it difficult for Atlantic City operators to maintain operating margins as
competition for market revenues intensified, leading to higher promotional
activities and discounting.
The Company competes with seven major casinos in the Reno area and with
five casinos in the Lake Tahoe area. To the Company's knowledge, five major
construction projects are planned for the Reno area in the next two years. One
project is a major bowling facility being built to accommodate the American
Bowling Congress and the Women's International Bowling Congress; the second
project will add 1,720 hotel rooms and 60,000 square feet of casino space; the
third will add approximately 250 hotel rooms and 12,000 square feet of casino
space; the fourth will add 300 hotel rooms and 10,000 square feet of casino
space; and the fifth will add 300 hotel rooms and 24,000 square feet of casino
space.
Legalization of casino gaming in states beyond Nevada and New Jersey has
created the opportunity for Harrah's to expand into new casino entertainment
markets. Harrah's' first riverboat casino opened in Joliet, Illinois, in May
1993 and its second opened in January 1994. In November 1993 Harrah's opened
dockside gaming facilities in Vicksburg and Tunica, Mississippi. Harrah's also
has riverboat projects under development in North Kansas City and Maryland
Heights (St. Louis), Missouri, and Shreveport, Louisiana, and is considering
additional riverboat projects in other markets.
In Joliet, Harrah's competes with two other licensees within 50 miles of
Chicago. Each licensee is allowed a maximum of 1,200 gaming positions on no more
than two riverboats, which are required to cruise on approved routes. The most
direct competition comes from another licensee near the City of Joliet which is
operating two riverboats. A second competitor operates two riverboats in nearby
Aurora, Illinois. A third competitor has been licensed to operate in Elgin,
Illinois and has reported it expects to open in 1994. Riverboat casinos have
also been approved in neighboring Indiana. Furthermore, there continues to be
discussion of legalizing casino gaming in downtown Chicago.
Harrah's Vicksburg faces competition from two dockside casinos in the city.
Another casino is expected to open in Vicksburg in the second half of 1994, and
additional competition is anticipated from an as yet unopened Indian facility in
Philadelphia, Mississippi. In Tunica County, there are currently six dockside
casinos operating including Harrah's. Some 10 to 15 additional dockside casinos
are planned for Tunica County including at least eight which have substantial
construction in progress.
Harrah's Black Hawk and Harrah's Central City each compete with numerous
gaming establishments in Black Hawk and Central City.
Harrah's Indian Gaming Division has signed development contracts with the
Ak-Chin Indian Community outside of Phoenix, Arizona. When this casino opens, it
will compete with tribal owned casinos in Arizona, one of which already operates
in the Phoenix area. Indian tribes in Arizona that own casinos are permitted to
have a specified number of electronic gaming devices depending on the tribal
population. However, any one tribal owned location is limited to a maximum of
500 electronic gaming devices and only certain types of table games are
permitted. Tribal owned casinos in Arizona will compete for guests with Las
Vegas and Laughlin casinos.
When the New Orleans Permanent Casino is completed, it will be one of the
largest casinos in the world offering approximately 200,000 square feet of
gaming space. Due to their size and nature both the New Orleans Permanent Casino
and the Temporary Casino are expected to compete with other major
15
casino destinations such as Las Vegas, as well as with 15 planned riverboat
casinos in Louisiana, including several in the New Orleans metropolitan area,
and dockside casinos in Mississippi.
Harrah's and its partner have been selected to develop a casino in
Auckland, New Zealand, Harrah's first international casino project. For a
minimum of five years after opening, this casino will have no competition in the
City of Auckland. It will compete to some extent with existing and future
casinos in Australia.
Harrah's believes it is well positioned to take advantage of the recent
trends of proliferation of jurisdictions which allow casino gaming, positive
consumer acceptance of casino gaming as an entertainment activity and increased
visitation to casino facilities. This trend also presents competitive issues for
the Company with regard to its existing and planned properties.
HOTELS
Intense competition among many chains exists for hotel guests, as well as
in the sale of hotel franchises and in obtaining management contracts. Promus'
hotels are in vigorous competition with a wide range of facilities offering
various types of lodging options and related services to the public. The
competition includes several large and moderate size chains and independent
hotels offering all-suite, upper and lower upscale, midscale, and upper and
lower economy accommodations.
The hotel industry saw improvement in 1993. With improving occupancies and
modest growth in average daily rate, revenue per available room in the industry
grew by more than 5% in 1993 based on data provided by the major firm that
tracks nationwide hotel statistics.
In 1993 all of the Company's hotel brands outperformed their respective
competitive market segments in revenue per available room/suite (RevPAR/S).
In 1993 Embassy Suites increased its RevPAS to $68.58 giving it a $5.15
premium over upscale competition. Embassy Suites also posted occupancy and
RevPAS premiums over the upscale all-suite segment of 2.8 percentage points and
$4.83 respectively.
Hampton Inns outperformed upper economy and midscale competition in 1993.
Hampton Inns achieved RevPAR premiums over upper economy and midscale
competition of $9.37 and $3.17, respectively. One out of every ten newly
constructed hotels opened in the U.S. in 1993 was a Hampton Inn hotel.
Homewood Suites posted a $5.87 RevPAR premium over competitive lower
upscale chains. There are several competitors in this segment including one
company with considerably more hotels than Homewood Suites.
CERTAIN MATTERS RELATING TO THE MERGER AGREEMENT WITH BASS
See information on pages 53 through 56, 58 and 59 of the Special Proxy
Statement, which pages are incorporated herein by reference, regarding certain
representations and warranties, indemnification agreements, insurance agreements
and a Tax Sharing Agreement that became effective as a result of the Merger
Agreement. These matters are further described in the Merger Agreement that is
attached as Annex I to the Special Proxy Statement and the Tax Sharing Agreement
that is attached as Annex II to the Special Proxy Statement, each of which
agreements is incorporated herein by reference. (See "Legal Proceedings" below
for a description of currently pending litigation brought by Bass.)
16
GOVERNMENTAL REGULATION
GAMING-NEVADA
The ownership and operation of casino gaming facilities in Nevada are
subject to: (i) the Nevada Gaming Control Act and the regulations promulgated
thereunder (collectively, "Nevada Act"); and (ii) various local regulations.
Promus' gaming operations are subject to the licensing and regulatory control of
the Nevada Gaming Commission ("Nevada Commission"), the Nevada State Gaming
Control Board ("Nevada Board"), the Clark County Liquor and Gaming Licensing
Board ("CCLGLB"), the City of Reno ("Reno"), and the Douglas County Sheriff's
Department ("Douglas"). The Nevada Commission, the Nevada State Gaming Control
Board, the CCLGLB, Reno, and Douglas are collectively referred to as the "Nevada
Gaming Authorities."
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and
fraudulent practices; and (v) to provide a source of state and local revenues
through taxation and licensing fees. Changes in such laws, regulations and
procedures could have an adverse effect on Promus' Nevada gaming operations.
Harrah's Club, Harrah's Las Vegas, Inc. and Harrah's Laughlin, Inc., each
an indirect subsidiary of Promus (hereinafter collectively referred to as the
"Gaming Subsidiaries"), are required to be licensed by the Nevada Gaming
Authorities to enable Promus to operate casinos at Harrah's Lake Tahoe,
including Bill's Lake Tahoe Casino, Harrah's Reno, Harrah's Las Vegas, and
Harrah's Laughlin. The gaming licenses require the periodic payment of fees and
taxes and are not transferable. Promus is registered with the Nevada Commission
as a publicly traded corporation ("Registered Corporation"), and as such, it is
required periodically to submit detailed financial and operating reports to the
Nevada Commission and furnish any other information which the Nevada Commission
may require. No person may become a stockholder of, or receive any percentage of
profits from, the Gaming Subsidiaries without first obtaining licenses and
approvals from the Nevada Gaming Authorities. Promus and the Gaming Subsidiaries
have obtained from the Nevada Gaming Authorities the various registrations,
approvals, permits and licenses required in order to engage in gaming activities
in Nevada.
Promus has been found suitable to be the sole shareholder of Embassy, which
in turn is registered as a publicly-traded corporation (by virtue of being the
obligor on certain outstanding debt securities) and has been found suitable to
be the sole shareholder of Harrah's. Harrah's is registered as an intermediary
company and has been found suitable to be the sole shareholder of Harrah's Club
and Harrah's Laughlin, Inc. In addition to its gaming license, Harrah's Club is
also licensed as a manufacturer and distributor of gaming devices, is registered
as an intermediary company and has been found suitable to be the sole
shareholder of Harrah's Las Vegas, Inc.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, Promus or the Gaming
Subsidiaries in order to determine whether such individual is suitable or should
be licensed as a business associate of a gaming licensee. Officers, directors
and certain key employees of the Gaming Subsidiaries must file applications with
the Nevada Gaming Authorities and may be required to be licensed or found
suitable by the Nevada Gaming Authorities. Officers, directors and key employees
of Promus who are actively and directly involved in gaming activities of the
Gaming Subsidiaries may be required to be licensed or found suitable by the
Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application
for licensing for any cause which they deem reasonable. A finding of suitability
is comparable to licensing, and both require submission of detailed personal and
financial information followed by a thorough investigation.
17
The applicant for licensing or a finding of suitability must pay all the costs
of the investigation. Changes in licensed positions must be reported to the
Nevada Gaming Authorities and in addition to their authority to deny an
application for a finding of suitability or licensure, the Nevada Gaming
Authorities have jurisdiction to disapprove a change in a corporate position.
If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with Promus or the Gaming Subsidiaries, the companies involved
would have to sever all relationships with such person. In addition, the Nevada
Commission may require Promus or the Gaming Subsidiaries to terminate the
employment of any person who refuses to file appropriate applications. According
to the Nevada Act, determinations of suitability or of questions pertaining to
licensing are not subject to judicial review in Nevada.
Promus and the Gaming Subsidiaries are required to submit detailed
financial and operating reports to the Nevada Commission. Substantially all
material loans, leases, sales of securities and similar financing transactions
by the Gaming Subsidiaries must be reported to, or approved by, the Nevada
Commission.
If it were determined that the Nevada Act was violated by the Gaming
Subsidiaries, the gaming licenses they hold could be limited, conditioned,
suspended or revoked, subject to compliance with certain statutory and
regulatory procedures. In addition, the Gaming Subsidiaries, Promus, and the
persons involved could be subject to substantial fines for each separate
violation of the Nevada Act at the discretion of the Nevada Commission. Further,
a supervisor could be appointed by the Nevada Commission to operate Promus'
gaming properties and, under certain circumstances, earnings generated during
the supervisor's appointment (except for the reasonable rental value of the
Company's gaming properties) could be forfeited to the State of Nevada.
Limitation, conditioning or suspension of any gaming license or the appointment
of a supervisor could (and revocation of any gaming license would) materially
adversely affect Promus' gaming operations.
Any beneficial holder of Promus' voting securities, regardless of the
number of shares owned, may be required to file an application, be investigated,
and have his suitability as a beneficial holder of Promus' voting securities
determined if the Nevada Commission has reason to believe that such ownership
would otherwise be inconsistent with the declared policies of the state of
Nevada. The applicant must pay all costs of investigation incurred by the Nevada
Gaming Authorities in conducting any such investigation.
The Nevada Act requires any person who acquires more than 5% of Promus'
voting securities to report the acquisition to the Nevada Commission. The Nevada
Act requires that beneficial owners of more than 10% of Promus' voting
securities apply to the Nevada Commission for a finding of suitability within
thirty days after the Chairman of the Nevada Board mails the written notice
requiring such filing. Under certain circumstances, an "institutional investor,"
as defined in the Nevada Act, which acquires more than 10%, but not more than
15%, of Promus' voting securities may apply to the Nevada Commission for a
waiver of such finding of suitability if such institutional investor holds the
voting securities for investment purposes only. An institutional investor shall
not be deemed to hold voting securities for investment purposes unless the
voting securities were acquired and are held in the ordinary course of business
as an institutional investor and not for the purpose of causing, directly or
indirectly, the election of a majority of the members of the board of directors
of Promus, any change in Promus' corporate charter, bylaws, management, policies
or operations of Promus, or any of its gaming affiliates, or any other action
which the Nevada Commission finds to be inconsistent with holding Promus' voting
securities for investment purposes only. Activities which are not deemed to be
inconsistent with holding voting securities for investment purposes only
include: (i) voting on all matters voted on by stockholders; (ii) making
financial and other inquiries of management of the type normally made by
securities analysts for informational purposes and not to cause a change in its
management, policies or operations; and (iii) such other activities as the
Nevada Commission may determine to be consistent with such investment intent. If
the beneficial holder of voting securities who must be found suitable is a
18
corporation, partnership or trust, it must submit detailed business and
financial information including a list of beneficial owners. The applicant is
required to pay all costs of investigation.
Any person who fails or refuses to apply for a finding of suitability or a
license within thirty days after being ordered to do so by the Nevada Commission
or the Chairman of the Nevada Board may be found unsuitable. The same
restrictions apply to a record owner if the record owner, after request, fails
to identify the beneficial owner. Any stockholder found unsuitable and who
holds, directly or indirectly, any beneficial ownership of the common stock of a
Registered Corporation beyond such period of time as may be prescribed by the
Nevada Commission may be guilty of a criminal offense. Promus is subject to
disciplinary action if, after it receives notice that a person is unsuitable to
be a stockholder or to have any other relationship with Promus or the Gaming
Subsidiaries, it: (i) pays that person any dividend or interest upon voting
securities of Promus; (ii) allows that person to exercise, directly or
indirectly, any voting right conferred through securities held by that person;
(iii) pays remuneration in any form to that person for services rendered or
otherwise; or (iv) fails to pursue all lawful efforts to require such unsuitable
person to relinquish his voting securities for cash at fair market value.
Additionally, the CCLGLB requires that any person who is required to be licensed
or found suitable by the Nevada Commission must file a license application with
the CCLGLB.
The Nevada Commission may, in its discretion, require the holder of any
debt security of a Registered Corporation to file applications, be investigated
and be found suitable to own the debt security of a Registered Corporation. If
the Nevada Commission determines that a person is unsuitable to own such
security, then pursuant to the Nevada Act, the Registered Corporation can be
sanctioned, including the loss of its approvals, if without the prior approval
of the Nevada Commission, it: (i) pays to the unsuitable person any dividend,
interest, or any distribution whatsoever; (ii) recognizes any voting right by
such unsuitable person in connection with such securities; (iii) pays the
unsuitable person remuneration in any form; or (iv) makes any payment to the
unsuitable person by way of principal, redemption, conversion, exchange,
liquidation, or similar transaction.
Promus would normally be required to maintain a current stock ledger in
Nevada which may be examined by the Nevada Gaming Authorities at any time, but
it has received permission from the Nevada Gaming Commission to maintain its
stock ledgers in the State of Tennessee. If any securities are held in trust by
an agent or by a nominee, the record holder may be required to disclose the
identity of the beneficial owner to the Nevada Gaming Authorities. A failure to
make such disclosure may be grounds for finding the record holder unsuitable.
Promus also is required to render maximum assistance in determining the identity
of the beneficial owner. The Nevada Commission has the power to require the
Company's stock certificates to bear a legend indicating that the securities are
subject to the Nevada Act. However, to date, the Nevada Commission has not
imposed such a requirement on Promus.
Promus may not make a public offering of its securities without the prior
approval of the Nevada Commission if the securities or the proceeds therefrom
are intended to be used to construct, acquire or finance gaming facilities in
Nevada, or to retire or extend obligations incurred for such purposes. Such
approval, if given, does not constitute a finding, recommendation or approval by
the Nevada Commission or the Nevada Board as to the accuracy or adequacy of the
prospectus or the investment merits of the securities. Any representation to the
contrary is unlawful.
Changes in control of Promus through merger, consolidation, stock or asset
acquisitions, management or consulting agreements, or any act or conduct by a
person whereby he obtains control, may not occur without the prior approval of
the Nevada Commission. Entities seeking to acquire control of a Registered
Corporation must satisfy the Nevada Board and Nevada Commission in a variety of
stringent standards prior to assuming control of such Registered Corporation.
The Nevada Commission may also require controlling stockholders, officers,
directors and other persons having a material relationship or involvement with
the entity proposing to acquire control, to be investigated and licensed as part
of the approval process relating to the transaction.
19
The Nevada legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and corporate defense
tactics affecting Nevada gaming licensees, and Registered Corporations that are
affiliated with those operations, may be injurious to stable and productive
corporate gaming. The Nevada Commission has established a regulatory scheme to
ameliorate the potentially adverse effects of these business practices upon
Nevada's gaming industry and to further Nevada's policy to: (i) assure the
financial stability of corporate gaming operators and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and (iii) promote a neutral environmental for the orderly governance of
corporate affairs. Approvals are, in certain circumstances, required from the
Nevada Commission before the Company can make exceptional repurchases of voting
securities above the current market price thereof and before a corporate
acquisition opposed by management can be consummated. The Nevada Act also
requires prior approval of a plan of recapitalization proposed by the Company's
Board of Directors in response to a tender offer made directly to the Registered
Corporation's stockholders for the purposes of acquiring control of the
Registered Corporation.
License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the Nevada licensee's respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received; (ii) the number of
gaming devices operated; or (iii) the number of table games operated. A casino
entertainment tax is also paid by casino operations where entertainment is
furnished in connection with the selling of food or refreshments. Nevada
licensees that hold a license as an operator of a slot route, or a
manufacturer's or distributor's license, also pay certain fees and taxes to the
State of Nevada.
Any person who is licensed, required to be licensed, registered, required
to be registered, or is under common control with such persons (collectively,
"Licensees"), and who proposes to become involved in a gaming venture outside of
Nevada is required to deposit with the Nevada Board, and thereafter maintain, a
revolving fund in the amount of $10,000 to pay the expenses of investigation of
the Nevada Board of their participation in such foreign gaming. The revolving
fund is subject to increase or decrease in the discretion of the Nevada
Commission. Thereafter, Licensees are required to comply with certain reporting
requirements imposed by the Nevada Act. Licensees are also subject to
disciplinary action by the Nevada Commission if they knowingly violate any laws
of the foreign jurisdiction pertaining to the foreign gaming operation, fail to
conduct the foreign gaming operation in accordance with the standards of honesty
and integrity required of Nevada gaming operations, engage in activities that
are harmful to the State of Nevada or its ability to collect gaming taxes and
fees, or employ a person in the foreign operation who has been denied a license
or finding of suitability in Nevada on the ground of personal unsuitability.
GAMING-NEW JERSEY
As a holding company of Marina Associates ("Marina"), which holds a license
to operate Harrah's Atlantic City in New Jersey, Promus is subject to the
provisions of the New Jersey Casino Control Act (the "New Jersey Act"). The
ownership and operation of casino hotel facilities in Atlantic City, New Jersey,
are the subject of pervasive state regulation under the New Jersey Act and the
regulations adopted thereunder by the New Jersey Casino Control Commission (the
"New Jersey Commission"). The New Jersey Commission is empowered to regulate a
wide spectrum of gaming and non-gaming related activities and to approve the
form of ownership and financial structure of not only the casino licensee,
Marina, but also its intermediary and ultimate holding companies, including
Promus and Embassy. In addition to taxes imposed by the State of New Jersey on
all businesses, the New Jersey Act imposes certain fees and taxes on casino
licensees, including an 8% gross gaming revenue tax, an investment alternative
obligation of 1.25% (or an investment alternative tax of 2.5%) of gross gaming
revenue and various license fees.
20
No casino hotel facility may operate unless the appropriate licenses and
approvals are obtained from the New Jersey Commission, which has broad
discretion with regard to the issuance, renewal and revocation or suspension of
the non-transferable casino license (which licenses are issued initially for a
one-year period and renewable for a one-year period for the first two renewal
periods and two years thereafter), including the power to impose conditions
which are necessary to effectuate the purposes of the New Jersey Act. Each
applicant for a casino license must demonstrate, among other things, its
financial stability (including establishing ability to maintain adequate casino
bankroll, meet ongoing operating expenses, pay all local, state and federal
taxes, make necessary capital improvements and pay, exchange, refinance, or
extend all long and short term debt due and payable during the license term),
its financial integrity and responsibility, its reputation for good character,
honesty and integrity, the suitability of the casino and related facilities and
that it has sufficient business ability and casino experience to establish the
likelihood of creation or maintenance of a successful, efficient casino
operation. With the exception of licensed lending institutions and certain
"institutional investors" waived from the qualification requirements under the
New Jersey Act, each applicant is also required to establish the reputation of
its financial sources including, but not limited to, its financial backers,
investors, mortgagees and bond holders.
The New Jersey Act requires that all officers, directors and principal
employees of the casino licensee be licensed. In addition, each person who
directly or indirectly holds any beneficial interest or ownership of the casino
licensee and any person who in the opinion of the New Jersey Commission has the
ability to control the casino licensee must obtain qualification approval. Each
holding and intermediary company having an interest in the casino licensee must
also obtain qualification approval by meeting essentially the same standards as
that required of the casino licensee. All directors, officers and persons who
directly or indirectly hold any beneficial interest, ownership or control in any
of the intermediary or ultimate holding companies of the casino licensee may
have to seek qualification from the New Jersey Commission. Lenders,
underwriters, agents, employees and security holders of both equity and debt of
the intermediary and holding companies of the casino licensee and any other
person whom the New Jersey Commission deems appropriate may also have to seek
qualification from the New Jersey Commission. Since Promus and Embassy are
publicly-traded holding companies (as defined by the New Jersey Act), however,
the persons described in the two previous sentences may be waived from
compliance with the qualification process if the New Jersey Commission, with the
concurrence of the Director of the New Jersey Division of Gaming Enforcement,
determines that they are not significantly involved in the activities of the
Marina and, in the case of security holders, that they do not have the ability
to control Promus (or its subsidiaries) or elect one or more of its directors.
Any person holding 5% or more of a security in an intermediary or ultimate
holding company, or having the ability to elect one or more of the directors of
a company, is presumed to have the ability to control the company and thus may
be required to seek qualification unless the presumption is rebutted.
Notwithstanding this presumption of control, the New Jersey Act permits the
waiver of the qualification requirements for passive "institutional investors"
(as defined by the New Jersey Act), when such institutional holdings are for
investment purposes only and where such securities represent less than 10% of
the equity securities of a casino licensee's holding or intermediary companies
or debt securities of a casino licensee's holding or intermediary companies not
exceeding 20% of a company's total outstanding debt or 50% of an individual debt
issue. The waiver, which is subject to certain specified conditions including,
upon request, the filing of a certified statement that the investor has no
intention of influencing the affairs of the issuer, may be granted to an
"institutional investor" holding a higher percentage of such securities upon a
showing of good cause. If an "institutional investor" is granted a waiver of the
qualification requirements and subsequently changes its investment intent, the
New Jersey Act provides that no action other than divestiture may be taken by
the investor without compliance with the Interim Casino Authorization Act (the
"Interim Act") described below.
In the event a security holder of either equity or debt is required to
qualify under the New Jersey Act, the provisions of the Interim Act may be
triggered requiring, among other things, either: (i) the filing of a completed
application for qualification within thirty days after being ordered to do so,
which
21
application must include an approved Trust Agreement pursuant to which all
securities of Promus (or its respective subsidiaries) held by the security
holder must be placed in trust with a trustee who has been approved by the New
Jersey Commission; or (ii) the divestiture of all securities of Promus (or its
respective subsidiaries) within 120 days after the New Jersey Commission
determines that qualification is required or declines to waive qualification,
provided the security holder files a notice of intent to divest within 30 days
after the determination of qualification. If a security holder files an
application under the Interim Act, during the period the Trust Agreement remains
in place, such holder may, through the approved trustee, continue to exercise
all rights incident to the ownership of the securities with the exception that:
(i) the security holder may only receive a return on its investment in an amount
not to exceed the actual cost of the investment (as defined by the New Jersey
Act) until the New Jersey Commission finds such holder qualified; and (ii) in
the event the New Jersey Commission finds there is reasonable cause to believe
that the security holder may be found unqualified, the Trust Agreement will
become fully operative vesting the trustee with all rights incident to ownership
of the securities pending a determination on such holder's qualifications;
provided, however, that during the period the securities remain in trust, the
security holder may petition the New Jersey Commission to: (a) direct the
trustee to dispose of the trust property; and (b) direct the trustee to
distribute proceeds thereof to the security holder in an amount not to exceed
the lower of the actual cost of the investment or the value of the securities on
the date the Trust became operative. If the security holder is ultimately not
found to be qualified, the trustee is required to sell the securities and to
distribute the proceeds of the sale to the applicant in an amount not exceeding
the lower of the actual cost of the investment or the value of the securities on
the date the Trust became operative (if not already sold and distributed at the
direction of the security holder) and to distribute the remaining proceeds to
the Casino Revenue Fund. If the security holder is found qualified, the Trust
Agreement will be terminated.
The New Jersey Commission can find that any holder of the equity or debt
securities issued by Promus or its subsidiaries is not qualified to own such
securities. If a security holder of Promus or its subsidiaries is found
disqualified, the New Jersey Act provides that it is unlawful for the security
holder to: (i) receive any dividends or interest payment on such securities;
(ii) exercise, directly or indirectly, any rights conferred by the securities;
or (iii) receive any remuneration from the company in which the security holder
holds an interest. To implement these provisions, the New Jersey Act requires,
among other things, casino licensees and their holding companies to adopt
provisions in their certificate of incorporation providing for certain remedial
action in the event that a holder of any security of such company is found
disqualified. The required certificate of incorporation provisions vary
depending on whether such company is a publicly or privately traded company as
defined by the New Jersey Act. The Certificates of Incorporation of Promus and
Embassy (both "publicly-traded companies" as defined by the New Jersey Act)
contain provisions which provide Promus and Embassy, respectively, with the
right to redeem the securities of disqualified holders, if necessary, to prevent
the loss or to secure the reinstatement of any license or franchise held by
Promus or Embassy or their subsidiaries. The Certificates of Incorporation of
Promus and Embassy also contain provisions defining the redemption price and the
rights of a disqualified security holder. In the event a security holder is
disqualified, the New Jersey Commission is empowered to propose any necessary
action to protect the public interest, including the suspension or revocation of
the casino license of Marina. The New Jersey Act provides, however, that the New
Jersey Commission shall not take action against a casino licensee or its parent
companies with respect to the continued ownership of the security interest by
the disqualified holder, if the New Jersey Commission finds that: (i) such
company has a certificate of incorporation provision providing for the
disposition of such securities as discussed above; (ii) such company has made a
good faith effort to comply with any order requiring the divestiture of the
security interest held by the disqualified holder; and (iii) the disqualified
holder does not have the ability to control the casino licensee or its parent
companies or to elect one or more members to the board of directors of such
company. The Certificate of Incorporation of Embassy further provides that debt
securities issued by Embassy are held subject to the condition that if a holder
is found unsuitable by any governmental agency the corporation shall have the
right to redeem the securities.
22
If, at any time, it is determined that Marina or its holding companies have
violated the New Jersey Act or regulations promulgated thereunder or that such
companies cannot meet the qualification requirements of the New Jersey Act,
Marina could be subject to fines or its license could be suspended or revoked.
If Marina's license is suspended or revoked, the New Jersey Commission could
appoint a Conservator to operate and dispose of the casino hotel facilities of
Marina. A Conservator would be vested with title to the assets of Marina,
subject to valid liens, claims and encumbrances. The Conservator would be
required to act under the general supervision of the New Jersey Commission and
would be charged with the duty of conserving, preserving and, if permitted,
continuing the operation of the casino hotel. During the period of any such
conservatorship, the Conservator may not make any distributions of net earnings
without the prior approval of the New Jersey Commission. The New Jersey
Commission may direct that all or part of such net earnings be paid to the
Casino Revenue Fund, provided, however, that a suspended or former licensee is
entitled to a fair rate of return.
The New Jersey Commission granted Marina a plenary casino license in
connection with Harrah's Atlantic City in November 1981, and it has been renewed
since then. In May 1992, the New Jersey Commission renewed the license for a
two-year period and also found Promus, Embassy, Harrah's and Casino Holding
Company to be qualified as holding companies of Marina. A license renewal
hearing is scheduled for April 1994.
GAMING-ILLINOIS
The ownership and operation of a gaming riverboat in Illinois is subject to
extensive regulation under Illinois gaming laws and regulations. A five-member
Illinois Gaming Board is charged with such regulatory authority, including the
issuance of riverboat gaming licenses not to exceed ten in number. The granting
of a gaming license involves a preliminary approval procedure in which the
Illinois Gaming Board issues a preliminary finding of suitability to a license
applicant and effectively reserves a gaming license for such applicant. The
Board has issued all ten licenses or preliminary findings of suitability. The
Company's Joliet venture was issued a preliminary finding of suitability in 1992
and a license in 1993.
To obtain a gaming license (and a preliminary finding of suitability),
applicants must submit comprehensive application forms, be fingerprinted and
undergo an extensive background investigation by the Illinois Gaming Board.
Each license granted entitles a licensee to own and operate up to two
riverboats (with a combined maximum of 1,200 gaming positions) and equipment
thereon from a specific location. The duration of the license initially runs for
a period of three years (with a fee of $25,000 for the first year and $5,000 for
the following two years). Thereafter, the license is subject to renewal on an
annual basis upon payments of a fee of $5,000 and a determination by the
Illinois Gaming Board that the licensee continues to be eligible for an owner's
license pursuant to the Illinois legislation and the Illinois Gaming Board's
rules. A licensed owner is required to apply to the Illinois Gaming Board for,
and, if approved therefor, will receive, all licenses from the Illinois Gaming
Board necessary for the operation of a riverboat including a liquor license and
a license to prepare and serve food. All use, occupancy and excise taxes which
apply to food and beverages and all taxes imposed on the sale or use of tangible
property apply to sales aboard riverboats.
An applicant is ineligible to receive an owner's license if the applicant,
any of its officers, directors or managerial employees or any person who
participates in the management or operation of gaming operations: (i) has been
convicted of a felony; (ii) has been convicted of any violation under Article 28
of the Illinois Criminal Code or any similar statutes in any other jurisdiction;
(iii) has submitted an application which contains false information; or (iv) is
a member of the Illinois Gaming Board. In addition, an applicant is ineligible
to receive an owners' license if the applicant owns more than a 10% ownership
interest in an entity holding another Illinois owner's license, or if a license
of the applicant
23
issued under the Illinois legislation or a license to own or operate gaming
facilities in any other jurisdiction has been revoked.
In determining whether to grant a license, the Illinois Gaming Board
considers: (i) the character, reputation, experience and financial integrity of
the applicants; (ii) the type of facilities (including riverboat and docking
facilities) proposed by the applicant; (iii) the highest prospective total
revenue to be derived by the state from the conduct of riverboat gaming; (iv)
affirmative action plans of the applicant, including minority training and
employment; and (v) the financial ability of the applicant to purchase and
maintain adequate liability and casualty insurance. Municipal (or county, if an
operation is located outside of a municipality) approval of a proposed applicant
is required, and all documents, resolutions, and letters of support must be
submitted with the initial application.
A holder of a license shall be subject to the imposition of fines,
suspension or revocation of its license for any act that is injurious to the
public health, safety, morals, good order, and general welfare of the people of
the state of Illinois, or that would discredit or tend to discredit the Illinois
gaming industry or the state of Illinois, including without limitation: (i)
failing to comply with or make provision for compliance with the legislation,
the rules promulgated thereunder or any federal, state or local law or
regulation; (ii) failing to comply with any rule, order or ruling of the
Illinois Gaming Board or its agents pertaining to gaming; (iii) receiving goods
or services from a person or business entity who does not hold a supplier's
license but who is required to hold such license by the rules; (iv) being
suspended or ruled ineligible or having a license revoked or suspended in any
state or gaming jurisdiction; (v) associating with, either socially or in
business affairs, or employing persons of notorious or unsavory reputation or
who have extensive police records, or who have failed to cooperate with any
official constituted investigatory or administrative body and would adversely
affect public confidence and trust in gaming; and (vi) employing in any Illinois
riverboat's gaming operation any person known to have been found guilty of
cheating or using any improper device in connection with any game.
An ownership interest in a license or in a business entity, other than a
publicly held business entity which holds an owner's license, may not be
transferred without leave of the Illinois Gaming Board. In addition, an
ownership interest in a license or in a business entity, other than a publicly
held business entity, which holds either directly or indirectly an owner's
license, may not be pledged as collateral to other than a regulated bank or
saving and loan association without leave of the Illinois Gaming Board.
A person employed at a riverboat gaming operation must hold an occupational
license which permits the holder to perform only activities included within such
holder's level of occupation license or any lower level of occupation license.
In addition, the Illinois Gaming Board will issue suppliers licenses which
authorize the supplier licensee to sell or lease gaming equipment and supplies
to any licensee involved in the ownership and management of gaming operations.
Riverboat cruises are limited to a duration of four hours, and no gaming
may be conducted while the boat is docked, with the exceptions: (i) of 30-minute
time periods at the beginning of and at the end of a cruise while the passengers
are embarking and debarking (total gaming time is limited to four hours,
however, including the pre-and post-docking periods); and (ii) when weather or
mechanical problems prevent the boat from cruising. Minimum and maximum wagers
on games are set by the licensee and wagering may not be conducted with money or
other negotiable currency. No person under the age of 21 is permitted to wager,
and wagers may only be taken from a person present on a licensed riverboat. With
respect to electronic gaming devices, the payout percentage may not be less than
80% nor more than 100%.
The legislation imposes a 20% wagering tax on adjusted receipts from
gambling games. The tax imposed is to be paid by the licensed owner to the
Illinois Gaming Board on the day after the day when the wagers were made. Of the
proceeds of that tax, 25% goes to the local government where the home dock is
located, a small portion goes to the Illinois Gaming Board for administration
and enforcement expenses, and the remainder goes to the state education
assistance fund.
24
The legislation also requires that licensees pay a $2.00 admission tax for
each person admitted to a gaming cruise. Of this admission tax, the host
municipality or county receives $1.00. The licensed owner is required to
maintain public books and records clearly showing amounts received from
admission fees, the total amount of gross receipts and the total amount of
adjusted gross receipts.
GAMING-MISSISSIPPI
The ownership and operation of a gaming business in the State of
Mississippi is subject to extensive laws and regulations, including the
Mississippi Gaming Control Act (the "Mississippi Act") and the regulations (the
"Mississippi Regulations") promulgated thereunder by the Mississippi Gaming
Commission (the "Mississippi Commission"), which is empowered to oversee and
enforce the Mississippi Act. Gaming in Mississippi can be legally conducted only
on vessels of a certain minimum size in navigable waters within any county
bordering the Mississippi River or in waters of the State of Mississippi which
lie adjacent and to the south (principally in the Gulf of Mexico) of the
Counties of Hancock, Harrison and Jackson, provided that the county in question
has not voted by referendum not to permit gaming in that county. The voters in
Jackson County, the southeasternmost county of Mississippi, have voted not to
permit gaming in that county. However, gaming could be approved in Jackson
County in any subsequently held referendum. The underlying policy of the
Mississippi Act is to ensure that gaming operations in Mississippi are
conducted: (i) honestly and competitively; (ii) free of criminal and corruptive
influences; and (iii) in a manner which protects the rights of the creditors of
gaming operations.
The Mississippi Act requires that a person (including any corporation or
other entity) be licensed to conduct gaming activities in the State of
Mississippi. A license will be issued only for a specified location which has
been approved in advance as a gaming site by the Mississippi Commission. In
addition, a parent company of a company holding a license must register under
the Mississippi Act.
The Mississippi Act also requires that each officer or director of a gaming
licensee, or other person who exercises a material degree of control over the
licensee, either directly or indirectly, be found suitable by the Mississippi
Commission. In addition, any employee of a licensee who is directly involved in
gaming must obtain a work permit from the Mississippi Commission. The
Mississippi Commission will not issue a license or make a finding of suitability
unless it is satisfied, after an investigation paid for by the applicant, that
the persons associated with the gaming licensee or applicant for a license are
of good character, honesty and integrity, with no relevant or material criminal
record. In addition, the Mississippi Commission will not issue a license unless
it is satisfied that the licensee is adequately financed or has a reasonable
plan to finance its proposed operations from acceptable sources, and that
persons associated with the applicant have sufficient business probity,
competence and experience to engage in the proposed gaming enterprise. The
Mississippi Commission may refuse to issue a work permit to a gaming employee:
(i) if the employee has committed larceny, embezzlement or any crime of moral
turpitude, or has knowingly violated the Mississippi Act or Mississippi
Regulations; or (ii) for any other reasonable cause.
There can be no assurance that such persons will be found suitable by the
Mississippi Commission. An application for licensing, finding of suitability or
registration may be denied for any cause deemed reasonable by the issuing
agency. Changes in licensed positions must be reported to the issuing agency. In
addition to its authority to deny an application for a license, finding of
suitability or registration, the Mississippi Commission has jurisdiction to
disapprove a change in corporate position. If the Mississippi Commission were to
find a director, officer or key employee unsuitable for licensing or unsuitable
to continue having a relationship with the licensee, such entity would be
required to suspend, dismiss and sever all relationships with such person. The
licensee would have similar obligations with regard to any person who refuses to
file appropriate applications. Each gaming employee must obtain a work permit
which may be revoked upon the occurrence of certain specified events.
25
Any individual who is found to have a material relationship to, or material
involvement with, Promus may be required to submit to an investigation in order
to be found suitable or be licensed as a business associate of any subsidiary
holding a gaming license. Key employees, controlling persons or others who
exercise significant influence upon the management or affairs of Promus may be
deemed to have such a relationship or involvement.
The Mississippi Commission has the power to deny, limit, condition, revoke
and suspend any license, finding of suitability or registration, or to fine any
person, as it deems reasonable and in the public interest, subject to an
opportunity for a hearing. The Mississippi Commission may fine any licensee or
person who was found suitable up to $100,000 for each violation of the
Mississippi Act or the Mississippi Regulations which is the subject of an
initial complaint, and up to $250,000 for each such violation which is the
subject of any subsequent complaint. The Mississippi Act provides for judicial
review of any final decision of the Mississippi Commission by petition to a
Mississippi Circuit Court, but the filing of such petition does not necessarily
stay any action taken by the Mississippi Commission pending a decision by the
Circuit Court.
Each gaming licensee must pay a license fee to the State of Mississippi
based upon "gaming receipts" (generally defined as gross receipts less payouts
to customers as winnings). The license fee equals four percent of gaming
receipts of $50,000 or less per month, six percent of gaming receipts over
$50,000 and up to $134,000 per month, and 8 percent of gaming receipts over
$134,000. The foregoing license fees are allowed as a credit against Mississippi
State income tax liability for the year paid. A gaming operator may also be
subject to local, municipal or county taxes equal to one-tenth of the license
fee due to the State of Mississippi, as set forth above (.4 percent, .6 percent
and .8 percent, respectively). An additional license fee, based upon the number
of games conducted or planned to be conducted on the gaming premises, is payable
to the State of Mississippi annually in advance. Based upon Promus' activities
in Tunica and Vicksburg, this additional license fee is expected to be
approximately $81,200, plus $100 for each game in excess of 35 games at each
site. In addition to the state and local fees imposed under the Mississippi Act,
taxes and fees also may be assessed by municipalities and counties in amounts
varying from jurisdiction to jurisdiction. Warren County and the City of
Vicksburg have the authority to impose taxes on gaming receipts in an amount up
to 3.2 percent in the aggregate.
The Company also is subject to certain audit and record-keeping
requirements, primarily intended to ensure compliance with the Mississippi Act,
including compliance with the provisions relating to the payment of license
fees.
Under the Mississippi Regulations, a person is prohibited from acquiring
control of Promus without prior approval of the Mississippi Commission. Promus
also is prohibited from consummating a plan of recapitalization proposed by
management in opposition to an attempted acquisition of control of Promus and
which involves the issuance of a significant dividend to Common Stock holders,
where such dividend is financed by borrowings from financial institutions or the
issuance of debt securities. In addition, Promus is prohibited from repurchasing
any of its voting securities under circumstances (subject to certain exemptions)
where the repurchase involves more than one percent of Promus' outstanding
Common Stock at a price in excess of 110 percent of the then-current market
value of Promus' Common Stock from a person who owns and has for less than one
year owned more than three percent of Promus' outstanding Common Stock, unless
the repurchase has been approved by a majority of Promus' shareholders voting on
the issue (excluding the person from whom the repurchase is being made) or the
offer is made to all other shareholders of Promus.
Under the Mississippi Regulations, a gaming license may not be held by a
publicly held corporation, although an affiliated corporation, such as Promus,
may be publicly held so long as Promus registers with and gets the approval of
the Mississippi Commission. Promus must obtain prior approval from the
Mississippi Commission for any subsequent public offering of the securities of
Promus if any part of the proceeds from that offering are intended to be used to
pay for or reduce debt used to pay for the construction, acquisition or
operation of any gaming facility in Mississippi. In addition, in order to
register with the Mississippi Commission as a publicly held holding corporation,
Promus must provide further documentation which is satisfactory to the
Mississippi Commission, which includes all documents filed with the Securities
and Exchange Commission.
26
Any person who, directly or indirectly, or in association with others,
acquires beneficial ownership of more than 5% of the Common Stock of Promus must
notify the Mississippi Commission of this acquisition. Regardless of the amount
of securities owned, any person who has any beneficial ownership in the Common
Stock of Promus may be required to be found suitable if the Mississippi
Commission has reason to believe that such ownership would be inconsistent with
the declared policies of the State of Mississippi. Any person who is required to
be found suitable must apply for a finding of suitability from the Mississippi
Commission within 30 days after being requested to do so, and must deposit with
the State Tax Commission a sum of money which is adequate to pay the anticipated
investigatory costs associated with such finding. Any person who is found not to
be suitable by the Mississippi Commission shall not be permitted to have any
direct or indirect ownership in Promus' Common Stock. Any person who is required
to apply for a finding of suitability and fails to do so, or who fails to
dispose of his or her interest in Promus' Common Stock if found unsuitable, is
guilty of a misdemeanor. If a finding of suitability with respect to any person
is not applied for where required, or if it is denied or revoked by the
Mississippi Commission, Promus is not permitted to pay such person for services
rendered, or to employ or enter into any contract with such person.
Promus will be required to maintain current stock ledgers in the State of
Mississippi which may be examined by a representative of the Mississippi
Commission at any time. If any securities are held in trust by an agent or by a
nominee, the record holder may be required to disclose the identity of the
beneficial owner to the Mississippi Commission. A failure to make such
disclosure may be grounds for finding the record holder unsuitable. Promus also
is required to render maximum assistance in determining the identity of the
beneficial owner.
Because Promus will be licensed to conduct gaming in the State of
Mississippi, neither Promus nor any subsidiary may engage in gaming activities
in Mississippi while also conducting gaming operations outside of Mississippi
without approval of the Mississippi Commission. The Mississippi Commission has
approved the conduct of gaming in all jurisdictions in which Promus had ongoing
operations or approved projects as of November 1993, but will need to approve
any future gaming operations outside of Mississippi. There can be no assurance
that such approvals can be obtained. The failure to obtain such approvals could
have a materially adverse effect on Promus.
GAMING-COLORADO
The ownership and operation of limited gaming facilities in the State of
Colorado are subject to extensive state and local regulation. In Colorado, the
two casinos managed and partially owned by subsidiaries of Promus (Harrah's
Central City and Harrah's Black Hawk) are subject to licensing by and regulatory
control of both the State of Colorado Limited Gaming Control Commission and the
State of Colorado Division of Gaming (hereinafter collectively referred to as
the "Colorado Gaming Authorities"). As Promus is a public company, the casinos
must comply with specific rules relating to public companies involved in limited
gaming. The Colorado Gaming Authorities examine and decide upon the suitability
of persons owning any interest in a limited gaming establishment, as well as
those persons associated with such owners. Persons employed in connection with
gaming operations must also be licensed as either "key employees" or "support
employees." The State of Colorado Limited Gaming Control Commission also has the
power to levy substantial taxes with respect to gaming revenues, and with
respect to gaming devices. The licenses held by Harrah's Central City and
Harrah's Black Hawk are not transferable, and must be renewed on an annual
basis.
A Colorado constitutional amendment passed in November 1990, legalized
limited stakes gaming ($5.00 or less per bet) in three Colorado cities: Central
City, Black Hawk, and Cripple Creek. The constitutional amendment restricts
limited gaming to the commercially zoned districts of each respective city. At
each limited gaming location, no more than thirty-five percent (35%) of the
total square footage of a building, and no more than fifty percent (50%) of the
square footage of any single floor may be used for limited gaming purposes. The
Colorado Gaming Authorities have broad power to insure compliance with the
statute and regulations currently in force in the State of Colorado. The
Colorado
27
Gaming Authorities may inspect, without notice, any premises where gaming is
being conducted, and may seize, impound, or remove any gaming device. The
statute and regulations require licensees to maintain certain minimum operating,
security and payoff procedures, as well as books and records that are audited on
an annual basis.
There are specific reporting procedures and approval requirements for
transfers of interests and other involvement with publicly traded corporations
directly or indirectly involved in limited gaming in the State of Colorado. In
addition to the reporting requirements, certain provisions must be included in
the Articles of Organization or other similar chartering documents of any entity
licensed as either an operator or retailer in the State of Colorado. The State
of Colorado Limited Gaming Control Commission may require that any individual
who has a material relationship to or a material involvement with a licensee, or
otherwise, must apply for a finding of suitability by the Commission, or apply
for a key employee license. If an individual or person has been deemed to be
unsuitable by the State of Colorado Limited Gaming Control Commission, the
Commission may require a licensee to pursue all lawful efforts to require that
the unsuitable person relinquish all voting securities in addition to certain
other powers granted to the Commission.
The Colorado Gaming Authorities have full and complete access to any
records of a licensee, as well as individuals associated with licensees,
investigate the background and conduct of licensees and their employees, and are
empowered to bring disciplinary actions against licensees. The Colorado Gaming
Authorities have the power to investigate the background of creditors of
licensees as well. No interest in a licensee, once approved by the Commission,
may be alienated in any fashion without the prior approval of the State of
Colorado Limited Gaming Control Commission. Any person or entity may not have an
interest in more than three retail gaming licenses.
All persons, places or practices connected with limited gaming must be
"suitable" as determined by the Colorado Gaming Authorities. In this regard, the
burden is always on any applicant to prove by clear and convincing evidence that
the applicant is qualified for the licenses applied for. Thus, licensees must be
able to demonstrate that any equity holder, or any person providing financing in
connection with the establishment or operation of a licensee, must be: (i) of
good moral character; (ii) a person whose prior activities, criminal record,
reputation, habits and associations do not pose a threat to the public interests
of the State of Colorado; (iii) a person who has not served a sentence upon a
conviction of a felony or been under the supervision of a probation department
within ten years prior to the date of application; (iv) and, a person who has
not seriously or repeatedly violated the provisions of the "Limited Gaming Act
of 1991" in Colorado. At the request of the Colorado Gaming Authorities, any
person connected with limited gaming must disclose personal background and
financial information, including criminal records, and any and all other
information requested by the Colorado Gaming Authorities.
The constitutional amendment gave the State of Colorado Limited Gaming
Control Commission the power to tax up to forty percent (40%) of the adjusted
gross proceeds received by a licensee from limited gaming. Effective October 1,
1993, the tax schedule for the gaming year (October 1, 1993 to September 30,
1994) is as follows:
ADJUSTED GROSS PROCEEDS PERCENTAGE TAX
- ----------------------------------------------------------------------------- -------------------
Up to $1,000,000............................................................. 2%
$1,000,001 to $2,000,000..................................................... 8%
$2,000,001 to $3,000,000..................................................... 15%
$3,000,001 and over.......................................................... 18%
For the same gaming year, the State gaming device fee is One Hundred Dollars
($100) per gaming device for the year. In addition, local device fees are
assessed by both Central City and Black Hawk. In Central City the current device
fee is Five Hundred Eighty-Two Dollars and Fifty Cents ($582.50) per device per
six months. In Black Hawk Two Hundred Dollars ($200) per device per quarter is
the current device fee.
Changes in this regulatory scheme could adversely affect the operation of
the Colorado properties.
28
GAMING-OTHER
The Company has been granted a gaming license by the State of Louisiana in
connection with its riverboat casino project which is under development in
Shreveport. The Company will be subject to the regulations of such gaming
authority which will be extensive.
The Company has applied for a gaming license in Missouri and is negotiating
a gaming operating contract in New Orleans, Louisiana in connection with its
projects that are currently under development. In the event the Company's
applications are approved, the Company will be subject to extensive regulations
regarding these projects.
The Company and its joint venture partner have been granted a gaming
license in connection with the development of a casino entertainment facility in
Auckland, New Zealand and will also be subject to extensive regulations in that
jurisdiction.
HOTEL LICENSING
A number of states regulate the licensing of hotels and restaurants and the
granting of liquor licenses by requiring registration, disclosure statements and
compliance with specific standards of conduct. In addition, various federal and
state regulations mandate certain disclosures and other practices with respect
to the sales of license agreements and the licensor/licensee relationship. The
Company's operations have not been materially affected by such legislation and
regulations, but the Company cannot predict the effect of future legislation.
FUEL SHORTAGES AND COSTS; WEATHER
Although gasoline supplies are now in relative abundance, gasoline
shortages and price increases may have adverse effects on the hotel business of
Promus. The business of Harrah's in Nevada and Atlantic City is also sensitive
to the cost and availability of gasoline. Access to the Lake Tahoe and Reno
areas of northern Nevada and Atlantic City, New Jersey, may be restricted from
time to time during the winter months by adverse weather conditions which can
cause road closures. Such closures have at times adversely affected operating
results at Harrah's Lake Tahoe, Harrah's Reno, Bill's Lake Tahoe Casino and
Harrah's Atlantic City.
EMPLOYEE RELATIONS
Promus, through its subsidiaries, has approximately 25,300 employees. Labor
relations with employees are good.
Promus' subsidiaries have collective bargaining agreements covering
approximately 3,000 employees. These agreements relate to certain casino, hotel
and restaurant employees at Harrah's Atlantic City and Harrah's Las Vegas.
Approximately 2,500 of these 3,000 employees are covered by collective
bargaining agreements expiring in 1994. Negotiations for successor agreements
will begin later this year prior to the expiration of the current contracts.
ITEM 3. LEGAL PROCEEDINGS.
Bass Public Limited Company, Bass International Holdings N.V., Bass
(U.S.A.) Incorporated, Holiday Corporation and Holiday Inns, Inc. (collectively
"Bass") v. The Promus Companies Incorporated ("Promus"). A complaint was filed
in the United States District Court for the Southern District of New York
against Promus on February 6, 1992, under Civil Action No. 92 Civ. 0969(SWK).
The complaint alleges violation of Rule 10b-5 of the federal securities laws,
intentional and negligent misrepresentation, breach of express warranties,
breach of contract, and express and equitable indemnification. The complaint
generally alleges breaches of representations and warranties under the Merger
Agreement with respect to the 1990 spin-off of Promus and acquisition of the
Holiday Inn hotel business
29
by Bass, violation of the federal securities laws due to such alleged breaches,
and breaches of the Tax Sharing Agreement between Bass and Promus entered into
at the closing of the Merger Agreement. The complaint seeks an unspecified
amount of damages, unspecified punitive or exemplary damages, and declaratory
relief. The Company believes that it has complied with all applicable laws and
agreements with Bass in connection with the Merger and is defending its position
vigorously. Promus has filed (a) an answer denying, and asserting affirmative
defenses to, the substantive allegations of the complaint and (b) counterclaims
alleging that Bass has breached the Tax Sharing Agreement and agreements
ancillary to the Merger Agreement. The counterclaims request unspecified
compensatory damages, injunctive and declaratory relief and Promus' costs,
including reasonable attorneys fees and expenses. On April 17, 1992, Bass filed
a motion seeking to disqualify the Company's outside counsel in the litigation,
Latham & Watkins, on various grounds. That motion was denied by the trial court
on January 7, 1994. Discovery has begun, but no trial date has been set.
Certain tax matters. In connection with the Spin-off, Promus is liable,
with certain exceptions, for taxes of Holiday and its subsidiaries for all
pre-merger tax periods. Bass is obligated under the terms of the Tax Sharing
Agreement to pay Promus the amount of any tax benefits realized from pre-merger
tax periods of Holiday and its subsidiaries. All federal income taxes and
interest assessed by the Internal Revenue Service ("IRS") for the 1978 through
1984 tax years were paid during 1992. The federal income taxes and interest
thereon associated with the agreed issues from the IRS audit of the 1985 and
1986 tax years were paid in 1991. Negotiations with the IRS to resolve disputed
issues for the 1985 and 1986 tax years were concluded and settlement reached
during fourth quarter 1993. Final payment of the federal income taxes and
related interest due under the settlement is expected to be made during second
quarter 1994. The IRS has completed its examination of Holiday's federal income
tax returns for 1987 through the Spin-off date and has issued its proposed
adjustments to those returns. Federal income taxes and related interest assessed
on agreed issues were paid subsequent to year-end. The total liability of
approximately $23.7 million for the federal income tax and interest payments to
be made, as discussed above, was included in current liabilities on December 31,
1993. A protest of all unagreed issues for the 1987 through Spin-off periods was
filed with the IRS during the third quarter of 1993 and negotiations to resolve
disputed issues are currently expected to begin during the second quarter of
1994. Final resolution of the disputed issues is not expected to have a
materially adverse effect on Promus' consolidated financial position or its
results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
30
EXECUTIVE OFFICERS OF THE REGISTRANT
POSITIONS AND OFFICES HELD AND PRINCIPAL
OCCUPATIONS OR EMPLOYMENT DURING PAST 5
NAME AND AGE YEARS
- ----------------------------------- ------------------------------------------
Michael D. Rose (52)............... Chairman of the Board and Chief Executive
Officer of Promus since November 1989.
President of Promus (1989-1991). Chief
Executive Officer (1981-1990), Chairman
of the Board (1984-1990) and President
(1988-1990) of Holiday. Effective April
29, 1994, Mr. Philip G. Satre will
become Chief Executive Officer of
Promus. Mr. Rose will continue as
Chairman of the Board. Mr. Rose also is
a director of Ashland Oil, Inc., First
Tennessee National Corporation and
General Mills, Inc.
Philip G. Satre (44)............... Director, President and Chief Operating
Officer of Promus since April 1991.
Director and Senior Vice President of
Promus (1989-1991). President (since
1984) and Chief Executive Officer
(1984-1991) of Harrah's and Senior Vice
President (1987-1990) and a Director
(1988-1990) of Holiday. Effective April
29, 1994, Mr. Satre will become Chief
Executive Officer of Promus in addition
to his position as President. He also is
a director of Goody's Family Clothing,
Inc.
John M. Boushy (39)................ Senior Vice President, Information
Technology and Corporate Marketing of
Promus since June 1993. Vice President,
Strategic Marketing of Harrah's April
1989 to June 1993.
Charles A. Ledsinger, Jr. (44)..... Senior Vice President and Chief Financial
Officer of Promus since August 1990.
Treasurer of Promus from November 1989
to February 1991. Vice President of
Promus from November 1989 to August
1990. Vice President, Project Finance
(1986-1990) of Holiday. He also is a
director of Perkins Management Company,
Inc., a privately-held general partner
of Perkins Family Restaurants, L.P., a
publicly-traded limited partnership.
Ben C. Peternell (48).............. Senior Vice President, Corporate Human
Resources and Communications of Promus
since November 1989. Senior Vice
President, Corporate Human Resources
(1985-1990) of Holiday.
Colin V. Reed (46)................. Senior Vice President, Corporate
Development of Promus since May 1992.
Vice President, Corporate Development of
Promus from November 1989 to May 1992.
Vice President (1988-1990) of Holiday.
He also is a director of Sodak Gaming,
Inc.
E. O. Robinson, Jr. (54)........... Senior Vice President and General Counsel
of Promus since April 1993 and Secretary
of Promus since November 1989. Vice
President and Associate General Counsel
of Promus from November 1989 to April
1993. Vice President (1988-1990) of
Holiday.
31
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
Information as to the principal markets in which the Company's Common Stock
is traded and the high and low prices of such stock for the last two years is
set forth on the inside back cover of Book Two of the Annual Report, which
information is incorporated herein by reference. On February 26, 1993, the
Company's Board of Directors authorized a two-for-one stock split (the "First
Stock Split"), in the form of a stock dividend, which was effected by the
distribution on March 29, 1993 of one additional share of Common Stock for each
share of Common Stock owned by stockholders of record on March 8, 1993. On
October 29, 1993, the Company's Board of Directors authorized a three-for-two
stock split (the "Second Stock Split"), in the form of a stock dividend, which
was effected by the distribution on November 29, 1993 of one additional share
Common Stock for each two shares of Common Stock owned by stockholders of record
on November 8, 1993. All references herein to dividends paid, numbers of common
shares, per share prices and earnings per share amounts have been restated to
give retroactive effect to the First Stock Split and the Second Stock Split.
The approximate number of holders of record of the Company's Common Stock
as of March 4, 1994, is as follows:
APPROXIMATE NUMBER
TITLE OF CLASS OF HOLDERS OF RECORD
- ----------------------------------------------------------------------- ---------------------
Common Stock, Par Value $1.50 per share................................ 16,755
The Company paid a special, one-time $10 (retroactively adjusted for the
First Stock Split and the Second Stock Split) per share dividend to its common
stockholders on February 22, 1990. The Company does not presently intend to
declare any other cash dividends. The terms of the Company's Bank Facility
substantially limit the Company's ability to pay cash dividends on Common Stock
and limitations are also contained in agreements covering other debt of the
Company. See "Management's Discussion and Analysis--Intercompany Dividend
Restriction" on page 9 of Book Two of the Annual Report and Note 6 to the
financial statements on pages 16 and 17 of Book Two of the Annual Report,
which pages are incorporated herein by reference. When permitted under the
terms of the Bank Facility and the other debt, the declaration and payment of
dividends is at the discretion of the Board of Directors of the Company. The
Board of Directors of the Company intends to reevaluate its dividend policy in
the future in light of the Company's results of operations, financial
condition, cash requirements, future prospects and other factors deemed
relevant by the Board of Directors. There can be no assurance that any cash
dividends on Common Stock will be paid in the future.
ITEM 6. SELECTED FINANCIAL DATA.
See the information for the years 1989 through 1993 set forth under
"Selected Financial Data" in Book Two of the Annual Report on page 24, which
page is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
See the information set forth in Book Two of the Annual Report on pages 2
through 9, which pages are incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See the information set forth in Book Two of the Annual Report on pages 10
through 24, which pages are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not Applicable
32
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.
DIRECTORS
See the information regarding the names, ages, positions and prior business
experience of the directors of the Company set forth on pages 4 through 6 of the
Proxy Statement, which pages are incorporated herein by reference.
EXECUTIVE OFFICERS
See "Executive Officers of the Registrant" on page 31 in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION.
See the information set forth in the Proxy Statement on pages 6 and 7
thereof entitled "Compensation of Directors" and the information on pages 13
through 23 thereof. The information on pages 6 and 7 of the Proxy Statement
entitled "Compensation of Directors" and the information on pages 18 through 23
of the Proxy Statement entitled "Summary Compensation Table," "Option Grants in
the Last Fiscal Year," "Aggregated Option Exercises in 1993 and December 31,
1993, Option Values," and "Certain Employment Arrangements" are incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
See the information set forth in the Proxy Statement on page 3 thereof
entitled "Share Ownership of Directors and Executive Officers" and on pages 24
and 25 thereof entitled "Certain Stockholders," which information on said pages
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
See the information set forth in the Proxy Statement entitled "Certain
Transactions" on pages 23 and 24 thereof, which information is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial statements (including related notes to consolidated
financial statements)* filed as part of this report are listed below:
Report of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 1993 and December 31,
1992.
Consolidated Statements of Income for the Fiscal Years Ended December
31, 1993, December 31, 1992, and January 3, 1992.
Consolidated Statements of Stockholders' Equity for the Fiscal Years
Ended December 31, 1993, December 31, 1992, and January 3, 1992.
Consolidated Statements of Cash Flows for the Fiscal Years Ended
December 31, 1993, December 31, 1992, and January 3, 1992.
- ---------------
* Incorporated by reference from pages 10 through 23 of Book Two of the Annual
Report.
33
2. Schedules for the fiscal years ended December 31, 1993, December 31,
1992, and January 3, 1992, are as follows:
NO.
- -----
II -Consolidated amounts receivable from related parties and underwriters,
promoters, and employees other than related parties
III -Condensed financial information of registrant
V -Consolidated property and equipment
VI -Consolidated accumulated depreciation and amortization of property and
equipment
VIII -Consolidated valuation and qualifying accounts
X -Consolidated supplementary income statement information
Schedules I, IV, VII, IX, XI, XII, XIII and XIV are not applicable and have
therefore been omitted.
3. Exhibits (footnotes appear on pages 38 and 39):
NO.
- -------
3(1) -Certificate of Incorporation of The Promus Companies Incorporated. (1)
3(2) -Bylaws of The Promus Companies Incorporated, as amended. (16)
4(1) -Rights Agreement dated as of February 7, 1990, between The Promus
Companies Incorporated and The Bank of New York as Rights Agent. (12)
4(2) -Offering Circular dated February 9, 1988, for $200,000,000 Holiday
Inns, Inc. 8 5/8% Notes due 1993 and $200,000,000 9% Notes due 1995;
Indenture dated as of February 15, 1988, among Holiday Inns, Inc.,
Holiday Corporation and Sumitomo Bank of New York Trust Company,
Trustee; Irrevocable Letter of Credit dated February 25, 1988, by The
Sumitomo Bank, Limited, New York Branch. (3)
4(3) -Indenture Supplement No. 1 dated as of February 7, 1990, under
Indenture dated as of February 15, 1988, among Holiday Inns, Inc.,
Holiday Corporation and Sumitomo Bank of New York Trust Company,
Trustee; Amendment No. 1 dated February 7, 1990, to Irrevocable Letter
of Credit dated February 25, 1988, by The Sumitomo Bank, Limited, New
York Branch. (12)
4(4) -Indenture dated as of March 30, 1987, between Holiday Inns, Inc.,
Issuer, Holiday Corporation, Guarantor, and Commerce Union Bank (now
Sovran Bank/Central South), Trustee; Prospectus dated March 5, 1987,
for $900,000,000 Holiday Inns, Inc. 10 1/2% Senior Notes due 1994. (4)
4(5) -First Supplemental Indenture dated as of January 12, 1990, with respect
to the 10 1/2% Senior Notes due 1994, among Sovran Bank/Central South,
as trustee, Holiday Corporation, as guarantor, The Promus Companies
Incorporated and Holiday Inns, Inc., as issuer; Second Supplemental
Indenture dated as of February 7, 1990, with respect to the 10 1/2%
Senior Notes due 1994, among Holiday Inns, Inc., Holiday Corporation,
Embassy Suites, Inc., The Promus Companies Incorporated and Sovran
Bank/Central South; Form of Note for 10 1/2% Senior Notes due 1994.
(12)
4(6) -Indenture dated as of March 30, 1987, between Holiday Inns, Inc.,
Issuer, Holiday Corporation, Guarantor, and LaSalle National Bank,
Trustee; Prospectus dated March 5, 1987, for $500,000,000 Holiday Inns,
Inc. 11% Subordinated Debentures due 1999. (5)
4(7) -First Supplemental Indenture dated as of January 8, 1988, under
Indenture dated as of March 30, 1987, among Holiday Inns, Inc., Holiday
Corporation and LaSalle National Bank. (3)
4(8) -Second Supplemental Indenture dated as of February 23, 1988, under
Indenture dated as of March 30, 1987, among Holiday Inns, Inc., Holiday
Corporation, Guarantor, and LaSalle National Bank. (3)
34
NO.
- -------
4(9) -Third Supplemental Indenture dated as of January 17, 1990, with respect
to the 11% Subordinated Debentures due 1999, among LaSalle National
Bank, as trustee, Holiday Corporation, as guarantor, The Promus
Companies Incorporated and Holiday Inns, Inc., as issuer; Fourth
Supplemental Indenture dated as of February 7, 1990, with respect to
the 11% Subordinated Debentures due 1999, among Holiday Inns, Inc.,
Holiday Corporation, Embassy Suites, Inc., The Promus Companies
Incorporated and LaSalle National Bank; Form of Debenture for 11%
Subordinated Debentures due 1999. (12)
4(10) -Letter to Bank of New York dated March 18, 1993 constituting
Certificate under Section 12 of the Rights Agreement dated as of
February 7, 1990. (11)
4(11) -Interest Swap Agreement between Bank of America National Trust and
Savings Association and Embassy Suites, Inc. dated May 14, 1993. (6)
4(12) -Interest Swap Agreement between NationsBank of North Carolina, N.A. and
Embassy Suites, Inc. dated May 18, 1993. (6)
4(13) -First Supplemental Indenture dated as of July 15, 1987, among Irving
Trust Company, as resigning trustee with respect to the 1999 Notes,
Indiana National Bank as successor trustee with respect to the 1999
Notes and Holiday Inns, Inc.; Second Supplemental Indenture dated as of
January 8, 1988, under Indenture dated as of January 15, 1984, between
Holiday Inns, Inc., and Irving Trust Company, as trustee with respect
to 8 3/8% Notes due 1996; Third Supplemental Indenture dated as of
January 8, 1988, under Indenture dated as of January 15, 1984, among
Holiday Inns, Inc., Irving Trust Company, as resigning trustee with
respect to the 8 3/8% Notes due 1996, and LaSalle National Bank as
successor trustee with respect to the 8 3/8% Notes due 1996; Fourth
Supplemental Indenture dated as of February 23, 1988, under Indenture
dated as of January 15, 1984, between Holiday Inns, Inc. and LaSalle
National Bank, as trustee with respect to the 8 3/8% Notes due 1996.
(3)
4(14) -Fifth Supplemental Indenture dated as of January 23, 1990, with respect
to the 8 3/8% Notes due 1996, among LaSalle National Bank, as trustee,
The Promus Companies Incorporated and Holiday Inns, Inc., as issuer;
Sixth Supplemental Indenture dated as of February 7, 1990, with respect
to the 8 3/8% Notes due 1996, among Holiday Inns, Inc., Embassy Suites,
Inc., The Promus Companies Incorporated and LaSalle National Bank; Form
of Note for 8 3/8% Notes due 1996. (12)
4(15) -Indenture dated as of April 1, 1992, with respect to the 10 7/8% Senior
Subordinated Notes due 2002, among The Bank of New York, as trustee,
The Promus Companies Incorporated, as guarantor, and Embassy Suites,
Inc., as issuer; Form of Note for 10 7/8% Senior Subordinated Notes due
2002. (18)
4(16) -Indenture dated as of August 1, 1993, with respect to the 8 3/4% Senior
Subordinated Notes due 2000, among The Bank of New York, as trustee,
The Promus Companies Incorporated, as guarantor, and Embassy Suites,
Inc., as issuer; Form of Note for 8 3/4% Senior Subordinated Notes due
2000. (6)
4(17) -Interest Swap Agreement between The Sumitomo Bank, Limited and Embassy
Suites, Inc. dated October 22, 1992; Interest Swap Agreement between
The Bank of Nova Scotia and Embassy Suites, Inc. dated October 22,
1992; Interest Swap Agreement between The Nippon Credit Bank and
Embassy Suites, Inc. dated October 22, 1992; (18)
10(1) -Amended and Restated Agreement and Plan of Merger among Holiday
Corporation, Holiday Inns, Inc., The Promus Companies Incorporated,
Bass plc, Bass (U.S.A.) Hotels, Incorporated (a Delaware corporation)
and Bass (U.S.A.) Hotels, Incorporated (a Tennessee corporation), dated
as of August 24, 1989. (1)
10(2) -First Amendment to the Amended and Restated Agreement and Plan of
Merger among Holiday Corporation, Holiday Inns, Inc., The Promus
Companies Incorporated, Bass plc and Bass (U.S.A.) Hotels,
Incorporated, dated as of February 7, 1990. (2)
10(3) -Tax Sharing Agreement dated as of February 7, 1990, among Holiday
Corporation, Holiday Inns, Inc., The Promus Companies Incorporated,
Bass plc, Bass European Holdings, N.V., Bass (U.S.A.), Inc. and Bass
(U.S.A.) Hotels, Incorporated. (12)
+10(4) -Form of Indemnification Agreement entered into by The Promus Companies
Incorporated and each of its directors and executive officers. (1)
+10(5) -The Promus Companies Incorporated 1990 Stock Option Plan. (12)
- ---------------
+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14(a)(3) of Form 10-K.
35
NO.
- -------
+10(6) -The Promus Companies Incorporated 1990 Restricted Stock Plan. (12)
+10(7) -The Promus Companies Incorporated Savings and Retirement Plan Trust
Agreement. (12)
+10(8) -Amendment to The Promus Companies Incorporated Savings and Retirement
Plan dated May 1, 1991. (15)
+10(9) -Financial Counseling Plan of The Promus Companies Incorporated as
amended February 25, 1993. (11)
+10(10) -Form of Severance Agreement dated July 30, 1993, entered into with E.
O. Robinson, Jr. and John M. Boushy. (22)
10(11) -Credit Agreement, dated as of July 22, 1993, among Embassy Suites,
Inc., The Promus Companies Incorporated, the Banks parties thereto,
Marina Associates and Bankers Trust Company, as Administrative Agent.
(19)
10(12) -Amended and Restated Reimbursement Agreement, dated as of July 22,
1993, among Embassy Suites, Inc., The Promus Companies Incorporated,
Marina Associates and The Sumitomo Bank, Limited, New York Branch. (19)
10(13) -Master Collateral Agreement, dated as of July 22, 1993, among The
Promus Companies Incorporated, Embassy Suites, Inc., the other
Collateral Grantors parties thereto, Bankers Trust Company, as
Administrative Agent, and Bankers Trust Company as Collateral Agent.
(19)
10(14) -Security Agreement dated as of July 22, 1993, among Embassy Suites,
Inc., the Collateral Grantors parties thereto and Bankers Trust
Company, as Collateral Agent. (19)
10(15) -Deed of Trust, Leasehold Deed of Trust, Assignment, Assignment of
Leases and Rents, Security Agreement and Financing Statement, dated as
of July 22, 1993, from Embassy Suites, Inc., Harrah's Laughlin, Inc.,
and Harrah's Reno Holding Company, Inc., the Grantors, to First
American Title Company of Nevada, as Trustee, for the benefit of
Bankers Trust Company, as Beneficiary. (19)
10(16) -Mortgage, Leasehold Mortgage, Assignment, Assignment of Leases and
Rents and Security Agreement, dated as of July 22, 1993, from Marina
Associates and Embassy Suites, Inc., the Mortgagors, to Bankers Trust
Company, as Collateral Agent and the Mortgagee. (19)
10(17) -Pledge Agreement, dated as of July 22, 1993, between The Promus
Companies Incorporated and Bankers Trust Company, as Collateral Agent.
(19)
10(18) -Pledge Agreement, dated as of July 22, 1993, among Embassy Suites,
Inc., ESI Equity Development Corporation, Harrah's, Harrah's Club,
Casino Holding Company, and Bankers Trust Company, as the General
Collateral Agent, and Bank of America Nevada as the Nevada Collateral
Agent. (19)
10(19) -Form of License Agreement for Hampton Inns. (7)
10(20) -Form of License Agreement for Hampton Inns revised 1988. (8)
10(21) -Form of License Agreement for Hampton Inns revised 1991. (15)
10(22) -Form of License Agreement for Hampton Inns revised 1992. (18)
10(23) -Form of License Agreement for Embassy Suites. (9)
10(24) -Form of License Agreement for Embassy Suites revised 1989. (12)
10(25) -Form of License Agreement for Embassy Suites revised 1990. (13)
10(26) -Form of License Agreement for Embassy Suites revised 1991. (15)
10(27) -Form of License Agreement for Embassy Suites revised 1992. (18)
10(28) -Form of Short-Term License Agreement for Embassy Suites. (12)
10(29) -Form of Short-Term License Agreement for Embassy Suites revised 1990.
(13)
10(30) -Form of Short-Term License Agreement for Embassy Suites revised 1991.
(15)
10(31) -Form of Short-Term License Agreement for Embassy Suites revised 1992.
(18)
10(32) -Form of License Agreement for Homewood Suites. (3)
10(33) -Form of License Agreement for Homewood Suites revised 1992. (18)
- ---------------
+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14(a)(3) of Form 10-K.
36
NO.
- -------
**10(34) -Form of License Agreement for Homewood Suites revised 1993.
**10(35) -Form of License Agreement for Embassy Suites revised 1993.
**10(36) -Form of Short-Term License Agreement for Embassy Suites revised 1993.
**10(37) -Form of License Agreement for Hampton Inns revised 1993.
**10(38) -Form of License Agreement for Hampton Inn & Suites.
10(39) -Management Agreement dated as of December 17, 1986, between Hampton
Inns, Inc. and Hampton/GHI Associates No. 1. (10)
10(40) -Form of Management Agreement between Embassy Suites, Inc. and
affiliates of General Electric Pension Trust. (10)
+10(41) -Employment Agreement dated August 1, 1987 between Holiday Corporation
and Michael D. Rose; Amendment to Employment Agreement dated as of
January 31, 1990 between The Promus Companies Incorporated and Michael
D. Rose. (12)
+10(42) -Amended and Restated Severance Agreement dated as of May 1, 1992
between The Promus Companies Incorporated and Michael D. Rose. (18)
+10(43) -Summary Plan Description of Executive Term Life Insurance Plan. (18)
+10(44) -Forms of Stock Option (1990 Stock Option Plan). (12)
+10(45) -Revised Forms of Stock Option (1990 Stock Option Plan). (18)
+10(46) -Form of The Promus Companies Incorporated's Annual Bonus Plan, as
amended, for Managers and Executives. (13)
+10(47) -Forms of Restricted Stock Award (1990 Restricted Stock Plan). (12)
+10(48) -Deferred Compensation Plan dated October 16, 1991. (15)
+10(49) -Form of Deferred Compensation Agreement. (12)
+10(50) -Form of Deferred Compensation Agreement revised November 1991. (15)
+10(51) -Executive Deferred Compensation Plan. (12)
+10(52) -First Amendment to Executive Deferred Compensation Plan, dated as of
October 25, 1990. (13)
+10(53) -Second Amendment to Executive Deferred Compensation Plan, dated as of
October 25, 1991. (15)
+10(54) -Third Amendment to Executive Deferred Compensation Plan, dated as of
October 29, 1992. (18)
+10(55) -Forms of Restricted Stock Award (1990 Restricted Stock Plan). (18)
+10(56) -First Amendment to Escrow Agreement dated January 31, 1990 among
Holiday Corporation, certain subsidiaries thereof and Sovran Bank, as
escrow agent. (12)
+10(57) -Escrow Agreement dated February 6, 1990 between The Promus Companies
Incorporated, certain subsidiaries thereof, and Sovran Bank, as escrow
agent. (12)
+10(58) -Form of Amended and Restated Severance Agreement dated November 5,
1992, entered into with Charles A. Ledsinger, Jr., Ben C. Peternell,
Philip G. Satre and Colin V. Reed. (18)
+10(59) -Form of memorandum agreement dated July 2, 1991, eliminating stock
appreciation rights under stock options held by Charles A. Ledsinger,
Jr., Ben C. Peternell and Philip G. Satre. (14)
+10(60) -The Promus Companies Incorporated Amended and Restated Savings and
Retirement Plan dated as of February 6, 1990. (18)
+10(61) -Administrative Regulations, Long Term Compensation Plan (Restricted
Stock Plan and Stock Option Plan), dated as of January 1, 1992. (17)
+10(62) -Amendment dated October 29, 1992 to The Promus Companies Incorporated
Savings and Retirement Plan Trust Agreement; Amendment dated September
21, 1992 to The Promus Companies Incorporated Savings and Retirement
Plan Trust Agreement (18)
+10(63) -Revised Form of Stock Option. (21)
+10(64) -The Promus Companies Incorporated 1990 Stock Option Plan (as amended
as of April 30, 1993). (20)
- ---------------
** Filed herewith
+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14(a)(3) of Form 10-K.
37
NO.
- -------
**10(65)-Limited Partnership Agreement of Des Plaines Limited Partnership
between Harrah's Illinois Corporation and John Q. Hammons, dated
February 28, 1992; First Amendment to Limited Partnership Agreement of
Des Plaines Limited Partnership dated as of October 5, 1992.
+**10(66)-Amendment to Escrow Agreement dated as of October 29, 1993 among The
Promus Companies Incorporated, certain subsidiaries thereof, and
NationsBank, formerly Sovran Bank.
**10(67)-Amended and Restated Partnership Agreement of Harrah's Jazz Company,
dated as of March 15, 1994, among Harrah's New Orleans Investment
Company, New Orleans/Louisiana Development Corporation and Grand Palais
Casino, Inc.; First Amendment to the Amended and Restated Partnership
Agreement of Harrah's Jazz Company, effective as of March 15, 1994.
10(68) -Form of Rivergate Ground Lease by and among Harrah's Jazz Company,
Rivergate Development Corporation and the City of New Orleans. (23)
10(69) -Form of General Development Agreement among Harrah's Jazz Company,
Rivergate Development Corporation and the City of New Orleans. (23)
10(70) -Form of Temporary Casino Lease by and among Harrah's Jazz Company,
Rivergate Development Corporation and the City of New Orleans. (23)
10(71) -Form of Casino Management Agreement between Harrah's Jazz Company and
Harrah's New Orleans Management Company. (23)
**11 -Computations of per share earnings.
**12 -Computations of ratios.
**13 -Portions of Annual Report to Stockholders for the fiscal year ended
December 31, 1993. (24)
**21 -List of subsidiaries of The Promus Companies Incorporated.
99(1) -Proxy Statement--Information Statement--Prospectus dated December 13,
1989 of Holiday Corporation, The Promus Companies Incorporated and Bass
Public Limited Company. (12)
- ---------------
** Filed herewith
+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14(a)(3) of Form 10-K.
FOOTNOTES
(1) Incorporated by reference from the Company's Registration Statement on Form
10, File No. 1-10410, filed on December 13, 1989.
(2) Incorporated by reference from the Company's Current Report on Form 8-K
dated February 16, 1990, File No. 1-10410.
(3) Incorporated by reference from Holiday Corporation's Annual Report on Form
10-K for the fiscal year ended January 1, 1988, filed March 31, 1988, File
No. 1-8900.
(4) Incorporated by reference from Holiday Inns, Inc.'s Registration Statement
on Form S-3, File No. 33-11770, filed February 24, 1987.
(5) Incorporated by reference from Holiday Inns, Inc's Registration Statement
on Form S-3, File No. 33-11163, filed December 31, 1986.
(6) Incorporated by reference from the Company's and Embassy Suites, Inc.'s
Amendment No. 2 to Form S-4 Registration Statement, File No. 33-49509-01,
filed July 16, 1993.
(7) Incorporated by reference from Holiday Inns, Inc.'s Annual Report on Form
10-K for the fiscal year ended December 30, 1983, filed March 21, 1984,
File No. 1-4804.
(8) Incorporated by reference from Holiday Corporation's Annual Report on Form
10-K for the fiscal year ended December 30, 1988, filed March 30, 1989,
File No. 1-8900.
(9) Incorporated by reference from Holiday Corporation's Annual Report on Form
10-K for the fiscal year ended January 3, 1986, filed March 28, 1986, File
No. 1-8900.
(10) Incorporated by reference from Holiday Corporation's Annual Report on Form
10-K for the fiscal year ended January 2, 1987, filed March 27, 1987, File
No. 1-8900.
38
(11) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1993, filed May 13, 1993, File No. 1-10410.
(12) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended December 29, 1989, filed March 28, 1990, File No.
1-10410.
(13) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended December 28, 1990, filed March 21, 1991, File No.
1-10410.
(14) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended September 27, 1991, filed November 8, 1991, File No.
1-10410.
(15) Incorporated by reference from Amendment No. 2 to the Company's and
Embassy's Registration Statement on Form S-1, file No. 33-43748, filed
March 18, 1992.
(16) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended January 3, 1992, filed March 26, 1992, File No.
1-10410.
(17) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1992, filed May 13, 1992, File No. 1-10410.
(18) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992, filed March 12, 1993, File No.
1-10410.
(19) Incorporated by reference from the Company's Current Report on Form 8-K
filed August 6, 1993, File No. 1-10410.
(20) Incorporated by reference from Post-Effective Amendment No. 1 to the
Company's Form S-8 Registration Statement, File No. 33-32864-01, filed
July 22, 1993.
(21) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1993, filed August 12, 1993, File No.
1-10410.
(22) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1993, filed November 12, 1993, File No.
1-10410.
(23) Incorporated by reference from Amendment No. 1 to Form S-1 Registration
Statement of Harrah's Jazz Company and Harrah's Jazz Finance Corp.,
File No. 33-73370, filed February 22, 1994.
(24) Filed herewith to the extent provisions of such report are specifically
incorporated herein by reference.
(b) The following Reports on Form 8-K were filed during the fourth quarter
of 1993 and thereafter through March 24, 1994: NONE
39
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OF THE SECURITIES EXCHANGE ACT
OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
THE PROMUS COMPANIES INCORPORATED
Dated: March 28, 1994 By: MICHAEL D. ROSE
..................................
(Michael D. Rose, Chairman
and Chief Executive Officer)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT IN THE CAPACITIES AND ON THE DATES INDICATED.
Signature Title Date
- ------------------------------------- ------------------------ --------------
JAMES L. BARKSDALE Director March 28, 1994
.....................................
(James L. Barksdale)
JAMES B. FARLEY Director March 28, 1994
.....................................
(James B. Farley)
JOE M. HENSON Director March 28, 1994
.....................................
(Joe M. Henson)
MICHAEL D. ROSE Director and Chief March 28, 1994
..................................... Executive Officer
(Michael D. Rose)
WALTER J. SALMON Director March 28, 1994
.....................................
(Walter J. Salmon)
PHILIP G. SATRE Director, President and March 28, 1994
..................................... Chief Operating
(Philip G. Satre) Officer
BOAKE A. SELLS Director March 28, 1994
.....................................
(Boake A. Sells)
RONALD TERRY Director March 28, 1994
.....................................
(Ronald Terry)
EDDIE N. WILLIAMS Director March 28, 1994
.....................................
(Eddie N. Williams)
SHIRLEY YOUNG Director March 28, 1994
.....................................
(Shirley Young)
CHARLES A. LEDSINGER, JR. Chief Financial Officer March 28, 1994
.....................................
(Charles A. Ledsinger, Jr.)
MICHAEL N. REGAN Controller and Principal March 28, 1994
..................................... Accounting Officer
(Michael N. Regan)
40
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Promus Companies Incorporated:
We have audited in accordance with generally accepted auditing standards,
the financial statements included in The Promus Companies Incorporated 1993
annual report to stockholders, incorporated by reference in this Form 10-K, and
have issued our report thereon dated February 8, 1994. Our audits were made for
the purpose of forming an opinion on those statements taken as a whole. The
schedules listed under Item 14(a)2 on page 34 are the responsibility of the
Company's management and are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the audit of the basic financial statements, and in our
opinion, fairly state in all material respects the financial data required to be
set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN & CO.
Memphis, Tennessee,
February 8, 1994.
41
SCHEDULE II
THE PROMUS COMPANIES INCORPORATED
CONSOLIDATED AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
(IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE AT
DEDUCTIONS END OF PERIOD
-------------------------- --------------------------
BALANCE AT
BEGINNING OF AMOUNTS AMOUNTS
NAME OF DEBTOR PERIOD ADDITIONS COLLECTED WRITTEN OFF CURRENT NOT CURRENT
- ---------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED DECEMBER 31, 1993
Clyde E. Culp, III................... $ 124 $ - $ 124 $ - $ - $ -
Charles A. Ledsinger, Jr............. 126 - 126 - - -
Craig H. Norville.................... 120 351 120 - 351 -
Philip G. Satre...................... 240 - 240 - - -
Kevin O. Servatius................... - 112 - - 112 -
FISCAL YEAR ENDED DECEMBER 31, 1992
Clyde E. Culp, III................... $ - $ 124 $ - $ - $ 124 $ -
Charles A. Ledsinger, Jr............. - 191 65 - 126 -
Craig H. Norville.................... - 120 - - 120 -
Philip G. Satre...................... - 358 118 - 240 -
FISCAL YEAR ENDED JANUARY 3, 1992 $ - $ - $ - $ - $ - $ -
S-1
SCHEDULE III
THE PROMUS COMPANIES INCORPORATED
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
(IN THOUSANDS)
DECEMBER 31,
------------------------
1993 1992
----------- -----------
ASSETS
Cash.................................................................................... $ - $ -
Investments in and advances to subsidiaries (eliminated in consolidation)............... 535,707 427,275
Organizational costs.................................................................... 302 573
----------- -----------
$ 536,009 $ 427,848
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued taxes, including federal income taxes........................................... $ (28) $ (82)
----------- -----------
Commitments and contingencies-see page S-5
Stockholders' equity
Common stock, $1.50 par value, authorized-120,000,000 shares, outstanding-102,258,442
and 101,882,082 shares (excluding 25,251 and 44,442 shares held in treasury)....... 153,388 101,882
Capital surplus....................................................................... 201,035 229,913
Retained earnings..................................................................... 187,203 100,857
Deferred compensation related to restricted stock..................................... (5,589) (4,722)
----------- -----------
536,037 427,930
----------- -----------
$ 536,009 $ 427,848
----------- -----------
----------- -----------
The accompanying Notes to Financial Statements are an integral part of these
balance sheets.
S-2
SCHEDULE III (CONTINUED)
THE PROMUS COMPANIES INCORPORATED
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF INCOME
(IN THOUSANDS)
FISCAL YEAR ENDED
--------------------------------------
DECEMBER 31, DECEMBER 31, JANUARY 3,
1993 1992 1992
------------ ------------ ----------
Revenues................................................................. $ - $ - $ -
Costs and expenses....................................................... 319 458 402
------------ ------------ ----------
Loss before income taxes and equity in subsidiaries' continuing
earnings............................................................... (319) (458) (402)
Income tax benefit..................................................... 112 155 137
------------ ------------ ----------
Loss before equity in subsidiaries' continuing earnings.................. (207) (303) (265)
Equity in subsidiaries' continuing earnings.............................. 92,000 51,721 30,276
------------ ------------ ----------
Income before extraordinary items........................................ 91,793 51,418 30,011
Extraordinary items, net of tax benefit (provision) of $3,415 and $(753)
(Note 8)............................................................... (5,447) 1,074 -
------------ ------------ ----------
Net income............................................................... $ 86,346 $ 52,492 $ 30,011
------------ ------------ ----------
------------ ------------ ----------
The accompanying Notes to Financial Statements are an integral part of these
statements.
S-3
SCHEDULE III (CONTINUED)
THE PROMUS COMPANIES INCORPORATED
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
FISCAL YEAR ENDED
----------------------------------------
DECEMBER 31, DECEMBER 31, JANUARY 3,
1993 1992 1992
------------ ------------ ------------
Cash flows from operating activities
Net income.......................................................... $ 86,346 $ 52,492 $ 30,011
Adjustments to reconcile net income to cash flows from operating
activities
Extraordinary items............................................ 8,862 (1,827) -
Amortization................................................... 271 265 276
Equity in undistributed continuing earnings of subsidiaries.... (92,000) (51,721) (30,276)
Dividend received from subsidiary.............................. - 500 -
Net change in working capital accounts......................... (3,479) 791 (11)
------------ ------------ ------------
Cash flows from operating activities........................ - 500 -
------------ ------------ ------------
Cash flows used in investing activities
Advances and capital contributions to subsidiaries.................. - (500) (126,080)
------------ ------------ ------------
Cash flows provided by financing activities
Proceeds from issuance of stock, net of issue costs of $6,920....... - - 126,080
------------ ------------ ------------
Net change in cash.................................................... - - -
Cash, beginning of period............................................. - - -
------------ ------------ ------------
Cash, end of period................................................... $ - $ - $ -
------------ ------------ ------------
------------ ------------ ------------
The accompanying Notes to Financial Statements are an integral part of these
statements.
S-4
SCHEDULE III (CONTINUED)
THE PROMUS COMPANIES INCORPORATED
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993
NOTE 1--BASIS OF ORGANIZATION
The Promus Companies Incorporated (Promus), a Delaware corporation, is a
holding company, the principal assets of which are the capital stock of two
subsidiaries, Embassy Suites, Inc. (Embassy) and Aster Insurance Ltd. (Aster).
These condensed financial statements should be read in conjunction with the
consolidated financial statements of Promus and subsidiaries.
NOTE 2--FISCAL YEAR
As of the beginning of fiscal 1992, Promus changed from a fiscal year to a
calendar year for financial reporting purposes. The impact of this change on
Promus' financial statements was immaterial.
NOTE 3--ORGANIZATIONAL COSTS
Organizational costs are being amortized on a straight-line basis over a
five year period.
NOTE 4--OWNERSHIP OF ASTER
The value of Promus' investment in Aster has been reduced below zero.
Promus' negative investment in Aster at December 31, 1993 and 1992 was $12.8
million and $10.9 million, respectively, and is included in investments in and
advances to subsidiaries on the accompanying balance sheets. In addition, Promus
has guaranteed the future payment by Aster of certain insurance-related
liabilities.
NOTE 5--LONG-TERM DEBT
Promus has no long-term debt obligations. Promus has guaranteed certain
long-term debt obligations of Embassy.
NOTE 6--STOCKHOLDERS' EQUITY
On October 29, 1993, Promus' Board of Directors approved a three-for-two
stock split (the October split), in the form of a stock dividend, effected by a
distribution on November 29, 1993, of one additional share for each two shares
owned by stockholders of record on November 8, 1993. The October split followed
a two-for-one split, also effected as a stock dividend, approved by the Board on
February 26, 1993, and distributed on March 29, 1993. The $1.50 par value per
share of Promus' common stock was unchanged by these splits. The par value of
the additional shares issued as a result of these splits was capitalized into
common stock on the accompanying balance sheets by means of a transfer from
capital surplus. All references in these financial statements to numbers of
common shares and earnings per share have been restated to give retroactive
effect to both stock splits.
During the second quarter of 1993, Sodak Gaming, Inc. (Sodak), in which a
subsidiary of Embassy owns an equity investment, completed an initial public
offering of its common stock. As required by equity accounting rules, Embassy's
subsidiary increased the carrying value of its investment in Sodak by an amount
equal to its pro rata share of the proceeds of Sodak's offering, approximately
$6.4 million. A corresponding increase was recorded in the combination of the
subsidary's capital surplus and
S-5
SCHEDULE III (CONTINUED)
THE PROMUS COMPANIES INCORPORATED
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993
NOTE 6--STOCKHOLDERS' EQUITY (CONTINUED)
deferred income tax liability accounts. As a result of this activity, Promus
increased its investment in Embassy and its capital surplus by approximately
$3.8 million.
In addition to its common stock, Promus has the following classes of stock
authorized but unissued:
Preferred stock, $100 par value, 150,000 shares authorized
Special stock, 5,000,000 shares authorized-
Series B, $1.125 par value
NOTE 7--INCOME TAXES
Promus files a consolidated tax return with its subsidiaries.
During 1992, Promus and its subsidiaries adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. The provisions of the
statement were applied retroactively to the Spin-off date (February 7, 1990),
and the cumulative effect of this change in accounting for income taxes of
approximately $9.5 million was charged against stockholders' equity. There were
no changes in the amounts of previously reported income from continuing
operations or net income resulting from the application of this statement.
NOTE 8--EXTRAORDINARY ITEMS
Promus' equity in Embassy's net extraordinary items for fiscal 1993 and
1992 was as follows:
1993 1992
--------- ---------
Loss on early extinguishments of debt............................................ $ (8,862) $ (5,558)
Gain on forgiveness of joint venture debt........................................ - 4,353
Gain due to discounting of debt at extinguishment................................ - 3,032
--------- ---------
(8,862) 1,827
Income tax benefit (provision)................................................... 3,415 (753)
--------- ---------
Extraordinary items, net of income taxes....................................... $ (5,447) $ 1,074
--------- ---------
--------- ---------
S-6
SCHEDULE V
THE PROMUS COMPANIES INCORPORATED
CONSOLIDATED PROPERTY AND EQUIPMENT
(IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -----------------------------------------------------------------------------------------------------------------------
BALANCE AT OTHER BALANCE AT
BEGINNING OF ADDITIONS CHANGES ADD CLOSE OF
DESCRIPTION PERIOD AT COST(A) RETIREMENTS (DEDUCT) PERIOD
- -----------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED DECEMBER 31, 1993
Owned
Land and land rights......................... $ 203,392 $ 7,459 $ (6,862) $ (276) $ 203,713
Buildings, riverboats, improvements and
other...................................... 1,004,858 110,067 (55,270) 448 1,060,103
Furniture, fixtures and equipment............ 371,768 93,439 (35,707) 44 429,544
------------- ----------- ----------- ----------- -------------
1,580,018 210,965 (97,839) 216 1,693,360
Construction-in-progress..................... 53,370 25,488 (509) (104) 78,245
Property held for future use(B).............. 42,641 - - (99) 42,542
------------- ----------- ----------- ----------- -------------
1,676,029 236,453 (98,348) 13 1,814,147
------------- ----------- ----------- ----------- -------------
Leased
Buildings, improvements and other............ 4,993 15 - - 5,008
Furniture, fixtures and equipment............ 2,508 3,007 (87) (150) 5,278
------------- ----------- ----------- ----------- -------------
7,501 3,022 (87) (150) 10,286
------------- ----------- ----------- ----------- -------------
Totals.................................. $ 1,683,530 $ 239,475 $ (98,435) $ (137) $ 1,824,433
------------- ----------- ----------- ----------- -------------
------------- ----------- ----------- ----------- -------------
- ---------------
(A) Principally construction of new casino facilities and refurbishment of
existing casino and hotel properties, including transfers from
construction-in-progress.
(B) Land held for future development or disposition is included in property held
for future use and amounted to $42.1 million, net of an $11.0 million
reserve for property dispositions.
S-7
SCHEDULE V (CONTINUED)
THE PROMUS COMPANIES INCORPORATED
CONSOLIDATED PROPERTY AND EQUIPMENT
(IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -------------------------------------------------------------------------------------------------------------------------
BALANCE AT OTHER BALANCE AT
BEGINNING OF ADDITIONS CHANGES ADD CLOSE OF
DESCRIPTION PERIOD AT COST(A) RETIREMENTS (DEDUCT) PERIOD
- -------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED DECEMBER 31, 1992
Owned
Land and land rights........................... $ 199,108 $ 4,736 $ (559) $ 107 $ 203,392
Buildings, riverboats, improvements and
other........................................ 935,225 70,543 (910) - 1,004,858
Furniture, fixtures and equipment.............. 335,107 42,393 (6,198) 466 371,768
------------- ----------- ----------- ----------- -------------
1,469,440 117,672 (7,667) 573 1,580,018
Construction-in-progress....................... 54,404 (195) (369) (470) 53,370
Property held for future use(B)................ 42,641 - - - 42,641
------------- ----------- ----------- ----------- -------------
1,566,485 117,477 (8,036) 103 1,676,029
------------- ----------- ----------- ----------- -------------
Leased
Buildings, improvements and other.............. 5,169 - - (176) 4,993
Furniture, fixtures and equipment.............. 1,703 551 - 254 2,508
------------- ----------- ----------- ----------- -------------
6,872 551 - 78 7,501
------------- ----------- ----------- ----------- -------------
Totals.................................... $ 1,573,357 $ 118,028 $ (8,036) $ 181 $ 1,683,530
------------- ----------- ----------- ----------- -------------
------------- ----------- ----------- ----------- -------------
- ---------------
(A) Principally refurbishment and expansion of casino and hotel properties,
including transfers from construction-in-progress.
(B) Land held for future development or disposition is included in property held
for future use and amounted to $41.4 million, which is net of an $11.0
million reserve for property dispositions.
S-8
SCHEDULE V (CONTINUED)
THE PROMUS COMPANIES INCORPORATED
CONSOLIDATED PROPERTY AND EQUIPMENT
(IN THOUSANDS)
- ----------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ----------------------------------------------------------------------------------------------------------------------
BALANCE AT OTHER BALANCE AT
BEGINNING OF ADDITIONS CHANGES ADD CLOSE OF
DESCRIPTION PERIOD AT COST(A) RETIREMENTS (DEDUCT)(B) PERIOD
- ----------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED JANUARY 3, 1992
Owned
Land and land rights........................ $ 186,602 $ 12,590 $ (100) $ 16 $ 199,108
Buildings, riverboats, improvements and
other..................................... 781,546 158,991 (5,572) 260 935,225
Furniture, fixtures and equipment........... 283,530 57,785 (7,237) 1,029 335,107
------------- ----------- ----------- ----------- -------------
1,251,678 229,366 (12,909) 1,305 1,469,440
Construction-in-progress.................... 110,070 (60,562) (907) 5,803 54,404
Property held for future use(C)............. 39,314 4,106 (110) (669) 42,641
------------- ----------- ----------- ----------- -------------
1,401,062 172,910 (13,926) 6,439 1,566,485
------------- ----------- ----------- ----------- -------------
Leased
Buildings, improvements and other........... 4,864 305 - - 5,169
Furniture, fixtures and equipment........... 1,415 356 (92) 24 1,703
------------- ----------- ----------- ----------- -------------
6,279 661 (92) 24 6,872
------------- ----------- ----------- ----------- -------------
Totals................................. $ 1,407,341 $ 173,571 $ (14,018) $ 6,463 $ 1,573,357
------------- ----------- ----------- ----------- -------------
------------- ----------- ----------- ----------- -------------
- ---------------
(A) Principally refurbishment and expansion of casino and hotel properties,
including transfers from construction-in-progress.
(B) Principally transfers from deferred charges of $7.8 million, partially
offset by the transfer to investments in nonconsolidated affiliates of $1.0
million in assets contributed to a joint venture.
(C) Land held for future development or disposition is included in property held
for future use and amounted to $41.4 million, which is net of an $11.0
million reserve for property dispositions.
S-9
SCHEDULE VI
THE PROMUS COMPANIES INCORPORATED
CONSOLIDATED ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY AND EQUIPMENT
(IN THOUSANDS)
- ----------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ----------------------------------------------------------------------------------------------------------------------------
ESTIMATED ADDITIONS OTHER
USEFUL BALANCE AT CHARGED TO CHANGES BALANCE AT
LIFE IN BEGINNING COSTS AND ADD CLOSE OF
DESCRIPTION YEARS OF PERIOD EXPENSES RETIREMENTS (DEDUCT) PERIOD
- ----------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED DECEMBER 31, 1993
Owned
Buildings, riverboats, improvements and
other.................................. 5-40 $ 200,279 $ 33,649 $ (8,559) $ 28 $ 225,397
Furniture, fixtures and equipment........ 3-15 228,734 45,759 (21,049) 102 253,546
----------- ----------- ----------- ----------- -----------
429,013 79,408 (29,608) 130 478,943
----------- ----------- ----------- ----------- -----------
Leased
Buildings, improvements and other........ 4-35 4,513 114 - - 4,627
Furniture, fixtures and equipment........ 1-10 1,513 1,193 (16) (29) 2,661
----------- ----------- ----------- ----------- -----------
6,026 1,307 (16) (29) 7,288
----------- ----------- ----------- ----------- -----------
Totals.............................. $ 435,039 $ 80,715 $ (29,624) $ 101 $ 486,231
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
FISCAL YEAR ENDED DECEMBER 31, 1992
Owned
Buildings, riverboats, improvements and
other.................................. 5-40 $ 169,821 $ 32,402 $ (965) $ (979) $ 200,279
Furniture, fixtures and equipment........ 2-15 193,285 38,621 (4,562) 1,390 228,734
----------- ----------- ----------- ----------- -----------
363,106 71,023 (5,527) 411 429,013
----------- ----------- ----------- ----------- -----------
Leased
Buildings, improvements and other........ 4-40 4,254 291 - (32) 4,513
Furniture, fixtures and equipment........ 2-10 969 391 - 153 1,513
----------- ----------- ----------- ----------- -----------
5,223 682 - 121 6,026
----------- ----------- ----------- ----------- -----------
Totals.............................. $ 368,329 $ 71,705 $ (5,527) $ 532 $ 435,039
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
FISCAL YEAR ENDED JANUARY 3, 1992
Owned
Buildings, riverboats, improvements and
other.................................. 10-40 $ 141,016 $ 27,318 $ (237) $ 1,724 $ 169,821
Furniture, fixtures and equipment........ 3-15 164,402 37,537 (6,923) (1,731) 193,285
----------- ----------- ----------- ----------- -----------
305,418 64,855 (7,160) (7) 363,106
----------- ----------- ----------- ----------- -----------
Leased
Buildings, improvements and other........ 4-40 3,735 519 - - 4,254
Furniture, fixtures and equipment........ 2-10 648 570 (256) 7 969
----------- ----------- ----------- ----------- -----------
4,383 1,089 (256) 7 5,223
----------- ----------- ----------- ----------- -----------
Totals.............................. $ 309,801 $ 65,944 $ (7,416) $ - $ 368,329
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
S-10
SCHEDULE VIII
THE PROMUS COMPANIES INCORPORATED
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ---------------------------------------------------------------------------------------------------------------------
ADDITIONS
------------------------
CHARGED
BALANCE AT TO COSTS CHARGED DEDUCTIONS BALANCE AT
BEGINNING AND TO OTHER FROM CLOSE OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS RESERVES PERIOD
- ---------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED DECEMBER 31, 1993
Allowance for doubtful accounts
Current........................................ $ 11,598 $ 6,022 $ - $ 6,756(A) $ 10,864
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Long-term...................................... $ 644 $ - $ - $ - $ 644
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Allowance for losses on property dispositions..... $ 12,744 $ (128)(B) $ - $ 1,616(C) $ 11,000
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
FISCAL YEAR ENDED DECEMBER 31, 1992
Allowance for doubtful accounts
Current........................................ $ 12,710 $ 5,543 $ - $ 6,655(A) $ 11,598
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Long-term...................................... $ 1,696 $ 175 $ - $ 1,227 $ 644
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Allowance for losses on property dispositions..... $ 12,934 $ (190)(B) $ - $ - $ 12,744
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
FISCAL YEAR ENDED JANUARY 3, 1992
Allowance for doubtful accounts
Current........................................ $ 12,611 $ 6,421 $ (703) $ 5,619(A) $ 12,710
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Long-term...................................... $ 1,378 $ 57 $ 359 $ 98 $ 1,696
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Allowance for losses on property dispositions..... $ 13,107 $ (173)(B) $ - $ - $ 12,934
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
- ---------------
(A) Uncollectible accounts written off, net of amounts recovered.
(B) Amortization of reserve balance.
(C) Write-off at time of property dispositions.
S-11
SCHEDULE X
THE PROMUS COMPANIES INCORPORATED
CONSOLIDATED SUPPLEMENTARY INCOME STATEMENT INFORMATION
(IN THOUSANDS)
- ----------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B
- ----------------------------------------------------------------------------------------------------------------
ITEM CHARGED TO COSTS AND EXPENSES
- ----------------------------------------------------------------------------------------------------------------
FISCAL YEAR
-------------------------------
1993 1992 1991
--------- --------- ---------
Maintenance and repairs........................................................ $ 24,624 $ 23,665 $ 18,506
Taxes other than payroll and income taxes
Gaming taxes................................................................. 72,077 55,576 53,811
Property taxes............................................................... 19,152 18,993 16,186
Miscellaneous taxes.......................................................... 4,661 2,408 1,396
Advertising.................................................................... 33,071 31,366 25,930
S-12
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated February 8, 1994, included in or incorporated by reference
in this Form 10-K for the year ended December 31, 1993, into the Company's
previously filed Registration Statements File Nos. 33-32863, 33-32864 and
33-32865.
ARTHUR ANDERSEN & CO.
Memphis, Tennessee,
March 28, 1994.
EXHIBIT INDEX
NO.
- -------
3(1) -Certificate of Incorporation of The Promus Companies Incorporated. (1)
3(2) -Bylaws of The Promus Companies Incorporated, as amended. (16)
4(1) -Rights Agreement dated as of February 7, 1990, between The Promus
Companies Incorporated and The Bank of New York as Rights Agent. (12)
4(2) -Offering Circular dated February 9, 1988, for $200,000,000 Holiday
Inns, Inc. 8 5/8% Notes due 1993 and $200,000,000 9% Notes due 1995;
Indenture dated as of February 15, 1988, among Holiday Inns, Inc.,
Holiday Corporation and Sumitomo Bank of New York Trust Company,
Trustee; Irrevocable Letter of Credit dated February 25, 1988, by The
Sumitomo Bank, Limited, New York Branch. (3)
4(3) -Indenture Supplement No. 1 dated as of February 7, 1990, under
Indenture dated as of February 15, 1988, among Holiday Inns, Inc.,
Holiday Corporation and Sumitomo Bank of New York Trust Company,
Trustee; Amendment No. 1 dated February 7, 1990, to Irrevocable Letter
of Credit dated February 25, 1988, by The Sumitomo Bank, Limited, New
York Branch. (12)
4(4) -Indenture dated as of March 30, 1987, between Holiday Inns, Inc.,
Issuer, Holiday Corporation, Guarantor, and Commerce Union Bank (now
Sovran Bank/Central South), Trustee; Prospectus dated March 5, 1987,
for $900,000,000 Holiday Inns, Inc. 10 1/2% Senior Notes due 1994. (4)
4(5) -First Supplemental Indenture dated as of January 12, 1990, with respect
to the 10 1/2% Senior Notes due 1994, among Sovran Bank/Central South,
as trustee, Holiday Corporation, as guarantor, The Promus Companies
Incorporated and Holiday Inns, Inc., as issuer; Second Supplemental
Indenture dated as of February 7, 1990, with respect to the 10 1/2%
Senior Notes due 1994, among Holiday Inns, Inc., Holiday Corporation,
Embassy Suites, Inc., The Promus Companies Incorporated and Sovran
Bank/Central South; Form of Note for 10 1/2% Senior Notes due 1994.
(12)
4(6) -Indenture dated as of March 30, 1987, between Holiday Inns, Inc.,
Issuer, Holiday Corporation, Guarantor, and LaSalle National Bank,
Trustee; Prospectus dated March 5, 1987, for $500,000,000 Holiday Inns,
Inc. 11% Subordinated Debentures due 1999. (5)
4(7) -First Supplemental Indenture dated as of January 8, 1988, under
Indenture dated as of March 30, 1987, among Holiday Inns, Inc., Holiday
Corporation and LaSalle National Bank. (3)
4(8) -Second Supplemental Indenture dated as of February 23, 1988, under
Indenture dated as of March 30, 1987, among Holiday Inns, Inc., Holiday
Corporation, Guarantor, and LaSalle National Bank. (3)
4(9) -Third Supplemental Indenture dated as of January 17, 1990, with respect
to the 11% Subordinated Debentures due 1999, among LaSalle National
Bank, as trustee, Holiday Corporation, as guarantor, The Promus
Companies Incorporated and Holiday Inns, Inc., as issuer; Fourth
Supplemental Indenture dated as of February 7, 1990, with respect to
the 11% Subordinated Debentures due 1999, among Holiday Inns, Inc.,
Holiday Corporation, Embassy Suites, Inc., The Promus Companies
Incorporated and LaSalle National Bank; Form of Debenture for 11%
Subordinated Debentures due 1999. (12)
4(10) -Letter to Bank of New York dated March 18, 1993 constituting
Certificate under Section 12 of the Rights Agreement dated as of
February 7, 1990. (11)
4(11) -Interest Swap Agreement between Bank of America National Trust and
Savings Association and Embassy Suites, Inc. dated May 14, 1993. (6)
4(12) -Interest Swap Agreement between NationsBank of North Carolina, N.A. and
Embassy Suites, Inc. dated May 18, 1993. (6)
NO.
- -------
4(13) -First Supplemental Indenture dated as of July 15, 1987, among Irving
Trust Company, as resigning trustee with respect to the 1999 Notes,
Indiana National Bank as successor trustee with respect to the 1999
Notes and Holiday Inns, Inc.; Second Supplemental Indenture dated as of
January 8, 1988, under Indenture dated as of January 15, 1984, between
Holiday Inns, Inc., and Irving Trust Company, as trustee with respect
to 8 3/8% Notes due 1996; Third Supplemental Indenture dated as of
January 8, 1988, under Indenture dated as of January 15, 1984, among
Holiday Inns, Inc., Irving Trust Company, as resigning trustee with
respect to the 8 3/8% Notes due 1996, and LaSalle National Bank as
successor trustee with respect to the 8 3/8% Notes due 1996; Fourth
Supplemental Indenture dated as of February 23, 1988, under Indenture
dated as of January 15, 1984, between Holiday Inns, Inc. and LaSalle
National Bank, as trustee with respect to the 8 3/8% Notes due 1996.
(3)
4(14) -Fifth Supplemental Indenture dated as of January 23, 1990, with respect
to the 8 3/8% Notes due 1996, among LaSalle National Bank, as trustee,
The Promus Companies Incorporated and Holiday Inns, Inc., as issuer;
Sixth Supplemental Indenture dated as of February 7, 1990, with respect
to the 8 3/8% Notes due 1996, among Holiday Inns, Inc., Embassy Suites,
Inc., The Promus Companies Incorporated and LaSalle National Bank; Form
of Note for 8 3/8% Notes due 1996. (12)
4(15) -Indenture dated as of April 1, 1992, with respect to the 10 7/8% Senior
Subordinated Notes due 2002, among The Bank of New York, as trustee,
The Promus Companies Incorporated, as guarantor, and Embassy Suites,
Inc., as issuer; Form of Note for 10 7/8% Senior Subordinated Notes due
2002. (18)
4(16) -Indenture dated as of August 1, 1993, with respect to the 8 3/4% Senior
Subordinated Notes due 2000, among The Bank of New York, as trustee,
The Promus Companies Incorporated, as guarantor, and Embassy Suites,
Inc., as issuer; Form of Note for 8 3/4% Senior Subordinated Notes due
2000. (6)
4(17) -Interest Swap Agreement between The Sumitomo Bank, Limited and Embassy
Suites, Inc. dated October 22, 1992; Interest Swap Agreement between
The Bank of Nova Scotia and Embassy Suites, Inc. dated October 22,
1992; Interest Swap Agreement between The Nippon Credit Bank and
Embassy Suites, Inc. dated October 22, 1992; (18)
10(1) -Amended and Restated Agreement and Plan of Merger among Holiday
Corporation, Holiday Inns, Inc., The Promus Companies Incorporated,
Bass plc, Bass (U.S.A.) Hotels, Incorporated (a Delaware corporation)
and Bass (U.S.A.) Hotels, Incorporated (a Tennessee corporation), dated
as of August 24, 1989. (1)
10(2) -First Amendment to the Amended and Restated Agreement and Plan of
Merger among Holiday Corporation, Holiday Inns, Inc., The Promus
Companies Incorporated, Bass plc and Bass (U.S.A.) Hotels,
Incorporated, dated as of February 7, 1990. (2)
10(3) -Tax Sharing Agreement dated as of February 7, 1990, among Holiday
Corporation, Holiday Inns, Inc., The Promus Companies Incorporated,
Bass plc, Bass European Holdings, N.V., Bass (U.S.A.), Inc. and Bass
(U.S.A.) Hotels, Incorporated. (12)
10(4) -Form of Indemnification Agreement entered into by The Promus Companies
Incorporated and each of its directors and executive officers. (1)
10(5) -The Promus Companies Incorporated 1990 Stock Option Plan. (12)
10(6) -The Promus Companies Incorporated 1990 Restricted Stock Plan. (12)
10(7) -The Promus Companies Incorporated Savings and Retirement Plan Trust
Agreement. (12)
10(8) -Amendment to The Promus Companies Incorporated Savings and Retirement
Plan dated May 1, 1991. (15)
NO.
- -------
+10(9) -Financial Counseling Plan of The Promus Companies Incorporated as
amended February 25, 1993. (11)
+10(10) -Form of Severance Agreement dated July 30, 1993, entered into with E.
O. Robinson, Jr. and John M. Boushy. (22)
10(11) -Credit Agreement, dated as of July 22, 1993, among Embassy Suites,
Inc., The Promus Companies Incorporated, the Banks parties thereto,
Marina Associates and Bankers Trust Company, as Administrative Agent.
(19)
10(12) -Amended and Restated Reimbursement Agreement, dated as of July 22,
1993, among Embassy Suites, Inc., The Promus Companies Incorporated,
Marina Associates and The Sumitomo Bank, Limited, New York Branch. (19)
10(13) -Master Collateral Agreement, dated as of July 22, 1993, among The
Promus Companies Incorporated, Embassy Suites, Inc., the other
Collateral Grantors parties thereto, Bankers Trust Company, as
Administrative Agent, and Bankers Trust Company as Collateral Agent.
(19)
10(14) -Security Agreement dated as of July 22, 1993, among Embassy Suites,
Inc., the Collateral Grantors parties thereto and Bankers Trust
Company, as Collateral Agent. (19)
10(15) -Deed of Trust, Leasehold Deed of Trust, Assignment, Assignment of
Leases and Rents, Security Agreement and Financing Statement, dated as
of July 22, 1993, from Embassy Suites, Inc., Harrah's Laughlin, Inc.,
and Harrah's Reno Holding Company, Inc., the Grantors, to First
American Title Company of Nevada, as Trustee, for the benefit of
Bankers Trust Company, as Beneficiary. (19)
10(16) -Mortgage, Leasehold Mortgage, Assignment, Assignment of Leases and
Rents and Security Agreement, dated as of July 22, 1993, from Marina
Associates and Embassy Suites, Inc., the Mortgagors, to Bankers Trust
Company, as Collateral Agent and the Mortgagee. (19)
10(17) -Pledge Agreement, dated as of July 22, 1993, between The Promus
Companies Incorporated and Bankers Trust Company, as Collateral Agent.
(19)
10(18) -Pledge Agreement, dated as of July 22, 1993, among Embassy Suites,
Inc., ESI Equity Development Corporation, Harrah's, Harrah's Club,
Casino Holding Company, and Bankers Trust Company, as the General
Collateral Agent, and Bank of America Nevada as the Nevada Collateral
Agent. (19)
10(19) -Form of License Agreement for Hampton Inns. (7)
10(20) -Form of License Agreement for Hampton Inns revised 1988. (8)
10(21) -Form of License Agreement for Hampton Inns revised 1991. (15)
10(22) -Form of License Agreement for Hampton Inns revised 1992. (18)
10(23) -Form of License Agreement for Embassy Suites. (9)
10(24) -Form of License Agreement for Embassy Suites revised 1989. (12)
10(25) -Form of License Agreement for Embassy Suites revised 1990. (13)
10(26) -Form of License Agreement for Embassy Suites revised 1991. (15)
10(27) -Form of License Agreement for Embassy Suites revised 1992. (18)
10(28) -Form of Short-Term License Agreement for Embassy Suites. (12)
10(29) -Form of Short-Term License Agreement for Embassy Suites revised 1990.
(13)
10(30) -Form of Short-Term License Agreement for Embassy Suites revised 1991.
(15)
10(31) -Form of Short-Term License Agreement for Embassy Suites revised 1992.
(18)
10(32) -Form of License Agreement for Homewood Suites. (3)
10(33) -Form of License Agreement for Homewood Suites revised 1992. (18)
- ---------------
+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14(a)(3) of Form 10-K.
NO.
- -------
**10(34) -Form of License Agreement for Homewood Suites revised 1993.
**10(35) -Form of License Agreement for Embassy Suites revised 1993.
**10(36) -Form of Short-Term License Agreement for Embassy Suites revised 1993.
**10(37) -Form of License Agreement for Hampton Inns revised 1993.
**10(38) -Form of License Agreement for Hampton Inn & Suites.
10(39) -Management Agreement dated as of December 17, 1986, between Hampton
Inns, Inc. and Hampton/GHI Associates No. 1. (10)
10(40) -Form of Management Agreement between Embassy Suites, Inc. and
affiliates of General Electric Pension Trust. (10)
+10(41) -Employment Agreement dated August 1, 1987 between Holiday Corporation
and Michael D. Rose; Amendment to Employment Agreement dated as of
January 31, 1990 between The Promus Companies Incorporated and Michael
D. Rose. (12)
+10(42) -Amended and Restated Severance Agreement dated as of May 1, 1992
between The Promus Companies Incorporated and Michael D. Rose. (18)
+10(43) -Summary Plan Description of Executive Term Life Insurance Plan. (18)
+10(44) -Forms of Stock Option (1990 Stock Option Plan). (12)
+10(45) -Revised Forms of Stock Option (1990 Stock Option Plan). (18)
+10(46) -Form of The Promus Companies Incorporated's Annual Bonus Plan, as
amended, for Managers and Executives. (13)
+10(47) -Forms of Restricted Stock Award (1990 Restricted Stock Plan). (12)
+10(48) -Deferred Compensation Plan dated October 16, 1991. (15)
+10(49) -Form of Deferred Compensation Agreement. (12)
+10(50) -Form of Deferred Compensation Agreement revised November 1991. (15)
+10(51) -Executive Deferred Compensation Plan. (12)
+10(52) -First Amendment to Executive Deferred Compensation Plan, dated as of
October 25, 1990. (13)
+10(53) -Second Amendment to Executive Deferred Compensation Plan, dated as of
October 25, 1991. (15)
+10(54) -Third Amendment to Executive Deferred Compensation Plan, dated as of
October 29, 1992. (18)
+10(55) -Forms of Restricted Stock Award (1990 Restricted Stock Plan). (18)
+10(56) -First Amendment to Escrow Agreement dated January 31, 1990 among
Holiday Corporation, certain subsidiaries thereof and Sovran Bank, as
escrow agent. (12)
+10(57) -Escrow Agreement dated February 6, 1990 between The Promus Companies
Incorporated, certain subsidiaries thereof, and Sovran Bank, as escrow
agent. (12)
+10(58) -Form of Amended and Restated Severance Agreement dated November 5,
1992, entered into with Charles A. Ledsinger, Jr., Ben C. Peternell,
Philip G. Satre and Colin V. Reed. (18)
+10(59) -Form of memorandum agreement dated July 2, 1991, eliminating stock
appreciation rights under stock options held by Charles A. Ledsinger,
Jr., Ben C. Peternell and Philip G. Satre. (14)
+10(60) -The Promus Companies Incorporated Amended and Restated Savings and
Retirement Plan dated as of February 6, 1990. (18)
+10(61) -Administrative Regulations, Long Term Compensation Plan (Restricted
Stock Plan and Stock Option Plan), dated as of January 1, 1992. (17)
+10(62) -Amendment dated October 29, 1992 to The Promus Companies Incorporated
Savings and Retirement Plan Trust Agreement; Amendment dated September
21, 1992 to The Promus Companies Incorporated Savings and Retirement
Plan Trust Agreement (18)
+10(63) -Revised Form of Stock Option. (21)
+10(64) -The Promus Companies Incorporated 1990 Stock Option Plan (as amended
as of April 30, 1993). (20)
- ---------------
** Filed herewith
+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14(a)(3) of Form 10-K.
NO.
- -------
**10(65)-Limited Partnership Agreement of Des Plaines Limited Partnership
between Harrah's Illinois Corporation and John Q. Hammons, dated
February 28, 1992; First Amendment to Limited Partnership Agreement of
Des Plaines Limited Partnership dated as of October 5, 1992.
+**10(66)-Amendment to Escrow Agreement dated as of October 29, 1993 among The
Promus Companies Incorporated, certain subsidiaries thereof, and
NationsBank, formerly Sovran Bank.
**10(67)-Amended and Restated Partnership Agreement of Harrah's Jazz Company,
dated as of March 15, 1994, among Harrah's New Orleans Investment
Company, New Orleans/Louisiana Development Corporation and Grand Palais
Casino, Inc.; First Amendment to the Amended and Restated Partnership
Agreement of Harrah's Jazz Company, effective as of March 15, 1994.
10(68) -Form of Ground Lease by and among Harrah's Jazz Company, Rivergate
Development Corporation and the City of New Orleans. (23)
10(69) -Form of General Development Agreement among Harrah's Jazz Company,
Rivergate Development Corporation and the City of New Orleans. (23)
10(70) -Form of Temporary Casino Lease by and among Harrah's Jazz Company,
Rivergate Development Corporation and the City of New Orleans. (23)
10(71) -Form of Casino Management Agreement between Harrah's Jazz Company and
Harrah's New Orleans Management Company. (23)
**11 -Computations of per share earnings.
**12 -Computations of ratios.
**13 -Portions of Annual Report to Stockholders for the fiscal year ended
December 31, 1993. (24)
**21 -List of subsidiaries of The Promus Companies Incorporated.
99(1) -Proxy Statement--Information Statement--Prospectus dated December 13,
1989 of Holiday Corporation, The Promus Companies Incorporated and Bass
Public Limited Company. (12)
- ---------------
** Filed herewith
+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14(a)(3) of Form 10-K.
FOOTNOTES
(1) Incorporated by reference from the Company's Registration Statement on Form
10, File No. 1-10410, filed on December 13, 1989.
(2) Incorporated by reference from the Company's Current Report on Form 8-K
dated February 16, 1990, File No. 1-10410.
(3) Incorporated by reference from Holiday Corporation's Annual Report on Form
10-K for the fiscal year ended January 1, 1988, filed March 31, 1988, File
No. 1-8900.
(4) Incorporated by reference from Holiday Inns, Inc.'s Registration Statement
on Form S-3, File No. 33-11770, filed February 24, 1987.
(5) Incorporated by reference from Holiday Inns, Inc's Registration Statement
on Form S-3, File No. 33-11163, filed December 31, 1986.
(6) Incorporated by reference from the Company's and Embassy Suites, Inc.'s
Amendment No. 2 to Form S-4 Registration Statement, File No. 33-49509-01,
filed July 16, 1993.
(7) Incorporated by reference from Holiday Inns, Inc.'s Annual Report on Form
10-K for the fiscal year ended December 30, 1983, filed March 21, 1984,
File No. 1-4804.
(8) Incorporated by reference from Holiday Corporation's Annual Report on Form
10-K for the fiscal year ended December 30, 1988, filed March 30, 1989,
File No. 1-8900.
(9) Incorporated by reference from Holiday Corporation's Annual Report on Form
10-K for the fiscal year ended January 3, 1986, filed March 28, 1986, File
No. 1-8900.
(10) Incorporated by reference from Holiday Corporation's Annual Report on Form
10-K for the fiscal year ended January 2, 1987, filed March 27, 1987, File
No. 1-8900.
(11) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1993, filed May 13, 1993, File No. 1-10410.
(12) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended December 29, 1989, filed March 28, 1990, File No.
1-10410.
(13) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended December 28, 1990, filed March 21, 1991, File No.
1-10410.
(14) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended September 27, 1991, filed November 8, 1991, File No.
1-10410.
(15) Incorporated by reference from Amendment No. 2 to the Company's and
Embassy's Registration Statement on Form S-1, file No. 33-43748, filed
March 18, 1992.
(16) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended January 3, 1992, filed March 26, 1992, File No.
1-10410.
(17) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1992, filed May 13, 1992, File No. 1-10410.
(18) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992, filed March 12, 1993, File No.
1-10410.
(19) Incorporated by reference from the Company's Current Report on Form 8-K
filed August 6, 1993, File No. 1-10410.
(20) Incorporated by reference from Post-Effective Amendment No. 1 to Form S-8
Registration Statement, File No. 33-32864-01, filed July 22, 1993.
(21) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1993, filed August 12, 1993, File No.
1-10410.
(22) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1993, filed November 12, 1993, File No.
1-10410.
(23) Incorporated by reference from Amendment No. 1 to Form S-1 Registration
Statement, File No. 33-73370, filed February 22, 1994.
(24) Filed herewith to the extent provisions of such report are specifically
incorporated herein by reference.
HOMEWOOD SUITES DIVISION
6800 POPLAR AVENUE, SUITE 200
MEMPHIS, TENNESSEE 38138
HOMEWOOD SUITES(R)
LICENSE AGREEMENT
dated _______________________________, 19__ between Homewood Suites Division of
Embassy Suites, Inc., a Delaware corporation ("Licensor"), and _________________
________________________________________________________________________________
individual
a ______________________________________________________________ corporation
("Licensee"), whose partnership
address is______________________________________________________________________
_______________________________________________________________________________.
THE PARTIES AGREE AS FOLLOWS:
1. The License.
Licensor owns, operates and licenses a system designed to provide a
distinctive, high quality hotel service to the public under the name "Homewood
Suites" (the "System"). High standards established by Licensor are the essence
of the System. Future investments may be required of Licensee under this
Agreement. Licensee has independently investigated the risks of the business to
be operated hereunder, including current and potential market conditions,
competitive factors and risks, has read Licensor's "Offering Circular for
Prospective Franchisees", and has made an independent evaluation of all such
facts. Aware of the relevant facts, Licensee desires to enter into this
Agreement in order to obtain a license to use the System in the operation of a
hotel (the "Hotel") located at
_______________________________________________________________________________.
a. The Hotel. The Hotel comprises all structures, facilities,
appurtenances, furniture, fixtures, equipment, and entry, exit, parking and
other areas from time to time located on the land identified on the plot
plan most recently submitted to and acknowledged by Licensor in
anticipation of the execution of this Agreement, or located on any land
from time to time approved by Licensor for additions, signs or other
facilities. The Hotel now includes the facilities listed on Attachment A
hereto. No change in the number of approved suites or double bedded
bedrooms (suites and double bedded bedrooms are hereinafter referred to
collectively as "Suites") and no other significant change in the Hotel may
be made without Licensor's approval. Redecoration and minor structural
changes that comply with Licensor's standards and specifications will not
be considered significant. Licensee represents that it is entitled to
possession of the Hotel during the entire License Term without restrictions
that would interfere with anything contemplated in this Agreement.
b. The System. The System is composed of elements, as designated from
time to time by Licensor, designed to identify Homewood Suites hotels to
the consuming public and/or to contribute to such identification and its
association with quality standards. The System at present includes the
service mark "Homewood Suites" and such other service marks and such
copyrights, trademarks and similar property rights as may be designated
from time to time by Licensor to be part of the System; access to a
reservation service; distribution of advertising, publicity and other
marketing programs and materials; furnishing of training programs and
materials; standards, specifications and policies for construction,
furnishing, operation, appearance and service of the Hotel, and other
requirements as stated or referred to in this Agreement and from time to
time in Licensor's Standards Manual (the "Manual") or in other
communications to Licensee; and programs for inspecting the Hotel and
consulting with Licensee. Licensor may add elements to the System or
modify, alter or delete elements of the System at its sole discretion from
time to time.
2. Grant of License. Licensor hereby grants to Licensee a nonexclusive
license (the "License") to use the System only at the Hotel, only in
accordance with this Agreement and only during the "License Term" beginning
with the date hereof and terminating as provided in Paragraph 10 hereof.
The License applies to the location of the Hotel specified herein and no
other. This Agreement does not limit Licensor's right, or the rights of
any parent, subsidiary, division or affiliate of Licensor, to use or
license to others the System or any part thereof or to engage in or license
any business activity at any other location. Licensee acknowledges that
Licensor, its parent, subsidiaries, divisions and affiliates are and may in
the future be engaged in other business activities including activities
involving transient lodging and related activities which may be or may be
deemed to be competitive with the System; that facilities, programs,
services and/or personnel used in connection with the System may also be
used in connection with such other business activities of Licensor, its
parent, subsidiaries, divisions or affiliates; and that Licensee is
acquiring no rights hereunder other than the right to use the System as
specifically defined herein in accordance with the terms of this Agreement.
3. Licensee's Responsibilities.
a. Operational and Other Requirements. During the License Term, Licensee
will:
(1) maintain a high moral and ethical standard and atmosphere at the
Hotel;
(2) maintain the Hotel in a clean, safe and orderly manner and in
first class condition;
(3) provide efficient, courteous and high-quality service to the
public;
(4) operate the Hotel 24 hours a day every day except as otherwise
permitted by Licensor based on special circumstances;
(5) strictly comply in all respects with the Manual and with all
other policies, procedures and requirements of Licensor which may be
from time to time communicated to Licensee;
(6) strictly comply with Licensor's reasonable requirements to
protect the System and the Hotel from unreliable sources of supply;
(7) strictly comply with Licensor's requirements as to:
(a) the types of services and products that may be used,
promoted or offered at the Hotel;
(b) the types and quality of services and products that, to
supplement services listed on Attachment A, must be used,
promoted or offered at the Hotel;
(c) use, display, style and type of signage;
(d) directory and reservation service listings of the Hotel;
(e) training of persons to be involved in the operation of the
Hotel;
(f) participation in all marketing, reservation service,
advertising, training and operating programs designated by
Licensor as Systemwide (or area-wide) programs in the best
interests of hotels using the System;
(g) maintenance, appearance and condition of the Hotel; and
(h) quality and type of service offered to customers at the
Hotel.
(8) use such automated guest service and/or hotel management and/or
telephone system(s) which Licensor deems to be in the best interests
of the System, including any additions, enhancements, supplements or
variants thereof which may be developed during the term hereof;
(9) participate in and use those reservation services which Licensor
deems to be in the best interests of the System, including any
additions, enhancements, supplements or variants thereof which may be
developed during the term hereof;
(10) adopt improvements or changes to the System as may be from time
to time designated by Licensor;
(11) strictly comply with all governmental requirements including the
filing and maintenance of any required trade name or fictitious name
registrations, pay all taxes, and maintain all governmental licenses
and permits necessary to operate the Hotel in accordance with the
System;
(12) permit inspection of the Hotel by Licensor's representatives at
any time and give them free lodging for such time as may be reasonably
necessary to complete their inspections;
(13) promote the Hotel on a local or regional basis subject to
Licensor's requirements as to form, content and prior approvals;
(14) insure that no part of the Hotel or the System is used to
further or promote a competing business or other lodging facility,
except as Licensor may approve for those competing businesses or
lodging facilities owned, licensed, operated or otherwise approved by
Licensor or its parent, divisions, subsidiaries and/or affiliates;
(15) use every reasonable means to encourage use of Homewood Suites
facilities everywhere by the public;
(16) in all respects use Licensee's best efforts to reflect credit
upon and create favorable public response to the name "Homewood
Suites"; and
(17) promptly pay to Licensor all amounts due Licensor, its parent,
divisions, subsidiaries and/or affiliates as royalties or fees or for
goods or services purchased by Licensee; and
(18) comply with Licensor's requirements concerning confidentiality
of information.
b. Upgrading of the Hotel. Licensor may at any time during the term
hereof require substantial modernization, rehabilitation and other
upgrading of the Hotel. Limited exceptions from those standards may be
made by Licensor based on local conditions or special circumstances. If
the upgrading requirements contained in this Paragraph 3.b. cause Licensee
undue hardship, Licensee may terminate this Agreement by paying a fee
computed according to Paragraph 10.f.
c. Fees.
(1) For each month (or part of a month) during the License Term,
Licensee will pay to Licensor by the 15th of the following month:
(a) a royalty fee of 4 percent of the gross revenues
attributable to or payable for rental of Suites at the Hotel with
deductions for sales and room taxes only ("Gross Rooms Revenue");
(b) a "Marketing/Reservation Contribution" of 4 percent of Gross
Rooms Revenue ), this contribution being subject to change by
Licensor from time to time, which payments do not include the
cost of reservation services equipment or installation or
maintenance of it or training; and
(c) an amount equal to any sales, gross receipts or similar tax
imposed on Licensor and calculated solely on payment required
hereunder, unless the tax is an optional alternative to an income
tax otherwise payable by Licensor.
Licensee will operate the Hotel so as to maximize Gross
Rooms Revenue of the Hotel consistent with sound marketing and
industry practice and will not engage in any conduct which
reduces Gross Rooms Revenue of the Hotel in order to further
other business activities.
(2) Additional royalties may be charged on revenues (or upon any
other basis, if so determined by Licensor) from any activity if it is
added at the Hotel by mutual agreement and:
(a) it is not now offered at System hotels generally and it is
likely to benefit significantly from or be identified
significantly with the Homewood Suites name or other aspects of
the System; or
(b) it is designed or developed by or for Licensor.
(3) Charges may be made by Licensor for optional products or services
accepted by Licensee from Licensor either in accordance with current
practice or as developed in the future.
(4) A standard initial fee for Suite additions to a hotel as set
forth in Licensor's then current "Offering Circular for Prospective
Franchisees" shall be paid by Licensee to Licensor on Licensee's
submission of an application to add any Suites to the Hotel. As a
condition to Licensor granting its approval of such application,
Licensor may require Licensee to upgrade the Hotel, subject to
Paragraph 3.b.
(5) Local and regional marketing programs and related activities may
be conducted by Licensee, but only at Licensee's expense and subject
to Licensor's requirements. Reasonable charges may be made by
Licensor for optional advertising materials ordered or used by
Licensee for such programs and activities.
(6) Licensee shall participate in Licensor's travel agent commission
program(s) as it may be modified from time to time and shall reimburse
Licensor on or before the 15th of each month for travel agent
commissions paid by Licensor.
(7) Each payment under this Paragraph 3.c. shall be accompanied by
the monthly statement referred to in Paragraph 6. Licensor may apply
any amounts received under this paragraph to any amounts due under
this Agreement. If any amounts are not paid when due, such
non-payment shall constitute a breach of this Agreement and, in
addition, such unpaid amounts will accrue interest beginning on the
first day of the month following the due date at 1 1/2 percent per
month but not to exceed the maximum interest permitted by applicable
law.
4. Licensor's Responsibilities.
a. Training. During the License Term, Licensor will continue to specify
and provide required and optional training programs at various locations.
Reasonable charges may be made for required training services and
materials. Charges may also be made by Licensor for optional training
services and materials provided to Licensee. Travel, lodging and other
expenses of Licensee and its employees will be borne by Licensee.
b. Reservation Services. During the License Term, so long as Licensee is
in full compliance with its material obligations hereunder, Licensor will
afford Licensee access to reservation services for the Hotel.
c. Consultation on Operations, Facilities and Marketing. Licensor will,
from time to time at Licensor's sole discretion, make available to Licensee
consultation and advice in connection with operations, facilities and
marketing. Licensor shall have the right to establish fees in advance for
its advice and consultation on a project-by-project basis.
d. Use of Marketing/Reservation Contribution. The Marketing/Reservation
Contribution will be used by Licensor for costs associated with
advertising, promotion, publicity, market research and other marketing
programs and related activities, including reservation programs and
services. Licensor is not obligated to expend funds for marketing or
reservation services in excess of the amounts received from licensees using
the System.
e. Application of Manual. All hotels operated under the System will be
subject to the Manual, as it may from time to time be modified or revised
by Licensor, including limited exceptions which may be made by Licensor
based on local conditions or special circumstances. Each change in the
Manual must be explained in writing to Licensee at least 30 days before it
goes into effect.
f. Other Arrangements for Marketing, Etc. Licensor may enter into
arrangements for development, marketing, operations, administrative,
technical and support functions, facilities, programs, services and/or
personnel with any other entity and may use any facilities, programs,
services and/or personnel used in connection with the System in connection
with any business activities of its parent, subsidiaries, divisions or
affiliates.
g. Compliance Assistance. If the Hotel fails to comply with the standards
and rules of operation set forth in the Manual, Licensor may, at its option
and at Licensee's cost, meet with the Licensee at the Hotel to develop a
plan to ensure that the Hotel thereafter complies with the standards and
rules of operation set forth in the Manual.
5. Proprietary Rights.
a. Ownership of System. Licensee acknowledges and will not contest,
either directly or indirectly, Licensor's unrestricted and exclusive
ownership of the System and any element(s) or component(s) thereof, and
acknowledges that Licensor has the sole right to grant licenses to use all
or any element(s) or component(s) of the System. Licensee specifically
agrees and acknowledges that Licensor is the owner of all right, title and
interest in and to the service mark "Homewood Suites" and all other marks
associated with the System together with the goodwill symbolized thereby
and that Licensee will not contest directly or indirectly the validity or
ownership of the marks either during the term of this Agreement or at any
time thereafter. All improvements and additions whenever made to or
associated with the System by the parties to this Agreement or anyone else,
and all service marks, trademarks, copyrights, and service mark and
trademark registrations at any time used, applied for or granted in
connection with the System, and all goodwill arising from Licensee's use of
Licensor's marks shall inure to the benefit of and become the property of
Licensor. Upon expiration or termination of this Agreement, no monetary
amount shall be assigned as attributable to any goodwill associated with
Licensee's use of the System or any element(s) or component(s) of the
System including the name or marks.
b. Trademark Disputes. Licensor will have the sole right and
responsibility to handle disputes with third parties concerning use of all
or any part of the System, and Licensee will, at its reasonable expense,
extend its full cooperation to Licensor in all such matters. All
recoveries made as a result of disputes with third parties regarding use of
the System or any part thereof shall be for the account of Licensor.
Licensor need not initiate suit against alleged imitators or infringers and
may settle any dispute by grant of a license or otherwise. Licensee will
not initiate any suit or proceeding against alleged imitators or infringers
or any other suit or proceeding to enforce or protect the System.
c. Protection of Name and Marks. Both parties will make every effort
consistent with the foregoing to protect and maintain the name and mark
"Homewood Suites" and its distinguishing characteristics (and the other
service marks, trademarks, slogans, etc., associated with the System).
Licensee agrees to execute any documents deemed necessary by Licensor or
its counsel to obtain protection for Licensor's marks or to maintain their
continued validity and enforceability. Licensee agrees to use the names
and marks associated with the System only in the manner authorized by
Licensor and acknowledges that any unauthorized use thereof shall
constitute infringement of Licensor's rights.
6. Records and Audits.
a. Monthly Reports. At least monthly, Licensee shall prepare a statement
which will include all information concerning Gross Rooms Revenue, other
revenues generated at the Hotel, room occupancy rates, reservation data and
other information required by Licensor that may be useful in connection
with marketing and other functions of Licensor, its parent, subsidiaries,
divisions or affiliates (the "Data"). The Data shall be the property of
Licensor. The Data will be permanently recorded and retained as may be
reasonably required by Licensor. By the 15th of each month, Licensee will
submit to Licensor a statement setting forth the Data for the previous
month and reflecting the computation of the amounts then due under
Paragraph 3.c. The statement will be in such form and detail as Licensor
may reasonably request from time to time, and may be used by Licensor for
its reasonable purposes.
b. Daily Reports. At the request of Licensor, Licensee shall prepare and
deliver daily reports to Licensor, which reports will contain information
reasonably requested by Licensor on a daily basis, such as daily rate and
room occupancy, and which may be used by Licensor for its reasonable
purposes.
c. Preparation and Maintenance of Records. Licensee shall, in a manner
and form satisfactory to, Licensor and utilizing accounting and reporting
standards as reasonably required by Licensor, prepare on a current basis
(and preserve for no less than four years), complete and accurate records
concerning Gross Rooms Revenue and all financial, operating, marketing and
other aspects of the Hotel, and maintain an accounting system which fully
and accurately reflects all financial aspects of the Hotel and its
business. Such records shall include but not be limited to books of
account, tax returns, governmental reports, register tapes, daily reports,
and complete quarterly and annual financial statements (profit and loss
statements, balance sheets and cash flow statements).
d. Audit. Licensor may require Licensee to have the Gross Rooms Revenue
or other monies due hereunder computed and certified as accurate by a
certified public accountant. During the License Term and for two years
thereafter, Licensor and its authorized agents shall have the right to
verify information required under this Agreement by requesting, receiving,
inspecting and auditing, at all reasonable times, any and all records
referred to above wherever they may be located (or elsewhere if reasonably
requested by Licensor). If any such inspection or audit discloses a
deficiency in any payments due hereunder, Licensee shall immediately pay to
Licensor the deficiency and Licensee shall also immediately pay to Licensor
the entire cost of the inspection and audit, including but not limited to
travel, lodging, meals, salaries and other expenses of the inspecting or
auditing personnel. Licensor's acceptance of Licensee's payment of any
deficiency as provided for herein shall not waive Licensor's right to
terminate this Agreement as provided for herein in Paragraph 10. If the
audit discloses an overpayment, Licensor shall immediately refund it to
Licensee.
e. Annual Financial Statements. Licensee will submit to Licensor as soon
as available but not later than 90 days after the end of Licensee's fiscal
year, complete financial statements for such year. Licensee will certify
them to be true and correct and to have been prepared in accordance with
generally accepted accounting principles consistently applied, and any
false certification will be a breach of this Agreement.
7. Indemnity and Insurance.
a. Indemnity. Licensee will indemnify, during and after the term of this
Agreement, Licensor, its parent, and their respective subsidiaries,
divisions and affiliates and their officers, directors, employees, agents,
successors and assigns against, hold them harmless from, and promptly
reimburse them for, all payments of money (fines, damages, legal fees,
expenses, etc.) by reason of any claim, demand, tax, penalty, or judicial
or administrative investigation or proceeding (even where negligence of
Licensor and/or its parent, and/or their subsidiaries, divisions and
affiliates and/or their officers, directors, employees, agents, successors
and assigns is actual or alleged) arising from any claimed occurrence at
the Hotel or arising from, as a result of or in connection with the design,
construction, furnishings, equipment and acquisition of supplies or any
other of Licensee's acts, omissions or obligations or those of anyone
associated or affiliated with Licensee or the Hotel. At the election of
Licensor, Licensee will also defend Licensor and/or its parent, and their
subsidiaries, divisions and affiliates and their officers, directors,
employees, agents, successors and assigns against same. In any event,
Licensor will have the right, through counsel of its choice, to control any
matter to the extent it could directly or indirectly affect Licensor and/or
its parent and their subsidiaries, divisions and affiliates and their
officers, directors, employees, agents, successors and assigns financially.
Licensee will also reimburse Licensor for all expenses, including
attorneys' fees and court costs, reasonably incurred by Licensor to protect
itself and/or its parent, and their subsidiaries, divisions and affiliates
and/or their officers, directors, employees, agents and their successors
and assigns from, or to remedy Licensee's defaults under this Agreement.
b. Insurance. During the License Term, Licensee will comply with all
insurance requirements of any lease or mortgage covering the Hotel, and
Licensor's specifications for insurance as to amount and type of coverage
as may be reasonably specified by Licensor from time to time in writing,
and will in any event maintain as a minimum the following insurance
underwritten by an insurer approved by Licensor:
(1) employer's liability and workers' compensation insurance as
prescribed by applicable law; and
(2) liquor liability insurance naming Licensor, Embassy Suites, Inc.
and The Promus Companies Incorporated as additional insureds with
single-limit coverage for personal and bodily injury and property
damage of at least $10,000,000 for each occurrence; and
(3) comprehensive general liability insurance (with products,
completed operations and independent contractors coverage) and
comprehensive automobile liability insurance, all on an occurrence
basis naming Licensor, Embassy Suites, Inc. and The Promus Companies
Incorporated as additional insureds and underwritten by an insurer
approved by Licensor, with single-limit coverage for personal and
bodily injury and property damage of at least $10,000,000 for each
occurrence. In connection with all significant construction at the
Hotel during the License Term, Licensee will cause the general
contractor to maintain with an insurer approved by Licensor
comprehensive general liability insurance (with products, completed
operations and independent contractors coverage) in at least the
amount of $10,000,000 for each occurrence with Licensor, Embassy
Suites, Inc. and The Promus Companies Incorporated named as additional
insureds.
c. Changes in Insurance. Simultaneously herewith, annually hereafter and
each time a change is made in any insurance or insurance carrier, Licensee
will furnish to Licensor certificates of insurance including the term and
coverage of the insurance in force, the persons insured, and the fact that
the coverage may not be cancelled, altered or permitted to lapse or expire
without 30 days' advance written notice to Licensor.
8. Transfer.
a. Transfer by Licensor. Licensor shall have the right to transfer or
assign this Agreement or any of Licensor's rights or obligations hereunder
to any person or legal entity.
b. Transfer by Licensee. Licensee understands and acknowledges that the
rights and duties set forth in this Agreement are personal to Licensee, and
that Licensor has entered into this Agreement in reliance on the business
skill, financial capacity, and personal character of Licensee (if Licensee
is an individual), and that of the partners or stockholders of Licensee (if
Licensee is a partnership or corporation). Accordingly, neither Licensee
nor any immediate or remote successor to any part of Licensee's interest in
this Agreement, nor any individual, partnership, corporation, or other
legal entity which directly or indirectly owns an equity interest (as that
term is defined herein) in Licensee, shall sell, assign, transfer, convey,
pledge, mortgage, encumber, or give away any direct or indirect interest in
this Agreement or equity interest in Licensee, except as provided in this
Agreement. Any purported sale, assignment, transfer, conveyance, pledge,
mortgage, or encumbrance, by operation of law or otherwise, of any interest
in this Agreement or any equity interest in Licensee not in accordance with
the provisions of this Agreement, shall be null and void and shall
constitute a material breach of this Agreement, for which Licensor may
terminate this Agreement upon notice without opportunity to cure, pursuant
to Paragraph 10.d.(4).
(1) For the purposes of this Paragraph 8, the term "equity interest"
shall mean any stock or partnership interest in Licensee, the interest
of any partner, whether general or limited, in any partnership, with
respect to such partnership, and any stockholder of any corporation
with respect to such corporation, which partnership or corporation is
the Licensee hereunder or which partnership or corporation owns a
direct or indirect beneficial interest in Licensee. References in
this Agreement to "publicly-traded equity interest" shall mean any
equity interest which is traded on any securities exchange or is
quoted in any publication or electronic reporting service maintained
by the National Association of Securities Dealers, Inc. or any of its
successors.
(2) If Licensee is a partnership or corporation, Licensee represents
that the equity interests in Licensee are directly and (if applicable)
indirectly owned as shown in Attachment A hereto.
c. Transfer of Equity Interests that are not Publicly Traded.
(1) Except where otherwise provided in this Agreement, equity
interests in Licensee that are not publicly traded may be transferred,
issued, or eliminated with Licensor's prior written consent, which
will not be unreasonably withheld, provided that, after the
transaction:
(a) 50 percent or less of all equity interests in Licensee will
have changed hands since Licensee first became a party to this
Agreement, or
(b) 80 percent or less of all equity interests in Licensee will
have changed hands since Licensee first became a party to this
Agreement, and no equity interest will be held by other than
those who held them when Licensee first became a party to this
Agreement.
(2) In computing the percentages referred to in Paragraph 8.c.(1)
above, limited partners will not be distinguished from general
partners, and Licensor's judgment will be final if there is any
question as to the definition of "equity interest" or as to the
computation of relative equity interests, the principal considerations
being:
(a) Direct and indirect power to exercise control over the
affairs of Licensee; and
(b) Direct and indirect right to share in Licensee's profits;
and
(c) Amounts directly or indirectly exposed to risk in Licensee's
business.
d. Transfers of Publicly-Traded Equity Interests.
(1) Except as otherwise provided in this Agreement, publicly-traded
equity interests in the Licensee may be transferred without the
Licensor's consent, but only if:
(a) Immediately before the proposed transfer, the transferor
owns less than 25 percent of the equity interest of
Licensee; and
(b) Immediately after the transfer the transferee will own less
than 25 percent of the equity interest in Licensee; and
(c) The transfer is exempt from registration under federal
securities law.
(2) Publicly-traded equity interests may be transferred with
Licensor's written consent, which may not be unreasonably withheld, if
the transfer is exempt from registration under federal securities law.
(3) The chief financial officer of Licensee shall certify annually to
Licensor that Licensee is in compliance with the provisions of this
Paragraph 8.d. Such certification shall be delivered to Licensor with
the Annual Financial Statements referred to in Paragraph 6.e. hereof.
e. Transfer of the License.
(1) Licensee, if a natural person, may with Licensor's consent, which
will not be unreasonably withheld, transfer the License to Licensee's
spouse, parent, sibling, niece, nephew, descendant, or spouse's
descendant, provided that:
(a) Adequate provision is made for management of the Hotel; and
(b) The transferee executes a new license agreement for the
unexpired term of this Agreement, on the standard form then being
used to license new hotels under the System, except that the fees
charged then shall be the same as those contained herein; and
(c) Licensee guarantees, in Licensor's usual form, the
performance of the transferee's obligations under the
newly-executed license agreement.
(2) If Licensee is a natural person, he may, without the consent of
Licensor, upon 30 days prior written notice to Licensor, transfer the
License to a corporation entirely owned by him, provided that:
(a) Adequate provision is made for management of the Hotel; and
(b) The transferee executes a new license agreement for the
unexpired term of this Agreement, on the standard form then being
used to license new hotels under the System, except that the fees
charged then shall be the same as those contained herein; and
(c) The Licensee guarantees, in Licensor's usual form, the
performance of the transferee's obligations under the
newly-executed license agreement.
f. Transfers of the License or Equity Interest in Licensee Upon Death.
(1) If Licensee is a natural person, upon the Licensee's death, the
License will pass in accordance with Licensee's will, or, if Licensee
dies intestate, in accordance with laws of intestacy governing the
distribution of the Licensee's estate, provided that:
(a) Adequate provision is made for management of the Hotel; and
(b) Licensor gives written consent, which consent will not be
unreasonably withheld; and
(c) The transferee is one or more of the decedent's spouse,
parents, siblings, nieces, nephews, descendants, or spouse's
descendants; and
(d) Licensee's heirs or legatees promptly advise Licensor and
promptly execute a new license agreement for the unexpired term
of this Agreement, on the standard form then being used to
license new hotels under the System, except the fees charged
thereunder shall be the same contained herein.
(2) If an equity interest is owned by a natural person, the equity
interest will pass upon such person's death in accordance with such
person's will or, if such person dies intestate, in accordance with
the laws of intestacy governing the distribution of such person's
estate, provided that:
(a) Adequate provision is made for management of the Hotel; and
(b) Licensor gives written consent, which consent will not be
unreasonably withheld; and
(c) The transferee is one or more of the decedent's spouse,
parents, siblings, nieces, nephews, descendants, or spouse's
descendants; and
(d) The transferee assumes, in writing, on a continuing basis,
the decedent's guarantee, if any, of Licensee's obligations
hereunder.
g. Registration of a Proposed Transfer of Equity Interests. If a proposed
transfer of an equity interest in Licensee requires registration under any
federal or state securities law, Licensee shall:
(1) Request Licensor's consent at least 45 days before the proposed
effective date of the registration; and
(2) Accompany such request with one payment of a nonrefundable fee of
$25,000; and
(3) Reimburse Licensor for expenses incurred by Licensor in
connection with review of the materials concerning the proposed
registration, including without limitation, attorneys' fees and travel
expenses; and
(4) Agree, and all participants in the proposed offering subject to
registration shall agree, to fully indemnify Licensor in connection
with the registration; furnish Licensor all information requested by
Licensor; avoid any implication of Licensor's participating in, or
endorsing the offering; and use Licensor's service marks and
trademarks only as directed by Licensor.
h. Management of the Hotel. Licensee must at all times retain and
exercise direct management control over the Hotel's business. Licensee
shall not enter into any lease, management agreement or other similar
arrangement for the operation of the Hotel or any part thereof (including
without limitation, food and/or beverage service facilities), with any
independent entity without the prior consent of Licensor.
i. Application for New License Agreement upon Transfer of the Hotel.
(1) If Licensee wishes to transfer the Hotel, or any interest of
Licensee in the Hotel, Licensee shall give prompt written notice
thereof to Licensor, stating the identity of the prospective
transferee and the terms and conditions of the transfer, including a
copy of any proposed agreement and all other information with respect
thereto, which Licensor may reasonably require.
(2) If Licensee proposes to transfer the Hotel or any interest of
Licensee in the Hotel to a transferee who desires thereafter to
operate the Hotel under the System, the proposed transferee must, with
Licensee's consent, apply for a new license agreement to replace this
Agreement for a term to be determined by Licensor. Licensor shall
process the application in good faith and in accordance with
procedures, criteria and requirements regarding fees, upgrade of the
Hotel, credit, operational abilities and capabilities, prior business
dealings, if any, with Licensor, market feasibility and other factors
deemed relevant by Licensor, then being applied by Licensor in issuing
new licenses to use the System. If the application is approved,
Licensor and the transferee shall, upon surrender of this Agreement,
enter into a commitment agreement to govern the Hotel until the time
specified therein for the new license agreement to be entered into if
the transferee fulfills specified upgrading and other requirements by
that time. The new license agreement shall be on the standard form,
and contain the standard terms (except for duration), then being used
to license new hotels under the System. If the application is not
approved by Licensor, then this Agreement shall terminate pursuant to
Paragraph 10.d. hereof and Licensor shall be entitled to all of its
remedies.
9. Condemnation and Casualty.
a. Condemnation. Licensee shall, at the earliest possible time, give
Licensor full notice of any proposed taking by eminent domain. If Licensor
agrees that the Hotel or a substantial part thereof is to be taken,
Licensor will give due and prompt consideration, without any obligation, to
transferring this Agreement to a nearby location selected by Licensee and
approved by Licensor as promptly as reasonably possible, and in any event
within four months of the taking. If the new location is approved by
Licensor and the transfer authorized by Licensor and if Licensee opens a
new hotel at the new location in accordance with Licensor's specifications
within two years of the closing of the Hotel, the new hotel will
thenceforth be deemed to be the Hotel licensed under this Agreement. If a
condemnation takes place and a new hotel does not, for whatever reason,
become the Hotel under this Agreement in strict accordance with this
paragraph (or if it is reasonably evident to Licensor that such will be the
case), this Agreement will terminate forthwith upon notice thereof by
Licensor to Licensee, without the payment of liquidated damages hereunder.
b. Casualty. If the Hotel is damaged by fire or other casualty, Licensee
will expeditiously repair the damage. If the damage or repair requires
closing the Hotel, Licensee will immediately notify Licensor, will repair
or rebuild the Hotel in accordance with Licensor's standards, will commence
reconstruction within four months after closing, and will reopen the Hotel
for continuous business operations as soon as practicable (but in any event
within 24 months after closing of the Hotel), giving Licensor ample advance
notice of the date of reopening. If the Hotel is not reopened in
accordance with this paragraph, this Agreement will forthwith terminate
upon notice thereof by Licensor to Licensee, with the payment of liquidated
damages calculated in the manner set forth in Paragraph 10.f.
c. No Extensions of Term. Nothing in this Paragraph 9 will extend the
License Term but Licensee shall not be required to make any payments
pursuant to paragraphs 3.c.( 1), (2) or (3) for periods during which the
Hotel is closed by reason of condemnation or casualty.
10. Termination.
a. Expiration of Term. This Agreement will expire without notice 20 years
from the date hereof, subject to earlier termination as set forth herein.
The parties recognize the difficulty of ascertaining damages to Licensor
resulting from premature termination of this Agreement, and have provided
for liquidated damages in Paragraph 10.f. below, which liquidated damages
represent the parties' best estimate as to the damages arising from the
circumstances in which they are provided.
b. Permitted Termination Prior to Expiration of Term. Licensee may
terminate this Agreement on its 10th or 15th anniversary by giving at least
12 but less than 15 months advance notice to Licensor accompanied by a lump
sum payment (as liquidated damages and not as a penalty or in lieu of any
other payments required under this Agreement) equal to the total of all
amounts required under paragraphs 3.c.(1), (2) and (3) for the 24 calendar
months of operation preceding the notice.
c. Termination by Licensor on Advance Notice.
(1) In accordance with notice from Licensor to Licensee, this
Agreement will terminate (without any further notice unless required
by law) or, at Licensor's sole discretion with notice from Licensor to
Licensee, Licensor may suspend its services hereunder (including
reservation services), provided that:
(a) the notice is given at least 30 days (or longer, if required
by law) in advance of the termination date;
(b) the notice reasonably identifies one or more breaches of
Licensee's obligations hereunder; and
(c) the breach(es) are not fully remedied within the time period
specified in the notice.
(2) If during the then preceding 12 months Licensee shall have
engaged in a violation of this Agreement for which a notice of
termination was given and termination failed to take effect because
the default was remedied, the period given to remedy defaults
thereafter will, if and to the extent permitted by law, be 10 days
instead of 30.
(3) In any judicial proceeding in which the validity of termination
is at issue, Licensor will not be limited to the reasons set forth in
any notice sent under this Paragraph.
(4) Licensor's notice of termination or suspension of services shall
not relieve Licensee of its obligations hereunder.
d. Immediate Termination by Licensor. This Agreement may be immediately
terminated upon notice from Licensor to Licensee (or at the earliest time
permitted by applicable law), if:
(1) (a) Licensee or any guarantor of Licensee's obligations hereunder
shall generally not pay its debts as they become due or shall
admit in writing its inability to pay its debts, or shall make a
general assignment for the benefit of creditors; or
(b) Licensee or any such guarantor shall commence any case,
proceeding or other action seeking reorganization, arrangement,
adjustment, liquidation, dissolution or composition of it or its
debts under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, or seeking appointment of a
receiver, trustee, custodian or other similar official for it or
for all or any substantial part of its property; or
(c) Licensee or any such guarantor shall take any corporate or
other action to authorize any of the actions set forth above in
paragraphs (a) or (b); or
(d) Any case, proceeding or other action against Licensee or any
such guarantor shall be commenced seeking to have an order for
relief entered against it as debtor, or seeking reorganization,
arrangement, adjustment, liquidation, dissolution or composition
of it or its debts under any law relating to bankruptcy,
insolvency. reorganization or relief of debtors, or seeking
appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its
property, and such case, proceeding or other action (i) results
in the entry of an order for relief against it which is not fully
stayed within seven business days after the entry thereof or (ii)
remains undismissed for a period of 45 days; or
(e) An attachment remaining on all or a substantial part of the
Hotel or of Licensee's or any such guarantor's assets for 30
days; or
(f) Licensee or any such guarantor fails, within 60 days of the
entry of a final judgment against Licensee in any amount
exceeding $50,000, to discharge, vacate or reverse the judgment,
or to stay execution of it, or if appealed, to discharge the
judgment within 30 days after a final adverse decision in the
appeal; or
(2) Licensee loses possession or the right to possession of all or
a significant part of the Hotel, except as otherwise provided in
Paragraph 9 hereof; or
(3) Licensee contests in any court or proceeding Licensor's ownership
of the System or any part of it, or the validity of any service marks
or trademarks associated with Licensor's business; or
(4) A breach of paragraph 8 hereof occurs; or
(5) Licensee fails to continue to identify itself to the public as a
System hotel; or
(6) Any action is taken toward dissolving or liquidating Licensee or
any such guarantor, if it is a corporation or partnership, except for
death of a partner; or
(7) Licensee or any of its principals is, or is discovered to have
been, convicted of a felony (or any other offense if it is likely to
adversely reflect upon or affect the Hotel, the System, the Licensor,
the Licensor's parent or its affiliates or subsidiaries in any way);
or
(8) Licensee maintains false books and records of account or submits
false reports or information to Licensor.
e. De-identification of Hotel Upon Termination. Licensee will take
whatever action is necessary to assure that no use is made of any part of
the System at or in connection with the Hotel or otherwise after the
License Term ends. This will involve, among other things, returning to
Licensor the Manual and all other materials proprietary to Homewood Suites
and physical changes of distinctive System features of the Hotel, including
removal of the primary freestanding sign down to the structural steel, and
all other actions required to preclude any possibility of confusion on the
part of the public that the Hotel is no longer using all or any part of the
System or otherwise holding itself out to the public as a "Homewood Suites
" hotel. Anything not done by Licensee in this regard within 30 days after
termination of this Agreement may be done at Licensee's expense by Licensor
or its agents, who may enter upon the premises of the Hotel for that
purpose.
f. Payment of Liquidated Damages. If this Agreement terminates pursuant
to paragraphs 3.b., 9.b., 10.c. or 10.d. above, Licensee will promptly pay
Licensor (only as liquidated damages for the premature termination of this
Agreement, and not as a penalty or as damages for breaching this Agreement
or in lieu of any other payment) a lump sum equal to the total amounts
required under paragraphs 3.c.(1), (2) and (3) during the 36 full calendar
months of operation preceding the termination; or if the Hotel has not been
in operation in the System for 36 full calendar months, the greater of: (i)
36 times the monthly average of such amounts, or (ii) 36 times such amounts
as are due for the one full calendar month preceding such termination. If
the Hotel has been authorized to open as a Homewood Suites hotel but has
not been in operation for one full calendar month, the liquidated damages
amount shall be equal to the product of the number of Suites in the Hotel
multiplied by $3,000.00.
11. Agreement is Non-Renewable.
This Agreement is non-renewable.
12. Relationship of Parties.
a. No Agency Relationship. Licensee is an independent contractor.
Neither party is the legal representative or agent of, or has the power to
obligate (or has the right to direct or supervise the daily affairs of) the
other for any purpose whatsoever. Licensor and Licensee expressly
acknowledge that the relationship intended by them is a business
relationship based entirely on, and defined by, the express provisions of
this Agreement and that no partnership, joint venture, agency, fiduciary or
employment relationship is intended or created by reason of this Agreement.
b. Licensee's Notices to Public Concerning Independent Status. Licensee
will take such steps as are necessary and such steps as Licensor may from
time to time reasonably request to minimize the chance of a claim being
made against Licensor for anything that occurs at the Hotel, or for acts,
omissions or obligations of Licensee or anyone associated or affiliated
with Licensee or the Hotel. Such steps may, for example, include giving
notice in Suites, public rooms and advertisements, on business forms and
stationery, etc., making clear to the public that Licensor is not the owner
or operator of the Hotel and is not accountable for what happens at the
Hotel. Unless required by law, Licensee will not use the word "Homewood"
or any similar words in its corporate, partnership, or trade name, nor
authorize or permit such use by anyone else. Licensee will not use the
word "Homewood" or any other name or mark associated with the System to
incur any obligation or indebtedness on behalf of Licensor.
13. Miscellaneous.
a. Severability and Interpretation. The remedies provided in this
Agreement are not exclusive. In the event any provision of this Agreement
is held to be unenforceable, void or voidable as being contrary to the law
or public policy of the United States or any other jurisdiction entitled to
exercise authority hereunder, all remaining provisions shall nevertheless
continue in full force and effect unless deletion of the provision(s)
deemed unenforceable, void or voidable impairs the consideration for this
Agreement in a manner which frustrates the purpose of the parties or makes
performance commercially impracticable. In the event any provision of this
Agreement requires interpretation, such interpretation shall be based on
the reasonable intention of the parties in the context of this transaction
without interpreting any provision in favor of or against any party hereto
by reason of the drafting of the party or its position relative to the
other party. Any covenant, term or provision of this Agreement which, in
order to effect the intent of the parties, must survive the termination of
this Agreement, shall survive any such termination.
b. Binding Effect. This Agreement shall become valid when executed and
accepted by Licensor at Memphis, Tennessee. It shall be deemed made and
entered into in the state of Tennessee and shall be governed and construed
under and in accordance with the laws of the state of Tennessee. In
entering into this Agreement, Licensee acknowledges that it has sought,
voluntarily accepted and become associated with Licensor who is
headquartered in Memphis, Tennessee and that this Agreement contemplates
and will result in business relationships with Licensor's headquarter's
personnel. The choice of law designation permits, but does not require
that all suits concerning this Agreement be filed in the state of
Tennessee.
c. Exclusive Benefit. This Agreement is exclusively for the benefit of
the parties hereto and it shall not give rise to liability to a third
party, except as otherwise specifically set forth herein. No agreement
between Licensor and anyone else is for the benefit of Licensee.
d. Entire Agreement. This is the entire Agreement (and supersedes all
previous agreements including without limitation, any commitment agreement
between the parties concerning the Hotel) between the parties relating to
the Hotel. Neither Licensor nor any other person on Licensor's behalf has
made any representation to Licensee concerning this Agreement or relating
to the System, which representation is not fully set forth herein or in
Licensor's "Offering Circular for Prospective Franchisees." No change in
this Agreement will be valid unless in writing signed by both parties. No
failure to require strict performance or to exercise any right or remedy
hereunder will preclude requiring strict performance or exercising any
right or remedy in the future.
e. Licensor's Withholding of Consent. Licensor's consent, wherever
required, may be withheld if any default by Licensee exists under this
Agreement. Approvals and consents by Licensor will not be effective unless
evidenced by a writing duly executed on behalf of Licensor.
f. Notices. Notices will be effective hereunder when and only when they
are reduced to writing and delivered personally or mailed by Federal
Express or other express delivery service or by certified mail to the
appropriate party at its address first stated above or to such person and
at such address as may be designated by notice hereunder.
g. General Release. Licensee and its respective heirs, administrators,
executors, agents, representatives, and their respective successors and
assigns, hereby release, remise, acquit and forever discharge Licensor and
its parent, subsidiaries, divisions and affiliates and their officers,
directors, employees, agents, representatives and their respective
successors and assigns from any and all actions, claims, causes of action,
suits, rights, debts, liabilities, accounts, agreements, covenants,
contracts, promises, warrants, judgments, executions, demands, damages,
costs and expenses, whether known or unknown at this time, of any kind or
nature, absolute or contingent, if any there be, at law or in equity, on
account of any matter, cause or thing whatsoever which has happened,
developed or occurred at any time from the beginning of time to and
including the date of Licensee's execution and delivery to Licensor of this
Agreement. This release shall survive the termination of this Agreement.
Licensee shall take whatever steps are necessary or appropriate to carry
out the terms of this release upon Licensor's request.
h. Descriptive Headings. The descriptive headings in this Agreement are
for convenience only and shall not control or affect the meaning or
construction of any provision in this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first stated above.
LICENSEE: LICENSOR:
_____________________________________ Homewood Suites Division of Embassy
Suites Inc.
By: ________________________________ By: ______________________________
Title: _____________________________ Title: ___________________________
Date: ______________________________ Date: ____________________________
GUARANTY
As an inducement to Homewood Suites Division of Embassy Suites, Inc.
("Licensor") to execute the above License Agreement, the undersigned, jointly
and severally, hereby unconditionally warrant to Licensor and its successors and
assigns that all of Licensee's representations in the License Agreement and the
application submitted by Licensee to obtain the License Agreement are true and
guarantee that all of Licensee's obligations under the above License Agreement,
including any amendments thereto whenever made (the "Agreement"), will be
punctually paid and performed.
Upon default by Licensee or notice from Licensor, the undersigned will
immediately make each payment and perform each obligation required of Licensee
under the Agreement. Without affecting the obligations of the undersigned under
this Guaranty, Licensor may without notice to the undersigned extend, modify or
release any indebtedness or obligation of Licensee, or settle, adjust or
compromise any claims against Licensee. The undersigned waive notice of
amendment of the Agreement and notice of demand for payment or performance by
Licensee.
Upon the death of an individual guarantor, the estate of such guarantor
will be bound by this Guaranty but only for defaults and obligations hereunder
existing at the time of death, and the obligations of the other guarantors will
continue in full force and effect.
The Guaranty constitutes a guaranty of payment and performance and not of
collection, and each of the guarantors specifically waives any obligation of
Licensor to proceed against Licensee on any money or property held by Licensee
or by any other person or entity as collateral security, by way of set off or
otherwise. The undersigned further agree that this Guaranty shall continue to
be effective or be reinstated as the case may be, if at any time payment or any
of the guaranteed obligations is rescinded or must otherwise be restored or
returned by Licensor upon the insolvency, bankruptcy or reorganization of
Licensee or any of the undersigned, all as though such payment has not been
made.
IN WITNESS WHEREOF, each of the undersigned has signed this Guaranty as of
the date of the above Agreement.
Witnesses: Guarantors:
_____________________________________ ________________________________ (Seal)
_____________________________________ ________________________________ (Seal)
_____________________________________ ________________________________ (Seal)
ATTACHMENT A
Facilities and Services (Paragraph 1):
Site --- Area and general description:
Fee owners (names and addresses):
Leases (parties, terms, etc.), if any:
Number of approved suites:
Other concessions and shops:
Parking facilities (number of spaces, description):
Swimming pool:
Other facilities and services:
Ownership of Licensee (Paragraph 8):
EMBASSY SUITES, INC.
850 Ridge Lake Blvd.
Suite 400
Memphis, TN 38120
EMBASSY SUITES(R)
LICENSE AGREEMENT
dated _______________________________________, 19__ between Embassy Suites,
Inc. a Delaware corporation ("Licensor"), and _________________________________
__________________________________________________________________________ a
resident
_________________________________________________________________corporation
(Licensee"), whose partnership
address is ___________________________________________________________________.
THE PARTIES AGREE AS FOLLOWS:
1. The License.
Licensor owns, operates and licenses a system designed to provide a
distinctive, high-quality hotel service to the public under the name "Embassy
Suites" (the "System"). High standards established by Licensor are the essence
of the System. Future investments may be required of Licensee under this
Embassy Suites License Agreement ("this Agreement"). Licensee has independently
investigated the risks of the business to be operated hereunder, including
current and potential market conditions, competitive factors and risks, has read
Licensor's "Offering Circular for Prospective Franchisees," and has made an
independent evaluation of all such facts. Neither Licensor nor any other person
on Licensor's behalf has made any representation to Licensee concerning this
Agreement not fully set forth herein. Aware of the relevant facts, Licensee
desires to enter into this Agreement in order to obtain a license to use the
System in the operation of a hotel (the "Hotel") located at ____________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
____________________________________________________________.
A. The Hotel. The Hotel comprises all structures, facilities,
appurtenances, furniture, fixtures, equipment, and entry, exit, parking and
other areas from time to time located on the land identified on the plot
plan most recently acknowledged by Licensor in anticipation of the
execution of this Agreement, or located on any land from time to time
approved by Licensor for additions, signs or other facilities. The Hotel
now includes the facilities listed on Attachment A hereto. No change in
the number of approved guest suites and no significant change in the Hotel
may be made without Licensor's prior approval. Redecoration and minor
structural changes that comply with Licensor's standards and specifications
will not be considered significant. Licensee represents that it is
entitled to possession of the Hotel during the entire License Term (as
hereinafter defined) without restrictions that would interfere with
anything contemplated in this Agreement.
B. The System. The System is composed of elements, as designated from
time to time by Licensor, designed to identity "Embassy Suites hotels" to
the consuming public and/or to contribute to such identification and its
association with quality standards. The System at present includes the
trademark "Embassy Suites" and such other service marks and copyrights,
trademarks and similar property rights as may be designated from time to
time by Licensor to be part of the System; access to a reservation service;
distribution of advertising, publicity and other marketing programs and
materials; the furnishing of training programs and materials; standards,
specifications and policies for construction, furnishing, operation,
appearance and service of the Hotel, and other requirements as stated or
referred to in this Agreement and from time to time in Licensor's Standards
Manual (the "Manual") or in other communications to Licensee; and programs
for inspecting the Hotel and consulting with Licensee. Licensor may add
elements to the System or modify, alter or delete elements of the System at
its sole discretion from time to time.
2. Grant of License.
Licensor hereby grants to Licensee a nonexclusive license (the "License")
to use the System only at the Hotel, only in accordance with the terms and
conditions of this Agreement and only during the term of this Agreement (the
"License Term") beginning with the date hereof and terminating under paragraph
12 hereof. This Agreement applies to the specified location and no other. This
Agreement does not limit Licensor's right or the rights of any parent,
subsidiary, division or affiliate of Licensor, to use or license the System or
any part thereof or to engage in or license any business activity at any other
location. Licensee acknowledges that Licensor, its divisions, subsidiaries and
affiliates and parent are and may in the future be engaged in other business
activities including activities involving transient lodging and related
activities which may be or may be deemed to be competitive with the System; that
facilities, programs, services and/or personnel used in connection with the
System may also be used in connection with such other business activities of
Licensor, its parent, subsidiaries, divisions or affiliates; and that Licensee
is acquiring no rights hereunder other than the right to use the System as
specifically defined herein in accordance with the terms of this Agreement.
3. Licensee's Responsibilities.
A. Operational and Other Requirements. During the License Term, Licensee
will:
(1) maintain a high moral and ethical standard and atmosphere at the
Hotel;
(2) maintain the Hotel in a clean, safe and orderly manner and in
first-class condition;
(3) provide efficient, courteous and high-quality service to the
public;
(4) operate the Hotel 24 hours a day every day except as otherwise
permitted by Licensor based on special circumstances;
(5) strictly comply in all respects with the Manual and with all
other policies, procedures and requirements of Licensor which may be
from time to time communicated to Licensee;
(6) strictly comply with Licensor's reasonable requirements to
protect the System and the Hotel from unreliable sources of supply;
(7) strictly comply with Licensor's requirements as to:
(a) the types of services and products that may be used, promoted
or offered at the Hotel;
(b) the types and quality of services and products that, to
supplement services listed on Attachment A, must be used, promoted
or offered at the Hotel;
(c) use, display, style and type of signage;
(d) directory and reservation service listings of the Hotel;
(e) training of persons to be involved in the operation of the
Hotel;
(f) participation in all marketing, reservation service,
advertising, training and operating programs designated by
Licensor as System-wide programs in the best interests of hotels
using the System;
(g) maintenance, appearance and condition of the Hotel; and
(h) quality and type of service offered to customers at the
Hotel.
(8) use such automated guest service and/or hotel management and/or
telephone system(s) which Licensor deems to be in the best interests
of the System and adopts System-wide (including use in its own
hotels), including any additions, enhancements, supplements or
variants thereof which may be developed during the term hereof;
(9) participate in and use those reservation services which Licensor
deems to be in the best interests of the System, including any
additions, enhancements, supplements or variants thereof which may be
developed during the term hereof;
(10) strictly comply with all requirements, improvements or changes
to the System as may be from time to time designated by Licensor;
(11) strictly comply with all governmental requirements, including
but not limited to the filing and maintenance of any required trade
name or fictitious name registrations, pay all taxes, and maintain all
governmental licenses and permits necessary to operate the Hotel in
accordance with the System;
(12) permit inspection of the Hotel by Licensor's representatives at
any time and give them free lodging for such time as may be reasonably
necessary to complete their inspections;
(13) promote the Hotel on a local or regional basis subject to
Licensor's requirements as to form, content and prior approvals;
(14) insure that no part of the Hotel or the System is used to
further or promote a competing business or other lodging facility,
except as Licensor may approve for those competing businesses or
lodging facilities owned, licensed, operated or otherwise approved by
Licensor, its parent or their respective divisions, subsidiaries and
affiliates;
(15) use every reasonable means to encourage use of Embassy Suites
facilities everywhere by the public;
(16) upon request by Licensor provide to Licensor statistics on hotel
operations in the form specified by Licensor and using definitions
specified by Licensor;
(17) in all respects use Licensee's best efforts to reflect credit
upon and create favorable public response to the name "Embassy
Suites";
18) promptly pay to Licensor all amounts due Licensor, its parent,
subsidiaries, divisions and affiliates as royalties or fees or for
goods or services purchased by Licensee; and
(19) comply with Licensor's requirements concerning confidentiality
of information.
B. Upgrading of the Hotel. The Hotel shall be maintained in a first-class
condition at all times. Using the Standards applicable to the System,
Licensor may during the term hereof require substantial modernization,
rehabilitation and other upgrading of the Hotel. Limited exceptions from
those standards may be made by Licensor based on local conditions or
special circumstances. If the upgrading requirements contained in this
paragraph 3.B cause Licensee undue hardship, Licensee may terminate this
Agreement by paying a fee computed in accordance with paragraph 12.F.
C. Fees.
(1) For each month (or part of a month) during the License Term,
Licensee will pay to Licensor by the 15th of the following month:
(a) a royalty of 4% of the gross revenues attributable to or
payable for rental of guest suites at the Hotel with no deductions
except for sales and room taxes ("Gross Suites Revenue"); and
(b) a "Marketing and Reservation Contribution" of 3.5% of Gross
Suites Revenue (but no less then $1.75 per guest suite per night),
this contribution being subject to change by Licensor from time to
time if approved by a majority of members (which shall be counted
on the basis of one suite, one vote) of the "ESOA" (the Embassy
Suites Owners' Association or successor sanctioned as such by
Licensor) who represent a majority of the suites to be subject to
the increase, at an annual ESOA meeting or at a meeting of System
Licensees as may be convened by Licensor upon no less than 45
days' advance notice or by mail ballot with no less than
forty-five day deadline to cast ballot;
(i) Licensor may, in its sole discretion upon 30 days prior
written notice, increase this Contribution by an amount not to
exceed .5% of Gross Suites Revenue and such increase shall be
effective for a period that shall not exceed 12 months.
Licensor may not implement any additional discretionary
increase(s) within 24 months after the expiration of such
increase; and
(c) a special additional Reservation Contribution assessment of
one-eighth of one percent (.125%) of Gross Suites Revenue to be
paid in 1993; and
(d) an amount equal to any sales, gross receipts or similar tax
imposed on Licensor and calculated solely on payments required
hereunder, unless the tax is an optional alternative to an income
tax otherwise payable by Licensor.
Licensee will operate the Hotel so as to maximize Gross Suites Revenue
of the Hotel consistent with sound marketing and industry practice and
will not engage in any conduct which reduces Gross Suites Revenue of
the Hotel in order to further other business activities.
(2) A standard initial fee as set forth in Licensor's current
"Offering Circular for Prospective Franchisees" will be charged by
Licensor upon application for any guest suites to be added to the
Hotel.
(3) Additional royalties may be charged by Licensor on revenues (or
upon any other basis, if so determined by Licensor) from any activity
if it is added at the Hotel by mutual agreement and:
(a) it is not now offered at System hotels generally and it is
likely to benefit significantly from or be identified
significantly with the Embassy Suites name or other aspects of the
System; or
(b) it is designed or developed by or for Licensor.
(4) Charges may be made by Licensor for optional products or services
accepted by Licensee from Licensor either in accordance with current
practice or as developed in the future.
(5) If Licensee chooses to participate in any optional program
available through Licensor or its parent, or any other program
certified by Licensor, for payment of travel agent commissions,
Licensee will pay to Licensor or its designated agent by the 15th of
the month following receipt of a statement therefor, all amounts due.
(6) Each payment under this paragraph 3.C. shall be accompanied by
the monthly statement referred to in paragraph 8.A. Licensor may apply
any amounts received under this paragraph 3.C. to any amounts due
under this Agreement. If any amounts are not paid when due such non-
payment shall constitute a breach of this Agreement and in addition,
such unpaid amounts will accrue interest beginning on the first day of
the month following the due date at 1 1/2 % per month but not to
exceed the maximum interest permitted by applicable law.
(7) Local and regional marketing programs and related activities may
be conducted by Licensee, but only at Licensee's expense and subject
to Licensor's requirements. Reasonable charges may be made by
Licensor for optional advertising materials ordered or used by
Licensee for such programs and activities.
4. Licensor's Responsibilities.
A. Training. During the License Term, Licensor will continue to specify and
provide required training programs and may, at its discretion, provide
certain optional training programs at various locations. No tuition charge
will be made for any training required by Licensor, but travel, lodging
and other expenses of Licensee and its employees will be borne by Licensee.
Reasonable charges may be made by Licensor for optional training programs and
for all training materials provided to Licensee.
B. Reservation Services. During the License Term, so long as Licensee is in
full compliance with its material obligations hereunder, Licensor will afford
Licensee access to Reservation Services for the Hotel.
C. Consultation on Operations, Facilities and Marketing. Licensor will,
from time to time at Licensor's sole discretion, make available to Licensee
at no charge consultation and advice in connection with operations,
facilities and marketing.
D. Use of Marketing and Reservation Contribution. The Marketing and
Reservation Contribution will be used by and at the sole discretion of
Licensor for costs associated with advertising, promotion, publicity, market
research and other systemwide marketing programs and related activities and
for reservation programs and related activities. Licensor will make
available and use for the same purposes marketing and reservation funds
computed on the basis generally applicable to licensees of the System.
Licensor is not obligated to expend funds for marketing or reservation
services in excess of the amounts received by Licensor from licensees using
the System and those funds made available by Licensor as set out hereinabove.
E. Application of Manual. All hotels operated under the System will be
subject to the Manual, as it may from time to time be modified or revised by
Licensor, including limited exceptions from compliance which may be made
based on local conditions or special circumstances.
F. Other Arrangements for Marketing, etc. Licensor may enter into
arrangements for development, marketing, operations, administrative,
technical and support functions, facilities, programs, services and/or
personnel with any other entity and may use any facilities, programs,
services or personnel used in connection with the System in connection with
any business activities of its parent, subsidiaries, divisions or affiliates.
G. If the Hotel fails to comply with the standards and rules of operation
set forth in the Manual, the LIcensor may, at the Licensee's written request
and cost, meet with the Licensee or the Licensee's representative at the
Hotel to develop an action plan to correct the deficiencies. The Licensee's
failure to develop an approved plan within 30 days of receipt of notice of
noncompliance or to timely perform the requirements of the plan shall be an
additional ground for declaring Licensee to be in breach of the Agreement.
Licensor's participation in the development of an action plan and approval of
such plan shall not be a condition precedent for Licensor declaring Licensee
to be in breach of this Agreement based on the failure of the Hotel to comply
with standards and rules of operation set forth in the Manual.
5. Appeals, Changes in the Manual.
A. Appeals. Decisions, other than termination notices, made on behalf of
Licensor specifically with reference to the Hotel may be appealed to
Licensor's Franchise Committee if done promptly after Licensee has diligently
sought relief through Licensor's normal channels of authority. With the
approval in writing of any member of the Franchise Committee, the decision
may be further appealed to the members of the ESOA Executive Committee who
are also officers of Licensor or its Embassy Suites Hotel Division.
B. Changes in the Manual. Any change in the Manual must be explained in
writing to Licensee at least 30 days before it goes into effect. Any change
in the Manual that is shown to be arbitrary or capricious will be rescinded
by Licensor. A committee designated by Licensor which includes its Chief
Executive Officer or its Chief Operating Officer must determine that the
change was formulated in good faith in the best interests of the System, and
that it was approved by Licensor's Franchise Committee after seeking the
advice and counsel of the Operations Standards Subcommittee of the ESOA.
After it has been in effect 60 days, but less than 180 days, a change in the
Manual may be appealed to the members of the ESOA Executive Committee who are
also officers of Licensor or its Embassy Suites Hotel Division by ESOA
members representing at least 30% of the hotels authorized to use the System.
C. Decision on Appeal. Licensor shall have the right to decide appeals
under this paragraph solely in its discretion and may require that such
appeals be made solely on the basis of written submissions. No appeal will
suspend a decision or change until and unless the appeal is successful.
D. Limitation on Appeal Rights. Licensee will not be arbitrary, capricious
or unreasonable in exercising its appeal (or any other) rights under this
Agreement, and will use them only for the purposes for which intended.
6. ESOA.
A. Eligibility. Licensee, other licensees of the System, and Licensor are
eligible for membership in the ESOA in accordance with the By-laws of the
ESOA and are entitled to vote at its meetings on the basis of one open suite,
one vote. The purposes of the ESOA will be to consider and discuss, and make
recommendations on, common problems relating to the operation of System
hotels. Licensor will seek the advice and counsel of the ESOA Executive
Committee and its subcommittees.
B. Function of Committees. ESOA committees, their functions and their
members will be subject to approval in writing by Licensor, which approval
will not be unreasonably withheld. Recognizing that the ESOA must function
in a manner consistent with the best interests of all persons using the
System, the Licensee and Licensor will use their best efforts to cause the
governing rules of the ESOA to be consistent with this Agreement.
7. Proprietary Rights.
A. Ownership of System. The Licensee acknowledges and will not contest,
either directly or indirectly, Licensor's unrestricted and exclusive
ownership of the System and any element(s) or component(s) thereof, or that
Licensor has the sole right to grant licenses to use all or any element(s) or
component(s) of the System. Licensee specifically agrees and acknowledges
that Licensor is the owner of all right, title and interest in and to the
mark "Embassy Suites" and all other marks associated with the System together
with the goodwill symbolized thereby and that Licensee will not contest
directly or indirectly the validity or ownership of the marks either during
the License Term or after its termination. All improvements and additions
whenever made to or associated with the System by the parties to this
Agreement or anyone else, and all service marks, trademarks, copyrights, and
service mark and trademark registrations at any time used, applied for or
granted in connection with the System, and all goodwill arising from
Licensee's use of Licensor's marks shall inure to the benefit of and become
the property of Licensor. Upon expiration or termination of this Agreement,
no monetary amount shall be assigned as attributable to any goodwill
associated with Licensee's use of the System or any element(s) or
component(s) of the System including the name or marks.
B. Trademark Disputes. Licensor will have the sole right and responsibility
to handle disputes with third parties concerning use of all or any part of
the System, and Licensee will, at its reasonable expense, extend its full
cooperation to Licensor in all such matters. All recoveries made as a result
of disputes with third parties regarding use of the System or any part
thereof shall be for the account of Licensor. Licensor need not initiate
suit against alleged imitators or infringers and may settle any dispute by
grant of a license or otherwise. Licensee will not initiate any suit or
proceeding against alleged imitators or infringers, or any other suit or
proceeding to enforce or protect the System. Both parties will make every
effort consistent with the foregoing to protect, maintain, and promote the
name "Embassy Suites" and its distinguishing characteristics (and the other
service marks, trademarks, slogans, etc., associated with the System) as
standing for the System and only the System; provided, however, both parties
acknowledge that Licensor may allow certain hotels which had written
franchise commitments or licenses in the Granada Royale Hometel franchise
system to use the name "Embassy Suites" and other related marks of the
System.
C. Protection of Name and Marks. Both parties will make every effort
consistent with the foregoing to protect and maintain the name and mark
"Embassy Suites" and its distinguishing characteristics (and the other
service marks, trademarks, slogans, etc., associated with the System).
Licensee agrees to execute any documents deemed necessary by Licensor or its
counsel to obtain protection for Licensor's marks or to maintain their
continued validity and enforceability. Licensee agrees to use the names and
marks associated with the System only in the manner authorized by Licensor
and acknowledges that any unauthorized use thereof shall constitute
infringement of Licensor's rights.
8. Records and Audits.
A. Monthly Reports. At least monthly, Licensee shall prepare a statement
which will include all information concerning Gross Suites Revenue, other
revenues generated at the Hotel, suite occupancy rates, reservation data and
other information required by Licensor that may be useful in connection with
marketing and other functions of Licensor, its parent, subsidiaries,
divisions or affiliates (the "Data"). The Data shall be the property of
Licensor. The Data will be permanently recorded and retained as may be
reasonably required by Licensor. By the 15th of each month, Licensee will
submit to Licensor a statement setting forth the Data for the previous month
and reflecting the computation of the amounts then due under paragraph 3.C.
The statement shall be in such form and detail and shall use such definitions
as Licensor may reasonably request from time to time, and may be used by
Licensor for its reasonable purposes.
B. Daily Reports. At the request of Licensor, Licensee shall prepare and
deliver daily reports to Licensor, which reports will contain information
reasonably requested by Licensor on a daily basis such as daily rate and
suite occupancy, and which may be used by Licensor for its reasonable
purposes.
C. Preparation and Maintenance of Records. Licensee will, in a manner and
form satisfactory to Licensor and utilizing accounting and reporting
standards as reasonably required by Licensor, prepare on a current basis (and
preserve for no less then four years), complete and accurate records
concerning Gross Suites Revenue and all financial, operating, marketing and
other aspects of the Hotel, and maintain an accounting system which fully and
accurately reflects all financial aspects of the Hotel and its business.
Such records shall include but not be limited to books of account, tax
returns, governmental reports, register tapes, daily reports, and complete
quarterly and annual financial statements (profit and loss statements,
balance sheets and cash flow statements).
D. Audit. Licensor may require Licensee to have the Gross Suites Revenue or
other monies due hereunder computed and certified as accurate by a certified
public accountant. During the License Term and for two years afterward,
Licensor and its authorized agents will have the right to verify information
required under this Agreement by requesting, receiving, inspecting and
auditing, at all reasonable times, any and all records referred to above
wherever they may be located (or elsewhere if reasonably requested by
Licensor). If any such inspection or audit discloses a deficiency in any
payments due hereunder, Licensee shall immediately pay to Licensor the
deficiency, plus interest thereon as provided in paragraph 3.C.(6). In
addition, if the deficiency in any payment for any 12-month period exceeds 5%
of the correct amount and is not offset by overpayments, Licensee shall also
immediately pay to Licensor the entire cost of the inspection and audit,
including but not limited to travel, lodging, meals, salaries and other
expenses of the inspecting or auditing personnel. Licensor's acceptance of
Licensee's payment of any deficiency as provided for herein shall not waive
Licensor's right to terminate this Agreement as provided for herein in
paragraph 12. If the audit discloses an overpayment, Licensor will
immediately refund it to Licensee.
E. Annual Financial Statements. Licensee will submit to Licensor as soon as
available but not later than 90 days after the end of Licensee's fiscal year,
complete financial statements for the Hotel for such year. Licensee will
certify them to be true and correct and to have been prepared in accordance
with generally accepted accounting principles consistently applied, and any
false certification will be a breach of this Agreement.
9. Indemnity and Insurance.
A. Indemnity. Licensee will indemnify Licensor, its parent, and its
subsidiaries, divisions and affiliates and their officers, directors,
employees, agents, successors and assigns against, hold them harmless from,
and promptly reimburse them for, all payments of money (fines, damages, legal
fees, expenses, etc.) by reason of any claim, demand, tax, penalty, or
judicial or administrative investigation or proceeding (even where negligence
of Licensor and/or its parent, subsidiaries and affiliates is alleged)
arising from any claimed occurrence at the Hotel or any act, omission or
obligation of Licensee or anyone associated or affiliated with Licensee or
the Hotel. At the election of Licensor, Licensee will also defend Licensor
and/or its parent, subsidiaries, divisions and affiliates and their officers,
directors, employees, agents, successors and assigns against same. In any
event, Licensor will have the right, through counsel of its choice, to
control any matter to the extent it could directly or indirectly affect
Licensor and/or its parent, subsidiaries, divisions and affiliates and their
officers, directors, employees, agents, successors and assigns financially.
Licensee will also reimburse Licensor for all expenses including attorneys'
fees and court costs reasonably incurred by Licensor to protect itself and/or
its parent, subsidiaries, divisions, affiliates and their officers,
directors, employees, agents and their successors and assigns from, or to
remedy defaults of Licensee under this Agreement.
B. Insurance. During the License Term, Licensee will comply with all
insurance requirements of any lease or mortgage covering the Hotel, and
Licensor's specifications for insurance as to amount and type of coverage as
may be reasonably increased by Licensor from time to time in writing, and
will in any event maintain as a minimum the following insurance underwritten
by an insurer approved by Licensor:
(1) employer's liability and workers' compensation insurance as prescribed
by applicable law; and
(2) liquor liability insurance naming Licensor and its parent as
additional insureds with single-limit coverage for personal and bodily
injury and property damage of at least $10,000,000 for each occurrence; and
(3) comprehensive general liability insurance (with products, completed
operations and independent contractors coverage) and comprehensive
automobile liability insurance, all on an occurrence basis naming Licensor
and its parent as additional insureds and underwritten by an insurer
approved by Licensor, with single-limit coverage for personal and bodily
injury and property damage of at least $10,000,000 for each occurrence. In
connection with all significant construction at the Hotel during the
License Term, Licensee will cause the general contractor to maintain with
an insurer approved by Licensor comprehensive general liability insurance
(with products, completed operations and independent contractors coverage)
in at least the amount of $10,000,000 for each occurrence with Licensor and
its parent named as additional insureds.
C. Changes in Insurance. Simultaneously herewith, annually hereafter and
each time a change is made in any insurance or insurance carrier, Licensee
will furnish to Licensor copies of the policies of insurance setting forth
the term and coverage of the insurance in force, the persons insured, and the
fact that the coverage may not be cancelled, altered or permitted to lapse or
expire without 30 days' advance written notice to Licensor.
10. Transfer.
A. Transfer by Licensor. Licensor shall have the right to transfer or
assign this Agreement or any of Licensor's rights or obligations hereunder to
any person or legal entity.
B. Transfer by Licensee. Licensee understands and acknowledges that the
rights and duties set forth in this Agreement are personal to Licensee, and
that Licensor has entered into this Agreement in reliance on the business
skill, financial capacity, and personal character of Licensee (if Licensee is
an individual), and upon that of the partners or stockholders of Licensee (if
Licensee is a partnership or corporation). Accordingly, neither Licensee nor
any immediate or remote successor to any part of Licensee's interest in this
Agreement, nor any individual, partnership, corporation, or other legal
entity which directly or indirectly owns an equity interest (as that term is
defined herein) in Licensee, shall sell, assign, transfer, convey, pledge,
mortgage, encumber, or give away, any direct or indirect interest in this
Agreement or equity interest in Licensee, except as provided in this
Agreement. Any purported sale, assignment, transfer, conveyance, pledge,
mortgage, or encumbrance, by operation of law or otherwise, of any interest
in this Agreement or any equity interest in Licensee not in accordance with
the provisions of this Agreement, shall be null and void and shall constitute
a material breach of this Agreement, for which Licensor may terminate this
Agreement upon notice without opportunity to cure pursuant to paragraph
12.C.(4) of this Agreement.
(1) For the purposes of this paragraph 10, the term "equity interest"
shall mean any stock or partnership interest in Licensee, the interest of
any partner, whether general or limited, in any partnership, with respect
to such partnership, and any stockholder of any corporation with respect to
such corporation, which partnership or corporation is the Licensee
hereunder or which partnership or corporation owns a direct or indirect
beneficial interest in Licensee. References in this Agreement to
"publicly-traded equity interest" shall mean any equity interest which is
traded on any securities exchange or is quoted in any publication or
electronic reporting service maintained by the National Association of
Securities Dealers, Inc. or any of its successors.
(2) If Licensee is a partnership or corporation, Licensee represents that
the equity interests in Licensee are directly and (if applicable)
indirectly owned as shown in Attachment A.
C. Transfer of Equity Interests that are not Publicly Traded.
(1) Except where otherwise provided in this Agreement, equity interests in
the Licensee that are not publicly-traded may be transferred, issued, or
eliminated with Licensor's prior written consent, which will not be
unreasonably withheld, provided that, after the transaction:
(a) 50% or less of all equity interests in Licensee will have changed
hands since Licensee first became a party to this Agreement; or
(b) 80% or less of all equity interests in Licensee will have changed
hands since Licensee first became a party to this Agreement, and no
equity interest will be held by other than those who held them when
Licensee first became a party to this Agreement.
(2) In computing the percentages referred to in paragraph 10.C.(1) above,
limited partners will not be distinguished from general partners, and
Licensor's judgment will be final if there is any question as to the
definition of "equity interest" or as to the computation of relative equity
interest, the principal considerations being:
(a) Direct and indirect power to exercise control over the affairs of
Licensee; and
(b) Direct and indirect right to share in Licensee's profits; and
(c) Amounts directly or indirectly exposed to risk in the Licensee's
business.
D. Transfers of Publicly-Traded Equity Interests.
(1) Except as otherwise provided in this Agreement, publicly-traded equity
interests in the Licensee may be transferred without the Licensor's
consent, but only if:
(a) Immediately before the proposed transfer, the transferor
owns less than 25% of the equity interest of Licensee; and
(b) Immediately after the transfer the transferee will own less than
25% of the equity interest in Licensee; and
(c) The transfer is exempt from registration under federal securities
law.
(2) Publicly-traded equity interests may be transferred with Licensor's
written consent, which may not be unreasonably withheld, if the transfer is
exempt from registration under federal securities law.
(3) The chief financial officer of Licensee shall certify annually to
Licensor that Licensee is in compliance with the provisions of this
paragraph 10.D. Such certification shall be delivered to Licensor with the
Annual Financial Statements referred to in paragraph 8.E. hereof.
E. Transfer of this Agreement.
(1) Licensee, if a natural person, may with Licensor's consent, which will
not be unreasonably withheld, transfer this Agreement to Licensee's spouse,
parent, sibling, niece, nephew, descendant, or spouse's descendant,
provided that:
(a) Adequate provision is made for management of the Hotel; and
(b) The transferee executes a new license agreement for the unexpired
term of this Agreement on the standard form then being used to license
new Hotels under the System, except that the fees charged then shall
be the same as those contained herein; and
(c) Licensee guarantees, in Licensor's usual form, the performance of
the transferee's obligations under the newly-executed license
agreement.
(2) If Licensee is a natural person, he may, without the consent of
Licensor upon 30 days prior written notice to Licensor, transfer this
Agreement to a corporation entirely owned by him, provided that:
(a) Adequate provision is made for management of the Hotel; and
(b) The transferee executes a new license agreement for the unexpired
term of this Agreement on the standard form then being used to license
new hotels under the System, except that the fees charged in the new
license agreement shall be the same as those contained herein; and
(c) The Licensee guarantees, in Licensor's usual form, the
performance of the transferee's obligations under the newly-executed
license agreement.
F. Transfers of this Agreement or Equity Interest in this Agreement Upon
Death.
(1) If Licensee is a natural person, upon the Licensee's death this
Agreement will pass in accordance with Licensee's will, or, if Licensee
dies intestate, in accordance with laws of intestacy governing the
distribution of the Licensee's estate, provided that:
(a) Adequate provision is made for management of the Hotel; and
(b) The Licensor gives written consent, which consent will not be
unreasonably withheld; and
(c) The transferee is one or more of the decedent's spouse, parents,
siblings, nieces, nephews, descendants, or spouse's descendants; and
(d) Licensee's heirs or legatees promptly advise Licensor and
promptly execute a new license agreement for the unexpired term of
this Agreement on the standard form then being used to license new
Hotels under the System, except the fees charged thereunder shall be
the same contained herein.
(2) If an equity interest is owned by a natural person, the equity
interest will pass upon such person's death in accordance with such
person's will or, if such person dies intestate, in accordance with the
laws of intestacy governing the distribution of the Licensee's estate,
provided that:
(a) Adequate provision is made for management of the Hotel; and
(b) The Licensor gives written consent, which consent will not be
unreasonably withheld; and
(c) The transferee is one or more of the decedent's spouse, parents,
siblings, nieces, nephews, descendants, or spouse's descendants; and
(d) Transferee assumes, in writing, on a continuing basis, the
decedent's guarantee, if any, of the Licensee's obligations hereunder.
G. Registration of a Proposed Transfer of Equity Interests. If a proposed
transfer of an equity interest in the Licensee requires registration under
any federal or state securities law, Licensee shall:
(1) Request the Licensor's consent at least 45 days before the proposed
effective date of the registration; and
(2) Accompany such request with one payment of a nonrefundable fee of
$25,000; and
(3) Reimburse Licensor for expenses incurred by Licensor in connection
with review of the materials concerning the proposed registration,
including without limitation, attorneys' fees and travel expenses; and
(4) Agree, and all participants in the proposed offering subject to
registration agree, to fully indemnify Licensor in connection with the
registration; furnish the Licensor all information requested by Licensor;
avoid any implication of Licensor's participating in, or endorsing the
offering; and use the Licensor's service marks and trademarks only as
directed by Licensor.
H. Management of the Hotel. Licensee must at all times retain and exercise
management control over the Hotel's business, either directly or through a
management company approved by Licensor. Licensee shall not enter into any
lease, management agreement, or other similar arrangement for the operation
of the Hotel or any part thereof (including without limitation, food and/or
beverage service facilities), with any independent entity without the prior
written consent of Licensor.
I. Application for New License Agreement upon Transfer of the Hotel.
(1) If Licensee receives an offer to purchase or lease the Hotel or any
portion thereof and Licensee, pursuant to the terms of such offer, desires
to sell or lease the Hotel or any portion thereof, Licensee shall give
prompt written notice thereof to Licensor stating the identity of the
prospective purchaser or lessee, the price or rental and furnish a copy of
the proposed agreement concerning said offer and all other information with
respect thereto which may be reasonably requested by Licensor.
(2) If the proposed lessee or transferee desires to operate the Hotel
under the System, the proposed lessee or transferee will, with Licensee's
consent, apply for a new license agreement to replace this Agreement for a
term to be determined by Licensor. Licensor will process the application
in good faith and in accordance with procedures, criteria and requirements
regarding fees, upgrade of the Hotel, credit, operational abilities and
capabilities, prior business dealings, if any, with the Licensor, market
feasibility and other factors deemed relevant by Licensor, then being
applied by Licensor in issuing new licenses to use the System. If the
application is not approved by Licensor and Licensee proceeds with the
purchase or lease of the Hotel, then this Agreement shall terminate
pursuant to paragraph 12.C; and Licensor shall be entitled to all of its
remedies. If the application is approved, Licensor and the transferee
will, upon surrender of this Agreement, enter into a commitment agreement
to govern the Hotel until the time specified therein for the new license
agreement to be entered into if the transferee fulfills specified upgrading
and other requirements. The new license agreement will be on the standard
form, and contain the standard terms (except for duration) then being used
to license new Hotels under the System.
11. Condemnation and Casualty.
A. Condemnation. Licensee shall, at the earliest possible time, give
Licensor full notice of any proposed taking by eminent domain. If Licensor
agrees that the Hotel or a substantial part thereof is to be taken, Licensor
will give due and prompt consideration, without any obligation, to
substituting a nearby location selected by Licensee and approved by Licensor
as the Hotel hereunder as promptly as reasonably possible, and in any event
within four months of the taking. If the new location is approved by
Licensor and the substitution authorized by Licensor and if Licensee opens a
new hotel at the new location in accordance with Licensor's specifications
within two years of the closing of the Hotel, the new hotel will thenceforth
be deemed to be the Hotel licensed under this Agreement. If a condemnation
takes place and a new hotel does not, for whatever reason, become the Hotel
under this Agreement in strict accordance with this paragraph (or if it is
reasonably evident to Licensor that such will be the case), this Agreement
will terminate forthwith upon notice thereof by Licensor to Licensee without
the payment of liquidated damages required by paragraph 12.F.
B. Casualty.
(1) If the Hotel is destroyed or substantially destroyed during the License
Term by fire or other casualty and the cost of repairing, restoring,
rebuilding and replacing the same shall exceed the proceeds of the
insurance collectible with respect to such fire or other casualty (for this
purpose the deductible amount under the insurance policy shall be deemed to
be collectible proceeds) and the Hotel
(a) for at least the full twelve month period preceding the casualty,
did not have a positive cash flow after payment of all operating and
ownership costs; or
(b) can be shown by appraisal to have an economic value less than the
total cost to repair, restore, rebuild or replace.
Licensee shall have the right upon notice served upon Licensor within sixty
(60) days after such fire or casualty, to terminate this Agreement without
the payment of liquidated damages required by paragraph 12.F.
(2) If the cost of repairing, restoring, rebuilding or replacing the
damage shall be equal to or less than the proceeds of the insurance
collectible with respect to such fire or other casualty, or, if greater and
the Licensee did not meet (a) or (b) above or, if greater and the Licensee
did meet (a) or (b) above, but did not give notice to Licensor within the
sixty (60) day time period, Licensee shall expeditiously repair the damage.
If the damage or repair requires closing the Hotel, Licensee will
immediately notify Licensor, will repair or rebuild the Hotel in accordance
with Licensor's standards, will commence reconstruction within four months
after closing, and will reopen the Hotel for continuous business operations
as soon as practicable (but in any event within 24 months after closing of
the Hotel), giving Licensor ample advance notice of the date of reopening.
If the Hotel is not reopened in accordance with this paragraph, this
Agreement will forthwith terminate upon notice thereof from Licensor to
Licensee, with the payment of liquidated damages required by paragraph
12.F.
C. No Extensions of Term. Nothing in this paragraph 11 will extend the
License Term but Licensee shall not be required to make any payments pursuant
to paragraphs 3.C.(1), (3) and (4) for periods during which the Hotel is
closed by reason of condemnation or casualty.
12. Termination.
A. Expiration of Term. This Agreement will expire without notice 20 years
from the date hereof, subject to earlier termination as set forth herein.
The parties recognize the difficulty of ascertaining damages to Licensor
resulting from premature termination of this Agreement, and have provided for
liquidated damages in paragraph 12.F. below, which represent the parties'
best estimate as to the damages arising from the circumstances in which they
are provided.
B. Termination by Licensor on Advance Notice.
(1) In accordance with notice from Licensor to Licensee, this Agreement
will terminate (without any further notice unless required by law) or, at
Licensor's sole discretion with notice from Licensor to Licensee, Licensor
may cease to provide its services hereunder (including Reservation
Services), provided that:
(a) the notice is mailed at least 30 days (or longer, if required by
law) in advance of the termination date;
(b) the notice reasonably identifies one or more breaches of the
Licensee's obligations; and
(c) the breach(es) are not fully remedied within the time period
specified in the notice.
(2) If during the then preceding 12 months, Licensee shall have engaged in
a violation of this Agreement for which a notice of termination was given
and termination failed to take effect because the default was remedied, the
period given to remedy defaults thereafter will, if and to the extent
permitted by law, thereafter be 10 days instead of 30.
(3) In any judicial proceeding in which the validity of termination is at
issue, Licensor will not be limited to the reasons set forth in any notice
sent under this paragraph.
(4) Licensor's notice of termination or suspension of services shall not
relieve Licensee of its obligations under this Agreement.
C. Immediate Termination by Licensor. This Agreement may be immediately
terminated upon notice from Licensor to Licensee (or at the earliest time
permitted by applicable law) if:
(1)(a) Licensee or any guarantor of Licensee's obligations hereunder
generally does not pay its debts as they become due or shall admit in
writing its inability to pay its debts, or shall make a general
assignment for the benefit of creditors; or
(b) Licensee or any such guarantor shall commence any case, proceeding
or other action seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or relief of debtors,
or seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its
property; or
(c) Licensee or any such guarantor shall take any corporate or other
action to authorize any of the actions set forth above in paragraphs (a)
or (b); or
(d) Any case, proceeding or other action against Licensee or any such
guarantor shall be commenced seeking to have an order for relief entered
against it as debtor, or seeking reorganization, arrangement,
adjustment, liquidation, dissolution or composition of it or its debts
under any law relating to bankruptcy, insolvency, reorganization or
relief of debtors, or seeking appointment of a receiver, trustee,
custodian or other similar official for it or for all or any substantial
part of its property, and such case, proceeding or other action (i)
results in the entry of an order for relief against it which is not
fully stayed within seven business days after the entry thereof or (ii)
remains undismissed for a period of 45 days; or
(e) An attachment remains on all or a substantial part of the Hotel or
of Licensee's or any such guarantor's assets for 30 days; or
(f) Licensee or any such guarantor fails, within 60 days of the entry
of a final judgment against Licensee in any amount exceeding $50,000, to
discharge, vacate or reverse the judgment, or to stay execution of it,
or if appealed, to discharge the judgment within 30 days after a final
adverse decision in the appeal; or
(2) Licensee loses possession or the right to possession of all or a
significant part of the Hotel, except as otherwise provided in paragraph
11; or
(3) Licensee contests in any court or proceeding Licensor's ownership of
the System or any part of it, or the validity of any service marks or
trademarks associated with Licensor's business; or
(4) A breach of paragraph 10 hereof occurs; or
(5) Licensee fails to continue to identify itself to the public as a
System hotel; or
(6) Any action is taken toward dissolving or liquidating Licensee or any
guarantor, if it is a corporation or partnership, except for death of a
partner; or
(7) Licensee or any equity holder in Licensee is, or is discovered to have
been, convicted of a felony (or any other offense if it is likely to
adversely reflect upon or affect the Hotel, the System, the Licensor, the
Licensor's parent or its affiliates or subsidiaries in any way); or
(8) Licensee knowingly maintains false books and records of account or
knowingly submits false reports or information to Licensor.
D. Termination by Licensee. This Agreement may be terminated by Licensee
as provided in paragraph 3.B. herein.
E. De-identification of Hotel Upon Termination. Licensee will take whatever
action is necessary to assure that no use is made of any part of the System
at or in connection with the Hotel after the License Term ends. This will
involve, among other things, returning to Licensor the Manual and all other
materials proprietary to Licensor, physical changes of distinctive System
features of the Hotel, including removal of the primary freestanding sign,
and all other actions required to preclude any possibility of confusion on
the part of the public that the Hotel is no longer using all or any part of
the System or otherwise holding itself out to the public as an Embassy Suites
hotel. Anything not done by Licensee in this regard within 30 days after
termination may be done at Licensee's expense by Licensor or its agents who
may enter upon the premises of the Hotel for that purpose.
F. Payment of Liquidated Damages. If the Agreement terminates pursuant to
paragraphs 11.B(2), 12.B or 12.C above, Licensee will promptly pay Licensor
(as liquidated damages for the premature termination only, and not as penalty
or forfeiture, or in lieu of any other payment), a lump sum equal to the
total amounts required under paragraph 3.C(1) and 3.C(3) during the lesser of
the following: (i) 36 months of operation; or (ii) a number of months equal
to one-half of the number of the calendar months remaining prior to the date
of the License expiration set forth in this Agreement, as measured from the
date of termination of this Agreement. The liquidated damages shall then be
calculated by multiplying the applicable number of months (36 months or less)
times the monthly average of the amounts required under paragraph 3.C(1) and
3.C(3) for the 12 months preceding the date of termination, or if the hotel
has not been in operation as an Embassy Suites hotel for 12 months, then the
actual number of months preceding the date of termination.
13. Agreement is Non-Renewable.
This Agreement is non-renewable, except where otherwise may be provided by
applicable law. Licensee may apply for a new license agreement to use the
System at the Hotel for a term not to exceed 10 years by applying for a
commitment agreement for a new license agreement on Licensor's then-current
form. Licensee agrees that such application shall be made by Licensee in
accordance with Licensor's procedures, criteria, and requirements regarding
fees, and upgrade of the Hotel, credit, operational abilities and
capabilities, prior business relationship with Licensor, market feasibility
and such other factors deemed relevant by Licensor, as are then being applied
by Licensor in issuing new licenses to use the System.
14. Relationship of Parties.
A. No Agency Relationship. Licensee is an independent contractor. Neither
party is the legal representative or agent of, or has the power to obligate
(or has the right to direct or supervise the daily affairs of) the other for
any purpose whatsoever. Licensor and Licensee expressly acknowledge that the
relationship intended by them is a business relationship based entirely on
and circumscribed by the express provisions of this Agreement and that no
partnership, joint venture, agency, fiduciary or employment relationship is
intended or created by reason of this Agreement.
B. Licensee's Notices to Public Concerning Independent Status. Licensee
will take such steps as are necessary and such steps as Licensor may from
time to time reasonably request to minimize the chance of a claim being made
against Licensor for anything that occurs at the Hotel, or for acts,
omissions or obligations of Licensee or anyone associated or affiliated with
Licensee or the Hotel. Such steps may, for example, include giving notice in
guest suites, public rooms and advertisements, on business forms and
stationery, etc., making clear to the public that Licensor is not the owner
or operator of the Hotel and is not accountable for what happens at the
Hotel. Licensee shall not enter or execute any contracts in the name
"Embassy Suites hotel," and all contracts for the Hotel's operations and
services at the Hotel shall be in the name of Licensee or Licensee's approved
management company. Unless required by law, Licensee will not use the word
"Embassy," "Embassy Suites," or any similar words in its corporate,
partnership, or trade name, nor authorize or permit such use by anyone else.
Likewise the words "Embassy," "Embassy Suites," or any similar words will not
be used to name or identify developments adjacent to or associated with the
Hotel, nor will Licensee use such names in its general business in any manner
separated from the business of the Hotel. Licensee will not use the words
"Embassy" or "Embassy Suites" or any other name or mark associated with the
System to incur any obligation or indebtedness on behalf of Licensor.
15. Miscellaneous.
A. Severability and Interpretation. The remedies provided in this Agreement
are not exclusive. In the event any provision of this Agreement is held to
be unenforceable, void or voidable as being contrary to the law or public
policy of the United States or any other jurisdiction entitled to exercise
authority hereunder, all remaining provisions shall nevertheless continue in
full force and effect unless deletion of the provision(s) deemed
unenforceable, void or voidable impairs the consideration for this Agreement
in a manner which frustrates the purpose of the parties or makes performance
commercially impracticable. In the event any provision of this Agreement
requires interpretation, such interpretation shall be based on the reasonable
intention of the parties in the context of this transaction without
interpreting any provision in favor of or against any party hereto by reason
of the draftsmanship of the party or its position relative to the other
party. Any covenant, term or provision of this Agreement which, in order to
effect the intent of the parties, must survive the termination of this
Agreement, shall survive any such termination.
B. Binding Effect. This Agreement shall become valid when executed and
accepted by Licensor at Memphis, Tennessee, and it shall be deemed made and
entered into in the state of Tennessee and shall be governed and construed
under and in accordance with the laws of the state of Tennessee. In entering
into this Agreement, Licensee acknowledges that it has sought, voluntarily
accepted and become associated with Licensor who is headquartered in Memphis,
Tennessee and that this Agreement contemplates and will result in business
relationships with Licensor's headquarter's personnel. The choice of law
designation permits, but does not require that all lawsuits concerning this
Agreement be filed in the state of Tennessee.
C. Exclusive Benefit. This Agreement is exclusively for the benefit of the
parties hereto and it may not give rise to liability to a third party. No
agreement between Licensor and anyone else is for the benefit of Licensee.
D. Entire Agreement. This is the entire Agreement (and supersedes all
previous agreements including without limitation, any commitment agreement
between the parties concerning the Hotel) between the parties relating to the
Hotel. Neither Licensor nor any other person on Licensor's behalf has made
any representations to Licensee concerning this Agreement or relating to the
System which representation is not fully set forth herein or in Licensor's
"Offering Circular for Prospective Franchisees." No change in this Agreement
will be valid unless in writing signed by both parties. No failure to
require strict performance or to exercise any right or remedy hereunder will
preclude requiring strict performance or exercising any right or remedy in
the future.
E. Licensor Withholding Consent. Licensor's consent, wherever required,
may be withheld if any default by Licensee exists under this Agreement.
Approvals and consents by Licensor will not be effective unless evidenced by
a writing duly executed on behalf of Licensor.
F. Notices. Notices will be effective hereunder when and only when they are
reduced to writing and delivered personally or mailed by Federal Express or
comparable overnight delivery service or by certified mail to the appropriate
party at its address first stated above or to such person and at such address
as may be designated by notice hereunder.
G. General Release and Covenant Not to Sue. Licensee and its respective
heirs, administrators, executors, agents, representatives, successors or
assigns, hereby release, remise, acquit and forever discharge Licensor and
its parent, subsidiaries, divisions and affiliates and their officers,
directors, employees, agents, successors or assigns from any and all actions,
claims, causes of action, suits, rights, debts, liabilities, accounts,
agreements, covenants, contracts, promises, warrants, judgments, executions,
demands, damages, costs and expenses, whether known or unknown, of any kind
or nature, absolute or contingent, if any there be, at law or in equity from
the beginning of time to and including the date this Agreement is signed by
Licensor. Licensee and its respective heirs, representatives, successors and
assigns do hereby covenant and agree that they will not institute any suit or
action at law or otherwise against Licensor directly or indirectly relating
to any claim released hereby by Licensee. This release and covenant not to
sue shall survive the termination of this Agreement. Licensee shall take
whatever steps are necessary or appropriate to carry out the terms of this
release and covenant not to sue upon Licensor's request.
H. Descriptive Headings. The descriptive headings in this Agreement are for
convenience only and shall not control or affect the meaning or construction
of any provision in this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first stated above.
LICENSEE: LICENSOR:
EMBASSY SUITES, INC.
By: ___________________________________________
Name: _________________________________________
Title: ________________________________________
Embassy Suites Hotel Division
Attest: _______________________________________
Assistant Secretary
Date: _________________________________________
ATTACHMENT A
Facilities and Services (paragraph 1):
Site-Area and general description:
Fee owners (names and addresses):
Leases (parties, terms, etc.), if any:
Separate parcels for signs:
Number of approved guest suites:
Hotel Management Company:
Restaurant(s) and lounge(s) (number, seating capacity, names and description,
tenant):
Meeting and function space:
Indoor and outdoor recreational facilities (pool, whirlpool, exercise room,
sauna, etc.):
Atrium:
Gift shop:
Other concessions and shops:
Parking facilities (number of spaces, description):
Other facilities and services:
Ownership of Licensee:
Authorized signatories:
GUARANTY
EXECUTED ___________________ , 199__
As an inducement to Embassy Suites, Inc. ("Licensor") to execute the
_________ Agreement dated _________ with ____________ (the "Agreement"), the
undersigned ("Guarantor"), jointly and severally, hereby unconditionally warrant
to Licensor and its successors and assigns that all of Licensee's representa-
tions in the Agreement and the application submitted by Licensee to obtain the
License are true and further guarantee, absolutely, unconditionally and
irrevocably to Licensor that all of Licensee's obligations under the Agreement,
including any amendments thereto whenever made, will be punctually paid and
performed.
Upon default or failure to cure within the time specified in the Agreement by
Licensee or notice from Licensor, the undersigned Guarantor will immediately
make each payment (including reasonable counsel fees) and perform each
obligation required of Licensee under the Agreement. Without affecting the
obligations of Guarantor under this Guaranty, Licensor may without notice to
Guarantor extend, modify or release any indebtedness or obligation of Licensee,
or settle, adjust or compromise any claims against Licensee. Guarantor waives
notice of amendment of the Agreement and notice of demand for payment or
performance by Licensee.
All monies available to the Licensor for application in payment or reduction
of the indebtedness or obligations of Licensee may be applied by the Licensor in
such manner and in such amounts and at such time or times and in such order and
priority as the Licensor may see fit to the payment or reduction of such portion
of the indebtedness or obligations as the Licensor may elect.
Guarantor hereby waives (a) notice of acceptance of this Guaranty and of the
making of the Agreement by the Licensor to the Licensee; (b) presentment and
demand for payment of the indebtedness or obligations under the Agreement or any
portion thereof; (c) protest and notice of dishonor or default to the
undersigned or to any other person or party with respect to the Agreement or any
portion thereof; (d) all other notices to which the undersigned might otherwise
be entitled; and (e) any demand for payment under this Guaranty.
The Guaranty constitutes a guaranty of payment and performance and not of
collection, and each Guarantor specifically waives any obligation of Licensor to
proceed against Licensee on any money or property held by Licensee or by any
other person or entity as collateral security, by way of set off or otherwise.
Guarantor further agrees that this Guaranty shall continue to be effective or be
reinstated as the case may be, if at any time payment or any of the guaranteed
obligations is rescinded or must otherwise be restored or returned by Licensor
upon the insolvency, bankruptcy or reorganization of Licensee or any of the
undersigned, all as though such payment has not been made.
No delay on the part of the Licensor in exercising any rights hereunder or
under the documents executed in connection with the Agreement or the failure to
exercise the same shall operate as a waiver of such rights; no notice to or
demand on Guarantor shall be deemed to be a waiver of the obligation of
Guarantor or of the right of the Licensor to take further action without notice
or demand as provided herein; nor in any event shall any modification or waiver
of the provisions of this Guaranty be effective unless in writing nor shall any
such waiver be applicable except in the specific instance for which given.
Notwithstanding any payments made by the undersigned pursuant to the
provisions of this Guaranty, Guarantor shall have no right of subrogation in and
to the Agreement or the payment of the obligations thereof until the
indebtedness or performance has been paid in full to the Licensor.
Each reference herein to the Licensor shall be deemed to include its
successors and assigns, in whose favor the provisions of this Guaranty shall
also inure. Each reference herein to Guarantor shall be deemed to include the
heirs, executors, administrators, legal representatives, successors and assigns
of Guarantor, all of whom shall be bound by the provisions of this Guaranty.
Upon the death of an individual Guarantor, the estate of such Guarantor will
be bound by this Guaranty but only for defaults and obligations hereunder
existing at the time of death, and the obligations of the other Guarantors will
continue in full force and effect.
This Guaranty is, and shall be deemed to be, a contract entered into under
and pursuant to the laws of the state of Tennessee and shall be in all respects
governed, construed, applied and enforced in accordance with the laws of said
state.
IN WITNESS WHEREOF, each of the undersigned has signed this Guaranty as of the
date of the above Agreement.
Witnesses: Guarantors:
______________________________________ _________________________________ (Seal)
______________________________________ _________________________________ (Seal)
______________________________________ _________________________________ (Seal)
EMBASSY SUITES, INC.
850 Ridge Lake Blvd.
Suite 400
Memphis, TN 38120
EMBASSY SUITES(R)
SHORT-TERM LICENSE AGREEMENT
Dated ____________________________, 19__ between Embassy Suites, Inc. a Delaware
corporation ("Licensor"), and __________________________________________________
________________________________________________________________________________
resident
a ______________________________________________________________ corporation
("Licensee"), whose partnership
address is _____________________________________________________________________
THE PARTIES AGREE AS FOLLOWS:
1. The License.
Licensor owns, operates and licenses a system designed to provide a
distinctive, high-quality hotel service to the public under the name "Embassy
Suites" (the "System"). High standards established by Licensor are the essence
of the System. Future investments may be required of Licensee under this
Embassy Suites License Agreement ("this Agreement"). Licensee has independently
investigated the risks of the business to be operated hereunder, including
current and potential market conditions, competitive factors and risks, has read
Licensor's "Offering Circular for Prospective Franchisees," and has made an
independent evaluation of all such facts. Neither Licensor nor any other person
on Licensor's behalf has made any representation to Licensee concerning this
Agreement not fully set forth herein. Aware of the relevant facts, Licensee
desires to enter into this Agreement in order to obtain a license to use the
System in the operation of a hotel (the "Hotel") located at ____________________
________________________________________________________________________________
_____________________________________________________________________
A. The Hotel. The Hotel comprises all structures, facilities,
appurtenances, furniture, fixtures, equipment, and entry, exit, parking and
other areas from time to time located on the land identified on the plot plan
most recently acknowledged by Licensor in anticipation of the execution of
this Agreement, or located on any land from time to time approved by Licensor
for additions, signs or other facilities. The Hotel now includes the
facilities listed on Attachment A hereto. No change in the number of
approved guest suites and no significant change in the Hotel may be made
without Licensor's prior approval. Redecoration and minor structural changes
that comply with Licensor's standards and specifications will not be
considered significant. Licensee represents that it is entitled to
possession of the Hotel during the entire License Term (as hereinafter
defined) without restrictions that would interfere with anything contemplated
in this Agreement.
B. The System. The System is composed of elements, as designated from time
to time by Licensor, designed to identify "Embassy Suites hotels" to the
consuming public and/or to contribute to such identification and its
association with quality standards. The System at present includes the
trademark "Embassy Suites" and such other service marks and copyrights,
trademarks and similar property rights as may be designated from time to time
by Licensor to be part of the System; access to a reservation service;
distribution of advertising, publicity and other marketing programs and
materials; the furnishing of training programs and materials; standards,
specifications and policies for construction, furnishing, operation,
appearance and service of the Hotel, and otherrequirements as stated or
referred to in this Agreement and from time to time in Licensor's Standards
Manual (the "Manual") or in other communications to Licensee; and programs
for inspecting the Hotel and consulting with Licensee. Licensor may add
elements to the System or modify, alter or delete elements of the System at
its sole discretion from time to time.
2. Grant of License.
Licensor hereby grants to Licensee a non-exclusive license (the "License") to
use the System only at the Hotel, only in accordance with the terms and
conditions of this Agreement and only during the term of this Agreement (the
"License Term") beginning with the date hereof and terminating under
paragraph 12 hereof. This Agreement applies to the specified location and no
other. This Agreement does not limit Licensor's right or the rights of any
parent, subsidiary, division or affiliate of Licensor, to use or license the
System or any part thereof or to engage in or license any business activity
at any other location. Licensee acknowledges that Licensor, its divisions,
subsidiaries and affiliates and parent are and may in the future be engaged
in other business activities including activities involving transient lodging
and related activities which may be or may be deemed to be competitive with
the System; that facilities, programs, services and/ or personnel used in
connection with the System may also be used in connection with such other
business activities of Licensor, its parent, subsidiaries, divisions or
affiliates; and that Licensee is acquiring no rights hereunder other than the
right to use the System as specifically defined herein in accordance with the
terms of this Agreement.
3. Licensee's Responsibilities.
A. Operational and Other Requirements. During the License Term, Licensee
will:
(1) maintain a high moral and ethical standard and atmosphere at the
Hotel;
(2) maintain the Hotel in a clean, safe and orderly manner and in
first-class condition;
(3) provide efficient, courteous and high-quality service to the public;
(4) operate the Hotel 24 hours a day every day except as otherwise
permitted by Licensor based on special circumstances;
(5) strictly comply in all respects with the Manual and with all other
policies, procedures and requirements of Licensor which may be from time to
time communicated to Licensee;
(6) strictly comply with Licensor's reasonable requirements to protect the
System and the Hotel from unreliable sources of supply;
(7) strictly comply with Licensor's requirements as to:
(a) the types of services and products that may be used, promoted or
offered at the Hotel;
(b) the types and quality of services and products that, to supplement
services listed on Attachment A,must be used, promoted or offered at the
Hotel;
(c) use, display, style and type of signage;
(d) directory and reservation service listings of the Hotel;
(e) training of persons to be involved in the operation of the Hotel;
(f) participation in all marketing, reservation service, advertising,
training and operating programs designated by Licensor as System-wide
programs in the best interests of hotels using the System;
(g) maintenance, appearance and condition of the Hotel; and
(h) quality and type of service offered to customers at the Hotel.
(8) use such automated guest service and/or hotel management and/or
telephone system(s) which Licensor deems to be in the best interests of the
System and adopts System-wide (including use in its own hotels), including
any additions, enhancements, supplements or variants thereof which may be
developed during the term hereof;
(9) participate in and use those reservation services which Licensor deems
to be in the best interests of the System, including any additions,
enhancements, supplements or variants thereof which may be developed during
the term hereof;
(10) strictly comply with all requirements, improvements or changes to the
System as may be from time to time designated by Licensor;
(11) strictly comply with all governmental requirements, including but not
limited to the filing and maintenance of any required trade name or
fictitious name registrations, pay all taxes, and maintain all governmental
licenses and permits necessary to operate the Hotel in accordance with the
System;
(12) permit inspection of the Hotel by Licensor's representatives at any
time and give them free lodging for such time as may be reasonably
necessary to complete their inspections;
(13) promote the Hotel on a local or regional basis subject to Licensor's
requirements as to form, content and prior approvals;
(14) insure that no part of the Hotel or the System is used to further or
promote a competing business or other lodging facility, except as Licensor
may approve for those competing businesses or lodging facilities owned,
licensed, operated or otherwise approved by Licensor, its parent or their
respective divisions, subsidiaries and affiliates;
(15) use every reasonable means to encourage use of Embassy Suites
facilities everywhere by the public;
(16) upon request by Licensor provide to Licensor statistics on hotel
operations in the form specified by Licensor and using definitions
specified by Licensor;
(17) in all respects use Licensee's best efforts to reflect credit upon
and create favorable public response to the name "Embassy Suites";
(18) promptly pay to Licensor all amounts due Licensor, its parent,
subsidiaries, divisions and affiliates as royalties or fees or for goods or
services purchased by Licensee; and
(19) comply with Licensor's requirements concerning confidentiality of
information.
B. Fees.
(1) For each month (or part of a month) during the License Term, Licensee
will pay to Licensor by the 15th of the following month:
(a) a royalty of 4% of the gross revenues attributable to or payable
for rental of guest suites at the Hotel with no deductions except for
sales and room taxes ("Gross Suites Revenue"); and
(b) a "Marketing and Reservation Contribution" of 3.5% of Gross Suites
Revenue (but no less then $1.75 per guest suite per night), this
contribution being subject to change by Licensor from time to time if
approved by a majority of members (which shall be counted on the basis
of one suite, one vote) of the "ESOA" (the Embassy Suites Owners'
Association or successor sanctioned as such by Licensor) who represent a
majority of the suites to be subject to the increase, at an annual ESOA
meeting or at a meeting of System Licensees as may be convened by
Licensor upon no less than 45 days' advance notice or by mail ballot
with no less than forty-five day deadline to cast ballot.
(i) Licensor may, in its sole discretion upon 30 days prior written
notice, increase this Contribution by an amount not to exceed .5% of
Gross Suites Revenue and such increase shall be effective for a period
that shall not exceed 12 months. Licensor may not implement any
additional discretionary increase(s) within 24 months after the
expiration of such increase; and
(c) a special additional Reservation Contribution assessment of
one-eighth of one percent (.125%) of Gross Suites Revenue to be paid in
1993; and
(d) an amount equal to any sales, gross receipts or similar tax imposed
on Licensor and calculated solely on payments required hereunder, unless
the tax is an optional alternative to an income tax otherwise payable by
Licensor.
Licensee will operate the Hotel so as to maximize Gross Suites Revenue
of the Hotel consistent with sound marketing and industry practice and
will not engage in any conduct which reduces Gross Suites Revenue of the
Hotel in order to further other business activities.
(2) A standard initial fee as set forth in Licensor's current "Offering
Circular for Prospective Franchisees" will be charged by Licensor upon
application for any guest suites to be added to the Hotel.
(3) Additional royalties may be charged by Licensor on revenues (or upon
any other basis, if so determined by Licensor) from any activity if it is
added at the Hotel by mutual agreement and:
(a) it is not now offered at System hotels generally and it is likely
to benefit significantly from or be identified significantly with the
Embassy Suites name or other aspects of the System; or
(b) it is designed or developed by or for Licensor.
(4) Charges may be made by Licensor for optional products or services
accepted by Licensee from Licensor either in accordance with current
practice or as developed in the future.
(5) If Licensee chooses to participate in any optional program available
through Licensor or its parent, or any other program certified by Licensor,
for payment of travel agent commissions, Licensee will pay to Licensor or
its designated agent by the 15th of the month following receipt of a
statement therefor, all amounts due.
(6) Each payment under this paragraph 3.B. shall be accompanied by the
monthly statement referred to in paragraph 8.A. Licensor may apply any
amounts received under this paragraph 3.B. to any amounts due under this
Agreement. If any amounts are not paid when due such nonpayment shall
constitute a breach of this Agreement and in addition, such unpaid amounts
will accrue interest beginning on the first day of the month following the
due date at 1 1/2% per month but not to exceed the maximum interest
permitted by applicable law.
(7) Local and regional marketing programs and related activities may be
conducted by Licensee, but only at Licensee's expense and subject to
Licensor's requirements. Reasonable charges may be made by Licensor for
optional advertising materials ordered or used by Licensee for such
programs and activities.
4. Licensor's Responsibilities.
A. Training. During the License Term, Licensor will continue to specify
and provide required training programs and may, at its discretion, provide
certain optional training programs at various locations. No tuition charge
will be made for any training required by Licensor, but travel, lodging and
other expenses of Licensee and its employees will be borne by Licensee.
Reasonable charges may be made by Licensor for optional training programs and
for all training materials provided to Licensee.
B. Reservation Services. During the License Term, so long as Licensee is
in full compliance with its material obligations hereunder, Licensor will
afford Licensee access to Reservation Services for the Hotel.
C. Consultation on Operations, Facilities and Marketing. Licensor will,
from time to time at Licensor's sole discretion, make available to Licensee
at no charge consultation and advice in connection with operations,
facilities and marketing.
D. Use of Marketing and Reservation Contribution. The Marketing and
Reservation Contribution will be used by and at the sole discretion of
Licensor for costs associated with advertising, promotion, publicity, market
research and other systemwide marketing programs and related activities and
for reservation programs and related activities. Licensor will make
available and use for the same purposes marketing and reservation funds
computed on the basis generally applicable to licensees of the System.
Licensor is not obligated to expend funds for marketing or reservation
services in excess of the amounts received by Licensor from licensees using
the System and those funds made available by Licensor as set out hereinabove.
E. Application of Manual. All hotels operated under the System will be
subject to the Manual, as it may from time to time be modified or revised by
Licensor, including limited exceptions from compliance which may be made
based on local conditions or special circumstances.
F. Other Arrangements for Marketing, etc. Licensor may enter into
arrangements for development, marketing, operations, administrative,
technical and support functions, facilities, programs, services and/or
personnel with any other entity and may use any facilities, programs,
services or personnel used in connection with the System in connection with
any business activities of its parent, subsidiaries, divisions or affiliates.
G. If the Hotel fails to comply with the standards and rules of operation
set forth in the Manual, the LIcensor may, at the Licensee's written request
and cost, meet with the Licensee or the Licensee's representative at the
Hotel to develop an action plan to correct the deficiencies. The Licensee's
failure to develop an approved plan within 30 days of receipt of notice of
noncompliance or to timely perform the requirements of the plan shall be an
additional ground for declaring Licensee to be in breach of the Agreement.
Licensor's participation in the development of an action plan and approval of
such plan shall not be a condition precedent for Licensor declaring Licensee
to be in breach of this Agreement based on the failure of the Hotel to comply
with standards and rules of operation set forth in the Manual.
5. Appeals, Changes in the Manual.
A. Appeals. Decisions, other than termination notices, made on behalf of
Licensor specifically with reference to the Hotel may be appealed to
Licensor's Franchise Committee if done promptly after Licensee has diligently
sought relief through Licensor's normal channels of authority. With the
approval in writing of any member of the Franchise Committee, the decision
may be further appealed to the members of the ESOA Executive Committee who
are also officers of Licensor or its Embassy Suites Hotel Division.
B. Changes in the Manual. Any change in the Manual must be explained in
writing to Licensee at least 30 days before it goes into effect. Any change
in the Manual that is shown to be arbitrary or capricious will be rescinded
by Licensor. A committee designated by Licensor which includes its Chief
Executive Officer or its Chief Operating Officer must determine that the
change was formulated in good faith in the best interests of the System, and
that it was approved by Licensor's Franchise Committee after seeking the
advice and counsel of the Operations Standards Subcommittee of the ESOA.
After it has been in effect 60 days, but less than 180 days, a change in the
Manual may be appealed to the members of the ESOA Executive Committee who are
also officers of Licensor or its Embassy Suites Hotel Division by members
representing at least 30% of the hotels authorized to use the System.
C. Decision on Appeal. Licensor shall have the right to decide appeals
under this paragraph solely in its discretion and may require that such
appeals be made solely on the basis of written submissions. No appeal will
suspend a decision or change until and unless the appeal is successful.
D. Limitation on Appeal Rights. Licensee will not be arbitrary, capricious
or unreasonable in exercising its appeal (or any other) rights under this
Agreement, and will use them only for the purposes for which intended.
6. ESOA.
A. Eligibility. Licensee, other licensees of the System, and Licensor are
eligible for membership in the ESOA in accordance with the By-laws of the
ESOA and are entitled to vote at its meetings on the basis of one open suite,
one vote. The purposes of the ESOA will be to consider and discuss, and make
recommendations on, common problems relating to the operation of System
hotels. Licensor will seek the advice and counsel of the ESOA Executive
Committee and its subcommittees.
B. Function of Committees. ESOA committees, their functions and their
members will be subject to approval in writing by Licensor, which approval
will not be unreasonably withheld. Recognizing that the ESOA must function
in a manner consistent with the best interests of all persons using the
System, the Licensee and Licensor will use their best efforts to cause the
governing rules of the ESOA to be consistent with this Agreement.
7. Proprietary Rights.
A. Ownership of System. The Licensee acknowledges and will not contest,
either directly or indirectly, Licensor's unrestricted and exclusive
ownership of the System and any element(s) or component(s) thereof, or that
Licensor has the sole right to grant licenses to use all or any element(s) or
component(s) of the System. Licensee specifically agrees and acknowledges
that Licensor is the owner of all right, title and interest in and to the
mark "Embassy Suites" and all other marks associated with the System together
with the goodwill symbolized thereby and that Licenses will not contest
directly or indirectly the validity or ownership of the marks either during
the License Term or after its termination. All improvements and additions
whenever made to or associated with the System by the parties to this
Agreement or anyone else, and all service marks, trademarks, copyrights, and
service mark and trademark registrations at any time used, applied for or
granted in connection with the System, and all goodwill arising from
Licensee's use of Licensor's marks shall inure to the benefit of and become
the property of Licensor. Upon expiration or termination of this Agreement,
no monetary amount shall be assigned as attributable to any goodwill
associated with Licensee's use of the System or any element(s) or
component(s) of the System including the name or marks.
B. Trademark Disputes. Licensor will have the sole right and responsibility
to handle disputes with third parties concerning use of all or any part of
the System, and Licensee will, at its reasonable expense, extend its full
cooperation to Licensor in all such matters. All recoveries made as a result
of disputes with third parties regarding use of the System or any part
thereof shall be for the account of Licensor. Licensor need not initiate
suit against alleged imitators or infringers and may settle any dispute by
grant of a license or otherwise. Licensee will not initiate any suit or
proceeding against alleged imitators or infringers, or any other suit or
proceeding to enforce or protect the System. Both parties will make every
effort consistent with the foregoing to protect, maintain, and promote the
name "Embassy Suites" and its distinguishing characteristics (and the other
service marks, trademarks, slogans, etc., associated with the System) as
standing for the System and only the System; provided, however, both parties
acknowledge that Licensor may allow certain hotels which had written
franchise commitments or licenses in the Granada Royale Hometel franchise
system to use the name "Embassy Suites" and other related marks of the
System.
C. Protection of Name and Marks. Both parties will make every effort
consistent with the foregoing to protect and maintain the name and mark
"Embassy Suites" and its distinguishing characteristics (and the other
service marks, trademarks, slogans, etc. associated with the System).
Licensee agrees to execute any documents deemed necessary by Licensor or its
counsel to obtain protection for Licensor's marks or to maintain their
continued validity and enforceability. Licensee agrees to use the names and
marks associated with the System only in the manner authorized by Licensor
and acknowledges that any unauthorized use thereof shall constitute
infringement of Licensor's rights.
8. Records and Audits.
A. Monthly Reports. At least monthly, Licensee shall prepare a statement
which will include all information concerning Gross Suites Revenue, other
revenues generated at the Hotel, suite occupancy rates, reservation data and
other information required by Licensor that may be useful in connection with
marketing and other functions of Licensor, its parent, subsidiaries,
divisions or affiliates (the "Data"). The Data shall be the property of
Licensor. The Data will be permanently recorded and retained as may be
reasonably required by Licensor. By the 15th of each month, Licensee will
submit to Licensor a statement setting forth the Data for the previous month
and reflecting the computation of the amounts then due under paragraph 3.B.
The statement shall be in such form and detail and shall use such definitions
as Licensor may reasonably request from time to time, and may be used by
Licensor for its reasonable purposes.
B. Daily Reports. At the request of Licensor, Licensee shall prepare and
deliver daily reports to Licensor, which reports will contain information
reasonably requested by Licensor on a daily basis such as daily rate and
suite occupancy, and which may be used by Licensor for its reasonable
purposes.
C. Preparation and Maintenance of Records. Licensee will, in a manner and
form satisfactory to Licensor and utilizing accounting and reporting
standards as reasonably required by Licensor, prepare on a current basis (and
preserve for no less than four years), complete and accurate records
concerning Gross Suites Revenue and all financial, operating, marketing and
other aspects of the Hotel, and maintain an accounting system which fully and
accurately reflects all financial aspects of the Hotel and its business.
Such records shall include but not be limited to books of account, tax
returns, governmental reports, register tapes, daily reports, and complete
quarterly and annual financial statements (profit and loss statements,
balance sheets and cash flow statements).
D. Audit. Licensor may require Licensee to have the Gross Suites Revenue
or other monies due hereunder computed and certified as accurate by a
certified public accountant. During the License Term and for two years
afterward, Licensor and its authorized agents will have the right to verify
information required under this Agreement by requesting, receiving,
inspecting and auditing, at all reasonable times, any and all records
referred to above wherever they may be located (or elsewhere if reasonably
requested by Licensor). If any such inspection or audit discloses a
deficiency in any payments due hereunder, Licensee shall immediately pay to
Licensor the deficiency, plus interest thereon as provided in paragraph
3.B.(6). In addition, if the deficiency in any payment for any 12-month
period exceeds 5% of the correct amount and is not offset by overpayments,
Licensee shall also immediately pay to Licensor the entire cost of the
inspection and audit, including but not limited to travel, lodging, meals,
salaries and other expenses of the inspecting or auditing personnel.
Licensor's acceptance of Licensee's payment of any deficiency as provided for
herein shall not waive Licensor's right to terminate this Agreement as
provided for herein in paragraph 12. If the audit discloses an overpayment,
Licensor will immediately refund it to Licensee.
E. Annual Financial Statements. Licensee will submit to Licensor as soon as
available but not later than 90 days after the end of Licensee's fiscal year,
complete financial statements for the Hotel for such year. Licensee will
certify them to be true and correct and to have been prepared in accordance
with generally accepted accounting principles consistently applied, and any
false certification will be a breach of this Agreement.
9. Indemnity and Insurance.
A. Indemnity. Licensee will indemnify Licensor, its parent, and its
subsidiaries, divisions and affiliates and their officers, directors,
employees, agents, successors and assigns against, hold them harmless from,
and promptly reimburse them for, all payments of money (fines, damages, legal
fees, expenses, etc.) by reason of any claim, demand, tax, penalty, or
judicial or administrative investigation or proceeding (even where negligence
of Licensor and/or its parent, subsidiaries and affiliates is alleged)
arising from any claimed occurrence at the Hotel or any act, omission or
obligation of Licensee or anyone associated or affiliated with Licensee or
the Hotel. At the election of Licensor, Licensee will also defend Licensor
and/or its parent, subsidiaries, divisions and affiliates and their officers,
directors, employees, agents, successors and assigns against same. In any
event, Licensor will have the right, through counsel of its choice, to
control any matter to the extent it could directly or indirectly affect
Licensor and/or its parent, subsidiaries, divisions and affiliates and their
officers, directors, employees, agents, successors and assigns financially.
Licensee will also reimburse Licensor for all expenses including attorneys'
fees and court costs reasonably incurred by Licensor to protect itself and/or
its parent, subsidiaries, divisions, affiliates and their officers,
directors, employees, agents and their successors and assigns from, or to
remedy defaults of Licensee under this Agreement.
B. Insurance. During the License Term, Licensee will comply with all
insurance requirements of any lease or mortgage covering the Hotel, and
Licensor's specifications for insurance as to amount and type of coverage as
may be reasonably increased by Licensor from time to time in writing, and
will in any event maintain as a minimum the following insurance underwritten
by an insurer approved by Licensor:
(1) employer's liability and workers' compensation insurance as prescribed
by applicable law; and
(2) liquor liability insurance naming Licensor and its parent as
additional insureds with single-limit coverage for personal and bodily
injury and property damage of at least $10,000,000 for each occurrence; and
(3) comprehensive general liability insurance (with products, completed
operations and independent contractors coverage) and comprehensive
automobile liability insurance, all on an occurrence basis naming Licensor
and its parent as additional insureds and underwritten by an insurer
approved by Licensor, with single-limit coverage for personal and bodily
injury and property damage of at least $10,000,000 for each occurrence. In
connection with all significant construction at the Hotel during the
License Term, Licensee will cause the general contractor to maintain with
an insurer approved by Licensor comprehensive general liability insurance
(with products, completed operations and independent contractors coverage)
in at least the amount of $10,000,000 for each occurrence with Licensor and
its parent named as additional insureds.
C. Changes in Insurance. Simultaneously herewith, annually hereafter and
each time a change is made in any insurance or insurance carrier, Licensee
will furnish to Licensor copies of the policies of insurance setting forth
the term and coverage of the insurance in force, the persons insured, and the
fact that the coverage may not be cancelled, altered or permitted to lapse or
expire without 30 days' advance written notice to Licensor.
10. Transfer.
A. Transfer by Licensor. Licensor shall have the right to transfer or
assign this Agreement or any of Licensor's rights or obligations hereunder to
any person or legal entity.
B. Transfer by Licensee. Licensee understands and acknowledges that the
rights and duties set forth in this Agreement are personal to Licensee, and
that Licensor has entered into this Agreement in reliance on the business
skill, financial capacity, and personal character of Licensee (if Licensee is
an individual), and upon that of the partners or stockholders of Licensee (if
Licensee is a partnership or corporation). Accordingly, neither Licensee nor
any immediate or remote successor to any part of Licensee's interest in this
Agreement, nor any individual partnership, corporation, or other legal entity
which directly or indirectly owns an equity interest (as that term is defined
herein) in Licensee, shall sell, assign, transfer, convey, pledge, mortgage,
encumber, or give away, any direct or indirect interest in this Agreement or
equity interest in Licensee, except as provided in this Agreement. Any
purported sale, assignment, transfer, conveyance, pledge, mortgage, or
encumbrance, by operation of law or otherwise, of any interest in this
Agreement or any equity interest in Licensee not in accordance with the
provisions of this Agreement, shall be null and void and shall constitute a
material breach of this Agreement for which Licensor may terminate this
Agreement upon notice without opportunity to cure, pursuant to paragraph
12.C.(4) of this Agreement.
(1) For the purposes of this paragraph 10, the term "equity interest"
shall mean any stock or partnership interest in Licensee, the interest of
any partner, whether general or limited, in any partnership, with respect
to such partnership, and any stockholder of any corporation with respect to
such corporation, which partnership or corporation is the Licensee
hereunder or which partnership or corporation owns a direct or indirect
beneficial interest in Licensee. References in this Agreement to
"publicly-traded equity interest" shall mean any equity interest which is
traded on any securities exchange or is quoted in any publication or
electronic reporting service maintained by the National Association of
Securities Dealers, Inc. or any of its successors.
(2) If Licensee is a partnership or corporation, Licensee represents that
the equity interests in Licensee are directly and (if applicable)
indirectly owned as shown in Attachment A.
C. Transfer of Equity Interests that are not Publicly Traded.
(1) Except where otherwise provided in this Agreement, equity interests in
the Licensee that are not publicly traded may be transferred, issued, or
eliminated with Licensor's prior written consent, which will not be
unreasonably withheld provided that, after the transaction:
(a) 50% or less of all equity interests in Licensee will have changed
hands since Licensee first became a party to this Agreement; or
(b) 80% or less of all equity interests in Licensee will have changed
hands since Licensee first became a party to this Agreement, and no
equity interest will be held by other than those who held them when
Licensee first became a party to this Agreement.
(2) In computing the percentages referred to in paragraph 10.C.(1) above,
limited partners will not be distinguished from general partners, and
Licensor's judgment will be final if there is any question as to the
definition of "equity interest" or as to the computation of relative equity
interest, the principal considerations being:
(a) Direct and indirect power to exercise control over the affairs of
Licensee;
(b) Direct and indirect right to share in Licensee's profits; and
(c) Amounts directly or indirectly exposed to risk in Licensee's
business.
D. Transfers of Publicly-Traded Equity Interests.
(1) Except as otherwise provided in this Agreement, publicly-traded equity
interests in the Licensee may be transferred without the Licensor's
consent, but only if:
(a) Immediately before the proposed transfer the transferor owns less
than 25% of the equity interest of Licensee; and
(b) Immediately after the transfer the transferee will own less than
25% of the equity interest in Licensee; and
(c) The transfer is exempt from registration under federal securities
law.
(2) Publicly-traded equity interests may be transferred with Licensor's
written consent, which may not be unreasonably withheld, if the transfer is
exempt from registration under federal securities law.
(3) The chief financial officer of Licensee shall certify annually to
Licensor that Licensee is in compliance with the provisions of this
paragraph 10.D. Such certification shall be delivered to Licensor with the
Annual Financial Statements referred to in paragraph 8.E. hereof.
E. Transfer of this Agreement.
(1) Licensee, if a natural person, may with Licensor's consent, which will
not be unreasonably withheld, transfer this Agreement to Licensee's spouse,
parent, sibling, niece, nephew, descendant, or spouse's descendant provided
that:
(a) Adequate provision is made for management of the Hotel; and
(b) The transferee executes a new license agreement for the unexpired
term of this Agreement on the standard form then being used to license
new Hotels under the System, except that the fees charged then
shall be the same as those contained herein; and
(c) Licensee guarantees, in Licensor's usual form, the performance of
the transferee's obligations under the newly-executed license agreement.
(2) If Licensee is a natural person, he may, without the consent of
Licensor upon 30 days' prior written notice to Licensor, transfer
this Agreement to a corporation entirely owned by him provided that:
(a) Adequate provision is made for management of the Hotel; and
(b) The transferee executes a new license agreement for the unexpired
term of this Agreement on the standard form then being used to license
new hotels under the System, except that the fees charged then shall be
the same as those contained herein; and
(c) The Licensee guarantees, in Licensor's usual form, the performance
of the transferee's obligations under the newly-executed license
agreement.
F. Transfers of this Agreement or Equity Interest in this Agreement Upon
Death.
(1) If Licensee is a natural person, upon the Licensee's death this
Agreement will pass in accordance with Licensee's will, or, if Licensee
dies intestate, in accordance with laws of intestacy governing the
distribution of the Licensee's estate provided that:
(a) Adequate provision is made for management of the Hotel; and
(b) The Licensor gives written consent, which consent will not be
unreasonably withheld; and
(c) The transferee is one or more of the decedent's spouse, parents,
siblings, nieces, nephews, descendants, or spouse's descendants; and
(d) Licensee's heirs or legatees promptly advise Licensor and promptly
execute a new license agreement for the unexpired term of this Agreement
on the standard form then being used to license new Hotels under the
System, except the fees charged thereunder shall be the same contained
herein.
(2) If an equity interest is owned by a natural person, the equity
interest will pass upon such person's death in accordance with such
person's will or, if such person dies intestate, in accordance with the
laws of intestacy governing the distribution of Licensee's estate provided
that:
(a) Adequate provision is made for management of the Hotel; and
(b) The Licensor gives written consent, which consent will not be
unreasonably withheld; and
(c) The transferee is one or more of the decedent's spouse, parents,
siblings, nieces, nephews, descendants, or spouse's descendants; and
(d) Transferee assumes, in writing, on a continuing basis, the
decedent's guarantee, if any, of the Licensee's obligations hereunder.
G. Registration of a Proposed Transfer of Equity Interests. If a proposed
transfer of an equity interest in the Licensee requires registration under
any federal or state securities law, Licensee shall:
(1) Request the Licensor's consent at least 45 days before the proposed
effective date of the registration; and
(2) Accompany such request with one payment of a nonrefundable fee of
$25,000; and
(3) Reimburse Licensor for expenses incurred by Licensor in connection
with review of the materials concerning the proposed registration,
including without limitation, attorneys' fees and travel expenses; and
(4) Agree, and all participants in the proposed offering subject to
registration shall agree, to fully indemnity Licensor in connection with
the registration; furnish the Licensor all information requested by
Licensor; avoid any implication of Licensor's participating in, or
endorsing the offering; and use the Licensor's service marks and trademarks
only as directed by Licensor.
H. Management of the Hotel. Licensee must at all times retain and exercise
direct management control over the Hotel's business, either directly or
through a management company approved by Licensor. Licensee shall not enter
into any lease, management agreement, or other similar arrangement for the
operation of the Hotel or any part thereof (including without limitation,
food and/or beverage service facilities), with any independent entity without
the prior written consent of Licensor.
I. Application for New License Agreement upon Transfer of the Hotel.
(1) If Licensee receives an offer to purchase or lease the Hotel or any
portion thereof and Licensee, pursuant to the terms of such offer, desires
to sell or lease the Hotel or any portion thereof, Licensee shall give
prompt written notice thereof to Licensor stating the identity of the
prospective purchaser or lessee, the price or rental and furnish a copy of
the proposed agreement concerning said offer and all other information with
respect thereto which may be reasonably requested by Licensor.
(2) If the proposed lessee or transferee desires to operate the Hotel
under the System, the proposed lessee or transferee will, with Licensee's
consent, apply for a new license agreement to replace this Agreement for a
term to be determined by Licensor. Licensor will process the application
in good faith and in accordance with procedures, criteria and requirements
regarding fees, upgrade of the Hotel, credit, operational abilities and
capabilities, prior business dealings, if any, with the Licensor, market
feasibility and other factors deemed relevant by Licensor, then being
applied by Licensor in issuing new licenses to use the System. If the
application is not approved by Licensor and Licensee proceeds with the
purchase or lease of the Hotel, then this Agreement shall terminate
pursuant to paragraph 12.C., and Licensor shall be entitled to all of its
remedies. If the application is approved, Licensor and the transferee
will, upon surrender of this Agreement, enter into a commitment agreement
to govern the Hotel until the time specified therein for the new license
agreement to be entered into if the transferee fulfills specified upgrading
and other requirements. The new license agreement will be on the standard
form, and contain the standard terms (except for duration) then being used
to license new Hotels under the System.
11. Condemnation and Casualty.
A. Condemnation. Licensee shall, at the earliest possible time, give
Licensor full notice of any proposed taking by eminent domain. If Licensor
agrees that the Hotel or a substantial part thereof is to be taken, Licensor
will give due and prompt consideration, without any obligation, to
substituting a nearby location selected by Licensee and approved by Licensor
as the Hotel hereunder as promptly as reasonably possible, and in any event
within four months of the taking. If the new location is approved by
Licensor and the substitution authorized by Licensor and if Licensee opens a
new hotel at the new location in accordance with Licensor's specifications
within two years of the closing of the Hotel, the new hotel will thenceforth
be deemed to be the Hotel licensed under this Agreement. If a condemnation
takes place and a new hotel does not, for whatever reason, become the Hotel
under this Agreement in strict accordance with this paragraph (or if it is
reasonably evident to Licensor that such will be the case), this Agreement
will terminate forthwith upon notice thereof by Licensor to Licensee without
the payment of liquidated damages required by paragraph 12.E.
B. Casualty.
(1) If the Hotel is destroyed or substantially destroyed during the
License Term by fire or other casualty and the cost of repairing,
restoring, rebuilding and replacing the same shall exceed the proceeds of
the insurance collectible with respect to such fire or other casualty (for
this purpose the deductible amount under the insurance policy shall be
deemed to be collectible proceeds) and the Hotel
(a) for at least the full twelve month period preceding the casualty,
did not have a positive cash flow after payment of all operating and
ownership costs; or
(b) can be shown by appraisal to have an economic value less than the
total cost to repair, restore, rebuild or replace, Licensee shall have
the right upon notice served upon Licensor within sixty (60) days after
such fire or casualty, to terminate this Agreement without the payment
of liquidated damages required by paragraph 12.E.
(2) If the cost of repairing, restoring, rebuilding or replacing the
damage shall be equal to or less than the proceeds of the insurance
collectible with respect to such fire or other casualty, or, if greater and
the Licensee did not meet (a) or (b) above or, if greater and the Licensee
did meet (a) or (b) above, but did not give notice to Licensor within the
sixty (60) day time period, Licensee shall expeditiously repair the damage.
If the damage or repair requires closing the Hotel, Licensee will
immediately notify Licensor, will repair or rebuild the Hotel in accordance
with Licensor's standards, will commence reconstruction within four months
after closing, and will reopen the Hotel for continuous business operations
as soon as practicable (but in any event within 24 months after closing of
the Hotel), giving Licensor ample advance notice of the date of reopening.
If the Hotel is not reopened in accordance with this paragraph, this
Agreement will forthwith terminate upon notice thereof from Licensor to
Licensee, with the payment of liquidated damages required by paragraph
12.E.
C. No Extensions of Term. Nothing in this paragraph 11 will extend the
License Term but Licensee shall not be required to make any payments pursuant
to paragraphs 3.B.(1), (3) and (4) for periods during which the Hotel is
closed by reason of condemnation or casualty.
12. Termination.
A. Expiration of Term. This Agreement will expire without notice ___ years
from the date hereof, subject to earlier termination as set forth herein.
The parties recognize the difficulty of ascertaining damages to Licensor
resulting from premature termination of this Agreement, and have provided for
liquidated damages in paragraph 12.E. below, which represent the parties'
best estimate as to the damages arising from the circumstances in which they
are provided.
B. Termination by Licensor on Advance Notice.
(1) In accordance with notice from Licensor to Licensee, this Agreement
will terminate (without any further notice unless required by law), or, at
Licensor's sole discretion with notice from Licensor to Licensee, Licensor
may cease to provide its services hereunder (including reservation
services), provided that:
(a) the notice is mailed at least 30 days (or longer, if required by
law) in advance of the termination date;
(b) the notice reasonably identifies one or more breaches of the
Licensee's obligations hereunder; and
(c) the breach(es) are not fully remedied within the time period
specified in the notice.
(2) If during the then preceding 12 months, Licensee shall have engaged in
a violation of this Agreement for which a notice of termination was given
and termination failed to take effect because the default was remedied, the
period given to remedy defaults will, if and to the extent permitted by
law, thereafter be 10 days instead of 30.
(3) In any judicial proceeding in which the validity of termination is at
issue, Licensor will not be limited to the reasons set forth in any notice
sent under this paragraph.
(4) Licensor's notice of termination or suspension of services shall not
relieve Licensee of its obligations under this Agreement.
C. Immediate Termination by Licensor. This Agreement may be immediately
terminated upon notice from Licensor to Licensee (or at the earliest time
permitted by applicable law) if:
(1)(a) Licensee or any guarantor of Licensee's obligations hereunder
generally does not pay its debts as they become due or shall admit in
writing its inability to pay its debts, or shall make a general
assignment for the benefit of creditors; or
(b) Licensee or any such guarantor shall commence any case, proceeding
or other action seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or relief of debtors,
or seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its
property; or
(c) Licensee or any such guarantor shall take any corporate or other
action to authorize any of the actions set forth above in paragraphs (a)
or (b); or
(d) Any case, proceeding or other action against Licensee or any such
guarantor shall be commenced seeking to have an order for relief entered
against it as debtor, or seeking reorganization, arrangement,
adjustment, liquidation, dissolution or composition of it or its debts
under any law relating to bankruptcy, insolvency, reorganization or
relief of debtors, or seeking appointment of a receiver, trustee,
custodian or other similar official for it or for all or any substantial
part of its property, and such case, proceeding or other action (i)
results in the entry of an order for relief against it which is not
fully stayed within seven business days after the entry thereof or (ii)
remaining undismissed for a period of 45 days; or
(e) An attachment remains on all or a substantial part of the Hotel or
of Licensee's or any such guarantor's assets for 30 days; or
(f) Licensee or any such guarantor fails, within 60 days of the entry
of a final judgment against Licensee in any amount exceeding $50,000, to
discharge, vacate or reverse the judgment, or to stay execution of it,
or if appealed, to discharge the judgment within 30 days after a final
adverse decision in the appeal; or
(2) Licensee loses possession or the right to possession of all or a
significant part of the Hotel, except as otherwise provided in paragraph
11; or
(3) Licensee contests in any court or proceeding Licensor's ownership of
the System or any part of it, or the validity of any service marks or
trademarks associated with Licensor's business; or
(4) A breach of paragraph 10 hereof occurs; or
(5) Licensee fails to continue to identify itself to the public as a
System hotel; or
(6) Any action is taken toward dissolving or liquidating Licensee or any
such guarantor, if it is a corporation or partnership, except for death of
a partner; or
(7) Licensee or any of its principals is, or is discovered to have been,
convicted of a felony (or any other offense if it is likely to adversely
reflect upon or affect the Hotel, the System, the Licensor, the Licensor's
parent or its affiliates or subsidiaries in any way); or
(8) Licensee knowingly maintains false books and records of account or
knowingly submits false reports or information to Licensor.
D. De-identification of Hotel Upon Termination. Licensee will take whatever
action is necessary to assure that no use is made of any part of the System
at or in connection with the Hotel or otherwise after the License Term ends.
This will involve, among other things, returning to Licensor the Manual and
all other materials proprietary to Licensor, physical changes of distinctive
System features of the Hotel, including removal of the primary freestanding
sign, and all other actions required to preclude any possibility of confusion
on the part of the public that the Hotel is no longer using all or any part
of the System or otherwise holding itself out to the public as an Embassy
Suites hotel. Anything not done by Licensee in this regard within 30 days
after termination may be done at Licensee's expense by Licensor or its agents
who may enter upon the promises of the Hotel for that purpose.
E. Payment of Liquidated Damages. If the Agreement terminates pursuant to
paragraphs 11.B(2), 12.B or 12.C above, Licensee will promptly pay Licensor
(as liquidated damages for the premature termination only, and not as penalty
or forfeiture, or in lieu of any other payment), a lump sum equal to the
total amounts required under paragraph 3.B(1) and 3.B(3) during the lesser of
the following: (i) 36 months of operation; or (ii) a number of months equal
to one-half of the number of the calendar months remaining prior to the date
of the License expiration set forth in this Agreement, as measured from the
date of termination of this Agreement. The liquidated damages shall then be
calculated by multiplying the applicable number of months (36 months or less)
times the monthly average of the amounts required under paragraph 3.B(1) and
3.B(3) for the 12 months preceding the date of termination, or if the hotel
has not been in operation as an Embassy Suites hotel for 12 months, then the
actual number of months preceding the date of termination.
13. Agreement is Non-Renewable.
This Agreement is nonrenewable, except where otherwise may be provided by
applicable law.
14. Relationship of Parties.
A. No Agency Relationship. Licensee is an independent contractor.
Neither party is the legal representative or agent of or has the power to
obligate (or has the right to direct or supervise the daily affairs of) the
other for any purpose whatsoever. Licensor and Licensee expressly
acknowledge that the relationship intended by them is a business
relationship based entirely on and circumscribed by the express provisions
of this Agreement and that no partnership, joint venture, agency, fiduciary
or employment relationship is intended or created by reason of this
Agreement.
B. Licensee's Notices to Public Concerning Independent Status. Licensee
will take such steps as are necessary and such steps as Licensor may from
time to time reasonably request to minimize the chance of a claim being
made against Licensor for anything that occurs at the Hotel or for acts,
omissions or obligations of Licensee or anyone associated or affiliated
with Licensee or the Hotel. Such steps may, for example, include giving
notice in guest rooms, public rooms and advertisements, on business forms
and stationery, etc., making clear to the public that Licensor is not the
owner or operator of the Hotel and is not accountable for what happens at
the Hotel. Licensee shall not enter or execute any contracts in the name
"Embassy Suites hotel," and all contracts for the Hotel's operations and
services at the Hotel shall be in the name of Licensee or Licensee's
approved management company. Unless required by law, Licensee will not use
the word "Embassy," "Embassy Suites," or any similar words in its
corporate, partnership, or trade name, nor authorize or permit such use by
anyone else. Likewise the words "Embassy," "Embassy Suites," or any
similar words will not be used to name or identify developments adjacent to
or associated with the Hotel, nor will Licensee use such names in its
general business in any manner separated from the business of the Hotel.
Licensee will not use the words "Embassy" or "Embassy Suites" or any other
name or mark associated with the System to incur any obligation or
indebtedness on behalf of Licensor.
15. Miscellaneous.
A. Severability and Interpretation. The remedies provided in this
Agreement are not exclusive. In the event any provision of this Agreement
is held to be unenforceable, void or voidable as being contrary to the law
or public policy of the United States or any other jurisdiction entitled to
exercise authority hereunder, all remaining provisions shall nevertheless
continue in full force and effect unless deletion of the provision(s)
deemed unenforceable, void or voidable impairs the consideration for this
Agreement in a manner which frustrates the purpose of the parties or makes
performance commercially impracticable. In the event any provision of this
Agreement requires interpretation, such interpretation shall be based on
the reasonable intention of the parties in the context of this transaction
without interpreting any provision in favor of or against any party hereto
by reason of the draftsmanship of the party or its position relative to the
other party. Any covenant, term or provision of this Agreement which, in
order to effect the intent of the parties, must survive the termination of
this Agreement, shall survive any such termination.
B. Binding Effect. This Agreement shall become valid when executed and
accepted by Licensor at Memphis, Tennessee and it shall be deemed made and
entered into in the state of Tennessee and shall be governed and construed
under and in accordance with the laws of the state of Tennessee. In
entering into this Agreement, Licensee acknowledges that it has sought,
voluntarily accepted and become associated with Licensor who is
headquartered in Memphis, Tennessee, and that this Agreement contemplates
and will result in business relationships with Licensor's headquarter's
personnel. The choice of law designation permits, but does not require,
that all lawsuits concerning this Agreement be filed in the state of
Tennessee.
C. Exclusive Benefit. This Agreement is exclusively for the benefit of
the parties hereto, and it may not give rise to liability to a third party.
No agreement between Licensor and anyone else is for the benefit of
Licensee.
D. Entire Agreement. This is the entire Agreement (and supersedes all
previous agreements including without limitation, any commitment agreement
between the parties concerning the Hotel) between the parties relating to
the Hotel. Neither Licensor nor any other person on Licensor's behalf has
made any representation to Licensee concerning this Agreement or relating
to the system which representation is not fully set forth herein or in
Licensor's "Offering Circular for Prospective Franchisees." No change in
this Agreement will be valid unless in writing signed by both parties. No
failure to require strict performance or to exercise any right or remedy
hereunder will preclude requiring strict performance or exercising any
right or remedy in the future.
E. Licensor's Withholding Consent. Licensor's consent, wherever required,
may be withheld if any default by Licensee exists under this Agreement.
Approvals and consents by Licensor will not be effective unless evidenced
by a writing duly executed on behalf of Licensor.
F. Notices. Notices will be effective hereunder when and only when they
are reduced to writing and delivered personally or mailed by Federal
Express or comparable overnight delivery service or by certified mail to
the appropriate party at its address first stated above or to such person
and at such address as may be designated by notice hereunder.
G. General Release and Covenant Not to Sue. Licensee and its respective
heirs, administrators, executors, agents, representatives, successors or
assigns, hereby release, remise, acquit and forever discharge Licensor and
its parent, subsidiaries, divisions and affiliates and their officers,
directors, employees, agents, successors or assigns from any and all
actions, claims, causes of action, suits, rights, debts, liabilities,
accounts, agreements, covenants, contracts, promises, warrants, judgments,
executions, demands, damages, costs and expenses, whether known or unknown,
of any kind or nature, absolute or contingent, if any there be, at law or
in equity from the beginning of time to and including the date this
Agreement is signed by Licensor. Licensee and its respective heirs,
representatives, successors and assigns do hereby covenant and agree that
they will not institute any suit or action at law or otherwise against
Licensor directly or indirectly relating to any claim released hereby by
Licensee. This release and covenant not to sue shall survive the
termination of this Agreement. Licensee shall take whatever steps are
necessary or appropriate to carry out the terms of this release and
covenant not to sue upon Licensor's request.
H. Descriptive Headings. The descriptive headings in this Agreement are
for convenience only and shall not control or affect the meaning or
construction of any provision in this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first stated above.
LICENSEE: LICENSOR:
EMBASSY SUITES, INC.
By: _________________________________________
Name: ______________________________________
Title: _____________________________________
Embassy Suites Hotel Division
Attest: _____________________________________
Assistant Secretary
Date: ______________________________________
ATTACHMENT A
Facilities and Services (paragraph 1):
Site-Area and general description:
Fee owners (names and addresses):
Leases (parties, terms, etc.), if any:
Separate parcels for signs:
Number of approved guest suites:
Hotel Management Company:
Restaurant(s) and lounge(s) (number, seating capacity, names and description,
tenant):
Meeting and function space:
Indoor and outdoor recreational facilities (pool, whirlpool, exercise room,
sauna, etc.):
Atrium:
Gift shop:
Other concessions and shops:
Parking facilities (number of spaces, description):
Other facilities and services:
Ownership of Licensee:
Authorized signatories:
GUARANTY
EXECUTED ___________________ , 199__
As an inducement to Embassy Suites, Inc. ("Licensor") to execute the
_________ Agreement dated _________ with ____________ (the "Agreement"), the
undersigned ("Guarantor"), jointly and severally, hereby unconditionally warrant
to Licensor and its successors and assigns that all of Licensee's representa-
tions in the Agreement and the application submitted by Licensee to obtain the
License are true and further guarantee, absolutely, unconditionally and
irrevocably to Licensor that all of Licensee's obligations under the Agreement,
including any amendments thereto whenever made, will be punctually paid and
performed.
Upon default or failure to cure within the time specified in this Agreement
by Licensee or notice from Licensor, the undersigned Guarantor will immediately
make each payment (including reasonable counsel fees) and perform each
obligation required of Licensee under the Agreement. Without affecting the
obligations of Guarantor under this Guaranty, Licensor may without notice to
Guarantor extend, modify or release any indebtedness or obligation of Licensee,
or settle, adjust or compromise any claims against Licensee. Guarantor waives
notice of amendment of the Agreement and notice of demand for payment or
performance by Licensee.
All monies available to the Licensor for application in payment or reduction
of the indebtedness or obligations of Licensee may be applied by the Licensor in
such manner and in such amounts and at such time or times and in such order and
priority as the Licensor may see fit to the payment or reduction of such portion
of the indebtedness or obligations as the Licensor may elect.
Guarantor hereby waives (a) notice of acceptance of this Guaranty and of the
making of the Agreement by the Licensor to the Licensee; (b) presentment and
demand for payment of the indebtedness or obligations under the Agreement or any
portion thereof; (c) protest and notice of dishonor or default to the
undersigned or to any other person or party with respect to the Agreement or any
portion thereof; (d) all other notices to which the undersigned might otherwise
be entitled; and (e) any demand for payment under this Guaranty.
The Guaranty constitutes a guaranty of payment and performance and not of
collection, and each Guarantor specifically waives any obligation of Licensor to
proceed against Licensee on any money or property held by Licensee or by any
other person or entity as collateral security, by way of set off or otherwise.
Guarantor further agrees that this Guaranty shall continue to be effective or be
reinstated as the case may be, if at any time payment or any of the guaranteed
obligations is rescinded or must otherwise be restored or returned by Licensor
upon the insolvency, bankruptcy or reorganization of Licensee or any of the
undersigned, all as though such payment has not been made.
No delay on the part of the Licensor in exercising any rights hereunder or
under the documents executed in connection with the Agreement or the failure to
exercise the same shall operate as a waiver of such rights; no notice to or
demand on Guarantor shall be deemed to be a waiver of the obligation of
Guarantor or of the right of the Licensor to take further action without notice
or demand as provided herein; nor in any event shall any modification or waiver
of the provisions of this Guaranty be effective unless in writing nor shall any
such waiver be applicable except in the specific instance for which given.
Notwithstanding any payments made by the undersigned pursuant to the
provisions of this Guaranty, Guarantor shall have no right of subrogation in and
to the Agreement or the payment of the obligations thereof until the
indebtedness or performance has been paid in full to the Licensor.
Each reference herein to the Licensor shall be deemed to include its
successors and assigns, in whose favor the provisions of this Guaranty shall
also inure. Each reference herein to Guarantor shall be deemed to include the
heirs, executors, administrators, legal representatives, successors and assigns
of Guarantor, all of whom shall be bound by the provisions of this Guaranty.
Upon the death of an individual Guarantor, the estate of such Guarantor will
be bound by this Guaranty but only for defaults and obligations hereunder
existing at the time of death, and the obligations of the other Guarantors will
continue in full force and effect.
This Guaranty is, and shall be deemed to be, a contract entered into under
and pursuant to the laws of the state of Tennessee and shall be in all respects
governed, construed, applied and enforced in accordance with the laws of said
state.
IN WITNESS WHEREOF, each of the undersigned has signed this Guaranty as of the
date of the above Agreement.
Witnesses: Guarantors:
__________________________________ _________________________________ (Seal)
__________________________________ _________________________________ (Seal)
__________________________________ _________________________________ (Seal)
HAMPTON INN HOTEL DIVISION
6800 POPLAR AVENUE, SUITE 200
MEMPHIS, TENNESSEE 38138
HAMPTON INN(R)
LICENSE AGREEMENT
Dated _____________________________, 19__ between Hampton Inn Hotel Division of
Embassy Suites, Inc., a Delaware corporation ("Licensor"), and
resident
a ______________________________________________________________ corporation
("Licensee"), whose partnership
address is _____________________________________________________________________
_______________________________________________________________________________.
THE PARTIES AGREE AS FOLLOWS:
1. The License.
Licensor owns, operates and licenses a system designed to provide a
distinctive, high quality hotel service to the public under the name "Hampton
Inn" and "Hampton Inn & Suites" (the "System"). High standards established by
Licensor are the essence of the System. Future investments may be required of
Licensee under this Agreement. Licensee has independently investigated the
risks of the business to be operated hereunder, including current and potential
market conditions, competitive factors and risks, has read Licensor's "Offering
Circular for Prospective Franchisees," and has made an independent evaluation of
all such facts. Aware of the relevant facts, Licensee desires to enter into
this Agreement in order to obtain a license to use the System in the operation
of a Hampton Inn hotel located at ___________________________________________
__________________________________________________________________ (the "Hotel")
a. The Hotel. The Hotel comprises all structures, facilities,
appurtenances, furniture, fixtures, equipment, and entry, exit, parking and
other areas from time to time located on the land identified on the plot
plan most recently submitted to and acknowledged by Licensor in
anticipation of the execution of this Agreement, or located on any land
from time to time approved by Licensor for additions, signs or other
facilities. The Hotel now includes the facilities listed on Attachment A
hereto. No change in the number of approved guest rooms and no other
significant change in the Hotel may be made without Licensor's approval.
Redecoration and minor structural changes that comply with Licensor's
standards and specifications will not be considered significant. Licensee
represents that it is entitled to possession of the Hotel during the entire
License Term without restrictions that would interfere with anything
contemplated in this Agreement.
b. The System. The System is composed of elements, as designated from
time to time by Licensor, designed to identify "Hampton Inn hotels" and
"Hampton Inn & Suites hotels" to the consuming public and/or to contribute
to such identification and its association with quality standards. The
System at present includes the service marks "Hampton Inn" and "Hampton Inn
& Suites" and such other service marks and such copyrights, trademarks and
similar property rights as may be designated from time to time by Licensor
to be part of the System; access to a reservation service; distribution of
advertising, publicity and other marketing programs and materials; the
furnishing of training programs and materials, standards, specifications
and policies for construction, furnishing, operation, appearance and
service of the Hotel, and other requirements as stated or referred to in
this Agreement and from time to time in Licensor's Standards Manual (the
"Manual") or in other communications to Licensee; and programs for
inspecting the Hotel and consulting with Licensee. Licensor may add
elements to the System or modify, alter or delete elements of the System at
its sole discretion from time to time. Licensee is only authorized to use
----
"Hampton Inn" service marks and trademarks at or in connection with the
Hotel.
2. Grant of License.
Licensor hereby grants to Licensee a nonexclusive license (the "License")
to use the System only at the Hotel, but only in connection with the operation
of a Hampton Inn hotel and only in accordance with this Agreement and only
during the "License Term" beginning with the date hereof and terminating as
provided in Paragraph 10. The License applies to the location of the Hotel
specified herein and no other. This Agreement does not limit Licensor's right,
or the rights of any parent, subsidiary, division or affiliate of Licensor, to
use or license to others the System or any part thereof or to engage in or
license any business activity at any other location. Licensee acknowledges that
Licensor, its parent, subsidiaries, divisions, and affiliates are and may in the
future be engaged in other business activities including activities involving
transient lodging and related activities which may be or may be deemed to be
competitive with the System; that facilities, programs, services and/or
personnel used in connection with the System may also be used in connection with
such other business activities of Licensor, its parent, subsidiaries, divisions
or affiliates; and that Licensee is acquiring no rights hereunder other than the
right to use the System in connection with a Hampton Inn hotel as specifically
defined herein in accordance with the terms of this Agreement.
3. Licensee's Responsibilities.
a. Operational and Other Requirements. During the License Term,
Licensee will:
(1) maintain a high moral and ethical standard and atmosphere at the
Hotel;
(2) maintain the Hotel in a clean, safe and orderly manner and in
first class condition;
(3) provide efficient, courteous and high-quality service to the
public;
(4) operate the Hotel 24 hours a day every day except as otherwise
permitted by Licensor based on special circumstances;
(5) strictly comply in all respects with the Manual and with all
other policies, procedures and requirements of Licensor which may be
from time to time communicated to Licensee;
(6) strictly comply with Licensor's reasonable requirements to
protect the System and the Hotel from unreliable sources of supply;
(7) strictly comply with Licensor's requirements as to:
(a) the types of services and products that may be used,
promoted or offered at the Hotel;
(b) the types and quality of services and products that, to
supplement services listed on Attachment A, must be used,
promoted or offered at the Hotel;
(c) use, display, style and type of signage;
(d) directory and reservation service listings of the Hotel;
(e) training of persons to be involved in the operation of the
Hotel;
(f) participation in all marketing, reservation service,
advertising, training and operating programs designated by
Licensor as System-wide (or area-wide) programs in the best
interests of hotels using the System;
(g) maintenance, appearance and condition of the Hotel; and
(h) quality and type of service offered to customers at the
Hotel.
(8) use such automated guest service and/or hotel management and/or
telephone system(s) which Licensor deems to be in the best interests
of the System, including any additions, enhancements, supplements or
variants thereof which may be developed during the term hereof;
(9) participate in and use those reservation services which Licensor
deems to be in the best interests of the System, including any
additions, enhancements, supplements or variants thereof which may be
developed during the term hereof;
(10) adopt improvements or changes to the System as may be from time
to time designated by Licensor;
(11) strictly comply with all governmental requirements, including
the filing and maintenance of any required trade name or fictitious
name registrations, pay all taxes, and maintain all governmental
licenses and permits necessary to operate the Hotel in accordance with
the System;
(12) permit inspection of the Hotel by Licensor's representatives at
any time and give them free lodging for such time as may be reasonably
necessary to complete their inspections;
(13) promote the Hotel on a local or regional basis subject to
Licensor's requirements as to form, content and prior approvals;
(14) insure that no part of the Hotel or the System is used to
further or promote a competing business or other lodging facility,
except as Licensor may approve for those competing businesses or
lodging facilities owned, licensed, operated or otherwise approved by
Licensor or its parent, divisions, subsidiaries and/or affiliates;
(15) use every reasonable means to encourage use of Hampton Inn and
Hampton Inn & Suites facilities everywhere by the public;
(16) in all respects use Licensee's best efforts to reflect credit
upon and create favorable public response to the name "Hampton Inn"
and "Hampton Inn & Suites";
(17) promptly pay to Licensor all amounts due Licensor, its parent,
divisions, subsidiaries and/or affiliates as royalties or fees or for
goods or services purchased by Licensee; and
(18) comply with Licensor's requirements concerning confidentiality
of information.
b. Upgrading of the Hotel. Licensor may at any time during the term
hereof require substantial modernization, rehabilitation and other
upgrading of the Hotel. Limited exceptions from those standards may be
made by Licensor based on local conditions or special circumstances. If
the upgrading requirements contained in this Paragraph 3.b. cause Licensee
undue hardship, Licensee may terminate this Agreement by paying a fee
computed according to Paragraph 10.f.
c. Fees.
(1) For each month (or part of a month) during the License Term,
Licensee will pay to Licensor by the 15th of the following month:
(a) a royalty fee of 4 percent of the gross revenues
attributable to or payable for rental of guest rooms at the Hotel
with deductions for sales and room taxes only ("Gross Rooms
Revenue");
(b) a "Marketing/Reservation Contribution" of 4 percent of Gross
Rooms Revenue, this contribution being subject to change by
Licensor from time to time, which payments do not include the
cost of reservation services equipment or installation or
maintenance of it or training; and
(c) an amount equal to any sales, gross receipts or similar tax
imposed on Licensor and calculated solely on payment required
hereunder, unless the tax is an optional alternative to an income
tax otherwise payable by Licensor.
Licensee will operate the Hotel so as to maximize Gross
Rooms Revenue of the Hotel consistent with sound marketing and
industry practice and will not engage in any conduct which
reduces Gross Rooms Revenue of the Hotel in order to further
other business activities.
(2) Additional royalties may be charged on revenues (or upon any
other basis, if so determined by Licensor) from any activity if it is
added at the Hotel by mutual agreement and:
(a) it is not now offered at System hotels generally and it is
likely to benefit significantly from or be identified
significantly with the Hampton Inn or Hampton Inn & Suites name
or other aspects of the System; or
(b) it is designed or developed by or for Licensor.
(3) Charges may be made by Licensor for optional products or services
accepted by Licensee from Licensor either in accordance with current
practice or as developed in the future.
(4) A standard initial fee for quest room additions to a hotel as set
forth in Licensor's then current "Offering Circular for Prospective
Franchisees" shall be paid by Licensee to Licensor on Licensee's
submission of an application to add any guest rooms to the Hotel. As
a condition to Licensor granting its approval of such application,
Licensor may require Licensee to upgrade the Hotel, subject to
Paragraph 3.b.
(5) Local and regional marketing programs and related activities may
be conducted by Licensee, but only at Licensee's expense and subject
to Licensor's requirements. Reasonable charges may be made by
Licensor for optional advertising materials ordered or used by
Licensee for such programs and activities.
(6) Licensee shall participate in Licensor's travel agent commission
program(s) as it may be modified from time to time and shall reimburse
Licensor on or before the 15th of each month for travel agent
commissions paid by Licensor.
(7) Each payment under this Paragraph 3.c. shall be accompanied by
the monthly statement referred to in Paragraph 6. Licensor may apply
any amounts received under this paragraph to any amounts due under
this Agreement. If any amounts are not paid when due, such
non-payment shall constitute a breach of this Agreement and, in
addition, such unpaid amounts will accrue interest beginning on the
first day of the month following the due date at 1 1/2 percent per
month but not to exceed the maximum interest permitted by applicable
law.
4. Licensor's Responsibilities.
a. Training. During the License Term, Licensor will continue to specify
and provide required and optional training programs at various locations.
Reasonable charges may be made for required training services and
materials. Charges may also be made by Licensor for optional training
services and materials provided to Licensee. Travel, lodging and other
expenses of Licensee and its employees will be borne by Licensee.
b. Reservation Services. During the License Term, so long as Licensee is
in full compliance with its material obligations hereunder, Licensor will
afford Licensee access to reservation services for the Hotel.
c. Consultation on Operations, Facilities and Marketing. Licensor will,
from time to time at Licensor's sole discretion, make available to Licensee
consultation and advice in connection with operations, facilities and
marketing. Licensor shall have the right to establish fees in advance for
its advice and consultation on a project-by-project basis.
d. Use of Marketing/Reservation Contribution. The Marketing/Reservation
Contribution will be used by Licensor for costs associated with
advertising, promotion, publicity, market research and other marketing
programs and related activities, including reservation programs and
services. Licensor is not obligated to expend funds for marketing or
reservation services in excess of the amounts received from licensees using
the System.
e. Application of Manual. All hotels operated under the System will be
subject to the Manual, as it may from time to time be modified or revised
by Licensor, including limited exceptions from compliance which may be made
based on local conditions or special circumstances. Each change in the
Manual must be explained in writing to Licensee at least 30 days before it
goes into effect.
f. Other Arrangements for Marketing, Etc. Licensor may enter into
arrangements for development, marketing, operations, administrative,
technical and support functions, facilities, programs, services and/or
personnel with any other entity and may use any facilities, programs,
services and/or personnel used in connection with the System in connection
with any business activities of its parent, subsidiaries, divisions or
affiliates.
g. Compliance Assistance. If the Hotel fails to comply with the standards
and rules of operation set forth in the Manual, Licensor may, at its option
and at Licensee's cost, meet with the Licensee at the Hotel to develop a
plan to ensure that the Hotel thereafter complies with the standards and
rules of operation set forth in the Manual.
5. Proprietary Rights.
a. Ownership of System. Licensee acknowledges and will not contest,
either directly or indirectly, Licensor's unrestricted and exclusive
ownership of the System and any element(s) or component(s) thereof, and
acknowledges that Licensor has the sole right to grant licenses to use all
or any element(s) or component(s) of the System. Licensee specifically
agrees and acknowledges that Licensor is the owner of all right, title and
interest in and to the service mark "Hampton Inn" and all other marks
associated with the System together with the goodwill symbolized thereby
and that Licensee will not contest directly or indirectly the validity or
ownership of the marks either during the term of this Agreement or at any
time thereafter. All improvements and additions whenever made to or
associated with the System by the parties to this Agreement or anyone else,
and all service marks, trademarks, copyrights, and service mark and
trademark registrations at any time used, applied for or granted in
connection with the System, and all goodwill arising from Licensee's use of
Licensor's marks shall inure to the benefit of and become the property of
Licensor. Upon expiration or termination of this Agreement, no monetary
amount shall be assigned as attributable to any goodwill associated with
Licensee's use of the System or any element(s) or component(s) of the
System including the name or marks.
b. Trademark Disputes. Licensor will have the sole right and
responsibility to handle disputes with third parties concerning use of all
or any part of the System, and Licensee will, at its reasonable expense,
extend its full cooperation to Licensor in all such matters. All
recoveries made as a result of disputes with third parties regarding use of
the System or any part thereof shall be for the account of Licensor.
Licensor need not initiate suit against alleged imitators or infringers and
may settle any dispute by grant of a license or otherwise. Licensee will
not initiate any suit or proceeding against alleged imitators or infringers
or any other suit or proceeding to enforce or protect the System.
c. Protection of Name and Marks. Both parties will make every effort
consistent with the foregoing to protect and maintain the names and marks
"Hampton Inn", "Hampton Inn & Suites" and its distinguishing
characteristics (and the other service marks, trademarks, slogans, etc.,
associated with the System). Licensee agrees to execute any documents
deemed necessary by Licensor or its counsel to obtain protection for
Licensor's marks or to maintain their continued validity and
enforceability. Licensee agrees to use the names and marks associated with
the System only in connection with the operation of a Hampton Inn hotel and
in the manner authorized by Licensor and acknowledges that any unauthorized
use thereof shall constitute infringement of Licensor's rights.
6. Records and Audits.
a. Monthly Reports. At least monthly, Licensee shall prepare a statement
which will include all information concerning Gross Rooms Revenue, other
revenues generated at the Hotel, room occupancy rates, reservation data and
other information required by Licensor that may be useful in connection
with marketing and other functions of Licensor, its parent, subsidiaries,
divisions or affiliates (the "Data"). The Data shall be the property of
Licensor. The Data will be permanently recorded and retained as may be
reasonably required by Licensor. By the 15th of each month, Licensee will
submit to Licensor a statement setting forth the Data for the previous
month and reflecting the computation of the amounts then due under
Paragraph 3.c. The statement will be in such form and detail as Licensor
may reasonably request from time to time, and may be used by Licensor for
its reasonable purposes.
b. Daily Reports. At the request of Licensor, Licensee shall prepare and
deliver daily reports to Licensor, which reports will contain information
reasonably requested by Licensor on a daily basis, such as daily rate and
room occupancy, and which may be used by Licensor for its reasonable
purposes.
c. Preparation and Maintenance of Records. Licensee shall, in a manner
and form satisfactory to Licensor and utilizing accounting and reporting
standards as reasonably required by Licensor, prepare on a current basis
(and preserve for no less than four years), complete and accurate records
concerning Gross Rooms Revenue and all financial, operating, marketing and
other aspects of the Hotel, and maintain an accounting system which fully
and accurately reflects all financial aspects of the Hotel and its
business. Such records shall include but not be limited to books of
account, tax returns, governmental reports, register tapes, daily reports,
and complete quarterly and annual financial statements (profit and loss
statements, balance sheets and cash flow statements).
d. Audit. Licensor may require Licensee to have the Gross Rooms Revenue
or other monies due hereunder computed and certified as accurate by a
certified public accountant. During the License Term and for two years
thereafter, Licensor and its authorized agents shall have the right to
verify information required under this Agreement by requesting, receiving,
inspecting and auditing, at all reasonable times, any and all records
referred to above wherever they may be located (or elsewhere if reasonably
requested by Licensor). If any such inspection or audit discloses a
deficiency in any payments due hereunder, Licensee shall immediately pay to
Licensor the deficiency and Licensee shall also immediately pay to Licensor
the entire cost of the inspection and audit, including but not limited to,
travel, lodging, meals, salaries and other expenses of the inspecting or
auditing personnel. Licensor's acceptance of Licensee's payment of any
deficiency as provided for herein shall not waive Licensor's right to
terminate this Agreement as provided for herein in Paragraph 10. If the
audit discloses an overpayment, Licensor shall immediately refund it to
Licensee.
e. Annual Financial Statements. Licensee will submit to Licensor as soon
as available but not later than 90 days after the end of Licensee's fiscal
year, complete financial statements for such year. Licensee will certify
them to be true and correct and to have been prepared in accordance with
generally accepted accounting principles consistently applied, and any
false certification will be a breach of this Agreement.
7. Indemnity and Insurance.
a. Indemnity. Licensee will indemnify, during and after the term of this
Agreement, Licensor, its parent, and their respective subsidiaries,
divisions and affiliates and their officers, directors, employees, agents,
successors and assigns against, hold them harmless from, and promptly
reimburse them for, all payments of money (fines, damages, legal fees,
expenses, etc.) by reason of any claim, demand, tax, penalty, or judicial
or administrative investigation or proceeding (even where negligence of
Licensor and/or its parent, and/or their subsidiaries, divisions and
affiliates and/or their officers, directors, employees, agents, successors
and assigns is actual or alleged) arising from any claimed occurrence at
the Hotel or arising from, as a result of or in connection with the design,
construction, furnishings, equipment and acquisition of supplies or any
other of Licensee's acts, omissions or obligations or those of anyone
associated or affiliated with Licensee or the Hotel. At the election of
Licensor, Licensee will also defend Licensor and/or its parent, and their
subsidiaries, divisions and affiliates and/or their officers, directors,
employees, agents, successors and assigns against same. In any event,
Licensor will have the right, through counsel of its choice, to control any
matter to the extent it could directly or indirectly affect Licensor and/or
its parent, and their subsidiaries, divisions and affiliates and their
officers, directors, employees, agents, successors and assigns financially.
Licensee will also reimburse Licensor for all expenses, including
attorneys' fees and court costs, reasonably incurred by Licensor to protect
itself and/or its parent, and their subsidiaries, divisions and affiliates
and/or their officers, directors, employees, agents and their successors
and assigns from, or to remedy Licensee's defaults under this Agreement.
b. Insurance. During the License Term, Licensee will comply with all
insurance requirements of any lease or mortgage covering the Hotel, and
Licensor's specifications for insurance as to amount and type of coverage
as may be reasonably specified by Licensor from time to time in writing,
and will in any event maintain as a minimum the following insurance
underwritten by an insurer approved by Licensor:
(1) employer's liability and workers' compensation insurance as
prescribed by applicable law; and
(2) liquor liability insurance, if applicable, naming Licensor,
Embassy Suites, Inc. and The Promus Companies Incorporated as
additional insureds with single-limit coverage for personal and bodily
injury and property damage of at least $10,000,000 for each
occurrence; and
(3) comprehensive general liability insurance (with products,
completed operations and independent contractors coverage) and
comprehensive automobile liability insurance, all on an occurrence
basis naming Licensor, Embassy Suites, Inc. and The Promus Companies
Incorporated as additional insureds and underwritten by an insurer
approved by Licensor, with single-limit coverage for personal and
bodily injury and property damage of at least $10,000,000 for each
occurrence. In connection with all significant construction at the
Hotel during the License Term, Licensee will cause the general
contractor to maintain with an insurer approved by Licensor
comprehensive general liability insurance (with products, completed
operations and independent contractors coverage) in at least the
amount of $10,000,000 for each occurrence with Licensor, Embassy
Suites, Inc. and The Promus Companies Incorporated named as additional
insureds.
c. Changes in Insurance. Simultaneously herewith, annually hereafter and
each time a change is made in any insurance or insurance carrier, Licensee
will furnish to Licensor certificates of insurance including the term and
coverage of the insurance in force, the persons insured, and the fact that
the coverage may not be cancelled, altered or permitted to lapse or expire
without 30 days advance written notice to Licensor.
8. Transfer.
a. Transfer by Licensor. Licensor shall have the right to transfer or
assign this Agreement or any of Licensor's rights or obligations hereunder
to any person or legal entity.
b. Transfer by Licensee. Licensee understands and acknowledges that the
rights and duties set forth in this Agreement are personal to Licensee, and
that Licensor has entered into this Agreement in reliance on the business
skill, financial capacity, and personal character of Licensee (if Licensee
is an individual), and that of the partners or stockholders of Licensee (if
Licensee is a partnership or corporation). Accordingly, neither Licensee
nor any immediate or remote successor to any part of Licensee's interest in
this Agreement, nor any individual, partnership, corporation, or other
legal entity which directly or indirectly owns an equity interest (as that
term is defined herein) in Licensee, shall sell, assign, transfer, convey,
pledge, mortgage, encumber, or give away any direct or indirect interest in
this Agreement or equity interest in Licensee, except as provided in this
Agreement. Any purported sale, assignment, transfer, conveyance, pledge,
mortgage, or encumbrance, by operation of law or otherwise, of any interest
in this Agreement or any equity interest in Licensee not in accordance with
the provisions of this Agreement, shall be null and void and shall
constitute a material breach of this Agreement, for which Licensor may
terminate this Agreement upon notice without opportunity to cure pursuant
to Paragraph 10.d.(4).
(1) For the purposes of this Paragraph 8, the term "equity interest"
shall mean any stock or partnership interest in Licensee, the interest
of any partner, whether general or limited, in any partnership with
respect to such partnership, and any stockholder of any corporation
with respect to such corporation, which partnership or corporation is
the Licensee hereunder or which partnership or corporation owns a
direct or indirect beneficial interest in Licensee. References in
this Agreement to "publicly-traded equity interest" shall mean any
equity interest which is traded on any securities exchange or is
quoted in any publication or electronic reporting service maintained
by the National Association of Securities Dealers, Inc. or any of its
successors.
(2) If Licensee is a partnership or corporation, Licensee represents
that the equity interests in Licensee are directly and (if applicable)
indirectly owned as shown in Attachment A hereto.
c. Transfer of Equity Interests that are not Publicly Traded.
(1) Except where otherwise provided in this Agreement, equity
interests in the Licensee that are not publicly traded may be
transferred, issued, or eliminated with Licensor's prior written
consent, which will not be unreasonably withheld, provided that after
the transaction:
(a) 50 percent or less of all equity interests in Licensee will
have changed hands since Licensee first became a party to this
Agreement, or
(b) 80 percent or less of all equity interests in Licensee will
have changed hands since Licensee first became a party to this
Agreement, and no equity interest will be held by other than
those who held them when Licensee first became a party to this
Agreement.
(2) In computing the percentages referred to in Paragraph 8.c.(1)
above, limited partners will not be distinguished from general
partners, and Licensor's judgment will be final if there is any
question as to the definition of "equity interest" or as to the
computation of relative equity interests, the principal considerations
being:
(a) Direct and indirect power to exercise control over the
affairs of Licensee; and
(b) Direct and indirect right to share in Licensee's profits;
and
(c) Amounts directly or indirectly exposed to risk in Licensee's
business.
d. Transfers of Publicly-Traded Equity interests.
(1) Except as otherwise provided in this Agreement, publicly-traded
equity interests in the Licensee may be transferred without the
Licensor's consent, but only if:
(a) Immediately before the proposed transfer the transferor owns
less than 25 percent of the equity interest of Licensee; and
(b) Immediately after the transfer the transferee will own less
than 25 percent of the equity interest in Licensee; and
(c) The transfer is exempt from registration under federal
securities law.
(2) Publicly-traded equity interests may be transferred with
Licensor's written consent, which may not be unreasonably withheld, if
the transfer is exempt from registration under federal securities law.
(3) The chief financial officer of Licensee shall certify annually to
Licensor that Licensee is in compliance with the provisions of this
Paragraph 8.d. Such certification shall be delivered to Licensor with
the Annual Financial Statements referred to in Paragraph 6.e. hereof.
e. Transfer of the License.
(1) Licensee, if a natural person, may with Licensor's consent, which
will not be unreasonably withheld, transfer the License to Licensee's
spouse, parent, sibling, niece, nephew, descendant, or spouse's
descendant provided that:
(a) Adequate provision is made for management of the Hotel; and
(b) The transferee executes a new license agreement for the
unexpired term of this Agreement, on the standard form then being
used to license new hotels under the System, except that the fees
charged then shall be the same as those contained herein; and
(c) Licensee guarantees, in Licensor's usual form, the
performance of the transferee's obligations under the
newly-executed license agreement.
(2) If Licensee is a natural person, he may, without the consent of
Licensor, upon 30 days prior written notice to Licensor, transfer the
License to a corporation entirely owned by him, provided that:
(a) Adequate provision is made for management of the Hotel; and
(b) The transferee executes a new license agreement for the
unexpired term of this Agreement on the standard form then being
used to license new hotels under the System, except that the fees
charged then shall be the same as those contained herein; and
(c) The Licensee guarantees in Licensor's usual form, the
performance of the transferee's obligations under the
newly-executed license agreement.
f. Transfers of the License or Equity Interest in the Licensee Upon Death.
(1) If Licensee is a natural person, upon the Licensee's death, the
License will pass in accordance with Licensee's will, or, if Licensee
dies intestate, in accordance with laws of intestacy governing the
distribution of the Licensee's estate, provided that:
(a) Adequate provision is made for management of the Hotel; and
(b) Licensor gives written consent, which consent will not be
unreasonably withheld; and
(c) The transferee is one or more of the decedent's spouse,
parents, siblings, nieces, nephews, descendants, or spouse's
descendants; and
(d) Licensee's heirs or legatees, promptly advise Licensor and
promptly execute a new license agreement for the unexpired term
of this Agreement, on the standard form then being used to
license new hotels under the System, except the fees charged
thereunder shall be the same contained herein.
(2) If an equity interest is owned by a natural person, the equity
interest will pass upon such person's death in accordance with such
person's will or, if such person dies intestate, in accordance with
the laws of intestacy governing the distribution of such person's
estate, provided that:
(a) Adequate provision is made for management of the Hotel; and
(b) Licensor gives written consent, which consent will not be
unreasonably withheld; and
(c) The transferee is one or more of the decedent's spouse,
parents, siblings, nieces, nephews, descendants, or spouse's
descendants; and
(d) The transferee assumes, in writing, on a continuing basis,
the decedent's guarantee, if any, of the Licensee's obligations
hereunder.
g. Registration of a Proposed Transfer of Equity Interests. If a proposed
transfer of an equity interest in the Licensee requires registration under
any federal or state securities law, Licensee shall:
(1) Request Licensor's consent at least 45 days before the proposed
effective date of the registration; and
(2) Accompany such request with one payment of a nonrefundable fee of
$25,000; and
(3) Reimburse Licensor for expenses incurred by Licensor in
connection with review of the materials concerning the proposed
registration, including without limitation, attorneys' fees and travel
expenses; and
(4) Agree, and all participants in the proposed offering subject to
registration shall agree, to fully indemnify Licensor in connection
with the registration; furnish Licensor all information requested by
Licensor; avoid any implication of Licensor's participating in, or
endorsing the offering; and use Licensor's service marks and
trademarks only as directed by Licensor.
h. Management of the Hotel. Licensee must at all times retain and
exercise direct management control over the Hotel's business. Licensee
shall not enter into any lease, management agreement, or other similar
arrangement for the operation of the Hotel or any part thereof with any
independent entity without the prior written consent of Licensor.
i. Application for New License Agreement upon Transfer of the Hotel.
(1) If Licensee wishes to transfer the Hotel, or any interest of
Licensee in the Hotel, Licensee shall give prompt written notice
thereof to Licensor, stating the identity of the prospective
transferee and the terms and conditions of the transfer, including a
copy of any proposed agreement and all other information with respect
thereto, which Licensor may reasonably require.
(2) If Licensee proposes to transfer the Hotel or any interest of
Licensee in the Hotel to a transferee who desires thereafter to
operate the Hotel under the System, the proposed transferee must, with
Licensee's consent, apply for a new license agreement to replace this
Agreement for a term to be determined by Licensor. Licensor shall
process the application in good faith and in accordance with
procedures, criteria and requirements regarding fees, upgrade of the
Hotel, credit, operational abilities and capabilities, prior business
dealings, if any, with Licensor, market feasibility and other factors
deemed relevant by Licensor, then being applied by Licensor in issuing
new licenses to use the System. If the application is approved,
Licensor and the transferee shall, upon surrender of this Agreement,
enter into a commitment agreement to govern the Hotel until the time
specified therein for the new license agreement to be entered into if
the transferee fulfills specified upgrading and other requirements by
that time. The new license agreement shall be on the standard form,
and contain the standard terms (except for duration), then being used
to license new hotels under the System. If the application is not
approved by Licensor, then this Agreement shall terminate pursuant to
Paragraph 10.d. hereof and Licensor shall be entitled to all of its
remedies.
9. Condemnation and Casualty.
a. Condemnation. Licensee shall, at the earliest possible time, give
Licensor full notice of any proposed taking by eminent domain. If Licensor
agrees that the Hotel or a substantial part thereof is to be taken,
Licensor will give due and prompt consideration, without any obligation, to
transferring this Agreement to a nearby location selected by Licensee and
approved by Licensor as promptly as reasonably possible, and in any event
within four months of the taking. If the new location is approved by
Licensor and the transfer authorized by Licensor and if Licensee opens a
new hotel at the new location in accordance with Licensor's specifications
within two years of the closing of the Hotel, the new hotel will
thenceforth be deemed to be the Hotel licensed under this Agreement. If a
condemnation takes place and a new hotel does not, for whatever reason,
become the Hotel under this Agreement in strict accordance with this
paragraph (or if it is reasonably evident to Licensor that such will be the
case), this Agreement will terminate forthwith upon notice thereof by
Licensor to Licensee, without the payment of liquidated damages hereunder.
b. Casualty. If the Hotel is damaged by fire or other casualty, Licensee
will expeditiously repair the damage. If the damage or repair requires
closing the Hotel, Licensee will immediately notify Licensor, will repair
or rebuild the Hotel in accordance with Licensor's standards, will commence
reconstruction within four months after closing, and will reopen the Hotel
for continuous business operations as soon as practicable (but in any event
within 24 months after closing of the Hotel), giving Licensor ample advance
notice of the date of reopening. If the Hotel is not reopened in
accordance with this paragraph, this Agreement will forthwith terminate,
upon notice thereof by Licensor to Licensee, with the payment of liquidated
damages calculated in the manner set forth in Paragraph 10.f.
c. No Extensions of Term. Nothing in this Paragraph 9 will extend the
License Term but Licensee shall not be required to make any payments
pursuant to paragraphs 3.c.(l), (2) and (3) for periods during which the
Hotel is closed by reason of condemnation or casualty.
10. Termination.
a. Expiration of Term. This Agreement will expire without notice 20 years
from the date hereof, subject to earlier termination as set forth herein.
The parties recognize the difficulty of ascertaining damages to Licensor
resulting from premature termination of this Agreement, and have provided
for liquidated damages in Paragraph 10.f. below, which liquidated damages
represent the parties' best estimate as to the damages arising from the
circumstances in which they are provided.
b. Permitted Termination Prior to Expiration of Term. Licensee may
terminate this Agreement on its 10th or 15th anniversary by giving at least
12 but less than 15 months advance notice to Licensor accompanied by a lump
sum payment (as liquidated damages and not as a penalty or in lieu of any
other payments required under this Agreement) equal to the total of all
amounts required under paragraphs 3.c.(l), (2) and (3) for the 24 calendar
months of operation preceding the notice.
c. Termination by Licensor on Advance Notice.
(1) In accordance with notice from Licensor to Licensee, this
Agreement will terminate (without any further notice unless required
by law) or, at Licensor's sole discretion with notice from Licensor to
Licensee, Licensor may suspend its services hereunder (including
reservation services), provided that:
(a) the notice is mailed at least 30 days (or longer, if
required by law) in advance of the termination date;
(b) the notice reasonably identifies one or more breaches of
Licensee's obligations hereunder; and
(c) the breach(es) are not fully remedied within the time period
specified in the notice.
(2) If during the then preceding 12 months Licensee shall have
engaged in a violation of this Agreement for which a notice of
termination was given and termination failed to take effect because
the default was remedied, the period given to remedy defaults
thereafter will, if and to the extent permitted by law, thereafter be
10 days instead of 30.
(3) In any judicial proceeding in which the validity of termination
is at issue, Licensor will not be limited to the reasons set forth in
any notice sent under this paragraph.
(4) Licensor's notice of termination or suspension of services shall
not relieve Licensee of its obligation hereunder.
d. Immediate Termination by Licensor. This Agreement may be immediately
terminated upon notice from Licensor to Licensee (or at the earliest time
permitted by applicable law) if:
(1) (a) Licensee or any guarantor of Licensee's obligations
hereunder shall generally not pay its debts as they become due or
shall admit in writing its inability to pay its debts, or shall
make a general assignment for the benefit of creditors; or
(b) Licensee or any such guarantor shall commence any case,
proceeding or other action seeking reorganization, arrangement,
adjustment, liquidation, dissolution or composition of it or its
debts under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, or seeking appointment of a
receiver, trustee, custodian or other similar official for it or
for all or any substantial part of its property; or
(c) Licensee or any such guarantor shall take any corporate or
other action to authorize any of the actions set forth above in
paragraphs (a) or (b); or
(d) Any case, proceeding or other action against Licensee or any
such guarantor shall be commenced seeking to have an order for
relief entered against it as debtor, or seeking reorganization,
arrangement, adjustment, liquidation, dissolution or composition
of it or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, or seeking
appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its
property, and such case, proceeding or other action (i) results
in the entry of an order for relief against it which is not fully
stayed within seven business days after the entry thereof or (ii)
remains undismissed for a period of 45 days; or
(e) An attachment remains on all or a substantial part of the
Hotel or of Licensee's or any such guarantor's assets for 30
days; or
(f) Licensee or any such guarantor fails, within 60 days of the
entry of a final judgment against Licensee in any amount
exceeding $50,000, to discharge, vacate or reverse the judgment,
or to stay execution of it, or if appealed, to discharge the
judgment within 30 days after a final adverse decision in the
appeal; or
(2) Licensee loses possession or the right to possession of all or a
significant part of the Hotel, except as otherwise provided in
Paragraph 9; or
(3) Licensee contests in any court or proceeding Licensor's ownership
of the System or any part of it, or the validity of any service marks
or trademarks associated with Licensor's business; or
(4) A breach of Paragraph 8 hereof occurs; or
(5) Licensee fails to continue to identify itself to the public as a
System hotel; or
(6) Any action is taken toward dissolving or liquidating Licensee or
any such guarantor, if it is a corporation or partnership, except for
death of a partner; or
(7) Licensee or any of its principals is, or is discovered to have
been, convicted of a felony (or any other offense if it is likely to
adversely reflect upon or affect the Hotel, the System, the Licensor,
the Licensor's parent or its affiliates or subsidiaries in any way);
or
(8) Licensee maintains false books and records of account or submits
false reports or information to Licensor.
e. De-identification of Hotel Upon Termination. Licensee will take
whatever action is necessary to assure that no use is made of any part of
the System at or in connection with the Hotel or otherwise after the
License Term ends. This will involve, among other things, returning to
Licensor the Manual and all other materials proprietary to Licensor,
physical changes of distinctive System features of the Hotel, including
removal of the primary freestanding sign down to the structural steel, and
all other actions required to preclude any possibility of confusion on the
part of the public that the Hotel is no longer using all or any part of the
System or otherwise holding itself out to the public as a Hampton Inn
hotel. Anything not done by Licensee in this regard within 30 days after
termination of this Agreement may be done at Licensee's expense by Licensor
or its agents, who may enter upon the premises of the Hotel for that
purpose.
f. Payment of Liquidated Damages. If this Agreement terminates pursuant
to paragraphs 3.b., 9.b., 10.c. or 10.d. above, Licensee will promptly pay
Licensor (only as liquidated damages for the premature termination of this
Agreement, and not as a penalty or as damages for breaching this Agreement
or in lieu of any other payment) a lump sum equal to the total amounts
required under paragraphs 3.c.(1), (2) and (3) during the 36 full calendar
months of operation preceding the termination; or if the Hotel has not been
in operation in the System for 36 full calendar months, the greater of: (i)
36 times the monthly average of such amounts, or (ii) 36 times such amounts
as are due for the one full calendar month preceding such termination. If
the Hotel has been authorized to open as a Hampton Inn hotel but has not
been in operation for one full calendar month, the liquidated damages
amount shall be equal to the product of the number of guest rooms in the
Hotel multiplied by $3,000.00.
11. Renewal.
This Agreement is non-renewable.
12. Relationship of Parties.
a. No Agency Relationship. Licensee is an independent contractor. Neither
party is the legal representative or agent of, or has the power to obligate
(or has the right to direct or supervise the daily affairs of) the other
for any purpose whatsoever. Licensor and Licensee expressly acknowledge
that the relationship intended by them is a business relationship based
entirely on, and defined by, the express provisions of this Agreement and
that no partnership, joint venture, agency, fiduciary or employment
relationship is intended or created by reason of this Agreement.
b. Licensee's Notices to Public Concerning Independent Status. Licensee
will take such steps as are necessary and such steps as Licensor may from
time to time reasonably request to minimize the chance of a claim being
made against Licensor for anything that occurs at the Hotel, or for acts,
omissions or obligations of Licensee or anyone associated or affiliated
with Licensee or the Hotel. Such steps may, for example, include giving
notice in guest rooms, public rooms and advertisements, on business forms
and stationery, etc., making clear to the public that Licensor is not the
owner or operator of the Hotel and is not accountable for what happens at
the Hotel. Unless required by law, Licensee will not use the word
"Hampton" or any similar words in its corporate, partnership, or trade
name, nor authorize or permit such use by anyone else. Licensee will not
use the words "Hampton" or "Hampton Inn" or any other name or mark
associated with the System to incur any obligation or indebtedness on
behalf of Licensor.
13. Miscellaneous.
a. Severability and Interpretation. The remedies provided in this
Agreement are not exclusive. In the event any provision of this Agreement
is held to be unenforceable, void or voidable as being contrary to the law
or public policy of the United States or any other jurisdiction entitled to
exercise authority hereunder, all remaining provisions shall nevertheless
continue in full force and effect unless deletion of the provision(s)
deemed unenforceable, void or voidable impairs the consideration for this
Agreement in a manner which frustrates the purpose of the parties or makes
performance commercially impracticable. In the event any provision of this
Agreement requires interpretation, such interpretation shall be based on
the reasonable intention of the parties in the context of this transaction
without interpreting any provision in favor of or against any party hereto
by reason of the drafting of the party or its position relative to the
other party. Any covenant, term or provision of this Agreement which, in
order to effect the intent of the parties, must survive the termination of
this Agreement, shall survive any such termination.
b. Binding Effect. This Agreement shall become valid when executed and
accepted by Licensor at Memphis, Tennessee. It shall be deemed made and
entered into in the state of Tennessee and shall be governed and construed
under and in accordance with the laws of the state of Tennessee. In
entering into this Agreement, Licensee acknowledges that it has sought,
voluntarily accepted and become associated with Licensor who is
headquartered in Memphis, Tennessee, and that this Agreement contemplates
and will result in business relationships with Licensor's headquarter's
personnel. The choice of law designation permits, but does not require
that all suits concerning this Agreement be filed in the state of
Tennessee.
c. Exclusive Benefit. This Agreement is exclusively for the benefit of
the parties hereto, and it may not give rise to liability to a third party,
except as otherwise specifically set forth herein. No agreement between
Licensor and anyone else is for the benefit of Licensee.
d. Entire Agreement. This is the entire Agreement (and supersedes all
previous agreements including without limitation, any commitment agreement
between the parties concerning the Hotel) between the parties relating to
the Hotel. Neither Licensor nor any other person on Licensor's behalf has
made any representation to Licensee concerning this Agreement or relating
to the system which representation is not fully set forth herein or in
Licensor's "Offering Circular for Prospective Franchisees." No change in
this Agreement will be valid unless in writing signed by both parties. No
failure to require strict performance or to exercise any right or remedy
hereunder will preclude requiring strict performance or exercising any
right or remedy in the future.
e. Licensor's Withholding Consent. Licensor's consent, wherever required,
may be withheld if any default by Licensee exists under this Agreement.
Approvals and consents by Licensor will not be effective unless evidenced
by a writing duly executed on behalf of Licensor.
f. Notices. Notices will be effective hereunder when and only when they
are reduced to writing and delivered personally or mailed by Federal
Express or other express delivery service or by certified mail to the
appropriate party at its address first stated above or to such person and
at such address as may be designated by notice hereunder.
g. General Release. Licensee and its respective heirs, administrators,
executors, agents, representatives and their respective successors and
assigns, hereby release, remise, acquit and forever discharge Licensor and
its parent, subsidiaries, divisions and affiliates and their officers,
directors, employees, agents, representatives and their respective
successors and assigns from any and all actions, claims, causes of action,
suits, rights, debts, liabilities, accounts, agreements, covenants,
contracts, promises, warrants, judgments, executions, demands, damages,
costs and expenses, whether known or unknown at this time, of any kind or
nature, absolute or contingent, if any there be, at law or in equity, on
account of any matter, cause or thing whatsoever which has happened,
developed or occurred at any time from the beginning of time to and
including the date of Licensee's execution and delivery to Licensor of this
Agreement. This release shall survive the termination of this Agreement,
Licensee shall take whatever steps are necessary or appropriate to carry
out the terms of this release upon Licensor's request.
h. Descriptive Headings. The descriptive headings in this Agreement are
for convenience only and shall not control or affect the meaning or
construction of any provision in this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first stated above.
LICENSEE: LICENSOR:
HAMPTON INN HOTEL DIVISION
______________________________________ OF EMBASSY SUITES, INC.
By: _________________________________ By: ______________________________
Name: _______________________________ Name: ____________________________
Title: ______________________________ Title: ___________________________
GUARANTY
Date:
As an inducement to the Hampton Inn Hotel Division of Embassy Suites, Inc.
("Licensor") to execute the above License Agreement, the undersigned, jointly
and severally, hereby unconditionally warrant to Licensor and its successors and
assigns that all of Licensee's representations in the License Agreement and the
application submitted by Licensee to obtain the License Agreement are true and
guarantee that all of Licensee's obligations under the above License Agreement,
including any amendments thereto whenever made (the "Agreement"), will be
punctually paid and performed.
Upon default by Licensee or notice from Licensor, the undersigned will
immediately make each payment and perform each obligation required of Licensee
under the Agreement. Without affecting the obligations of the undersigned under
this Guaranty, Licensor may without notice to the undersigned extend, modify or
release any indebtedness or obligation of Licensee, or settle, adjust or
compromise any claims against Licensee. The undersigned waive notice of
amendment of the Agreement and notice of demand for payment or performance by
Licensee.
Upon the death of an individual guarantor, the estate of such guarantor
will be bound by this Guaranty but only for defaults and obligations hereunder
existing at the time of death, and the obligations of the other guarantors will
continue in full force and effect.
The Guaranty constitutes a guaranty of payment and performance and not of
collection, and each of the guarantors specifically waives any obligation of
Licensor to proceed against Licensee on any money or property held by Licensee
or by any other person or entity as collateral security, by way of set off or
otherwise. The undersigned further agree that this Guaranty shall continue to
be effective or be reinstated as the case may be, if at any time payment or any
of the guaranteed obligations is rescinded or must otherwise be restored or
returned by Licensor upon the insolvency, bankruptcy or reorganization of
Licensee or any of the undersigned, all as though such payment has not been
made.
IN WITNESS WHEREOF, each of the undersigned has signed this Guaranty as of
the date of the above Agreement.
Witnesses: Guarantors:
___________________________________ ___________________________________ (Seal)
___________________________________ ___________________________________ (Seal)
___________________________________ ___________________________________ (Seal)
ATTACHMENT A
Facilities and Services (Paragraph 1):
Site-Area and general description:
Fee owners (names and addresses):
Leases (parties, terms, etc.), if any:
Number of approved guest rooms:
Parking facilities (number of spaces, description):
Swimming pool:
Other facilities and services:
Ownership of Licensee (Paragraph 8):
HAMPTON INN HOTEL DIVISION
6800 POPLAR AVENUE, SUITE 200
MEMPHIS, TENNESSEE 38138
HAMPTON INN & SUITESsm
LICENSE AGREEMENT
Dated _____________________________, 19__ between Hampton Inn Hotel Division of
Embassy Suites, Inc., a Delaware corporation ("Licensor"), and
resident
a ______________________________________________________________ corporation
("Licensee"), whose partnership
address is ____________________________________________________________________
_______________________________________________________________________________.
THE PARTIES AGREE AS FOLLOWS:
1. The License.
Licensor owns, operates and licenses a system designed to provide a
distinctive, high quality hotel service to the public under the name "Hampton
Inn" and "Hampton Inn & Suites" (the "System"). High standards established by
Licensor are the essence of the System. Future investments may be required of
Licensee under this Agreement. Licensee has independently investigated the
risks of the business to be operated hereunder, including current and potential
market conditions, competitive factors and risks, has read Licensor's "Offering
Circular for Prospective Franchisees," and has made an independent evaluation of
all such facts. Aware of the relevant facts, Licensee desires to enter into
this Agreement in order to obtain a license to use the System in the operation
of a Hampton Inn & Suites hotel located at ____________________________________
_________________________________________________________________ (the "Hotel").
a. The Hotel. The Hotel comprises all structures, facilities,
appurtenances, furniture, fixtures, equipment, and entry, exit, parking and
other areas from time to time located on the land identified on the plot plan
most recently submitted to and acknowledged by Licensor in anticipation of
the execution of this Agreement, or located on any land from time to time
approved by Licensor for additions, signs or other facilities. The Hotel now
includes the facilities listed on Attachment A hereto. No change in the
number of approved guest rooms and/or suites (guest rooms and suites
hereinafter collectively referred to as "Guest Rooms") and no other
significant change in the Hotel may be made without Licensor's approval.
Redecoration and minor structural changes that comply with Licensor's
standards and specifications will not be considered significant. Licensee
represents that it is entitled to possession of the Hotel during the entire
License Term without restrictions that would interfere with anything
contemplated in this Agreement.
b. The System. The System is composed of elements, as designated from
time to time by Licensor, designed to identify "Hampton Inn" hotels and
"Hampton Inn & Suites hotels" to the consuming public and/or to contribute to
such identification and its association with quality standards. The System
at present includes the service marks "Hampton Inn" and "Hampton Inn &
Suites" and such other service marks and such copyrights, trademarks and
similar property rights as may be designated from time to time by Licensor to
be part of the System; access to a reservation service; distribution of
advertising, publicity and other marketing programs and materials; the
furnishing of training programs and materials, standards, specifications and
policies for construction, furnishing, operation, appearance and service of
the Hotel, and other requirements as stated or referred to in this Agreement
and from time to time in Licensor's Standards Manual (the "Manual") or in
other communications to Licensee; and programs for inspecting the Hotel and
consulting with Licensee. Licensor may add elements to the System or modify,
alter or delete elements of the System at its sole discretion from time to
time. Licensee is only authorized to use the "Hampton Inn & Suites" service
----
marks and trademarks at or in connection with the Hotel.
2. Grant of License.
Licensor hereby grants to Licensee a nonexclusive license (the "License") to
use the System only at the Hotel, but only in connection with the operation of a
Hampton Inn & Suites hotel and only in accordance with this Agreement and only
during the "License Term" beginning with the date hereof and terminating as
provided in Paragraph 10. The License applies to the location of the Hotel
specified herein and no other. This Agreement does not limit Licensor's right,
or the rights of any parent, subsidiary, division or affiliate of Licensor, to
use or license to others the System or any part thereof or to engage in or
license any business activity at any other location. Licensee acknowledges that
Licensor, its parent, subsidiaries, divisions, and affiliates are and may in the
future be engaged in other business activities including activities involving
transient lodging and related activities which may be or may be deemed to be
competitive with the System; that facilities, programs, services and/or
personnel used in connection with the System may also be used in connection with
such other business activities of Licensor, its parent, subsidiaries, divisions
or affiliates; and that Licensee is acquiring no rights hereunder other than the
right to use the System in connection with a Hampton Inn & Suites hotel as
specifically defined herein in accordance with the terms of this Agreement.
3. Licensee's Responsibilities.
a. Operational and Other Requirements. During the License Term, Licensee
will:
(1) maintain a high moral and ethical standard and atmosphere at the
Hotel;
(2) maintain the Hotel in a clean, safe and orderly manner and in first
class condition;
(3) provide efficient, courteous and high-quality service to the public;
(4) operate the Hotel 24 hours a day every day except as otherwise
permitted by Licensor based on special circumstances;
(5) strictly comply in all respects with the Manual and with all other
policies, procedures and requirements of Licensor which may be from time to
time communicated to Licensee;
(6) strictly comply with Licensor's reasonable requirements to protect the
System and the Hotel from unreliable sources of supply;
(7) strictly comply with Licensor's requirements as to:
(a) the types of services and products that may be used, promoted or
offered at the Hotel;
(b) the types and quality of services and products that, to supplement
services listed on Attachment A, must be used, promoted or offered at
the Hotel;
(c) use, display, style and type of signage;
(d) directory and reservation service listings of the Hotel;
(e) training of persons to be involved in the operation of the Hotel;
(f) participation in all marketing, reservation service, advertising,
training and operating programs designated by Licensor as System-wide
(or area-wide) programs in the best interests of hotels using
the System;
(g) maintenance, appearance and condition of the Hotel; and
(h) quality and type of service offered to customers at the Hotel.
(8) use such automated guest service and/or hotel management and/or
telephone system(s) which Licensor deems to be in the best interests of the
System, including any additions, enhancements, supplements or variants
thereof which may be developed during the term hereof;
(9) participate in and use those reservation services which Licensor deems
to be in the best interests of the System, including any additions,
enhancements, supplements or variants thereof which may be developed during
the term hereof;
(10) adopt improvements or changes to the System as may be from time to
time designated by Licensor;
(11) strictly comply with all governmental requirements, including the
filing and maintenance of any required trade name or fictitious name
registrations, pay all taxes, and maintain all governmental licenses and
permits necessary to operate the Hotel in accordance with the System;
(12) permit inspection of the Hotel by Licensor's representatives at any
time and give them free lodging for such time as may be reasonably
necessary to complete their inspections;
(13) promote the Hotel on a local or regional basis subject to Licensor's
requirements as to form, content and prior approvals;
(14) insure that no part of the Hotel or the System is used to further or
promote a competing business or other lodging facility, except as Licensor
may approve for those competing businesses or lodging facilities owned,
licensed, operated or otherwise approved by Licensor or its parent,
divisions, subsidiaries and/or affiliates;
(15) use every reasonable means to encourage use of Hampton Inn and
Hampton Inn & Suites facilities everywhere by the public;
(16) in all respects use Licensee's best efforts to reflect credit upon
and create favorable public response to the name "Hampton Inn" and "Hampton
Inn & Suites";
(17) promptly pay to Licensor all amounts due Licensor, its parent,
divisions, subsidiaries and/or affiliates as royalties or fees or for goods
or services purchased by Licensee; and
(18) comply with Licensor's requirements concerning confidentiality of
information.
b. Upgrading of the Hotel. Licensor may at any time during the term hereof
require substantial modernization, rehabilitation and other upgrading of the
Hotel. Limited exceptions from those standards may be made by Licensor based
on local conditions or special circumstances. If the upgrading requirements
contained in this Paragraph 3.b. cause Licensee undue hardship, Licensee may
terminate this Agreement by paying a fee computed according to Paragraph
10.f.
c. Fees.
(1) For each month (or part of a month) during the License Term, Licensee
will pay to Licensor by the 15th of the following month:
(a) a royalty fee of 4 percent of the gross revenues attributable to or
payable for rental of Guest Rooms at the Hotel with deductions for sales
and room taxes only ("Gross Rooms Revenue");
(b) a "Marketing/Reservation Contribution" of 4 percent of Gross Rooms
Revenue, this contribution being subject to change by Licensor from time
to time, which payments do not include the cost of reservation services
equipment or installation or maintenance of it or training; and
(c) an amount equal to any sales, gross receipts or similar tax imposed
on Licensor and calculated solely on payment required hereunder, unless
the tax is an optional alternative to an income tax otherwise payable by
Licensor.
Licensee will operate the Hotel so as to maximize Gross Rooms Revenue
of the Hotel consistent with sound marketing and industry practice and
will not engage in any conduct which reduces Gross Rooms Revenue of the
Hotel in order to further other business activities.
(2) Additional royalties may be charged on revenues (or upon any other
basis, if so determined by Licensor) from any activity if it is added at
the Hotel by mutual agreement and:
(a) it is not now offered at System hotels generally and it is likely
to benefit significantly from or be identified significantly with the
Hampton Inn and/or the Hampton Inn & Suites name or other aspects of the
System; or
(b) it is designed or developed by or for Licensor.
(3) Charges may be made by Licensor for optional products or services
accepted by Licensee from Licensor either in accordance with current
practice or as developed in the future.
(4) A standard initial fee for Guest Room additions to a hotel as set
forth in Licensor's then current "Offering Circular for Prospective
Franchisees" shall be paid by Licensee to Licensor on Licensee's submission
of an application to add any Guest Rooms to the Hotel. As a condition to
Licensor granting its approval of such application, Licensor may require
Licensee to upgrade the Hotel, subject to Paragraph 3.b.
(5) Local and regional marketing programs and related activities may be
conducted by Licensee, but only at Licensee's expense and subject to
Licensor's requirements. Reasonable charges may be made by Licensor for
optional advertising materials ordered or used by Licensee for such
programs and activities.
(6) Licensee shall participate in Licensor's travel agent commission
program(s) as it may be modified from time to time and shall reimburse
Licensor on or before the 15th of each month for travel agent commissions
paid by Licensor.
(7) Each payment under this Paragraph 3.c. shall be accompanied by the
monthly statement referred to in Paragraph 6. Licensor may apply any
amounts received under this paragraph to any amounts due under this
Agreement. If any amounts are not paid when due, such non-payment shall
constitute a breach of this Agreement and, in addition, such unpaid amounts
will accrue interest beginning on the first day of the month following the
due date at 1 1/2 percent per month but not to exceed the maximum interest
permitted by applicable law.
4. Licensor's Responsibilities.
a. Training. During the License Term, Licensor will continue to specify and
provide required and optional training programs at various locations.
Reasonable charges may be made for required training services and materials.
Charges may also be made by Licensor for optional training services and
materials provided to Licensee. Travel, lodging and other expenses of
Licensee and its employees will be borne by Licensee.
b. Reservation Services. During the License Term, so long as Licensee is in
full compliance with its material obligations hereunder, Licensor will afford
Licensee access to reservation services for the Hotel.
c. Consultation on Operations, Facilities and Marketing. Licensor will,
from time to time at Licensor's sole discretion, make available to Licensee
consultation and advice in connection with operations, facilities and
marketing. Licensor shall have the right to establish fees in advance for
its advice and consultation on a project-by-project basis.
d. Use of Marketing/Reservation Contribution. The Marketing/Reservation
Contribution will be used by Licensor for costs associated with advertising,
promotion, publicity, market research and other marketing programs and
related activities, including reservation programs and services. Licensor is
not obligated to expend funds for marketing or reservation services in excess
of the amounts received from licensees using the System.
e. Application of Manual. All hotels operated under the System will be
subject to the Manual, as it may from time to time be modified or revised by
Licensor, including limited exceptions from compliance which may be made
based on local conditions or special circumstances. Each change in the
Manual must be explained in writing to Licensee at least 30 days before it
goes into effect.
f. Other Arrangements for Marketing, Etc. Licensor may enter into
arrangements for development, marketing, operations, administrative,
technical and support functions, facilities, programs, services and/or
personnel with any other entity and may use any facilities, programs,
services and/or personnel used in connection with the System in connection
with any business activities of its parent, subsidiaries, divisions or
affiliates.
g. Compliance Assistance. If the Hotel fails to comply with the standards
and rules of operation set forth in the Manual, Licensor may, at its option
and at Licensee's cost, meet with the Licensee at the Hotel to develop a plan
to ensure that the Hotel thereafter complies with the standards and rules of
operation set forth in the Manual.
5. Proprietary Rights.
a. Ownership of System. Licensee acknowledges and will not contest, either
directly or indirectly, Licensor's unrestricted and exclusive ownership of
the System and any element(s) or component(s) thereof, and acknowledges that
Licensor has the sole right to grant licenses to use all or any element(s) or
component(s) of the System. Licensee specifically agrees and acknowledges
that Licensor is the owner of all right, title and interest in and to the
service marks "Hampton Inn, "Hampton Inn & Suites" and all other marks
associated with the System together with the goodwill symbolized thereby and
that Licensee will not contest directly or indirectly the validity or
ownership of the marks either during the term of this Agreement or at any
time thereafter. All improvements and additions whenever made to or
associated with the System by the parties to this Agreement or anyone else,
and all service marks, trademarks, copyrights, and service mark and trademark
registrations at any time used, applied for or granted in connection with the
System, and all goodwill arising from Licensee's use of Licensor's marks
shall inure to the benefit of and become the property of Licensor. Upon
expiration or termination of this Agreement, no monetary amount shall be
assigned as attributable to any goodwill associated with Licensee's use of
the System or any element(s) or component(s) of the System including the name
or marks.
b. Trademark Disputes. Licensor will have the sole right and responsibility
to handle disputes with third parties concerning use of all or any part of
the System, and Licensee will, at its reasonable expense, extend its full
cooperation to Licensor in all such matters. All recoveries made as a result
of disputes with third parties regarding use of the System or any part
thereof shall be for the account of Licensor. Licensor need not initiate
suit against alleged imitators or infringers and may settle any dispute by
grant of a license or otherwise. Licensee will not initiate any suit or
proceeding against alleged imitators or infringers or any other suit or
proceeding to enforce or protect the System.
c. Protection of Name and Marks. Both parties will make every effort
consistent with the foregoing to protect and maintain the names and marks
"Hampton Inn," "Hampton Inn & Suites," and its distinguishing characteristics
(and the other service marks, trademarks, slogans, etc., associated with the
System). Licensee agrees to execute any documents deemed necessary by
Licensor or its counsel to obtain protection for Licensor's marks or to
maintain their continued validity and enforceability. Licensee agrees to use
the names and marks associated with the System only in connection with the
operation of a Hampton Inn & Suites hotel and in the manner authorized by
Licensor and acknowledges that any unauthorized use thereof shall constitute
infringement of Licensor's rights.
6. Records and Audits.
a. Monthly Reports. At least monthly, Licensee shall prepare a statement
which will include all information concerning Gross Rooms Revenue, other
revenues generated at the Hotel, room occupancy rates, reservation data and
other information required by Licensor that may be useful in connection with
marketing and other functions of Licensor, its parent, subsidiaries,
divisions or affiliates (the "Data"). The Data shall be the property of
Licensor. The Data will be permanently recorded and retained as may be
reasonably required by Licensor. By the 15th of each month, Licensee will
submit to Licensor a statement setting forth the Data for the previous month
and reflecting the computation of the amounts then due under Paragraph 3.c.
The statement will be in such form and detail as Licensor may reasonably
request from time to time, and may be used by Licensor for its reasonable
purposes.
b. Daily Reports. At the request of Licensor, Licensee shall prepare and
deliver daily reports to Licensor, which reports will contain information
reasonably requested by Licensor on a daily basis, such as daily rate and
room occupancy, and which may be used by Licensor for its reasonable
purposes.
c. Preparation and Maintenance of Records. Licensee shall, in a manner and
form satisfactory to Licensor and utilizing accounting and reporting
standards as reasonably required by Licensor, prepare on a current basis (and
preserve for no less than four years), complete and accurate records
concerning Gross Rooms Revenue and all financial, operating, marketing and
other aspects of the Hotel, and maintain an accounting system which fully and
accurately reflects all financial aspects of the Hotel and its business.
Such records shall include but not be limited to books of account, tax
returns, governmental reports, register tapes, daily reports, and complete
quarterly and annual financial statements (profit and loss statements,
balance sheets and cash flow statements).
d. Audit. Licensor may require Licensee to have the Gross Rooms Revenue or
other monies due hereunder computed and certified as accurate by a certified
public accountant. During the License Term and for two years thereafter,
Licensor and its authorized agents shall have the right to verify information
required under this Agreement by requesting, receiving, inspecting and
auditing, at all reasonable times, any and all records referred to above
wherever they may be located (or elsewhere if reasonably requested by
Licensor). If any such inspection or audit discloses a deficiency in any
payments due hereunder, Licensee shall immediately pay to Licensor the
deficiency and Licensee shall also immediately pay to Licensor the entire
cost of the inspection and audit, including but not limited to, travel,
lodging, meals, salaries and other expenses of the inspecting or auditing
personnel. Licensor's acceptance of Licensee's payment of any deficiency as
provided for herein shall not waive Licensor's right to terminate this
Agreement as provided for herein in Paragraph 10. If the audit discloses an
overpayment, Licensor shall immediately refund it to Licensee.
e. Annual Financial Statements. Licensee will submit to Licensor as soon as
available but not later than 90 days after the end of Licensee's fiscal year,
complete financial statements for such year. Licensee will certify them to
be true and correct and to have been prepared in accordance with generally
accepted accounting principles consistently applied, and any false
certification will be a breach of this Agreement.
7. Indemnity and Insurance.
a. Indemnity. Licensee will indemnify, during and after the term of this
Agreement, Licensor, its parent, and their respective subsidiaries, divisions
and affiliates and their officers, directors, employees, agents, successors
and assigns against, hold them harmless from, and promptly reimburse them
for, all payments of money (fines, damages, legal fees, expenses, etc.) by
reason of any claim, demand, tax, penalty, or judicial or administrative
investigation or proceeding (even where negligence of Licensor and/or its
parent, and/or their subsidiaries, divisions and affiliates and/or their
officers, directors, employees, agents, successors and assigns is actual or
alleged) arising from any claimed occurrence at the Hotel or arising from, as
a result of or in connection with the design, construction, furnishings,
equipment and acquisition of supplies or any other of Licensee's acts,
omissions or obligations or those of anyone associated or affiliated with
Licensee or the Hotel. At the election of Licensor, Licensee will also
defend Licensor and/or its parent, and their subsidiaries, divisions and
affiliates and/or their officers, directors, employees, agents, successors
and assigns against same. In any event, Licensor will have the right,
through counsel of its choice, to control any matter to the extent it could
directly or indirectly affect Licensor and/or its parent, and their
subsidiaries, divisions and affiliates and their officers, directors,
employees, agents, successors and assigns financially. Licensee will also
reimburse Licensor for all expenses, including attorneys' fees and court
costs, reasonably incurred by Licensor to protect itself and/or its parent,
and their subsidiaries, divisions and affiliates and/or their officers,
directors, employees, agents and their successors and assigns from, or to
remedy Licensee's defaults under this Agreement.
b. Insurance. During the License Term, Licensee will comply with all
insurance requirements of any lease or mortgage covering the Hotel, and
Licensor's specifications for insurance as to amount and type of coverage as
may be reasonably specified by Licensor from time to time in writing, and
will in any event maintain as a minimum the following insurance underwritten
by an insurer approved by Licensor:
(1) employer's liability and workers' compensation insurance as prescribed
by applicable law; and
(2) liquor liability insurance, if applicable, naming Licensor, Embassy
Suites, Inc. and The Promus Companies Incorporated as additional insureds
with single-limit coverage for personal and bodily injury and property
damage of at least $10,000,000 for each occurrence; and
(3) comprehensive general liability insurance (with products, completed
operations and independent contractors coverage) and comprehensive
automobile liability insurance, all on an occurrence basis naming Licensor,
Embassy Suites, Inc. and The Promus Companies Incorporated as additional
insureds and underwritten by an insurer approved by Licensor, with
single-limit coverage for personal and bodily injury and property damage of
at least $10,000,000 for each occurrence. In connection with all
significant construction at the Hotel during the License Term, Licensee
will cause the general contractor to maintain with an insurer approved by
Licensor comprehensive general liability insurance (with products,
completed operations and independent contractors coverage) in at least the
amount of $10,000,000 for each occurrence with Licensor, Embassy Suites,
Inc. and The Promus Companies Incorporated named as additional insureds.
c. Changes in Insurance. Simultaneously herewith, annually hereafter and
each time a change is made in any insurance or insurance carrier, Licensee
will furnish to Licensor certificates of insurance including the term and
coverage of the insurance in force, the persons insured, and the fact that
the coverage may not be cancelled, altered or permitted to lapse or expire
without 30 days advance written notice to Licensor.
8. Transfer.
a. Transfer by Licensor. Licensor shall have the right to transfer or
assign this Agreement or any of Licensor's rights or obligations hereunder to
any person or legal entity.
b. Transfer by Licensee. Licensee understands and acknowledges that the
rights and duties set forth in this Agreement are personal to Licensee, and
that Licensor has entered into this Agreement in reliance on the business
skill, financial capacity, and personal character of Licensee (if Licensee is
an individual), and that of the partners or stockholders of Licensee (if
Licensee is a partnership or corporation). Accordingly, neither Licensee nor
any immediate or remote successor to any part of Licensee's interest in this
Agreement, nor any individual, partnership, corporation, or other legal
entity which directly or indirectly owns an equity interest (as that term is
defined herein) in Licensee, shall sell, assign, transfer, convey, pledge,
mortgage, encumber, or give away any direct or indirect interest in this
Agreement or equity interest in Licensee, except as provided in this
Agreement. Any purported sale, assignment, transfer, conveyance, pledge,
mortgage, or encumbrance, by operation of law or otherwise, of any interest
in this Agreement or any equity interest in Licensee not in accordance with
the provisions of this Agreement, shall be null and void and shall constitute
a material breach of this Agreement, for which Licensor may terminate this
Agreement upon notice without opportunity to cure pursuant to Paragraph
10.d.(4).
(1) For the purposes of this Paragraph 8, the term "equity interest" shall
mean any stock or partnership interest in Licensee, the interest of any
partner, whether general or limited, in any partnership with respect to
such partnership, and any stockholder of any corporation with respect to
such corporation, which partnership or corporation is the Licensee
hereunder or which partnership or corporation owns a direct or indirect
beneficial interest in Licensee. References in this Agreement to
"publicly-traded equity interest" shall mean any equity interest which is
traded on any securities exchange or is quoted in any publication or
electronic reporting service maintained by the National Association of
Securities Dealers, Inc. or any of its successors.
(2) If Licensee is a partnership or corporation, Licensee represents that
the equity interests in Licensee are directly and (if applicable)
indirectly owned as shown in Attachment A hereto.
c. Transfer of Equity Interests that are not Publicly Traded.
(1) Except where otherwise provided in this Agreement, equity interests in
the Licensee that are not publicly traded may be transferred, issued, or
eliminated with Licensor's prior written consent, which will not be
unreasonably withheld, provided that after the transaction:
(a) 50 percent or less of all equity interests in Licensee will have
changed hands since Licensee first became a party to this Agreement, or
(b) 80 percent or less of all equity interests in Licensee will have
changed hands since Licensee first became a party to this Agreement, and
no equity interest will be held by other than those who held them when
Licensee first became a party to this Agreement.
(2) In computing the percentages referred to in Paragraph 8.c.(1) above,
limited partners will not be distinguished from general partners, and
Licensor's judgment will be final if there is any question as to the
definition of "equity interest" or as to the computation of relative equity
interests, the principal considerations being:
(a) Direct and indirect power to exercise control over the affairs of
Licensee; and
(b) Direct and indirect right to share in Licensee's profits; and
(c) Amounts directly or indirectly exposed to risk in Licensee's
business.
d. Transfers of Publicly-Traded Equity interests.
(1) Except as otherwise provided in this Agreement, publicly-traded equity
interests in the Licensee may be transferred without the Licensor's
consent, but only if:
(a) Immediately before the proposed transfer the transferor owns less
than 25 percent of the equity interest of Licensee; and
(b) Immediately after the transfer the transferee will own less than 25
percent of the equity interest in Licensee; and
(c) The transfer is exempt from registration under federal securities
law.
(2) Publicly-traded equity interests may be transferred with Licensor's
written consent, which may not be unreasonably withheld, if the transfer is
exempt from registration under federal securities law.
(3) The chief financial officer of Licensee shall certify annually to
Licensor that Licensee is in compliance with the provisions of this
Paragraph 8.d. Such certification shall be delivered to Licensor with the
Annual Financial Statements referred to in Paragraph 6.e. hereof.
e. Transfer of the License.
(1) Licensee, if a natural person, may with Licensor's consent, which will
not be unreasonably withheld, transfer the License to Licensee's spouse,
parent, sibling, niece, nephew, descendant, or spouse's descendant provided
that:
(a) Adequate provision is made for management of the Hotel; and
(b) The transferee executes a new license agreement for the unexpired
term of this Agreement, on the standard form then being used to license
new hotels under the System, except that the fees charged then shall be
the same as those contained herein; and
(c) Licensee guarantees, in Licensor's usual form, the performance of
the transferee's obligations under the newly-executed license agreement.
(2) If Licensee is a natural person, he may, without the consent of
Licensor, upon 30 days prior written notice to Licensor, transfer the
License to a corporation entirely owned by him, provided that:
(a) Adequate provision is made for management of the Hotel; and
(b) The transferee executes a new license agreement for the unexpired
term of this Agreement on the standard form then being used to license
new hotels under the System, except that the fees charged then shall be
the same as those contained herein; and
(c) The Licensee guarantees in Licensor's usual form, the performance
of the transferee's obligations under the newly-executed license
agreement.
f. Transfers of the License or Equity Interest in the Licensee Upon Death.
(1) If Licensee is a natural person, upon the Licensee's death, the
License will pass in accordance with Licensee's will, or, if Licensee dies
intestate, in accordance with laws of intestacy governing the distribution
of the Licensee's estate, provided that:
(a) Adequate provision is made for management of the Hotel; and
(b) Licensor gives written consent, which consent will not be
unreasonably withheld; and
(c) The transferee is one or more of the decedent's spouse, parents,
siblings, nieces, nephews, descendants, or spouse's descendants; and
(d) Licensee's heirs or legatees, promptly advise Licensor and promptly
execute a new license agreement for the unexpired term of this
Agreement, on the standard form then being used to license new hotels
under the System, except the fees charged thereunder shall be the same
contained herein.
(2) If an equity interest is owned by a natural person, the equity
interest will pass upon such person's death in accordance with such
person's will or, if such person dies intestate, in accordance with the
laws of intestacy governing the distribution of such person's estate,
provided that:
(a) Adequate provision is made for management of the Hotel; and
(b) Licensor gives written consent, which consent will not be
unreasonably withheld; and
(c) The transferee is one or more of the decedent's spouse, parents,
siblings, nieces, nephews, descendants, or spouse's descendants; and
(d) The transferee assumes, in writing, on a continuing basis, the
decedent's guarantee, if any, of the Licensee's obligations hereunder.
g. Registration of a Proposed Transfer of Equity Interests. If a proposed
transfer of an equity interest in the Licensee requires registration under
any federal or state securities law, Licensee shall:
(1) Request Licensor's consent at least 45 days before the proposed
effective date of the registration; and
(2) Accompany such request with one payment of a nonrefundable fee of
$25,000; and
(3) Reimburse Licensor for expenses incurred by Licensor in connection
with review of the materials concerning the proposed registration,
including without limitation, attorneys' fees and travel expenses; and
(4) Agree, and all participants in the proposed offering subject to
registration shall agree, to fully indemnify Licensor in connection with
the registration; furnish Licensor all information requested by Licensor;
avoid any implication of Licensor's participating in, or endorsing the
offering; and use Licensor's service marks and trademarks only as directed
by Licensor.
h. Management of the Hotel. Licensee must at all times retain and exercise
direct management control over the Hotel's business. Licensee shall not
enter into any lease, management agreement, or other similar arrangement for
the operation of the Hotel or any part thereof with any independent entity
without the prior written consent of Licensor.
i. Application for New License Agreement upon Transfer of the Hotel.
(1) If Licensee wishes to transfer the Hotel, or any interest of Licensee
in the Hotel, Licensee shall give prompt written notice thereof to
Licensor, stating the identity of the prospective transferee and the terms
and conditions of the transfer, including a copy of any proposed agreement
and all other information with respect thereto, which Licensor may
reasonably require.
(2) If Licensee proposes to transfer the Hotel or any interest of Licensee
in the Hotel to a transferee who desires thereafter to operate the Hotel
under the System, the proposed transferee must, with Licensee's consent,
apply for a new license agreement to replace this Agreement for a term to
be determined by Licensor. Licensor shall process the application in good
faith and in accordance with procedures, criteria and requirements
regarding fees, upgrade of the Hotel, credit, operational abilities and
capabilities, prior business dealings, if any, with Licensor, market
feasibility and other factors deemed relevant by Licensor, then being
applied by Licensor in issuing new licenses to use the System. If the
application is approved, Licensor and the transferee shall, upon surrender
of this Agreement, enter into a commitment agreement to govern the Hotel
until the time specified therein for the new license agreement to be
entered into if the transferee fulfills specified upgrading and other
requirements by that time. The new license agreement shall be on the
standard form, and contain the standard terms (except for duration), then
being used to license new hotels under the System. If the application is
not approved by Licensor, then this Agreement shall terminate pursuant to
Paragraph 10.d. hereof and Licensor shall be entitled to all of its
remedies.
9. Condemnation and Casualty.
a. Condemnation. Licensee shall, at the earliest possible time, give
Licensor full notice of any proposed taking by eminent domain. If Licensor
agrees that the Hotel or a substantial part thereof is to be taken, Licensor
will give due and prompt consideration, without any obligation, to
transferring this Agreement to a nearby location selected by Licensee and
approved by Licensor as promptly as reasonably possible, and in any event
within four months of the taking. If the new location is approved by
Licensor and the transfer authorized by Licensor and if Licensee opens a new
hotel at the new location in accordance with Licensor's specifications within
two years of the closing of the Hotel, the new hotel will thenceforth be
deemed to be the Hotel licensed under this Agreement. If a condemnation
takes place and a new hotel does not, for whatever reason, become the Hotel
under this Agreement in strict accordance with this paragraph (or if it is
reasonably evident to Licensor that such will be the case), this Agreement
will terminate forthwith upon notice thereof by Licensor to Licensee, without
the payment of liquidated damages hereunder.
b. Casualty. If the Hotel is damaged by fire or other casualty, Licensee
will expeditiously repair the damage. If the damage or repair requires
closing the Hotel, Licensee will immediately notify Licensor, will repair or
rebuild the Hotel in accordance with Licensor's standards, will commence
reconstruction within four months after closing, and will reopen the Hotel
for continuous business operations as soon as practicable (but in any event
within 24 months after closing of the Hotel), giving Licensor ample advance
notice of the date of reopening. If the Hotel is not reopened in accordance
with this paragraph, this Agreement will forthwith terminate, upon notice
thereof by Licensor to Licensee, with the payment of liquidated damages
calculated in the manner set forth in Paragraph 10.f.
c. No Extensions of Term. Nothing in this Paragraph 9 will extend the
License Term but Licensee shall not be required to make any payments pursuant
to paragraphs 3.c.(l), (2) and (3) for periods during which the Hotel is
closed by reason of condemnation or casualty.
10. Termination.
a. Expiration of Term. This Agreement will expire without notice 20 years
from the date hereof, subject to earlier termination as set forth herein.
The parties recognize the difficulty of ascertaining damages to Licensor
resulting from premature termination of this Agreement, and have provided for
liquidated damages in Paragraph 10.f. below, which liquidated damages
represent the parties' best estimate as to the damages arising from the
circumstances in which they are provided.
b. Permitted Termination Prior to Expiration of Term. Licensee may
terminate this Agreement on its 10th or 15th anniversary by giving at least
12 but less than 15 months advance notice to Licensor accompanied by a lump
sum payment (as liquidated damages and not as a penalty or in lieu of any
other payments required under this Agreement) equal to the total of all
amounts required under paragraphs 3.c.(l), (2) and (3) for the 24 calendar
months of operation preceding the notice.
c. Termination by Licensor on Advance Notice.
(1) In accordance with notice from Licensor to Licensee, this Agreement
will terminate (without any further notice unless required by law) or, at
Licensor's sole discretion with notice from Licensor to Licensee, Licensor
may suspend its services hereunder (including reservation services),
provided that:
(a) the notice is mailed at least 30 days (or longer, if required by
law) in advance of the termination date;
(b) the notice reasonably identifies one or more breaches of Licensee's
obligations hereunder; and
(c) the breach(es) are not fully remedied within the time period
specified in the notice.
(2) If during the then preceding 12 months Licensee shall have engaged in
a violation of this Agreement for which a notice of termination was given
and termination failed to take effect because the default was remedied, the
period given to remedy defaults thereafter will, if and to the extent
permitted by law, thereafter be 10 days instead of 30.
(3) In any judicial proceeding in which the validity of termination is at
issue, Licensor will not be limited to the reasons set forth in any notice
sent under this paragraph.
(4) Licensor's notice of termination or suspension of services shall not
relieve Licensee of its obligation hereunder.
d. Immediate Termination by Licensor. This Agreement may be immediately
terminated upon notice from Licensor to Licensee (or at the earliest time
permitted by applicable law) if:
(1) (a) Licensee or any guarantor of Licensee's obligations hereunder
shall generally not pay its debts as they become due or shall admit in
writing its inability to pay its debts, or shall make a general
assignment for the benefit of creditors; or
(b) Licensee or any such guarantor shall commence any case, proceeding
or other action seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or relief of debtors,
or seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its
property; or
(c) Licensee or any such guarantor shall take any corporate or other
action to authorize any of the actions set forth above in paragraphs (a)
or (b); or
(d) Any case, proceeding or other action against Licensee or any such
guarantor shall be commenced seeking to have an order for relief entered
against it as debtor, or seeking reorganization, arrangement,
adjustment, liquidation, dissolution or composition of it or its debts
under any law relating to bankruptcy, insolvency, reorganization or
relief of debtors, or seeking appointment of a receiver, trustee,
custodian or other similar official for it or for all or any substantial
part of its property, and such case, proceeding or other action (i)
results in the entry of an order for relief against it which is not
fully stayed within seven business days after the entry thereof or (ii)
remains undismissed for a period of 45 days; or
(e) An attachment remains on all or a substantial part of the Hotel or
of Licensee's or any such guarantor's assets for 30 days; or
(f) Licensee or any such guarantor fails, within 60 days of the entry
of a final judgment against Licensee in any amount exceeding $50,000, to
discharge, vacate or reverse the judgment, or to stay execution of it,
or if appealed, to discharge the judgment within 30 days after a final
adverse decision in the appeal; or
(2) Licensee loses possession or the right to possession of all or a
significant part of the Hotel, except as otherwise provided in Paragraph 9;
or
(3) Licensee contests in any court or proceeding Licensor's ownership of
the System or any part of it, or the validity of any service marks or
trademarks associated with Licensor's business; or
(4) A breach of Paragraph 8 hereof occurs; or
(5) Licensee fails to continue to identify itself to the public as a
System hotel; or
(6) Any action is taken toward dissolving or liquidating Licensee or any
such guarantor, if it is a corporation or partnership, except for death of
a partner; or
(7) Licensee or any of its principals is, or is discovered to have been,
convicted of a felony (or any other offense if it is likely to adversely
reflect upon or affect the Hotel, the System, the Licensor, the Licensor's
parent or its affiliates or subsidiaries in any way); or
(8) Licensee maintains false books and records of account or submits false
reports or information to Licensor.
e. De-identification of Hotel Upon Termination. Licensee will take whatever
action is necessary to assure that no use is made of any part of the System
at or in connection with the Hotel or otherwise after the License Term ends.
This will involve, among other things, returning to Licensor the Manual and
all other materials proprietary to Licensor, physical changes of distinctive
System features of the Hotel, including removal of the primary freestanding
sign down to the structural steel, and all other actions required to preclude
any possibility of confusion on the part of the public that the Hotel is no
longer using all or any part of the System or otherwise holding itself out to
the public as a Hampton Inn & Suites hotel. Anything not done by Licensee in
this regard within 30 days after termination of this Agreement may be done at
Licensee's expense by Licensor or its agents, who may enter upon the premises
of the Hotel for that purpose.
f. Payment of Liquidated Damages. If this Agreement terminates pursuant to
paragraphs 3.b., 9.b., 10.c. or 10.d. above, Licensee will promptly pay
Licensor (only as liquidated damages for the premature termination of this
Agreement, and not as a penalty or as damages for breaching this Agreement or
in lieu of any other payment) a lump sum equal to the total amounts required
under paragraphs 3.c.(1), (2) and (3) during the 36 full calendar months of
operation preceding the termination; or if the Hotel has not been in
operation in the System for 36 full calendar months, the greater of: (i) 36
times the monthly average of such amounts, or (ii) 36 times such amounts as
are due for the one full calendar month preceding such termination. If the
Hotel has been authorized to open as a Hampton Inn & Suites hotel but has not
been in operation for one full calendar month, the liquidated damages amount
shall be equal to the product of the number of Guest Rooms in the Hotel
multiplied by $3,000.00.
11. Renewal.
This Agreement is non-renewable.
12. Relationship of Parties.
a. No Agency Relationship. Licensee is an independent contractor. Neither
party is the legal representative or agent of, or has the power to obligate
(or has the right to direct or supervise the daily affairs of) the other for
any purpose whatsoever. Licensor and Licensee expressly acknowledge that the
relationship intended by them is a business relationship based entirely on,
and defined by, the express provisions of this Agreement and that no
partnership, joint venture, agency, fiduciary or employment relationship is
intended or created by reason of this Agreement.
b. Licensee's Notices to Public Concerning Independent Status. Licensee
will take such steps as are necessary and such steps as Licensor may from
time to time reasonably request to minimize the chance of a claim being made
against Licensor for anything that occurs at the Hotel, or for acts,
omissions or obligations of Licensee or anyone associated or affiliated with
Licensee or the Hotel. Such steps may, for example, include giving notice in
Guest Rooms, public rooms and advertisements, on business forms and
stationery, etc., making clear to the public that Licensor is not the owner
or operator of the Hotel and is not accountable for what happens at the
Hotel. Unless required by law, Licensee will not use the word "Hampton" or
any similar words in its corporate, partnership, or trade name, nor authorize
or permit such use by anyone else. Licensee will not use the words
"Hampton," "Hampton Inn," "Hampton Inn & Suites" or any other name or mark
associated with the System to incur any obligation or indebtedness on behalf
of Licensor.
13. Miscellaneous.
a. Severability and Interpretation. The remedies provided in this Agreement
are not exclusive. In the event any provision of this Agreement is held to
be unenforceable, void or voidable as being contrary to the law or public
policy of the United States or any other jurisdiction entitled to exercise
authority hereunder, all remaining provisions shall nevertheless continue in
full force and effect unless deletion of the provision(s) deemed
unenforceable, void or voidable impairs the consideration for this Agreement
in a manner which frustrates the purpose of the parties or makes performance
commercially impracticable. In the event any provision of this Agreement
requires interpretation, such interpretation shall be based on the reasonable
intention of the parties in the context of this transaction without
interpreting any provision in favor of or against any party hereto by reason
of the drafting of the party or its position relative to the other party.
Any covenant, term or provision of this Agreement which, in order to effect
the intent of the parties, must survive the termination of this Agreement,
shall survive any such termination.
b. Binding Effect. This Agreement shall become valid when executed and
accepted by Licensor at Memphis, Tennessee. It shall be deemed made and
entered into in the state of Tennessee and shall be governed and construed
under and in accordance with the laws of the state of Tennessee. In entering
into this Agreement, Licensee acknowledges that it has sought, voluntarily
accepted and become associated with Licensor who is headquartered in Memphis,
Tennessee, and that this Agreement contemplates and will result in business
relationships with Licensor's headquarter's personnel. The choice of law
designation permits, but does not require that all suits concerning this
Agreement be filed in the state of Tennessee.
c. Exclusive Benefit. This Agreement is exclusively for the benefit of the
parties hereto, and it may not give rise to liability to a third party,
except as otherwise specifically set forth herein. No agreement between
Licensor and anyone else is for the benefit of Licensee.
d. Entire Agreement. This is the entire Agreement (and supersedes all
previous agreements including without limitation, any commitment agreement
between the parties concerning the Hotel) between the parties relating to the
Hotel. Neither Licensor nor any other person on Licensor's behalf has made
any representation to Licensee concerning this Agreement or relating to the
system which representation is not fully set forth herein or in Licensor's
"Offering Circular for Prospective Franchisees." No change in this Agreement
will be valid unless in writing signed by both parties. No failure to
require strict performance or to exercise any right or remedy hereunder will
preclude requiring strict performance or exercising any right or remedy in
the future.
e. Licensor's Withholding Consent. Licensor's consent, wherever required,
may be withheld if any default by Licensee exists under this Agreement.
Approvals and consents by Licensor will not be effective unless evidenced by
a writing duly executed on behalf of Licensor.
f. Notices. Notices will be effective hereunder when and only when they are
reduced to writing and delivered personally or mailed by Federal Express or
other express delivery service or by certified mail to the appropriate party
at its address first stated above or to such person and at such address as
may be designated by notice hereunder.
g. General Release. Licensee and its respective heirs, administrators,
executors, agents, representatives and their respective successors and
assigns, hereby release, remise, acquit and forever discharge Licensor and
its parent, subsidiaries, divisions and affiliates and their officers,
directors, employees, agents, representatives and their respective successors
and assigns from any and all actions, claims, causes of action, suits,
rights, debts, liabilities, accounts, agreements, covenants, contracts,
promises, warrants, judgments, executions, demands, damages, costs and
expenses, whether known or unknown at this time, of any kind or nature,
absolute or contingent, if any there be, at law or in equity, on account of
any matter, cause or thing whatsoever which has happened, developed or
occurred at any time from the beginning of time to and including the date of
Licensee's execution and delivery to Licensor of this Agreement. This
release shall survive the termination of this Agreement, Licensee shall take
whatever steps are necessary or appropriate to carry out the terms of this
release upon Licensor's request.
h. Descriptive Headings. The descriptive headings in this Agreement are for
convenience only and shall not control or affect the meaning or construction
of any provision in this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first stated above.
LICENSEE: LICENSOR:
______________________________________ HAMPTON INN HOTEL DIVISION OF EMBASSY
SUITES, INC.
By: _________________________________ By: ___________________________________
Name: _______________________________ Name: _________________________________
Title: ______________________________ Title: ________________________________
GUARANTY
Date: __________________________________
As an inducement to the Hampton Inn Hotel Division of Embassy Suites, Inc.
("Licensor") to execute the above License Agreement, the undersigned, jointly
and severally, hereby unconditionally warrant to Licensor and its successors and
assigns that all of Licensee's representations in the License Agreement and the
application submitted by Licensee to obtain the License Agreement are true and
guarantee that all of Licensee's obligations under the above License Agreement,
including any amendments thereto whenever made (the "Agreement"), will be
punctually paid and performed.
Upon default by Licensee or notice from Licensor, the undersigned will
immediately make each payment and perform each obligation required of Licensee
under the Agreement. Without affecting the obligations of the undersigned under
this Guaranty, Licensor may without notice to the undersigned extend, modify or
release any indebtedness or obligation of Licensee, or settle, adjust or
compromise any claims against Licensee. The undersigned waive notice of
amendment of the Agreement and notice of demand for payment or performance by
Licensee.
Upon the death of an individual guarantor, the estate of such guarantor will
be bound by this Guaranty but only for defaults and obligations hereunder
existing at the time of death, and the obligations of the other guarantors will
continue in full force and effect.
The Guaranty constitutes a guaranty of payment and performance and not of
collection, and each of the guarantors specifically waives any obligation of
Licensor to proceed against Licensee on any money or property held by Licensee
or by any other person or entity as collateral security, by way of set off or
otherwise. The undersigned further agree that this Guaranty shall continue to
be effective or be reinstated as the case may be, if at any time payment or any
of the guaranteed obligations is rescinded or must otherwise be restored or
returned by Licensor upon the insolvency, bankruptcy or reorganization of
Licensee or any of the undersigned, all as though such payment has not been
made.
IN WITNESS WHEREOF, each of the undersigned has signed this Guaranty as of
the date of the above Agreement.
Witnesses: Guarantors:
__________________________________ ___________________________________ (Seal)
__________________________________ ___________________________________ (Seal)
__________________________________ ___________________________________ (Seal)
ATTACHMENT A
Facilities and Services (Paragraph 1):
Site-Area and general description:
Fee owners (names and addresses):
Other facilities and services:
Ownership of Licensee (Paragraph 8):
LIMITED PARTNERSHIP AGREEMENT
OF
DES PLAINES DEVELOPMENT LIMITED PARTNERSHIP
between
HARRAH'S ILLINOIS CORPORATION
and
JOHN Q. HAMMONS
Dated February 28, 1992
TABLE OF CONTENTS
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Page
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R E C I T A L S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1 - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 - FORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.01 Partnership Agreement . . . . . . . . . . . . . . . . . 5
2.02 Organization and Name . . . . . . . . . . . . . . . . . 5
2.03 Place of Business and Principal Office;
Registered Agent and Registered Office . . . . . . 5
2.04 Purpose and Title . . . . . . . . . . . . . . . . . . . 5
2.05 Term . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 3 - CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.01 Capital Contributions; Partnership Interests . . . . . 6
3.02 Capital Accounts . . . . . . . . . . . . . . . . . . . 8
3.03 Assignment of Entitlements . . . . . . . . . . . . . . 9
ARTICLE 4 - ALLOCATIONS AND DISTRIBUTIONS . . . . . . . . . . . . . . . . . 10
4.01 Allocations of Taxable Income . . . . . . . . . . . . . 10
4.02 Allocations of Tax Loss . . . . . . . . . . . . . . . . 10
4.03 Timing and Amount of Allocations of Taxable
Income and Tax Loss . . . . . . . . . . . . . . . 10
4.04 Distributions of Proceeds of a Major Capital
Event . . . . . . . . . . . . . . . . . . . . . . 10
4.05 Distribution of Cash Flow . . . . . . . . . . . . . . . 10
4.06 Priority and Distribution of Property . . . . . . . . . 11
4.07 Additional Allocation Provisions . . . . . . . . . . . 11
ARTICLE 5 - GENERAL PARTNER . . . . . . . . . . . . . . . . . . . . . . . . 15
5.01 Management Authority of the General Partner . . . . . . 15
5.02 Limitation on Authority of the General Partner . . . . 19
5.03 Delegation of Authority . . . . . . . . . . . . . . . . 19
5.04 Compensation . . . . . . . . . . . . . . . . . . . . . 20
5.05 Extent of Management Duties . . . . . . . . . . . . . . 20
5.06 Transactions with Related Parties . . . . . . . . . . . 20
5.07 Liability for Acts and Omissions . . . . . . . . . . . 20
5.08 Right to Rely Upon the Authority of the General . . . . 22
5.09 Continuing Liability . . . . . . . . . . . . . . . . . 22
5.10 Effect of Bankruptcy of the General Partner . . . . . . 22
5.11 Transfer of General Partnership Interest . . . . . . . 23
5.12 Right to Own Limited Partnership Interest . . . . . . . 25
ARTICLE 6 - LIMITED PARTNER . . . . . . . . . . . . . . . . . . . . . . . . 25
6.01 Limitation on Liability of Limited Partners . . . . . . 25
6.02 Management of the Partnership . . . . . . . . . . . . . 25
6.03 Power of Attorney . . . . . . . . . . . . . . . . . . . 26
6.04 Representations . . . . . . . . . . . . . . . . . . . . 27
6.05 Restriction on Transfer of Limited Partnership . . . . 28
6.06 Disposition if No Gaming Qualification . . . . . . . . 30
6.07 Effect of Bankruptcy, Death or Incompetency
of Limited Partner . . . . . . . . . . . . . . . . 31
6.08 Notices to Limited Partner . . . . . . . . . . . . . . 31
ARTICLE 7 - EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 8 - REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.01 Remedies . . . . . . . . . . . . . . . . . . . . . . . 34
8.02 Choice of Remedies . . . . . . . . . . . . . . . . . . 34
8.03 Buy and Sell . . . . . . . . . . . . . . . . . . . . . 35
8.04 Advances; Buy-Down . . . . . . . . . . . . . . . . . . 37
8.05 Appraisal Buy Out . . . . . . . . . . . . . . . . . . . 40
8.06 Forbearance . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 9 - VALUATION AND APPRAISAL PROCEDURE . . . . . . . . . . . . . . . 41
9.01 Voluntary Appraisal . . . . . . . . . . . . . . . . . . 41
9.02 Appraisal Panel . . . . . . . . . . . . . . . . . . . . 41
9.03 Appraised Value . . . . . . . . . . . . . . . . . . . . 43
9.04 Expenses . . . . . . . . . . . . . . . . . . . . . . . 43
9.05 Qualification . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 10 - ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . 43
10.01 Bank Accounts . . . . . . . . . . . . . . . . . . . . 43
10.02 Title to Partnership Property . . . . . . . . . . . . 43
10.03 Books and Records . . . . . . . . . . . . . . . . . . 43
10.04 Notices . . . . . . . . . . . . . . . . . . . . . . . 44
10.05 Meetings . . . . . . . . . . . . . . . . . . . . . . 45
10.06 Amendment . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 11 - FISCAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 45
11.01 Fiscal Year . . . . . . . . . . . . . . . . . . . . . 45
11.02 Method of Accounting . . . . . . . . . . . . . . . . 45
11.03 Accountants and Accounting Principles . . . . . . . . 46
11.04 Reports . . . . . . . . . . . . . . . . . . . . . . . 46
11.05 Tax Returns; Tax Matters Partner . . . . . . . . . . 46
11.06 Basis Election . . . . . . . . . . . . . . . . . . . 46
11.07 Partnership Expenses . . . . . . . . . . . . . . . . 47
11.08 Change in Control . . . . . . . . . . . . . . . . . . 47
ARTICLE 12 - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.01 Events of Dissolution . . . . . . . . . . . . . . . . 48
12.02 Winding Up . . . . . . . . . . . . . . . . . . . . . 48
12.03 Distribution on Dissolution and Termination . . . . . 49
ARTICLE 13 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 50
13.01 Governing Law . . . . . . . . . . . . . . . . . . . . 50
13.02 Successors and Assigns . . . . . . . . . . . . . . . 50
13.03 Grammatical Changes . . . . . . . . . . . . . . . . . 51
13.04 Captions . . . . . . . . . . . . . . . . . . . . . . 51
13.05 Severability . . . . . . . . . . . . . . . . . . . . 51
13.06 Counterparts . . . . . . . . . . . . . . . . . . . . 51
13.07 Other Matters . . . . . . . . . . . . . . . . . . . . 51
13.08 Private Litigation . . . . . . . . . . . . . . . . . 51
13.09 Waiver of Right to Court Decree of Dissolution
and Partition . . . . . . . . . . . . . . . . . . . 52
13.10 Competing Business . . . . . . . . . . . . . . . . . 52
13.11 Personal Property . . . . . . . . . . . . . . . . . . 53
13.12 No Third Party Rights . . . . . . . . . . . . . . . . 53
13.13 Consent of Bank Group . . . . . . . . . . . . . . . . 53
EXHIBIT A - Capital Contributions and Percentage Share . . . . . . . . . . 1
General Partner . . . . . . . . . . . . . . . . . . . . . . 1
Limited Partner . . . . . . . . . . . . . . . . . . . . . . 1
EXHIBIT B - Legal Description of Property . . . . . . . . . . . . . . . . . 1
LIMITED PARTNERSHIP AGREEMENT
OF
DES PLAINES DEVELOPMENT LIMITED PARTNERSHIP
THIS LIMITED PARTNERSHIP AGREEMENT of Des Plaines Development Limited
Partnership (the "Partnership Agreement" or "Agreement") is made and entered as
of the 28th day of February, 1992, by and among Harrah's Illinois Corporation, a
Nevada corporation, and John Q. Hammons, an individual.
RECITALS
--------
A. The General Partner is a wholly-owned, indirect subsidiary of
Harrah's, a Nevada corporation ("Harrah's"). Harrah's and the General Partner
are in the business of operating gaming facilities.
B. The Limited Partner is the sole owner of Des Plaines Development
Corporation, an Illinois corporation ("DPDC"), which has applied for a license
to operate a riverboat gaming facility on the Des Plaines River in Joliet,
Illinois, and has received a finding of preliminary suitability from the
Illinois Gaming Board.
C. The Limited Partner desires that the General Partner invest in such
riverboat gaming facility, and rather than continue the corporate form of
ownership through DPDC, the General Partner and the Limited Partner desire to
undertake a joint venture to develop and operate a riverboat gaming facility on
the Des Plaines River in Joliet, Illinois on the terms set forth herein and
desire that any funding of preliminary suitability of DPDC be transferred to
such joint venture consistent with the rules of the Illinois Gaming Board.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual agreements of the parties
hereto and subject to the terms and conditions hereof, it is hereby agreed as
follows:
ARTICLE 1
---------
DEFINITIONS
-----------
Unless otherwise expressly provided herein or unless the context otherwise
requires, each of the following terms when used herein shall have the following
defined meanings:
"Act" means the Delaware Revised Uniform Limited Partnership Act, 6 Del. C.
--- -
Sec. 17-101, et seq. as amended from time to time, or any successor statute.
-- ---
"Adjusted Capital Account Deficit" shall have the meaning set forth in
Section 4.07(g)(i) hereof.
"Affiliate," when used with reference to a specified Person, means (i) any
relative or spouse of the specified Person; (ii) any Person who is an officer,
partner or trustee of, or serves in a similar capacity with respect to, the
specified Person; (iii) any partnership, corporation, trust or other entity of
which the specified Person is a partner, officer, trustee or serves in a similar
capacity or is directly or indirectly the owner of a partnership interest, any
portion of a class of equity securities, or in which the specified Person has a
substantial beneficial interest; and (iv) any Person that directly or indirectly
through one or more intermediaries controls or is controlled by or is under
common control with the specified Person. "Affiliate" when used in reference to
any of the Partners shall also include any Person that directly or indirectly
through one or more intermediaries controls or is controlled by or is under
common control with any one or more of the beneficial owners of such Partner.
"Agreement" means this Limited Partnership Agreement of Des Plaines
Development Limited Partnership, as amended, modified or supplemented from time
to time.
"Capital Account" shall have the meaning set forth in Section 3.02(a)
hereof.
"Capital Contribution" means the total amount of money and the fair market
value of any property (determined net of any liabilities secured by such
property that the Partnership is considered to assume or take subject to and
determined consistently with Code Section 752(c) and without regard to Code
Section 7701(g)) contributed, or to be contributed, as the case may be, to the
Partnership by a Partner.
"Cash Flow" means all cash received by the Partnership from all sources in
excess of all cash expended or reserved in the discretion of the General Partner
for (i) currently due and maturing obligations and liabilities (excluding
Partner loans) and expenses of the Partnership or obligations secured by
Partnership assets including but not limited to debt service upon any
indebtedness incurred by the Partnership, (ii) capital expenditures, (iii)
contingent liabilities or (iv) such other purposes as the General Partner shall
determine to be necessary or proper. Without limiting the generality of the
foregoing, all amounts received from the City of Joliet, Illinois or any other
governmental agencies as reimbursements, subsidies or payments in respect of the
Project, including without limitation reimbursements of gaming tax, shall be
included in the calculations of "Cash Flow".
"Code" means the Internal Revenue Code of 1986, as amended.
"Default Loan" shall have the meaning set forth in Section 8.04(a) hereof.
"Defaulting Partner" shall have the meaning set forth in Section 8.01
hereof.
"Distributions" means all distributions or other payments to Partners by
the Partnership of cash or the fair market value of any property (determined net
of any liabilities secured by such property that the distributee is considered
to assume or take subject to and determined consistently with Code Section
752(c) and without regard to Code Section 7701(g)) distributed to the Partners
pursuant to Article 4 or Section 12.03 hereof.
"Event of Default" shall have the meaning set forth in Article 7 hereof.
"General Partner" means Harrah's Illinois Corporation, a Nevada
corporation, or any Person who, at the time of reference thereto, has been
admitted to the Partnership as a successor or additional general partner of the
Partnership, in each such Person's capacity as a General Partner.
"Initial Capital Loan" shall have the meaning set forth in Section 3.01(d)
hereof.
"Initial Capital Loan Documents" shall have the meaning set forth in
Section 3.01(d) hereof.
"Limited Partner" means John Q. Hammons, an individual, or any Person who,
at the time of reference thereto, has been admitted to the Partnership as a
successor or additional limited partner of the Partnership, in each such
Person's capacity as a Limited Partner.
"Major Capital Event" means any borrowings or financings (except short term
borrowing in the ordinary course of business) by the Partnership or otherwise
relating to the Project, any sale of all or a portion of the Project or any
Partnership assets (except dispositions of personal property and equipment in
the ordinary course of business) or any insured casualty loss or condemnation or
other involuntary conversion (including losses covered by title insurance).
"Net Invested Capital" means the initial Capital Contribution for such
Partner set forth on Exhibit A hereto plus the amount of capital hereafter
---------
contributed to the Partnership by such Partner and credited to its Capital
Account, less all distributions hereafter made by the Partnership to such
Partner and debited against its Capital Account, but in no event less than zero.
"Nondefaulting Partner" shall have the meaning set forth in Section 8.01
hereof.
"Partner Minimum Gain" shall have the meaning set forth in Section
4.07(g)(iii) hereof.
"Partners" means the General Partner(s) and the Limited Partner(s).
"Partnership" means the Delaware limited partnership governed by this
Agreement.
"Partnership Minimum Gain" shall have the meaning set forth in Section
4.07(g)(ii) hereof.
"Percentage Share" means the percentage assigned to each Partner by which
each such Partner shall share in various allocations and distributions of the
Partnership in accordance with the terms of this Agreement. The Percentage
Share initially allocated to each Partner is set forth in Section 3.01(f)
hereof, and is subject to the provisions of Section 8.04(b) hereof.
"Person" means any individual, partnership, corporation, unincorporated
association, trust or other entity.
"Prime Rate" means the prime rate of interest charged by Citibank, N.A.,
New York, New York to borrowers on ninety (90) day unsecured commercial loans,
as the same may be changed from time to time.
"Project" means the gaming/recreational business conducted with respect to
the Property.
"Property" means the real property and improvements thereto located in the
City of Joliet, Will County, Illinois, generally described in Exhibit B hereto
---------
and by this reference incorporated herein, together with such additional real
property as the General Partner may determine to acquire and one or more
riverboats, berthing and docking facilities, reception buildings, parking
facilities, offices and storage areas, restaurants, hotels, gaming devices and
other property relating to the business of the Partnership.
"Treasury Regulation" shall mean the income tax regulations promulgated
under the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
ARTICLE 2
---------
FORMATION
---------
2.01 Partnership Agreement. The Partnership is a limited partnership
---------------------
organized under and pursuant to the terms of the Act and this Partnership
Agreement. From and after its execution, this Partnership Agreement shall
constitute the only agreement of limited partnership of the Partnership, except
as it may hereafter be amended pursuant to the provisions of this Partnership
Agreement. This Partnership Agreement represents the entire agreement and
understanding of the parties hereto, and all prior or concurrent agreements,
understandings, representations and warranties in regard to the subject matter
hereof are and have been merged herein.
2.02 Organization and Name. The Partnership is and shall be a limited
---------------------
partnership organized under and pursuant to the Act. The name of the Partnership
is "Des Plaines Development Limited Partnership." The General Partner and the
Limited Partner of the Partnership shall be the parties designated aforesaid.
The Partners agree to execute such certificates or documents and do such filings
and recordings and all other acts, including the filing of a Certificate of
Limited Partnership of the Partnership and any amendments thereto in appropriate
governmental offices as may be required in order to comply with all applicable
laws.
2.03 Place of Business and Principal Office; Registered Agent and
------------------------------------------------------------
Registered Office
- -----------------
(a) The principal place of business of the Partnership shall be
Joliet, Illinois and its principal office shall be at 1023 Cherry Road, Memphis,
Tennessee 38117, or at such other place as the General Partner may designate by
notice to all Partners.
(b) The name and address of the registered agent for service of
process on the Partnership in the State of Delaware is The Corporation Trust
Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801. The registered office of the Partnership is located at
such address. The General Partner may designate any other Person as the
registered agent and any other location as the registered office, respectively,
as the General Partner deems appropriate subject to applicable law.
2.04 Purpose and Title. The purpose and business of the Partnership
-----------------
shall be to own, develop and operate the Property and the Project. The
Partnership shall have the power to do all acts and things necessary,
appropriate, convenient or useful in connection with the foregoing, including
without limitation, all of the powers that may be exercised by the General
Partner on behalf of the Partnership under this Agreement. Title to any or all
of the Property (or the interest of the Partnership therein) may be taken and
held in the name of the Partnership or in the name of an Illinois land trust in
which the entire beneficial interest shall be owned by the Partnership and the
power of direction vested in the Partnership or its designees, as provided in
this Agreement. The Partnership shall be a partnership only for the purposes
described in this Section 2.04, and this Agreement shall not be deemed to create
a partnership between the Partners with respect to any activities whatsoever
other than the activities contemplated hereby or incident thereto.
2.05 Term. The Partnership commenced on the date of first filing of
----
the Partnership's Certificate of Limited Partnership with the office of the
Secretary of State of the State of Delaware and shall continue in full force and
effect until the date which is fifty (50) years from such date, or until
dissolution prior thereto pursuant to the provisions hereof or by operation of
law.
ARTICLE 3
---------
CONTRIBUTIONS
-------------
3.01 Capital Contributions; Partnership Interests
--------------------------------------------
(a) Capital Contributions by the General Partner. The General
--------------------------------------------
Partner shall contribute Twenty Five Million Nine Hundred Twenty Thousand
Dollars ($25,920,000) to the Partnership when called for pursuant to Section
3.01(c) hereof as an initial Capital Contribution which shall be credited to the
General Partner's Capital Account. The General Partner shall make additional
Capital Contributions as and when called for by the General Partner in its sole
discretion, which shall be credited to the General Partner's Capital Account.
(b) Capital Contributions by the Limited Partner. The Limited
--------------------------------------------
Partner shall contribute Six Million Four Hundred Eighty Thousand Dollars
($6,480,000) to the Partnership when called for pursuant to Section 3.01(c)
hereof as an initial Capital Contribution which shall be credited to the Limited
Partner's Capital Account. The Limited Partner shall make additional Capital
Contributions as and when called for by the General Partner in its sole
discretion, which shall be credited to the Limited Partner's Capital Account.
(c) Calls for Contributions. The General Partner may at any
-----------------------
time or from time to time call for Capital Contributions, including initial
Capital Contributions, from the Partners by not less than three (3) days written
notice to the Partners. The Partners shall make such Capital Contributions to
the Partnership on or before the date specified in any such notice from the
General Partner.
(d) Initial Capital Loan. The General Partner shall
--------------------
contribute, on behalf of the Limited Partner, the Limited Partner's initial
Capital Contribution set forth in Section 3.01(b) hereof as a loan to the
Limited Partner (the "Initial Capital Loan"). The Limited Partner hereby grants
authority to the General Partner to disburse portions of the Initial Capital
Loan to the Partnership when portions of the Limited Partner's initial Capital
Contribution are called for pursuant to Section 3.01(c) hereof. The Initial
Capital Loan shall be deemed a Default Loan hereunder and the rights of the
Partners hereunder in respect of the Initial Capital Loan shall include all
rights of the Partners in respect of Default Loans, including, without
limitation, the distribution provisions of Sections 4.04, 4.05 and 8.04(d)
hereof and Article 12 hereof; provided that (x) nothing herein shall be
construed as causing the Limited Partner to be in default as a result of the
Initial Capital Loan being deemed to be a Default Loan unless the Limited
Partner shall fail to pay or perform under the Initial Capital Loan Documents
(as defined below) and (y) the General Partner may not exercise any right under
Article 8 hereof with respect to the Initial Capital Loan, unless and until an
Event of Default shall have occurred hereunder. The Initial Capital Loan shall
(i) be evidenced by a promissory note in form and substance acceptable to the
General Partner, (ii) be secured by the Limited Partner's interest in the
Partnership pursuant to a security agreement and UCC financing statements in
form and substance acceptable to the General Partner and any other documents as
may be necessary to further assure and perfect a security interest in the
Limited Partner's Partnership interest (such promissory note, security agreement
and UCC-1 financing statements are the "Initial Capital Loan Documents"), (iii)
bear interest on the outstanding principal balance, payable on the first day of
each calendar quarter in arrears (the first such payment to be due on July 1,
1992), at a rate equal to the lower of (x) the then current Prime Rate plus two
percent (2%) per annum or (y) the maximum rate of interest permitted under
applicable law, from the date hereof until payment in full by the Limited
Partner, (iv) be prepayable at any time, and (v) be due and payable (including
all principal and accrued interest outstanding) on the earlier of the date which
is four (4) years from the date hereof, or the occurrence of an Event of Default
hereunder (unless accelerated earlier pursuant to the terms of the promissory
note evidencing such loan). The Initial Capital Loan shall be made to the
Limited Partner and guaranteed by the spouse of the Limited Partner pursuant to
the Guarantee attached hereto, with full recourse to the assets of the Limited
Partner and the spouse of the Limited Partner.
(e) Evidence of Partnership Interest. No certificates or other
--------------------------------
evidence of ownership shall be issued with respect to the partnership interests
in the Partnership except this Agreement which, when executed, shall solely
represent and evidence the partnership interests in the Partnership owned by
each Partner.
(f) Percentage Share. Effective as of the date hereof, the
----------------
partnership interests hereunder are allocated between the Partners such that the
Percentage Share which is attributed to each Partner is as follows:
(i) 80% - General Partner
(ii) 20% - Limited Partner
Such Percentage Shares are subject to revision pursuant to Section 8.04(b)
hereof.
(g) Withdrawal of Capital; Loans. No Partner shall have any
----------------------------
right to withdraw or make a demand for withdrawal of all or any portion of such
Partner's capital (or the amount, if any, reflected in such Partner's Capital
Account). No interest or additional share of profits shall be paid or credited
to the Partners on their Capital Accounts, or on any undistributed profits or
funds left on deposit with the Partnership; provided, however, that nothing
-------- -------
herein contained shall be construed to prevent or prohibit the payment of
interest on account of loans made by the Partners to the Partnership. Any loans
made to the Partnership by a Partner shall not increase its Capital Account or
interest in the profits, losses, or Cash Flow, but shall be a debt due from the
Partnership and repaid accordingly only out of Cash Flow or the Partnership
assets in the discretion of the General Partner.
3.02 Capital Accounts
----------------
(a) There shall be established for each Partner on the books of
the Partnership, as of the date hereof, a capital account (the "Capital
Account") reflecting the excess (deficit) of (i) the sum of (A) such Partner's
initial Capital Account balance which initial balance reflects the deemed
contributions of such Partner to the Partnership in exchange for such Partner's
interest in the Partnership, (B) such Partner's additional Capital Contributions
(if any) to its Capital Account made in accordance with this Agreement, (C) such
Partner's share of taxable income and (D) such Partner's share of tax-exempt
income of the Partnership over (ii) the sum of (A) such Partner's share of tax
losses, (B) such Partner's share of other Partnership expenditures that are not
deductible for federal income tax purposes and (C) any Distributions to such
Partner, (iii) as adjusted by such Partner's share of income, gain, deduction or
loss described in Treasury Regulation Section 1.704-1(b)(2)(iv)(g).
(b) Notwithstanding any other provision in this Section 3.02 or
elsewhere in this Agreement, each Partner's Capital Account shall be maintained
and adjusted in accordance with the Code and the Treasury Regulations, including
Treasury Regulation Section 1.704-1(b)(2)(iv). It is intended that appropriate
adjustments shall thereby be made to Capital Accounts to give effect to any
income, gain, loss or deduction (or items thereof) that is specially allocated
pursuant to this Agreement.
(c) A Partner's Capital Account shall be reduced by the fair
market value (determined without regard to Code Section 7701(g)) of any property
(net of liabilities secured by such property that the Partner is considered to
assume or take subject to and determined consistently with Code Section 752(c))
distributed by the Partnership to such Partner, whether in connection with a
liquidation of the Partnership or of such Partner's partnership interests or
otherwise. Accordingly, Capital Accounts shall first be adjusted to reflect the
manner in which the unrealized income, gain, loss and deduction inherent in such
property (that has not been previously reflected in Capital Accounts) would be
allocated, pursuant to Article 4 hereof, among the Partners if there were a
taxable disposition of such property for its fair market value (taking Code
Section 7701(g) into account) on the date of distribution.
(d) The foregoing provisions and other provisions of this
Agreement relating to the maintenance of capital accounts are intended to comply
with Treasury Regulation Section 1.704-1, and shall be interpreted and applied
in a manner consistent with such Treasury Regulation. In the event the General
Partner shall determine, in its sole discretion, that it is prudent to modify
the manner in which the capital accounts, or any debits or credits thereto, are
computed in order to comply with such Treasury Regulation, the General Partner
may make such modification, provided that it will not have a material adverse
effect on the amounts distributable to any Limited Partner during the operation
of, or upon the dissolution of, the Partnership.
3.03 Assignment of Entitlements. Without any adjustments to the
--------------------------
Partners' Percentage Shares or to the Partners' Capital Accounts, the General
Partner and the Limited Partner hereby (and the Limited Partner shall cause DPDC
to) irrevocably assign and transfer by quitclaim conveyance any and all of their
respective rights and interest in any studies, plans, engineering reports,
environmental reports, wetlands reports or other marketing materials, property,
contracts, agreements, options, licenses, permits, or other rights or interests
relating to the development and operation of the Project, including without
limitation, any easements, gaming applications or licenses, variances, consents,
approvals or entitlements from any Port Authorities, the U.S. Army Corp of
Engineers, the City of Joliet, Illinois, or any other federal, state, county or
municipal authority or any governmental or quasi-governmental entity necessary
for the development and use of the Property in connection with the Project.
ARTICLE 4
---------
ALLOCATIONS AND DISTRIBUTIONS
-----------------------------
4.01 Allocations of Taxable Income. Except as provided in Section
-----------------------------
4.07 hereof, taxable income of the Partnership (including any gain realized in a
Major Capital Event) shall be allocated among the Partners in accordance with
their Percentage Shares.
4.02 Allocations of Tax Loss. Except as provided in Section 4.07
-----------------------
hereof, tax loss of the Partnership (including any loss realized in a Major
Capital Event) shall be allocated among the Partners in accordance with their
Percentage Shares.
4.03 Timing and Amount of Allocations of Taxable Income and Tax Loss.
---------------------------------------------------------------
Taxable income and tax loss of the Partnership shall be determined and allocated
with respect to each fiscal year of the Partnership as of the end of such year.
Subject to the other provisions of this Article 4, an allocation to a Partner of
a share of taxable income or tax loss shall be treated as an allocation of the
same share of each item of income, gain, loss or deduction that is taken into
account in computing taxable income or tax loss.
4.04 Distributions of Proceeds of a Major Capital Event. The proceeds
--------------------------------------------------
of any Major Capital Event (other than in connection with or in contemplation of
a liquidation of the Partnership) shall be applied as follows:
(a) First, to pay all expenses incurred in connection with
the Major Capital Event;
(b) Second, to pay all accrued and unpaid interest on and
the principal balance of all Default Loans made by the Nondefaulting
Partner under Section 8.04(a) hereof and accounted for as set forth in
Section 8.04(d) hereof;
(c) Third, to repay, at the discretion of the General
Partner, any or all indebtedness of the Partnership secured by liens on the
Property;
(d) Fourth, to repay any Capital Contribution by a Partner
in excess of its Percentage Share of the total Capital Contributions in the
Partnership; and
(e) Fifth, the balance, if any, to the Partners in
accordance with their Percentage Shares.
4.05 Distribution of Cash Flow. Cash Flow (other than proceeds of any
-------------------------
Major Capital Event or in connection with or in contemplation of a liquidation
of the Partnership) shall be applied as follows:
(a) First, to pay all accrued and unpaid interest on and
the principal balance of all Default Loans made by the Nondefaulting
Partner under Section 8.04(a) hereof and accounted for as set forth in
Section 8.04(d) hereof;
(b) Second, to repay any Capital Contribution by a Partner
in excess of its Percentage Share of the total Capital Contributions in the
Partnership; and
(c) Third, the balance, if any, to and among the Partners
in accordance with their Percentage Shares.
4.06 Priority and Distribution of Property. Except as herein
-------------------------------------
expressly provided, no Partner shall have priority over any other Partner as to
the return of capital, income or losses, or Distributions of Cash Flow. No
Partners shall have the right to demand or receive property other than cash for
its Capital Contributions to the Partnership or in payment of its share of Cash
Flow.
4.07 Additional Allocation Provisions. Notwithstanding the foregoing
--------------------------------
provisions of this Article 4:
(a) The losses allocated under Section 4.02 hereof to any
Partner shall not exceed the maximum amount of losses that can be so allocated
without causing such Partner to have an Adjusted Capital Account Deficit at the
end of any fiscal year. If some but not all of the Partners would have Adjusted
Capital Account Deficits as a consequence of an allocation of losses pursuant to
Section 4.02 hereof, then the limitation set forth in this Section 4.07(a) shall
be applied so as to allocate the maximum permissible loss to each Partner under
the preceding sentence and Treasury Regulation Section 1.704-1(b)(2)(ii)(d).
Losses, the allocation of which to any Partner are prohibited under the first
sentence of this Section 4.07(a), shall be allocated to the remaining Partners
in proportion to their respective Percentage Shares.
(b) Notwithstanding any other provisions of this Section 4.07,
if there is a net decrease in Partnership Minimum Gain during any Partnership
fiscal year, each Partner shall be specially allocated items of Partnership
income and gain (as specified in Regulations Sections 1.704-2(f)(6) and 1.704-
2(j)(2)(i)) for such year (and, if necessary, for subsequent years, as provided
in Regulation Section 1.704-2(j)(2)(iii)) in an amount equal to the portion of
such Partner's share of the net decrease in such Partnership Minimum Gain,
determined in accordance with Treasury Regulations Section 1.704-2(g)(2).
The items of income and gain to be so specially allocated pursuant to this
Section 4.07(b) shall be determined in accordance with Treasury Regulation
Section 1.704-2(f). This Section 4.07(b) is intended to comply with the minimum
gain chargeback requirement of Treasury Regulation Section 1.704-2(f) and shall
be interpreted consistently therewith.
(c) Notwithstanding any provision of this Section 4.07 to the
contrary (except Section 4.07(b) hereof), if there is a net decrease in Partner
Minimum Gain attributable to a "partner nonrecourse debt" (within the meaning of
Treasury Regulation Section 1.704-2(b)(4)) during any Partnership fiscal year,
each Partner who has a share of the Partner Minimum Gain attributable to such
partner nonrecourse debt, determined in accordance with Treasury Regulation
Section 1.704-2(i)(5), shall be specially allocated items of Partnership income
and gain (as specified in Regulation Section 1.704-2(j)(2)(ii)) for such fiscal
year (and, if necessary, subsequent years, as provided in Regulation Section
1.704-2(j)(2)(iii)) in an amount equal to the portion of such Partner's share of
the net decrease in Partner Minimum Gain attributable to such partner
nonrecourse debt, determined in accordance with Treasury Regulation Section
1.704-2(g)(2).
The items of income and gain to be so specially allocated pursuant to this
Section 4.07(c) shall be determined in accordance with Treasury Regulation
Section 1.704-2(i)(4). This Section 4.07(c) is intended to comply with the
partner minimum gain chargeback requirement of Treasury Regulation Section
1.704-2(i)(4) and shall be interpreted consistently therewith.
(d) Subject to the priority rules of Treasury Regulation Section
1.704-2, if any Partner unexpectedly receives any adjustment, allocation or
distribution described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6) that causes or increases an
Adjusted Capital Account Deficit with respect to such Partner, items of
Partnership income and gain shall be specially allocated to such Partner in an
amount and manner sufficient to eliminate, to the extent required by Treasury
Regulation Sections 1.704-1(b) and 1.704-2, the Adjusted Capital Account Deficit
of such Partner as quickly as possible. It is intended that this Section
4.07(d) qualify and be construed as a "qualified income offset" within the
meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(d).
(e) If special allocations are required under Sections 4.07(b),
4.07(c) and/or 4.07(d) hereof in any fiscal year, such allocations shall be
made in the priorities required by Treasury Regulation Sections 1.704-1(b) and
1.704-2.
(f) "Nonrecourse deductions" (within the meaning of Treasury
Regulation Sections 1.704-2(b)(1) and 1.704-2(c)) for any fiscal year or other
period shall be specially allocated to the Partners in proportion to their
Percentage Shares. "Partner nonrecourse deductions" (within the meaning of
Treasury Regulation Section 1.704-2(i)) for any fiscal year or other period
shall be specially allocated to the Partner who bears the economic risk of loss
with respect to the "partner nonrecourse debt" (within the meaning of Treasury
Regulation Section 1.704-2(b)(4)) to which such partner nonrecourse deductions
are attributable in accordance with Treasury Regulation Section 1.704-2(i).
(g) As used herein, the following terms shall have the following
meanings associated with them:
(i) The term "Adjusted Capital Account Deficit" means,
with respect to any Partner, the deficit balance, if any in such Partner's
Capital Account as of the end of the relevant fiscal year, after giving
effect to the following adjustments:
(A) Add to such Capital Account the
following items: (1) the amount, if any, which such
Partner is obligated to contribute to the Partnership
upon liquidation of such Partner's interest; and (2)
the amount which such Partner is deemed to be obligated
to restore to the Partnership pursuant to the
penultimate sentences of Treasury Regulation Sections
1.704-2(g)(1) and 1.704-2(i)(5); and
(B) Subtract from such Capital Account such
Partner's share of the items described in Treasury
Regulation Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6).
(ii) The term "Partnership Minimum Gain" shall have the
meaning set forth in Treasury Regulation Sections 1.704-2(b) and
1.704-2(d).
(iii) The term "Partner Minimum Gain" means an amount,
with respect to each "partner nonrecourse debt" (within the meaning of
Treasury Regulation Section 1.704-2(b)(4)), equal to the Partnership
Minimum Gain that would result if such partner nonrecourse debt were
treated as a "nonrecourse liability" (within the meaning of Treasury
Regulation Sections 1.704-2(b)(3) and 1.752-1(a)(2)), determined in
accordance with Treasury Regulation Section 1.704-2(i).
(h) The Partners acknowledge that all Distributions (including
distributions upon liquidation of the Partnership) are intended to be made in
accordance with the priorities set forth in Sections 4.04, 4.05 and 12.03 hereof
and that the Partners' Capital Accounts are intended to reflect the manner in
which such distributions are intended to be made. The allocations set forth in
Sections 4.07(a) (last sentence), 4.07(b), 4.07(c), 4.07(d) and/or 4.07(f)
hereof (the "Regulatory Allocations") are intended to comply with certain
requirements of Treasury Regulation Sections 1.704-1(b) and 1.704-2, but may
result in distortions of the Partners' Capital Accounts in relation to the
Distributions that each Partner is intended to receive from the Partnership.
Notwithstanding the provisions of Sections 4.01, 4.02, 4.03 and 4.07 hereof
(other than the Regulatory Allocations), the Regulatory Allocations shall be
taken into account in allocating other items of income, gain, loss and deduction
among the Partners so that, to the extent possible, at any point in time the
Partners' Capital Accounts shall reflect the manner in which Distributions would
be made to the Partners, if the Partnership were liquidated and the proceeds of
such liquidation were distributed to the Partners in accordance with Section
12.03 hereof.
(i) For any fiscal year during which (a) a Partner's interest in
the Partnership is assigned by such Partner (or by an assignee or successor in
interest to a Partner) or (b) a Partner's Percentage Share changes, the portion
of the taxable income and tax loss of the Partnership that is allocable in
respect of such Partner's transferred or modified interest shall be apportioned
between the assignor and the assignee of such Partner's interest, in the case of
an assignment, or allocated, as otherwise provided in this Article 4, in the
case of a change in Percentage Shares, on the basis of an interim closing of the
Partnership's books, without regard to any payments or distributions made to the
Partners before or after such assignment or change, except as otherwise provided
in and required by Code Section 706(d)(2); provided that in any event any
assignments or transfers of any interest in the Partnership shall be subject to
the provisions of Sections 5.11 and 6.05 hereof.
(j) In the event that any amount claimed by the Partnership to
constitute a deductible expense in any fiscal year is treated for federal income
tax purposes as a distribution made to a Partner in its capacity as a partner of
the Partnership and not a guaranteed payment as defined in Code Section 707(c)
or a payment to a Partner not acting in its capacity as a partner under Code
Section 707(a), then the Partner who is deemed to have received such
distribution shall first be allocated an amount of Partnership gross income
equal to such payment, its Capital Account shall be reduced to reflect the
distribution, and for purposes of this Article 4, taxable income and tax loss
shall be determined after making the allocation required by this Section
4.07(j).
(k) Notwithstanding any other provision of this Agreement,
allocations of items for book and tax purposes and adjustments to the Partners'
Capital Accounts shall be made in accordance with the provisions of Treasury
Regulation Sections 1.704-1(b) and 1.704-2. In particular, as required by
Treasury Regulation Section 1.704-1(b)(4)(i), income, gain, loss and deduction
for tax purposes with respect to Partnership property revalued on the
Partnership's books and records shall be shared among the Partners so as to take
account of the variation between the adjusted tax basis of such property and its
book value in the same manner as variations between the adjusted tax basis and
fair market value of property contributed to a partnership are to be taken into
account in determining the partners' shares of tax items under Code Section
704(c).
(l) Notwithstanding the foregoing provisions of this Article 4,
income, gain, loss and deduction with respect to property contributed to the
Partnership by a Partner shall be shared among the Partners, pursuant to
Treasury Regulations promulgated under Code Section 704(c), so as to take
account of the variation, if any, between the basis of the property to the
Partnership and its fair market value at the time of contribution.
(m) In the event that the Code or any Treasury Regulations
promulgated thereunder require allocations of items of income, gain, loss,
deduction or credit different from those set forth in this Agreement, upon the
advice of the Partnership's counsel or accountants, the General Partner is
hereby authorized to make new allocations in reliance upon the Code, the
Treasury Regulations and such advice of the Partnership's counsel or
accountants, and no such new allocation shall give rise to any claim or cause of
action by the Limited Partner or the Partnership.
ARTICLE 5
---------
GENERAL PARTNER
---------------
5.01 Management Authority of the General Partner. The General Partner
-------------------------------------------
shall have full, complete and exclusive discretion to manage and control the
business of the Partnership for the purposes herein stated, shall make all
decisions affecting the business of the Partnership, and shall manage and
control the affairs of the Partnership. In addition to the rights and powers
herein conferred, the General Partner shall possess and may exercise all of the
rights and powers of a general partner as provided in (but subject to the
limitations and restrictions of) the Act. The General Partner, on behalf of the
Partnership and in furtherance of the business of the Partnership, shall have
the power and authority to perform all acts which the Partnership is authorized
to perform, and to (without limitation) do any of the following:
(a) enter into such sales agreements, construction
agreements, leases, licenses, easements, covenants, conditions or
restrictions, agreements with other land owners, construction contracts,
set aside agreements, or other contracts, agreements, documents, or
arrangements with respect to all or any portion of the Property or the
other Partnership assets, whether or not such arrangements (including
renewal terms) shall extend beyond the date of the termination of the
Partnership, at such rental or amount, or for such consideration, and upon
such terms, as it deems proper;
(b) compromise, submit to arbitration, sue on or defend
all claims in favor of or against the Partnership;
(c) make and revoke any election permitted the Partnership
by any taxing authority;
(d) borrow money for Partnership purposes and as security
therefor to mortgage, pledge, hypothecate or encumber all or any part of
the Property or other assets of the Partnership, and to repay, prepay,
refinance, increase, modify, recast, consolidate or extend, in whole or in
part, all such loans and indebtedness, as and when it shall see fit and
enter into any loan agreements, notes, mortgages, financing statements,
assignment of rents, guarantees, letters of credit, or other documents,
agreements, security arrangements or other arrangements in connection
therewith;
(e) acquire rights, title or interests in, manage,
maintain and improve all or any portion of the Property consistent with the
purposes of the Partnership;
(f) do all acts it deems necessary, appropriate,
incidental or convenient for the operation, development, management,
disposition, improvement, protection or preservation of the Partnership
business;
(g) obtain and keep in force such forms of insurance in
such amounts, and upon such terms and with such carriers, as it shall
determine;
(h) employ, engage or contract with persons for the
operation, development, management, disposition, improvement, protection or
presentation of the Partnership business, including but not limited to,
land managers, construction managers, property managers, casino managers,
riverboat operators, appraisers, consulting engineers, architects,
contractors, developers, agents, insurance brokers, real estate brokers,
leasing agents, loan brokers, accountants and attorneys, on such terms, for
such compensation and pursuant to any such contracts or agreements as the
General Partner shall determine;
(i) establish reserve funds for Partnership purposes from
revenues derived from Partnership operations or from financing,
refinancing, sales or other dispositions of the Property or any of the
Partnership assets;
(j) enter into agreements, options or any other
arrangements for the lease, sale, exchange or other disposition of all or
any portion of the Property or any of the Partnership assets,
notwithstanding that such activity may constitute a sale or disposition of
all or substantially all of the assets of the Partnership, it being agreed
that such a sale or disposition shall not be deemed to constitute an act
which would make it impossible to carry on the ordinary business of the
Partnership;
(k) execute, acknowledge, deliver and perform any and all
deeds, agreements, documents and instruments to effectuate the foregoing;
(l) obtain and maintain all necessary permits, licenses,
rezoning, variances, consents, approvals or entitlements from any Port
Authorities, the U.S. Army Corp of Engineers, the Illinois Gaming Board,
the City of Joliet, Illinois, the County of Will, the State of Illinois or
any other federal, state, county or municipal authority or any governmental
or quasi-governmental entity necessary for the development and use of the
Property in connection with the Project;
(m) develop and improve shore facilities, acquire and
renovate vessels, appear before the Illinois Gaming Board or other
governmental authorities and manage and control the relationship of the
Partnership with such governmental authorities, and commission and obtain
environmental, wetlands, engineering and other reports and studies;
(n) execute, acknowledge, deliver and perform a
Construction Contract with Service Marine Industries, Inc. or any other
contractor for construction of a vessel as General Partner shall determine,
and a Development Agreement with The City of Joliet, each on terms and
conditions it deems appropriate;
(o) execute, acknowledge, deliver and perform a Management
Agreement with the General Partner or any of its Affiliates on the terms
and conditions set forth on the term sheet attached hereto as Exhibit C,
---------
which agreement the Partners hereby agree complies with the provisions of
Section 5.06 hereof, and the Limited Partner hereby acknowledges its
understanding that said Management Agreement will be between the
Partnership with the General Partner acting on behalf of the Partnership,
as Owner, and the General Partner or its Affiliate, as Manager, and the
Limited Partner hereby expressly acknowledges and agrees that the General
Partner, on behalf of the Partnership, as Owner under such Management
Agreement, shall have the sole authority, in its discretion, to (defined
terms used in the following items shall have the meanings specified in said
Management Agreement):
(1) approve any Pre-Opening Budget;
(2) approve any Pre-Opening Program;
(3) approve any plans and specifications in connection with the
construction and renovation of the Building or the Vessel;
(4) inspect and approve for occupancy or use the Building or
the Vessel;
(5) incur and approve Capital Expenditures;
(6) approve any Annual Plan;
(7) exercise any right of first offer under the Management
Agreement;
(8) declare or waive any Event of Default under the Management
Agreement and exercise or forebear from exercising any
remedy to which the Partnership, as Owner, is entitled
under the Management Agreement;
(9) submit to arbitration any dispute arising under the
Management Agreement;
(10) enter any agreement with the Manager to amend or modify the
Management Agreement; or
(11) perform any other action, give any consent, or approval or
exercise any other right on behalf of the Partnership, as
Owner, under the Management Agreement.
(p) admit additional general and limited partners of the
Partnership on such terms and conditions as the General Partner shall
determine; provided, however, that (1) if the General Partner shall admit
-------- -------
an additional general partner who is not an Affiliate of the General
Partner, then the General Partner shall give notice to the Limited Partner
of such impending admission no less than thirty (30) days prior to such
admission, and the Limited Partner shall have the right, for a period of
thirty (30) days after the date of such notice, to notify the General
Partner in writing of its objection to such admission and require the
General Partner to exercise the remedies set forth in either Section
8.01(c) or Section 8.01(d) hereof, at the sole election of the General
Partner and (2) the General Partner's right to admit additional limited
partners, other than in the case of a transfer of any interest of the
Limited Partner or the General Partner, shall be limited to admitting
additional limited partners which limited partners' aggregate Percentage
Share does not exceed fifty percent (50%), and any such admission of
additional limited partners shall ratably reduce the Percentage Shares of
existing partners. For the purposes of any exercise of remedies pursuant
to this Section 5.01(p), (i) the Limited Partner shall be deemed the
Defaulting Partner, and (ii) the Appraisal Buyout Price (as defined in
Section 8.05(b) hereof) shall be calculated by using one hundred percent
(100%) of the Appraised Value (as defined in Section 9.03 hereof).
Any and all of the foregoing powers of the General Partner as set forth in this
Section 5.01 shall be exercised in the sole determination of the General
Partner, and the Limited Partner shall have no right to approve, veto or vote on
any such decision.
5.02 Limitation on Authority of the General Partner. The General
----------------------------------------------
Partner shall have no authority without the prior written consent of the Limited
Partner to:
(a) do any act in contravention of this Agreement;
(b) do any act which would make it impossible to carry on
the ordinary business of the Partnership (it being expressly understood
that the General Partner may consummate a sale, financing, or other
disposition of all or any portion of the assets of the Partnership,
including the Property, without obtaining the prior consent or approval of
the Limited Partner and that such action is not inconsistent with this
Subsection 5.02(b));
(c) possess Partnership property or assign the rights of
the Partnership in specific Partnership assets for other than a Partnership
purpose;
(d) on behalf of the Partnership, become a surety or
guarantor of, or an accommodation party to, an obligation of any other
person, except as may be necessary in connection with the development,
financing, refinancing, operation or sale or other disposition of the
Property or any of the Partnership assets; or
(e) assign the Partnership assets in trust for creditors
or on the assignee's promise to pay the debts of the Partnership.
5.03 Delegation of Authority. The General Partner may delegate any of its
-----------------------
powers, rights and obligations hereunder, and may appoint, employ, contract or
otherwise deal with any person for the transaction of the business of the
Partnership, which person may, under supervision of the General Partner, perform
any acts or services for the Partnership as the General Partner may approve.
Any delegation of powers, rights or obligations pursuant to this Section 5.03
shall at all times be subject to the supervision of the General Partner.
5.04 Compensation. The General Partner shall receive no compensation
------------
for its activities as General Partner, except as otherwise authorized in Section
5.06 hereof; provided that nothing herein shall restrict reimbursement to the
General Partner of any costs or expense incurred by it in connection with the
Partnership.
5.05 Extent of Management Duties. The General Partner and its
---------------------------
officers and directors, shall not be required to devote their full time to the
management of the Partnership business, and the General Partner and its officers
and directors, shall devote only such time to the Partnership business as they,
in their sole discretion, shall deem to be necessary to manage and supervise the
Partnership business and affairs in an efficient manner; but nothing in this
Agreement shall preclude the employment, at the expense of the Partnership, of
any agent or third party manager to manage or provide other services in respect
of the Partnership assets, subject to the supervision by the General Partner of
any such agent or party.
5.06 Transactions with Related Parties
---------------------------------
(a) The General Partner may engage the individual services of
any Partner (including the General Partner), or any Affiliate of a Partner, and
nothing in this Agreement shall preclude the payment as a Partnership expense to
such Partner or Affiliate of compensation for such services rendered; provided,
--------
however, that any such compensation, fee, commission or other payment shall not
- -------
exceed the rates generally charged by others for similar services.
(b) Except as herein provided or as permitted under Section
5.06(a) hereof, no Partner shall receive any fee or other compensation for its
services to the Partnership; provided that the Partnership shall reimburse the
General Partner for all reasonable out-of-pocket expenses authorized by the
General Partner and incurred by the General Partner on behalf of the Partnership
in connection with the business and affairs of the Partnership, including,
without limitation, all legal, accounting, travel, lodging, telephone, third
party consulting charges and other similar expenses.
5.07 Liability for Acts and Omissions
--------------------------------
(a) To the fullest extent permitted by applicable law, the
General Partner, any Affiliate of the General Partner, and any agents, officers,
directors, stockholders and employees of the General Partner or such Affiliate
(each an "Indemnified Person") shall not be liable, responsible or accountable
in damages or otherwise to the Partnership, or to any of the Partners, for any
act or omission performed or omitted by them in good faith on behalf of the
Partnership and in a manner reasonably believed by them to be within the scope
of their authority and in the best interests of the Partnership; provided,
--------
however, that this exculpation shall not apply to acts or omissions which are
- -------
determined, by final decision of a court of competent jurisdiction, to
constitute either fraud, bad faith, gross negligence, or wilful misconduct.
(b) To the fullest extent permitted by law, the Partnership,
its receiver or its trustee, shall indemnify and hold harmless each Indemnified
Person from and against any and all loss, cost, damage, expense or liability,
including, without limitation, fees and expenses of attorneys and other experts
and advisors and any and all court costs incurred by them or any of them, which
relate to or arise out of the Partnership, the Property, the Project or the
Partnership's business or affairs, regardless of whether such Indemnified Person
continues to be the General Partner, any Affiliate of the General Partner, and
any agents, officers, directors, stockholders and employees of the General
Partner or such Affiliate at the time any such liability or expense is paid or
incurred, if the Indemnified Person's conduct did not constitute fraud, bad
faith, gross negligence or willful misconduct.
(c) To the extent that, at law or in equity, an Indemnified
Person has duties (including fiduciary duties) and liabilities relating thereto
to the Partnership or to the Partners, any Indemnified Person acting under this
Agreement or otherwise shall not be liable to the Partnership or to any Partner
for its good faith reliance on the provisions of this Agreement. The provisions
of this Agreement, to the extent that they expand or restrict the duties and
liabilities of an Indemnified Person otherwise existing at law or in equity, are
agreed by the Partners to replace such other duties and liabilities of such
Indemnified Person.
(d) Whenever in this Agreement the General Partner is permitted
or required to make a decision (i) in its "sole discretion" or "discretion," or
under a similar grant of authority or latitude, the General Partner shall make
such decision in good faith considering only the best interests of the
Partnership and shall have no duty or obligation to give any consideration to
any interest of or factors affecting any Limited Partner, or (ii) in its "good
faith" or under another express standard, the General Partner shall act under
such express standard and shall not be subject to any other or different
standards imposed by this Agreement or by law or any other agreement
contemplated herein. Any agreement made in good faith by the General Partner
shall be binding on the Partners and the Partnership. The Limited Partner
hereby agrees that any standard of care or duty imposed in this Agreement or any
other agreement contemplated herein or under the Act or any other applicable
law, rule or regulations shall be modified, waived or limited in each case as
required to permit the General Partner to act under this Agreement or any other
agreement contemplated herein and to make any decision pursuant to the authority
prescribed in this Agreement so long as such action or decision does not
constitute wilful misconduct and is reasonably believed by the General Partner
to be consistent with the overall purposes of the Partnership.
5.08 Right to Rely Upon the Authority of the General Partner. Persons
-------------------------------------------------------
dealing with the Partnership may rely upon the representation of the General
Partner that it has the authority to make any commitment or undertaking on
behalf of the Partnership. No person dealing with the General Partner shall be
required to ascertain its authority to make any such commitment or undertaking,
or any other fact or circumstance bearing upon the existence of its authority.
In no event shall any person dealing with the General Partner, with respect to
any of the Partnership assets, be obligated to see to the application of any
purchase money, rent or money borrowed or advanced thereon, or be obligated to
see that the terms of this Agreement have been complied with, or be obligated to
inquire into the necessity or expediency of any act or action of such General
Partner, and every contract, agreement, deed, mortgage, lease, promissory note
or other instrument or document executed by the General Partner, with respect to
any of the Partnership's assets, shall be conclusive evidence in favor of any
and every person relying thereon or claiming thereunder that (a) at the time or
times of the execution and/or delivery thereof, the Partnership was in full
force and effect, (b) such instrument or document was duly executed and
authorized and is binding upon the Partnership and all of the Partners and (c)
the General Partner executing and delivering the same was duly authorized and
empowered to execute and deliver any and every such instrument or document for
and on behalf of the Partnership.
5.09 Continuing Liability. In the event that the General Partner
--------------------
withdraws from the Partnership, or sells, transfers or assigns its entire
partnership interest, the General Partner shall be free of any obligation or
liability incurred on account of the activities of the Partnership from and
after such time, and unless the General Partner's successor assumes the
obligations and liabilities incurred by the General Partner prior to such date,
the General Partner shall remain liable for all such obligations and liabilities
incurred by it as General Partner prior to the effective date of such
occurrence.
5.10 Effect of Bankruptcy of the General Partner. None of the events
-------------------------------------------
described in Section 17-402(a)(4) or (5) of the Act with respect to the General
Partner shall cause the General Partner to cease to be a general partner of the
Partnership or the dissolution of the Partnership, and the business of the
Partnership shall continue. Upon the occurrence of any of the events described
in Section 17-402(a)(4) or (5) of the Act with respect to the General Partner,
the Limited Partner at its option by written notice to the General Partner may
assume all rights of the General Partner for the purpose of managing the affairs
of the Partnership or designate a successor General Partner to replace the
General Partner.
5.11 Transfer of General Partnership Interest; Right of First Refusal
----------------------------------------------------------------
(a) If the General Partner desires to sell, assign or otherwise
transfer its Partnership interest to a person or entity (other than an Affiliate
of the General Partner), it shall not sell, assign or otherwise transfer its
Partnership interest to any person, or other entity not then a Partner (other
than an Affiliate of the General Partner), until such Partnership interest is
first offered for sale to the Limited Partner. Such first refusal offer to the
Limited Partner shall be made in writing setting forth all of the terms and
conditions on which the General Partner proposes to sell its Partnership
interest (whether or not the General Partner has received a bona fide offer for
the purchase of its Partnership interest) and shall state the name of the
prospective purchasers, if any, who have indicated a willingness to purchase on
such terms and conditions. Said terms and conditions shall include at a minimum
the purchase price, timing, method of payment and financing terms, if any. The
Limited Partner shall then have a first refusal right for fifteen (15) days
after the date of the receipt of such first refusal offer to elect to acquire
the General Partner's Partnership interest upon the same terms and conditions as
those set forth in such first refusal offer.
(b) For the purposes of this Section 5.11, the General Partner
may grant to a prospective purchaser an option or contingent contract to
purchase its Partnership interest without offering to grant the Limited Partner
a similar option or contingent contract and without making a first refusal offer
pursuant to this Section 5.11 to the Limited Partner, but the Partnership
interest may not be sold to such prospective purchaser, pursuant to the exercise
of such option or contingent contract or otherwise unless such Partnership
interest is first offered to the Limited Partner pursuant to a first refusal
offer under this Section 5.11.
(c) If the Limited Partner shall not exercise the right to
acquire the General Partner's Partnership interest by notifying the General
Partner of its election to do so within fifteen (15) days of such offer,
accepting a conveyance of the Partnership interest and making payment therefor
within such period on the above terms, the General Partner may, within a period
of six (6) months from the date of such first refusal offer, either (i) dispose
of the Partnership interest upon terms and conditions no more favorable to the
prospective purchaser than those set forth in such first refusal offer, or (ii)
arrange for the sale of both its interest and the Limited Partner's interest in
the Partnership on such terms and conditions as it deems acceptable, and the
Limited Partner hereby agrees to dispose of its entire Partnership interest to
the prospective purchaser on such terms and conditions. The proceeds from such
sale of all of the Partnership interest shall be distributed in accordance with
Article 12 hereof.
(d) If during the six (6) month period from the date of such
first refusal offer the General Partner receives an offer for its Partnership
interest from a prospective purchaser on terms less favorable to the General
Partner than the terms specified in such first refusal offer, prior to accepting
such offer the General Partner shall give notice (the "Subsequent Offer") to the
Limited Partner and specify that the General Partner is willing to sell its
Partnership interest on such terms. The Limited Partner shall have the right
for a period of fifteen (15) days after the Subsequent Offer to elect to
purchase the Partnership interest of the General Partner, on the terms less
favorable to the General Partner than the terms specified in the Subsequent
Offer. If the Limited Partner shall not exercise the right to acquire the
General Partner's Partnership interest by notifying the General Partner of its
election to do so within fifteen (15) days thereafter, accepting a conveyance of
the Partnership interest and making payment therefor within such period on the
terms set forth in the Subsequent Offer, such Partnership interest may be
disposed of by the General Partner to a prospective purchaser upon terms and
conditions no more favorable to such prospective purchaser than those set forth
in the Subsequent Offer. The General Partner may reinstitute the procedure set
forth in this Section 5.11(d) if no disposition is made within the six (6) month
period.
(e) In the event that the General Partner, pursuant to this
Section 5.11, transfers all or a portion of its interest in the Partnership as a
general partner of the Partnership to another Person (a "Transferee"), the
admission to the Partnership of the Transferee as a successor or additional
General Partner, as the case may be, shall be conditioned upon the receipt by
the General Partner of the following: (1) the successor or additional General
Partner's agreement in writing to be bound by all of the terms of this
Agreement, including acting as a General Partner hereunder, (2) such other
documents or instruments as may be required in order to effect its admission as
a General Partner under this Agreement and applicable law, and (3) the
Transferee expressly assumes all of the obligations of this Agreement, including
without limitation, those in this Section 5.11. In the event the transfer by
the General Partner is of its entire interest in the Partnership as a general
partner of the Partnership, upon satisfaction of the conditions set forth in
items (1), (2) and (3) above, the admission of the Transferee to the Partnership
as a successor General Partner shall occur, and for all purposes shall be deemed
to have occurred, immediately prior to the transfer by the General Partner of
its interest in the Partnership. Upon a transfer by the General Partner of its
entire interest in the Partnership, the General Partner shall cease to be a
general partner of the Partnership and the successor General Partner shall
continue, and is hereby authorized to continue, the business of the Partnership
without dissolution. In the event that the General Partner, pursuant to this
Section 5.11, transfers a portion of its interest in the Partnership as a
general partner of the Partnership to a Transferee, the admission of the
Transferee to the Partnership as an additional General Partner shall occur upon
satisfaction of the conditions set forth in items (1), (2) and (3) above. In
accordance with the Act, upon the admission of a successor or additional General
Partner to the Partnership as set forth above, an appropriate amendment to the
Certificate of Limited Partnership of the Partnership shall be filed with the
Secretary of State of the State of Delaware.
(f) For purposes of this Section, such terms and conditions of
the prospective purchaser's offer will be considered more favorable to such
prospective purchaser if the present value of the purchase price in such offer
(discounted at a rate of fifteen percent (15%)) is less than the present value
of the purchase price in such first refusal offer.
5.12 Right to Own Limited Partnership Interest. Nothing herein shall
-----------------------------------------
prevent the General Partner or an officer, shareholder, director or Affiliate of
the General Partner from owning any limited partner interest herein, and to the
extent of such ownership, said officer, shareholder or director shall not be
deemed to be a General Partner and shall be considered as a Limited Partner and
shall be governed by all of the rights, privileges, duties and responsibilities
attendant upon said limited partner interest.
ARTICLE 6
---------
LIMITED PARTNER
---------------
6.01 Limitation on Liability of Limited Partners. The Limited Partner
-------------------------------------------
shall not be liable for the debts, liabilities, contracts or any other
obligations of the Partnership in excess of its contribution to the capital of
the Partnership (which has not been previously returned to it), its obligations
to make other payments provided for in this Agreement, and its share of the
Partnership's assets and undistributed profits (subject to the obligation of a
Limited Partner to repay any funds wrongfully distributed to it). The Limited
Partner shall be liable to make its Capital Contributions as and when required
pursuant to Section 3.01(c) hereof or otherwise under the terms of this
Agreement, and to contribute any negative balance in its Capital Account when
and as required hereby. The Limited Partner shall not be required to lend any
funds to the Partnership.
6.02 Management of the Partnership. The Limited Partner shall not
-----------------------------
take part in the management or control of the business of the Partnership, nor
transact any business in the name of the Partnership, nor shall have any right
or authority to act for or bind the Partnership, except as shall be expressly
required pursuant to this Agreement.
6.03 Power of Attorney. The Limited Partner, by execution hereof,
-----------------
hereby irrevocably constitutes and appoints the General Partner with full power
of substitution as its true and lawful attorney-in-fact, in its name, place and
stead to make, execute, sign, acknowledge, swear to, record and file, on behalf
of the Limited Partner and on behalf of the Partnership, the following:
(a) the Partnership's Certificate of Limited Partnership,
a certificate of doing business under an assumed name, and any other
certificates or instruments which may be required to be filed by the
Partnership or the Partners under applicable law;
(b) a certificate of cancellation of the Partnership and
such other instruments or documents as may be deemed necessary or desirable
by said attorney upon the dissolution and winding up of the affairs of the
Partnership;
(c) any and all amendments of the instruments described
in Subsections (a) and (b) above and amendments to this Agreement, provided
such amendments are either required by law to be filed, permitted to be
made by the General Partner pursuant to Section 10.06 hereof or have been
authorized by the Partners;
(d) any and all notes, security agreements, mortgages and
UCC-1 financing statements, as may be necessary to grant and perfect a
security interest in the Defaulting Partner's Partnership interest to
secure any Default Loan made by a Nondefaulting Partner pursuant to Section
8.04(a) hereof; and
(e) any and all such other instruments as may be deemed
necessary or desirable by said attorney to carry out fully the provisions
hereof in accordance with its terms.
The foregoing appointments and grants of authority (i) are special powers
of attorney, coupled with an interest, (ii) shall survive the death, bankruptcy,
dissolution, or adjudication of incompetency of the Limited Partner and (iii)
may be exercised by the General Partner for the Limited Partner by a facsimile
signature of the General Partner. Pursuant to the power of attorney granted by
the Limited Partner to the General Partner as hereinabove described, the Limited
Partner authorizes said attorney to take any further action which said attorney
shall consider necessary or convenient in connection with any of the foregoing,
hereby giving said attorney full power and authority to do and perform each and
every act and thing whatsoever requisite and necessary to be done in and about
the foregoing as fully as the Limited Partner might or could do if personally
present, and hereby ratifying and confirming all that said attorney shall
lawfully do or cause to be done by virtue hereof.
6.04 Representations
---------------
(a) No registration statement relating to the limited
partnership interests in the Partnership or otherwise, has been or shall be
filed with the United States Securities and Exchange Commission under the
federal Securities Act of 1933, as amended, or the securities laws of any state.
(b) The Limited Partner represents and warrants to the General
Partner and to the Partnership that:
(i) The Limited Partner has the power and authority to
execute and comply with the terms and provisions hereof;
(ii) The Limited Partner's Partnership interest has been
or will be acquired solely by and for the account of the Limited Partner
for investment purposes only and is not being purchased for, or with a view
to, subdivision, fractionalization, resale or distribution; except as
provided in this Agreement, the Limited Partner has no contract,
undertaking, agreement or arrangement with any person to sell, transfer or
pledge to such person or anyone else the Limited Partner's Partnership
interest (or any part thereof); and the Limited Partner has no present
plans or intentions to enter into any such contract, undertaking or
arrangement; and agrees not to sell, hypothecate or otherwise dispose of
all or any part of its partnership interest;
(iii) The Limited Partner's partnership interest has not
and will not be registered under the federal Securities Act of 1933, as
amended, and cannot be sold or transferred without compliance with the
registration provisions of said Act or compliance with exemptions, if any,
available thereunder. The Limited Partner understands that neither the
Partnership nor its General Partner have any obligation or intention to
register the partnership interests under any federal or state securities
act or law, or to file the reports to make public the information required
by Rule 144 under the Securities Act of 1933, as amended;
(iv) The Limited Partner represents that: (A) the Limited
Partner has knowledge and experience in financial and business matters in
general, and in investments of the type made by the Partnership in
particular; (B) the Limited Partner is capable of evaluating the merits and
risks of an investment in the Partnership; (C) the Limited Partner's
financial condition is such that the Limited Partner has no need for
liquidity with respect to the Limited Partner's investment in the
Partnership to satisfy any existing or contemplated undertaking or
indebtedness; (D) the Limited Partner is able to bear the economic risk of
the Limited Partner's investment in the Partnership for an indefinite
period of time, including the risk of losing all of such investment, and
loss of such investment would not materially adversely affect the Limited
Partner; (E) the Limited Partner has either secured independent tax advice
with respect to the investment in the Partnership, upon which the Limited
Partner is solely relying, or the Limited Partner is sufficiently familiar
with the income taxation of partnerships that the Limited Partner has
deemed such independent advice unnecessary;
(v) The Limited Partner acknowledges that it has received
or has access to all material information and documents with respect to the
Partnership and has had an opportunity to ask questions and receive answers
thereto and to verify and clarify any information available to the General
Partner;
(vi) The Limited Partner has relied solely upon
independent investigation made by the Limited Partner, and not on any
statements, actions or representations of the General Partner or any
Affiliate of the General Partner, in making the decision to acquire the
Limited Partner's partnership interest; and
(vii) The Limited Partner acknowledges that: (A) no
federal or state agency has reviewed or passed upon the adequacy or
accuracy of the information set forth in the documents submitted to the
Limited Partner or made any finding or determination as to the fairness for
investment, or any recommendation or endorsement of an investment in the
Partnership; (B) there are restrictions on the transferability of the
Limited Partner's interest hereunder; (C) there will be no public market
for the Limited Partner's partnership interest, and, accordingly, it may
not be possible for the Limited Partner to liquidate its investment in the
Partnership; and (D) any anticipated federal or state income tax benefits
applicable to the Limited Partner's partnership interest may be lost
through changes in, or adverse interpretations of, existing laws and
regulations.
(viii) The Limited Partner is the sole owner of DPDC, and
DPDC and the Limited Partner, in connection with the investigation of DPDC
by the Illinois Gaming Board, have been found suitable by the Illinois
Gaming Board.
6.05 Restriction on Transfer of Limited Partnership Interest; Right of
-----------------------------------------------------------------
First Refusal
- -------------
(a) Notwithstanding anything to the contrary contained herein,
the Limited Partner may not sell, transfer or assign, in whole or in part, its
partnership interest without first obtaining the General Partner's prior written
consent, which consent may not be unreasonably withheld or denied.
(b) If the Limited Partner desires to sell, assign or otherwise
transfer its Partnership interest, it shall not sell, assign or otherwise
transfer its Partnership interest to any person, or other entity not then a
Partner, until such Partnership interest is first offered for sale to the
General Partner. Such first refusal offer to the General Partner shall be made
in writing setting forth all of the terms and conditions on which the Limited
Partner proposes to sell its Partnership interest (whether or not the Limited
Partner has received a bona fide offer for the purchase of its Partnership
interest) and shall state the name of the prospective purchasers, if any, who
have indicated a willingness to purchase on such terms and conditions. Said
terms and conditions shall include at a minimum the purchase price, timing,
method of payment and financing terms, if any. The General Partner shall then
have a first refusal right for fifteen (15) days after the date of the receipt
of such first refusal offer to elect to acquire the Limited Partner's
Partnership interest upon the same terms and conditions as those set forth in
such first refusal offer.
(c) For the purposes of this Section 6.05 and subject to the
provisions of Section 6.05(a) hereof, the Limited Partner may grant to a
prospective purchaser an option or contingent contract (which such option or
contingent contract expressly states that any sale thereunder is subject to the
first refusal offer under this Section) to purchase its Partnership interest
without offering to grant the General Partner a similar option or contingent
contract and without making a first refusal offer pursuant to this Section 6.05
to the General Partner, but the Partnership interest may not be sold to such
prospective purchaser, pursuant to the exercise of such option or contingent
contract or otherwise unless such Partnership interest is first offered to the
General Partner pursuant to a first refusal offer under this Section 6.05.
(d) If the General Partner shall not exercise the right to
acquire the Limited Partner's Partnership interest by notifying the Limited
Partner of its election to do so within fifteen (15) days of such offer,
accepting a conveyance of the Partnership interest and making payment therefor
within such period on the above terms, such Partnership interest may and subject
to the provisions of Section 6.05(a) hereof, within a period of six (6) months
from the date of such first refusal offer, be disposed of by the Limited Partner
upon terms and conditions no more favorable to the prospective purchaser than
those set forth in such first refusal offer, but not otherwise.
(e) If during the six (6) month period from the date of such
first refusal offer the Limited Partner receives an offer for its Partnership
interest from a prospective purchaser on terms less favorable to the Limited
Partner than the terms specified in such first refusal offer, prior to accepting
such offer the Limited Partner shall give notice (the "Subsequent Offer") to the
General Partner and specify that the Limited Partner is willing to sell its
Partnership interest on such terms. The General Partner shall have the right
for a period of fifteen (15) days after the Subsequent Offer to elect to
purchase the Partnership interest of the Limited Partner, on the terms specified
in the Subsequent Offer. If the General Partner shall not exercise the right to
acquire the Limited Partner's Partnership interest by notifying the Limited
Partner of its election to do so within fifteen (15) days thereafter, accepting
a conveyance of the Partnership interest and making payment therefor within such
period on the terms set forth in the Subsequent Offer, such Partnership interest
may be disposed of by the Limited Partner to a prospective purchaser upon terms
and conditions no more favorable to the purchaser than those set forth in the
Subsequent Offer. The Limited Partner may reinstitute the procedure set forth
in this Section 6.05(e) if no disposition is made within the six (6) month
period.
(f) If, in accordance with this Section, the General Partner
approves a transfer by the Limited Partner of a portion of its Partnership
interest to another Person (an "Assignee"), such Assignee shall be admitted to
the Partnership as a limited partner of the Partnership upon (1) its execution
of a counterpart to this Agreement, (2) when such Assignee is listed as a
Limited Partner of the Partnership on the books and records of the Partnership,
and (3) the Assignee expressly assumes all of the obligations of this Agreement,
including without limitation, those contained in this Section 6.05. In the
event the transfer by the Limited Partner is of its entire interest in the
Partnership as a limited partner of the Partnership, upon satisfaction of
conditions (1), (2) and (3) above, the admission of the Assignee to the
Partnership as a successor Limited Partner shall occur, and for all purposes
shall be deemed to have occurred immediately prior to the transfer by the
Limited Partner of its interest in the Partnership.
(g) For purposes of this Section, such terms and conditions of
the prospective purchaser's offer will be considered more favorable to such
prospective purchaser if the present value of the purchase price in such offer
(discounted at a rate of fifteen percent (15%)) is less than the present value
of the purchase price in such first refusal offer.
6.06 Disposition if No Gaming Qualification. Affiliates of the
--------------------------------------
General Partner own and operate or will own and operate casino gaming facilities
in the states of Nevada and New Jersey, and other jurisdictions, which are
subject to extensive state and local regulation. The Partnership and the
Partners will be subject to gaming laws and regulations in the State of
Illinois. If in the sole judgment and discretion of the General Partner
(without regard for the interests of the Partnership or the Limited Partner) the
status of the Limited Partner or any Affiliate of the Limited Partner as they
may be associated with the General Partner may result in a disciplinary action
or the loss of or inability to reinstate any registration, application or
license or any rights or entitlements held by the Partnership, the General
Partner or any Affiliate of the General Partner under any state or local gaming
laws, or if the Limited Partner or any Affiliate of the Limited Partner fails to
remain qualified in Illinois or is required to qualify or be found suitable
under any other state or local gaming laws under which the General Partner, the
Partnership or any Affiliate of the General Partner is licensed, registered,
qualified or found suitable, and the Limited Partner or any Affiliate of the
Limited Partner does not so qualify (at its own expense), then (i) the General
Partner shall deliver written notice of the foregoing to the Limited Partner,
and (ii) if in the sole judgment and discretion of the General Partner (without
regard for the interests of the Partnership or the Limited Partner) the
foregoing is either not curable within ten (10) days or less from the date of
such notice, or if curable within such time period the Limited Partner does not
effect such cure within such time period, then the Limited Partner shall be
deemed to be in default in accordance with paragraph (e) of Article 7 hereof and
the General Partner shall be deemed the Nondefaulting Partner under Section 8.01
hereof and be entitled, in its sole discretion (without regard for the interest
of the Partnership or the Limited Partner), to exercise the remedies in Section
8.01(b) hereof or Section 8.01(c) hereof (subject to applicable gaming
regulations); provided, however, that for purposes of any exercise of remedies
-------- -------
pursuant to this Section 6.06 the Appraisal Buyout Price (as defined in Section
8.05(b) hereof) shall be calculated by using One Hundred percent (100%) of the
Appraised Value (as defined in Section 9.03 hereof), and shall be subject to
applicable gaming regulations.
6.07 Effect of Bankruptcy, Death or Incompetency of Limited Partner.
--------------------------------------------------------------
The Limited Partner shall have no right to withdraw, retire or resign from the
Partnership. The bankruptcy, dissolution, death or adjudication of incompetency
of the Limited Partner shall not in and of itself cause the termination or
dissolution of the Partnership, and the business of the Partnership shall
continue. Upon any such occurrence, the trustee, receiver, executor,
administrator, committee, guardian or conservator of the Limited Partner shall
have all the rights of the Limited Partner for the purpose of settling or
managing their estate or property.
6.08 Notices to Limited Partner. Prior to entering into any of the
--------------------------
following transactions, the General Partner agrees to give the Limited Partner
written notice of the following:
(a) execution by the Partnership of any contract, including
without limitation any contract to borrow money, which by its express terms
commits the Partnership to pay an amount in excess of One Million Dollars
($1,000,000);
(b) entering into a binding agreement for any capital
expenditure item which agreement by its express terms commits the Partnership to
pay an amount in excess of One Million Dollars ($1,000,000);
(c) prior to the commencement of each fiscal year, a copy of
the Partnership's annual budget for the coming fiscal year; and
(d) proposed action or undertaking by the Partnership which
shall require an additional Capital Contribution by the Limited Partner in
excess of One Million Dollars ($1,000,000).
The General Partner further agrees that within fifteen (15) days of such
notice the Limited Partner shall have the opportunity to call a meeting of the
Partners in accordance with Section 10.05 hereof to discuss any such proposed
action or undertaking of the Partnership. The Limited Partner acknowledges and
agrees that the right of the Limited Partner to call such meeting and discuss
the proposed action under this Section 6.08(d) shall in no way be construed as
granting the Limited Partner any right to consent, approve or disapprove of the
contemplated action or undertaking by the Partnership set forth in the notice
provided for in this Section 6.08(d). The Limited Partner acknowledges and
agrees that the General Partner, after such meeting with the Limited Partner,
shall in its sole discretion (as set forth in Section 5.07(d)) decide what
action shall be taken.
ARTICLE 7
---------
EVENTS OF DEFAULT
-----------------
It shall be an event of default (an "Event of Default") if any one or more
of the following events shall occur:
(a) the failure of either Partner to make any Capital
Contributions when and as required by Section 3.01(c) hereof or otherwise
hereunder;
(b) the failure of either Partner to perform any of its
obligations under this Agreement or the breach by either Partner of any of the
other terms, conditions or covenants of this Agreement or the failure of any
representation or warranty in this Agreement to be true in all material respects
and a continuation of such failure or breach for more than thirty (30) days
after written notice by the Nondefaulting Partner to the Defaulting Partner that
such Defaulting Partner has failed to perform any of its obligations under, or
has breached, this Agreement; provided, that no Event of Default shall exist
hereunder if cure of such default has been commenced within such thirty (30)
days and is thereafter diligently prosecuted;
(c) a case or proceeding shall be commenced by either Partner
seeking relief under any provision or chapter of the federal Bankruptcy Code or
any other federal or state law relating to insolvency, bankruptcy or
reorganization; an adjudication that either Partner is insolvent or bankrupt;
the entry of an order for relief under the federal Bankruptcy Code with respect
to either Partner; the filing of any such petition or the commencement of any
such case or proceeding against either Partner, unless such petition and the
case or proceeding initiated thereby are dismissed within ninety (90) days from
the date of such filing; the filing of an answer by either Partner admitting the
allegations of any such petition; the appointment of a trustee, receiver or
custodian for all or substantially all of the assets of either Partner unless
such appointment is vacated or dismissed within ninety (90) days from the date
of such appointment but not less than five (5) days before the proposed sale of
any assets of either Partner; the insolvency of either Partner or the execution
by either Partner of a general assignment for the benefit of creditors; the
convening by either Partner of a meeting of its creditors, or any class thereof,
for purposes of effecting a moratorium upon or extension or composition of its
debts; the failure of either Partner to pay its debts as they mature, or the
failure generally of either Partner to pay its debts as they become due; the
levy, attachment, execution or other seizure of the Project or other assets of
the Partner or all or substantially all of the assets or the Partner's
Partnership interest where such seizure is not discharged within thirty (30)
days thereafter; or the admission by either Partner in writing of its inability
to pay its debts as they mature or that it is generally not paying its debts as
they become due;
(d) the failure of either Partner to make payment on any
purchase obligation or otherwise close any purchase arising under Section 8.03
hereof for a period of five (5) days after notice from the Partner to whom
payment was due or to whom the interest in the Partnership is to be transferred.
(e) after notice to the Limited Partner and expiration of the
cure period (if applicable) provided in Section 6.06 hereof, the failure of the
Limited Partner to remain qualified under the Illinois gaming laws and
regulations to own and operate a casino gaming facility or the finding that the
Limited Partner is unsuitable under any other state or local gaming laws under
which the General Partner, the Partnership or any Affiliates of the General
Partner are licensed, registered and qualified, or if, in the sole judgment and
discretion of the General Partner (without regard for the interests of the
Partnership or the Limited Partner), the status of the Limited Partner or any
Affiliate of the Limited Partner as they may be associated with the General
Partner might result in a disciplinary action or the loss of or inability to
reinstate any registration, application or license or any rights or entitlements
held by the Partnership, the General Partner or an Affiliate of the General
Partner.
(f) the failure of the Limited Partner to pay or perform under
the Initial Capital Loan Documents.
(g) the death, incapacity or insanity of the Limited Partner.
ARTICLE 8
---------
REMEDIES
--------
8.01 Remedies. In accordance with Section 8.02 hereof, upon the
--------
occurrence of any Event of Default with respect to a Partner (the "Defaulting
Partner") which shall not have been cured prior to an election by the other
Partner (the "Nondefaulting Partner") under this Section 8.01, the Nondefaulting
Partner may elect to do one or more of the following by written notice of such
election to the Defaulting Partner:
(a) advance money to the Defaulting Partner and exercise the
rights as provided in Section 8.04 hereof;
(b) wind up the affairs of, and dissolve, the Partnership, or
sell the Property and any other assets of the Partnership; as provided in
Section 12.01 hereof, with the proceeds of such liquidation to be applied as
provided in Section 12.03 hereof;
(c) purchase the Defaulting Partner's Partnership interest as
provided in Section 8.05 hereof;
(d) exercise the buy/sell as provided in Section 8.03 hereof;
(e) enforce any covenant by the Defaulting Partner to advance
money (including, without limitation, any contributions required pursuant to
Section 3.01(c) hereof and the contribution of a negative Capital Account
balance) or to take or forbear from any other action hereunder;
(f) pursue any other remedy permitted at law or in equity;
8.02 Choice of Remedies. The election to pursue any other remedies at
------------------
law or in equity pursuant to Section 8.01 hereof may be made alone or in
combination with any other remedies. Nothing contained herein shall limit any
rights to sue a Defaulting Partner for amounts owing to the Partnership
hereunder, or for any other breach of this Agreement.
8.03 Buy and Sell
------------
(a) If an Event of Default occurs, the Nondefaulting Partner
(the "Offeror") may by written notice establish a gross sales price for the
Partnership ("Partnership Price"), which shall be the price to be used in the
calculation procedures set forth in Section 8.03(b) hereof. Any offer made
pursuant to this Section 8.03(a) shall be the "Offer" and any notice of an Offer
shall be a "Notice." The Offeror shall prepare the Notice which shall (i) state
the Partnership Price, and (ii) summarize in reasonable detail the calculations
described in Section 8.03(b) hereof which determine the terms on which the
Offeror would be willing either (x) to purchase from the other Partner (the
"Offeree") the Offeree's partnership interest or (y) to sell to the Offeree the
Offeror's partnership interest, and (iii) state the liabilities to be assumed
pursuant to Section 8.03(d) hereof. If the Offeror shall become a Defaulting
Partner at any time after making an Offer, the buy/sell initiated pursuant to
such Offer shall terminate.
(b) The prices payable to the Offeror or Offeree, as the case
may be, shall be determined as follows: (i) first, the Offeror shall designate a
Partnership Price as the basis for the further calculations to be made pursuant
to this Section 8.03(b); (ii) second, the Partnership Price shall be treated as
hypothetical proceeds of liquidation pursuant to Section 12.03 hereof, and the
portions of such hypothetical proceeds which would be respectively distributed
to each Partner under Section 12.03 hereof (assuming that all debts and
liabilities of the Partnership to third parties shall be paid from such
hypothetical proceeds or assumed by the purchasing Partner) shall be calculated,
and (iii) third, (a) the portion so calculated of such hypothetical proceeds
that the Offeror would receive for its Partnership interest (including or less
any amounts as are payable to such Partner in respect of Default Loans pursuant
to Section 8.04(d) hereof) shall be defined as the Offeror's "Net Partnership
Price", and (b) the portion so calculated of such hypothetical proceeds that the
Offeree would receive for its interest in the Partnership (including or less any
amounts as are payable to such Partner in respect of Default Loans pursuant to
Section 8.04(d) hereof) shall be defined as the Offeree's "Net Partnership
Price."
(c) From the date the Notice is given, the Offeree shall have
thirty (30) days to notify the Offeror of its election either to purchase the
Offeror's partnership interest or sell its own partnership interest at the
prices so offered.
(1) If the Offeree determines to purchase the Offeror's
partnership interest, the Offeree shall serve written notice of such election
specifying a closing date for such purchase not more than ninety (90) days from
the date of such notice of election (including the escrow period) within which
it must purchase the partnership interest of the Offeror at the Offeror's Net
Partnership Price as calculated above.
(2) If the Offeree determines to sell its partnership
interest, it shall give written notice of such election to the Offeror, who
shall, within ten (10) days of the Offeree's election, designate a closing date
for such sale not more than ninety (90) days thereafter and shall purchase the
Offeree's partnership interest at the Offeree's Net Partnership Price as
calculated above.
(3) If the Offeree does not elect either to buy or sell
within the thirty (30) day period referred to above, the Offeror may elect to
buy the Offeree's partnership interest and the Offeror shall have the ten (10)
days following expiration of such thirty (30) day period in which to designate a
closing date for such purchase not more than one hundred twenty (120) days from
the date of such deemed election.
(d) The closing of the purchase and sale contemplated by
Section 8.03(c) hereof shall occur at a specific time and place designated by
the buying Partner and at the time for closing designated in accordance with
Section 8.03(c) hereof. The Partners understand and agree that, under certain
circumstances, the Net Partnership Price applicable to a Partner may be less
than zero (0) and require a reimbursement from the selling Partner to the buying
Partner rather than a payment from the buying Partner to the selling Partner
(as, for example, in the case where the selling Partner has a Capital Account
with a negative balance). The Net Partnership Price for any purchase and sale
pursuant to Section 8.03(c) hereof shall be paid in cash at the closing. At the
closing of the purchase of a partnership interest pursuant to this Section
8.03(d), the Partnership and the buying Partner shall, and do hereby, save,
protect, defend, indemnify, and hold harmless the selling Partner from all debts
and liabilities owed by the Partnership to third parties. Costs of any sale of
a partnership interest, including recording fees, escrow costs, if any, and
other fees (but not attorneys' fees) shall be divided equally between the
Partners. A Partner selling its interest in the Partnership pursuant to Section
8.03(c) hereof shall deliver all appropriate documents of transfer at closing
and shall convey its Partnership interest to the buying Partner, or its nominee,
free and clear of all liens, claims, encumbrances or other charges of any kind
whatsoever. In the event the Partnership interest is conveyed to a nominee of
the buying Partner, the admission of such nominee to the Partnership as a
successor to the selling Partner shall occur, and for all purposes shall be
deemed to have occurred immediately prior to the transfer by the selling Partner
of its Partnership interest. From and after the closing of any such sale of a
partnership interest, the selling Partner shall have no further interest in the
assets, profits or management of the Partnership and shall not be responsible
for any of its obligations or losses except for uninsured tort claims by third
parties arising out of incidents which occurred prior to the closing, and all
obligations of the Partnership to the selling Partner, including all capital
accounts, loans and advances, shall be deemed satisfied and discharged.
(e) If the buying Partner shall fail to close a purchase
pursuant to Section 8.03(d) hereof, the selling Partner may, in addition to any
other rights hereunder, elect to purchase the buying Partner's partnership
interest at the Net Partnership Price which would otherwise have been payable to
the buying Partner pursuant to Section 8.03(b) hereof.
8.04 Advances; Buy-Down
------------------
(a) If the Defaulting Partner shall have failed to make any
Capital Contribution or to pay any other amount as required under this Agree-
ment, the Nondefaulting Partner may advance to the Partnership on behalf of the
Defaulting Partner the amount of such delinquency, with each such advance to be
treated as a loan by the Nondefaulting Partner to the Defaulting Partner (a
"Default Loan"). Each separate advance by a Nondefaulting Partner shall be a
separate Default Loan. The amount of each such advance shall be credited to the
Defaulting Partner's Capital Account. Each Default Loan shall be (i) secured by
the Defaulting Partner's interest in the Partnership, (ii) payable on demand,
and (iii) bear interest, payable monthly, at a rate equal to the lower of (x)
the then Prime Rate plus three percent (3%) or (y) the maximum rate permitted
under applicable law, from the date of such Default Loan to the earlier of the
date of payment in full by the Defaulting Partner or the date of the Nonde-
faulting Partner's exercise of its rights pursuant to Sections 8.04(b) or
8.04(c) hereof. The Defaulting Partner hereby grants the Nondefaulting Partner
a security interest in its Partnership interest and all proceeds thereof to
secure any Default Loans made by the Nondefaulting Partner to the Defaulting
Partner. The Nondefaulting Partner shall give written notice to the Defaulting
Partner of the making of any such Default Loan, and the Defaulting Partner shall
have one hundred twenty (120) days thereafter within which to repay the
Nondefaulting Partner the amount of such Default Loan. Any interest paid on
such Default Loan shall be paid directly to the Nondefaulting Partner and shall
not affect either the Nondefaulting Partner's or the Defaulting Partner's
Capital Account. Upon the payment in full of the principal of and all accrued
interest on a Default Loan within such one hundred twenty (120) day period or
pursuant to Sections 8.04(b) or 8.04(c) hereof, the Defaulting Partner's
default, with respect to which a Default Loan was made, shall be deemed cured.
The making of a Default Loan shall not be deemed to cure a default with respect
to which a Default Loan has been made, and such cure may be made only in the
manner set forth in the immediately preceding sentence or in Sections 8.04(b),
8.04(c) and 8.04(d) hereof. Any Default Loan made pursuant hereto shall be made
to the Limited Partner, and guaranteed by the spouse of the Limited Partner
pursuant to the Guarantee attached hereto, with full recourse to the assets of
the Limited Partner and the spouse of the Limited Partner.
(b) If the Defaulting Partner fails to repay the Nondefaulting
Partner with respect to any one or more Default Loans within the one hundred
twenty (120) day period referred to in Section 8.04(a) hereof, the Nondefaulting
Partner may, at any time after the expiration of such one hundred twenty (120)
day period and before the repayment of such Default Loan or Default Loans by the
Defaulting Partner (including a repayment pursuant to Section 8.04(c) hereof),
elect, by one hundred twenty (120) days prior written notice (the "Conversion
Notice") with respect to any one or more Default Loans to the Defaulting
Partner, to increase the Nondefaulting Partner's Percentage Share and decrease
the Defaulting Partner's Percentage Share as of the date of and immediately
following the date thirty (30) days following the Conversion Notice. If a
Defaulting Partner has not repaid the Default Loan or Default Loans specified in
the Conversion Notice within said thirty (30) days, the Nondefaulting Partner
may elect to increase its Percentage Share (but not to exceed One Hundred
percent (100%)) to equal a percentage derived from a fraction the numerator of
which equals the Adjusted Capital Contribution (as defined below) of the
Nondefaulting Partner and the denominator of which equals the aggregate sum of
both Partners' Capital Contributions. The Defaulting Partner's Percentage Share
shall be correspondingly decreased so that it shall be equal to One Hundred
percent (100%) minus the Nondefaulting Partner's Percentage Share as increased
in accordance with the preceding sentence. "Adjusted Capital Contribution"
shall mean the sum of all Capital Contributions, not including the Contribution
representing the Default Loan, actually made by the Nondefaulting Partner as of
the time of the recalculation plus an amount equal to One Hundred and Twenty
percent (120%) of the sum of all Default Loans which the Nondefaulting Partner
has made to the Defaulting Partner with respect to which such adjustments were
made. The parties acknowledge that in the event this remedy is exercised,
additional Capital Contributions will be of critical value to the Partnership,
and the parties further acknowledge that such value is not readily ascertainable
as of the date hereof and a reasonable estimate of such value is achieved by the
formula contained herein. Such formula for the "buy-down" reflects such
estimate of the parties, and is not intended to be a penalty. Upon any such
election, the Defaulting Partner's default, with respect to which the Default
Loan or Default Loans specified in the Conversion Notice was made, shall be
deemed cured, the Nondefaulting Partner's advance pursuant to 8.04(a) hereof
with respect to which such Default Loan or Default Loans was made shall be added
to the Nondefaulting Partner's Capital Account, and the amount of such advance
shall be deducted from the Defaulting Partner's Capital Account. Upon such
recalculations of the Partners' Percentage Shares and the corresponding
adjustments of the Partners' respective Percentage Share, the default associated
with the Default Loan with respect to which such adjustments were made shall be
deemed cured, to the extent such Default Loan made by the Nondefaulting Partner,
as of the date of such adjustments.
(c) Notwithstanding anything to the contrary contained in
Section 8.04 (b) hereof, in the event that the Percentage Share is adjusted as
set forth in Section 8.04(b) hereof, and the Defaulting Partner's Percentage
Share, as readjusted, is equal to zero (0), then the General Partner shall have
the right (but not the obligation), in its sole discretion, to either (i) admit
to the Partnership as an additional limited partner of the Partnership a nominee
of the General Partner, and to deem the Limited Partner to have transferred its
entire interest in the Partnership to such nominee (instead of increasing the
General Partner's Percentage Share by such amount), whereupon the Limited
Partner will cease to be a limited partner of and to have any interest in the
Partnership, or (ii) take all steps necessary to dissolve and wind up the
affairs of the Partnership, and to cause all assets to be liquidated and the net
proceeds therefrom to be distributed solely to the General Partner, with the
Limited Partner having no right to receive any such Distribution. The General
Partner is expressly authorized to make any filings or take any actions on
behalf of the Limited Partner or the Partnership to effectuate the provisions of
this Section 8.04(c).
(d) At any time when any Default Loan shall be outstanding, all
distributions of cash pursuant to Article 4 or Article 12 hereof from and after
the making of such Default Loan to which the Defaulting Partner would otherwise
be entitled shall be paid to the Nondefaulting Partner to be applied first
against interest and then against the principal of any Default Loans until the
repayment in full of all accrued interest and principal of any Default Loans or
an election or elections by the Nondefaulting Partner pursuant to Sections
8.04(b) or 8.04(c) hereof to increase the Nondefaulting Partner's Percentage
Share with respect to all Default Loans which have not previously been repaid in
full. Any such amounts so applied to accrued and unpaid interest and then to
principal on a Default Loan shall be deducted from the Defaulting Partner's
Capital Account. Upon request by the Nondefaulting Partner at any time from the
date of the Nondefaulting Partner's advance pursuant to Section 8.04(a) hereof
until any such Default Loan shall be repaid in full or converted to an increased
in Percentage Share, the Defaulting Partner (or, if the Defaulting Partner
should refuse to do so, the General Partner pursuant to the power of attorney
granted herein) shall execute any and all documents reasonably requested by the
Nondefaulting Partner, including, without limitation, notes, security agreements
and UCC-1 financing statements which notes, security agreements and UCC-1
financing statements shall be in the form provided by the Nondefaulting Partner
to the Defaulting Partner, as may be necessary to further assure and perfect a
security interest in the Defaulting Partner's Partnership interest to secure the
Nondefaulting Partner's Default Loan.
8.05 Appraisal Buy Out
-----------------
(a) Except as otherwise provided in this Article 8, upon the
occurrence of any Event of Default, the Nondefaulting Partner may give the
Defaulting Partner notice that it intends to exercise its right to buy the
Defaulting Partner's Partnership interest pursuant to this Section 8.05. Upon
such notice the fair market value of the assets of the Partnership shall be
determined pursuant to Article 9 hereof. The Nondefaulting Partner shall have
thirty (30) days from the earlier of the date on which the Partners agree upon a
fair market value pursuant to Section 9.01 hereof or the date on which the
Partners receive notice of the decision of the appraisers pursuant to Section
9.02 hereof (the "Valuation Date") in which to purchase the Defaulting Partner's
partnership interest by payment, in cash, to the Defaulting Partner of an amount
equal to the Appraisal Buyout Price, as determined pursuant to Section 8.05(b)
hereof.
(b) The "Appraisal Buyout Price" shall be an amount equal to
the amount derived from the following calculations: (i) first, ninety percent
(90%) of the Appraised Value (as established pursuant to Section 9.03 hereof) of
the assets of the Partnership shall be treated as hypothetical sales proceeds
for distribution under Section 12.03 hereof, and the portions of such hypothet-
ical sales proceeds which would be respectively distributed to each Partner
pursuant to Section 12.03 hereof (assuming that all debts and liabilities of the
Partnership to third parties shall be paid from such hypothetical sales proceeds
and that any gain or loss realized upon such hypothetical sale shall have been
allocated to the Partners' Capital Accounts) shall be calculated; and (ii)
second, the portion so calculated of such hypothetical sales proceeds that the
Defaulting Partner would receive, if any (including or less any amounts as are
payable to a Partner in respect of Default Loans pursuant to Section 8.04(d)
hereof), shall be the Appraisal Buyout Price.
(c) The closing of the Nondefaulting Partner's purchase of the
Defaulting Partner's partnership interest shall occur at a place and time
designated by the Nondefaulting Partner within thirty (30) days after the
Valuation Date and shall be paid in cash in the amount of the Appraisal Buyout
Price at the closing. At the closing of the purchase of a partnership interest
pursuant to this Section 8.05(c), the Partnership and the buying Partner shall,
and do hereby, save, protect, defend, indemnify and hold harmless the selling
Partner from all debts and liabilities owed by the Partnership to third
parties. The Partners understand and agree that under certain circumstances the
Appraisal Buyout Price may be less than zero and require a reimbursement from
the selling Partner to the buying Partner rather than a payment from the buying
Partner to the selling Partner (as, for example, in the case where the selling
Partner has a Capital Account with a negative balance).
(d) Costs of the transaction, including recording fees, escrow
costs, if any, and other fees (but not attorneys' fees) shall be borne by the
Defaulting Partner. The Defaulting Partner shall deliver all appropriate
documents of transfer at the closing and shall convey its entire partnership
interest to the Nondefaulting Partner, or the Nondefaulting Partner's nominee,
free and clear of all liens, claims, encumbrances, or other charges of any kind
whatsoever on its partnership interest. In the event the Partnership interest
is transferred to a nominee of the Nondefaulting Partner, the admission of such
nominee to the Partnership as a successor to the Defaulting Partner shall occur,
and for all purposes shall be deemed to have occurred immediately prior to the
transfer by the Defaulting Partner of its Partnership interest. From and after
the closing, the Defaulting Partner shall have no further interest in the
assets, profits or management of the Partnership and shall not be responsible
for any of its obligations or losses except uninsured tort claims by third
parties arising out of incidents which occurred prior to the closing, and all
obligations of the Partnership to the Defaulting Partner, including all capital
accounts, loans and advances, shall be satisfied and discharged.
8.06 Forbearance. Notwithstanding anything to the contrary contained in
-----------
Articles 8 hereof, the General Partner agrees to forebear from exercising any
remedies hereunder for failure of the Limited Partner to make any Capital
Contributions pursuant to Section 3.01(c) hereof (other than the initial Capital
Contribution of $6,480,000) until the date that is one hundred eighty (180) days
after the opening of the Project for business. Nothing herein shall restrict
the exercise of any remedies with respect to the initial Capital Contribution.
ARTICLE 9
---------
VALUATION AND APPRAISAL PROCEDURE
---------------------------------
9.01 Voluntary Appraisal. Upon an election under Section 8.05 hereof, the
-------------------
Partners shall promptly attempt, in good faith, to agree upon the fair market
value of all or a part of the assets of the Partnership.
9.02 Appraisal Panel
---------------
(a) If the Partners cannot agree within fifteen (15) days
following an election under Section 8.05 hereof by a Nondefaulting Partner upon
the fair market value of some or all of the assets of the Partnership, either
Partner shall have the right to call for an appraisal, and the electing Partner
may give the other Partner written notice that it intends to exercise its right
to call for an appraisal pursuant to this Section 9.02. Such notice shall
designate those assets of the Partnership the value of which has not been agreed
upon. The Partners shall thereupon attempt, in good faith, to agree upon a
single appraiser to appraise the assets of the Partnership. If the Partners
cannot agree upon a single appraiser within fifteen (15) days, either Partner
may give the other Partner a written notice calling for appointment of an
appraisal panel (the "Appraisal Panel"), and such notice shall designate a
disinterested person who is familiar with gaming operations and recognized by
those in the business of operating gaming facilities as one who could fairly and
accurately evaluate a gaming operation (the "First Appraiser") selected by the
electing Partner to serve on the Appraisal Panel provided for below.
(b) Upon receipt of such notice from the electing Partner, the
other Partner shall have seven (7) days in which to designate a disinterested
person who is familiar with gaming operations and recognized by those in the
business of operating gaming facilities as one who could fairly and accurately
evaluate a gaming operation (the "Second Appraiser") to serve on the Appraisal
Panel by serving notice of such designation on the electing Partner. If the
Second Appraiser is not so appointed and designated within or by the time so
specified, then the First Appraiser shall be the sole appraiser to determine the
value of the assets of the Partnership.
(c) Upon the designation, if any, of the Second Appraiser, the
First Appraiser and the Second Appraiser shall themselves appoint a third
disinterested person who is familiar with gaming operations and recognized by
those in the business of operating gaming facilities as one who could fairly and
accurately evaluate a gaming operation (the "Third Appraiser") within seven (7)
days. If the First Appraiser and the Second Appraiser are unable to agree upon
such appointment within said seven (7) days, then the electing Partner shall
request such appointment by the president or executive committee of the Chapter
of the American Institute of Real Estate Appraisers which includes the Property
within its jurisdiction.
(d) In the event of failure, refusal or inability of any
appraiser to act, a new appraiser shall be appointed in the stead thereof, which
appointment shall be made in the same manner as provided in this Section 9.02
for the appointment of such appraiser so failing, refusing or being unable to
act.
(e) The one or three appraisers appointed as the appraisal
panel pursuant to Section 9.02 hereof (the "Appraisal Panel") shall each
appraise the assets designated in the electing Partner's notice taking into
account appropriate indicators of the fair market value of such assets in a cash
sale between a willing buyer and seller not under undue duress and shall report
their findings to the Partners in writing. In the case of a three appraiser
Appraisal Panel, if one or more appraisers fail to deliver their reports within
sixty (60) days after the appointment of the Third Appraiser, the electing
Partner may dismiss the delinquent appraiser and a new appraiser may be
appointed in accordance with Section 9.02(d) above.
9.03 Appraised Value. The "Appraised Value" of the assets to be
---------------
appraised shall be equal to the mean of the two closest appraised values
reported by the Appraisal Panel; provided that if such values are equally
distributed, the "Appraised Value" of the assets to be appraised shall be equal
to the mean of the three appraised values reported by the Appraisal Panel.
9.04 Expenses. Except as otherwise provided herein, each Partner shall
--------
pay the fees and expenses of the appraiser appointed by such Partner, or in
whose stead, as above provided, such appraiser was appointed, and the fees and
expenses of the third appraiser, and all other expenses, if any, shall be borne
equally by both parties.
9.05 Qualification. To be qualified to be selected or designated as an
-------------
appraiser for purposes of this Article 9, such appraiser must demonstrate (a)
current good standing as a licensed appraiser, and (b) past appraising experi-
ence of at least five years, which experience shall include the appraisal of
riverboat or casino gaming operations.
ARTICLE 10
----------
ADMINISTRATION
--------------
10.01 Bank Accounts. All funds of the Partnership not otherwise invested
-------------
shall be deposited as the General Partner shall determine, and withdrawals shall
be made only on the signature of the General Partner or such other person or
persons as the General Partner may from time to time designate.
10.02 Title to Partnership Property. Title to the Property shall be held
-----------------------------
either in the name of the Partnership, or in the name of any bank or trust
company authorized to accept land trusts under the laws of the State of
Illinois, or as the General Partner may from time to time determine.
10.03 Books and Records. The books and records of the Partnership shall
-----------------
be maintained at the principal office of the Partnership and shall be available
for examination there by any Partner, or its duly authorized representatives, at
any and all reasonable times during regular business hours. The Partnership
shall maintain such books and records and provide such financial or other
statements as the General Partner in its sole discretion deems advisable. Such
financial statements may be prepared with or without audit in the sole
discretion of the General Partner. A current list of the full name and last
known address of each Partner, a copy of the Partnership's Certificate of
Limited Partnership and all amendments thereto and executed copies of all powers
of attorney pursuant to which such Certificate or any certificate of amendment
has been executed, copies of the Partnership's federal, state and local income
tax returns and reports, if any, for the three most recent years after the date
hereof, and copies of this Agreement, any amendments thereto, and of any
financial statements of the Partnership for the three most recent years after
the date hereof, and the Partnership's books, shall be maintained at the
principal office of the Partnership.
10.04 Notices. The address of each of the parties shall for all purposes
-------
be as set forth below unless otherwise changed by the applicable party by notice
to the other as provided herein.
General Partner:
Harrah's Illinois Corporation
c/o The Promus Companies Incorporated
1023 Cherry Road
Memphis, Tennessee 38117
Phone: (901) 762-8724
Fax: (901) 762-8777
Attn: Corporate Secretary
with a copy to:
The Promus Companies Incorporated
1023 Cherry Road
Memphis, Tennessee 38117
Phone: (901) 762-8724
Fax: (901) 762-8777
Attn: Stephen H. Brammell
The Limited Partner:
John Q. Hammons
300 John Q. Hammons Parkway
Suite 900
Springfield, Missouri 65806
Phone:________________
Fax:________________
with a copy to:
William J. Hart
Farrington & Curtis
750 North Jefferson
Springfield, Missouri 65802
Phone: (417) 862-6726
Fax: (417) 862-6948
All notices or other communications required or permitted to be given pursuant
to the provisions of this Agreement shall be in writing and shall be considered
as properly given if mailed by first class United States mail, postage prepaid,
registered or certified with return receipt requested, or by overnight courier
service, or by telecopier or facsimile, or by delivering the same in person to
the intended addressee, or by prepaid telegram. Notices hereunder in any manner
shall be effective only if and when received by the addressee.
10.05 Meetings. The General Partner may but shall not be obligated to
--------
call meetings of the Partnership from time to time, for the purpose of having a
vote by the Partners, or for any other purpose which the General Partner deems
appropriate. The Limited Partner may but shall not be obligated to call
meetings of the Partnership for the purposes set forth in Section 6.08(d)
hereof. Such meetings shall be called by notice duly given to each of the
Partners not less than five (5) days prior to the date of such meeting, or by
telephone or telegram communication, confirmed afterwards in writing. The
meetings shall be at the principal office of the Partnership, or at such other
place as is designated in writing by the General Partner and shall be at the
specific time designated in such notice.
10.06 Amendment. Amendments may be made to this Agreement from time to
---------
time by the General Partner without the consent of the Limited Partner;
provided, however, that without the consent of the Limited Partner, this
- -------- -------
Agreement may not be amended so as to (a) convert the Limited Partner's interest
into a General Partner's interest; (b) modify the limited liability of the
Limited Partner; (c) limit the rights of the Limited Partner hereunder; (d)
modify the allocation of taxable income and tax losses or the distribution
provisions contained herein so as adversely to affect the Limited Partner; or
(e) modify the capital account provisions contained herein so as adversely to
affect the Limited Partner.
ARTICLE 11
----------
FISCAL MATTERS
--------------
11.01 Fiscal Year. The fiscal year of the Partnership shall be the
-----------
calendar year, or such other period as may be determined by the General Partner,
as permitted by the Code.
11.02 Method of Accounting. The General Partner, in its sole discretion,
--------------------
may cause the Partnership to make or revoke the election regarding cash or
accrual method tax treatment referred to in Section 446 of the Code or any
similar provision enacted in lieu thereof. The expense of preparing the
Partnership's annual Federal and Illinois tax returns shall be borne by the
Partnership.
11.03 Accountants and Accounting Principles. The General Partner shall
-------------------------------------
keep, or cause to be kept, full and accurate books and records of all
transactions of the Partnership, which books and records shall be maintained in
accordance with generally accepted accounting principles. If the General
Partner elects to have the financial statements prepared with an audit, the
records and books of account shall be audited by a certified public accountant
selected by the General Partner as of the end of each fiscal year of the
Partnership and at any other time that the General Partner may deem it necessary
or desirable.
11.04 Reports. As soon as practicable after the end of each fiscal
-------
quarter of the Partnership, the General Partner shall deliver to each Partner
quarterly financial reports of the Partnership. As soon as practicable after
the end of each fiscal year of the Partnership, the General Partner shall
deliver to each Partner such information as is necessary for the preparation by
such Partner of its federal and state or other income tax returns, and such
other information as in the judgment of the General Partner shall be reasonably
necessary for the Partners to be advised of the results of the operations of the
Partnership. All elections and options available to the Partnership for federal
or state income tax purposes shall be taken or rejected by the Partnership in
the sole discretion of the General Partner.
11.05 Tax Returns; Tax Matters Partner. The General Partner shall
--------------------------------
prepare, or cause to be prepared, income tax returns for the Partnership and, in
connection therewith, make any available or necessary elections, including
elections with respect to the rates of depreciation of such assets. The General
Partner shall be the "tax matters partner" for purposes of Code Sections 6221
through 6232 and the Treasury Regulations promulgated thereunder. The General
Partner shall use its best efforts to prepare, or cause to be prepared, the
Partnership's income tax return for any fiscal year on or before April 1 of the
succeeding calendar year. The Limited Partner shall furnish to the General
Partner a copy of the Limited Partner's federal and state tax returns each year
concurrently with its filing of such tax returns.
11.06 Basis Election. Upon the transfer of an interest in the
--------------
Partnership, or a distribution of its property, the General Partner, on behalf
of the Partnership, may, in its sole discretion, elect to adjust the basis of
the partnership assets as allowed by Code Sections 734(b) and 743(b) or any
successors to said Sections. Except insofar as such an election pursuant to the
aforesaid Sections has been made with respect to the interest of any Partner,
the determination of taxable income, tax loss, or Cash Flow shall be made as
provided for in this Agreement. Each Partner agrees to furnish the Partnership
with all information necessary to give effect to such election.
11.07 Partnership Expenses. The Partnership shall pay or reimburse the
--------------------
General Partner for all expenses (which expenses may be billed directly to the
Partnership) of the Partnership which may include, but are not limited to: (a)
all costs of personnel employed by the Partnership and involved in the business
of the Partnership; (b) all costs of borrowed money, taxes and assessments on
the Property and other taxes applicable to the Partnership; (c) legal, audit,
accounting, brokerage and other fees; (d) printing and other expenses and taxes
incurred in connection with the issuance, distribution, transfer, registration
and recording of documents evidencing ownership of an interest in the
Partnership or in connection with the business of the Partnership; (e) fees and
expenses paid to independent contractors, mortgage bankers, brokers and
servicers, leasing agents, consultants, on-site managers, real estate brokers,
insurance brokers and other agents; (f) expenses in connection with the
disposition, replacement, alteration, repair, remodeling, refurbishment,
leasing, refinancing and operation of the Property or other Partnership assets
(including the costs and expenses of foreclosures, insurance premiums, real
estate brokerage and leasing commissions, and maintenance); (g) the cost of
insurance as required in connection with the business of the Partnership; (h)
expenses of organizing, revising, amending, converting, modifying or terminating
the Partnership; (i) expenses in connection with distributions made by the
Partnership to, and communications and bookkeeping and clerical work necessary
in maintaining relations with, the Partners, including the cost of printing and
mailing to such persons various notices or other communications; (j) expenses in
connection with preparing and mailing reports required to be furnished to the
Partners for investor, tax reporting or other purposes, or which reports the
General Partner deems the furnishing thereof to be in the best interests of the
Partnership; (k) costs of any accounting, statistical or bookkeeping equipment
necessary for the maintenance of the books and records of the Partnership, (l)
the cost of preparation and dissemination of the information, material and
documentation relating to a potential sale, refinancing or other disposition of
the Property or other Partnership assets, (m) the cost of any appraisals of the
Property as may be required by, financings, General Partner's internal
procedures or any regulatory reporting requirements on an annual or special
basis, and (n) any letter of credit fees or expenses incurred by the General
Partner or its Affiliates in connection with development of the Property.
11.08 Change in Control. If (i) the majority of the outstanding stock
-----------------
of the General Partner shall cease to be owned directly or indirectly by
Harrah's or The Promus Companies Incorporated, and (ii) within ninety (90) days
after the close of such transaction there is a change in the majority of the
directors on the board of the General Partner, then the Limited Partner shall
have the right to exercise the "Buy and Sell" remedy in accordance with Section
8.03 hereof by written notice within thirty (30) days from the date of notice to
the Limited Partner of the transfer of the majority of the outstanding stock of
the General Partner or the Promus Companies Incorporated and change in the
majority of the directors of the General Partner; provided, however, that if the
-------- -------
Limited Partner fails to deliver such written notice to the General Partner
within such thirty (30) day period, the Limited Partner shall be deemed to have
consented to such transfer or change.
ARTICLE 12
----------
TERMINATION
-----------
12.01 Events of Dissolution. The Partnership shall be dissolved on the
---------------------
earliest to occur of:
(a) the expiration of the term of the Partnership;
(b) the passage of thirty (30) days after the conversion to cash
or its equivalent, sale or other disposition of all of the Partnership assets;
(c) the election by the General Partner to dissolve the
Partnership, notice of which is given to the Limited Partner;
(d) the withdrawal or removal of the General Partner, or the
filing of a certificate of dissolution or its equivalent, for the General
Partner, or the revocation of its charter and the expiration of ninety (90) days
after the date of notice to the General Partner of revocation without a
reinstatement of its charter, unless (i) at the time of occurrence of such event
there is at least one other general partner who is hereby authorized to and
agrees to continue the business of the Partnership without dissolution, or (ii)
within ninety (90) days after the occurrence of such event, all Partners agree
in writing to continue the business of the Partnership and to the appointment,
effective as of the date of such event, of one or more additional general
partners of the Partnership; or
(e) any other event requiring the dissolution of the Partnership
under the laws of the State of Delaware.
12.02 Winding Up
----------
(a) Upon the dissolution of the Partnership pursuant to Section
12.01 hereof, the Partnership business shall be wound up and its assets
liquidated by the Liquidator, as defined herein, as provided in this Section
12.02, and the net proceeds of such liquidation shall be distributed in
accordance with Section 12.03 hereof. The "Liquidator," as used herein shall
mean the General Partner, or, if there is none at the time in question, such
other person who may be appointed by the Partners (or in accordance with
applicable law if the Partners fail to make such appointment). The Liquidator
shall be responsible for taking all action necessary or appropriate to wind up
the affairs and distribute the assets of the Partnership upon its dissolution.
(b) The Liquidator shall file all certificates and notices of
the dissolution of the Partnership required by law. The Liquidator shall
proceed without any unnecessary delay to sell and otherwise liquidate the
Partnership's assets; provided, however, that if the Liquidator shall determine
that an immediate sale of part or all of the Partnership assets would cause
undue loss to the Partners, then, in order to avoid such loss, the Liquidator
may defer the liquidation, to the extent permitted by law.
12.03 Distribution on Dissolution and Termination
-------------------------------------------
(a) Upon dissolution of the Partnership, the net proceeds of
such liquidation shall be applied and distributed in the following order of
priority; provided that the higher level(s) of priority have been fully
satisfied and provided, further that if the Capital Account of any Partner shall
have a negative balance after giving effect to the allocation of tax items, such
Partner shall pay to the Partnership the amount of such negative balance not
later than ten (10) days from the date of written notice to such effect:
(i) first, to the payment of debts and liabilities of the
Partnership to third parties (including any loans or advances that may have
been made by any of the Partners to the Partnership) and the expenses of
liquidation, and to the setting up of any reserves which may be deemed
reasonably necessary for any contingent or unforeseen liabilities or
obligations of the Partnership. Such reserves shall be paid over to an
escrowee designated by the Liquidator to be held for the purpose of
disbursing such reserves in payment of any of the aforementioned
contingencies and, at the expiration of such period as shall be deemed
advisable, to distribute the balance hereafter remaining in the manner
provided in this Section 12.03;
(ii) second, according to the order of priority set forth
in Section 4.04 (a) through (c) hereof; provided, however, that all Capital
Account balances shall be determined after taking into account all Capital
Account adjustments for the Partnership taxable year during which such
liquidation occurs; and
(iii) thereafter, to the Partners in respect of the
balances, if any, remaining in their Capital Accounts.
(b) If there is not a pro rata distribution of each asset, asset
distributions in kind shall be appraised by appraisers retained by the
Liquidator, if necessary, so that each Partner receives his pro rata share of
net Partnership assets as appraised. It shall not be a requirement that each
Partner receive a pro rata share of each asset available for distribution to the
Partners on dissolution. In the event valuation of the assets of the
Partnership cannot be agreed upon, such assets shall be valued at their fair
market value as determined by appraisers retained by the Liquidator. The
Liquidator may retain such appraisers and other consultants as may be necessary
and advisable, all at the expense of the Partnership, in connection with the
wind-up of the Partnership affairs. No Partner shall have any right to demand
or receive property other than cash upon dissolution and termination of the
Partnership.
(c) A reasonable time shall be allowed for the orderly
liquidation of the assets of the Partnership and the discharge of liabilities as
to creditors.
(d) Within ninety (90) days after the complete liquidation of
the Partnership, the Liquidator shall furnish to each of the Partners a
financial statement for the period from the first day of the then current fiscal
year through the date of such complete liquidation certified by the
Partnership's certified public accountant. Such statement shall include a
Partnership statement of operation for such period and a Partnership balance
sheet as to the date of such complete liquidation.
(e) Each Partner shall look solely to the assets of the
Partnership for all distributions with respect to the Partnership and its
Capital Contribution thereto and share of profits and losses thereof, and shall
have no recourse therefor (upon dissolution or otherwise) against the General
Partner or the Liquidator. It is expressly understood and agreed that the
General Partner shall not be personally liable for the return or repayment of
all or any portion of the capital of any Partner.
ARTICLE 13
----------
MISCELLANEOUS
-------------
13.01 Governing Law. This Agreement and the rights of the parties
-------------
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware.
13.02 Successors and Assigns. Any person acquiring or claiming an
----------------------
interest in the Partnership, in any manner whatsoever, shall be subject to and
bound by all terms, conditions and obligations of this Agreement to which its or
his predecessor in interest was subject or bound, without regard to whether such
a person has executed a counterpart hereof or any other document contemplated
hereby. No person, including the legal representative, heir or legatee of a
deceased Partner, shall have any rights or obligations greater than those set
forth in this Agreement and no person shall acquire an interest in the
Partnership or become a Partner hereof except as permitted by the terms of this
Agreement. This Agreement shall be binding upon and inure to the benefit of the
parties hereto, their successors, assigns, heirs, legal representatives,
executors and administrators.
13.03 Grammatical Changes. Whenever from the context it appears
-------------------
appropriate, each term stated in either the singular or the plural shall include
the singular and the plural, and pronouns stated in either the masculine, the
feminine or the neuter gender shall include the masculine, feminine and neuter
gender as the circumstances require.
13.04 Captions. Captions contained in this Agreement are inserted only as
--------
a matter of convenience and in no way define, limit or extend the scope or
intent of this Agreement or any provision hereof.
13.05 Severability. If any provision of this Agreement, or the
------------
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those to which it is held invalid, shall
not be affected thereby; provided that the parties shall attempt to reformulate
such invalid provision to give effect to such portions thereof as may be valid
without defeating the intent of such provision; and further provided that this
Section 13.05 shall not apply to change the status of any Limited Partner to a
General Partner, or to alter the classification of the Partnership as a
partnership under the Code.
13.06 Counterparts. This Agreement, or any amendment hereto may be
------------
executed in multiple counterparts, each of which shall be deemed an original but
all of which shall constitute one and the same instrument, notwithstanding that
all of the Partners are not signatories to the original or the same counterpart.
In addition, this Agreement, or any amendment hereto, may contain more than one
counterpart of the signature pages, and this Agreement, or any amendment hereto,
may be executed by the affixing of the signatures of each of the Partners to one
of such counterpart signature pages; all of such counterpart signature pages
shall be read as though one, and they shall have the same force and effect as
though all of the signers had signed a single signature page.
13.07 Other Matters. Matters not covered in this Agreement relating to
-------------
limited partnerships shall be governed and controlled by the Act.
13.08 Private Litigation
------------------
(a) In the event the Partnership is made a party to any
litigation, or otherwise incurs any losses or expenses as a result of or in
connection with any Partner's personal obligations or liabilities unconnected
with Partnership business, such Partner shall reimburse the Partnership for all
such expenses incurred (including attorneys' fees and court costs), and the
interest of such Partner in this Partnership may be charged thereof.
(b) If either the General Partner or the Limited Partner brings
any judicial action or proceeding to enforce its rights under this Agreement,
the prevailing party shall be entitled, in addition to any other remedy, to
recover from the other, regardless of whether such action or proceeding is
prosecuted to judgment, all costs and expenses, including without limitation
reasonable attorneys' fees, incurred therein by the prevailing party.
13.09 Waiver of Right to Court Decree of Dissolution and Partition. The
------------------------------------------------------------
Partners agree that irreparable damage would be done to the good will and
reputation of the Partnership if any Partner should bring an action in court to
dissolve this Partnership. To the extent permitted by law, each Partner hereby
waives and renounces its right to seek a court decree of dissolution or to seek
the appointment by a court of a liquidator for the Partnership. The Partners
further agree that the Property is not and will not be suitable for partition
and, accordingly, to the fullest extent permitted by applicable law, each of the
Partners hereby irrevocably waives any and all rights which it may have to
maintain an action for partition of the Property, or any portion thereof, or to
otherwise divide (whether through an action in equity or through some other
means) the beneficial interest in any nominee holding title thereto.
13.10 Competing Business. The Partners agree as follows:
------------------
(a) Any Partner may engage and possess an interest in any other
business venture of any nature, kind of description, including, without limiting
the generality of the foregoing, any business venture engaged in the same type
of business as the Partnership, even if such other business is competitive with
that of the Partnership, and the ownership, financing and management of casino
and other gaming operations of any kind whatsoever. Further, the Partners agree
that except as otherwise agreed in writing by the Partners:
(i) Neither the Partnership nor any of its Partners shall
have the right in and to such other business venture or the income or
profits derived therefrom.
(ii) No Partner need disclose to any other Partner or the
Partnership any other business venture in which he may have an interest or
any other business opportunity presented to him, even if such opportunity
is of a character which, if presented to the Partnership, could be taken by
the Partnership, and the General Partner shall have the right to take for
its own account or to recommend to others any such particular investment
opportunity or business venture.
(iii) As a natural part of the consideration for the
execution of this Agreement by the General Partner, the Limited Partner
hereby waives, relinquishes and renounces any right or claim of
participation in another business venture of the General Partner.
(b) Notwithstanding the foregoing, in no event shall any Partner
or any Affiliate of such Partner engage in any business venture to the extent
same is prohibited under any agreement to which the Partnership is a party, or
by which any of its property or assets are bound.
13.11 Personal Property. This Agreement shall not be deemed to create in
-----------------
any Partner any right, title, interest or lien in, to or on all or any portion
of the Property, it being understood that any right or interest of any Partner
created by this Agreement shall solely be an interest in the Partnership and
shall be personal property.
13.12 No Third Party Rights. This Agreement is for the sole and exclusive
---------------------
benefit of the Partners designated herein and the Partnership and no other
person or entity (including any creditors of the Partnership or the Partners)
shall under any circumstances be deemed to be a beneficiary of any of the
rights, remedies, terms and provisions of this Agreement.
13.13 Consent of Bank Group. The effectiveness of this Agreement is
---------------------
expressly conditioned upon and shall not be effective until receipt of the
approval by certain lenders to The Promus Companies Incorporated (the indirect
parent of the General Partner) of investments of the type contemplated by this
Agreement on or before April 15, 1992. Upon obtaining such notice, the General
Partner shall promptly give written notice of such approval to the Limited
Partner and the giving of such notice shall be conclusive evidence of
satisfaction of the condition contained in this Section 13.13. If such approval
is not obtained prior to such date, this Agreement shall be void and of no
further force or effect. The General Partner shall give written notice to the
Limited Partner if such approval is not obtained prior to such date, and such
notice shall be conclusive evidence that this Agreement is void and of no force
or effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GENERAL PARTNER:
HARRAH'S ILLINOIS CORPORATION,
a Delaware corporation
By: /s/ Philip G. Satre
-------------------------------
Name: Philip G. Satre
-------------------------
Title: President
------------------------
LIMITED PARTNER:
/s/ John Q. Hammons
-------------------------------
John Q. Hammons, an individual
Guarantee
Mrs. Juanita Hammons (the "Guarantor") joins in this Agreement for the purpose
of guarantying the Limited Partner's obligations hereunder and hereby
unconditionally guarantees any and all obligations of the Limited Partner under
this Agreement, including and without limitation, the repayment by the Limited
Partner of the Initial Capital Loan and any Default Loans (the "Guaranteed
Obligations"). Except as specifically set forth above, the Guarantor shall have
no obligation or liability under this Agreement.
The Guaranteed Obligations may be extended or renewed and the Guarantor will be
bound under this guarantee notwithstanding any extension, renewal, or alteration
of the Guaranteed Obligations. The Guarantor hereby waives presentation of,
demand of, and protest of the Guaranteed Obligations and waives notice of
protest for nonpayment. This guarantee shall not be affected by:
(a) the failure of any party to assert any claim or demand
or to enforce any right or remedy against the Limited Partner under this
Agreement,
(b) any extension or renewal of any provision thereof, or
(c) any rescission, waiver, amendment or modification of
any of the terms or provisions of this Agreement.
The Guarantor further agrees that this guarantee constitutes a guarantee of
payment when due and not of collection and waives any right to require that any
resort be had by any party to any of the security held for payment of any of the
Guaranteed Obligations or to any balance of any deposit account or credit on the
books of any party in favor of any person.
The obligations of the Guarantor shall not be subject to any reduction,
limitation, impairment or termination for any reason, including, without
limitation, any claim of waiver, release, surrender, alteration or compromise of
any of the Guaranteed Obligations, and shall not be subject to any defense or
setoff, counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality or unenforceability of any of the Guaranteed Obligations,
discharge of the Limited Partner from obligations in a bankruptcy or similar
proceeding or otherwise. Without limiting the generality of the foregoing, the
obligations of the Guarantor shall not be discharged or impaired or otherwise
affected by its failure to assert any claim or demand or to enforce any remedy
under this Agreement, by any waiver or modification of any thereof, by any
default, failure or delay, willful or otherwise, in the performance of any of
the Guaranteed Obligations, or by any other act or thing or omission or delay to
do any other act or thing which may or might in any manner or to any extent vary
the risk of the Guarantor or which would otherwise operate as a discharge of the
Guarantor as a matter of law or equity.
The Guarantor further agrees that this guarantee shall continue to be effective
or to be reinstated, as the case may be, if at any time payment, or any part
thereof, of principal of or interest on any Guaranteed Obligation is rescinded
or must otherwise be restored by any party upon the bankruptcy or reorganization
of the Limited Partner or otherwise.
Upon payment by the Guarantor of any sum as provided above so long as any of the
Guaranteed Obligations shall remain outstanding hereunder, all rights of the
Guarantor against the Limited Partner arising as a result thereof by way of
right of subrogation or otherwise, shall in all respects be subordinated and
junior in right of payment to the prior indefeasible payment in full of all the
Guaranteed Obligations.
The Guarantor hereby waives and relinquishes all rights and remedies accorded by
applicable law to sureties or guarantors and agrees not to assert or take
advantage of any such rights or remedies, including without limitation (a) any
right to require the General Partner to proceed against or exhaust its recourse
against the Limited Partner or any security or collateral held by the Limited
Partner or to pursue any other remedy in its power before being entitled to
payment from the Limited Partner; (b) any defense that may arise by reason of
(i) the incapacity, lack of authority, death or disability of the Guarantor,
(ii) the revocation or repudiation hereof or the revocation or repudiation of
the Partnership Agreement unless caused by a Partner other than the Limited
Partner, (iii) the failure of the General Partner to file or enforce a claim
against the estate (either in administration, bankruptcy or any other
proceeding) of the Limited Partner, (iv) the unenforceability in whole or in
part of the Partnership Agreement or any other instrument, document or agreement
referred to herein unless caused by a Partner other than Limited Partner, (v)
the General Partner's election, in any proceeding instituted under the federal
Bankruptcy Code, of the application of Section 1111(b)(2) of the federal
Bankruptcy Code, or (vi) any borrowing or grant of a security interest under
Section 364 of the federal Bankruptcy Code; (c) presentment, demand for payment,
protest, notice of discharge, notice of acceptance of this Agreement, and
indulgences and notices of any other kind whatsoever; (d) any defense based upon
an election of remedies (including, if available, an election to proceed by
non-judicial foreclosure) by the General Partner which destroys or otherwise
impairs the subrogation rights of the Guarantor to proceed against the Limited
Partner for reimbursement; (e) any defense based upon any taking, modification
or release of any collateral or guarantees for any indebtedness of the Limited
Partner to the General Partner, or any failure to perfect any security interest
in, or the taking of or failure to take any other action with respect to any
collateral; or (f) any rights or defenses based upon an offset by the Guarantor
against any obligation now or hereafter owed to the Guarantor by the Limited
Partner; it being the intention hereof that Guarantor shall remain liable as
principal, to the extent set forth herein, until the full payment of the
Guaranteed Obligations notwithstanding any act, omission or thing which might
otherwise operate as a legal or equitable discharge of Guarantor.
The Guarantor hereby represents and warrants as follows: (i) the Guarantor has
the capacity and legal right to execute, deliver, and perform this Agreement,
(ii) this Agreement and all other documents required to be executed and
delivered hereunder, when executed and delivered, will constitute legal, valid
and binding obligations of the Guarantor enforceable against the Guarantor in
accordance with their terms, (iii) neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will,
with or without notice and/or lapse of time: constitute a breach of any of the
terms and provisions of, or constitute a default under, any note, contract,
document, instrument, agreement or undertaking, whether written or oral, to
which the Guarantor is a party or to which the Guarantor's property is subject;
accelerate or constitute an event entitling the holder of any indebtedness of
the Guarantor to accelerate the maturity of any such indebtedness; conflict with
or result in a breach of any writ, order, injunction or decree against the
Guarantor any court or governmental agency or instrumentality, whether national,
state, local or other; or conflict with or be prohibited by any federal, state,
local or other governmental law, statute, rule or regulation.
The General Partner may maintain successive actions for other defaults. The
rights of the General Partner hereunder shall not be exhausted by its exercise
of any of its rights or remedies or by any such action or by any number of
successive actions so long as this Agreement is in force and effect.
No delay or omission by the General Partner to exercise any right under this
guarantee shall impair any such right, nor shall it be construed to be a waiver
thereof. No amendment, modification, termination or waiver of any provision of
any guarantee, or consent to any departure by the Guarantor therefrom, shall in
any event be effective without the written concurrence of the General Partner.
No waiver of any single breach of default under this guarantee shall be deemed a
waiver of any other breach or default.
Guarantor agrees that any proceeding to enforce, or otherwise relating to or
arising from, this Agreement may be brought in federal court located in the
State of Illinois if such court has jurisdiction, or if no such jurisdiction
exists, then state court in the State of Illinois, each as the General Partner
may elect. By executing this Agreement, Guarantor irrevocably accepts and
submits to the nonexclusive personal jurisdiction of each of the aforesaid
courts, generally and unconditionally with respect to any such proceeding.
Guarantor agrees not to assert any basis for transferring jurisdiction of any
such proceeding to another court. Guarantor further agrees
that a final judgment no longer subject to appeal against Guarantor in any
proceeding shall be conclusive evidence of Guarantor's liability for the full
amount of such judgment.
/s/ Mrs. Juanita Hammons
--------------------------
Mrs. Juanita Hammons
GUARANTOR
EXHIBIT A
Capital Contributions and Percentage Share
------------------------------------------
General Partner
- ---------------
Initial Percentage Share - 80%
Initial Capital Contribution $25,920,000
Limited Partner
- ---------------
Initial Percentage Share - 20%
Initial Capital Contribution $ 6,480,000
A-1
EXHIBIT B
Legal Description of Property
-----------------------------
(See Article 1, "Property")
[Diagram of property]
B-1
EXHIBIT C
Term Sheet for Management Agreement
-----------------------------------
JOLIET MANAGEMENT AGREEMENT
SUMMARY OF TERMS
1. Terms and Renewals
(a) Initial Term: 20
(b) Renewals: 3 ten-year terms
2. Development of the boat and ancillary shoreside facilities
(a) Party responsible: Owner constructs and furnishes boat and
ancillary shoreside facilities
(b) Plans and Prepared on Owner's behalf, subject to
Specifications: Manager's approval of design/layout
No material changes of design/layout
allowed without Manager's approval
(c) Deadline for If boat and facilities are not
completion: operational by April 1, 1993 (unless
extended by Manager), Manager may
terminate Management Agreement
3. Pre-Opening
(a) Budget: Agreed by Owner and Manager 120 days
prior to opening. Budget line items may
be exceeded by 10% for reasonable
unanticipated expenditures. Budget may
be exceeded to cover additional expenses
caused by construction delays
(b) Programs Agreed by Owner and Manager 90 days
after execution of Management Agreement
(will include, among other things,
recruiting and training of staff and
advertisement and marketing)
(c) Payment of Expenses: Owner deposits funds into accounts
established in Owner's name by Manager;
payment is made by Manager
4. Operations
(a) Manager control: Manager determines operating policies
and standards, including guest
admittance, gaming policies, labor
policies, food and beverage policies,
credit policies, etc.
(b) Contractual Manager has authority to lease space in
Authority: the boat and shoreside facilities in
Owner's name (restaurant, gift shop,
other retail space),
supervise such lessees and their
operations and enforce the agreements
with such lessees until any court action
is required, and lease equipment in the
Owner's Name
(c) Permits: Manager obtains and maintains all
licenses and permits at Owner's expense
(d) Personnel: Manager employs on-site personnel
Manager hires, supervises and discharges
all personnel
Owner responsible for all salaries and
expenses of on-site personnel and all
expenses of other Manager employees who
perform services for operation
(e) Marketing: Manager responsible for all marketing
decisions and expenditures at Owner's
expense, subject to annual budget
(f) Maintenance: Manager responsible for all maintenance
of the boat and other facilities at
Owner's expense, subject to annual
budget
(g) Capital Replacements: Annual capital reserve of 3.5% of gross
revenues
Owner responsible for designing and
implementing capital replacements of a
structural or extraordinary nature,
subject to Manager's approval
Manager responsible for designing and
implementing, at Owner's expense,
capital replacements of a non-structural
or ordinary nature, subject to the
annual budget (except in the case of
expenditures occasioned by emergencies
or legal requirements)
5. Accounting matters
(a) Books/records: Manager maintains
(b) Auditors: To be agreed by Owner and Manager
(c) Statements: Manager delivers quarterly and annual
profit and loss statements to Owner
6. Budget Manager submits proposed budget to Owner
for approval at least 60 days prior to
opening and 60 days prior to each fiscal
year thereafter
Any budget disputes submitted to
arbitration
Manager may reallocate budgeted items
within departments
Manager may exceed budget (within limits
to be agreed on) for unexpected
expenditures
7. Bank Accounts Manager establishes bank accounts in
name of Owner with Manager entitled to
withdraw funds
Minimum cash reserve (funded by Owner)
to be agreed by Owner and Manager
8. Management Fee (includes 6% of gross revenue
license fee; use of
separate license
arrangement to be
determined)
9. Priority of Funds Disbursement
Manager disburses funds from bank account monthly in the following order of
priority:
(a) Operating costs (including management fee and Manager's
reimbursable expenses)
(b) Replenishment of bank account or capital reserve fund for payment
of emergency expenditures
(c) Deposits into the bank accounts to maintain minimum cash reserve
(d) Deposits into the capital reserve fund
(e) Payment of debt service
(f) Payment to Owner
10. Insurance
Owner obtains and maintains customary liability, priority and other
insurance
11. Indemnification
(a) To Manager: Owner indemnifies Manager against all
claims pertaining to ownership,
management or use of boat and shoreside
facilities unless caused by Manager's
gross negligence or willful misconduct
(b) To Owner: Manager indemnifies Owner against all
claims pertaining to management or use
of boat and shoreside facilities caused
by Manager's gross negligence or willful
misconduct
12. Termination Rights
(a) For cause: Either party may terminate in the case
of customary events of default,
including uncured breach under
Management Agreement, bankruptcy and
insolvency
(b) Termination fees/ Management fees for previous 3
liquidated damages years (including termination as a result
of casualty, default of Owner and
certain other circumstances)
13. Governing Law Illinois
14. Assignment/Mortgage
(a) By Manager: Manager may assign to affiliate, entity
that acquires substantially all of
Joliet riverboat gaming business, or as
part of corporate reorganization or
recapitalization
Manager may assign management fees in
connection with any financing
(b) By Owner: Owner may not sell boat or shoreside
facilities without Manager's consent
Owner may mortgage the boat and
shoreside facilities if the financing
meets coverage and other financial tests
acceptable to Manager
Owner will be required to dispose of
interests in the boat and shoreside
facilities to the extent their ownership
jeopardizes any Harrah's gaming license
15. Boat Operation Owner appoints boat operator subject to
Manager's consent
If boat is operated in manner which
interferes with Manager's ability to
conduct successful operations, Manager
may appoint new boat operator, subject
to Owner's approval; if Owner refuses to
approve Manager's appointment, Manager
may terminate Management Agreement and
collect termination fee
FIRST AMENDMENT TO
LIMITED PARTNERSHIP AGREEMENT OF
DES PLAINES DEVELOPMENT LIMITED PARTNERSHIP
This First Amendment (this "Amendment") to Limited Partnership
Agreement of Des Plaines Development Limited Partnership is made as of this 5th
day of October, 1992 by and between Harrah's Illinois Corporation, a Nevada
corporation, and John Q. Hammons, an individual.
Recitals
--------
A. The parties hereto are parties to that certain Limited Partnership
Agreement of Des Plaines Development Limited Partnership, dated as of February
28, 1992 (as amended hereby, the "Partnership Agreement"). Capitalized terms
used herein and not defined herein shall have the meaning given to them in the
Partnership Agreement.
B. The Partnership Agreement provides for the General Partner to loan
to the Limited Partner the Limited Partner's initial Capital Contribution, and
the parties hereto desire that any amounts so advanced by the General Partner
shall be repaid, and such loan shall no longer be available to the Limited
Partner upon such repayment. After such repayment, the Limited Partner shall
make contributions to the Partnership pursuant to Section 3.01 of the
Partnership Agreement, as amended hereby.
C. The parties hereto desire to enter into certain other agreements
with respect to the Partnership, and to amend certain provisions of the
Partnership Agreement, all as more fully set forth herein.
Agreement
---------
NOW, THEREFORE, in consideration of the mutual agreements of the
parties hereto and subject to the terms and conditions hereof, the parties
hereto agree as follows:
1. Repayment of Initial Capital Loan. The Limited Partner agrees to
---------------------------------
repay all outstanding principal and accrued interest of the Initial Capital
Loan, in immediately available funds, on or before October 13, 1992. The
failure to make such payment shall constitute an Event of Default. Upon such
payment, the promissory note evidencing the Initial Capital Loan shall be
returned to the Limited Partner, the Security Agreement securing the Initial
Capital Loan shall be of no further force or effect, and the General Partner
shall deliver to the Limited Partner appropriate UCC termination statements
terminating the UCC financing statements on file with respect to the Initial
Capital Loan.
2. Termination of Initial Capital Loan Availability. Effective
------------------------------------------------
upon the repayment of the Initial Capital Loan required by paragraph 1 hereof,
the Partnership Agreement shall be amended as follows:
a. The following definitions are hereby deleted from Article I of
the Partnership Agreement: (i) "Initial Capital Loan," and (ii) "Initial
Capital Loan Documents."
b. Section 3.01(d) of the Partnership Agreement is hereby deleted
in its entirety, and subsections (e), (f) and (g) shall be relettered (d), (e)
and (f), respectively.
c. Item (f) in Article VII of the Partnership Agreement is hereby
deleted in its entirety, and item (g) is hereby relettered as (f).
3. Amendment to Section 3.01(c). Section 3.01(c) of the Partnership
-----------------------------
Agreement is hereby deleted in its entirety, and the following is hereby
substituted therefor:
(c) Calls for Contributions. The General Partner may at any time
------------------------
or from time to time call for Capital Contributions, including initial Capital
Contributions, from the Partners by not less than seven (7) business days
written notice to the Partners. The Partners shall make such Capital
Contributions to the Partnership on or before the date specified in any such
notice from the General Partner.
4. Amendment to Buy-Down Remedy. Sections 8.04(a) and (b) of the
----------------------------
Partnership Agreement are hereby deleted in their entirety, and the following is
hereby substituted therefor:
(a) If the Defaulting Partner shall have failed to make any
Capital Contribution or to pay any other amount as required under this Agreement
prior to the opening of the Project for business, the Nondefaulting Partner may
advance to the Partnership on behalf of the Defaulting Partner the amount of
such delinquency (a "Default Contribution"). If the Defaulting Partner shall
have failed to make any Capital Contribution or to pay any other amount as
required under this Agreement after the opening of the Project for business, the
Nondefaulting Partner may advance to the Partnership on behalf of the Defaulting
Partner the amount of such delinquency, with each such advance to be treated as
a loan by the Nondefaulting Partner to the Defaulting Partner (a "Default
Loan"). Each separate advance by a Nondefaulting Partner shall be a separate
Default Contribution or Default Loan, as the case may be. The amount of any
Default Loan shall be credited to the Defaulting Partner's Capital Account.
Each Default Loan shall be (i) secured by the Defaulting Partner's
interest in the Partnership, (ii) payable on demand, and (iii) bear interest,
payable monthly, at a rate equal to the lower of (x) the then Prime Rate plus
three percent (3%) or (y) the maximum rate permitted under applicable law, from
the date of such Default Loan to the earlier of the date of payment in full by
the Defaulting Partner or the date of the Nondefaulting Partner's exercise of
its rights pursuant to Sections 8.04(b) or 8.04(c) hereof. The Defaulting
Partner hereby grants the Nondefaulting Partner a security interest in its
Partnership interest and all proceeds thereof to secure any Default Loans made
by the Nondefaulting Partner to the Defaulting Partner. The Nondefaulting
Partner shall give written notice to the Defaulting Partner of the making of any
such Default Loan, and the Defaulting Partner shall have one hundred twenty
(120) days thereafter within which to repay the Nondefaulting Partner the amount
of such Default Loan. Any interest paid on such Default Loan shall be paid
directly to the Nondefaulting Partner and shall not affect either the
Nondefaulting Partner's or the Defaulting Partner's Capital Account. Upon the
payment in full of the principal of and all accrued interest on a Default Loan
within such one hundred twenty (120) day period or pursuant to Sections 8.04(b)
or 8.04(c) hereof, the Defaulting Partner's default, with respect to which a
Default Loan was made, shall be deemed cured. The making of a Default Loan
shall not be deemed to cure a default with respect to which a Default Loan has
been made, and such cure may be made only in the manner set forth in the
immediately preceding sentence or in Sections 8.04(b), 8.04(c) and 8.04(d)
hereof. Any Default Loan made pursuant hereto to the Limited Partner shall be
guaranteed by the spouse of the Limited Partner pursuant to the Guarantee
attached hereto, with full recourse to the assets of the Limited Partner and the
spouse of the Limited Partner.
(b) In the event a Nondefaulting Partner shall make a Default
Contribution the Nondefaulting Partner's Percentage Share shall be increased and
the Defaulting Partner's Percentage Share shall be decreased as of the date of
such advance. At such time the Nondefaulting Partner's Percentage Share shall
increase to a percentage (but not to exceed One Hundred percent (100%)) that is
equal to a percentage derived from a fraction the numerator of which equals the
sum of all Capital Contributions, including the Default Contribution, actually
made by the Nondefaulting Partner as of the time of the recalculation, and the
denominator of which equals the aggregate sum of both Partners' Capital
Contributions. The Defaulting Partner's Percentage Share shall be
correspondingly decreased so that it shall be equal to One Hundred percent
(100%) minus the Nondefaulting Partner's Percentage Share as increased in
accordance with the preceding sentence. The Nondefaulting Partner's advance
pursuant to 8.04(a) constituting such Default Contribution(s) shall be added to
the Nondefaulting Partner's Capital Account. Upon such recalculations of the
Partners' Percentage Shares and the corresponding adjustments of the Partners'
respective Percentage Shares, the default associated with the Default
Contribution(s) with respect to which such adjustments were made shall be deemed
cured, to the extent of such Default Contribution(s) made by the Nondefaulting
Partner, as of the date of such adjustments.
If the Defaulting Partner fails to repay the Nondefaulting Partner
with respect to any one or more Default Loans within the one hundred twenty
(120) day period referred to in Section 8.04(a) hereof, the Nondefaulting
Partner may, at any time after the expiration of such one hundred twenty (120)
day period and before the repayment of such Default Loan or Default Loans by the
Defaulting Partner (including a repayment pursuant to Section 8.04(c) hereof),
elect, by one hundred twenty (120) days prior written notice (the "Conversion
Notice") with respect to any one or more Default Loans to the Defaulting
Partner, to increase the Nondefaulting Partner's Percentage Share and decrease
the Defaulting Partner's Percentage Share as of the date of and immediately
following the date thirty (30) days following the Conversion Notice. If a
Defaulting Partner has not repaid the Default Loan or Default Loans specified in
the Conversion Notice within said thirty (30) days, the Nondefaulting Partner
may elect to increase its Percentage Share (but not to exceed One Hundred
percent (100%)) to equal a percentage derived from a fraction the numerator of
which equals the Adjusted Capital Contribution (as defined below) of the
Nondefaulting Partner and the denominator of which equals the aggregate sum of
both Partners' Capital Contributions. The Defaulting Partner's Percentage Share
shall be correspondingly decreased so that it shall be equal to One Hundred
percent (100%) minus the Nondefaulting Partner's Percentage Share as increased
in accordance with the preceding sentence. "Adjusted Capital Contribution"
shall mean the sum of all Capital Contributions, not including the Contribution
representing the Default Loan, actually made by the Nondefaulting Partner as of
the time of the recalculation plus an amount equal to One Hundred and Twenty
percent (120%) of the sum of all Default Loans which the Nondefaulting Partner
has made to the Defaulting Partner with respect to which such adjustments were
made. The parties acknowledge that in the event this remedy is exercised,
additional Capital Contributions will be of critical value to the Partnership,
and the parties further acknowledge that such value is not readily ascertainable
as of the date hereof and a reasonable estimate of such value is achieved by the
formula contained herein. Such formula for the "buy-down" reflects such
estimate of the parties, and is not intended to be a penalty. Upon any such
election, the Defaulting Partner's default, with respect to which the Default
Loan(s) specified in the Conversion Notice was made, shall be deemed cured, the
Nondefaulting Partner's advance pursuant to 8.04(a) hereof with respect to which
such Default Loan(s) were made shall be added to the Nondefaulting Partner's
Capital Account, and the amount of such advance shall be deducted from the
Defaulting Partner's Capital Account. Upon such recalculations of the Partner's
Percentage Shares and the corresponding adjustments of the Partner's respective
Percentage Shares, the default associated with the Default Loan(s) with respect
to which such adjustments were made shall be deemed cured, to the extent of such
Default Loan(s) made by the Nondefaulting Partner, as of the date of such
adjustments.
5. Amendment to Appraisal But Out Remedy. Section 8.05(b) of the
-------------------------------------
Partnership Agreement is hereby amended to delete the number "ninety percent
(90%) from the third line thereof, and the following is hereby substituted
therefor: "(x) prior to the opening of the Project for business, one hundred
percent (100%), or (y) after the opening of the Project for business, ninety
percent (90%),".
6. Amendment to Section 8.06. Section 8.06 of the Partnership
-------------------------
Agreement is hereby deleted in its entirety.
7. Amendment to Section 9.03. Section 9.03 of the Partnership
-------------------------
Agreement is hereby deleted in its entirety, and the following is hereby
substituted therefor:
The "Appraised Value" of the assets shall be equal to the following
amounts: (a) prior to the opening of the Project for business, the
aggregate Capital Contributions of the Partners plus the outstanding
principal balance of any debt owed by the Partnership; (b) after the
opening of the Project for business and if the Partners are in agreement as
to the fair market value of the assets, such agreed value; or (c) after the
opening of the Project for business if the Partners are unable to agree as
to fair market value, the mean of the two closest appraised values reported
by the Appraisal Panel; provided that if such values are equally
distributed, the "Appraised Value" of the assets to be appraised shall be
equal to the mean of the three appraised values reported by the Appraisal
Panel.
8. Amendment to Section 13.13. Section 13.13 of the Partnership
--------------------------
Agreement is hereby deleted in its entirety.
9. References. All references to the Partnership Agreement contained
----------
therein shall be deemed to refer to the Partnership Agreement as amended hereby.
10. Modification. Except as modified hereby, the Partnership
------------
Agreement remains in full force and effect. In the case of any inconsistency
between this Amendment and the Partnership Agreement this Amendment shall
control.
11. Counterparts. This Amendment may be executed in one or more
------------
counterparts, each of which is an original and all of which constitute one
agreement.
12. Gaming Approval. The parties hereto confirm that the
---------------
Partnership Agreement, as amended hereby, is subject to all statutes and
regulations regulating gaming in the State of Illinois, and that certain acts
contemplated by the Partnership Agreement as amended hereby, including without
limitation transfers of partnership interests, are subject to the approval of
the Illinois Gaming Board.
[SIGNATURES ON THE FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the date first written above.
GENERAL PARTNER:
HARRAH'S ILLINOIS CORPORATION,
By: /s/ Philip G. Satre
------------------------------
Name: Philip G. Satre
------------------------------
Title: President
------------------------------
LIMITED PARTNER:
/s/ John Q. Hammons
------------------------------
John Q. Hammons, an individual
I hereby consent to the foregoing Amendment, and confirm and ratify my guarantee
contained in the Partnership Agreement in all respects.
/s/ Mrs. Juanita Hammons
---------------------------
Mrs. Juanita Hammons
Guarantor
AMENDMENT TO ESCROW AGREEMENT
-----------------------------
Amendment ("this Amendment") dated as of October 29, 1993 to that certain
Escrow Agreement (the "Escrow Agreement") dated February 6, 1990, by and between
The Promus Companies Incorporated (the "Company"), the subsidiaries of the
Company listed on the execution page of this Amendment, and NationsBank,
formerly Sovran Bank (the "Escrow Agent").
WHEREAS, the parties desire to amend the Escrow Agreement to allow the
Company's Chief Executive Officer and Chief Financial Officer jointly, to direct
the Escrow Agent to borrow funds from any insurance policies in the Escrow Fund
and to use such funds to purchase other life insurance policies, as may be
jointly directed by the Company's Chief Executive Officer and Chief Financial
Officer;
NOW THEREFORE, in consideration of the mutual agreements contained herein
and for other good and valuable consideration the receipt of which is hereby
acknowledged, the parties hereto agree as follow:
1. The following paragraph is hereby added at the end of Section 2.02(b).
"Notwithstanding anything herein to the contrary, the Company's Chief
Executive Officer and Chief Financial Officer, jointly, shall have
authority to direct the Escrow Agent in writing, from time to time, to
borrow from any Life Insurance Policies in the Escrow Fund and use the
funds received from such borrowing to purchase other life insurance
policies, including variable insurance or annuity contracts, as may be
directed in writing by the Company's Chief Executive Officer and Chief
Financial Officer, jointly, which other insurance policies shall be
assets of the Escrow Fund subject to the terms and provisions of the
Escrow Agreement, as amended. The Escrow Agent shall act only as an
administrative agent in carrying out directed investment transactions
in accordance with this paragraph and shall not be responsible for the
investment decision. If a directed investment transaction violates
any duty to diversify, to maintain liquidity or to meet any other
investment standard or other requirement under this Escrow Agreement
or applicable law, the entire responsibility shall rest upon the
Company. The Escrow Agent shall be fully protected in acting upon or
complying with any restrictions or directions provided in accordance
with this paragraph."
2. The parties understand that Holiday Inns, Inc. is no longer a
Subsidiary of the Company, no employees of Holiday Inns, Inc. are Participants,
and Holiday Inns, Inc. is no longer a party hereto and has no rights or
obligations under the Escrow Agreement.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
THE PROMUS COMPANIES NATIONSBANK (Formerly
INCORPORATED Sovran Bank)
BY: /s/ William S. McCalmont BY: /s/ John H. Pylant
-------------------------- -----------------------
TITLE: VP & Treasurer TITLE: VP
----------------------- --------------------
HARRAH'S
BY: /s/ John M. Boushy
--------------------------
TITLE: SVP-IT & Corp. Mktg.
-----------------------
EMBASSY SUITES, INC.
BY: /s/ William S. McCalmont
--------------------------
TITLE: VP & Treasurer
-----------------------
HAMPTON INNS, INC.
BY: /s/ William S. McCalmont
--------------------------
TITLE: VP & Treasurer
-----------------------
AMENDED AND RESTATED
PARTNERSHIP AGREEMENT
OF HARRAH'S JAZZ COMPANY
AMONG
HARRAH'S NEW ORLEANS INVESTMENT COMPANY,
NEW ORLEANS/LOUISIANA DEVELOPMENT CORPORATION
AND
GRAND PALAIS CASINO, INC.
dated as of
March 15, 1994
TABLE OF CONTENTS
-----------------
PAGE
ARTICLE 1 - DEFINITIONS . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 - FORMATION . . . . . . . . . . . . . . . . . . . . 20
2.01 Partnership Agreement . . . . . . . . . . . . . . 20
2.02 Organization and Name . . . . . . . . . . . . . . 21
2.03 Place of Business and Principal Office;
Registered Agent and Registered Office . . . . . 21
2.04 Purpose and Title . . . . . . . . . . . . . . . . 21
2.05 Term . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 3 - CONTRIBUTIONS . . . . . . . . . . . . . . . . . . 22
3.01 Initial Capital Contributions . . . . . . . . . . 22
3.02 Value of Purchased Property . . . . . . . . . . . 25
3.03 Additional Capital Contributions . . . . . . . . 25
3.04 Financing. . . . . . . . . . . . . . . . . . . . 26
3.05 Evidence of Partnership Interest . . . . . . . . 26
3.06 Percentage Share . . . . . . . . . . . . . . . . 27
3.07 Withdrawal of Capital; Loans . . . . . . . . . . 27
3.08 Capital Accounts . . . . . . . . . . . . . . . . 27
ARTICLE 4 - ALLOCATIONS AND DISTRIBUTIONS . . . . . . . . . . 29
4.01 Allocations of Taxable Income . . . . . . . . . . 29
4.02 Allocations of Tax Loss . . . . . . . . . . . . . 29
i
4.03 Timing and Amount of Allocations of Taxable
Income and Tax Loss . . . . . . . . . . . . . . . 29
4.04 Distributions of Cash Flow and Proceeds of Major
Capital Event . . . . . . . . . . . . . . . . . . 30
4.05 Reallocation of Distribution Priorities . . . . . 31
4.06 Priority and Distribution of Property . . . . . . 32
4.07 Distribution of Tax Reserve . . . . . . . . . . . 33
4.08 Additional Allocation Provisions . . . . . . . . 33
4.09 Guaranteed Payments . . . . . . . . . . . . . . . 39
4.10 Unpermitted Payments, Distributions and
Reimbursements . . . . . . . . . . . . . . . . . 42
ARTICLE 5 - DECISIONS AND MANAGEMENT . . . . . . . . . . . . 40
5.01 Management . . . . . . . . . . . . . . . . . . . 40
5.02 Budget . . . . . . . . . . . . . . . . . . . . . 51
5.03 Compensation . . . . . . . . . . . . . . . . . . 52
5.04 Transactions with Related Parties . . . . . . . . 53
5.05 Partner Groups . . . . . . . . . . . . . . . . . 53
ARTICLE 6 - TRANSFERS AND ASSIGNMENT . . . . . . . . . . . . 55
6.01 Restrictions on Transfers . . . . . . . . . . . . 55
6.02 Right of First Refusal . . . . . . . . . . . . . 58
6.03 Grant of Security Interest . . . . . . . . . . . 63
6.04 Conditions on Transfers . . . . . . . . . . . . . 63
6.05 Limit on Transferability . . . . . . . . . . . . 67
ARTICLE 7 - EVENTS OF DEFAULT . . . . . . . . . . . . . . . . 68
7.01 Events of Default . . . . . . . . . . . . . . . . 68
ii
ARTICLE 8 - REMEDIES . . . . . . . . . . . . . . . . . . . . 71
8.01 Remedies . . . . . . . . . . . . . . . . . . . . 71
8.02 Choice of Remedies . . . . . . . . . . . . . . . 72
8.03 Buy/Sell . . . . . . . . . . . . . . . . . . . . 73
8.04 Advances; Buy-Down . . . . . . . . . . . . . . . 80
8.05 Appraisal Buyout . . . . . . . . . . . . . . . . 85
8.06 Non-Material Partner Appraisal Buyout . . . . . . 89
8.07 Waiver . . . . . . . . . . . . . . . . . . . . . 95
8.08 Waiver Regarding Embassy . . . . . . . . . . . . 95
8.09 Waiver Regarding Harrah's and Manager . . . . . . 96
ARTICLE 9 - VALUATION AND APPRAISAL PROCEDURES . . . . . . . 96
9.01 Voluntary Appraisal . . . . . . . . . . . . . . . 96
9.02 Appraisal Panel . . . . . . . . . . . . . . . . . 96
9.03 Appraised Value . . . . . . . . . . . . . . . . . 98
9.04 Expenses . . . . . . . . . . . . . . . . . . . . 98
9.05 Qualification . . . . . . . . . . . . . . . . . . 99
9.06 Continued Use of Appraisal . . . . . . . . . . . 99
ARTICLE 10 - REPRESENTATIONS, WARRANTIES AND INDEMNITIES . . 99
10.01 Representations and Warranties by the Partners . 99
10.02 Indemnities . . . . . . . . . . . . . . . . . . . 104
10.03 Security For Certain Indemnities . . . . . . . . 105
10.04 Additional Indemnities . . . . . . . . . . . . . 106
10.05 Liability for Acts and Omissions . . . . . . . . 107
10.06 Joint and Several Liability . . . . . . . . . . . 108
10.07 Indemnity Procedures . . . . . . . . . . . . . . 108
ARTICLE 11 - GAMING QUALIFICATION . . . . . . . . . . . . . . 111
iii
11.01 Gaming Qualifications in the State . . . . . . . 111
11.02 Other Gaming Qualifications . . . . . . . . . . . 113
11.03 Lender Suitability . . . . . . . . . . . . . . . 115
ARTICLE 12 - DISPUTE RESOLUTION . . . . . . . . . . . . . . . 116
12.01 Buy/Sell . . . . . . . . . . . . . . . . . . . . 116
12.02 Arbitration . . . . . . . . . . . . . . . . . . . 116
ARTICLE 13 - ADMINISTRATION . . . . . . . . . . . . . . . . . 119
13.01 Bank Accounts . . . . . . . . . . . . . . . . . . 119
13.02 Books and Records . . . . . . . . . . . . . . . . 119
13.03 Notices . . . . . . . . . . . . . . . . . . . . . 120
ARTICLE 14 - FISCAL MATTERS . . . . . . . . . . . . . . . . . 123
14.01 Fiscal Year . . . . . . . . . . . . . . . . . . . 123
14.02 Accounting Decisions . . . . . . . . . . . . . . 123
14.03 Tax Returns . . . . . . . . . . . . . . . . . . . 123
14.04 Elections . . . . . . . . . . . . . . . . . . . . 123
14.05 Partnership Expenses . . . . . . . . . . . . . . 124
ARTICLE 15 - TERMINATION . . . . . . . . . . . . . . . . . . 125
15.01 Events of Dissolution . . . . . . . . . . . . . . 125
15.02 Winding Up . . . . . . . . . . . . . . . . . . . 126
15.03 Distribution on Dissolution and Termination . . . 127
ARTICLE 16 - COVENANTS . . . . . . . . . . . . . . . . . . . 130
16.01 Competing Business . . . . . . . . . . . . . . . 130
16.02 Prohibited Payments . . . . . . . . . . . . . . . 132
16.03 Securities Law Requirements . . . . . . . . . . . 133
iv
16.04 Regulatory Information . . . . . . . . . . . . . 133
16.05 Confidentiality . . . . . . . . . . . . . . . . . 134
16.06 Holding Entity Requirements . . . . . . . . . . . 134
16.07 Lender Requirements . . . . . . . . . . . . . . . 136
16.08 Supplementary Restrictions. . . . . . . . . . . . 138
ARTICLE 17 - MISCELLANEOUS . . . . . . . . . . . . . . . . . 138
17.01 Governing Law . . . . . . . . . . . . . . . . . . 138
17.02 Successors and Assigns . . . . . . . . . . . . . 138
17.03 Grammatical Changes . . . . . . . . . . . . . . . 139
17.04 Captions . . . . . . . . . . . . . . . . . . . . 139
17.05 Severability . . . . . . . . . . . . . . . . . . 139
17.06 Counterparts . . . . . . . . . . . . . . . . . . 139
17.07 Other Matters . . . . . . . . . . . . . . . . . . 140
17.08 Waiver of Right to Court Decree of Dissolution
and Partition . . . . . . . . . . . . . . . . . . 140
17.09 Amendments . . . . . . . . . . . . . . . . . . . 140
17.10 Succeeding Business Day . . . . . . . . . . . . . 141
17.11 Conflicts . . . . . . . . . . . . . . . . . . . . 141
17.12 Personal Property . . . . . . . . . . . . . . . . 141
17.13 No Third Party Rights . . . . . . . . . . . . . . 142
17.14 Voluntary Agreement . . . . . . . . . . . . . . . 142
17.15 Advice From Counsel . . . . . . . . . . . . . . . 142
17.16 Judicial Interpretation . . . . . . . . . . . . . 142
17.17 Attorneys' Fees . . . . . . . . . . . . . . . . . 142
v
EXHIBITS
EXHIBIT A INITIAL CAPITAL CONTRIBUTIONS
EXHIBIT B REAL ESTATE AND EXISTING LIENS AND OBLIGATIONS
EXHIBIT C CONTRIBUTED STUDIES, PLANS, REPORTS AND
SPECIFICATIONS
EXHIBIT D OBLIGATIONS AND LIABILITIES INCURRED ON BEHALF
OF THE PARTNERSHIP
EXHIBIT E CLAIMS AND LITIGATION OF THE PARTNERS
EXHIBIT F CASINO CONCEPTUAL PLANS
EXHIBIT G FORM UCC-1 FINANCING STATEMENT
EXHIBIT H FORM OF REDEMPTION PROVISIONS TO BE INCLUDED IN
HOLDING ENTITY ARTICLES OF INCORPORATION OR
OTHER FORMATIVE DOCUMENTS
vi
1 AMENDED AND RESTATED UNITED STATES OF AMERICA
PARTNERSHIP AGREEMENT STATE OF LOUISIANA
2 OF HARRAH'S JAZZ COMPANY PARISH OF ORLEANS
AMONG
3 HARRAH'S NEW ORLEANS INVESTMENT COMPANY,
NEW ORLEANS/LOUISIANA DEVELOPMENT CORPORATION
4 AND
GRAND PALAIS CASINO, INC.
5
On this 14th day of March, 1994, before me, the
6
undersigned Notary Public, duly commissioned and qualified in and
7
for the State of Louisiana, Parish of Orleans, and in the
8
presence of the undersigned competent witnesses, personally came
9
and appeared:
10
11
HARRAH'S NEW ORLEANS INVESTMENT COMPANY, a Nevada
12
corporation, having an office and mailing address at
13
206 N. Virginia Street, Reno, Nevada 89501 (Taxpayer ID
14
No. 62-1534758), represented herein by Colin V. Reed,
15
its duly authorized Senior Vice President ("Harrah's");
16
17
NEW ORLEANS/LOUISIANA DEVELOPMENT CORPORATION, a
18
Louisiana corporation having an office and mailing
19
address at 3500 North Hullen, Metairie, Louisiana 70002
20
(Taxpayer ID No. 72-1213495), represented herein by
21
Wendell H. Gauthier, its duly authorized Chairman of
22
the Board ("NOLDC"); and
23
24
GRAND PALAIS CASINO, INC., a Delaware corporation
25
(f/k/a Celebration Park Casino, Inc.), having an office
26
and mailing address at 111 Rue D'Iberville, New
27
Orleans, Louisiana 70130 (Taxpayer ID No. 72-1214224),
28
represented herein by Christopher B. Hemmeter, its duly
authorized Chairman of the Board ("Grand Palais");
1 who, being duly sworn, declared that they hereby enter into an
2 Amended and Restated Partnership Agreement effective as of March
3 15, 1994, for purposes of amending, restating and superseding in
4 its entirety that certain Partnership Agreement dated November
5 29, 1993, among Harrah's, NOLDC and Grand Palais (the "Original
6 Agreement"), and adopt Articles of Partnership of HARRAH'S JAZZ
7 COMPANY as follows:
8
9
10 ARTICLE 1
11
12 DEFINITIONS
13
14 Unless otherwise expressly provided herein or unless
15 the context otherwise requires, each of the following terms when
16 used herein shall have the following defined meanings:
17
18 "Additional Capital Contributions" means all capital
19 contributions to the Partnership in excess of the Initial Capital
20 Contributions.
21
22 "Adjusted Capital Account Deficit" has the meaning set
23 forth in Section 4.08(g)(i) hereof.
24
25 "Affiliate" means, as to any Partner (or as to any
26 other Person the affiliates of whom are relevant for purposes of
27 any provisions of this Agreement), (i) any Person owned or
28 Controlled by, under common ownership or Control with, or which
2
1 owns or Controls, directly or indirectly, such Partner or other
2 Person or any trustee of a Partner or other Person or limited
3 partner of a Partner or other Person owning a majority interest
4 in such Partner or other Person, and (ii) any members of such
5 Partner's or other Person's immediate family. For purposes
6 hereof, shares or other ownership interests held by a trust shall
7 be deemed to be owned pro rata by the beneficiaries of such
8 trust, and members of the immediate family of any Partner or
9 other Person shall mean the children, spouse and parents of such
10 Partner or other Person and ownership shall mean ownership of any
11 direct or indirect beneficial interest in the Person with respect
12 to whom Affiliation is being determined.
13
14 "Agreement" means this Amended and Restated Partnership
15 Agreement of Harrah's Jazz Company, as amended, modified or
16 supplemented from time to time.
17
18 "Appraisal Buyout" has the meaning set forth in Section
19 8.05(a) hereof.
20
21 "Appraisal Buyout Price" has the meaning set forth in
22 Section 8.05(b) hereof.
23
24 "Appraisal Panel" has the meaning set forth in Section
25 9.02(e) hereof.
26
27 "Appraised Value" has the meaning set forth in Section
28 9.03 hereof.
3
1 "Assembled Real Estate" means the real property
2 described in Exhibit B-1 attached hereto and by this reference
3 incorporated herein.
4
5 "Budget" means any or all of the Operating Budget,
6 Temporary Casino Project Budget, Permanent Casino Project Budget
7 and Remaining Property Project Budget.
8
9 "Business Day" means any day other than Saturday,
10 Sunday or any day which is a federal or State holiday.
11
12 "Capital Account" has the meaning set forth in Section
13 3.08(a) hereof.
14
15 "Capital Contribution" means the total amount of
16 Initial Capital Contributions, Additional Capital Contributions
17 and any other money and the agreed value of any property
18 (determined net of any liabilities secured by such property that
19 the Partnership is considered to assume or take subject to and
20 determined consistently with Code Section 752(c) and without
21 regard to Code Section 7701(g)) contributed, or to be
22 contributed, as the case may be, to the Partnership by a Partner.
23
24 "Cash Flow" means all cash received by the Partnership
25 from all sources (except Major Capital Events) remaining after
26 payment of current expenses, liabilities, debts or obligations of
27 the Partnership, including without limitation the deduction of
28
4
1 any Contingent Payments under and as defined in the Rivergate
2 Lease and the Temporary Casino Lease.
3
4 "Casino Act" means Act 384 of 1992, codified as L.R.S.
5 4:601, et seq., as amended.
6
7 "Casino Operating Contract" means the contract to be
8 entered into between Louisiana Jazz Company and LEDGC pursuant to
9 the LEDGC Proposal with respect to the Temporary Casino and/or
10 the Permanent Casino as defined by Section 605 (6) of the Casino
11 Act, as such contract may be amended from time to time by the
12 parties thereto.
13
14 "City" means the City of New Orleans in the State.
15
16 "Code" means the Internal Revenue Code of 1986, as
17 amended.
18
19 "Collateral" has the meaning set forth in Section
20 10.03(d)(i) hereof.
21
22 "Completion Loan Agreement" means that certain
23 Completion Loan Agreement contemplated to be entered into by and
24 among the Partnership, Embassy Suites, Inc. and The Promus
25 Companies Incorporated.
26
27 "Control" means the ability, whether by the direct or
28 indirect ownership of shares or other equity interest, by
5
1 contract or otherwise, to elect a majority of the directors of a
2 corporation, to select the managing partner of a partnership (in
3 the case of this Partnership, the power to direct the votes of
4 two (2) of the three (3) members of the Executive Committee
5 representing any Represented Group), or otherwise to select, or
6 have the power to remove and select, a majority of those Persons
7 exercising governing authority over an entity, and, in the case
8 of a limited partnership shall mean the sole general partner, all
9 of the general partners to the extent each has equal management
10 control and authority, or the managing general partner or
11 managing general partners thereof.
12
13 "Conversion Notice" has the meaning set forth in
14 Section 8.04(b) hereof.
15
16 "Default Lender" has the meaning set forth in Section
17 8.04(a)(ii) hereof.
18
19 "Default Loan" has the meaning set forth in Section
20 8.04(a) hereof.
21
22 "Defaulted Obligations" has the meaning set forth in
23 Section 10.03(d) hereof.
24
25 "Defaulting Indemnifying Partner" has the meaning set
26 forth in Section 10.03(d) hereof.
27
28
6
1 "Defaulting Partner" has the meaning set forth in
2 Section 8.01 hereof.
3
4 "Disqualified Buyer" means any Person (i) engaged in a
5 gaming business that generates in excess of Fifty Million Dollars
6 ($50,000,000) in annual gross revenues; (ii) who has at any time
7 in the 5-year period preceding any proposed Transfer been
8 involved in any litigation set forth in any filing of a Form 10-
9 Q, 10-K or 8-K with the Securities and Exchange Commission by
10 Harrah's or any Affiliates that are Controlled by, under common
11 Control with, or Controlling Harrah's, or (iii) any Person which
12 has more than one-third ( 1/3) of its direct or indirect beneficial
13 ownership interest owned or Controlled by any Person described in
14 the foregoing clauses (i) and (ii).
15
16 "Distributions" means all distributions or other
17 payments to Partners by the Partnership of cash or the fair
18 market value of any property (determined net of any liabilities
19 secured by such property that the distributee is considered to
20 assume or take subject to and determined consistently with Code
21 Section 752(c) and without regard to Code Section 7701(g))
22 distributed to the Partners pursuant to Article 4 or Section
23 15.03 hereof.
24
25 "Electing Partner" means a Nondefaulting Partner as
26 determined pursuant to any of Sections 8.03, 8.04 or 8.06 hereof.
27
28
7
1 "Embassy" means Embassy Suites, Inc., a Delaware
2 corporation and an indirect parent of Harrah's.
3
4 "Event of Default" has the meaning set forth in Section
5 7.01 hereof.
6
7 "Exercising Partners' Percentage Share" means for
8 purposes of any election by a Material Partner pursuant to
9 Sections 6.02, 8.03, 8.04 or 8.06 hereof a percentage equal to a
10 fraction the numerator of which is any one electing Material
11 Partner's aggregate Percentage Share and the denominator of which
12 is the sum of all electing Material Partners' aggregate
13 Percentage Shares.
14
15 "Executive Committee" has the meaning set forth in
16 Section 5.01(a) hereof.
17
18 "First Appraiser" has the meaning set forth in Section
19 9.02(a) hereof.
20
21 "Force Majeure", when used with reference to a
22 specified Person, means any event beyond the reasonable control
23 of such Person, including, without limitation, strike, lockout,
24 breakdown, accident or other acts of God, acts of war,
25 insurrection, civil strife and commotion, labor unrest, failure
26 of supply despite the exercise of reasonable diligence by such
27 Person, order or regulation of any governmental authority, and
28 any litigation not instituted or caused by such Person
8
1 interfering with the normal development or operation of the
2 Project.
3
4 "Grand Palais" means Grand Palais Casino, Inc., a
5 Delaware corporation (f/k/a Celebration Park Casino, Inc.).
6
7 "Grand Palais Riverboat" means a single riverboat
8 gaming vessel, the rights to which are currently owned by Grand
9 Palais Riverboat, Inc., which is to be located on the Mississippi
10 River in Orleans Parish in the State together with any ownership
11 or participating interest in any one terminal facility at a
12 single location related thereto, and any joint venture with, or
13 other participation in the revenues or management of, any other
14 riverboat sharing such terminal facility.
15
16 "Gross Revenues" has the meaning set forth in the
17 Management Agreement.
18
19 "Harrah's" means Harrah's New Orleans Investment
20 Company, a Nevada corporation.
21
22 "Holding Entity" means the Partners and any
23 corporation, partnership, trust, limited liability company,
24 limited partnership or other entity or Person that, directly or
25 remotely, holds any interest in the Partnership or any beneficial
26 interest in any Partner's Partnership Interest.
27
28
9
1 "House Bank" has the meaning set forth in Article
2 1.01(gg) of the Management Agreement.
3
4 "Indemnified Person" means as to any Partner
5 indemnified under Article 10 hereof, such Partner and any
6 Affiliate of such Partner, and any agents, attorneys, officers,
7 members, directors, stockholders or employees of such Partner or
8 such Affiliate.
9
10 "Indemnifying Partner" has the meaning set forth in
11 Section 4.05(b) hereof.
12
13 "Indemnifying Partner Default" has the meaning set
14 forth in Section 10.03(d) hereof.
15
16 "Initial Capital Contributions" has the meaning set
17 forth in Section 3.01(a) hereof.
18
19 "Institutional Investor" means a lender or
20 institutional investor which is exempt from a suitability
21 determination by LEDGC, or has been waived from a suitability
22 determination by LEDGC.
23
24 "Keeper" has the meaning set forth in Section 10.03(g)
25 hereof.
26
27 "LEDGC" means Louisiana Economic Development and Gaming
28 Corporation, a special purpose corporation formed by the State
10
1 pursuant to the Casino Act, or any successor governmental
2 authority succeeding to its responsibilities to regulate the
3 Temporary Casino and/or Permanent Casino.
4
5 "LEDGC Proposal" means the proposal, as amended, of
6 Louisiana Jazz Company (f/k/a Harrah's Jazz Company), a Louisiana
7 general partnership whose sole partners are NOLDC and Harrah's,
8 to develop and operate the Project in response to the Second
9 Request For Qualifications and Proposals from LEDGC dated
10 July 21, 1993.
11
12 "Letter of Intent" means the letter dated October 13,
13 1993, among Grand Palais Enterprises, Inc., Grand Palais, NOLDC
14 and Harrah's, and the side letters thereto of even date therewith
15 among NOLDC, Harrah's, Grand Palais and Grand Palais Enterprises,
16 Inc., and among Harrah's, Harrah's New Orleans Management Company
17 and NOLDC.
18
19 "Liquidator" has the meaning set forth in Section
20 15.02(a) hereof.
21
22 "Major Capital Event" means any borrowings or equity or
23 debt financings (except short term borrowing in the ordinary
24 course of business) by the Partnership or otherwise relating to
25 the Project (excluding any loan made pursuant to the Completion
26 Loan Agreement, Partner Loans and any other loans to the
27 Partnership made by a Partner or its Affiliate that is Controlled
28 by, under common Control with, or Controlling such Partner), any
11
1 sale of all or a portion of the Project or any Partnership assets
2 (except dispositions of personal property and equipment in the
3 ordinary course of business), any insured casualty loss or any
4 condemnation or other involuntary conversion with respect to the
5 Project (including losses covered by title insurance), or any
6 revocation or breach by LEDGC under the Casino Operating
7 Contract.
8
9 "Major Decisions" has the meaning set forth in Section
10 5.01(d) hereof.
11
12 "Manager" means Harrah's New Orleans Management
13 Company, a Nevada corporation.
14
15 "Management Agreement" means that certain Amended and
16 Restated Management Agreement by and between the Louisiana Jazz
17 Company (f/k/a Harrah's Jazz Company) and Manager, of even date
18 herewith, and as it may be amended from time to time by the
19 Partnership and Manager.
20
21 "Material Change Order" means any modification or
22 change order with respect to any of the Remaining Project Budget,
23 the Temporary Casino Project Budget, Temporary Casino Conceptual
24 Plans, Permanent Casino Project Budget, or Permanent Casino
25 Conceptual Plans which either (i) result in incremental increases
26 or decreases in costs of Two Hundred Fifty Thousand Dollars
27 ($250,000) per change order or One Million Dollars ($1,000,000)
28 in the aggregate for all modifications or change orders with
12
1 respect to the Temporary Casino or the Permanent Casino
2 considered separately, or (ii) materially change the design or
3 character of the Temporary Casino or Permanent Casino from that
4 which is described in the Temporary Casino Conceptual Plans or
5 the Permanent Casino Conceptual Plans; in either case excluding
6 any modifications or change orders that result from (A) a Force
7 Majeure with respect to the Partnership, (B) delays caused by the
8 City, RDC, LEDGC or any other governmental agency, (C) changes in
9 law or changes in the interpretation of existing law, (D) change
10 in interest rates, (E) title encumbrances or defects, or (F)
11 delays resulting from the conditional use, zoning and other land
12 use entitlements necessary for the Project.
13
14 "Material Partner" means any Partner owning or
15 controlling a twenty-six percent (26%) or greater Percentage
16 Share in the Partnership.
17
18 "Minimum Balance" has the meaning set forth in Article
19 8.03 of the Management Agreement.
20
21 "Monetary Default" means (i) the failure to make an
22 Initial Capital Contribution when and as required by Section 3.01
23 hereof, (ii) the failure to make an Additional Capital
24 Contribution when and as required by Section 3.03 hereof, (iii)
25 the failure to repay a Default Loan at its maturity date, (iv)
26 the failure to pay any indemnity obligations to the Partnership
27 pursuant to Sections 10.02 and 10.04 hereof when due pursuant to
28 Section 10.07(c) hereof, and (v) the failure timely to contribute
13
1 the amount of a negative Capital Account balance pursuant to
2 Section 15.03 hereof.
3
4 "Named Parishes" has the meaning set forth in Section
5 16.01(a) hereof.
6
7 "Net Partnership Price" has the meaning set forth in
8 Section 8.03(e) hereof.
9
10 "NOLDC" means New Orleans/Louisiana Development
11 Corporation, a Louisiana corporation.
12
13 "NOLDC Loan" means (i) fifty percent (50%) of the
14 November Real Estate Loan, and (ii) a non-revolving loan from an
15 Institutional Investor to NOLDC secured by its Partnership
16 Interest in a principal amount equal to Twenty-Three Million
17 Three Hundred and Thirty-Three Thousand, Three Hundred and Thirty
18 Three and 33/100 Dollars ($23,333,333.33), plus any interest or
19 other amounts due pursuant to the loan documents for such loan,
20 the proceeds of which are solely used to fund Initial Capital
21 Contributions or Additional Capital Contributions; provided that
22 in no event may such NOLDC Loan exceed Forty Million Dollars
23 ($40,000,000) in principal amount plus interest or other amounts
24 due thereon.
25
26 "Non-Casino Investments" has the meaning set forth in
27 Section 16.01(a) hereof.
28
14
1 "Nondefaulting Partners" has the meaning set forth in
2 Section 8.01 hereof.
3
4 "Non-Material Partner Appraisal Buyout" has the meaning
5 set forth in Section 8.06(a) hereof.
6
7 "Non-Material Partner Appraisal Buyout Price" has the
8 meaning set forth in Section 8.06(b) hereof.
9
10 "Non-Material Partner Appraisal Purchaser" has the
11 meaning set forth in Section 8.06(a)(ii) hereof.
12
13 "November Real Estate" means the real property
14 described on Exhibit B-2 attached hereto and by this reference
15 incorporated herein.
16
17 "November Real Estate Loan" means that certain Term
18 Note in the original principal amount of $17,827,177.49 by and
19 between First National Bank of Commerce and Louisiana Jazz
20 Company, dated as of November 30, 1993, secured by a collateral
21 mortgage encumbering the November Real Estate.
22
23 "Offer" has the meaning set forth in Section 8.03(b)
24 hereof.
25
26 "Offer Related Partnership Interest" means a portion of
27 the Partnership Interest of the Partner in which a Holding Entity
28 directly or indirectly owns an interest determined by multiplying
15
1 the Percentage Share of such Partner by the percentage of the
2 ownership interest in such Partner directly or indirectly owned
3 by the Holding Entity.
4
5 "Offer Related Partnership Interest Price" has the
6 meaning set forth in Section 6.02(b) hereof.
7
8 "Offeree" has the meaning set forth in Section 8.03(d)
9 hereof.
10
11 "Offered Interest" has the meaning set forth in Section
12 6.02(b) hereof.
13
14 "Offeror" has the meaning set forth in Section 8.03(c)
15 hereof.
16
17 "Operating Budget" means the pre-opening expense budget
18 and annual budgets for the operation of the Temporary Casino or
19 the Permanent Casino, as the case may be, attached to, or
20 presented by the Manager and as approved by the Partnership
21 pursuant to Article 8.02 of the Management Agreement.
22
23 "Operating Cash Deficiency" has the meaning set forth
24 in Section 3.03(a) hereof.
25
26 "Original Agreement" has the meaning set forth in the
27 recital to this Agreement.
28
16
1 "Partners" means Harrah's, NOLDC and Grand Palais, or
2 any other Person who, at the time of reference thereto, has been
3 admitted to the Partnership as a successor or additional Partner
4 of the Partnership, in each such Person's capacity as a general
5 partner.
6
7 "Partner Group" has the meaning set forth in Section
8 5.05(a) hereof.
9
10 "Partner Group Representative" has the meaning set
11 forth in Section 5.05(b) hereof.
12
13 "Partner Loans" means loans to the Partnership by any
14 Partner made from time to time by any Partner with the approval
15 of the Partnership or deemed to have been made pursuant to
16 Section 3.03(c) hereof.
17
18 "Partner Minimum Gain" has the meaning set forth in
19 Section 4.08(g)(iii) hereof.
20
21 "Partnership" means the partnership continued hereby.
22
23 "Partnership Agreement" means this Agreement as it may
24 be amended from time to time pursuant to Section 17.09 hereof.
25
26 "Partnership Interest" means each Partner's total
27 interest in the Partnership, including, without limitation, its
28 Percentage Share, its Capital Account, its right to
17
1 Distributions, and its right, if any, to participate in the
2 management of the Partnership.
3
4 "Partnership Minimum Gain" has the meaning set forth in
5 Section 4.08(g)(ii) hereof.
6
7 "Percentage Share" means the percentage assigned to
8 each Partner by which each such Partner shall share in various
9 allocations and Distributions of the Partnership in accordance
10 with the terms of this Agreement. The Percentage Share initially
11 allocated to each Partner is set forth in Section 3.06 hereof,
12 and is subject to the provisions of Section 8.04(b) hereof.
13
14 "Permanent Casino" means the official gaming
15 establishment described in Sections 605 and 641 of the Casino Act
16 to be constructed pursuant to the Permanent Casino Conceptual
17 Plans and any further plans and specifications approved by the
18 Partnership pursuant to Section 5.01(b) hereof or by Harrah's
19 pursuant to Section 5.01(c) hereof.
20
21 "Permanent Casino Conceptual Plans" means conceptual
22 plans and specifications for the Permanent Casino approved by the
23 Partnership prior to the date of this Agreement as described in
24 Exhibit F-2 attached hereto and by this reference incorporated
25 herein and as thereafter modified from time to time by the
26 Partnership pursuant to Section 5.01(b) hereof or by Harrah's
27 pursuant to Section 5.01(c) hereof.
28
18
1 "Permanent Casino Project Budget" has the meaning set
2 forth in Section 5.02(a) hereof.
3
4 "Permanent Casino Project Costs" has the meaning set
5 forth in Section 5.02(b) hereof.
6
7 "Permanent/Temporary Casino Financing" means financing
8 which meets the following criteria: (i) maximum required equity
9 investment: Seventy Million Dollars ($70,000,000); (ii) non-
10 recourse to the Partners; (iii) maximum interest rate of fourteen
11 percent (14%) per annum; (iv) no equity sharing or contingent
12 interest; (v) security consisting of first leasehold mortgage on
13 the Temporary Casino and the Permanent Casino and a first lien on
14 tangible personal property which is part of the Property; (vi)
15 principal amount sufficient to obtain the Casino Operating
16 Contract, acquire the Assembled Real Estate and the November Real
17 Estate and to design, construct, complete, equip, furnish and
18 open the Temporary Casino and the Permanent Casino (including,
19 without limitation, any payments by the Partnership to the City,
20 RDC, LEDGC or any Partner in connection therewith) according to
21 the Permanent Casino Conceptual Plans and the Temporary Casino
22 Conceptual Plans, but in no event less than Six Hundred Million
23 Dollars ($600,000,000); (vii) weighted average maturity of any
24 public bond financing portion of the financing of no less than
25 seven (7) years, and no more than Two Hundred Million Dollars
26 ($200,000,000) of principal payments required in any year; (viii)
27 institutional lender or public debt with institutional lender
28 trustee approved by LEDGC; and (ix) other terms and conditions
19
1 customary for major casino financing transactions; or such other
2 financing as may be approved by the Partnership to obtain the
3 Casino Operating Contract, acquire the Assembled Real Estate and
4 the November Real Estate and to design, construct, complete,
5 equip, furnish and open the Temporary Casino and the Permanent
6 Casino (including, without limitation, any payments by the
7 Partnership to the City, RDC, LEDGC or any Partner in connection
8 therewith).
9
10 "Person" means any individual, partnership, limited
11 liability company, corporation, unincorporated association, trust
12 or other entity.
13
14 "Prime Rate" means the prime rate of interest charged
15 by Bankers Trust Company, New York, New York to borrowers on
16 ninety (90) day unsecured commercial loans, as the same may be
17 changed from time to time, but if such rate shall cease to be
18 published, the Prime Rate shall be the prime rate of interest
19 published in the Wall Street Journal, adjusted monthly on the
20 first weekday of every month, or, if such rate shall cease to be
21 published, an equivalent published rate of interest as determined
22 by the Partnership.
23
24 "Proceeds of Major Capital Events" means the net
25 proceeds of any Major Capital Event after deducting any closing
26 costs or expenses arising in connection with the Major Capital
27 Event, debt repaid in connection with such Major Capital Event
28 out of such proceeds and any amounts reinvested in the Project or
20
1 the Property or held in any escrow or other restricted accounts
2 for investment in the Project, including without limitation the
3 deduction of any Contingent Payments under and as defined in the
4 Rivergate Lease and the Temporary Casino Lease.
5
6 "Project" means any business conducted at or with
7 respect to the Property.
8
9 "Property" means the Temporary Casino, the Permanent
10 Casino, the Assembled Real Estate, the November Real Estate and
11 such additional movable and immovable property as the Partnership
12 may determine to lease or acquire, that is either located thereat
13 or used in connection with or relates to the business of the
14 Partnership and, following its assignment to the Partnership
15 pursuant to Section 3.01(b) hereof, the Casino Operating
16 Contract.
17
18 "Public Offering" means the issuance and sale of stock
19 or other equity interest in a Person pursuant to a public
20 offering of such stock or equity interest registered with the
21 Securities and Exchange Commission.
22
23 "Public Transfer" means a Transfer of (i) publicly-held
24 stock or other equity interests in a Person provided that such
25 stock or other equity interests are publicly held immediately
26 prior to, at the time of, and immediately following such
27 Transfer, or (ii) shares issued in an initial public offering
28
21
1 pursuant to a registration statement duly filed with and declared
2 effective by the Securities and Exchange Commission.
3
4 "Qualified Institutional Buyer" means a qualified
5 institutional buyer as defined in Rule 144A of the Securities and
6 Exchange Commission promulgated pursuant to the Securities Act of
7 1933, as amended.
8
9 "RDC" means Rivergate Development Corporation, a public
10 benefit corporation formed by the City to act as the Landlord
11 under the Rivergate Lease.
12
13 "Redeemed Interest" has the meaning set forth in
14 Section 8.05(a) hereof.
15
16 "Regulatory Allocations" has the meaning set forth in
17 Section 4.08(h) hereof.
18
19 "Remaining Partner" means a Partner who is eligible to
20 exercise, but does not initiate, any remedy for purposes of any
21 of Sections 8.03, 8.04 or 8.06 hereof.
22
23 "Remaining Property Project Budget" has the meaning set
24 forth in Section 5.02(a) hereof.
25
26 "Remaining Property Project Costs" has the meaning set
27 forth in Section 5.02(b) hereof.
28
22
1 "Representatives" has the meaning set forth in Section
2 5.01(a)(i) hereof.
3
4 "Represented Group" means a Partner Group having at
5 least one Material Partner as a member.
6
7 "Restricted Parties" has the meaning set forth in
8 Section 16.01(a) hereof.
9
10 "Rivergate Lease" means that certain Amended Lease
11 Agreement for the Permanent Casino by and among RDC, as Landlord;
12 City, as Intervenor; and the Partnership, as Tenant, of even date
13 herewith, and all documents incorporated therein by reference, as
14 such lease and documents may be amended by the parties thereto
15 from time to time.
16
17 "Second Appraiser" has the meaning set forth in Section
18 9.02(b) hereof.
19
20 "Secured Party" has the meaning set forth in Section
21 10.03(d) hereof.
22
23 "Securities Act" has the meaning set forth in Section
24 10.03(d)(vi) hereof.
25
26 "Star Casino Riverboat" means that certain riverboat
27 gaming vessel (and license authorizing the development and
28 operation thereof) owned by Star Casino, Inc. (whose shareholders
23
1 include Carl J. Eberts and Louie Roussel, III, shareholders of
2 NOLDC) and located in Orleans Parish in the State.
3
4 "State" means the State of Louisiana.
5
6 "Subsequent Offer" has the meaning set forth in Section
7 6.02(h) hereof.
8
9 "Tax Liabilities" means income tax liabilities which
10 may be chargeable to any Partner, or, if such Partner is not a
11 tax-paying entity, each beneficial owner of such Partner who is a
12 tax-paying entity (using the maximum income tax rate applicable
13 to such Partner or such tax-paying entity) for each fiscal year
14 of the Partnership, in respect of the taxable income of the
15 Partnership (net of any prior taxable loss of the Partnership not
16 previously used to offset taxable income of the Partnership)
17 shown on the information returns of the Partnership as of the end
18 of the fiscal year of the Partnership as to which such
19 determination is being made.
20
21 "Tax Reserve" means a reserve of the Partnership
22 against Tax Liabilities to be established each year and to be
23 equal to the estimated Tax Liabilities of the Partner or
24 applicable tax-paying entity with the highest tax rate for its
25 estimated Tax Liabilities for such year divided by such Partner's
26 Percentage Share (or the Percentage Share beneficially owned by
27 such tax-paying entity). To the extent Tax Liabilities of the
28 Partner or applicable tax-paying entity with the highest actual
24
1 tax rate for Tax Liabilities in any one year exceeds the
2 estimated amount in the Tax Reserve for such Partner or entity
3 times its Percentage Share (or the Percentage Share beneficially
4 owned by such tax-paying entity), the Tax Reserve shall be
5 replenished from Cash Flow to an amount equal to its actual Tax
6 Liabilities divided by its Percentage Share (or the Percentage
7 Share beneficially owned by such tax-paying entity).
8
9 "Temporary Casino" means the temporary gaming
10 establishment to be located at such site as shall be determined
11 by the Partnership, subject to approval by LEDGC pursuant to
12 Section 641(J) of the Casino Act, constructed pursuant to the
13 Temporary Casino Conceptual Plans and any further plans and
14 specifications approved by the Partnership pursuant to Section
15 5.01(b) hereof or by Harrah's pursuant to Section 5.01(c) hereof.
16
17 "Temporary Casino Conceptual Plans" means conceptual
18 plans and specifications for the Temporary Casino approved by the
19 Partnership prior to the date of this Agreement as described on
20 Exhibit F-1 attached hereto and by this reference incorporated
21 herein and as thereafter modified from time to time by the
22 Partnership pursuant to Section 5.01(b) hereof or by Harrah's
23 pursuant to Section 5.01(c) hereof.
24
25 "Temporary Casino Lease" means that certain Temporary
26 Casino Lease by and among the RDC, as Landlord; City, as
27 intervenor; and the Partnership as Tenant, of even date herewith,
28 and all documents incorporated therein, as such lease and
25
1 documents may be amended by the parties thereto from time to
2 time.
3
4 "Temporary Casino Project Budget" has the meaning set
5 forth in Section 5.02(a) hereof.
6
7 "Temporary Casino Project Costs" has the meaning set
8 forth in Section 5.02(b) hereof.
9
10 "Third Appraiser" has the meaning set forth in Section
11 9.02(c) hereof.
12
13 "Transfer" has the meaning set forth in Section 6.01(a)
14 hereof.
15
16 "Treasury Regulation" means the income tax regulations
17 promulgated under the Code, as such regulations may be amended
18 from time to time (including corresponding provisions of
19 succeeding regulations).
20
21 "Unanimous Approval" means unanimous approval by the
22 Represented Groups expressed by vote of their Representatives.
23
24 "Unsuitability Determination" has the meaning set forth
25 in Section 11.01(b) hereof.
26
27 "Valuation Date" has the meaning set forth in Section
28 8.05(a) hereof.
26
1
2 ARTICLE 2
3
4 FORMATION
5
6 2.01 Partnership Agreement. The Partnership is a
---------------------
7 general partnership organized under and pursuant to the terms of
8 the partnership laws of the State and the Original Agreement.
9 From and after its execution, this Agreement shall constitute the
10 only agreement of partnership of the Partners, except as it may
11 hereafter be amended pursuant to the provisions of this
12 Agreement. This Agreement represents the entire agreement and
13 understanding of the parties hereto, and all prior agreements,
14 understandings, representations and warranties in regard to the
15 subject matter hereof, including without limitation, the Letter
16 of Intent and the Original Agreement, are superseded hereby.
17
18 2.02 Organization and Name. The name of the
---------------------
19 Partnership is "Harrah's Jazz Company". At any such time as
20 Harrah's or any Affiliates that are Controlled by, under common
21 Control with, or Controlling Harrah's shall no longer be a
22 Partner in the Partnership, the Partnership shall no longer be
23 entitled to use the word "Harrah's" as a part of its name and
24 shall thereupon change the name of the Partnership to eliminate
25 the use of the word "Harrah's". The partners of the Partnership
26 shall be the Partners. The Partners agree to execute such
27 certificates or documents and make such filings and recordings
28 and perform all other acts, including the filing of this
27
1 Agreement and any amendments hereto, in appropriate governmental
2 offices as may be required to effect any name change of the
3 Partnership or otherwise in order to comply with all applicable
4 laws.
5
6 2.03 Place of Business and Principal Office; Registered
--------------------------------------------------
7 Agent and Registered Office
---------------------------
8
9 (a) The principal place of business of the Partnership
10 shall be the City and its principal office shall be One Canal
11 Place, 365 Canal Street, New Orleans, Louisiana 70130, or at such
12 other place as the Partners may agree.
13
14 (b) The name and address of the registered agent for
15 service of process on the Partnership in the State is The
16 Prentice Hall Corporation System, Inc., 203 Carondelet Street,
17 Suite 811, New Orleans, Louisiana 70130. The registered office
18 of the Partnership is located at such address. The Partnership
19 may designate any other Person as the registered agent and any
20 other location as the registered office, respectively, as the
21 Partnership deems appropriate, subject to applicable law.
22
23 2.04 Purpose and Title. The purpose and business of
-----------------
24 the Partnership shall be to own, develop and operate the Property
25 and the Project. The Partnership shall have the power to do all
26 acts and things necessary, appropriate, convenient or useful in
27 connection with the foregoing. Title to any or all of the
28 Property (or the interest of the Partnership therein) may be
28
1 taken and held in the name of the Partnership and the power of
2 direction vested in the Partnership or its designees, as provided
3 in this Agreement. The Partnership shall be a partnership only
4 for the purposes described in this Section 2.04, and this
5 Agreement shall not be deemed to create a partnership between the
6 Partners with respect to any activities whatsoever other than the
7 activities contemplated hereby or incident thereto.
8
9 2.05 Term. The Partnership commenced on November 29,
----
10 1993 and shall continue in full force and effect until the date
11 which is sixty-one (61) years from date of this Agreement, or
12 until dissolution prior thereto pursuant to the provisions hereof
13 or by operation of law. Each Partner agrees not to withdraw from
14 the Partnership prior to the end of the term of the Partnership
15 set forth in this Section 2.05 or to terminate or dissolve the
16 Partnership other than pursuant to Section 15.01 hereof. If the
17 Partnership is continued pursuant to Section 15.01(f) hereof
18 following the bankruptcy of any Partner, any succession of the
19 Partnership Interest of such Partner shall be deemed a Transfer,
20 subject to and effective upon compliance with all terms and
21 conditions of this Agreement.
22
23
24
25
26
27
28
29
1 ARTICLE 3
2
3 CONTRIBUTIONS
4
5 3.01 Initial Capital Contributions
-----------------------------
6
7 (a) The Partners have previously made capital
8 contributions to the Partnership. The purchases, assignments and
9 transfers to the Partnership pursuant to Section 3.01(b) hereof
10 shall not result in any adjustments to the Capital Accounts of
11 the Partners. The Partners may from time to time hereafter prior
12 to the closing of the Permanent/Temporary Casino Financing make
13 additional capital contributions. Prior to the closing of the
14 Permanent/Temporary Casino Financing, the aggregate initial
15 capital contributions to the Partnership (the "Initial Capital
16 Contributions") shall be not less than the amounts set forth on
17 Exhibit A attached hereto and by this reference incorporated
18 herein.
19
20 (b) The Partnership has purchased the Assembled Real
21 Estate subject to existing debt and liens identified in Exhibit
22 B-1 attached hereto and by this reference incorporated herein.
23 The Partnership has purchased the November Real Estate subject to
24 existing debt and liens identified in Exhibit B-2 hereto. The
25 Partnership has purchased and the Partners have assigned and
26 transferred to the Partnership those certain studies, plans,
27 specifications, engineering reports, environmental reports, and
28 contracts relating to the development and operation of the
30
1 Project (excluding the LEDGC Proposal) identified in Exhibit C
2 attached hereto and by this reference incorporated herein
3 together with all other intangibles and predevelopment assets
4 relating to the Project. NOLDC and Harrah's as partners of
5 Louisiana Jazz Company shall apply for, and together with Grand
6 Palais shall take all action within their control to obtain
7 approval of LEDGC to the transfer of the Casino Operating
8 Contract to the Partnership concurrently with its issuance of the
9 Casino Operating Contract, such transfer to be in consideration
10 of the assumption of all the obligations thereunder by the
11 Partnership. If LEDGC should refuse to approve the transfer of
12 the Casino Operating Contract to the Partnership, and if such
13 alternate procedure is available under the Casino Act, Harrah's
14 and NOLDC shall apply for (i) the approval of LEDGC to the
15 admission of Grand Palais to Louisiana Jazz Company, as an
16 additional general partner; (ii) the approval of LEDGC to the
17 amendment and restatement of the partnership agreement of
18 Louisiana Jazz Company to replicate this Partnership Agreement;
19 and (iii) the approval of RDC and the City to the assignment of
20 the Rivergate Lease and Temporary Casino Lease to Louisiana Jazz
21 Company in consideration of the assumption by Louisiana Jazz
22 Company of such leases. The events described in (i), (ii) and
23 (iii) above shall be undertaken only if all three events are
24 approved and closed simultaneously. The Partners agree that each
25 of the Partners acting alone may enforce the covenants set forth
26 in the three (3) preceding sentences. Each Partner agrees to
27 execute such documents as may be necessary to consummate such
28 events.
31
1 (c) The Partners agree that they shall receive
2 reimbursements of their separate costs and expenses incurred by
3 them for negotiating documents and performing acts necessary to
4 form the Partnership, amend this Agreement, and acquire the
5 Assembled Real Estate and November Real Estate, and enter into
6 the Temporary Casino Lease and the Rivergate Lease, in the period
7 between October 1, 1993 and the closing of the
8 Permanent/Temporary Casino Financing, not to exceed Three Million
9 Dollars ($3,000,000) to each Partner in the amounts as agreed
10 upon by the Partnership only from the proceeds of the
11 Permanent/Temporary Casino Financing, to the extent permitted by
12 the lenders thereof.
13
14 (d) The Partnership shall assume all principal and
15 unpaid interest on each loan described on Exhibits B-1 and B-2
16 hereto as obligations of the Partnership which shall be
17 nonrecourse to the Partners.
18
19 (e) All interest, property taxes, insurance and other
20 carry costs incurred by Grand Palais with respect to the
21 Assembled Real Estate and Louisiana Jazz Company with respect to
22 the November Real Estate, during the period from October 1, 1993
23 through March 15, 1994, shall be reimbursed pari passu to Grand
---- -----
24 Palais in respect of the Assembled Real Estate and Louisiana Jazz
25 Company in respect of the November Real Estate, only from the
26 Proceeds of a Major Capital Event following payment of amounts
27 payable under Section 3.01(f) hereof. Any interest, property
28 tax, insurance or other carry costs with respect to the Assembled
32
1 Real Estate or the November Real Estate which come due after
2 March 15, 1994, and relate to the period from October 1, 1993
3 through March 15, 1994, shall be prorated between the Partnership
4 and Grand Palais or Louisiana Jazz Company, as the case may be.
5 As any such costs hereafter come due, (i) the Partnership shall
6 pay in cash the portion of any such costs allocable to the period
7 after March 15, 1994, for the Assembled Real Estate and the
8 November Real Estate, (ii) Grand Palais shall pay in cash the
9 portion of any such costs allocable to the period prior to March
10 15, 1994, for the Assembled Real Estate, and (iii) Louisiana Jazz
11 Company shall pay in cash the portion of any such costs allocable
12 to the period prior to March 15, 1994, for the November Real
13 Estate. All reimbursements made pursuant to this Section 3.01(e)
14 shall be subject to the following terms and conditions:
15
16 (A) such costs shall be audited and otherwise
17 documented to the reasonable satisfaction of the Executive
18 Committee; and
19
20 (B) payment or reimbursement by the Partnership
21 of such costs shall not be restricted by the Casino Act or other
22 applicable law, rules, regulations or orders or be in violation
23 of Section 16.02 hereof.
24
25 (f) The Partnership shall pay and each Partner shall
26 receive a payment for soft costs incurred prior to September 1,
27 1993 in preparation for the development of the Temporary Casino
28 and Permanent Casino and related personalty sold to the
33
1 Partnership, as set forth on Exhibit A hereto. Such payment
2 shall be made only from and to the extent of any Proceeds of, and
3 upon the occurrence of any Major Capital Events pari passu. Such
---- -----
4 payment may only be used by such Partners for purposes of payment
5 of, or reimbursement for, such soft costs for which it was
6 distributed. Each Partner will, within sixty (60) days following
7 its receipt of such funds, provide an accurate accounting to the
8 Partnership of all payments made with such funds and shall refund
9 to the Partnership, and not otherwise use or distribute, any
10 amounts not applied to the costs for which they were paid. Any
11 funds so refunded to the Partnership shall be held by the
12 Partnership, if requested by the refunding Partner, for later
13 disbursement to pay the costs for which it was reimbursed,
14 provided that if such costs are not paid within one hundred
15 twenty (120) days, the Partnership shall be excused from any
16 obligation to pay the Partners for such costs.
17
18 3.02 Value of Purchased Property. The Partners agree
---------------------------
19 that no credit or other amount in respect of any property
20 purchased by or assigned or transferred to, the Partnership
21 pursuant to Sections 3.01(b) and 3.01(f) hereof shall be credited
22 or attributed to the Capital Account of any Partner.
23
24 3.03 Additional Capital Contributions
--------------------------------
25
26 (a) Additional Capital Contributions shall be made in
27 accordance with each Partner's Percentage Share within five (5)
28 Business Days of written notice from the Partnership that such
34
1 amount is needed because the Partnership lacks sufficient funds
2 in excess of the Minimum Balance and House Bank, to pay its
3 current costs, liabilities or expenses or any contractually
4 required reserve (an "Operating Cash Deficiency").
5
6 (b) Prior to making a call for an Additional Capital
7 Contribution for any reason other than to fund an Operating Cash
8 Deficiency, the Partnership shall first use reasonable efforts
9 for at least twenty (20) days to obtain non-recourse financing
10 from at least two (2) Institutional Investors.
11
12 (c) If any Partners shall timely make all or any
13 portion of any Additional Capital Contributions in response to
14 any call for Additional Capital Contributions made from time to
15 time pursuant to this Section 3.03 and any other Partner or
16 Partners shall fail timely to make corresponding Additional
17 Capital Contributions in an equal amount pursuant to any such
18 call for Additional Capital Contributions, the portion of any
19 Additional Capital Contribution contributed by any Partner or
20 Partners in excess of the lowest amount of Additional Capital
21 Contribution contributed by any other Partner shall be deemed to
22 be Partner Loans bearing interest at a fixed rate equal to the
23 greater of (i) the then Prime Rate plus three percent (3%) or
24 (ii) nine and one-quarter percent (9 1/4%) per annum, but in no
25 event greater than the maximum rate permitted by applicable law,
26 from the date such amount was advanced until the date such amount
27 is repaid; provided that such deemed Partner Loan shall not cure
28 the default of the Partner failing to make an Additional Capital
35
1 Contribution. If NOLDC fails timely to make any Additional
2 Capital Contributions pursuant to this Section 3.03, each
3 Nondefaulting Partner shall have the option either to make a
4 Default Loan to NOLDC pursuant to Section 8.04 hereof, or to fund
5 directly to the Partnership all or any portion of NOLDC's
6 Additional Capital Contribution as a Partner Loan on the same
7 terms as a Partner Loan pursuant to the preceding sentence. To
8 the extent that every Partner failing timely to make an
9 Additional Capital Contribution shall cure its default by
10 thereafter making such Additional Capital Contribution or to the
11 extent such Partner's failure to make such Additional Capital
12 Contribution shall be cured by a Default Loan subsequently made
13 to the Partner failing timely to make its Additional Capital
14 Contribution, any Partner Loan deemed to have been made pursuant
15 to this Section 3.03(c) shall from and after the date of such
16 cure be thereafter deemed to be an equity contribution pursuant
17 to Section 3.03(a) hereof but the Partnership shall remain liable
18 for any interest accruing on any such Partner Loan up to the date
19 of such cure or repayment of such Partner Loan.
20
21 3.04 Financing. The Partnership desires to obtain
---------
22 Permanent/Temporary Casino Financing to fund all costs necessary
23 to lease, design, construct, complete, equip, furnish and open
24 the Temporary Casino and the Permanent Casino.
25
26 3.05 Evidence of Partnership Interest. No certificates
--------------------------------
27 or other evidence of ownership shall be issued with respect to
28 the Partnership Interests except this Agreement which, when
36
1 executed, shall solely represent and evidence the interest owned
2 by each Partner. In the event Partnership certificates are
3 issued with respect to the Partnership Interests, such
4 certificates shall be legended in accordance with the Casino Act
5 and this Agreement and shall represent and evidence the interest
6 owned by each Partner and shall bear a legend stating that such
7 Partnership Interests are subject to any restrictions required by
8 the Rivergate Lease and all the terms and conditions of this
9 Partnership Agreement.
10
11 3.06 Percentage Share. The Percentage Share which is
----------------
12 attributed to each Partner shall be as follows:
13
14 Harrah's 33 1/3%
15 NOLDC 33 1/3%
16 Grand Palais 33 1/3%.
17
18 Such Percentage Shares are subject to revision pursuant to
19 Article 8 hereof.
20
21 3.07 Withdrawal of Capital; Loans. No Partner shall
----------------------------
22 have any right to withdraw or make a demand for withdrawal of all
23 or any portion of such Partner's capital (or the amount, if any,
24 reflected in such Partner's Capital Account). No interest or
25 additional share of profits shall be paid or credited to the
26 Partners on their Capital Accounts, or on any undistributed
27 profits or funds left on deposit with the Partnership; provided,
28 however, that nothing herein contained shall be construed to
37
1 prevent or prohibit the payment of interest on account of Partner
2 Loans. Any Partner Loans shall not increase a Partner's Capital
3 Account or interest in the profits, losses, or Distributions, but
4 shall be a debt due from the Partnership. No Partner shall make
5 Partner Loans to the Partnership unless such Partner Loans are
6 approved by the Partnership or are made or deemed made pursuant
7 to Section 3.03(c) hereof.
8
9 3.08 Capital Accounts
----------------
10
11 (a) There shall be established for each Partner on the
12 books of the Partnership, as of the date hereof, a capital
13 account (the "Capital Account") reflecting the excess (deficit)
14 of (i) the sum of (A) such Partner's initial Capital Account
15 balance which initial balance reflects the Initial Capital
16 Contributions of such Partner to the Partnership, (B) such
17 Partner's Additional Capital Contributions (if any) to its
18 Capital Account made in accordance with this Agreement, (C) such
19 Partner's share of taxable income and (D) such Partner's share of
20 tax-exempt income of the Partnership over (ii) the sum of (A)
21 such Partner's share of tax losses, (B) such Partner's share of
22 other Partnership expenditures that are not deductible for
23 federal income tax purposes and (C) any Distributions to such
24 Partner, (iii) as adjusted by such Partner's share of income,
25 gain, deduction or loss described in Treasury Regulation Section
26 1.704-1(b)(2)(iv)(g) to reflect differences between adjusted
27 basis for tax purposes and the value reflected in the Capital
28 Accounts.
38
1 (b) Notwithstanding any other provision in this
2 Section 3.08 or elsewhere in this Agreement, each Partner's
3 Capital Account shall be maintained and adjusted in accordance
4 with the Code and the Treasury Regulations, including Treasury
5 Regulation Section 1.704-1(b)(2)(iv). It is intended that
6 appropriate adjustments shall thereby be made to Capital Accounts
7 to give effect to any income, gain, loss or deduction (or items
8 thereof) that is specially allocated pursuant to this Agreement.
9
10 (c) A Partner's Capital Account shall be reduced by
11 the fair market value (determined without regard to Code Section
12 7701(g)) of any property (net of liabilities secured by such
13 property that the Partner is considered to assume or take subject
14 to and determined consistently with Code Section 752(c))
15 distributed by the Partnership to such Partner, whether in
16 connection with a liquidation of the Partnership or of such
17 Partner's Partnership Interest or otherwise. Accordingly,
18 Capital Accounts shall first be adjusted to reflect the manner in
19 which the unrealized income, gain, loss and deduction inherent in
20 such property (that has not been previously reflected in Capital
21 Accounts) would be allocated, pursuant to Article 4 hereof, among
22 the Partners if there were a taxable disposition of such property
23 for its fair market value (taking Code Section 7701(g) into
24 account) on the date of distribution.
25
26 (d) The foregoing provisions and other provisions of
27 this Agreement relating to the maintenance of Capital Accounts
28 are intended to comply with Treasury Regulation Section 1.704-1,
39
1 and shall be interpreted and applied in a manner consistent with
2 such Treasury Regulation. In the event the Partnership shall
3 determine that it is prudent to modify the manner in which the
4 Capital Accounts, or any debits or credits thereto, are computed
5 in order to comply with such Treasury Regulation, the Partnership
6 may make such modification, provided that it will not have a
7 material adverse effect on the amounts distributable to any
8 Partner during the operation of, or upon the dissolution of, the
9 Partnership.
10
11
12 ARTICLE 4
13
14 ALLOCATIONS AND DISTRIBUTIONS
15
16 4.01 Allocations of Taxable Income. Except as provided
-----------------------------
17 in Section 4.08 hereof, taxable income of the Partnership
18 (including any gain realized in a Major Capital Event) shall be
19 allocated among the Partners in accordance with their Percentage
20 Shares.
21
22 4.02 Allocations of Tax Loss. Except as provided in
-----------------------
23 Section 4.08 hereof, tax loss of the Partnership (including any
24 loss realized in a Major Capital Event) shall be allocated among
25 the Partners in accordance with their Percentage Shares.
26
27 4.03 Timing and Amount of Allocations of Taxable Income
--------------------------------------------------
28 and Tax Loss. Taxable income and tax loss of the Partnership
------------
40
1 shall be determined and allocated with respect to each fiscal
2 year of the Partnership as of the end of such year. Subject to
3 the other provisions of this Article 4, an allocation to a
4 Partner of a share of taxable income or tax loss shall be treated
5 as an allocation of the same share of each item of income, gain,
6 loss or deduction that is taken into account in computing taxable
7 income or tax loss of the Partnership.
8
9 4.04 Distributions of Cash Flow and Proceeds of Major
------------------------------------------------
10 Capital Event. Cash Flow and Proceeds of Major Capital Events
-------------
11 shall be reserved or distributed as follows:
12
13 (a) to establish reserves for: (i) contingent or
14 unforeseen obligations, debts or liabilities of the Partnership
15 which may be deemed reasonably necessary by the Partnership's
16 accountants, (ii) amounts required by any contracts or agreements
17 of the Partnership, or (iii) such other purposes as the
18 Partnership may decide;
19
20 (b) to repay any principal and interest on Partner
21 Loans deemed made pursuant to Section 3.03(c) hereof on a first
22 in - first out basis, and if there are more than one Partner Loan
23 made or deemed made pursuant to Section 3.03(c) hereof of equal
24 priority, on a pari passu basis;
---- -----
25
26 (c) to establish the Tax Reserve to be held by the
27 Partnership and distributed in accordance with Section 4.07
28 hereof;
41
1 (d) subject to Section 4.05 hereof, to repayment to the
2 Partners first of any interest due on any Partner Loans other
3 than those made or deemed made pursuant to Section 3.03(c) hereof
4 pari passu in accordance with the total amount of interest
---- -----
5 outstanding on all such Partner Loans and, second of any
6 principal due on any Partner Loans other than those made or
7 deemed made pursuant to Section 3.03(c) hereof pari passu in
---- -----
8 accordance with the total amount of principal outstanding on all
9 such Partner Loans, or in such other order of priority as the
10 Partnership shall agree upon at the time any Partner Loan other
11 than those made or deemed made pursuant to Section 3.03(c) hereof
12 is approved by the Partnership; and
13
14 (e) subject to Section 4.05 hereof, to the Partners in
15 accordance with their respective Percentage Shares.
16
17 4.05 Reallocation of Distribution Priorities
---------------------------------------
18
19 (a) At any time when any Default Loan shall be
20 outstanding, all Distributions pursuant to Sections 4.04 or 15.03
21 hereof from and after the making of such Default Loan to which
22 the Defaulting Partner would otherwise be entitled shall be
23 considered a Distribution to the Defaulting Partner but shall be
24 paid directly to the Default Lender to be applied first against
25 interest and then against the principal of any Default Loans
26 until the repayment in full of all accrued interest and principal
27 of any Default Loans or an election or elections by any Default
28 Lender pursuant to Sections 8.04(b) or 8.04(c) hereof to increase
42
1 the Default Lender's Percentage Share with respect to all Default
2 Loans which have not previously been repaid in full. If there
3 are more than one Default Loans outstanding to a Nondefaulting
4 Partner or Partners, any Distributions to be paid directly to any
5 Default Lender pursuant to this Section 4.05(a) shall be applied
6 to such Default Loans on a first in-first out basis. If there
7 are more than one Default Loans of equal priority, such
8 Distributions shall be applied to such Default Loans on a pari
----
9 passu basis. Any such amounts so applied to accrued and unpaid
-----
10 interest and then to principal on a Default Loan shall be
11 considered a Distribution to, and deducted from the Capital
12 Account of, the Defaulting Partner to whom such Default Loan was
13 made. At any time when payments are currently due and owing on
14 the NOLDC Loan, Distributions otherwise payable to the Default
15 Lender of a Default Loan to NOLDC shall be paid to NOLDC, but
16 only to the extent that NOLDC in fact applies such Distributions
17 to the repayment of the NOLDC Loan. The Partnership shall make
18 any such payment by a check to the lender of the NOLDC Loan. Any
19 such amounts so applied to the NOLDC Loan shall be considered a
20 Distribution to, and shall be deducted from the Capital Account
21 of, NOLDC.
22
23 (b) Where a Distribution is otherwise available to a
24 Partner pursuant to Section 4.04 hereof or Section 15.03 hereof
25 and any such Partner shall owe or have its Partnership Interest
26 encumbered to secure any amount due to any Indemnified Person
27 pursuant to Section 10.02 hereof or Section 10.04 hereof (an
28 "Indemnifying Partner"), such Distribution shall be considered a
43
1 Distribution to such Partner but shall be paid directly to the
2 Indemnified Person, subject and subordinate to any rights of a
3 secured Institutional Investor holding a valid and enforceable
4 security interest therein to receive Distributions and the rights
5 of Harrah's pursuant to its security interest in NOLDC's
6 Partnership Interest granted by that certain Harrah's/NOLDC Loan
7 Agreement of even date herewith, until such amount owed under
8 Section 10.02 hereof or Section 10.04 hereof shall have been
9 satisfied; provided that if the Indemnifying Partner also is a
10 Defaulting Partner to whom a Default Loan is outstanding, any
11 Distributions otherwise payable to such Defaulting Partner shall
12 first be applied pursuant to Section 4.05(a) hereof until its
13 Default Loans are repaid and thereafter shall be applied pursuant
14 to this Section 4.05(b). Any such amounts so applied to
15 indemnity obligations or Default Loans shall be considered a
16 Distribution to such Partner and shall be deducted from the
17 Indemnifying Partner's Capital Account.
18
19 4.06 Priority and Distribution of Property. Except as
-------------------------------------
20 provided in Section 4.05 hereof or otherwise expressly provided
21 in this Agreement, no Partner shall have priority over any other
22 Partner as to the return of capital, allocation of income or
23 losses, or distributions of Cash Flow or Proceeds of Major
24 Capital Events or any other Distributions. No Partner shall have
25 the right to demand or receive property other than cash for its
26 Capital Contributions to the Partnership or in payment of its
27 share of Cash Flow, Proceeds of Major Capital Events or other
28 Distributions.
44
1 4.07 Distribution of Tax Reserve. Within sixty (60)
---------------------------
2 days after the end of each Partnership fiscal year during which a
3 Tax Reserve has been created, the Partnership shall distribute
4 such Tax Reserve to the Partners, such Distribution to be
5 allocated among the Partners based on each Partner's Percentage
6 Share.
7
8 4.08 Additional Allocation Provisions. Notwithstanding
--------------------------------
9 the foregoing provisions of this Article 4:
10
11 (a) The losses allocated under Section 4.02 hereof to
12 any Partner shall not exceed the maximum amount of losses that
13 can be so allocated without causing such Partner to have an
14 Adjusted Capital Account Deficit at the end of any fiscal year.
15 If some but not all of the Partners would have Adjusted Capital
16 Account Deficits as a consequence of an allocation of losses
17 pursuant to Section 4.02 hereof, then the limitation set forth in
18 this Section 4.08(a) shall be applied so as to allocate the
19 maximum permissible loss to each Partner under the preceding
20 sentence and Treasury Regulation Section 1.704-1(b)(2)(ii)(d).
21 Losses, the allocation of which to any Partner are prohibited
22 under the first sentence of this Section 4.08(a), shall be
23 allocated to the remaining Partners in proportion to their
24 respective Percentage Shares.
25
26 (b) Notwithstanding any other provisions of this
27 Section 4.08, if there is a net decrease in Partnership Minimum
28 Gain during any Partnership fiscal year, each Partner shall be
45
1 specially allocated items of Partnership income and gain (as
2 specified in Treasury Regulations Sections 1.704-2(f)(6) and
3 1.704-2(j)(2)(i)) for such year (and, if necessary, for
4 subsequent years, as provided in Treasury Regulation Section
5 1.704-2(j)(2)(iii)) in an amount equal to the portion of such
6 Partner's share of the net decrease in such Partnership Minimum
7 Gain, determined in accordance with Treasury Regulation Section
8 1.704-2(g)(2). The items of income and gain to be so specially
9 allocated pursuant to this Section 4.08(b) shall be determined in
10 accordance with Treasury Regulation Section 1.704-2(f). This
11 Section 4.08(b) is intended to comply with the minimum gain
12 chargeback requirement of Treasury Regulation Section 1.704-2(f)
13 and shall be interpreted consistently therewith.
14
15 (c) Notwithstanding any provision of this Section 4.08
16 to the contrary (except Section 4.08(b) hereof), if there is a
17 net decrease in Partner Minimum Gain attributable to a "partner
18 nonrecourse debt" (within the meaning of Treasury Regulation
19 Section 1.704-2(b)(4)) during any Partnership fiscal year, each
20 Partner who has a share of the Partner Minimum Gain attributable
21 to such partner nonrecourse debt, determined in accordance with
22 Treasury Regulation Section 1.704-2(i)(5), shall be specially
23 allocated items of Partnership income and gain (as specified in
24 Treasury Regulation Section 1.704-2(j)(2)(ii)) for such fiscal
25 year (and, if necessary, subsequent years, as provided in
26 Regulation Section 1.704-(j)(2)(iii)) in an amount equal to the
27 portion of such Partner's share of the net decrease in Partner
28 Minimum Gain attributable to such partner nonrecourse debt,
46
1 determined in accordance with Treasury Regulation Section
2 1.704-2(g)(2). The items of income and gain to be so specially
3 allocated pursuant to this Section 4.08(c) shall be determined in
4 accordance with Treasury Regulation Section 1.704-2(i)(4). This
5 Section 4.08(c) is intended to comply with the partner minimum
6 gain chargeback requirement of Treasury Regulation Section
7 1.704-2(i)(4) and shall be interpreted consistently therewith.
8
9 (d) Subject to the priority rules of Treasury
10 Regulation Section 1.704-2, if any Partner unexpectedly receives
11 any adjustment, allocation or distribution described in Treasury
12 Regulation Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-
13 1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6) that causes or
14 increases an Adjusted Capital Account Deficit with respect to
15 such Partner, items of Partnership income and gain shall be
16 specially allocated to such Partner in an amount and manner
17 sufficient to eliminate, to the extent required by Treasury
18 Regulation Sections 1.704-1(b) and 1.704-2, the Adjusted Capital
19 Account Deficit of such Partner as quickly as possible. It is
20 intended that this Section 4.08(d) qualify and be construed as a
21 "qualified income offset" within the meaning of Treasury
22 Regulation Section 1.704-1(b)(2)(ii)(d).
23
24 (e) If special allocations are required under Sections
25 4.08(b), 4.08(c) and/or 4.08(d) hereof in any fiscal year, such
26 allocations shall be made in the priorities required by Treasury
27 Regulation Sections 1.704-1(b) and 1.704-2.
28
47
1 (f) "Nonrecourse deductions" (within the meaning of
2 Treasury Regulation Sections 1.704-2(b)(1) and 1.704-2(c)) for
3 any fiscal year or other period shall be specially allocated to
4 the Partners in proportion to their Percentage Shares. "Partner
5 nonrecourse deductions" (within the meaning of Treasury
6 Regulation Section 1.704-2(i)) for any fiscal year or other
7 period shall be specially allocated to the Partner who bears the
8 economic risk of loss with respect to the "partner nonrecourse
9 debt" (within the meaning of Treasury Regulation Section
10 1.704-2(b)(4)) to which such partner nonrecourse deductions are
11 attributable in accordance with Treasury Regulation Section
12 1.704-2(i).
13
14 (g) As used herein, the following terms shall have the
15 following meanings associated with them:
16
17 (i) The term "Adjusted Capital Account Deficit"
18 means, with respect to any Partner, the deficit balance, if any
19 in such Partner's Capital Account as of the end of the relevant
20 fiscal year, after giving effect to the following adjustments:
21
22 (A) Add to such Capital Account the
23 following items: (1) the amount, if any, which such Partner is
24 obligated to contribute to the Partnership upon liquidation of
25 such Partner's interest; and (2) the amount which such Partner is
26 deemed to be obligated to restore to the Partnership pursuant to
27 the penultimate sentences of Treasury Regulation Sections
28 1.704-2(g)(1) and 1.704-2(i)(5); and
48
1 (B) Subtract from such Capital Account such
2 Partner's share of the items described in Treasury Regulation
3 Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
4 1.704-1(b)(2)(ii)(d)(6).
5
6 (ii) The term "Partnership Minimum Gain" shall
7 have the meaning set forth in Treasury Regulation Sections
8 1.704-2(b) and 1.704-2(d).
9
10 (iii) The term "Partner Minimum Gain" means an
11 amount, with respect to each "partner nonrecourse debt" (within
12 the meaning of Treasury Regulation Section 1.704-2(b)(4)), equal
13 to the Partnership Minimum Gain that would result if such partner
14 nonrecourse debt were treated as a "nonrecourse liability"
15 (within the meaning of Treasury Regulation Sections 1.704-2(b)(3)
16 and 1.752-1 (a)(2)), determined in accordance with Treasury
17 Regulation Section 1.704-2(i).
18
19 (h) The Partners acknowledge that all Distributions
20 (including distributions upon liquidation of the Partnership) are
21 intended to be made in accordance with the priorities set forth
22 in Sections 4.04, 4.05 and 15.03 hereof and that the Partners'
23 Capital Accounts are intended to reflect the manner in which such
24 distributions are intended to be made. The allocations set forth
25 in Sections 4.08(a) (last sentence), 4.08(b), 4.08(c), 4.08(d)
26 and/or 4.08(e) hereof (the "Regulatory Allocations") are intended
27 to comply with certain requirements of Treasury Regulation
28 Sections 1.704-1(b) and 1.704-2, but may result in distortions of
49
1 the Partners' Capital Accounts in relation to the Distributions
2 that each Partner is intended to receive from the Partnership.
3 Notwithstanding the provisions of Sections 4.01, 4.02, 4.03 and
4 4.08 hereof (other than the Regulatory Allocations), the
5 Regulatory Allocations shall be taken into account in allocating
6 other items of income, gain, loss and deduction among the
7 Partners so that, to the extent possible, at any point in time
8 the Partners' Capital Accounts shall reflect the manner in which
9 Distributions would be made to the Partners if the Partnership
10 were liquidated and the proceeds of such liquidation were
11 distributed to the Partners in accordance with Section 15.03
12 hereof.
13
14 (i) For any fiscal year during which (i) a Partner's
15 Partnership Interest is assigned by such Partner (or by an
16 assignee or successor in interest to a Partner) or (ii) a
17 Partner's Percentage Share changes, the portion of the taxable
18 income and tax loss of the Partnership that is allocable in
19 respect of such Partner's Transferred or modified Partnership
20 Interest shall be apportioned between the assignor and the
21 assignee of such Partner's Partnership Interest, in the case of
22 an assignment, or allocated, as otherwise provided in this
23 Article 4, in the case of a change in Percentage Shares, on the
24 basis of a monthly interim closing of the Partnership's books
25 (with all items prorated equally to each day of such month),
26 without regard to any payments or distributions made to the
27 Partners before or after such assignment or change, except as
28 otherwise provided in and required by Code Section 706(d)(2);
50
1 provided that in any event any assignments or Transfers of any
2 Partnership Interest shall be subject to the provisions of
3 Article 6 hereof.
4
5 (j) Amounts paid to a Person who is deemed a partner
6 for federal income tax purposes shall be treated as either
7 payments to a partner not acting as a partner under Code Section
8 707(a) or as guaranteed payments under Code Section 707(c). In
9 the event that any amount claimed by the Partnership to
10 constitute a deductible expense in any fiscal year is treated for
11 federal income tax purposes as a distribution made to a Partner
12 (or a Person deemed to be a partner for federal income tax
13 purposes) in its capacity as a partner of the Partnership and not
14 a guaranteed payment as defined in Code Section 707(c) or a
15 payment to a Partner not acting in its capacity as a partner
16 under Code Section 707(a), then the Partner (or other Person) who
17 is deemed to have received such distribution shall first be
18 allocated an amount of Partnership gross income equal to such
19 payment, its Capital Account shall be reduced to reflect the
20 distribution, and for purposes of this Article 4, taxable income
21 and tax loss shall be determined after making the allocation
22 required by this Section 4.08(j).
23
24 (k) Notwithstanding any other provision of this
25 Agreement, allocations of items for book and tax purposes and
26 adjustments to the Partners' Capital Accounts shall be made in
27 accordance with the provisions of Treasury Regulation Sections
28 1.704-1(b) and 1.704-2. In particular, as required by Treasury
51
1 Regulation Section 1.704-1(b)(4)(i), income, gain, loss and
2 deduction for tax purposes with respect to Partnership property
3 revalued on the Partnership's books and records shall be shared
4 among the Partners so as to take account of the variation between
5 the adjusted tax basis of such property and its book value in the
6 same manner as variations between the adjusted tax basis and fair
7 market value of property contributed to a partnership are to be
8 taken into account in determining the Partners' shares of tax
9 items under Code Section 704(c).
10
11 (l) Notwithstanding the foregoing provisions of this
12 Article 4, income, gain, loss and deduction with respect to
13 property contributed to the Partnership by a Partner shall be
14 shared among the Partners, pursuant to Treasury Regulations
15 promulgated under Code Section 704(c), so as to take account of
16 the variation, if any, between the basis of the property to the
17 Partnership and its fair market value at the time of
18 contribution.
19
20 (m) In the event that the Code or any Treasury
21 Regulations promulgated thereunder require allocations of items
22 of income, gain, loss, deduction or credit different from those
23 set forth in this Agreement, upon the advice of the Partnership's
24 counsel or accountants, the Partners shall make new allocations
25 in reliance upon the Code, the Treasury Regulations and such
26 advice of the Partnership's counsel or accountants.
27
28
52
1 4.09 Guaranteed Payments
-------------------
2
3 (a) If any Partner or its Affiliate has been required
4 to pay to the Landlord a portion of its Profit (as Profit and
5 Affiliate are defined in the Temporary Casino Lease and in the
6 Rivergate Lease) upon a sale, assignment, transfer or other
7 disposition of any ownership interest in such Partner or its
8 Affiliate pursuant to Section 24.1 of the Rivergate Lease or
9 Section 24.1 of the Temporary Casino Lease, upon a subsequent
10 sale or other disposition of the Temporary Casino or Permanent
11 Casino, as the case may be, which results in a credit to the
12 Partnership against payments to Landlord pursuant to Section 4.8
13 of the Rivergate Lease or Section 4.8 of the Temporary Casino
14 Lease, as the case may be, such Partner shall receive a
15 guaranteed payment in an amount equal to the credit received by
16 the Partnership against the amount paid by the Partnership to the
17 Landlord pursuant to Section 22.2 of the Rivergate Lease or
18 Section 22.2 of the Temporary Casino Lease in respect of such
19 subsequent sale or other disposition; provided that if the
20 guaranteed payment as a result of such subsequent sale or other
21 disposition is less than the amount of the previous payment to
22 the Landlord by a Partner, any remaining amount of such previous
23 payment shall be paid as a guaranteed payment to such Partner
24 upon any sales or dispositions by the Partnership thereafter
25 until such Partner has received guaranteed payments equal to the
26 full amount of such previous payments. If any guaranteed
27 payments are due to more than one Partner pursuant to this
28 Section 4.09(a), such guaranteed payments shall be made pari
----
53
1 passu to such Partners from the proceeds of any such subsequent
-----
2 sale or other disposition.
3
4 (b) To the extent a Partner does not receive
5 reimbursements of costs and expenses of Three Million Dollars
6 ($3,000,000) as provided in Section 3.01(c) hereof, such Partner
7 shall receive a guaranteed payment in an amount equal to the
8 difference between the amount actually received pursuant to
9 Section 3.01(c) hereof and Three Million Dollars ($3,000,000).
10 Such guaranteed payment shall be determined without regard to the
11 income of the Partnership and shall constitute a guaranteed
12 payment pursuant to Section 707(c) of the Code. Such guaranteed
13 payment shall be payable from the first Cash Flow or Proceeds of
14 Major Capital Event available to the Partnership.
15
16 4.10 Unpermitted Payments, Distributions and
---------------------------------------
17 Reimbursements. Notwithstanding any other provision in this
--------------
18 Agreement, the Partners agree that no payment, Distribution or
19 reimbursement shall be made by the Partnership to any Partner if
20 and to the extent any such payment, Distribution or reimbursement
21 would be in violation of any gaming law, rule or regulation, or
22 administrative determination applicable to such Partner or the
23 Partnership and such Partner shall be otherwise subject to any
24 other remedies as shall be required by applicable law.
25
26
27
28
54
1 ARTICLE 5
2
3 DECISIONS AND MANAGEMENT
4
5 5.01 Management
----------
6
7 (a) Except as provided in Section 5.01(c) hereof,
8 management and control of the Partnership shall be vested in the
9 Executive Committee pursuant to this Section 5.01. Except as
10 otherwise provided in Sections 5.01(f) and (h) hereof, all
11 decisions arising under this Agreement shall require Unanimous
12 Approval. No Partner shall hold itself out as having actual or
13 apparent authority to bind the Partnership without first
14 obtaining Unanimous Approval. The Partnership shall act through
15 a nine (9) member executive committee (the "Executive Committee")
16 appointed and acting pursuant to the following procedures:
17
18 (i) Each Represented Group shall appoint three
19 (3) natural persons to be members on the Executive Committee (the
20 "Representatives"). If any Represented Group fails at any time
21 to have at least one of its three (3) Representatives duly
22 appointed to the Executive Committee, such Represented Group
23 shall forfeit its right to representation on the Executive
24 Committee until such time as such Represented Group appoints at
25 least one (1) natural person to be a Representative. Each
26 Represented Group shall have the right to replace any
27 Representative appointed by such Represented Group at any time at
28 its sole discretion by written notice to the Material Partner(s)
55
1 who are members of the other Represented Groups. One
2 Representative of each three (3) Representative group
3 representing a Represented Group on the initial Executive
4 Committee shall be a member of a minority group.
5
6 (ii) Each three (3) member group of
7 Representatives representing a Represented Group on the Executive
8 Committee shall be obligated to vote as a block and shall be
9 controlled by a majority vote of such group of three
10 Representatives.
11
12 (iii) The Representatives may adopt by-laws to
13 govern the conduct of the Executive Committee.
14
15 (iv) Any Representative may participate in any
16 duly noticed meeting through the use of any means of
17 communication by which all Representatives participating may
18 simultaneously hear and speak to each other during the meeting.
19 A Representative participating in a meeting by this means shall
20 be deemed to be present in person at such meeting.
21
22 (v) Any action required or permitted to be taken
23 by the Executive Committee may be taken without a meeting if the
24 action is taken by at least two (2) Representatives of each three
25 (3) member group of Representatives. Any such action shall be
26 evidenced by one or more written consents describing the action
27 taken, signed by at least two (2) Representatives appointed by
28 each Represented Group, and included in Partnership records
56
1 reflecting such action. Any such action shall be effective when
2 the last required Representative signs the consent, unless the
3 consent specifies a different effective date.
4
5 (vi) Any Representative may waive any notice
6 requirement of this Section 5.01 before or after the date and
7 time stated in such notice. Except as provided below, a
8 Representative's waiver must be in writing, signed by such
9 Representative and included in Partnership records with respect
10 to such meeting. A Representative's attendance at or
11 participation in a meeting waives any required notice to such
12 Representative unless the Representative objects at the beginning
13 of the meeting to holding the meeting or to transacting business
14 at the meeting and does not thereafter vote for or assent to
15 action taken at such meeting.
16
17 (vii) No Person other than the Material Partners
18 who are members of any Represented Group shall have Control of,
19 or the right to select, more than one Representative of any three
20 (3) member group of Representatives on the Executive Committee
21 unless the Partner Group Representatives of the remaining
22 Represented Groups otherwise unanimously agree. If any Partner
23 Group no longer has a Material Partner as a member of its Partner
24 Group, such Partner Group shall no longer be entitled to have
25 representation on the Executive Committee. Following any
26 suspension of a right of representation by a Material Partner
27 which is a Defaulting Partner pursuant to Section 8.01(e) hereof,
28 such Represented Group of which such Material Partner is a member
57
1 shall no longer be entitled to representation on the Executive
2 Committee until such time as the Event of Default is cured.
3
4 (viii) Unless otherwise agreed by the Partnership,
5 all meetings of the Executive Committee shall be held in the City
6 between 9:00 a.m. and 4:00 p.m. on any Tuesday, Wednesday or
7 Thursday which is a Business Day. Any Represented Group may call
8 a meeting of the Executive Committee upon not less than three (3)
9 days advance notice from a Material Partner who is a member of
10 such Represented Group to the Material Partners who are members
11 of each other Represented Group. If no Representatives of a
12 Represented Group appear at a duly noticed meeting, or if all
13 Representatives of a Represented Group who do appear abstain from
14 voting at a duly noticed meeting, Unanimous Approval shall be
15 deemed to mean the unanimous consent of those Represented Groups
16 whose Representatives appear at such duly noticed meeting and who
17 vote at such duly noticed meeting of the Executive Committee.
18 Members of Represented Groups may vote by proxies for any other
19 members of their three (3) member group of Representatives on the
20 Executive Committee. A Represented Group shall be deemed to have
21 appeared at a duly noticed meeting of the Executive Committee if
22 at least one Representative appointed by such Represented Group
23 appears at such meeting and at least two (2) of its three (3)
24 Representatives are represented in person or by proxy.
25
26 (b) The Represented Groups, acting in accordance with
27 Section 5.01(a) hereof, shall have the power and authority to
28
58
1 carry out all Partnership purposes, including (without
2 limitation) to do any of the following:
3
4 (i) enter into such sales agreements,
5 construction agreements, leases, licenses, easements, servitudes,
6 rights of way, covenants, conditions or restrictions, agreements
7 with other landowners, construction contracts, set aside
8 agreements, or other contracts, agreements, documents, or
9 arrangements with respect to all or any portion of the Property
10 or the other Partnership assets, whether or not such arrangements
11 (including renewal terms) shall extend beyond the date of the
12 termination of the Partnership, at such rental or amount, or for
13 such consideration, and upon such terms, as it deems proper;
14
15 (ii) incur any debts, liabilities or obligations
16 or enter into any contracts or agreements on behalf of the
17 Partnership or binding upon the Partnership;
18
19 (iii) make and revoke any election permitted the
20 Partnership by any taxing authority;
21
22 (iv) obtain the Permanent/Temporary Casino
23 Financing or otherwise borrow money for Partnership purposes and
24 as security therefor to mortgage, pledge, hypothecate or encumber
25 all or any part of the Property or other assets of the
26 Partnership, and to repay, prepay, refinance, increase, modify,
27 recast, consolidate or extend, in whole or in part, all such
28 loans and indebtedness, as and when it shall see fit and enter
59
1 into any loan agreements, notes, mortgages, financing statements,
2 assignment of rents, guarantees, letters of credit, or other
3 documents, agreements, security arrangements or other
4 arrangements in connection therewith, and any such mortgages or
5 security agreements may contain a confession of judgment, pact de
-------
6 non alienado, waiver of delay and appraisement and all other
------------
7 security clauses usual and customary in the State, or to incur
8 any obligation in respect of any of the foregoing;
9
10 (v) acquire rights, title or interests in,
11 manage, maintain and improve all or any portion of the Property
12 consistent with the purposes of the Partnership;
13
14 (vi) do all acts they deem necessary, appropriate,
15 incidental or convenient for the operation, development,
16 management, disposition, improvement, protection or preservation
17 of the Project;
18
19 (vii) obtain and keep in force such forms of
20 insurance in such amounts, and upon such terms and with such
21 carriers, as they shall determine or as otherwise required by law
22 or by contract;
23
24 (viii) employ, engage or contract with Persons for
25 the operation, development, management, disposition, improvement,
26 protection or presentation of the Partnership business, including
27 but not limited to, land managers, construction managers,
28 property managers, casino managers, appraisers, consulting
60
1 engineers, architects, contractors, developers, agents, insurance
2 brokers, real estate brokers, leasing agents, loan brokers,
3 accountants and attorneys, on such terms, for such compensation
4 and pursuant to any such contracts or agreements as determined by
5 the Partnership;
6
7 (ix) establish reserve funds for Partnership
8 purposes from revenues derived from Partnership operations or
9 from financing, refinancing, sales or other dispositions of the
10 Property or any of the Partnership assets;
11
12 (x) enter into agreements, options or any other
13 arrangements for the lease, sale, exchange or other disposition
14 of all or any portion of the Property or any of the Partnership
15 assets;
16
17 (xi) execute, acknowledge, deliver and perform any
18 and all deeds, agreements, documents and instruments to
19 effectuate the foregoing, including any agreements with the City
20 and the State;
21
22 (xii) pursue the LEDGC Proposal and any other bids
23 or proposals to develop and operate the Project, on such terms as
24 the Partnership shall approve;
25
26 (xiii) obtain, maintain and perform all necessary
27 permits, licenses, rezoning, variances, conditional use permits,
28 consents, approvals or entitlements from LEDGC, the City, the
61
1 State, or any other federal, state, parish or municipal authority
2 or any governmental or quasi-governmental entity necessary for
3 the development and use of the Property in connection with the
4 Project;
5
6 (xiv) perform the obligations of the Partnership
7 under, or to terminate, amend or modify, the Management
8 Agreement, the Rivergate Lease, the Temporary Casino Lease, the
9 Open Access Program established pursuant to the Rivergate Lease,
10 the General Development Agreement with the RDC pursuant to the
11 Rivergate Lease, or the Casino Operating Contract;
12
13 (xv) other than admission of transferees of
14 Partners in connection with any Transfer made in accordance with
15 Article 6 hereof, admit any additional or substitute Partners to
16 the Partnership or approve any Transfer to any such additional or
17 substitute Partner on such terms and conditions as the
18 Partnership shall determine;
19
20 (xvi) determine the suitability of a proposed
21 transferee pursuant to Section 6.01 hereof;
22
23 (xvii) approve any item of an Operating Budget, the
24 Temporary Casino Project Budget, the Permanent Casino Project
25 Budget, the Remaining Property Project Budget, the Temporary
26 Casino Conceptual Plans or Permanent Casino Conceptual Plans,
27 except for items permitted without Partnership approval under
28 Section 5.01(c) hereof;
62
1 (xviii) commence, discontinue, settle, compromise,
2 submit to arbitration, defend or participate in any actions in
3 the nature of legal proceedings as to Partnership matters in any
4 court, before any governmental agency, or in arbitration, other
5 than actions arising out of the ordinary course of business and
6 as specifically provided herein; and
7
8 (xix) make any other decisions affecting the
9 business and affairs of the Partnership, including, but not
10 limited to, the development, financing, refinancing, sale or
11 leasing of the Property.
12
13 (c) Notwithstanding Sections 5.01(a) and 5.01(b)
14 hereof:
15
16 (i) Harrah's shall have exclusive authority to
17 act as developer and control the Permanent/Temporary Casino
18 Financing and the construction and development of the Temporary
19 Casino, including administering contractors, consultants,
20 architects, engineers, attorneys or other third party firms in
21 connection therewith on behalf of the Partnership, and Harrah's
22 may make changes in the Temporary Casino Project Budget and the
23 Temporary Casino Conceptual Plans so long as such changes are not
24 the result of any Material Change Orders;
25
26 (ii) Harrah's shall have exclusive authority to
27 act as developer and control the Permanent/Temporary Casino
28 Financing and the construction and development of the Permanent
63
1 Casino, including administering contractors, consultants,
2 architects, engineers, attorneys or other third party firms in
3 connection therewith on behalf of the Partnership, and Harrah's
4 may make changes in the Permanent Casino Project Budget, and the
5 Permanent Casino Conceptual Plans so long as such changes are not
6 the result of any Material Change Orders;
7
8 (iii) Manager will have the exclusive authority to
9 operate the Temporary Casino and Permanent Casino pursuant to the
10 Management Agreement; and
11
12 (iv) Harrah's will be the tax matters partner of
13 the Partnership, provided that all material tax elections will be
14 made by the Partnership.
15
16 (d) "Major Decision" shall mean decisions of the
17 Partnership to:
18
19 (i) incur (A) the Permanent/Temporary Casino
20 Financing or (B) any other debt, liability or obligation not
21 provided for in the Operating Budget or the Temporary Casino
22 Project Budget or the Permanent Casino Project Budget and which
23 involves an amount in excess of One Hundred Million Dollars
24 ($100,000,000) in the aggregate;
25
26 (ii) terminate the Manager or the Management
27 Agreement or to hire any new manager for the Temporary Casino or
28 for the Permanent Casino or to enter into any new management
64
1 agreement or amendment of the Management Agreement for the
2 Temporary Casino or the Permanent Casino;
3
4 (iii) sell, assign, transfer, hypothecate, pledge,
5 lease, encumber or otherwise dispose of all or any substantial
6 portion of the Property or to enter into any agreement to do so;
7
8 (iv) commence, discontinue, settle, compromise,
9 submit to arbitration, defend or participate in any actions in
10 the nature of legal proceedings in any court, before any
11 governmental agency, or in arbitration, other than actions
12 arising out of the ordinary course of business and as
13 specifically provided herein, involving any potential liabilities
14 to, or claims by or against, the Partnership not provided for in
15 the Operating Budget or the Temporary Casino Project Budget or
16 the Permanent Casino Project Budget and which involve in excess
17 of Seventy-Five Million Dollars ($75,000,000); and
18
19 (v) terminate or, enter into, amend or modify the
20 Casino Operating Contract, the Rivergate Lease or the Temporary
21 Casino Lease in any manner which has a material adverse economic
22 effect on the Partnership, which for the purposes of this
23 provision shall be an economic effect of One Hundred Million
24 Dollars ($100,000,000) or more.
25
26 (e) Decisions which require Unanimous Approval but
27 which shall not be subject to the dispute resolution provisions
28 of Article 12 hereof are decisions to:
65
1 (i) invest in any business or project other than
2 the Temporary Casino, the Permanent Casino, the Assembled Real
3 Estate and the November Real Estate;
4
5 (ii) enter into the Casino Operating Contract, the
6 Rivergate Lease, the Temporary Casino Lease or the General
7 Development Agreement with the RDC pursuant to the Rivergate
8 Lease;
9
10 (iii) other than admission of transferees of
11 Partners in connection with any Transfer made in accordance with
12 Article 6 hereof, admit any additional or substitute Partners to
13 the Partnership or approve any Transfer to any such additional or
14 substitute Partner on such terms and conditions as the
15 Partnership shall determine;
16
17 (iv) except as provided in Section 15.01 hereof,
18 terminate or dissolve the Partnership, or merge the Partnership
19 into another entity;
20
21 (v) subject to the provisions of Section 5.01(i)
22 hereof, amend or modify the Partnership Agreement pursuant to
23 Section 17.09(a) hereof;
24
25 (vi) adopt by-laws of the Executive Committee; and
26
27
28
66
1 (vii) permit a Partner Loan other than pursuant to
2 Section 3.03(c) hereof.
3
4 (f) A decision of the Partners to elect to continue
5 the Partnership on the same basis as provided in this Partnership
6 Agreement following the dissolution of any Partner, the
7 bankruptcy of any Partner, or the occurrence of any other event
8 requiring the dissolution of the Partnership under the laws of
9 the State pursuant to Sections 15.01(e), 15.01(f) or 15.01(g)
10 hereof shall be by majority vote of the remaining Partners whose
11 Partnership Interests entitle them to at least a majority of the
12 Percentage Shares. Any such decision shall not be subject to the
13 dispute resolution provisions of Article 12 hereof.
14
15 (g) In the event of any failure of Unanimous Approval
16 with respect to any Partnership decision other than as provided
17 in Sections 5.01(e) and 5.01(f) hereof, an arbitration shall be
18 available pursuant to Section 12.02 hereof. In the event of any
19 failure of Unanimous Approval with respect to a Major Decision,
20 in addition to such arbitration the buy/sell remedy shall be
21 available pursuant to Section 12.01 hereof.
22
23 (h) Grand Palais agrees that (i) it shall not
24 participate in any decisions of the Partnership with respect to
25 riverboat or dockside gaming in the State and (ii) it shall not
26 directly or indirectly through Affiliates, agents or other
27 Persons engage in any lobbying activities with respect to
28 dockside gaming in the State or any amelioration of the currently
67
1 existing laws or regulations of the State, the City or any
2 regulatory body with jurisdiction within the State requiring
3 riverboats to limit access according to established cruising
4 schedules. No Partners shall participate in any decisions of the
5 Partnership in connection with any claims, arbitration,
6 litigation, or other adversary proceedings, between the
7 Partnership and Affiliates of any Partner that are Controlled by,
8 under common Control with or, Controlling such Partner. Without
9 limiting the foregoing, Harrah's agrees that it shall not
10 participate in any decisions of the Partnership with respect to
11 approval of the Operating Budget or arbitration thereof pursuant
12 to Article 20.02 of the Management Agreement or the determination
13 to declare a default of Manager or exercise remedies against
14 Manager under the Management Agreement; provided that nothing
15 herein shall limit or restrict the Manager's rights of approval
16 or action pursuant to the Management Agreement. In each case set
17 forth in this Section 5.01(h), the Representatives appointed by
18 each applicable Partner shall not be entitled to vote on such
19 matters, and resolutions of the Executive Committee may be
20 adopted with respect to such matters without the vote of such
21 Representatives; provided, however, if any Partner shall have a
22 right to initiate a buy/sell pursuant to Section 12.01 hereof in
23 connection with any Partnership decision which is subject to this
24 Section 5.01(h), all Represented Groups shall have the right to
25 exercise a buy/sell with respect to such decision whether or not
26 any Partner Group had the right to participate in such decision
27 as a result of this Section 5.01(h).
28
68
1 (i) A decision of the Partnership to modify or amend
2 the Partnership Agreement pursuant to Section 17.09(a) hereof
3 shall be by the unanimous written consent of the Material
4 Partners provided that no amendment or modification may be made
5 without the prior written consent of such Partner if the effect
6 of such amendment or modification shall be adversely to change
7 the economic rights of any Partner.
8
9 (j) The Partners agree that fewer than all of the
10 Partners may commence an involuntary proceeding under either
11 chapter 7 or 11 of the Bankruptcy Code, Title 11 of the United
12 States Code; provided that any such involuntary case may only be
13 commenced upon the consent of at least two Material Partners one
14 of which shall be Harrah's until such time as any Completion
15 Guaranty (as defined in the Completion Loan Agreement) shall have
16 been satisfied and released.
17
18 5.02 Budget
------
19
20 (a) The Partnership shall pay all costs and expenses
21 incurred by the Partnership for all of the Partnership's costs of
22 designing, leasing, renovating, constructing, financing,
23 equipping, furnishing, licensing and opening the Temporary Casino
24 as described on one or more budgets for the Temporary Casino as
25 approved by the Partnership (as it may from time to time be
26 modified by the Partnership, collectively and separately the
27 "Temporary Casino Project Budget"). The Partnership shall pay
28 all costs of acquiring, designing, leasing, renovating,
69
1 constructing, financing, equipping, furnishing, licensing and
2 opening the Permanent Casino, demolishing existing structures at
3 the site of the Permanent Casino, and acquiring the Assembled
4 Real Estate and November Real Estate and ancillary property
5 pursuant to one or more budgets for the Permanent Casino as
6 approved by the Partnership (as it may from time to time be
7 modified by the Partnership, collectively and separately the
8 "Permanent Casino Project Budget"). The Partnership shall pay
9 all costs and expenses of designing, leasing, renovating,
10 constructing, financing, equipping, furnishing and opening any
11 development on that portion of the Assembled Real Estate and
12 November Real Estate that is excluded from the Rivergate Lease,
13 pursuant to one or more budgets as approved by the Partnership
14 (as it may from time to time be modified by the Partnership,
15 collectively and separately the "Remaining Property Project
16 Budget").
17
18 (b) The costs set forth in the Temporary Casino
19 Project Budget together with any Material Change Orders or other
20 changes approved by the Partnership and additional changes not
21 requiring such approval are referred to herein as the "Temporary
22 Casino Project Costs". The costs set forth in the Permanent
23 Casino Project Budget together with any Material Change Orders
24 and other changes approved by the Partnership and additional
25 changes not requiring such approval are referred to herein as the
26 "Permanent Casino Project Costs". The costs set forth in the
27 Remaining Property Project Budget together with any Material
28 Change Orders or other changes approved by the Partnership and
70
1 additional changes not requiring such approval are referred to
2 herein as the "Remaining Property Project Costs." The
3 Partnership shall pay the Temporary Casino Project Costs, the
4 Permanent Casino Project Costs and the Remaining Property Project
5 Costs as such costs are incurred.
6
7 5.03 Compensation. No Partner or Affiliate Controlled
------------
8 by, under common Control with, or Controlling such Partner shall
9 receive any compensation for its activities as Partner or
10 otherwise from the Partnership except (i) charges and fees paid
11 to Manager under the Management Agreement, (ii) fees payable to
12 designees of Christopher B. Hemmeter and NOLDC or its permitted
13 designee pursuant to consulting agreements of even date herewith,
14 (iii) amounts payable pursuant to the Completion Loan Agreement,
15 and (iv) as otherwise approved by the Partnership.
16
17 5.04 Transactions with Related Parties. The fact that
---------------------------------
18 a Partner or an Affiliate thereof, or a stockholder, director,
19 officer, member, or employee of a Partner or an Affiliate
20 thereof, is employed by, or is directly or indirectly interested
21 in or connected with, any Person, firm, or corporation which may
22 be employed by the Partnership to render or perform a service, or
23 from which the Partnership may purchase any property, shall not
24 prohibit the Partnership from employing such Person, firm or
25 corporation, or otherwise dealing with him or it, provided such
26 employment or dealing is on a basis which is fair to the
27 Partnership, is disclosed to all Partners in advance, and is
28 approved in writing by the Partnership. The Partners hereby
71
1 agree and consent to the compensation and other agreements
2 referenced in Section 5.03 hereof.
3
4 5.05 Partner Groups
--------------
5
6 (a) If any portion of the Partnership Interest of
7 Harrah's, NOLDC or Grand Palais is Transferred, the transferor
8 and all direct and indirect transferees shall be treated as a
9 single Partner Group (the "Partner Group") for the purposes
10 expressly set forth in this Agreement. To the extent any of
11 Harrah's, NOLDC or Grand Palais retains its entire Partnership
12 Interest, such Partner shall constitute its Partner Group. To
13 the extent that any Material Partner acquires any additional
14 Partnership Interest, such Material Partner's Partner Group prior
15 to such acquisition together with any such acquired Partnership
16 Interest, shall constitute a single Partner Group. If any
17 portion of the Partnership Interest of any Partner is Transferred
18 to a Partner other than a Material Partner, the transferee shall
19 remain a member of its Partner Group with respect to its
20 Partnership Interest before such Transfer and of the Partner
21 Group of its transferor with respect to the Partnership Interest
22 acquired in such Transfer.
23
24 (b) It shall be the sole responsibility of the members
25 of each Partner Group to designate in writing to the Partnership
26 a single natural person with full power and authority to accept
27 notice on behalf of, or otherwise act on behalf of, each Partner
28 Group (the "Partner Group Representative"); provided that the
72
1 Partner Group Representative shall not act in lieu of or have any
2 powers of any Representative. Any act, approval or consent of a
3 Partner Group Representative shall be deemed to be the act,
4 approval or consent of the Partner Group which designated such
5 Partner Group Representative, and neither the Partnership nor any
6 Partner shall be required to inquire into the authority of such
7 Partner Group Representative as to such act, approval or consent
8 on behalf of the Partner Group that designated such Partner Group
9 Representative. Each such Partner Group Representative shall be
10 appointed by an irrevocable power of attorney coupled with an
11 interest, a duplicate of which shall be filed with the
12 Partnership, and in connection with any Transfer as may be
13 permitted pursuant to this Agreement, as a condition to the
14 effectiveness of such Transfer such power of attorney for such
15 Partner Group Representative shall be affirmed by the transferee
16 or a new irrevocable power of attorney coupled with an interest
17 shall be filed with the Partnership. Any such Partner Group
18 Representative may be replaced by a successor Partner Group
19 Representative by notice to the other Partner Groups and
20 designation of a substitute for such Partner Group
21 Representative. Until another Representative is appointed, the
22 Partner Group Representatives of the Partner Groups shall be
23 those natural persons to whose attention notices must be sent on
24 behalf of the Partner Groups pursuant to Section 13.03 hereof.
25
26 (c) If any Partner Group contains more than one
27 Material Partner, such Represented Group must select a single
28 Partner Group Representative pursuant to Section 5.05(b) hereof
73
1 and a single group of three (3) Representatives to be appointed
2 to the Executive Committee pursuant to Section 5.01 hereof.
3
4 (d) Each Partner and its permitted transferees agree
5 to hold, save and defend each other Partner and their permitted
6 transferees free and harmless from any liability whatsoever
7 arising out of the such Partner's and their permitted
8 transferees' reliance on any statement or act by such Partner's
9 Representatives or Partner Group Representative, regardless of
10 whether the relying party has any knowledge that another party
11 objects to said action.
12
13
14 ARTICLE 6
15
16 TRANSFERS AND ASSIGNMENT
17
18 6.01 Restrictions on Transfers
-------------------------
19
20 (a) Except as specifically provided in Sections 6.02
21 and 6.03 hereof and subject to Sections 6.01(b), 6.01(d),
22 6.01(e), 6.04, and 6.05 hereof, any Partner or any other Holding
23 Entity may, directly or indirectly, (i) sell, assign, transfer,
24 hypothecate, pledge, encumber or otherwise dispose of all or any
25 portion of its Partnership Interest or its ownership interest in
26 any Holding Entity, (ii) merge or consolidate with or into any
27 other entity, or (iii) liquidate, wind up, or dissolve itself
28 (collectively, a "Transfer") without prior approval or consent of
74
1 any other Partner; provided that income, voting or other rights
2 of a Partner may not be divided other than in connection with a
3 Transfer of a Percentage Interest to a new Partner or existing
4 Partner or a pledge of Distributions.
5
6 (b) All Transfers which LEDGC is authorized by law to
7 consider shall require a prior suitability determination of
8 LEDGC. Where LEDGC is not authorized by law to consider a
9 Transfer, refuses to consider a Transfer on grounds of
10 administrative discretion granted by applicable law, or otherwise
11 fails to consider a Transfer, such Transfer shall not be
12 permitted without the prior written approval of each Material
13 Partner other than the Material Partner containing the interest
14 to be Transferred as to the gaming suitability of the transferee;
15 provided, however, that no Material Partner approval shall be
16 required if the proposed transferee:
17
18 (i) (A) has been and continues to be determined
19 suitable and licensed or otherwise approved or entitled to
20 conduct gaming by the applicable state gaming regulatory agency
21 in any of Colorado, Illinois, Mississippi, Nevada or New Jersey,
22 and (B) there are no administrative, investigative or judicial
23 proceedings pending by any such state gaming regulations agency
24 pursuant to which any civil or criminal penalty may be imposed on
25 such Person or an Affiliate that is Controlled by, under common
26 Control with, or Controlling such Person, or any license, permit,
27 approval, contract or entitlement of such Person or an Affiliate
28 that is Controlled by, under common Control with, or Controlling
75
1 such Person has been suspended, revoked, terminated, not renewed,
2 not granted or rescinded, such matters set forth in the foregoing
3 clauses (A) and (B) to be confirmed in writing to the Partnership
4 by a letter from the applicable state gaming regulatory agency or
5 other evidence reasonably satisfactory to the remaining Material
6 Partners;
7
8 (ii) is an entity which is an Institutional
9 Investor or has been approved by LEDGC;
10
11 (iii) acquires an ownership interest in a Public
12 Transfer which is exempt from a suitability determination by
13 LEDGC or has been waived from a suitability determination by
14 LEDGC; or
15
16 (iv) acquires a Transferred Partnership Interest
17 as a result of a reorganization, merger or other business
18 combination of one or more Partner that results in no new
19 beneficial owners of the Partnership and following which the
20 aggregate net worth of the Partner(s) so reorganizing, merging or
21 otherwise combining is equal to or greater than the aggregate net
22 worth of such Partner(s) prior to the reorganization, merger or
23 other combination.
24
25 (c) In approving any Transfer requiring approval
26 pursuant to Section 6.01(b) hereof, the Material Partners shall
27 only disapprove such Transfer if they reasonably determine that
28 the proposed transferee does not comply with the LEDGC
76
1 suitability standards or reasonably determine that the proposed
2 transferee would jeopardize any gaming or alcoholic beverage
3 license, permit, approval or other entitlement of such Material
4 Partner. Such decision shall not be unreasonably delayed after
5 the delivery of all reasonably requested documents. A decision
6 to approve such a Transfer shall not preclude a subsequent
7 buy/sell or Appraisal Buyout pursuant to Article 11 hereof in the
8 event such transferee is subject to the provisions of Article 11
9 hereof.
10
11 (d) Notwithstanding any provision of this Article 6,
12 the Partners agree that none of Harrah's, NOLDC or Grand Palais
13 or their successors or assigns or any direct or indirect
14 transferee of its initial Partnership Interest may make a
15 Transfer such that at any time initial Partnership Interest of
16 each of Harrah's, NOLDC and Grand Palais shall be divided into
17 more than three (3) parts with the effect that at no time shall
18 there be more than nine (9) Partners.
19
20 (e) Except for (i) Transfers to any lender, (ii)
21 Transfers pursuant to Article 8 hereof, (iii) Transfers to any
22 Partner or any Affiliate of any Partner that is Controlled by,
23 under common Control with, or Controlling such Partner, (iv)
24 Transfers of any asset group more than fifty percent (50%) of the
25 value of which is attributable to assets other than the interest
26 in the Partnership being Transferred, and (v) Transfers pursuant
27 to Section 6.01(b)(iv) hereof, no Partner shall Transfer all or
28 any portion of its Partnership Interest without first notifying
77
1 the Material Partners that it is interested in making such
2 Transfer and negotiating in good faith for sixty (60) days with
3 any such Material Partner with respect to such Transfer and shall
4 notify such Partner within ten (10) days of receipt of the notice
5 from such Partner that such Material Partner has an interest in
6 entering into such negotiations.
7
8 6.02 Right of First Refusal
----------------------
9
10 (a) In the case of a Transfer to a Disqualified Buyer
11 by any Partner other than Harrah's or any Holding Entity of any
12 Partner other than an Affiliate of Harrah's that is Controlled
13 by, under common Control with, or Controlling such Partner, such
14 Transfer may be made only subject to a right of first refusal
15 pursuant to this Section 6.02 and only for an all cash price.
16
17 (b) If a Partner other than Harrah's or an Affiliate
18 that is Controlled by, under common Control with, or Controlling
19 Harrah's desires to Transfer its Partnership Interest or portion
20 thereof or if any Person owning an interest in a Holding Entity
21 of any Partner other than Harrah's that is Controlled by, under
22 common Control with, or Controlling such Partner desires to
23 Transfer any legal or beneficial interest in any such Holding
24 Entity (such legal or beneficial interest in a Holding Entity,
25 the "Offered Interest") to a Disqualified Buyer, it may Transfer
26 such Partnership Interest or Offered Interest if such Partner
27 desiring to Transfer its Partnership Interest or the Partner in
28 which such Holding Entity directly or indirectly owns an interest
78
1 first offers for sale to the Material Partners the right at the
2 election of such Material Partners to purchase any of (A) in the
3 case of a proposed Transfer of a Partnership Interest, such
4 Partnership Interest, or (B) in the case of proposed Transfer of
5 an interest in a Holding Entity, the Offer Related Partnership
6 Interest.
7
8 (i) Such first refusal offer shall be made in
9 writing setting forth at a minimum the cash purchase price,
10 timing, method of payment and financing terms, if any, on which
11 the Partner proposes to Transfer the offered Partnership Interest
12 or the Holding Entity proposes to Transfer the Offered Interest
13 and shall state the name of the prospective transferees and all
14 Persons having a legal or beneficial interest therein, if any,
15 who have indicated a willingness to be a transferee on such terms
16 and conditions. At the election of the Partner making the first
17 refusal offer, such offer may set forth any other terms and
18 conditions of the prospective transferee's offer.
19
20 (ii) In the case of a proposed Transfer of an
21 interest in a Holding Entity, the first refusal notice shall also
22 set forth the Appraised Value (and it shall be the responsibility
23 of the offering Partner to initiate the appraisal procedures of
24 Article 9 hereof to determine such Appraised Value), and the
25 Offer Related Partnership Interest, and the calculation of the
26 corresponding price for the Offer Related Partnership Interest
27 (the "Offer Related Partnership Interest Price"). The Offer
28 Related Partnership Interest Price shall be calculated as
79
1 follows: (A) the Appraised Value of the assets of the
2 Partnership shall be treated as the hypothetical sales proceeds
3 for distribution under Section 15.03 hereof and the amount which
4 would be distributed to such offering Partner or in respect of
5 the Offer Related Partnership Interest on liquidation shall be
6 calculated, (B) all debts on the portion of the Partnership
7 Interest or the Offer Related Partnership Interest being
8 Transferred shall be deducted from such hypothetical sales
9 proceeds which would be distributed to the offering Partner.
10
11 (iii) If any Material Partner elects to acquire the
12 Offer Related Partnership Interest, it shall pay the Offer
13 Related Partnership Interest Price to the Partner in which such
14 Holding Entity directly or indirectly owns an interest. Such
15 Partner may at its election redeem the Offered Interest with such
16 payment but whether or not such redemption is made, in no such
17 event may such Holding Entity Transfer such Offered Interest to
18 any Person other than such Partner.
19
20 (c) Such Material Partner shall have a first refusal
21 right for fifteen (15) days after the date of the receipt of the
22 first refusal offer pursuant to Section 6.02(b) hereof to elect
23 by written notice to the other Material Partner and the offering
24 Partner to elect as specified in the notice of election to
25 acquire either the offered Partnership Interest or the Offer
26 Related Partnership Interest on the same terms and conditions as
27 those set forth in such first refusal offer and in the case of an
28
80
1 Offer Related Partnership Interest at the price set forth in the
2 first refusal notice.
3
4 (d) If more than one Material Partner timely give
5 notice of an election to acquire the offered Partnership Interest
6 or the Offer Related Partnership Interest, such electing Material
7 Partner shall each acquire a pro rata portion of the offered
8 Partnership Interest or the Offer Related Partnership Interest,
9 as the case may be, in accordance with their Exercising Partner's
10 Percentage Share.
11
12 (e) For the purposes of this Section 6.02, a Partner
13 or Holding Entity may not grant to a Disqualified Buyer an option
14 or contingent contract to purchase a Partnership Interest or
15 Offered Interest without the Partner offering to grant the other
16 Material Partners a right of first refusal pursuant to this
17 Section 6.02 with respect to such option or contingent contract
18 for the Partnership Interest or Offer Related Partnership
19 Interest, as the case may be.
20
21 (f) Unless one or more Material Partner shall exercise
22 the right to acquire the offered Partnership Interest or the
23 Offer Related Partnership Interest by notifying the offering
24 Partner and the other Material Partners of its or their election
25 to do so within fifteen (15) days of receiving such offer,
26 accepting a conveyance of the offered Partnership Interest or the
27 Offer Related Partnership Interest and making payment therefor on
28 the price and terms offered to the Material Partner, such
81
1 offering Partner may, or if a Holding Entity is involved, the
2 Holding Entity owning the Offered Interest may, within a period
3 of six (6) months from the date of such first refusal offer,
4 dispose of the offered Partnership Interest or Offered Interest
5 upon terms and conditions no more favorable to the prospective
6 purchaser than those set forth in such first refusal offer.
7 Where more than one Material Partner elect to exercise their
8 first refusal rights, if a Material Partner fails to close on its
9 portion of the acquisition, any other electing Material Partner
10 shall, by written notice to the other Material Partner within an
11 additional twenty (20) day period, either elect to purchase the
12 entire offered Partnership Interest or Offer Related Partnership
13 Interest without any further participation by the Material
14 Partner that failed to close or elect not to proceed further with
15 the first refusal. Such closing shall occur on a date within
16 said additional twenty (20) day period as designated in said
17 notice by the Material Partner making such election to close.
18
19 (g) Following the failure of any Material Partner to
20 elect to purchase an offered Partnership Interest or Offer
21 Related Partnership Interest pursuant to Section 6.02(c) hereof,
22 if no disposition is made on the terms specified in such offer
23 within the six (6) month period, or if a disposition is proposed
24 on terms less favorable to the offering Partner or Holding Entity
25 than the terms specified in such offer within the six (6) month
26 period, an offering Partner or Holding Entity desiring to
27 Transfer such offered Partnership Interest or Offered Interest
28
82
1 must reinstitute the procedure set forth in this Section 6.02
2 prior to any Transfer to a Disqualified Buyer.
3
4 (h) Notwithstanding Section 6.02(a) hereof, Grand
5 Palais, free of any first refusal requirements but subject to the
6 requirements of Section 6.01(b) hereof, Section 6.04 hereof and
7 Section 6.05 hereof, may: (i) acquire, as the surviving
8 corporation in a merger or by asset acquisition, any entity that
9 is a Disqualified Buyer; (ii) acquire or be acquired by NOLDC; or
10 (iii) be acquired by, or merged into, any Affiliate of Grand
11 Palais (including Hemmeter Enterprises, Inc.) that is not owned
12 or controlled in whole or in part by any Disqualified Buyer which
13 Affiliate may also acquire NOLDC; provided that this exception
14 shall apply only so long as Grand Palais owns the Transferred
15 Partnership Interest and shall not apply to any subsequent
16 Transfers of any Partnership Interest that has been Transferred
17 by Grand Palais.
18
19 (i) Notwithstanding Section 6.02(a) hereof but subject
20 to Section 6.01(b) hereof, Section 6.04 hereof and Section 6.05
21 hereof, any Partner or Holding Entity of any Partner may Transfer
22 its Offered Interest to any Person, or agree to do so, free of
23 any first refusal requirements:
24
25 (i) in a Public Transfer of an interest in a
26 Partner or a Holding Entity; or
27
28
83
1 (ii) pursuant to a Public Offering of an interest
2 in a Partner or a Holding Entity in which the Partner or Holding
3 Entity and the underwriters of such Public Offering do not
4 promote, and such Partner or Holding Entity has no knowledge of,
5 at the time of the Public Offering, the acquisition of such
6 Offered Interest by a Disqualified Buyer.
7
8 (j) The provisions of this Section 6.02 shall not
9 apply to Holding Entities (i) which own a direct or indirect
10 beneficial interest of less than five percent (5%) of the
11 Partnership and where such proposed transferee would not
12 following such Transfer be in Control of the Partnership or any
13 three (3) member group of Representatives, or (ii) where at least
14 fifty percent (50%) (in fair market value) of the assets of such
15 Holding Entity are assets other than its direct or indirect
16 beneficial interest in the Partnership and where such proposed
17 transferee would not following such Transfer be in Control of the
18 Partnership or any three (3) member group of Representatives.
19
20 6.03 Grant of Security Interest
--------------------------
21
22 (a) Subject to Sections 6.01, 11.03 and 16.07 hereof,
23 any Partner shall have the right, without the consent of the
24 other Partners but with notice to the Represented Groups, to
25 grant a security interest in, pledge or encumber all or any
26 portion of its Partnership Interest or in any Distributions to be
27 made by the Partnership but, in such event, the party to or with
28 whom such grant of security interest is made shall not become a
84
1 substitute Partner but shall only be entitled to receive the
2 Distributions applicable to such Partnership Interest, subject to
3 the prior rights of the Partnership and other Partners under the
4 provisions of this Agreement, and the documents pursuant to which
5 the interest in such Distributions has been assigned, pledged or
6 encumbered shall so provide. Such Person to whom a security
7 interest is granted may not be, or be Controlled by, a
8 Disqualified Buyer. Prior to the grant of any such security
9 interest, the Executive Committee shall be provided a copy of the
10 documents creating such security interest for its review and
11 shall be entitled to require changes thereto for the sole purpose
12 of conforming such documents to the provisions of this Agreement.
13
14 (b) The Partnership agrees to provide the lender of
15 any such loan a copy of any notice of default to any such lender,
16 and to accept performance by any such lender of any obligations
17 under this Agreement in the place of the Partner to whom it has
18 made such loan after any default by such Partner in the
19 performance of its obligations under this Agreement; provided
20 that such performance shall not entitle such lender to admission
21 to the Partnership except in accordance with the terms of this
22 Agreement.
23
24 (c) Subject to compliance with Sections 6.01(b),
25 6.01(d) and 6.04 hereof, the Partners hereby consent to the grant
26 of a security interest by NOLDC in its Partnership Interest to
27 secure the NOLDC Loan.
28
85
1 (d) Subject to compliance with Sections 6.01(b) and
2 6.04 hereof, the Partners consent to any purchaser at a
3 foreclosure sale of any security interest becoming a Partner in
4 the Partnership so long as such Purchaser is not a Disqualified
5 Buyer.
6
7 6.04 Conditions on Transfers
-----------------------
8
9 (a) No Transfer by a Partner of all or any part of its
10 Partnership Interest permitted to be made under this Article 6
11 shall be binding on the non-assigning Partners or on the
12 Partnership unless (i) the transferee shall execute and
13 acknowledge an instrument, in form reasonably satisfactory to the
14 Material Partners, whereby it agrees to assume and be bound by
15 all of the covenants, terms and conditions of this Agreement as
16 it may be amended from time to time and makes on its own behalf
17 each of the representations and warranties contained in Section
18 10.01 hereof, or, in the case of a grant of security interest,
19 pledge or encumbrance, the transferee executes and acknowledges
20 an instrument, in form reasonably satisfactory to the Material
21 Partners, whereby it acknowledges that its security interest,
22 pledge or encumbrance is subject to all of the covenants, terms
23 and conditions of this Agreement as it may be amended from time
24 to time, (ii) a duplicate original of each instrument of
25 transfer, assumption, grant of security interest, pledge or
26 encumbrance (and any related loan documents), duly executed in
27 each case, is delivered to the Material Partners, (iii) the
28 transferee shall (if required) execute and acknowledge an
86
1 agreement amending the Partnership Agreement in order to reflect
2 such change or take any other action that may be required in
3 connection therewith, including provisions whereby the transferee
4 acknowledges the provision of Section 6.05 hereof, (iv) the
5 transferee shall pay all reasonable expenses of the Partnership
6 in connection with such Transfer, including, but not limited to,
7 the cost (including reasonable attorneys' fees) of preparing the
8 agreement referred to in subsection (iii) above and reviewing any
9 documents pursuant to Section 6.04(g) hereof, and (v) unless such
10 Transfer is made pursuant to Section 6.01(b)(iv) hereof, the
11 transferor shall have cured all of its defaults and repaid all of
12 its Default Loans.
13
14 (b) Except as otherwise expressly provided in this
15 Agreement, all Transfers made in accordance with this Article 6
16 shall be subject to any liens created pursuant to Section 10.03
17 hereof to secure indemnity obligations and further subject to any
18 then existing indemnity obligations pursuant to Article 10 hereof
19 with respect to the Transferor and the Transferor's Partnership
20 Interest.
21
22 (c) Upon any Transfer of a Partnership Interest
23 (excluding any grant of security interest, pledge or encumbrance)
24 made in accordance with this Article 6, and provided that the
25 provisions of this Article 6 are complied with, (i) the
26 Transferring Partner shall be relieved of all of its obligations
27 under or in respect to the Partnership and this Agreement
28 thereafter accruing, except for any indemnity obligations
87
1 pursuant to Article 10 hereof with respect to matters occurring
2 prior to the date of such Transfer, and (ii) the transferee shall
3 be admitted as a substitute Partner in the Partnership in the
4 place and stead of the Transferring Partner and shall own the
5 Transferred Partnership Interest subject to any indemnity or
6 other obligations of the Transferring Partner under this
7 Agreement with respect to matters occurring prior to the date of
8 such Transfer.
9
10 (d) In the event of any permitted Transfer of a
11 Partnership Interest or interest in a Holding Entity, a duly
12 authorized member of the Executive Committee shall, upon the
13 request of the Transferring Partner or Partner in which such
14 Holding Entity owns a direct or indirect interest, execute such
15 reasonable documentation as may be required to confirm that such
16 Transfer is permitted.
17
18 (e) A purported Transfer shall be null and void at its
19 inception unless such Transfer shall comply with the provisions
20 of this Article 6.
21
22 (f) Anything herein to the contrary notwithstanding,
23 no Transfer shall be made under this Article 6 which would effect
24 a termination or dissolution of the Partnership for tax purposes
25 or otherwise create adverse tax consequences to the Partnership
26 or result in any violations of securities laws. In connection
27 with any proposed Transfer, the transferee, at its sole expense,
28 shall provide the Material Partners with a satisfactory legal
88
1 opinion of counsel, addressed to the Partnership and the
2 Partners, and satisfactory to the Material Partners confirming
3 that (i) there is no and will not be any termination,
4 dissolution, change in tax status of the Partnership or other
5 adverse tax consequences as a result of such Transfer, (ii) there
6 is no and will not be any violations of any securities laws as a
7 result of such Transfer and (iii) any agreements executed
8 pursuant to Section 6.01(a) hereof shall be valid, binding and
9 enforceable.
10
11 (g) As to Transfers pursuant to a Public Offering,
12 each of the Material Partners will have rights to join in any
13 Public Offering of any other Partner on a basis which is
14 reasonably acceptable to the underwriters for the Public
15 Offering, and each of the Material Partners will have the right
16 to review and comment on the prospectus and other offering
17 materials for fifteen (15) days as to an initial review, or for a
18 reasonable period of time under the circumstances as to an
19 amendment to such materials for such Public Offering to assure
20 that there is no misrepresentation or omission of facts which
21 would in any manner mischaracterize or misrepresent,
22 intentionally or otherwise, facts concerning the Partnership,
23 such Material Partner or any Affiliates that are Controlled by,
24 under common Control with, or Controlling such Material Partner.
25 The Partner initiating the Public Offering shall indemnify the
26 Partnership and all other Partners against all loss, cost and
27 damage relating to its Public Offering and shall deliver such
28 assurance as the Partnership or its legal counsel may reasonably
89
1 request to assure that there is no adverse tax or other liability
2 as a result of such Public Offering to the Partnership or the
3 Material Partners.
4
5 (h) Except in respect of Transfers described in
6 Section 6.02(h) hereof, if a Partner who was not a Disqualified
7 Buyer at the time it initially acquired a Transferred Partnership
8 Interest subsequently indicates its intent to operate any casino
9 gaming business, or actually operates any such casino gaming
10 business, then: (i) if such Partner is a non-Material Partner, it
11 shall immediately forego its right to receive any Partnership
12 information regarding marketing strategies or methods of
13 operation or any proprietary information; or (ii) if such Partner
14 is a Material Partner, the Partners who are members of the
15 Partner Group of which such Partner is a member shall immediately
16 forgo their right to receive competitive or gaming sensitive
17 Partnership information and the Partner Group Representatives
18 representing such Partner is a member shall immediately forego
19 their right to vote with respect to any decisions of the
20 Partnership related to any competitive or gaming sensitive
21 matters. If any Partner shall challenge the right of the
22 Partnership to withhold such Partnership information regarding
23 marketing strategies or methods of operation or any proprietary
24 information, other than a challenge to determine what constitutes
25 such information, each Material Partner shall have the option to
26 initiate an appraisal buyout of the Partner making such challenge
27 to be exercised in the manner of Section 8.05 hereof with the
28 purchase price to be the lower of the Appraisal Buyout Price
90
1 calculated using one hundred percent (100%) of Appraised Value or
2 the actual acquisition cost of such non-Material Partner, or such
3 Material Partner and any other Partners in the Partner Group of
4 which such Material Partner is a member, as the case may be. Any
5 such option to initiate any such Appraisal Buyout shall be
6 effective only at such time as the Partnership shall have been
7 required pursuant to a final adjudication to provide such
8 information to any such Partner.
9
10 6.05 Limit on Transferability. Any Represented Group
------------------------
11 as to which a Transfer occurs may only make or permit such
12 Transfer on the condition that the transferee shall have rights
13 of management or control in respect of the Partnership only
14 through its Represented Group as set forth in Section 5.05
15 hereof.
16
17
18 ARTICLE 7
19
20 EVENTS OF DEFAULT
21
22 7.01 Events of Default. It shall be an event of
-----------------
23 default (an "Event of Default") if any one or more of the
24 following events shall occur:
25
26 (a) a Monetary Default;
27
28
91
1 (b) except for any Events of Default set forth in any
2 of Sections 7.01(a), 7.01(c), 7.01(d), 7.01(e), 7.01(f), 7.01(g)
3 and 7.01(h) hereof, the failure of any Partner to perform any of
4 its other obligations under this Agreement or the breach by any
5 Partner of any of the other terms, conditions or covenants of
6 this Agreement or the failure of any representation or warranty
7 in this Agreement to be true in all material respects and a
8 continuation of such failure or breach for more than thirty (30)
9 days after written notice by any Nondefaulting Partner to the
10 Defaulting Partner that such Partner has failed to perform any of
11 its obligations under, or has breached, this Agreement; provided,
12 that no Event of Default shall exist hereunder if (i) such
13 default is not capable of being cured within such thirty (30)
14 days, (ii) such default is capable of cure in a longer period of
15 time, (iii) such default is not also a default under any of the
16 Temporary Casino Lease, Rivergate Lease or Casino Operating
17 Contract and, (iv) cure of such default has been promptly
18 commenced within such thirty (30) days and such cure is
19 thereafter diligently and expeditiously prosecuted to completion,
20 but in no event shall any cure period under this Agreement for
21 any default be longer than the cure period provided in the
22 Temporary Casino Lease, Rivergate Lease or Casino Operating
23 Contract for such default;
24
25 (c) a case or proceeding shall be commenced by any
26 Partner seeking relief under any provision or chapter of the
27 federal Bankruptcy Code or any other federal or state law
28 relating to insolvency, bankruptcy or reorganization; an
92
1 adjudication that any Partner is insolvent or bankrupt; the entry
2 of an order for relief under the federal Bankruptcy Code with
3 respect to any Partner; the filing of any such petition or the
4 commencement of any such case or proceeding against any Partner,
5 unless such petition and the case or proceeding initiated thereby
6 are dismissed within ninety (90) days from the date of such
7 filing; the filing of an answer by any Partner admitting the
8 allegations of any such petition; the appointment of a trustee,
9 receiver or custodian for all or substantially all of the assets
10 of any Partner unless such appointment is vacated or dismissed
11 within ninety (90) days from the date of such appointment but not
12 less than five (5) days before the proposed sale of any assets of
13 any Partner; the execution by any Partner of a general assignment
14 for the benefit of creditors; the convening by any Partner of a
15 meeting of its creditors, or any class thereof, for purposes of
16 effecting a moratorium upon or extension or composition of its
17 debts; except in the case of a holder of a permitted security
18 interest in a Partnership Interest, the levy, attachment,
19 execution or other seizure of all or substantially all of the
20 assets of any Partner or any Partner's Partnership Interest,
21 except as otherwise provided in Section 6.03 hereof, where such
22 seizure is not discharged within thirty (30) days thereafter; or
23 the admission by any Partner in writing of its inability to pay
24 its debts as they mature or that it is generally not paying its
25 debts as they become due;
26
27 (d) the failure of any Partner to make payment or
28 perform any other obligation in connection with any purchase
93
1 arising under Sections 6.02 or 8.03 hereof for a period of five
2 (5) days after notice from the Partner or Represented Group, as
3 the case may be, to whom payment or performance was due or to
4 whom the Transfer was to be made;
5
6 (e) if any Partner or an Affiliate of such Partner is
7 required to qualify or be found suitable under gaming laws of the
8 State and such Partner (or such Affiliate) does not so qualify or
9 is not found so suitable, or if it becomes so qualified or is
10 found so suitable and it fails to remain so, or if it is found
11 unsuitable or unqualified under such gaming laws; provided that
12 no Event of Default shall exist hereunder if a cure provision is
13 available under the Casino Act or any rule or regulation
14 promulgated thereunder and the default is cured within such cure
15 period;
16
17 (f) the dissolution of any Partner other than as
18 permitted under Section 6.01(a) hereof;
19
20 (g) any Transfer in violation of Article 6 hereof by a
21 Partner or by a Holding Entity of any Partner; provided that no
22 Event of Default shall exist hereunder if a cure provision is
23 available under the Casino Act or any rule or regulation
24 promulgated thereunder and the default is cured within such cure
25 period, or, if no cure period is available, if the default is not
26 cured within thirty (30) days; or
27
28
94
1 (h) the attempted withdrawal of any Partner from the
2 Partnership other than in connection with any Transfer not in
3 violation of Article 6 hereof; provided that in the case of
4 Section 6.01(b) hereof no Event of Default shall exist hereunder
5 if a cure provision is available under the Casino Act or any
6 rules or regulations promulgated thereunder and the default is
7 cured within such cure period.
8
9
10 ARTICLE 8
11
12 REMEDIES
13
14 8.01 Remedies. Upon the occurrence of any Event of
--------
15 Default with respect to any Partner (the "Defaulting Partner")
16 which shall not have been cured prior to an election by any one
17 or more Material Partners which is not a Defaulting Partner (the
18 "Nondefaulting Partners") under this Section 8.01, any
19 Nondefaulting Partner may elect to do one or more of the
20 following by written notice of such election to the Defaulting
21 Partner:
22
23 (a) in the case of a Monetary Default, (i) if the
24 default is by a Material Partner, (A) advance money to the
25 Defaulting Partner, (B) at any time after the expiration of
26 thirty (30) days from the occurrence of such Monetary Default,
27 exercise any buy/sell remedy as provided in Section 8.03 hereof,
28 or (C) exercise any Default Loan and dilution rights as provided
95
1 in Section 8.04 hereof, (ii) if the default is by a non-Material
2 Partner, advance money to the Defaulting Partner, exercise any
3 buy/sell remedy as provided in Section 8.03 hereof, exercise any
4 Default Loan and dilution rights as provided in Section 8.04
5 hereof, or elect to exercise the Non-Material Partner Appraisal
6 Buyout remedy as provided in Section 8.06 hereof or (iii) in
7 either case, exercise any rights provided in Section 3.03(c)
8 hereof;
9
10 (b) if the Event of Default occurs pursuant to Section
11 7.01(g) hereof, the Nondefaulting Partners may specifically
12 enforce their rights to acquire the Offered Interest or the Offer
13 Related Partnership Interest;
14
15 (c) together with any other Nondefaulting Partner,
16 wind up the affairs of, and dissolve, the Partnership, or sell
17 the Property and any other assets of the Partnership, as provided
18 in Section 15.01 hereof, with the proceeds of such liquidation to
19 be applied as provided in Section 15.03 hereof;
20
21 (d) enforce any covenant by the Defaulting Partner to
22 advance money (including, without limitation, the contribution of
23 a negative Capital Account balance) or to take or forbear from
24 any other action hereunder;
25
26 (e) following any Event of Default pursuant to any of
27 Sections 7.01(c), 7.01(e) and 7.01(f) hereof as to any Partner,
28 suspend any right of the Partner Group of which a Defaulting
96
1 Partner is a member to be a Represented Group and to be entitled
2 to be represented on the Executive Committee until such time as
3 the Event of Default is cured; provided that the rights of such
4 Partner Group, with respect to amendments and modifications of
5 the Partnership Agreement as specified in Section 5.01(e)(v)
6 hereof shall not be so suspended; or
7
8 (f) pursue any other remedy permitted at law or in
9 equity.
10
11 8.02 Choice of Remedies
------------------
12
13 (a) From and after the date a Nondefaulting Partner
14 has elected to exercise any remedy pursuant to Section 8.01
15 hereof, such exercise of remedies may be continued thereafter by
16 the Nondefaulting Partner regardless of whether the Defaulting
17 Partners thereafter cures such Event of Default.
18
19 (b) The election to pursue any other remedies pursuant
20 to Section 8.01 hereof may be made alone or in combination with
21 any other remedies; provided that a buy/sell pursuant to Section
22 8.03 hereof, an Appraisal Buyout pursuant to Section 8.05 hereof
23 or a Non-Material Partner Appraisal Buyout pursuant to Section
24 8.06 hereof, as the case may be, may not be pursued
25 simultaneously against any one Partner Group or Defaulting
26 Partner, as the case may be.
27
28
97
1 (c) Nothing contained herein shall limit any rights to
2 sue a Partner Group or Defaulting Partner, as the case may be,
3 for amounts owing to the Partnership hereunder, or for any other
4 breach of this Agreement. A Defaulting Partner shall have no
5 right to demand the immediate valuation and payment of its
6 Partnership Interest.
7
8 (d) In any action against a Defaulting Partner for a
9 failure to make any Initial Capital Contribution pursuant to
10 Section 3.01 hereof or any Additional Capital Contribution
11 pursuant to Section 3.03 hereof or in any levy or enforcement of
12 any judgment against a Defaulting Partner for any such failure to
13 contribute, the recovery against such Defaulting Partner may
14 include any assets of such Defaulting Partner but shall not
15 include any taking or Transfer of such Defaulting Partner's
16 Partnership Interests other than any Transfer as may occur
17 pursuant to any exercise of rights under Sections 8.03, 8.04,
18 8.05 or 8.06 hereof.
19
20 (e) Upon any Transfer of a Partnership Interest
21 pursuant to Sections 8.03, 8.04, 8.05 or 8.06 hereof, the
22 transferee shall acquire the Partnership Interest free and clear
23 of any lien or security interest with respect to such Partnership
24 Interest; provided that nothing herein shall restrict or impair
25 the lien of any lender holding any such security interest to any
26 proceeds payable to the Partner so Transferring its Partnership
27 Interest or any right of such lender to receive directly such
28 proceeds.
98
1 8.03 Buy/Sell
--------
2
3 (a) The provisions of this Section 8.03 may be
4 exercised (i) by a Nondefaulting Partner pursuant to Section
5 8.01(a) hereof as to either the Partner Group if a Material
6 Partner is the Defaulting Partner or as to the Defaulting Partner
7 if a non-Material Partner is the Defaulting Partner, (ii) by a
8 Material Partner pursuant to Section 11.02 hereof as to either
9 the Partner Group if a Material Partner is the Defaulting Partner
10 or as to the Defaulting Partner if a non-Material Partner is the
11 Defaulting Partner, and (iii) by a Material Partner pursuant to
12 Section 12.01 hereof as to any Partner Group. In any case where
13 a Material Partner exercises a buy/sell pursuant to Section
14 8.01(a) hereof, the Material Partner shall have the option to
15 offer in such buy/sell its entire Partnership Interest or a
16 portion of its Partnership Interest containing a Percentage Share
17 equal to the Percentage Share of the Defaulting Partner or
18 Partner Group, as the case may be. If such Defaulting Partner or
19 Partner Group, as the case may be, has a Percentage Share greater
20 than the Percentage Share of the Material Partner exercising the
21 buy/sell, the Material Partner shall offer its entire Partnership
22 Interest in the buy/sell.
23
24 (b) Any Material Partner eligible to elect a buy/sell
25 pursuant to Section 8.03(a) hereof may, by written notice to the
26 Partner Group or Partner, as the case may be, with respect to
27 which the buy/sell is being exercised and any other Material
28 Partners, establish a gross sales price for the Partnership
99
1 ("Partnership Price"), which shall be the price to be used in the
2 calculation procedures set forth in Section 8.03(e) hereof. The
3 Material Partner first to exercise its right under this Section
4 8.03 shall be the Electing Partner for the purposes of this
5 Section 8.03. Any offer made pursuant to this Section 8.03(b)
6 shall be the "Offer". Any Material Partner other than the
7 Electing Partner and the Partner or Partner Group with respect to
8 whom such buy/sell has been exercised shall be a Remaining
9 Partner for the purposes of this Section 8.03, so long as such
10 Material Partner is not a Defaulting Partner.
11
12 (c) A Remaining Partner shall have the option for ten
13 (10) days after notice of the Offer is given by the Electing
14 Partner to the other Material Partners to participate in the
15 Offer made by the Electing Partner. If a Remaining Partner by
16 written notice to the other Material Partners within said ten
17 (10) day period elects to join the Electing Partner in the Offer,
18 such Material Partners shall participate in the buy/sell pursuant
19 to this Section 8.03(b) on a pro rata basis in accordance with
20 each such Exercising Partner's Percentage Share. If any
21 Remaining Partner does not by timely written notice to the other
22 Material Partners elect to join the Electing Partner in the
23 Offer, such Remaining Partner shall have no right of
24 participation in the buy/sell pursuant to this Section 8.03(b).
25 If more than one Material Partner elect to exercise this buy/sell
26 right concurrently, each shall act jointly with the other
27 exercising Material Partners and shall participate in the
28 buy/sell pursuant to this Section 8.03 on a pro rata basis in
100
1 accordance with each such Material Partner's Exercising Partner's
2 Percentage Share. The Material Partner(s) participating in the
3 Offer shall be the "Offeror".
4
5 (d) The Electing Partner shall in the notice of the
6 Offer (i) designate the Partner Group or Partner, as the case may
7 be, with respect to which the buy/sell is being exercised (the
8 "Offeree"), (ii) state the Partnership Price, (iii) summarize in
9 reasonable detail the calculations described in Section 8.03(e)
10 hereof which determine the terms on which the Offeror would be
11 willing either (A) to purchase from the Offeree the Offeree's
12 Partnership Interest or (B) to sell to the Offeree the Offeror's
13 Partnership Interest, and (iv) state the liabilities to be
14 assumed pursuant to Section 8.03(g) hereof. The notice of the
15 Offer may designate any date, so long as such date is not more
16 than ninety (90) days prior to the date such notice of the Offer
17 is given and no later than the date on which the buy/sell closes,
18 as to the effective date on which the hypothetical liquidation
19 pursuant to Section 8.03(e) hereof shall occur. If the Offeror
20 shall become a Defaulting Partner at any time after making an
21 Offer, the buy/sell initiated pursuant to such Offer shall
22 terminate. Where more than one Material Partner are
23 participating in the buy/sell remedy, if any of such Material
24 Partners becomes a Defaulting Partner, the remaining
25 Nondefaulting Partners may proceed with the buy/sell without any
26 further participation by any Material Partner which becomes a
27 Defaulting Partner.
28
101
1 (e) For purposes of calculating the Partnership Price
2 payable to the Offeror or Offeree, the Partnership Price shall be
3 treated as hypothetical proceeds of liquidation pursuant to
4 Section 15.03 hereof, and the portions of such hypothetical
5 proceeds which would be respectively distributed to each of the
6 Offeror and the Offeree under Section 15.03 hereof (assuming that
7 all debts and liabilities of the Partnership to third parties
8 (including any loans or advances that may have been made by any
9 Partner to the Partnership) shall be paid from such hypothetical
10 proceeds or assumed by the purchasing Partner(s)) shall be
11 calculated (as well as any negative Capital Account balance of
12 the Offeror and the Offeree which would result in such
13 hypothetical liquidation). The portion so calculated of such
14 hypothetical proceeds that the Offeree would receive for its
15 Partnership Interest (including any amounts as are payable to the
16 Offeree in respect of Default Loans pursuant to Section 8.04
17 hereof or in respect of indemnity obligations pursuant to Section
18 10.02 and 10.04 hereof) shall be defined as the "Net Partnership
19 Price" of the Offeree. The portion so calculated of such
20 hypothetical proceeds that the Offeror(s) would receive for its
21 Partnership Interest(s) (including any amounts as are payable to
22 the Offeror(s) in respect of Default Loans pursuant to Section
23 8.04 hereof or in respect of indemnity obligations pursuant to
24 Sections 10.02 and 10.04 hereof) shall be defined as the "Net
25 Partnership Price" of the Offeror(s). If the Offeror or Offeree,
26 as the case may be, would have a negative Capital Account and be
27 required to pay the amount of such negative Capital Account to
28 the Partnership pursuant to Section 15.03 hereof in connection
102
1 with such hypothetical liquidation, the amount of such negative
2 Capital Account shall be the "Net Partnership Price" as to such
3 Offeror or Offeree. The Partners understand and agree that in
4 such circumstances, the Net Partnership Price applicable to an
5 Offeror or Offeree will require a payment from the selling
6 Partner or Partner Group(s), as the case may be, to the buying
7 Partner or Partner Group(s), as the case may be, rather than a
8 payment from the buying Partner or Partner Group(s) to the
9 selling Partner or Partner Group(s) as the case may be.
10
11 (f) From the date the notice of the Offer is given,
12 the Offeree shall have sixty (60) days to notify the Offeror(s)
13 of its election either to purchase the Partnership Interest of
14 the Offeror(s) or to sell its own Partnership Interest at the
15 prices so offered.
16
17 (i) If the Offeree determines to purchase the
18 Partnership Interest of the Offeror(s), the Offeree shall serve
19 written notice of such election specifying a closing date for
20 such purchase not more than ninety (90) days from the date of
21 such notice of election (including the escrow period) within
22 which it must purchase the Partnership Interest of the Offeror(s)
23 at the Net Partnership Price of the Offeror(s) as calculated
24 above.
25
26 (ii) If the Offeree determines to sell its
27 Partnership Interest, it shall give written notice of such
28 election to the Offeror(s), who shall, within ten (10) days of
103
1 the Offeree's election, designate a closing date for such sale
2 not more than ninety (90) days thereafter and shall purchase the
3 Partnership Interest of the Offeree at the Net Partnership Price
4 of the Offeree as calculated above.
5
6 (iii) If the Offeree does not elect either to buy
7 or sell within the thirty (30) day period referred to above, the
8 Offeror(s) may elect to buy the Partnership Interest of the
9 Offeree and the Offeror(s) shall have the ten (10) days following
10 expiration of such thirty (30) day period in which to designate a
11 closing date for such purchase not more than one hundred twenty
12 (120) days from the date of such deemed election.
13
14 (iv) If the Partnership Interest of Harrah's is
15 being purchased, the notice of offer or election, as the case may
16 be must state whether the purchaser will elect to acquire the
17 interest of Manager and must request the Partnership's
18 accountants to determine the appraised value of such interest as
19 provided in Section 17.02 of the Management Agreement. If such
20 election is made, the purchaser shall purchase the interests of
21 Harrah's and Manager simultaneously.
22
23 (g) The closing of the purchase and sale contemplated
24 by Section 8.03(f) hereof shall be subject to the following terms
25 and conditions:
26
27 (i) The closing shall occur at the offices of the
28 Partnership at 9:00 a.m. on the date specified on the notice of
104
1 the Offer or the next succeeding Business Day which is also a
2 Tuesday, Wednesday or Thursday.
3
4 (ii) The Net Partnership Price for any purchase
5 and sale pursuant to Section 8.03(f) hereof and purchase price
6 for the interest of Manager, if applicable, shall be paid in cash
7 at the closing. Costs of any sale of a Partnership Interest,
8 including recording fees, escrow costs, if any, and other fees
9 (but not attorneys' fees) shall be divided equally between the
10 Offeror(s) and the Offeree.
11
12 (iii) At the closing of the purchase of a
13 Partnership Interest pursuant to this Section 8.03(g), the
14 Partnership and the buying Partner(s) or Partner Group, as the
15 case may be, shall save, protect, defend, indemnify, and hold
16 harmless the selling Partner(s) or Partner Group, as the case may
17 be, from all debts and liabilities owed by the Partnership to
18 third parties but the selling Partner(s) or Partner Group, as the
19 case may be, shall not be relieved of any of their indemnity
20 obligations pursuant to Article 10 hereof for liabilities arising
21 out of events occurring prior to or during the period any selling
22 Partner was a Partner in the Partnership.
23
24 (iv) A Partner Group or Partner selling its
25 Partnership Interest pursuant to Section 8.03(f) hereof shall
26 deliver all appropriate documents of Transfer at closing and
27 shall convey its Partnership Interest to the buying Partner
28 Group(s) or Partner, or its nominee or their respective nominees,
105
1 free and clear of all liens, claims, encumbrances or other
2 charges of any kind whatsoever. In the event the Partnership
3 Interest is conveyed to any such nominee or nominees of the
4 buying Partner Group(s) or Partner, the admission of such nominee
5 or nominees to the Partnership as a successor to the selling
6 Partner Group(s) or Partner shall occur, and for all purposes
7 shall be deemed to have occurred immediately prior to the
8 transfer by the selling Partner Group(s) or Partner of its
9 Partnership Interest.
10
11 (v) From and after the closing of any such sale
12 of a Partnership Interest, the selling Partner Group(s) or
13 Partner shall have no further interest in the assets, profits or
14 management of the Partnership and shall not be responsible for
15 any of the obligations or losses of the Partnership, and all
16 obligations of the Partnership to the selling Partner Group(s) or
17 Partner, including all capital accounts, loans and advances,
18 shall be deemed satisfied and discharged, but the selling Partner
19 Group(s) or Partner shall not be relieved of any indemnity
20 obligations pursuant to Article 10 hereof for liabilities arising
21 out of events occurring prior to or during the period any selling
22 Partner was a Partner in the Partnership.
23
24 (h) If the buying Partner Group(s) or Partner shall
25 fail to close a purchase pursuant to Section 8.03(g) hereof, the
26 selling Partner Group(s) or Partner may, in addition to any other
27 rights hereunder, elect to purchase the buying Partner Group(s)'
28 or Partner's Partnership Interest at the Net Partnership Price
106
1 which would otherwise have been payable to the buying Partner
2 Group(s) or Partner pursuant to Section 8.03(e) hereof. Where
3 more than one Partner Group or Partners are buying Partner Groups
4 or Partners and one such buying Partner Group or Partners shall
5 fail to close a purchase under Section 8.03(g) hereof, any other
6 buying Partner Group or Partners shall, by written notice to the
7 other participating Partner Groups or Partners within an
8 additional twenty (20) day period, elect either to act as the
9 Buying Partner for the entire purchase without any further
10 participation by the Partner Group or Partners that failed to
11 close or elect not to proceed with the purchase. Such closing
12 shall occur on a date at the expiration of said additional twenty
13 (20) day period as designated in said notice by the Partner Group
14 or Partners making such election to close.
15
16 8.04 Advances; Buy-Down
------------------
17
18 (a) If a Defaulting Partner shall have failed to make
19 any Capital Contribution pursuant to either Section 3.01 or
20 Section 3.03 hereof, any Nondefaulting Partner may, but shall not
21 be obligated to, advance to the Partnership on behalf of the
22 Defaulting Partner the amount of all or any part of such
23 delinquency, with each such advance to be treated as a loan by
24 the Nondefaulting Partner to the Defaulting Partner (a "Default
25 Loan").
26
27 (i) Any Nondefaulting Partner may elect to make a
28 Default Loan at any time until six (6) months after the later to
107
1 occur of the date of a call for Additional Capital Contributions
2 pursuant to Section 3.03 hereof or the date on which a cash
3 deficiency occurs as a result of a failure of a Partner to
4 contribute pursuant to Section 3.03 hereof. Any Nondefaulting
5 Partner first to exercise its right under this Section 8.04(a)
6 shall be the Electing Partner for the purposes of this Section
7 8.04. If more than one Nondefaulting Partner concurrently
8 exercise their rights under this Section 8.04(a), all such
9 concurrently electing Nondefaulting Partners shall jointly be the
10 Electing Partner. The Electing Partner shall promptly give
11 written notice to the Defaulting Partner and any other Material
12 Partners of making such advance to the Partnership.
13
14 (ii) Any Material Partner(s) other than a
15 Defaulting Partner and the Material Partner first electing to
16 make a Default Loan, so long as it is not a Defaulting Partner,
17 shall be a Remaining Partner for the purposes of this Section
18 8.04. Any Remaining Partner shall have the option for ten (10)
19 days after such notice is given to join the Electing Partner and
20 participate in the Default Loan. If any Remaining Partner elects
21 by written notice to the other Material Partners within the said
22 ten (10) day period to participate in the Default Loan, such
23 Remaining Partner shall, upon such election, advance to the
24 Electing Partner an amount so that such Remaining Partner shares
25 in such Default Loan with the Electing Partner pro rata in
26 accordance with its Exercising Partner's Percentage Share. If
27 such Remaining Partner does not give timely written notice of
28 such election to join the Electing Partner, such Remaining
108
1 Partner shall have no right to participate in such Default Loan.
2 The Nondefaulting Partner(s) participating in the Default Loan
3 shall be the "Default Lender".
4
5 (iii) Each separate advance by a Default Lender
6 shall be a separate Default Loan. The amount of each such
7 advance to the Partnership shall be credited to the Capital
8 Account of the Defaulting Partner.
9
10 (iv) Each Default Loan shall be (i) for a term of
11 two (2) years, and (ii) bear interest, payable monthly, at a
12 fixed rate equal to the greater of (A) the then Prime Rate plus
13 three percent (3%) or (B) nine and one-quarter percent (9 1/4%) per
14 annum, but in no event greater than the maximum rate permitted by
15 applicable law, from the date of such Default Loan to the earlier
16 of the date of payment in full by the Defaulting Partner or the
17 date of the Default Lender's exercise of its rights pursuant to
18 Sections 8.04(b) or 8.04(c) hereof.
19
20 (v) The Defaulting Partner shall have two (2)
21 years after the making of any Default Loan within which to repay
22 the principal amount of such Default Loan (provided that any
23 portion of a Default Loan in connection with an Additional
24 Capital Contribution pursuant to Section 3.03 hereof attributable
25 to NOLDC shall have no stated maturity, and shall remain
26 outstanding until paid by the application of Distributions
27 otherwise distributable to NOLDC in accordance with Section 4.05
28 hereof). Any interest payable by the Defaulting Partner on any
109
1 Default Loan shall be paid directly to the Default Lender by the
2 Defaulting Partner and any such payment shall not affect either
3 the Nondefaulting Partners' or the Defaulting Partner's Capital
4 Accounts.
5
6 (vi) Upon the payment in full of the principal of
7 and all accrued interest on a Default Loan within such two (2)
8 year period (or with respect to NOLDC with respect to a Default
9 Loan in connection with an Additional Capital Contribution
10 pursuant to Section 3.03 hereof at any time) or pursuant to
11 Sections 8.04(b) or 8.04(c) hereof, the Defaulting Partner's
12 default, with respect to which a Default Loan was made, shall be
13 deemed cured. The making of a Default Loan shall not be deemed
14 to cure an Event of Default with respect to which a Default Loan
15 has been made, and such cure may be made only in the manner set
16 forth in the immediately preceding sentence or in Sections
17 4.05(a), 8.04(b) and 8.04(c) hereof.
18
19 (b) If the Defaulting Partner fails to repay the
20 Default Lender(s) with respect to any one or more Default Loan
21 within the two (2) year period referred to in Section 8.04(a)(v)
22 hereof, any Default Lender may, at any time after the expiration
23 of such two (2) year period elect, by written notice (the
24 "Conversion Notice") with respect to all or any portion of the
25 Default Loans from such Default Lender to the Defaulting Partner
26 to increase such Default Lender's aggregate Percentage Share and
27 decrease the Defaulting Partner's Percentage Share as of the date
28
110
1 of the Conversion Notice as herein set forth with respect to such
2 Default Lender's portion of any such outstanding Default Loan.
3
4 (i) The Default Lender that delivered the
5 Conversion Notice shall, as to its portion of any Default Loan,
6 increase its aggregate Percentage Share (but not to exceed one
7 hundred percent (100%)) by a percentage derived from a fraction,
8 the numerator of which equals one hundred ten percent (110%) of
9 all outstanding principal and interest of the Default Loan being
10 converted and the denominator of which equals the positive amount
11 the Defaulting Partner would receive upon a hypothetical
12 liquidation of the Partnership treating one hundred percent
13 (100%) of Appraised Value of the assets of the Partnership as
14 hypothetical sales proceeds for distribution under Section 15.03
15 hereof (assuming all debts and liabilities of the Partnership to
16 third parties, including any loans or advances permitted or
17 required under the terms of this Agreement or approved by the
18 Partnership that may have been made by any of the Partners to the
19 Partnership, shall have been paid from such hypothetical sales
20 proceeds) and that any gain or loss realized from such
21 hypothetical sale shall have been allocated to the Partners'
22 Capital Accounts. If such hypothetical liquidation of the
23 Partnership results in a negative Capital Account for the
24 Defaulting Partner, the Default Lender shall acquire all of the
25 Percentage Interest of the Defaulting Partner upon any such
26 conversion and the Defaulting Partner shall remain liable to
27 restore such negative Capital Account balance. If the Default
28 Lender consists of more than one Partner, such Partners shall
111
1 share such increased Percentage Interest pro rata in accordance
2 with their respective Exercising Partner's Percentage Share. If
3 the Defaulting Partner's Percentage Share is decreased to zero as
4 a result of any conversion pursuant to this Section 8.05(b), the
5 Defaulting Partner shall thereupon cease to be a Partner in the
6 Partnership and the Defaulting Partner shall remain liable to
7 restore any negative Capital Account balance resulting from such
8 hypothetical liquidation. The Defaulting Partner shall have its
9 Percentage Share correspondingly decreased by the amount by which
10 the Default Lender's Percentage Share is increased.
11
12 (ii) The Partners acknowledge that Capital
13 Contributions will be of critical importance to the Partnership,
14 and the Partners further acknowledge that the value of Capital
15 Contributions or Default Loans made to Partners who have failed
16 to make Capital Contributions is not readily ascertainable as of
17 the date hereof and a reasonable estimate of such value is
18 achieved by the formula contained in Section 8.04(b)(i) hereof.
19 Such formula reflects such estimate of the Partners, and is not
20 intended to be a penalty.
21
22 (iii) Upon such recalculation and the corresponding
23 adjustments of Percentage Shares, if all of the Default Loan has
24 been converted pursuant to this Section 8.04(b), the Event of
25 Default associated with the Default Loan with respect to which
26 such adjustments were made shall be deemed cured as of the date
27 of such conversion.
28
112
1 (c) Notwithstanding anything to the contrary contained
2 in Section 8.04(b) hereof, in the event that any Percentage
3 Shares are adjusted as set forth in Section 8.04(b) hereof, and
4 the Defaulting Partner's Percentage Share, as readjusted, is
5 equal to zero (0), then the Default Lender shall have the right
6 (but not the obligation), in its or their sole discretion, either
7 to (i) admit to the Partnership as an additional Partner of the
8 Partnership a nominee of the Default Lender, and to deem the
9 Defaulting Partner to have Transferred its remaining Partnership
10 Interest to such nominee (instead of increasing the Default
11 Lender's Percentage Share by such amount), whereupon the
12 Defaulting Partner will cease to be a Partner in the Partnership,
13 and to have any Partnership Interest and such Partner shall not
14 be relieved of any indemnity obligations pursuant to Article 10
15 hereof for liabilities arising out of events occurring prior to
16 or during the period any selling Partner was a Partner in the
17 Partnership, or (ii) if, after the exercise of the dilution
18 remedy in Section 8.04(b) hereof no other Partner remains, take
19 all steps necessary to dissolve and wind up the affairs of the
20 Partnership, and to cause all assets to be liquidated and the net
21 proceeds therefrom to be distributed solely to the Default
22 Lender, with the Defaulting Partner having no right to receive
23 any such Distribution.
24
25 (d) Upon request by any Default Lender at any time
26 from the date of the Default Lender's advance pursuant to Section
27 8.04(a) hereof until any such Default Loan shall be repaid in
28 full or converted to an increased Percentage Share, the
113
1 Defaulting Partner shall execute any and all documents reasonably
2 requested by any Default Lender, including, without limitation,
3 notes and any other documents which may be necessary to evidence
4 the Default Loan.
5
6 (e) The dilution remedy in Section 8.04(b) hereof may
7 not be elected by any Material Partner with respect to NOLDC with
8 respect to Default Loans made in connection with an Additional
9 Capital Contribution pursuant to Section 3.03 hereof, to the
10 extent NOLDC retains all or any part of its original Partnership
11 Interest. This exception shall not apply to any Partnership
12 Interest subsequently acquired by NOLDC by purchase, merger or
13 otherwise, or to any part of NOLDC's Partnership Interest which
14 is Transferred other than to First National Bank of Commerce or
15 any successor Institutional Investor holding the NOLDC Loan or a
16 nominee who holds title for such bank or Institutional Investor
17 in respect of any existing Default Loans to NOLDC prior to
18 foreclosure of the NOLDC Loan.
19
20 8.05 Appraisal Buyout
----------------
21
22 (a) Upon the occurrence of an Unsuitability
23 Determination, the Partnership shall exercise promptly its right
24 pursuant to Section 11.01 hereof to redeem (i) the Partnership
25 Interest of the Partner Group containing the Defaulting Partner
26 in the case of an Unsuitability Determination with respect to a
27 Material Partner, (ii) the Partnership Interest of a non-Material
28 Partner in the case of an Unsuitability Determination with
114
1 respect to a non-Material Partner, or (iii) the entire
2 Partnership Interest of a Partner who has failed to redeem an
3 unsuitable Holding Entity pursuant to Section 11.01(b)(iii)
4 hereof or Section 16.06(e) hereof, as the case may be (the
5 "Redeemed Interest"), pursuant to this Section 8.05 (the
6 "Appraisal Buyout"). Upon such notice the fair market value of
7 the assets of the Partnership shall be determined pursuant to
8 Article 9 hereof. The Partnership shall have sixty (60) days or
9 such period of time allowed or required by LEDGC from the earlier
10 of the date on which the Represented Groups agree upon a fair
11 market value pursuant to Section 9.01 hereof or the date on which
12 the Remaining Partners receive notice of the decision of the
13 appraisers pursuant to Section 9.02 hereof (the "Valuation Date")
14 in which to purchase the Redeemed Interest by payment, in
15 accordance with Section 8.05(c) hereof, to the Partner Group or
16 Partner of an amount equal to the Appraisal Buyout Price.
17
18 (b) For purposes of calculating the "Appraisal Buyout
19 Price", ninety percent (90%) of the Appraised Value of the assets
20 of the Partnership shall be treated as hypothetical sales
21 proceeds for distribution under Section 15.03 hereof, and the
22 portions of such hypothetical sales proceeds which would be
23 respectively distributed to each Partner in respect of its
24 Redeemed Interest pursuant to Section 15.03 hereof (assuming that
25 all debts and liabilities of the Partnership to third parties,
26 including any loans or advances permitted or required by the
27 terms of this Agreement or approved by the Partnership that may
28 have been made by any of the Partners to the Partnership, shall
115
1 be paid from such hypothetical sales proceeds and that any gain
2 or loss realized upon such hypothetical sale shall have been
3 allocated to the Partners' Capital Accounts) shall be calculated
4 (as well as any negative Capital Account balance of any Partner
5 which would result from such a hypothetical liquidation).
6
7 (i) The notice may designate any date, so long as
8 such date is not more than ninety (90) days prior to the date
9 such notice is given and no later than the date on which the
10 Appraisal Buyout closes, as to the effective date on which the
11 hypothetical liquidation pursuant to Section 8.05(b) hereof shall
12 occur.
13
14 (ii) The portion so calculated of such
15 hypothetical sales proceeds that the Partner Group or Partner
16 with respect to which the Unsuitability Determination was made
17 would receive, if any (including, or less, any amounts as are
18 payable to any Partners in respect of Default Loans pursuant to
19 Section 8.04 hereof or indemnity obligations pursuant to Sections
20 10.02 and 10.04 hereof), or such lesser amounts to be paid to the
21 Partner Group or Partner as may be necessary to comply with
22 applicable laws, rules, regulations or requirements of any
23 governmental entity, shall be the Appraisal Buyout Price for such
24 Redeemed Interest.
25
26 (iii) If any Partner Group or Partner would have a
27 negative Capital Account and be required to pay the amount of
28 such negative Capital Account to the Partnership pursuant to
116
1 Section 15.03 hereof in such hypothetical liquidation, the amount
2 of such negative Capital Account (including, or less, any amounts
3 as are payable to any Partners in respect of Default Loans
4 pursuant to Section 8.04 hereof or indemnity obligations pursuant
5 to Sections 10.02 and 10.04 hereof) shall be the Appraisal Buyout
6 Price for its Redeemed Interest. The Partners understand and
7 agree that in such circumstances of a negative Capital Account,
8 the Appraisal Buyout Price applicable to a Partner Group or
9 Partner for its Redeemed Interest will require a payment from the
10 selling Partner Group or Partner to the Partnership rather than a
11 payment from the Partnership to the selling Partner Group or
12 Partner, as the case may be.
13
14 (iv) If the Partnership Interest of Harrah's is
15 being purchased, the notice must state whether the Management
16 Agreement will be terminated pursuant to Section 17.02 of the
17 Management Agreement, and all amounts due to Manager in
18 connection with such termination must be paid in full to Manager
19 at the closing of such purchase.
20
21 (c) Whenever an Offer Related Partnership Interest is
22 being purchased pursuant to Section 8.05(a) hereof, the Appraisal
23 Buyout Price of the Offer Related Partnership Interest shall be
24 the amount of hypothetical sales proceeds which would be
25 allocable to the Offer Related Partnership Interest based on its
26 pro rata share of the Percentage Share of the subject Partnership
27 Interest.
28
117
1 (d) The closing of the Partnership's purchase of a
2 Redeemed Interest and, if applicable, termination of the
3 Management Agreement, shall occur at a place and time designated
4 by the Partnership in its written notice pursuant to Section
5 8.05(a) hereof within sixty (60) days or such other period as
6 allowed or required by LEDGC after the Valuation Date. The
7 Appraisal Buyout Price as determined in Section 8.05(b) hereof,
8 to the extent not prohibited by law, shall be paid from
9 Distributions otherwise distributable to the Partner or Partner
10 Group which owns the Redeemed Interest had such purchase not
11 occurred, without interest. At the closing of the purchase of a
12 Redeemed Interest pursuant to this Section 8.05(d), the
13 Partnership shall, in virile shares, save, protect, defend,
14 indemnify and hold harmless the selling Partner Group or Partner
15 from all debts and liabilities owed by the Partnership to third
16 parties, excluding any personal guarantee incurred by a Partner
17 prior to the date of this Agreement, the obligation to repay any
18 Default Loans pursuant to Section 8.04 hereof or the obligation
19 to pay to the Partnership any negative Capital Account balance
20 pursuant to Section 15.03 hereof, and the selling Partner Group
21 or Partner shall not be relieved of any indemnity obligation
22 pursuant to Article 10 hereof arising out of events occurring
23 prior to or during the period of time any selling Partner was a
24 Partner in the Partnership.
25
26 (e) Costs of the transaction, including recording
27 fees, escrow costs, if any, and other fees (but not attorneys'
28 fees) shall be borne by the Partner Group or Partner, as the case
118
1 may be, which owned the Redeemed Interest. The Partner Group or
2 Partner, as the case may be, shall deliver all appropriate
3 documents of Transfer and, if applicable, termination of the
4 Management Agreement, to any nominee of the Partnership at the
5 closing and shall cause its entire Redeemed Interest to be free
6 and clear of all liens, claims, encumbrances, or other charges of
7 any kind whatsoever. If a Partner's entire Partnership Interest
8 is Transferred pursuant to this Section 8.05, such Partner shall
9 thereupon cease to be a Partner in the Partnership. The
10 Percentage Share of any Partnership Interest or Offer Related
11 Redeemed Interest acquired by the Partnership pursuant to this
12 Section 8.05 shall be reallocated among the remaining Material
13 Partners, pro rata in accordance with their respective Percentage
14 Shares. If the Partnership Interest or Offer Related Redeemed
15 Interest is Transferred to a nominee of the Partnership, the
16 admission of such nominee to the Partnership as a successor to
17 the Partner Group or Partner which owned the Redeemed Interest,
18 as the case may be, shall occur, and for all purposes shall be
19 deemed to have occurred immediately prior to the Transfer by the
20 Partner Group or Partner, as the case may be, of the Redeemed
21 Interest. From and after the closing, the Partner Group or
22 Partner which owned the Redeemed Interest, as the case may be,
23 shall have no further interest in the assets, profits or
24 management of the Partnership and shall not be responsible for
25 any of its obligations or losses in respect of the Redeemed
26 Interest, and all obligations other than indemnity obligations of
27 the Partnership to the Partner Group or Partner which owned the
28 Redeemed Interest shall be satisfied and discharged in respect of
119
1 the Redeemed Interest Transferred, including all Capital
2 Accounts, Partner Loans or any other amounts advanced to the
3 Partnership or owed by the Partnership to the Partner Group or
4 Partner which owned the Redeemed Interest, excluding any personal
5 guarantee incurred by a Partner prior to the date of this
6 Agreement, the obligation to repay any Default Loans pursuant to
7 Section 8.04 hereof, or the obligation to pay to the Partnership
8 the negative Capital Account balance pursuant to Section 15.03
9 hereof, and the selling Partner Group or Partner shall not be
10 relieved of any indemnity obligation pursuant to Article 10
11 hereof arising out of events occurring prior to or during the
12 period of time any selling Partner was a Partner in the
13 Partnership.
14
15 8.06 Non-Material Partner Appraisal Buyout
-------------------------------------
16
17 (a) Upon a Monetary Default by a non-Material Partner,
18 any Nondefaulting Partner may give to the other Material Partners
19 written notice that it intends to exercise its right to buy any
20 defaulting non-Material Partner's Partnership Interest pursuant
21 to this Section 8.06 (the "Non-Material Partner Appraisal
22 Buyout"). By Unanimous Approval of such Nondefaulting Partners
23 within the ten (10) day notice period provided in Section
24 8.06(a)(ii) hereof, the Nondefaulting Partners may elect to have
25 the Partnership exercise the Non-Material Partner Appraisal
26 Buyout remedy pursuant to this Section 8.06. If the
27 Nondefaulting Partners so elect to have the Partnership be the
28
120
1 purchaser, the Partnership shall be the Electing Partner for the
2 purposes of this Section 8.06.
3
4 (i) Any Nondefaulting Partner first to exercise
5 its right under this Section 8.06(a) shall be the Electing
6 Partner for the purposes of this Section 8.06(a). If more than
7 one Nondefaulting Partner concurrently exercise their rights
8 under this Section 8.06(a), such concurrently exercising
9 Nondefaulting Partners shall jointly be the Electing Partner.
10
11 (ii) Any Material Partner other than a Defaulting
12 Partner and the Electing Partner, so long as it is not a
13 Defaulting Partner, shall be a Remaining Partner for the purposes
14 of this Section 8.06. Any Remaining Partner shall have the
15 option for ten (10) days after first notice of an Electing
16 Partner is given to elect by written notice to the other Material
17 Partners to join the Electing Partner and participate in the Non-
18 Material Partner Appraisal Buyout. If any Remaining Partner
19 timely elects by written notice to the other Material Partners to
20 participate in the Non-Material Partner Appraisal Buyout, each
21 Electing Partner will participate in the Non-Material Partner
22 Appraisal Buyout pursuant to this Section 8.06(a) on a pro rata
23 basis in accordance with each Material Partner's Exercising
24 Partner's Percentage Share. If any Remaining Partner does not
25 elect by timely written notice to join the Electing Partner, such
26 Remaining Partner shall have no participation in the Non-Material
27 Partner Appraisal Buyout. The Nondefaulting Partner(s)
28 participating in the Non-Material Partner Appraisal Buyout (e.g.,
121
1 the Electing Partner(s) and Remaining Partners giving notice as
2 aforesaid) shall be the "Non-Material Partner Appraisal
3 Purchaser".
4
5 (iii) Upon the first notice of an Electing Partner
6 the fair market value of the assets of the Partnership shall be
7 determined pursuant to Article 9 hereof. The Non-Material
8 Partner Appraisal Purchaser shall have sixty (60) days from the
9 earlier of the date on which the Electing Partners agree upon a
10 fair market value pursuant to Section 9.01 hereof or the
11 Valuation Date in which to purchase the defaulting non-Material
12 Partner's Partnership Interest by payment, in accordance with
13 Section 8.06(c) hereof, to the defaulting non-Material Partner of
14 an amount equal to the Non-Material Partner Appraisal Buyout
15 Price, as determined pursuant to Section 8.06(b) hereof.
16
17 (iv) If more than one Material Partners are acting
18 jointly as the Non-Material Partner Appraisal Purchaser under
19 this Section 8.06 and one becomes a Defaulting Partner, any other
20 Nondefaulting Partner may, at its sole discretion, within an
21 additional twenty (20) day period, elect to act as the Non-
22 Material Partner Appraisal Purchaser without the participation of
23 such Defaulting Partner in which case the closing date pursuant
24 to Section 8.06(c) hereof shall be extended by twenty (20) days.
25
26 (b) For purposes of calculating the "Non-Material
27 Partner Appraisal Buyout Price", ninety percent (90%) of the
28 Appraised Value (as established pursuant to Section 9.03 hereof)
122
1 of the assets of the Partnership shall be treated as hypothetical
2 sales proceeds for distribution under Section 15.03 hereof, and
3 the portion of such hypothetical sales proceeds which would be
4 distributed to the defaulting non-Material Partner pursuant to
5 Section 15.03 hereof (assuming that all debts and liabilities of
6 the Partnership to third parties (including any loans or advances
7 permitted or required by the terms of this Agreement or approved
8 by the Partnership that may have been made by any of the Partners
9 to the Partnership) shall be paid from such hypothetical sales
10 proceeds and that any gain or loss realized upon such
11 hypothetical sale shall have been allocated to the Partners'
12 Capital Accounts) shall be calculated (as well as any negative
13 Capital Account balance of any Partner which would result from
14 such a hypothetical liquidation).
15
16 (i) The notice may designate any date, so long as
17 such date is not more than ninety (90) days prior to the date
18 such notice is given and no later than the date on which the Non-
19 Material Partner Appraisal Buyout closes, as to the effective
20 date on which the hypothetical liquidation pursuant to Section
21 8.06(b) hereof shall occur.
22
23 (ii) The portion so calculated of such
24 hypothetical sales proceeds that the defaulting non-Material
25 Partner would receive, if any (including, or less, any amounts as
26 are payable to any Partners in respect of Default Loans pursuant
27 to Section 8.04 hereof or indemnity obligations pursuant to
28 Sections 10.02 and 10.04 hereof), or such lesser amounts to be
123
1 paid to the defaulting non-Material Partner as may be necessary
2 to comply with applicable laws, rules, regulations or
3 requirements of any governmental entity, shall be the Non-
4 Material Partner Appraisal Buyout Price.
5
6 (iii) If any defaulting non-Material Partner would
7 have a negative Capital Account and be required to pay the amount
8 of such negative Capital Account to the Partnership pursuant to
9 Section 15.03 hereof in such hypothetical liquidation, the amount
10 of such negative Capital Account shall be the Non-Material
11 Partner Appraisal Buyout Price. The Partners understand and
12 agree that in such circumstances of a negative Capital Account
13 (including, or less, any amounts as are payable to any Partners
14 in respect of Default Loans pursuant to Section 8.04 hereof or
15 indemnity obligations pursuant to Sections 10.02 or 10.04
16 hereof), the Non-Material Partner Appraisal Buyout Price
17 applicable to a defaulting non-Material Partner will require a
18 payment from the selling Partner to the Non-Material Partner
19 Appraisal Purchaser rather than a payment from the Non-Material
20 Partner Appraisal Purchaser to the selling Partner.
21
22 (c) The closing of the Non-Material Partner Appraisal
23 Purchaser's purchase of the defaulting non-Material Partner's
24 Partnership Interest shall occur at a place and time designated
25 by the Non-Material Partner Appraisal Purchaser in written notice
26 to the Remaining Partners and non-Material Partner whose
27 Partnership Interest is to be purchased. Such notice shall be
28 given in writing within ten (10) days after the Valuation Date.
124
1 If the Partnership is the Non-Material Partner Appraisal
2 Purchaser, the Non-Material Partner Appraisal Buyout Price as
3 determined in Section 8.06(b) hereof, to the extent not
4 prohibited by law, shall be paid from Distributions otherwise
5 distributable to the non-Material Partner whose Partnership
6 Interest is being purchased had it remained a Partner, without
7 interest. Otherwise the Non-Material Partner Appraisal Buyout
8 Price shall be paid in such manner as shall be elected by the
9 Non-Material Partner Appraisal Purchaser.
10
11 (i) At the closing of the purchase of a
12 Partnership Interest pursuant to this Section 8.06(c), the
13 Partnership and the Non-Material Partner Appraisal Purchaser
14 shall, in virile shares, save, protect, defend, indemnify and
15 hold harmless the selling non-Material Partner from all debts and
16 liabilities owed by the Partnership to third parties, excluding
17 any debts upon which a Partner has personal liabilities, any
18 indemnity obligations pursuant to Article 10 hereof, the
19 obligation to repay any Default Loans pursuant to Section 8.04
20 hereof, or the obligation to pay to the Partnership any negative
21 capital balance of a Capital Account pursuant to Section 15.03
22 hereof, and the selling non-Material Partner shall not be
23 relieved of any indemnity obligation pursuant to Article 10
24 hereof arising out of events occurring prior to or during the
25 period the selling non-Material Partner was a Partner in the
26 Partnership.
27
28
125
1 (ii) Where more than one Material Partner are
2 acting jointly as the Non-Material Partner Appraisal Purchaser
3 and one such Material Partner fails to close a Non-Material
4 Partner Appraisal Buyout under this Section 8.06, any other
5 purchasing Material Partner shall by written notice to the other
6 participating Material Partners within an additional twenty (20)
7 day period, either elect to act as the Non-Material Partner
8 Appraisal Purchaser without the participation by the Partner
9 Group that failed to close or elect not to proceed further with
10 the Non-Material Partner Appraisal Buyout. Such closing shall
11 occur on a date at the expiration of said additional twenty (20)
12 day period as designated in such notice by the Material Partner
13 making such election to close.
14
15 (d) Costs of the transaction, including recording
16 fees, escrow costs, if any, and other fees (but not attorneys'
17 fees) shall be borne by the defaulting non-Material Partner. The
18 defaulting non-Material Partner shall deliver all appropriate
19 documents of Transfer at the closing and shall convey its entire
20 Partnership Interest to the Non-Material Partner Appraisal
21 Purchaser, or its or their nominee(s), free and clear of all
22 liens, claims, encumbrances, or other charges of any kind
23 whatsoever on its Partnership Interest. In the event such
24 Partnership Interest is Transferred to a nominee of any
25 Nondefaulting Partner, the admission of such nominee to the
26 Partnership as a successor to the defaulting non-Material Partner
27 shall occur, and for all purposes shall be deemed to have
28 occurred immediately prior to the Transfer by the defaulting non-
126
1 Material Partner of its Partnership Interest. From and after the
2 closing, the defaulting non-Material Partner shall have no
3 further interest in the assets, profits or management of the
4 Partnership and shall not be responsible for any of its
5 obligations or losses, excluding any debts upon which a Partner
6 has personal liabilities, any indemnity obligations pursuant to
7 Article 10 hereof, the obligation to repay any Default Loans
8 pursuant to Section 8.04 hereof, or the obligation to pay to the
9 Partnership any negative capital balance of a Capital Account
10 pursuant to Section 15.03 hereof, and the selling non-Material
11 Partner shall not be relieved of any indemnity obligation
12 pursuant to Article 10 hereof arising out of events occurring
13 prior to or during the period of time any selling Partner was a
14 Partner in the Partnership.
15
16 (e) In the event a Material Partner has elected to
17 exercise a buy/sell against a defaulting non-Material Partner
18 pursuant to Section 8.03 hereof, any other Material Partner shall
19 have the option, for a period of ten (10) days following written
20 notice as required by Section 8.03(b) hereof, to elect by written
21 notice to the other Material Partners and the Defaulting Partner
22 to exercise the Non-Material Partner Appraisal Buyout pursuant to
23 this Section 8.06. If such notice is timely given, the buy/sell
24 pursuant to Section 8.03 hereof shall be terminated effective as
25 of the date of such notice and the Non-Material Appraisal Buyout
26 shall be initiated effective as of the date of such notice with
27 the Material Partner making such election being the Electing
28 Partner pursuant to Section 8.06(a) hereof.
127
1 8.07 Waiver. Each Partner hereby acknowledges and
------
2 agrees that any exercise of the buy/sell pursuant to the
3 provisions of Section 8.03 hereof, the dilution pursuant to the
4 provisions of Section 8.04 hereof, the Appraisal Buyout pursuant
5 to the provisions of Section 8.05 hereof, or the Non-Material
6 Partner Appraisal Buyout pursuant to the provisions of Section
7 8.06 hereof, for any reason or at any time in accordance with the
8 terms of such Sections shall not be deemed to be in bad faith or
9 a breach of any fiduciary or other Partnership duty, and each
10 Partner hereby expressly waives any claim of bad faith or breach
11 of fiduciary or other Partnership duty as a result of any
12 exercise of a buy/sell pursuant to the provisions of Section 8.03
13 hereof, a dilution pursuant to the provisions of Section 8.04
14 hereof, an Appraisal Buyout pursuant to the provisions of Section
15 8.05 hereof or a Non-Material Partner Appraisal Buyout pursuant
16 to the provisions of Section 8.06 hereof.
17
18 8.08 Waiver Regarding Embassy. Each Partner hereby
------------------------
19 acknowledges and agrees that Embassy may take any separate action
20 or actions as it shall determine in its sole discretion to be in
21 its own best interest with respect to the Partnership in
22 connection with any of its roles as (i) a lender to the
23 Partnership under the Completion Loan Agreement, (ii) an
24 Affiliate of a Partner, or (iii) a completion guarantor in
25 respect of any loan to the Partnership, and that Embassy shall
26 not be deemed to have acted in bad faith or to have breached any
27 fiduciary or other Partnership duty for so acting in its best
28 interest. Each Partner hereby expressly waives any claim of bad
128
1 faith or breach of fiduciary or other Partnership duty as a
2 result of any such action or actions which Embassy may take in
3 its own best interest in any such separate roles to the
4 Partnership.
5
6 8.09 Waiver Regarding Harrah's and Manager. Each
-------------------------------------
7 Partner hereby acknowledges and agrees that Harrah's and Manager
8 may take any separate action or actions as they individually
9 shall determine in their sole discretion to be in their own
10 respective best interest in connection with their respective
11 roles as (i) a Partner and (ii) Manager, and that Harrah's and
12 Manager shall not be deemed to have breached any fiduciary or
13 other Partnership duty for so acting in their respective best
14 interests. Each Partner hereby expressly waives any claim of bad
15 faith or breach of fiduciary or other Partnership duty as a
16 result of any such act in or actions which Harrah's or Manager
17 may take in their own respective best interests in any such
18 separate role with respect to the Partnership.
19
20
21 ARTICLE 9
22
23 VALUATION AND APPRAISAL PROCEDURES
24
25 9.01 Voluntary Appraisal. Upon an election of any
-------------------
26 Material Partner(s) to exercise their rights pursuant to any of
27 Sections 8.04, 8.05 or 8.06 hereof, the electing Material
28 Partners shall promptly attempt, in good faith, to agree upon the
129
1 fair market value of all of the assets of the Partnership for a
2 period of fifteen (15) days from written notice of any electing
3 Material Partners to exercise its rights pursuant to Sections
4 8.04, 8.05 or 8.06 hereof.
5
6 9.02 Appraisal Panel
---------------
7
8 (a) If the participating Material Partners, within the
9 fifteen (15) day period specified in Section 9.01 hereof, do not
10 agree upon the fair market value of the assets of the
11 Partnership, any participating Material Partners shall have the
12 right to call for an appraisal by written notice to all other
13 participating Material Partners involved designating a
14 disinterested Appraiser (the "First Appraiser") to serve on the
15 Appraisal Panel provided for below.
16
17 (b) The Defaulting Partner in the case of an exercise
18 of rights pursuant to Section 8.04 hereof, the Partner owning the
19 Redeemed Interest in the case of an exercise of rights pursuant
20 to Section 8.05 hereof, or the defaulting non-Material Partner in
21 the case of an exercise of rights pursuant to Section 8.06 hereof
22 shall have seven (7) days from receipt of notice invoking Section
23 9.02(a) hereof appointing the First Appraiser in which to
24 designate a disinterested appraiser (the "Second Appraiser") to
25 serve on the Appraisal Panel by serving notice of such
26 designation on the electing Material Partner(s). If the Second
27 Appraiser is not so appointed and designated within or by the
28 time so specified, then the First Appraiser shall be the sole
130
1 appraiser to determine the value of the assets of the
2 Partnership.
3
4 (c) Within seven (7) days after the designation, if
5 any, of the Second Appraiser, the First Appraiser and the Second
6 Appraiser shall themselves appoint a third disinterested
7 appraiser (the "Third Appraiser"). If the First Appraiser and
8 the Second Appraiser are unable to agree upon such appointment
9 within said seven (7) days, then the electing Material Partner(s)
10 shall request such appointment of a qualified independent
11 appraiser to act as the Third Appraiser by the New York office of
12 one of the following certified public accounting firms or its
13 successor (other than Arthur Andersen & Co.), such firm to be
14 selected by lot by the First Appraiser and the Second Appraiser:
15 Coopers & Lybrand, Deloitte & Touche, Ernst & Young, KMPG Peat
16 Marwick, and Price Waterhouse or a firm of equivalent status.
17
18 (d) In the event of failure, refusal or inability of
19 any appraiser to act, a new appraiser shall be appointed in the
20 stead thereof, which appointment shall be made in the same manner
21 as provided in this Section 9.02 for the appointment of such
22 appraiser so failing, refusing or being unable to act.
23
24 (e) The one or three appraisers appointed as the
25 appraisal panel pursuant to this Section 9.02 hereof (the
26 "Appraisal Panel") shall each appraise the assets of the
27 Partnership taking into account appropriate indicators of the
28 fair market value of such assets in a cash sale between a willing
131
1 buyer and seller not under undue duress and shall report their
2 findings to the Partnership and the Material Partners in writing
3 within sixty (60) days after the appointment of the Third
4 Appraiser. In the case of a three appraiser Appraisal Panel, if
5 one or more appraiser fails to deliver their reports within sixty
6 (60) days after the appointment of the Third Appraiser, the party
7 which appointed the delinquent appraiser may dismiss the
8 delinquent appraiser and a new appraiser may be appointed in
9 accordance with Section 9.02(d) above whose report shall be
10 submitted to the Partnership within thirty (30) days of its
11 appointment.
12
13 9.03 Appraised Value. The "Appraised Value" of the
---------------
14 Partnership's assets shall be equal to the mean of the two (2)
15 closest appraised values reported by the appraisers on the
16 Appraisal Panel; provided that if such values are equally
17 distributed, the "Appraised Value" of the assets to be appraised
18 shall be equal to the mean of the three appraised values reported
19 by the appraisers on the Appraisal Panel.
20
21 9.04 Expenses. Except as otherwise provided herein,
--------
22 each party shall pay the fees and expenses of the appraiser
23 appointed by such party, or in whose stead, as above provided,
24 such appraiser was appointed, and the fees and expenses of the
25 Third Appraiser, and all other expenses, if any, shall be borne
26 one half by the Partner or Partners appointing the First
27 Appraiser and one half by the Partner or Partners appointing the
28 Second Appraiser.
132
1 9.05 Qualification. To be qualified to be selected or
-------------
2 designated as an appraiser for purposes of this Article 9, such
3 appraiser must demonstrate (a) current good standing as a
4 licensed appraiser, and (b) past appraising experience of at
5 least five (5) years, which experience shall include the
6 appraisal of casino gaming operations.
7
8 9.06 Continued Use of Appraisal. If an Appraised Value
--------------------------
9 shall have been established pursuant to the procedures of this
10 Article 9 after the opening of the Temporary Casino or the
11 Permanent Casino, as the case may be, such Appraised Value shall
12 be used for purposes of any subsequent election pursuant to
13 Sections 8.04, 8.05 or 8.06 hereof for a period of nine (9)
14 months after the date such Appraised Value was established.
15
16
17 ARTICLE 10
18
19 REPRESENTATIONS, WARRANTIES AND INDEMNITIES
20
21 10.01 Representations and Warranties by the Partners.
----------------------------------------------
22 Each Partner represents and warrants to and with the Partnership
23 and each other Partner as of the date hereof or the date of its
24 admission to the Partnership that:
25
26 (a) it is, and shall continue to be, validly existing
27 and duly organized under the laws of the state of its formation,
28 and the Persons acting in its behalf have all the requisite power
133
1 and authority to execute, deliver and comply with the terms and
2 provisions hereof and consummate the transactions contemplated
3 herein;
4
5 (b) its execution, delivery and performance of this
6 Agreement do not require the consent or approval of any
7 governmental body or regulatory authority or other entity, is not
8 in contravention of or in conflict with any applicable law or
9 regulation and this Agreement is, and will continue to be, the
10 valid, binding and legally enforceable obligation of such Partner
11 in accordance with its terms;
12
13 (c) except for Transfers permitted by Article 6
14 hereof, its Partnership Interest has been or will be acquired
15 solely by and for its account for investment purposes only and is
16 not being purchased for, or with a view to, subdivision,
17 fractionalization, resale or distribution; except as provided in
18 this Agreement, it has no contract, undertaking, agreement or
19 arrangement with any Person to Transfer to such Person or anyone
20 else its Partnership Interest (or any part thereof); and it has
21 no present plans or intentions to enter into any such contract,
22 undertaking or arrangement; and agrees not to Transfer all or any
23 part of its Partnership Interest, except that subject to
24 compliance with the terms of this Partnership Agreement,
25 Rivergate Lease, Temporary Casino Lease, and Casino Operating
26 Contract and all applicable laws, Grand Palais and NOLDC have
27 indicated their intent to obtain financing secured by a loan on
28 their Partnership Interest and an interest in considering a
134
1 public offering of direct or indirect interests in the
2 Partnership;
3
4 (d) it has no knowledge of, and has not caused to
5 exist, any liens or encumbrances on the Property or Project or
6 any Partnership Interest, except as set forth in Exhibits B and D
7 hereto and hereafter will not cause or suffer to exist any liens
8 or encumbrances on the Property or Project or any Partnership
9 Interest, except as otherwise provided by Section 6.03 hereof and
10 as set forth in Exhibits B and D hereto;
11
12 (e) Harrah's, NOLDC, Grand Palais and Grand Palais
13 Enterprises, Inc. have incorporated provisions into their
14 articles of incorporation, charters, partnership agreements or
15 other formative documents as required by Section 16.06 hereof and
16 placed legends on their shares of capital stock substantially in
17 the form of Exhibits H-3 and H-5 attached hereto and by this
18 reference incorporated herein;
19
20 (f) except as set forth in Exhibit E attached hereto
21 and by this reference incorporated herein, it is not in violation
22 or default under any agreement with any Person, or under any law,
23 judgment, order, decree, license, permit, approval, rule, or
24 regulation of any court, arbitrator, administrative agency, or
25 other governmental authority to which it may be subject which
26 might have a material adverse impact on the Partnership, and
27 hereafter shall take no action which shall be in violation or
28 cause a default under any agreement with any Person, or under any
135
1 law, judgment, order, decree, license, permit, approval, rule, or
2 regulation of any court, arbitrator, administrative agency, or
3 other governmental authority to which it may be subject which
4 might have a material adverse impact on the Partnership;
5
6 (g) Harrah's, NOLDC and Grand Palais have placed
7 legends on their shares of capital stock substantially in the
8 form of Exhibit H-4 attached hereto and by this reference
9 incorporated herein;
10
11 (h) with respect to its investment in the Partnership:
12
13 (i) it has knowledge and experience in financial
14 and business matters in general, and in investments of the type
15 made by the Partnership in particular;
16
17 (ii) it is capable of evaluating the merits and
18 risks of an investment in the Partnership;
19
20 (iii) it has either secured independent tax advice
21 with respect to the investment in the Partnership, upon which it
22 is solely relying, or it is sufficiently familiar with the income
23 taxation of partnerships that it has deemed such independent
24 advice unnecessary;
25
26 (iv) it has received or has access to all material
27 information and documents with respect to the Partnership and has
28 had an opportunity to ask questions and receive answers thereto
136
1 and to verify and clarify any information available to the other
2 Partners;
3
4 (v) except as otherwise expressly set forth in
5 this Agreement, it has relied solely upon its independent
6 investigation, and not on any statements, actions or represen-
7 tations of the other Partners or any Affiliate of the other
8 Partners, in making the decision to acquire its Partnership
9 Interest;
10
11 (vi) no federal or state agency has reviewed or
12 passed upon the adequacy or accuracy of the information set forth
13 in the documents submitted to it or made any finding or
14 determination as to the fairness for investment, or any
15 recommendation or endorsement of an investment in the
16 Partnership;
17
18 (vii) there are restrictions on the transferability
19 of its Partnership Interest hereunder;
20
21 (viii) there will be no public market for its
22 Partnership Interest, and, accordingly, it may not be possible to
23 liquidate its investment in the Partnership; and
24
25 (ix) any anticipated federal or state income tax
26 benefits applicable to its Partnership Interest may be lost
27 through changes in, or adverse interpretations of, existing laws
28 and regulations;
137
1 (i) each of the following is true and correct:
2
3 (i) none of it or any Affiliate that are
4 Controlled by, under common Control with, or Controlling such
5 Person is a party to any other agreement or other arrangement
6 which would interfere with the development or operation of the
7 Project or the Property;
8
9 (ii) its performance under this Agreement will not
10 violate any other material agreement or other arrangement to
11 which it, or to the best of its knowledge, its Affiliates
12 Controlled by, under common Control with, or Controlling such
13 Partner, is a party;
14
15 (iii) except as provided in Exhibit E hereto, it,
16 and to the best of its knowledge, its Affiliates Controlled by,
17 under common Control with, or Controlling such Partner, have not
18 received notice of any claim which would interfere with its
19 performance under this Agreement;
20
21 (iv) it has Transferred to the Partnership all of
22 its right, title and interest in any rights or property related
23 to the Property and the Project;
24
25 (v) none of it, its Affiliates Controlled by,
26 under common Control with, or Controlling such Partner, or the
27 shareholders of NOLDC, Grand Palais and Grand Palais Enterprises,
28 Inc., has incurred any material liabilities or obligations on
138
1 behalf of the Partnership or has knowledge of any liabilities or
2 obligations of the Partnership other than those described on
3 Exhibit D attached hereto and by this reference incorporated
4 herein or pursuant to a Budget and agrees hereafter that it will
5 not, nor cause any of its Affiliates, to incur any liability or
6 obligation on behalf of the Partnership, except as otherwise
7 expressly provided herein;
8
9 (vi) it knows of no actions or lawsuits, pending,
10 planned or threatened, by or against it, the Partnership, or its
11 Affiliates, other than those described on Exhibit E attached
12 hereto, which could create an obligation or liability for the
13 Partnership or any of the other Partners; and
14
15 (vii) none of such Partner, Affiliates that are
16 Controlled by, under common Control with, or Controlling such
17 Person, or to the best of its knowledge, its Holding Entities has
18 been determined by LEDGC to be unsuitable, has had any
19 application for any gaming license or permit rejected, or has had
20 any gaming license or permit, once having been issued, rescinded,
21 suspended, revoked or not renewed or reinstated, and no Partner
22 has knowledge that the affiliation of any member of its Partner
23 Group with any other Partner will threaten any gaming license,
24 permit, entitlement or approval in any jurisdiction other than
25 the State of any member of a Partner Group of which it is not a
26 member;
27
28
139
1 (j) the execution, delivery and performance of this
2 Agreement, and the consummation of the transactions contemplated
3 hereby, will not
4
5 (i) violate any law, judgment, order, decree,
6 license, permit, approval, rule or regulation of any court,
7 arbitrator, administrative agency, or other governmental
8 authority to which it may be subject;
9
10 (ii) result in a breach or default under any
11 contract or other binding commitment or any provision of the
12 charter or by-laws or partnership agreement or other
13 organizational documents, as the case may be, of such entity; or
14
15 (iii) require any consent, or approval or vote of
16 any court or governmental authority or of any Person that, as of
17 the date hereof, has not been given or taken, and does not remain
18 effective.
19
20 10.02 Indemnities
-----------
21
22 (a) Grand Palais shall and does hereby indemnify,
23 defend and hold harmless the Partnership, the Indemnified Persons
24 of Harrah's and the Indemnified Persons of NOLDC, and each of
25 them separately, from and against all loss, cost, or damage
26 whatsoever (including attorneys fees) resulting from any act,
27 claim or omission of or by Grand Palais and all Affiliates that
28 are Controlled by, under common Control with, or Controlling
140
1 Grand Palais or Caesar's New Orleans, Inc. and all Affiliates
2 that are Controlled by, under common Control with, or Controlling
3 Caesar's New Orleans, Inc. prior to the date hereof, including
4 without limitation those matters described on Exhibit E hereto.
5
6 (b) Harrah's shall and does hereby indemnify, defend
7 and hold harmless the Partnership, the Indemnified Persons of
8 Grand Palais and the Indemnified Persons of NOLDC, and each of
9 them separately, from and against any loss, cost, or damage
10 whatsoever (including attorneys fees) resulting from any act,
11 claim or omission of or by Harrah's and all Affiliates that are
12 Controlled by, under common Control with, or Controlling Harrah's
13 prior to the date hereof.
14
15 (c) NOLDC shall and hereby does indemnify, defend and
16 hold harmless the Partnership, the Indemnified Persons of Grand
17 Palais and the Indemnified Persons of Harrah's, and each of them
18 separately, from and against any loss, cost, or damage whatsoever
19 (including attorneys fees) resulting from any act, claim or
20 omission of or by NOLDC and all Affiliates that are Controlled
21 by, under common Control with, or Controlling NOLDC prior to the
22 date hereof.
23
24 (d) As and to the extent provided in Section 10.03
25 hereof, the rights of the Indemnified Persons pursuant to this
26 Section 10.02 shall be subject and subordinate to any rights of
27 any secured Institutional Investor holding a valid and
28 enforceable security interest in a Partnership Interest.
141
1 10.03 Security For Certain Indemnities
--------------------------------
2
3 (a) (i) Each of Grand Palais, Harrah's and NOLDC,
4 respectively, hereby grants to each other on behalf of their
5 respective Indemnified Persons a first security interest in a
6 Percentage Share of one percent (1%) and all proceeds thereof to
7 secure its indemnity obligations under Section 10.02 hereof. At
8 such time as Grand Palais shall deliver to Harrah's and NOLDC an
9 indemnity from Hemmeter Enterprises, Inc. in a form satisfactory
10 to Harrah's and NOLDC indemnifying Harrah's and NOLDC in respect
11 of the matters set forth in Section 10.02(a) hereof together with
12 satisfactory evidence that Hemmeter Enterprises, Inc. is a public
13 company with capitalization adequate to satisfy such indemnity,
14 the security interest granted hereby by Grand Palais with respect
15 to its one percent (1%) Percentage Share shall be released by
16 Harrah's and NOLDC on behalf of their respective Indemnified
17 Persons.
18
19 (ii) Grand Palais, Harrah's and NOLDC have each
20 duly executed, delivered and filed in the appropriate locations
21 UCC-1 financing statements in the form of Exhibit G attached
22 hereto and by this reference incorporated herein.
23 Notwithstanding the ranking of security interests based on the
24 order of the filing of such UCC-1 financing statements, all
25 Indemnified Persons having liquidated indemnity claims shall
26 share on a pari passu basis in the proceeds of the Percentage
---- -----
27 Shares which are the subject of such security interests.
28
142
1 (iii) Upon the expiration of one year from the date
2 of the closing of the Permanent/Temporary Casino Financing and so
3 long as no indemnity claims have been made and remain pending
4 which are secured by such security interest, the security
5 interest granted hereby by each of Grand Palais, Harrah's and
6 NOLDC in a Percentage Share of one percent (1%) shall be released
7 by Harrah's, NOLDC and Grand Palais on behalf of their respective
8 Indemnified Persons. If any indemnity claims secured by such
9 security interest are made prior to such release, such security
10 interest shall not be released until such indemnity claim has
11 been resolved or satisfied to the satisfaction of Harrah's, NOLDC
12 or Grand Palais, as the case may be, on behalf of the Indemnified
13 Person, and at such time such security interest shall be
14 released. Each of the Partners agree to execute and deliver such
15 UCC termination statements or other documents as shall be
16 necessary to accomplish the foregoing releases of security
17 interest in accordance with the terms of this Agreement.
18
19 (iv) At such time as a security interest is
20 released pursuant to this Section 10.03(a), the Claims of
21 Indemnified Person(s) under Section 10.02 hereof against the
22 Partner with respect to whose security interest is released shall
23 thereupon be subject and subordinate to any rights of any secured
24 Institutional Investor holding a valid and enforceable security
25 interest in such Partner's Partnership Interest.
26
27 (v) Grand Palais hereby grants to Harrah's and
28 NOLDC on behalf of their respective Indemnified Persons a first
143
1 security interest in its remaining thirty two and one-third
2 percent (32 1/3%) Percentage Share and all proceeds thereof to
3 secure its indemnity obligations under Section 10.02 hereof.
4
5 (b) The security interest created pursuant to Section
6 10.03(a) hereof securing each Partner's indemnity obligation
7 pursuant to Section 10.02 hereof, is hereby subordinated, to any
8 security interest securing repayment of the NOLDC Loan, but only
9 to the extent any Cash Flow, Proceeds of Major Capital Events or
10 other Distributions are used solely to repay any such NOLDC Loan.
11 Any such Distributions used to repay the NOLDC Loan shall be made
12 by a check from the Partnership payable to the lender of the
13 NOLDC Loan.
14
15 (c) Upon the request of any secured Material Partner
16 to an Indemnifying Partner, at any time, the Indemnifying Partner
17 (or, if the Indemnifying Partner should refuse to do so, such
18 Material Partner pursuant to the power of attorney granted
19 herein) shall execute any and all documents reasonably requested
20 by such Material Partner including, without limitation, notes,
21 security agreements and UCC-1 financing statements which notes,
22 security agreements and UCC-1 financing statements shall be in
23 the form provided by such Material Partner, as may be necessary
24 to further assure and perfect a security interest in the
25 Partnership Interest of the Indemnifying Partner in favor of such
26 Material Partner, as provided in this Section 10.03.
27
28
144
1 (d) Upon the failure of any Indemnifying Partner (the
2 "Defaulting Indemnifying Partner") to make prompt payment or
3 performance under Section 10.07 (c) hereof (such unsatisfied
4 obligations being hereinafter referred to as the "Defaulted
5 Obligations"; and such failure to make payment or performance
6 being hereinafter referred to as an "Indemnifying Partner
7 Default"), the Indemnified Person to whom the payment or
8 performance is owed (the "Secured Party") may, at its option,
9 without notice to or demand upon the Defaulting Indemnifying
10 Partner, do any one or more of the following:
11
12 (i) Transfer any property which serves as
13 collateral for the Defaulted Obligations (the "Collateral") into
14 the name of its nominee;
15
16 (ii) Exercise any or all of the rights and
17 remedies provided for by the applicable Uniform Commercial Code,
18 specifically including, without limitation, the right to recover
19 the reasonable attorneys' fees and other expenses incurred by the
20 Secured Party in the enforcement of this Agreement or in
21 connection with the Defaulting Indemnifying Partner's redemption
22 of any Collateral;
23
24 (iii) Notify the Partnership that the Secured Party
25 has the right to receive any payments from the Partnership to the
26 Defaulting Indemnifying Partner, as a Partner or creditor of the
27 Partnership;
28
145
1 (iv) Retain the Collateral in satisfaction of the
2 Defaulted Obligations, with notice of such retention sent to the
3 Defaulting Indemnified Partner as required by law;
4
5 (v) Enforce one or more remedies hereunder,
6 successively or concurrently, and such action shall not operate
7 to estop or prevent the Secured Party from pursuing any other or
8 further remedy which it may have, and any repossession or
9 retaking or sale of the Collateral pursuant to the terms hereof
10 shall not operate to release the Defaulting Indemnifying Partner
11 until full and final payment of any deficiency has been made in
12 cash. The Defaulting Indemnifying Partner shall reimburse the
13 Secured Party upon demand for, or the Secured Party may apply any
14 proceeds of Collateral to, the costs and expenses (including
15 attorneys' fees, transfer taxes and any other charges) incurred
16 by the Secured Party in connection with any sale, disposition or
17 retention of any Collateral hereunder;
18
19 (vi) The Secured Party shall not be required to
20 marshal the Collateral or any other security for the Defaulted
21 Obligations or to resort to the Collateral or any other security
22 for the Defaulted Obligations in any particular order and all of
23 the Secured Party's rights under the various instruments relating
24 to the Collateral shall be cumulative. The Defaulting
25 Indemnifying Partner, to the maximum extent permitted by law,
26 hereby waives every defense (now, theretofore or hereafter
27 arising) of estoppel, laches, extension or moratorium applicable
28 to any obligations or liabilities covered by this Agreement or of
146
1 the Defaulting Indemnifying Partner under this Agreement. The
2 Defaulting Indemnifying Partner expressly waives extension of the
3 obligations of this Agreement arising by any reason whatsoever,
4 including without limitation, by reason of the institution of
5 proceedings by or against Defaulting Indemnifying Partner or the
6 Partnership under or pursuant to the Federal Bankruptcy Code, or
7 any amendment thereto, or any similar state or federal laws
8 relating to the relief of debtors. The Secured Party may sell
9 the Collateral, or any part thereof, at any public or private
10 sale or at any broker's board or on any securities exchange, for
11 cash, upon credit or for future delivery, as the Secured Party
12 shall deem appropriate. The Secured Party shall be authorized at
13 any such sale, if it deems it advisable to do so, to restrict the
14 prospective bidders or purchasers to Persons who will provide
15 assurances satisfactory to the Secured Party that they may be
16 offered and sold the Collateral without registration under the
17 Securities Act of 1933, as amended (the "Securities Act"), or any
18 statute then in effect corresponding to the Securities Act, and
19 upon consummation of any such sale, the Secured Party shall have
20 the right to assign, transfer and deliver to the purchaser or
21 purchasers thereof the Collateral so sold. Each such purchaser
22 at any such sale shall hold the property sold absolutely, free
23 from any claim or right on the part of the Defaulting
24 Indemnifying Partner, and the Defaulting Indemnifying Partner
25 hereby waives, to the extent permitted by law, all rights of
26 redemption, stay and/or appraisal which the Defaulting
27 Indemnifying Partner now has or may at any time in the future
28 have under any rule of law or statute now existing or hereafter
147
1 enacted. The Secured Party shall give the Defaulting
2 Indemnifying Partner written notice, at least ten (10) days in
3 advance of the Secured Party's intention to make any such public
4 or private sale. Such notice, in case of public sale, shall
5 state the time and place fixed for such sale, and in the case of
6 sale at a broker's board or on a securities exchange, shall state
7 the board or exchange at which such sale is to be made and the
8 day on which the Collateral, or portion thereof, will first be
9 offered for sale at such board or exchange. Any such public sale
10 shall be held at such time or times within ordinary business
11 hours and at such place or places as the Secured Party may fix in
12 the notice of such sale. At any private or public or other sale,
13 the Collateral, or portion thereof, to be sold may be sold in one
14 lot as an entirety or in separate parcels, as the Secured Party
15 may in its sole and absolute discretion determine and the Secured
16 Party may bid (which bid may be, in whole or in part, in the form
17 of cancellation of indebtedness) for and purchase for its account
18 the whole or any part of the Collateral at any public sale or
19 sale at a broker's board or on a security exchange. The Secured
20 Party shall not be obligated to sell any Collateral if it shall
21 determine not to do so, regardless of the fact that notice of
22 sale of Collateral may have been given. The Secured Party may,
23 without notice or publication, adjourn any sale or cause the same
24 to be adjourned from time to time by announcement at the time and
25 place fixed for sale, and such sale may, without further notice,
26 be made at the time and place to which the same was so adjourned.
27 If the sale of all or any part of the Collateral is made on
28 credit or for future delivery, the Collateral so sold may be
148
1 retained by the Secured Party until the sale price is paid by the
2 purchaser or purchasers thereof, but the Secured Party shall not
3 incur any liability in case any such purchaser or purchasers
4 shall fail to take up and pay for Collateral so sold and, in case
5 of any such failure, such Collateral may be sold again upon like
6 notice. The parties hereto agree that the method, manner and
7 terms of sale or disposition of the Collateral authorized by this
8 subsection are commercially reasonable. As an alternative to
9 exercising the power of sale herein conferred upon it, the
10 Secured Party may, without limitation, proceed by a suit or suits
11 at law or in equity to foreclose this security interest and to
12 sell the Collateral, or any portion thereof, pursuant to a
13 judgment or decree or a court or courts of competent
14 jurisdiction;
15
16 (vii) Proceed by an action or actions at law or in
17 equity to recover the Defaulted Obligations or to foreclose this
18 security interest and sell the Collateral, or any portion
19 thereof, pursuant to a judgment or decree of a court or courts of
20 competent jurisdiction; and
21
22 (viii) In the event the Secured Party recovers
23 possession of all or any part of the Collateral pursuant to a
24 writ of possession or other judicial process, whether prejudgment
25 or otherwise, the Secured Party may thereafter retain, sell or
26 otherwise dispose of such Collateral in accordance with Section
27 10.03(d)(vi) hereof or the applicable Uniform Commercial Code,
28 and following such retention, sale or other disposition, the
149
1 Secured Party may voluntarily dismiss without prejudice the
2 judicial action in which such writ of possession or other
3 judicial process was issued. The Defaulting Indemnifying Partner
4 hereby consents to the voluntary dismissal by the Secured Party
5 of such judicial action, and the Defaulting Indemnifying Partner
6 further consents to the exoneration of any bond which the Secured
7 Party filed in such action.
8
9 (e) For purposes of executory process under applicable
10 State law, each of the Partners hereby acknowledges the
11 obligations owed to the other Partners pursuant to Section 10.02
12 hereof, CONFESSES JUDGMENT thereon and consents that judgment be
13 rendered and signed, whether during the court's term or during
14 vacation, in favor of any Secured Party, for the full amount of
15 the Defaulted Obligations in principal, interest and attorneys'
16 fees, together with all charges and expenses whatsoever pursuant
17 to this Agreement. Upon an Indemnifying Partner Default and in
18 addition to all of its rights, powers and remedies under this
19 instrument and applicable law, the Secured Party may, at its
20 option, cause all or any part of the Collateral to be seized and
21 sold under executory process or under writ of fieri facias issued
----- ------
22 in execution of an ordinary judgment obtained in respect of the
23 Defaulted Obligations, without appraisement, to the highest
24 bidder, for cash or under such terms as Secured Party deems
25 acceptable. Each Partner hereby waives all and every
26 appraisement of the Collateral and waives and renounces the
27 benefit of appraisement and the benefit of all laws relative to
28 the appraisement of the Collateral seized and sold under
150
1 executory or other legal process. Each Partner agrees to waive,
2 and does hereby specifically waive:
3
4 (i) the benefit of appraisement provided for in
5 Articles 2332, 2336, 2723 and 2724, Louisiana Code of
6 Civil Procedure, and all other laws conferring such
7 benefits;
8
9 (ii) the demand and three (3) days delay accorded
10 by Articles 2639 and 2721, Louisiana Code of Civil
11 Procedure;
12
13 (iii) the notice of seizure required by Articles
14 2293 and 2721, Louisiana Code of Civil Procedure;
15
16 (iv) the three (3) days delay provided by Articles
17 2331 and 2722, Louisiana Code of Civil Procedure;
18
19 (v) the benefit of the other provisions of
20 Articles 2331, 2722 and 2723, Louisiana Code of Civil
21 Procedure;
22
23 (vi) the benefit of the provisions of any other
24 articles of the Louisiana Code of Civil Procedure not
25 specifically mentioned above; and
26
27 (vii) all rights of division and discussion with
28 respect to the Defaulted Obligations.
151
1 (f) In the event the Secured Party elects, at its
2 option, to enter suit via ordinaria on the Defaulted Obligations,
--- ---------
3 in addition to the foregoing confession of judgment, the
4 Defaulting Indemnifying Partner hereby waives legal delays and
5 hereby consents that judgment for the unpaid principal due on the
6 Defaulted Obligations, together with interest, attorneys' fees,
7 costs and other charges that may be due on the Defaulted
8 Obligations, be rendered and signed immediately.
9
10 (g) Pursuant to the authority contained in La. R.S.
11 9:5131 through 9:5140.2, each Partner does hereby expressly
12 designate the Secured Party with respect to its Defaulted
13 Obligations, or its designee, to be keeper or receiver ("Keeper")
14 with respect to that portion of the Collateral located within the
15 State of Louisiana, such designation to take effect immediately
16 upon any seizure of any of the Collateral under writ of executory
17 process or under writ of sequestration or fieri facias as an
----- ------
18 incident to an action brought by the Secured Party. The fees of
19 the Keeper are hereby fixed at ten percent (10%) of the amount
20 due or sued for or claimed or sought to be protected, preserved
21 or enforced in the proceeding for the recognition of the security
22 interest created hereby, and the payment of such fees shall be
23 secured by the security interest in the Collateral granted in
24 this instrument. The Keeper shall have the right and power to
25 the extent permitted by applicable law, but shall not be
26 obligated, to enter upon and take possession of any of the
27 Collateral, and to exclude the Defaulting Indemnifying Partner,
28 and the Defaulting Indemnifying Partner's agents or servants,
152
1 wholly therefrom, and to hold, use, administer, manage and
2 operate the same to the extent that the Defaulting Indemnifying
3 Partner shall be at the time entitled and in its place and stead.
4 The Keeper, or any Person designated by the Keeper, may operate
5 the same without any liability to the Defaulting Indemnifying
6 Partner in connection with such operations, except to use
7 ordinary care in the operation of such properties, and the Keeper
8 or any Person designated by the Keeper, shall have the right to
9 exercise every power, right and privilege of the Defaulting
10 Indemnifying Partner with respect to the Collateral.
11
12 10.04 Additional Indemnities. Each Partner shall and
----------------------
13 does hereby indemnify, defend and hold harmless the Partnership
14 and each other Partner from and against any loss, cost, or damage
15 whatsoever (including attorneys fees) resulting from any breach
16 by any of them of the representations and warranties under
17 Section 10.01 hereof, any losses or expenses as a result of or in
18 connection with any of their personal obligations or liabilities
19 unconnected with Partnership business, or any losses or expenses
20 as a result of or in connection with any breach of this
21 Partnership Agreement. Rights of the Partners pursuant to this
22 Section 10.04 shall be subject and subordinate to any rights of
23 any secured Institutional Investor holding a valid and
24 enforceable security interest in a Partnership Interest.
25
26
27
28
153
1 10.05 Liability for Acts and Omissions
--------------------------------
2
3 (a) To the fullest extent permitted by applicable law,
4 each Material Partner and its Indemnified Persons shall not be
5 liable, responsible or accountable in damages or otherwise to the
6 Partnership, or to any of the Partners, for any act or omission
7 performed or omitted by them in good faith on behalf of the
8 Partnership and in a manner reasonably believed by them to be
9 within the scope of their authority and in the best interests of
10 the Partnership; provided, however, that this exculpation shall
11 not apply to acts or omissions which are determined, by final
12 decision of a court of competent jurisdiction, to constitute
13 either fraud, bad faith, gross negligence, or willful misconduct.
14
15 (b) To the fullest extent permitted by law, the
16 Partnership, its receiver or its trustee, shall indemnify and
17 hold harmless each Material Partner and its Indemnified Persons
18 from and against any and all loss, cost, damage, expense or
19 liability (other than a loss of any equity contributions, Partner
20 Loan or other investment in the Partnership), which relate to or
21 arise out of the Partnership, the Property, the Project or the
22 Partnership's business or affairs, regardless of whether the
23 Material Partners continue to be Partners, an Affiliate of a
24 Material Partner, or an agent, officer, member, director,
25 stockholder or employee of such Partner or such Affiliate at the
26 time any such liability or expense is paid or incurred, if such
27 Material Partner's or its Indemnified Persons' conduct did not
28 constitute fraud, bad faith, gross negligence or willful
154
1 misconduct and was not the result of an action by such Material
2 Partner outside the scope of such Represented Group's authority.
3
4 (c) To the extent that, at law or in equity, a Partner
5 or its Indemnified Persons have duties (including fiduciary
6 duties) and liabilities relating thereto to the Partnership or to
7 the Partners, each Material Partner and its Indemnified Persons
8 acting under this Agreement or otherwise shall not be liable to
9 the Partnership or to any Partner for its good faith reliance on
10 the provisions of this Agreement. The provisions of this Section
11 10.05, to the extent that they expand or restrict the duties and
12 liabilities of a Material Partner or its Indemnified Persons
13 otherwise existing at law or in equity, are agreed by the
14 Partners to replace such other duties and liabilities of such
15 Material Partner and its Indemnified Person; provided that the
16 provisions of this Section 10.05 shall in no way limit or reduce
17 the indemnification provided by the Partnership to the Manager
18 under the Management Agreement.
19
20 10.06 Joint and Several Liability. The Partners agree
---------------------------
21 that, except as otherwise provided in this Agreement or any other
22 agreement to which the Partnership is a party, each Partner shall
23 have joint and several liability for all debts, obligations and
24 liabilities of the Partnership to the extent that such debts,
25 obligations and liabilities, are recourse obligations and hereby
26 waive any and all provisions of the laws of the State regarding
27 the limitation of liability to a virile share. The Partners do
28 not waive any right to discussion as provided by the laws of the
155
1 State. To the extent that any Partner shall incur any debt,
2 obligation or liability in excess of its pro rata share in
3 accordance with the Percentage Shares of such Partner as a
4 consequence of such joint and several liability, such Partner
5 shall have a right of contribution against all other Partners
6 such that all debts, obligations and liabilities of the
7 Partnership are shared by the Partners pro rata in accordance
8 with their respective Percentage Shares.
9
10 10.07 Indemnity Procedures
--------------------
11
12 (a) Claiming Procedure
------------------
13
14 (i) Promptly after the assertion of any claim by
15 a third party which may give rise to a claim for indemnification
16 from an Indemnifying Partner under this Agreement, an Indemnified
17 Person shall notify the Indemnifying Partner in writing of such
18 claim and advise the Indemnifying Partner whether the Indemnified
19 Person intends to contest such claim.
20
21 (ii) The Indemnified Person shall permit the
22 Indemnifying Partner to contest and defend against such claim, at
23 the Indemnifying Partner's expense, if the Indemnifying Partner
24 has confirmed to the Indemnified Person in writing that it agrees
25 that the Indemnified Person is entitled to indemnification
26 hereunder in respect of such claim, unless the Indemnified Person
27 can establish, by reasonable evidence, that the conduct of its
28 defense by the Indemnifying Person could be reasonably likely to
156
1 prejudice such Indemnified Person due to the nature of the claims
2 presented or by virtue of a conflict between the interests of
3 such Indemnified Person and such Indemnifying Partner and another
4 Indemnifying Partner whose defense has been assumed by the
5 Indemnifying Partner. Notwithstanding a determination by the
6 Indemnifying Partner to contest such claim, the Indemnified
7 Person shall have the right to be represented by its own counsel
8 and accountants at its own expense except as set forth above. In
9 any case, the Indemnified Person shall make available to the
10 Indemnifying Partner and its attorneys and accountants, at all
11 reasonable times during normal business hours, all books,
12 records, and other documents in its possession relating to such
13 claim. The party contesting any such claim shall be furnished
14 all reasonable assistance in connection therewith by the other
15 party (with reimbursement of reasonable expenses by the
16 Indemnifying Partner). If the Indemnifying Partner fails to
17 undertake the defense of or to settle or pay any such third-party
18 claim within fifteen (15) days after the Indemnified Person has
19 given written notice to the Indemnifying Partner advising the
20 Indemnifying Partner of such claim, or if the Indemnifying
21 Partner, after having given notice to the Indemnified Person that
22 it intends to undertake the defense, fails forthwith to defend,
23 settle or pay such claim, then the Indemnified Person may take
24 any and all necessary action to dispose of such claim including,
25 without limitation, the settlement or full payment thereof upon
26 such terms as it shall deem appropriate, in its sole discretion,
27 subject to the following with respect to any proposed settlement
28 thereof.
157
1 (iii) The Indemnifying Partner shall not consent to
2 the terms of any compromise or settlement of any third-party
3 claim defended by the Indemnifying Partner in accordance herewith
4 (other than terms related solely to the payment of money damages
5 and only after the Indemnifying Partner has furnished the
6 Indemnified Person with such evidence as the Indemnified Person
7 may reasonably request of the Indemnifying Partner's capacity and
8 capability (financial and otherwise) to pay promptly the amount
9 of such money damages at such times as provided in the compromise
10 or settlement) without the prior written consent of the
11 Indemnified Person if as a result of such compromise or
12 settlement such Indemnified Person could be adversely affected.
13
14 (iv) Any claim for indemnification under this
15 Agreement which does not result from the assertion of a claim by
16 a third party shall be asserted by written notice given by the
17 Indemnified Person to the Indemnifying Partner. Such
18 Indemnifying Partner shall have a period of thirty (30) days
19 within which to respond thereto. If such Indemnifying Partner
20 does not respond within such thirty (30) day period, such
21 Indemnifying Partner shall be deemed to have accepted
22 responsibility to make payment, and shall have no further right
23 to contest the validity of such claim. If the Indemnifying
24 Partner does respond within such 30-day period and rejects such
25 claim in whole or in part, such Indemnified Person shall be free
26 to pursue such remedies as may be available to such party under
27 applicable law.
28
158
1 (b) Mitigation. Each Indemnifying Partner and
----------
2 Indemnified Person shall use reasonable efforts and shall consult
3 and cooperate with each other with a view towards mitigating
4 claims, losses, liabilities, damages, deficiencies, costs and
5 expenses that may give rise to claims for indemnification under
6 Sections 10.02 and 10.04 hereof.
7
8 (c) Payment. Each Indemnifying Partner agrees to pay
-------
9 any amounts due hereunder (i) within ten (10) days of written
10 notice in respect of its indemnity obligations which it has
11 accepted pursuant to Section 10.07(a)(ii) or (iv) hereof or which
12 it has been deemed to accept pursuant to Section 10.07(a)(iv)
13 hereof, and (ii) within five (5) days of any final adjudication
14 of any indemnity obligations as to which it has not so accepted.
15
16
17 ARTICLE 11
18
19 GAMING QUALIFICATION
20
21 11.01 Gaming Qualifications in the State
----------------------------------
22
23 (a) All Partners, and all Persons owning directly or
24 indirectly any ownership interest, security interest, other legal
25 or beneficial interests in any Holding Entities, and their
26 successors and assigns, who are required to be licensed,
27 permitted or determined suitable pursuant to Section 6.01(b)
28 hereof, shall be so licensed, permitted or determined suitable
159
1 prior to their admission to, and at all times during their
2 participation in, the Partnership or any Holding Entity.
3
4 (b) If any Partner, or any Holding Entity of any
5 Partner, is determined by LEDGC to be unsuitable, or has an
6 application for a license or permit rejected, or has a previously
7 issued license or permit rescinded, suspended, revoked or not
8 renewed, as the case may be (collectively, an "Unsuitability
9 Determination"), all Distributions shall be suspended and
10 escrowed, and such Partner or Holding Entity shall be subject to
11 any other penalties or provisions as may be provided by
12 applicable law, with respect to the Partnership Interest of the
13 Partner with respect to which an Unsuitability Determination is
14 made to the extent and for so long as provided by applicable law,
15 or the Partner in which a Holding Entity owns a direct or
16 indirect interest and with respect to which Holding Entity an
17 Unsuitability Determination has been made to the extent and so as
18 provided by applicable law, and, in such case, the Partner in
19 which such Holding Entity owns a direct or indirect interest and
20 each intervening Holding Entity shall enforce all provisions of
21 their formative documents which provide for the suspension of
22 dividends and/or distributions to the unsuitable Holding Entity.
23
24 (i) In the case of an Unsuitability Determination
25 of a Material Partner, the Partnership shall redeem the
26 Partnership Interests of all Partners in the Partner Group of
27 which such Material Partner is a member at a price equal to the
28 Appraisal Buyout Price of such Partnership Interests determined
160
1 in accordance with Section 8.05 hereof as of the date of the
2 Unsuitability Determination;
3
4 (ii) In the case of an Unsuitability Determination
5 of a non-Material Partner, the Partnership shall redeem such
6 Partner's Partnership Interest at a price equal to the Appraisal
7 Buyout Price of such Partnership Interest determined in
8 accordance with Section 8.05 hereof as of the date of such
9 Unsuitability Determination; and
10
11 (iii) In the case of an Unsuitability Determination
12 of a Holding Entity, the Partner with respect to which such
13 Holding Entity has a direct or indirect interest shall redeem
14 such Holding Entity within thirty (30) days of such Unsuitability
15 Determination or such lesser period of time as may be required by
16 law. If for any reason such Partner fails to redeem the
17 ownership interest of such Holding Entity, the Partnership shall
18 redeem the entire Partnership Interest of such Partner at the
19 Appraisal Buyout Price determined in accordance with Section 8.05
20 hereof as of the date of such Unsuitability Determination.
21
22 (c) If a Partner's Partnership Interest or Offer
23 Related Partnership Interest is redeemed pursuant to Sections
24 11.01(b) hereof, the Partnership Interest or Offer Related
25 Partnership Interest redeemed shall be re-allocated to the
26 remaining Material Partners pro rata in accordance with their
27 Percentage Shares in the Partnership. If a Partner's entire
28
161
1 Partnership Interest is redeemed pursuant to this Section 11.01,
2 such Partner shall cease to be a Partner in the Partnership.
3
4 11.02 Other Gaming Qualifications
---------------------------
5
6 (a) If any Material Partner reasonably determines that
7 the affiliation of such Material Partner with another Partner, or
8 any of its Holding Entities Controlled by, under common Control
9 with, or Controlling such Person, will threaten any gaming or
10 alcoholic beverage license, permit, approval, or other
11 entitlement that such affected Partner or any Affiliates that are
12 Controlled by, under common Control with, or Controlling such
13 Partner hold or apply for in any jurisdiction other than the
14 State solely because of matters relating to the gaming
15 suitability of such Person, such Material Partner may invoke the
16 buy/sell remedy set forth in Section 8.03 hereof with respect to
17 (i) the objectionable Partner if such objectionable Partner is a
18 non-Material Partner, (ii) the Partner Group containing the
19 objectionable Partner if such Partner is a Material Partner,
20 (iii) in the case of an objectionable Holding Entity, the Offer
21 Related Partnership Interest with respect to the Partner in which
22 such objectionable Holding Entity directly or indirectly owns an
23 interest if such Partner is a non-Material Partner, or (iv) in
24 the case of an objectionable Holding Entity, the Partner Group of
25 which such Partner is a member if such Partner is a Material
26 Partner.
27
28
162
1 (b) In any case where a Material Partner exercises a
2 buy/sell pursuant to this Section 11.02, the Material Partner
3 shall have the option to offer in such buy/sell its entire
4 Partnership Interest or a portion of its Partnership Interest
5 containing Percentage Shares equal to the Percentage Shares of
6 the objectionable Partner or Offer Related Partnership Interest
7 in the case of an objectionable Holding Entity. If such
8 objectionable Partner has, or if such Offer Related Partnership
9 Interest constitutes, a Percentage Share greater than the
10 Percentage Share of the Material Partner exercising the buy/sell,
11 the Material Partner shall offer its entire Partnership Interest
12 in the buy/sell.
13
14 (c) Where the Material Partner invoking this Section
15 11.02 elects to buy/sell the Offer Related Partnership Interest
16 of the Partner in which such objectionable Holding Entity
17 directly or indirectly owns an interest, if such Partner is the
18 seller in such buy/sell, such Partner must redeem the interest of
19 the objectionable Holding Entity with the proceeds of such sale
20 concurrently with the closing of the buy/sell. If, for any
21 reason, such Partner should be unwilling or unable to exercise
22 such redemption concurrently with the closing of the buy/sell,
23 the Material Partner invoking such buy/sell remedy shall have the
24 right in lieu of closing the buy/sell to purchase the entire
25 Partnership Interest of such Partner at the Appraisal Buyout
26 Price determined in accordance with Section 8.05 hereof.
27
28
163
1 (d) Without limiting reasonableness to such
2 circumstance, the Partners agree that such determination shall be
3 reasonable if based upon (i) any written communication from a
4 gaming or alcoholic beverage regulatory authority, or (ii)
5 evidence which, if true, would violate any law, rule or
6 regulation administered by any such regulatory authority, so long
7 as such evidence is not induced in bad faith by its recipient, or
8 (iii) even if such evidence is induced in bad faith by its
9 recipient, such evidence is true and accurate. To the extent
10 that notice and cure remedies are made available by such
11 jurisdiction and may be pursued without risk to the affected
12 Partner, the buy/sell remedy may not be invoked unless cure is
13 not effected within the time permitted by such jurisdiction.
14
15 11.03 Lender Suitability. If any lender to the
------------------
16 Partnership or Holding Entity of the Partnership (other than a
17 Holding Entity which is exempt from a suitability determination
18 by LEDGC) is determined by LEDGC to be unsuitable, the result of
19 which is to threaten the revocation, suspension, termination or
20 rescission of the Casino Operating Contract or result in any
21 other penalty to the Partnership, and if the Partnership or such
22 Holding Entity shall not have taken such action as shall be
23 necessary to cure such unsuitability within any cure period
24 available under the Casino Act or any rule or regulation
25 promulgated thereunder, or if no cure period is specifically
26 provided (but cure is permitted), if the unsuitability is not
27 cured in accordance with applicable gaming law, rule or
28 regulation, then to the extent and so long as provided by
164
1 applicable law (i) all payments to such lender shall be suspended
2 and escrowed, (ii) such lender shall immediately divest itself of
3 all loans made to the Partnership or such Holding Entity and
4 (iii) such lender shall be subject to any other remedies as shall
5 be required by applicable law. If, notwithstanding the
6 application of, or failing the enforcement of, the preceding
7 sentence, the Holding Entity has not satisfactorily complied with
8 the requirements of the Casino Act or LEDGC so as to eliminate
9 such lender unsuitability, the Partnership Interest of the
10 Partner owned in whole or in part by such Holding Entity shall be
11 subject to redemption in the manner set forth in Section 11.01
12 hereof. Redemption shall be initiated by the Partnership at the
13 request of any Material Partner. If any Material Partner
14 reasonably determines that the existence of a loan from a lender
15 to the Partnership will threaten any gaming license, permit,
16 approval, or other entitlement that such affected Partner or any
17 Affiliates of such Partner, hold or apply for in any
18 jurisdiction, such Material Partner may, at no cost to the
19 Partnership or any other Partner, (i) require the Partnership to
20 exercise any redemption rights in any loan documents with such
21 lender and redeem such loan so long as such Material Partner
22 makes an unsecured loan to the Partnership (with the same
23 interest and maturity provisions as the redeemed loan) of the
24 funds necessary to effect such redemption or procures an
25 unsecured loan for the Partnership (with the same interest and
26 maturity provisions as the redeemed loan) from a lender
27 satisfactory to the Partnership and so long as such loan is in
28 compliance with the Partnership's loan documents, (ii) require
165
1 the Partnership to exercise any rights in any loan documents with
2 such lender to procure a suitable lender or lenders which assume
3 and accept the rights and obligations of the objectionable
4 lender, or (iii) with the consent of such lender as may be
5 required in any loan documents with such lender, procure a
6 suitable lender or lenders that assume and accept the rights and
7 obligations of the objectionable lender.
8
9
10 ARTICLE 12
11
12 DISPUTE RESOLUTION
13
14 12.01 Buy/Sell. In the event of a disagreement by the
--------
15 Representatives of the Represented Groups relating to a vote on
16 any Major Decision, from and after the earlier of (i) the third
17 anniversary of the opening of the Permanent Casino, or (ii) the
18 fifth anniversary of the date hereof, and notwithstanding the
19 outcome of any arbitration pursuant to Section 12.02 hereof, any
20 Represented Group may elect to exercise the buy/sell remedy in
21 accordance with Section 8.03 hereof; provided that (A) there
22 shall not exist with respect to the exercising Represented Group
23 any Event of Default or event which, with the giving of notice or
24 passage of time, would constitute an Event of Default, (B) the
25 exercising Represented Group may only exercise such buy/sell
26 remedy if an arbitration shall have first been initiated under
27 Section 12.02 hereof and such arbitration shall have either
28 concluded or a period of sixty (60) days from initiation of such
166
1 arbitration shall have elapsed, and (C) the exercising
2 Represented Group may only exercise such buy/sell during the
3 period beginning with the earlier of the end of such sixty (60)
4 day period or arbitration decision and ending one hundred eighty
5 (180) days after the earlier of the end of such sixty (60) day
6 period or arbitration decision.
7
8 12.02 Arbitration
-----------
9
10 (a) In the event of a failure of the Represented
11 Groups to reach Unanimous Approval with respect to any
12 Partnership decision other than decisions specified in Sections
13 5.01(e) and (f) hereof, an arbitration shall be conducted in
14 accordance with the following procedures:
15
16 (i) Any Represented Group may serve upon the
17 other Represented Groups a written notice stating that such
18 Represented Group desires to have such dispute reviewed by a
19 board of three (3) qualified and disinterested arbitrators who
20 are not Affiliates that are Controlled by, under common Control
21 with, or Controlling any Partner in such Represented Group or any
22 other arbitrator acting hereunder and naming the person whom such
23 Represented Group has designated to act as an arbitrator. Within
24 fifteen (15) days after receipt of the arbitration notice, the
25 other Represented Groups acting together shall use their best
26 efforts jointly to designate a person to act as arbitrator and
27 shall notify the Represented Group requesting arbitration of such
28 designation and the name of the Person so designated.
167
1 (ii) If the other Represented Groups are unable to
2 agree on the joint selection of an arbitrator within said fifteen
3 (15) days, each Represented Group shall select an arbitrator
4 independently.
5
6 (iii) Where the other Represented Groups are acting
7 together, or one of the other Represented Groups fails timely to
8 select an arbitrator but another Represented Group timely selects
9 an arbitrator, the two (2) arbitrators designated as aforesaid
10 shall promptly select a third arbitrator, and if such arbitrators
11 are not able to agree on such third arbitrator, then either
12 arbitrator, on five (5) days notice in writing to the other, or
13 both arbitrators, shall apply to the branch of the American
14 Arbitration Association nearest to the Property to designate and
15 appoint such third arbitrator.
16
17 (iv) If all Represented Groups upon whom such
18 written request for arbitration is served shall fail to designate
19 an arbitrator within fifteen (15) days after receipt of such
20 notice, then the arbitrator designated by the Represented Group
21 requesting arbitration shall act as the sole arbitrator and shall
22 be deemed to be the unanimously approved arbitrator to resolve
23 such dispute. The decision and award of such sole arbitrator
24 shall be binding upon the Partners.
25
26 (v) If two appointed arbitrators have selected a
27 third arbitrator the decision and award of a majority of the
28 arbitrators shall be binding upon the Partners.
168
1 (vi) If each Represented Group has selected an
2 arbitrator and there remains three (3) Represented Groups at such
3 time, the three arbitrators so selected shall use their best
4 efforts to agree on the resolution of the arbitrated matter
5 pursuant to Section 12.02(b) hereof. If such arbitrators are
6 unable to reach a unanimous decision as to a disputed matter, the
7 arbitrators shall unanimously select an independent qualified
8 arbitrator who will act as the sole arbitrator. If the three (3)
9 arbitrators are unable to select an independent arbitrator to act
10 as the sole arbitrator, any Represented Group may apply to the
11 branch of the American Arbitration Association nearest to the
12 Property to designate and appoint such independent arbitrator who
13 will act as the sole arbitrator. The decision and award of such
14 sole arbitrator shall be binding upon the Partners.
15
16 (vii) The fees and expenses of the arbitrators
17 shall be paid in equal shares by the Represented Group(s) whose
18 position is not adopted by the arbitrators. The award of any
19 arbitrators made in accordance with this Section 12.02 shall be
20 binding on the Partners and enforceable in any court of competent
21 jurisdiction.
22
23 (b) In all arbitration proceedings submitted to the
24 arbitrators, the arbitrators shall be required to agree upon and
25 approve the substantive position advocated by one Represented
26 Group with respect to each disputed item. The arbitrators shall
27 make their decision based solely on the best interests of the
28 Partnership and the Project. All proceedings by the arbitrators
169
1 shall be conducted in accordance with the Uniform Arbitration
2 Act, except to the extent the provisions of such Act are modified
3 by this Agreement or the mutual agreement of the parties. Unless
4 otherwise agreed, all arbitration proceedings shall be conducted
5 in the City.
6
7 (c) In the event of any disagreement as to a matter
8 subject to arbitration under the Management Agreement,
9 arbitration shall occur pursuant to Article 20.02 of the
10 Management Agreement rather than pursuant to this Section 12.02.
11
12
13 ARTICLE 13
14
15 ADMINISTRATION
16
17 13.01 Bank Accounts. Except as otherwise provided in
-------------
18 the Management Agreement, all funds of the Partnership not
19 otherwise invested shall be deposited as the Partnership shall
20 determine, and withdrawals shall be made only on the signature of
21 such Person or Persons as the Partnership may from time to time
22 designate.
23
24 13.02 Books and Records. Except as otherwise provided
-----------------
25 in the Management Agreement, the books and records of the
26 Partnership may be maintained at any office and by any Person
27 designated by the Partnership, provided that a copy of such books
28 and records shall be maintained at the principal office of the
170
1 Partnership and at the Temporary Casino or the Permanent Casino,
2 as the case may be, and shall be available for examination there
3 by any Material Partner, or its duly authorized certified public
4 accountant or lawyer, at any and all reasonable times during
5 regular business hours. The Partnership shall maintain such
6 books and records and provide such financial or other statements
7 as the Partnership may deem advisable. A current list of the
8 full name and last known address of each Partner, a copy of the
9 this Agreement and all amendments hereto and executed copies of
10 all powers of attorney pursuant to which this Agreement or any
11 amendment has been executed, copies of the Partnership's federal,
12 state and local income tax returns and reports, if any, for the
13 three (3) most recent years after the date hereof, any financial
14 statements of the Partnership for the three (3) most recent years
15 after the date hereof, and the Partnership's books, shall be
16 maintained at the principal office of the Partnership. Except as
17 otherwise provided in the Management Agreement, the Partnership's
18 accountants and auditors shall be selected by the Partnership.
19
20 13.03 Notices. The address of each of the Partner
-------
21 Groups shall for all purposes be as set forth below unless
22 otherwise changed by the applicable Partner Group by notice to
23 the others as provided herein.
24
25
26
27
28
171
1 Harrah's: Harrah's New Orleans Investment Company
2 c/o The Promus Companies Incorporated
3 1023 Cherry Road
4 Memphis, Tennessee 38117
5 Phone: (901) 762-8600
6 Fax: (901) 762-8914
7
8 Attn: Colin V. Reed
9 Senior Vice President
10
11 with a copy to:
12
13 Harrah's New Orleans Investment Company
14 c/o The Promus Companies Incorporated
15 1023 Cherry Road
16 Memphis, Tennessee 38117
17 Phone: (901) 762-8600
18 Fax: (901) 762-8777
19
20 Attn: General Counsel
21
22
23
24
25
26
27
28
172
1 NOLDC: New Orleans/Louisiana Development Company
2 c/o Gauthier and Murphy
3 3500 North Hullen
4 Metairie, Louisiana 70002
5 Phone: (504) 456-8600
6 Fax: (504) 456-8624
7
8 Attn: Wendell H. Gauthier, Esq.
9 Chairman of the Board
10
11 with a copy to:
12
13 Monroe & Lemann
14 201 St. Charles Avenue
15 Suite 3300
16 New Orleans, Louisiana 70170
17 Phone: (504) 586-1900
18 Fax: (504) 581-7312
19
20 Attn: John D. Wogan, Esq.
21
22
23
24
25
26
27
28
173
1 Grand Palais: Grand Palais Casino, Inc.
2 111 Rue D'Iberville
3 New Orleans, Louisiana 70130
4 Phone: (504) 524-4422
5 Fax: (504) 524-0880
6
7 Attn: Christopher B. Hemmeter
8 Chairman of the Board
9
10 with a copy to:
11
12 Shefsky & Froelich Ltd.
13 444 North Michigan Avenue, Suite 2300
14 Chicago, Illinois 60611
15 Phone: (312) 527-4000
16 Fax: (312) 527-9897
17
18 Attn: Cezar M. Froelich, Esq.
19
20 All notices or other communications required or
21 permitted to be given pursuant to the provisions of this
22 Agreement shall be in writing and shall be considered as properly
23 given if mailed by certified United States mail, postage prepaid,
24 with return receipt requested, by overnight courier service, or
25 by facsimile transmission with reception confirmed. Notices
26 hereunder in any manner shall be effective only if and when
27 received by the addressee. Certified mail receipt or express
28
174
1 courier receipt at the above addresses shall establish receipt
2 for purposes of notices under this Agreement.
3
4
5 ARTICLE 14
6
7 FISCAL MATTERS
8
9 14.01 Fiscal Year. The fiscal year of the Partnership
-----------
10 shall be the calendar year.
11
12 14.02 Accounting Decisions. Except as otherwise
--------------------
13 provided in the Management Agreement, all decisions as to
14 accounting elections, whether for book or tax purposes (and such
15 decisions may be different for each such purpose), shall be
16 approved by the Partnership.
17
18 14.03 Tax Returns. The Partnership, with the
-----------
19 assistance of its accountants, will prepare and timely file
20 federal and state income tax returns of the Partnership. As
21 promptly as practicable, and in any event, in sufficient time to
22 permit timely preparation and filing by each Partner of its
23 respective federal and state tax returns, the Partnership shall
24 deliver to each Partner a copy of each federal and state tax
25 return or tax report filed by the Partnership. Harrah's shall be
26 the tax matters Partner.
27
28
175
1 14.04 Elections. To the extent that the Partnership
---------
2 may or is required to make elections for federal, state or local
3 tax purposes, and to the extent that Partners may or are required
4 to make such elections concerning the business and properties of
5 the Partnership and such elections may not be made in different
6 ways by different Partners, such elections shall be made in such
7 manner as is best calculated, in the judgment of the Partnership,
8 to minimize taxable income of the Partnership and maximize
9 deductions therefrom.
10
11 14.05 Partnership Expenses. The Partnership shall pay
--------------------
12 or reimburse the Material Partners for all expenses (which
13 expenses may be billed directly to the Partnership) of the
14 Partnership incurred following the execution of this Agreement
15 that are approved by the Partnership which may include, but are
16 not limited to: (a) all costs of personnel employed by the
17 Partnership and involved in the business of the Partnership; (b)
18 all costs of borrowed money, taxes and assessments on the
19 Property and other taxes applicable to the Partnership; (c)
20 legal, audit, accounting, brokerage and other fees; (d) printing
21 and other expenses and taxes incurred in connection with the
22 issuance, distribution, Transfer, registration and recording of
23 documents evidencing ownership of a Partnership Interest or in
24 connection with the business of the Partnership; (e) fees and
25 expenses paid to independent contractors, mortgage bankers,
26 brokers and services, leasing agents, consultants, on-site
27 managers, real estate brokers, insurance brokers and other
28 agents; (f) expenses in connection with the disposition,
176
1 replacement, alteration, repair, remodeling, refurbishment,
2 leasing, refinancing and operation of the Property or other
3 Partnership assets (including the costs and expenses of
4 foreclosures, insurance premiums, real estate brokerage and
5 leasing commissions, and maintenance); (g) the cost of insurance
6 as required in connection with the business of the Partnership;
7 (h) expenses of organizing, revising, amending, converting,
8 modifying or terminating the Partnership; (i) expenses in
9 connection with distributions made by the Partnership to, and
10 communications and bookkeeping and clerical work necessary in
11 maintaining relations with, the Partners, including the cost of
12 printing and mailing to such persons various notices or other
13 communications; (j) expenses in connection with preparing and
14 mailing reports required to be furnished to the Partners for
15 investor, tax reporting or other purposes, or which reports the
16 Partners deem the furnishing thereof to be in the best interests
17 of the Partnership; (k) costs of any accounting, statistical or
18 bookkeeping equipment necessary for the maintenance of the books
19 and records of the Partnership; (l) the cost of preparation and
20 dissemination of the information, material and documentation
21 relating to a potential sale, refinancing or other disposition of
22 the Property or other Partnership assets; (m) the cost of any
23 appraisals of the Property as may be required by financings, any
24 Partner's internal procedures or any regulatory reporting
25 requirements on an annual or special basis; and (n) any letter of
26 credit fees or expenses incurred by the Partners or their
27 Affiliates in connection with development of the Property
28
177
1 Controlled by, under common Control with, or Controlling such
2 Partner.
3
4
5 ARTICLE 15
6
7 TERMINATION
8
9 15.01 Events of Dissolution. The Partnership shall be
---------------------
10 dissolved on the earliest to occur of:
11
12 (a) the expiration of the term of the Partnership;
13
14 (b) the passage of thirty (30) days after the
15 conversion to cash or its equivalent, sale or other disposition
16 of all of the Partnership assets;
17
18 (c) the election by all of the Represented Groups to
19 dissolve the Partnership;
20
21 (d) the termination of the Management Agreement in
22 accordance with the terms thereof, unless the Material Partners
23 other than Harrah's elect to within ninety (90) days continue the
24 Partnership on such a basis as such Material Partners shall
25 decide; provided that if such Material Partners so elect,
26 Harrah's shall have the option, for a period of sixty (60) days
27 following such election to continue the Partnership, to require
28 the Partnership to acquire its entire Partnership Interest on the
178
1 same terms as an Appraisal Buyout pursuant to Section 8.05 hereof
2 with the Appraisal Buyout Price computed based on one hundred
3 percent (100%) of Appraised Value;
4
5 (e) the dissolution of any Partner, unless the
6 remaining Partners elect within ninety (90) days to continue the
7 Partnership on such a basis as the Partnership shall decide;
8
9 (f) the bankruptcy of any Partner, unless the
10 remaining Partners elect within ninety (90) days to continue the
11 Partnership on such a basis as the Partnership shall decide; and
12
13 (g) the occurrence of any other event requiring the
14 dissolution of the Partnership under the laws of the State,
15 unless the remaining Partners elect within ninety (90) days to
16 continue the Partnership on such a basis as the Partnership shall
17 decide.
18
19 15.02 Winding Up
----------
20
21 (a) Upon the dissolution of the Partnership pursuant
22 to Section 15.01 hereof, the Partnership business shall be wound
23 up out of court and its assets liquidated by the Liquidator as
24 provided in this Section 15.02, and the net proceeds of such
25 liquidation shall be distributed in accordance with Section 15.03
26 hereof. The "Liquidator," as used herein shall mean such Person
27 who may be appointed by the Nondefaulting Partners (or in
28 accordance with applicable law if such Nondefaulting Partners
179
1 fail to make such appointment). The Liquidator shall be
2 responsible for taking all action necessary or appropriate to
3 wind up the affairs and distribute the assets of the Partnership
4 upon its dissolution.
5
6 (b) The Liquidator shall file all certificates and
7 notices of the dissolution of the Partnership required by law.
8 The Liquidator shall proceed without any unnecessary delay to
9 sell and otherwise liquidate the Partnership's assets; provided,
10 however, that if the Liquidator shall determine that an immediate
11 sale of part or all of the Partnership assets would cause undue
12 loss to the Partners, then, in order to avoid such loss, the
13 Liquidator may defer the liquidation, to the extent permitted by
14 law.
15
16 15.03 Distribution on Dissolution and Termination
-------------------------------------------
17
18 (a) Upon dissolution of the Partnership, the net
19 proceeds of such liquidation shall be applied and distributed in
20 the following order of priority; provided that the higher
21 level(s) of priority have been fully satisfied and provided
22 further that if the Capital Account of any Partner shall have a
23 negative balance after giving effect to the allocation of tax
24 items and giving effect to any debts, liabilities or other
25 obligations of the Partnership, such Partner shall pay to the
26 Partnership the amount of such negative balance not later than
27 ten (10) days from the date of written notice to such effect from
28 the Liquidator or any Represented Group (but in no event later
180
1 than the end of the Partnership taxable year in which such
2 liquidation occurs, or, if later, within ninety (90) days after
3 the date of such liquidation):
4
5 (i) to pay expenses of liquidation, and to the
6 setting up of any reserves for (A) contingent or unforeseen
7 obligations, debts or liabilities of the Partnership which may be
8 deemed reasonably necessary by the Partnership's accountants, (B)
9 amounts required by any contracts or agreements of the
10 Partnership, or (C) such other purposes as the Partnership may
11 decide. Such reserves shall be paid over to an escrowee
12 designated by the Liquidator to be held for the purpose of
13 disbursing such reserves in payment of any of the aforementioned
14 contingencies and, at the expiration of such period as shall be
15 deemed advisable, to distribute the balance hereafter remaining
16 in the manner provided in this Section 15.03;
17
18 (ii) to repay any principal and interest due on
19 any Partner Loans made or deemed made pursuant to Section 3.03(c)
20 hereof on a first in - first out basis, and if there are more
21 than one Partner Loan made or deemed made pursuant to Section
22 3.03(c) hereof of equal priority, on a pari passu basis;
---- -----
23
24 (iii) to the Partners pro rata in accordance with
25 their Percentage Shares, any amount remaining in the Tax Reserve;
26
27 (iv) subject to Section 4.05 hereof, to repayment
28 to the Partners first of any interest due on any Partner Loans
181
1 other than those made or deemed made pursuant to Section 3.03(c)
2 hereof pari passu in accordance with the total amount of interest
---- -----
3 outstanding on all such Partner Loans and, second of any
4 principal due on any Partner Loans other than those made or
5 deemed made pursuant to Section 3.03(c) hereof pari passu in
---- -----
6 accordance with the total amount of principal outstanding on all
7 such Partner Loans, or in such other order of priority as the
8 Partnership shall agree upon at the time any Partner Loan other
9 than those made or deemed made pursuant to Section 3.03(c) hereof
10 is approved by the Partnership; and
11
12 (v) subject to Section 4.05 hereof, thereafter,
13 to the Partners in respect of the balances, if any, remaining in
14 their Capital Accounts; provided, however, that all Capital
15 Account balances shall be determined after taking into account
16 all Capital Account adjustments for the Partnership taxable year
17 during which such liquidation occurs.
18
19 (b) If there is not a pro rata distribution of each
20 asset, asset distributions in kind shall be appraised by
21 appraisers retained by the Liquidator, if necessary, so that each
22 Partner receives its pro rata share of net Partnership assets as
23 appraised. The Capital Accounts shall be adjusted prior to such
24 distribution in kind as if such asset were sold at its Appraised
25 Value. It shall not be a requirement that each Partner receive a
26 pro rata share of each asset available for Distribution to the
27 Partners on dissolution. In the event valuation of the assets of
28 the Partnership cannot be agreed upon, such assets shall be
182
1 valued at their fair market value as determined by appraisers
2 retained by the Liquidator. The Liquidator may retain such
3 appraisers and other consultants as may be necessary and
4 advisable, all at the expense of the Partnership, in connection
5 with the wind-up of the Partnership affairs. No Partner shall
6 have any right to demand or receive property other than cash upon
7 dissolution and termination of the Partnership.
8
9 (c) A reasonable time shall be allowed for the orderly
10 liquidation of the assets of the Partnership and the discharge of
11 liabilities as to creditors.
12
13 (d) Within ninety (90) days after the complete
14 liquidation of the Partnership, the Liquidator shall furnish to
15 each of the Partner Groups a financial statement for the period
16 from the first day of the then current fiscal year through the
17 date of such complete liquidation certified by the Partnership's
18 certified public accountant. Such statement shall include a
19 Partnership statement of operation for such period and a
20 Partnership balance sheet as to the date of such complete
21 liquidation.
22
23 (e) Each Partner shall look solely to the assets of
24 the Partnership for all distributions with respect to the
25 Partnership and its Capital Contribution thereto and share of
26 profits and losses thereof, and shall have no recourse therefor
27 (upon dissolution or otherwise) against the other Partners or the
28 Liquidator except to the extent of any requirement of any Partner
183
1 to pay to the Partnership its negative capital balance pursuant
2 to this Section 15.03. It is expressly understood and agreed
3 that the Partners shall not be personally liable for the return
4 or repayment of all or any portion of the capital of any Partner
5 except to the extent of any requirement of any Partner to pay to
6 the Partnership its negative capital balance pursuant to this
7 Section 15.03 which shall survive the termination of its status
8 as Partner.
9
10
11 ARTICLE 16
12
13 COVENANTS
14
15 16.01 Competing Business
------------------
16
17 (a) For purposes of this Section 16.01, the following
18 shall all be the "Restricted Parties": each Partner, William C.
19 Broadhurst, Eddie L. Sapir, Christopher B. Hemmeter, Wendell H.
20 Gauthier, Carl J. Eberts, Calvin C. Fayard, Jr., Ronald M.
21 Lamarque, Duplain W. Rhodes, III, Louie Roussel, III, Michael X.
22 St. Martin, John J. Cummings, III, T. George Solomon, Jr. and all
23 Affiliates Controlled by, under common Control with, or
24 Controlling such Person. Any Restricted Party may directly or
25 indirectly, engage and possess any right or interest in the
26 ownership, operation, management, income, or profits of any other
27 business venture of any nature, kind or description, including,
28 without limiting the generality of the foregoing, any business
184
1 venture engaged in the same type of business as the Partnership,
2 even if such other business is competitive with that of the
3 Partnership, and the development, ownership, financing and
4 management of casino and other gaming operations of any kind
5 whatsoever; provided, however, that except as expressly permitted
6 herein, no Restricted Party, so long as such Restricted Party
7 owns any direct or indirect beneficial interest in the
8 Partnership, other than an Institutional Investor may be
9 associated with the development, ownership, financing or
10 management of (i) casino and other gaming operations in Orleans,
11 Plaquemines, St. Charles, St. Bernard, St. Tammany and Jefferson
12 Parishes in the State (the "Named Parishes") or (ii) any of the
13 properties known as (A) Canal Place Project, including the office
14 tower known as One Canal Place, 365 Canal Street, in the City;
15 the Canal Place Shopping Mall, hotel facility and garage
16 facility, all located on lots 1CP and 2CP, Second Municipal
17 District, in the City, (B) International Trade Mart Building,
18 including all land and improvements, located at 2 Canal Street,
19 in the City and (C) the hotel operation known as the Westin Canal
20 Place, located on lot 2CP, Second Municipal District, in the City
21 (the "Non-Casino Investments").
22
23 (b) The investments of Grand Palais Riverboat, Inc.
24 and its Affiliates that are Controlled by, under common Control
25 with, or Controlling Grand Palais Riverboat, Inc. in the Grand
26 Palais Riverboat and Carl J. Eberts and Louie Roussel III in the
27 Star Casino Riverboat are hereby permitted by the Partnership to
28 the extent permitted by State law and not violative of the
185
1 Rivergate Lease or the Temporary Casino Lease. The Partners
2 agree not to directly or indirectly through Affiliates, agents or
3 other Persons engage in any lobbying activities with respect to
4 any legislation which would abolish either such riverboat or
5 cause either such riverboat to be subject to rules or regulations
6 which are more restrictive than current laws or regulations
7 applicable to either such riverboat.
8
9 (c) Other than investments described in Section
10 16.01(b) hereof, gaming or casino investments in the Named
11 Parishes and/or the Non-Casino Investments by the Restricted
12 Parties are hereby permitted by the Partnership if each Material
13 Partner is given a right of first refusal to participate in such
14 projects in accordance with its Percentage Share at the time of
15 such offer, except that no Defaulting Partner shall have the
16 right to so participate.
17
18 (d) Except for any such permitted investments in the
19 Named Parishes, neither the Partnership nor any of its Partners
20 shall have any right or interest in the ownership, operation,
21 management, income, or profits of any other gaming or casino
22 business venture in the Named Parishes.
23
24 (e) Except for investments in the Named Parishes other
25 than those set forth in Section 16.01(a)(i) hereof, no Partner
26 need disclose to any other Partner or the Partnership any other
27 business venture in which it may have an interest or any other
28 business opportunity presented to it, even if such opportunity is
186
1 of a character which, if presented to the Partnership, could be
2 taken by the Partnership, and each Partner shall have the right
3 to take for its own account or to recommend to others any such
4 particular investment opportunity or business venture.
5
6 (f) Notwithstanding the foregoing, in no event shall
7 any Partner or any Affiliate of such Partner bound by such
8 agreement engage in any business venture to the extent same is
9 prohibited under any agreement to which has been approved by the
10 Partnership, or by which any of its property or assets are bound.
11
12 16.02 Prohibited Payments. Each Partner agrees that
-------------------
13 it and its Affiliates Controlled by, under common Control with,
14 or Controlling such Partner will conduct their activities, and
15 will cause any activities conducted on their behalf to be
16 conducted, in a lawful manner and specifically will not engage in
17 the following transactions:
18
19 (a) payments or offers of payment, directly or
20 indirectly, to any domestic or foreign government official or
21 employee in order to obtain business, retain business or direct
22 business to others, or for the purpose of inducing such
23 government official or employee to fail to perform or to perform
24 improperly his official functions;
25
26 (b) receive, pay or offer anything of value, directly
27 or indirectly, from or to any private party in the form of a
28
187
1 commercial bribe, influence payment or kickback for any such
2 purpose; or
3
4 (c) use, directly or indirectly, any funds or other
5 assets of the Partnership for any unlawful purpose including,
6 without limitation, political contributions in violation of
7 applicable law.
8
9 16.03 Securities Law Requirements. NOLDC and Grand
---------------------------
10 Palais acknowledge that Harrah's is owned by a publicly held
11 corporation and that trading in the securities of such
12 corporation based on non-public information or unauthorized
13 disclosure or other use of material developments could expose
14 Harrah's and Affiliates that are Controlled by, under common
15 Control with, or Controlling Harrah's, NOLDC and Grand Palais to
16 significant penalties. NOLDC and Grand Palais shall take
17 appropriate precautions to inform its employees and agents of
18 such requirements. In the event NOLDC and/or Grand Palais or any
19 Affiliates that are Controlled by, under common Control with, or
20 Controlling NOLDC and/or Grand Palais, as the case may be,
21 becomes a publicly held corporation, the Represented Groups shall
22 take appropriate precautions to inform each of their respective
23 employees and agents that trading in the securities of NOLDC
24 and/or Grand Palais or any Affiliates that are Controlled by,
25 under common Control with, or Controlling NOLDC and/or Grand
26 Palais, as the case may be, based on non-public information or
27 unauthorized disclosure or other use of material developments
28
188
1 could expose NOLDC, Grand Palais and Harrah's to significant
2 penalties.
3
4 16.04 Regulatory Information. Each Partner shall
----------------------
5 provide to the Partnership or regulatory agency, as the case may
6 be, as required by applicable law, all information pertaining to
7 the Partnership and the Project and each Partner's officers,
8 directors, shareholders, financial sources, and associations as
9 shall be required by any federal or state securities law or any
10 regulatory authority with jurisdiction over the Partnership, the
11 Project, or any Partner or any Affiliates that are Controlled by,
12 under common Control with, or Controlling such Person including,
13 without limitation, regulatory authorities in the State and the
14 States of Illinois, Nevada, New Jersey, or any other state.
15
16 16.05 Confidentiality
---------------
17
18 (a) Any financial information in connection with the
19 Property or the Project in the possession of any Partner which
20 has not been generally disclosed to the public shall be held in
21 confidence and shall not be disclosed to any Person other than
22 Partners, employees, attorneys, agents, or lenders other than a
23 Disqualified Buyer of the Partners and their Affiliates
24 Controlled by, under common Control with, or Controlling such
25 Partner, except as may be required by any regulatory authority
26 having jurisdiction or by any other applicable law, rule,
27 regulation, or requirement of any governmental entity. Any
28 disclosure of confidential information to any employee, attorney,
189
1 agent or lender shall be kept in confidence and delivered to such
2 Persons subject to a written confidentiality agreement
3 benefitting the Partnership, as approved by the Executive
4 Committee, except as may be required by any regulatory authority
5 having jurisdiction or by any other applicable law, rule,
6 regulation, or requirement of any governmental entity.
7
8 (b) Each Partner other than Harrah's agrees that it
9 shall keep confidential all Partnership information regarding
10 marketing strategies or methods of operation or any proprietary
11 information in its possession or knowledge.
12
13 16.06 Holding Entity Requirements
---------------------------
14
15 (a) Harrah's, NOLDC, Grand Palais and any additional
16 or substitute Partner shall incorporate provisions into their
17 articles of incorporation, charters, partnership agreements or
18 other formative documents substantially in the form of Exhibit H-
19 1 attached hereto and by this reference incorporated herein.
20 Subject to Section 16.06(b) hereof, each Partner shall assure
21 that (i) each Holding Entity owning a direct ownership interest
22 in such Partner and (ii) each of its other Holding Entities
23 Controlled by, under common Control with or Controlling such
24 Partner (but such other Holding Entities shall exclude any
25 Institutional Investor or any other Holding Entity that is exempt
26 from a suitability determination by LEDGC, or has been waived
27 from a suitability determination by LEDGC) at no cost to any
28 other Partner shall incorporate provisions into their articles of
190
1 incorporation, charters, partnership agreements or other
2 formative documents substantially in the form of Exhibit H-1
3 hereto; provided that in no event shall any Holding Entity whose
4 equity securities are publicly traded pursuant to the Securities
5 Exchange Act of 1934, as amended, and traded on the New York
6 Stock Exchange, the American Stock Exchange or NASDAQ be required
7 to include in its formative documents paragraph (B) of the first
8 paragraph of Exhibit H-1 hereto or the last paragraph of Exhibit
9 H-1 hereto. Each Partner shall assure that any provisions
10 required of any of its Holding Entities by this Section 16.06(a)
11 are enforced and that each of its Holding Entities Controlled by,
12 under common Control with, or Controlling such Partner shall not
13 amend such provisions without the approval of the Partnership.
14 Subject to 16.06(b) hereof, each Partner has delivered to the
15 Partnership a copy of the formative documents of its Holding
16 Entities containing the provisions required by this Section
17 16.06(a) certified by a secretary, partner or other authorized
18 Person, as being true and correct and adopted in accordance with
19 its formative documents.
20
21 (b) Any Holding Entity of Harrah's presently in
22 existence other than The Promus Companies Incorporated, shall not
23 be required to comply with Section 16.06(a) hereof until July 15,
24 1994. The Promus Companies Incorporated shall not be required to
25 comply with Section 16.06(a) hereof, to the extent it is
26 obligated to do so pursuant to Section 16.06(a) hereof, until
27 July 15, 1995. Promptly upon complying with the provisions of
28 Section 16.06(a) hereof, such Holding Entity shall deliver a copy
191
1 of its formative documents containing the provisions required by
2 Section 16.06(a) hereof certified by a secretary, general
3 partner, trustee or other authorized Person, as being true and
4 correct and adopted in accordance with its formative documents.
5
6 (c) Each Partner and all Holding Entities Controlled
7 by, under common Control with or Controlling such Partner (other
8 than those exempt from application of the legend) shall deliver
9 to the Partnership a representative copy of any evidence of an
10 ownership interest in such Holding Entity containing a legend
11 substantially in the form of Exhibit H-3 hereto. Each Partner
12 shall use reasonable efforts to assure that any evidence of
13 ownership of any of its other Holding Entities shall contain a
14 legend substantially in the form of Exhibit H-3 hereto.
15
16 (d) Each Partner shall assure that any evidence of
17 ownership of each Holding Entity that is Controlled by, under
18 common Control with or Controlling such Partner (other than any
19 Institutional Investor or Holding Entity that is exempt from a
20 suitability determination by LEDGC, or has been waived from a
21 suitability determination by LEDGC) shall contain a legend
22 substantially in the form of Exhibit H-5 hereto. Each Partner
23 shall use reasonable efforts to assure that any evidence of
24 ownership of any of its other Holding Entities shall contain a
25 legend substantially in the form of Exhibit H-5 hereto. In no
26 event shall the legend requirements of this Section 16.06(d)
27 apply to any evidence of ownership of any Holding Entity which is
28 publicly traded pursuant to the Securities Exchange Act of 1934,
192
1 as amended, and traded on the New York Stock Exchange, the
2 American Stock Exchange, or NASDAQ.
3
4 (e) Without diminishing the rights of the Material
5 Partners or the Partnership under Article 11 hereof, each Partner
6 shall at its sole cost and expense remove any Person within its
7 chain of ownership (on or after August 11, 1993 and prior to the
8 date hereof) who is determined by LEDGC, as part of the initial
9 determination of suitability of such Person, to be unsuitable.
10 The remaining Partners shall bear no cost of removal of any such
11 Person. Each Partner agrees to comply with any requirements of
12 LEDGC in connection with any such removal.
13
14 (f) Harrah's, NOLDC and Grand Palais have delivered to
15 the Partnership a copy of their shares of capital stock
16 containing a legend on both sides of such stock certificate
17 substantially in the form of Exhibit H-4 hereto and shall assure
18 that such legend is enforced and not amended without the approval
19 of the Partnership. At such time as any additional or substitute
20 Partner hereafter acquires a Partnership Interest, such Partner
21 shall deliver to the Partnership a copy of its shares of capital
22 stock containing a legend on both sides of such stock certificate
23 substantially in the form of Exhibit H-4 hereto and shall assure
24 that such legend is enforced and not amended without the approval
25 of the Partnership, and if required, of LEDGC.
26
27 16.07 Lender Requirements. Harrah's, NOLDC, Grand
-------------------
28 Palais and any additional or substitute Partners shall assure
193
1 that any loan documents evidencing loans for borrowed money from
2 any lender to such entity shall include provisions substantially
3 in the form of Exhibit H-2 attached hereto and by this reference
4 incorporated herein, or otherwise sufficient to permit such
5 entity to comply with Section 11.03 hereof.
6
7 16.08 Supplementary Restrictions. The requirements of
--------------------------
8 Sections 16.06 and 16.07 hereof regarding provisions in formative
9 documents and loan documents and legends on securities
10 substantially in the form of Exhibits H-1, H-2, H-3, H-4 and H-5
11 hereto shall not restrict the Partnership or any Holding Entity
12 from adopting, requiring, or including provisions in any
13 formative documents, loan documents or securities legends in
14 addition to the provisions and legends required by Sections 16.06
15 and 16.07 hereof; provided that the Partnership, Harrah's, Grand
16 Palais, NOLDC and any additional or substitute Partners shall use
17 best efforts to include such provisions in any loan documents to
18 the extent required to do so by LEDGC.
19
20
21 ARTICLE 17
22
23 MISCELLANEOUS
24
25 17.01 Governing Law. This Agreement and the rights of
-------------
26 the parties hereunder shall be governed by and interpreted in
27 accordance with the laws of the State without application of
28 conflict of laws principles.
194
1 17.02 Successors and Assigns. Any Person acquiring or
----------------------
2 claiming an interest in the Partnership, in any manner
3 whatsoever, shall be subject to and bound by all terms,
4 conditions and obligations of this Agreement to which its or his
5 predecessor in interest was subject or bound, without regard to
6 whether such a Person has executed a counterpart hereof or any
7 other document contemplated hereby. No Person, including the
8 legal representative, heir or legatee of a deceased Partner,
9 shall have any rights or obligations greater than those set forth
10 in this Agreement and no Person shall acquire a Partnership
11 Interest or become a Partner hereof except as permitted by the
12 terms of this Agreement. This Agreement shall be binding upon
13 and inure to the benefit of the parties hereto, their successors,
14 assigns, heirs, legal representatives, executors and
15 administrators.
16
17 17.03 Grammatical Changes. Whenever from the context
-------------------
18 it appears appropriate, each term stated in either the singular
19 or the plural shall include the singular and the plural, and
20 pronouns stated in either the masculine, the feminine or the
21 neuter gender shall include the masculine, feminine and neuter
22 gender as the circumstances require.
23
24 17.04 Captions. Captions contained in this Agreement
--------
25 are inserted only as a matter of convenience and in no way
26 define, limit or extend the scope or intent of this Agreement or
27 any provision hereof.
28
195
1 17.05 Severability. If any provision of this
------------
2 Agreement, or the application of such provision to any Person or
3 circumstance, shall be held invalid, the remainder of this
4 Agreement, or the application of such provision to Persons or
5 circumstances other than those to which it is held invalid, shall
6 not be affected thereby; provided that the parties shall attempt
7 to reformulate such invalid provision to give effect to such
8 portions thereof as may be valid without defeating the intent of
9 such provision; and further provided that this Section 17.05
10 shall not apply to alter the classification of the Partnership as
11 a partnership under the Code, or to reallocate the economic
12 benefits or burdens of this Agreement among the Partners.
13
14 17.06 Counterparts. This Agreement, or any amendment
------------
15 hereto may be executed in multiple counterparts, each of which
16 shall be deemed an original but all of which shall constitute one
17 and the same instrument, notwithstanding that all of the Partners
18 are not signatories to the original or the same counterpart. In
19 addition, this Agreement, or any amendment hereto, may contain
20 more than one counterpart of the signature pages, and this
21 Agreement, or any amendment hereto, may be executed by the
22 affixing of the signatures of each of the Partners to one of such
23 counterpart signature pages; all of such counterpart signature
24 pages shall be read as though one, and they shall have the same
25 force and effect as though all of the signers had signed a single
26 signature page.
27
28
196
1 17.07 Other Matters. Matters not covered in this
-------------
2 Agreement relating to partnerships shall be governed and
3 controlled by the partnership laws of the State.
4
5 17.08 Waiver of Right to Court Decree of Dissolution
----------------------------------------------
6 and Partition. The Partners agree that irreparable damage would
-------------
7 be done to the good will and reputation of the Partnership if any
8 Partner should bring an action in court to dissolve this
9 Partnership. To the extent permitted by law, each Partner hereby
10 waives and renounces its right to seek a court decree of
11 dissolution or to seek the appointment by a court of a liquidator
12 for the Partnership. The Partners further agree that the
13 Property is not and will not be suitable for partition and,
14 accordingly, to the fullest extent permitted by applicable law,
15 each of the Partners hereby irrevocably waives any and all rights
16 which it may have to maintain an action for partition of the
17 Property, or any portion thereof, or to otherwise divide (whether
18 through an action in equity or through some other means) the
19 beneficial interest in any nominee holding title thereto.
20
21 17.09 Amendments
----------
22
23 (a) Any amendments or modifications to this Agreement
24 may only be made and shall only be effective in writing by the
25 Represented Group.
26
27 (b) Notwithstanding Section 17.09(a) hereof, following
28 any buy/sell pursuant to Section 8.03 hereof, Default Loan or a
197
1 dilution pursuant to Section 8.04 hereof, Appraisal Buyout
2 pursuant to Section 8.05 hereof, Non-Material Partner Appraisal
3 Buyout pursuant to Section 8.06 hereof, each Partner hereby
4 appoints the buying Partner pursuant to Section 8.03 hereof, the
5 Default Lender pursuant to Section 8.04 hereof, the Partnership
6 pursuant to Section 8.05 hereof, and Non-Material Partner
7 Appraisal Purchaser pursuant to Section 8.06 hereof, as the case
8 may be, as its agent and attorney, and grants an irrevocable
9 power of attorney coupled with an interest to take any actions on
10 behalf of such Partner to consummate any exercise of rights
11 pursuant to such Sections 8.03, 8.04, 8.05 and 8.06 hereof,
12 including without limitation filing or executing any notes, or
13 such other documents as may be required to evidence a Default
14 Loan, any instruments of Transfer to consummate any Transfer
15 pursuant to Sections 8.03, 8.04, 8.05 or 8.06 hereof, any
16 amendments to this Agreement to effect or give effect to any
17 Transfers or termination of any Partner pursuant to Sections
18 8.03, 8.04, 8.05 or 8.06 hereof, or any other documents necessary
19 to effect any such exercise of rights. Each Partner hereby
20 agrees that any Transfer or termination of a Partner pursuant to
21 Sections 8.03, 8.04, 8.05 or 8.06 hereof may be fully evidenced
22 and consummated by execution pursuant to such power of attorney
23 of an amendment to this Agreement reflecting such Transfer or
24 termination of such Partner.
25
26 17.10 Succeeding Business Day. If any designated date
-----------------------
27 pursuant to any notice provision in this Agreement falls on, or
28 expiration of any period to elect to exercise rights pursuant to
198
1 this Agreement expires on, a day which is not a Business Day,
2 such designated date or expiration period to elect to exercise
3 rights shall be deemed to be, or occur on, the next succeeding
4 Business Day.
5
6 17.11 Conflicts. In the event of any conflict between
---------
7 a provision in this Agreement and a provision in the Management
8 Agreement, the provision in the Management Agreement shall
9 control.
10
11 17.12 Personal Property. This Agreement shall not be
-----------------
12 deemed to create in any Partner any right, title, interest or
13 lien in, to or on all or any portion of the Property, it being
14 understood that any right or interest of any Partner created by
15 this Agreement shall solely be an interest in the Partnership and
16 shall be personal property.
17
18 17.13 No Third Party Rights. This Agreement is for
---------------------
19 the sole and exclusive benefit of the Partners designated herein
20 and the Partnership and no other Person or entity other than
21 Manager as to those provisions affecting its interests (including
22 any creditors of the Partnership or the Partners) shall under any
23 circumstances be deemed to be a beneficiary of any of the rights,
24 remedies, terms and provisions of this Agreement.
25
26 17.14 Voluntary Agreement. Each Partner has entered
-------------------
27 into this Agreement freely and voluntarily, without coercion,
28 duress, distress, or undue influence by any other Persons or
199
1 their respective shareholders, directors, officers, partners,
2 agents or employees.
3
4 17.15 Advice From Counsel. Each Partner understands
-------------------
5 that this Agreement may affect legal rights. Each Partner
6 represents to the other that it has received legal advice from
7 counsel of its choice in connection with the negotiation and
8 execution of this Agreement and is satisfied with its legal
9 counsel and the advice received from it.
10
11 17.16 Judicial Interpretation. Should any provision
-----------------------
12 of this Agreement require judicial interpretation or
13 construction, there shall be no presumption that the terms hereof
14 shall be more strictly construed or interpreted against any
15 Partner by reason of the rule of construction that a document is
16 to be construed more strictly against the party who prepared the
17 same.
18
19 17.17 Attorneys' Fees. Each Partner may bring any
---------------
20 judicial action or proceeding to enforce any rights under this
21 Agreement. If any Partner brings any judicial action or
22 proceeding to enforce its rights under this Agreement, the
23 prevailing Partner shall be entitled, in addition to any other
24 remedy, to recover from the other Partners, regardless of whether
25 such action or proceeding is prosecuted to judgment, all costs
26 and expenses, including without limitation reasonable attorneys'
27 fees, incurred therein by the prevailing Partner.
28
200
1 THUS DONE AND PASSED in multiple originals in Orleans
2 Parish in the State, in the presence of the undersigned witnesses
3 and Notary Public on the date first above written.
4
5 WITNESSES TO ALL SIGNATURES: HARRAH'S NEW ORLEANS
6 INVESTMENT COMPANY, a Nevada
7 corporation
8
9
10 /s/ Dennis Bourgeois By /s/ Colin V. Reed
----------------------------- -----------------------
11
12 Colin V. Reed
13 Senior Vice President
14
15
16 NEW ORLEANS/LOUISIANA
17 DEVELOPMENT CORPORATION, a
18 Louisiana corporation
19
20
21 /s/ Donna J. Mueller By /s/ Wendell H. Gauthier
----------------------------- -----------------------
22
23 Wendell H. Gauthier,
24 Chairman of the Board
25
26
27
28
201
1 /s/ Dennis Bourgeois GRAND PALAIS CASINO, INC., a
-----------------------------
2
3 Delaware corporation
4
5
6 /s/ Donna J. Mueller By /s/ Christopher B. Hemmeter
----------------------------- ---------------------------
7
8 Christopher B. Hemmeter,
9 Chairman of the Board
10
11
12 /s/ Thomas Y. Roberson, Jr.
-------------------------------------------
13 Notary Public
14
15 My commission expires
16 at death
-------------------------------------------
17
18
19
20
21
22
23
24
25
26
27
28
202
EXHIBIT A
---------
INITIAL CAPITAL CONTRIBUTIONS
-----------------------------
Grand Palais Harrah's NOLDC
------------ -------- -----
$23,333,333.33 $23,333,333.34 $23,333,333.33
============== ============== ==============
A-1
AGREED AMOUNTS OF COSTS AND EXPENSES
------------------------------------
FOR REIMBURSEMENT PURSUANT TO SECTION 3.01(f)
---------------------------------------------
Grand Palais Harrah's NOLDC
------------ -------- -----
Soft Costs
Incurred Through
September 30, 1993
Eligible for Payments $16,519,523.93 $1,021,534.84 $1,536,018.66
Note: See attached computation of the soft costs incurred
through September 30, 1993 eligible for payment.
A-2
ATTACHMENT TO EXHIBIT "A"
TO HARRAH'S JAZZ COMPANY PARTNERSHIP AGREEMENT
Grand Palais
Pre-9/30/93 Expenditures Related to
Harrah's New Orleans Casino
AMOUNTS
-------
Costs of Properties Acquired Netted Against
Parking Revenues $17,817,567.99
Other Property Costs 1,612,467.79
Consultants Costs - General 5,659,663.73
Financing Costs 5,849,193.62
Design Fees 2,416,373.59
Consultants Costs - Planning & Development 1,748,300.32
Payments to City of New Orleans/RDC 17,106,866.19
General & Administrative Expenses 4,009,985.60
General Legal Fees 2,956,968.76
Charitable Contributions 159,319.18
Rivergate & Lease Insurance 48,218.39
City & State Proposals 902,591.20
---------------
Total $60,287,516.36
==============
Less Debt $43,767,992.43
--------------
Reimbursable Amount $16,519.523.93
A-3
ATTACHMENT TO EXHIBIT "A"
TO HARRAH'S JAZZ COMPANY PARTNERSHIP AGREEMENT
Harrah's New Orleans Investment Company
Pre-9/30/93 Expenditures Related to
Harrah's New Orleans Casino
AMOUNTS
-------
Salaries & Benefits of Development Project
Team Members $446,828.76
Consultants Fees and Expenses 248,226.77
General & Administrative Expenses 269,378.85
Design Fees 7,100.46
RFP Submission 50,000.00
---------------
Total $1,021,534.84
=============
A-4
ATTACHMENT TO EXHIBIT "A"
TO HARRAH'S JAZZ COMPANY PARTNERSHIP AGREEMENT
NOLDC
Pre-9/30/93 Expenditures Related to
Harrah's New Orleans Casino
AMOUNTS
-------
Salaries & Benefits of Development Project
Team Members $ 60,758.17
Consultants Fees and Expenses 193,995.16
General & Administrative Expenses 432,215.89
Legal Fees 586,613.49
Charitable Contributions 160.00
Design Fees 268,235.95
RFP Submission 3,040.00
---------------
Total $1,536,018.66
=============
A-5
EXHIBIT "B"
-----------
PARCEL I.
---------
237 LAFAYETTE STREET
--------------------
THAT PORTION OF GROUND, together with all rights, ways,
privileges, servitudes, appurtenances and advantages thereunto
belonging, situated in the First District of the City of New
Orleans, Parish of Orleans, State of Louisiana, in SQUARE NO. 16,
bounded by New Levee, now Peters, Fulton, Poydras and Lafayette
Streets, designated as LOTS NUMBERS FOURTEEN AND FIFTEEN on a
plan of J. A. Beard, certified by Hugh Grant, dated January 12,
1852, deposited in the office of H. B. Cenas, late Notary Public,
and measuring as follows:
Lot 14, twenty-one feet, eleven inches and five lines front on
Peters Street, twenty-three feet and six lines front on Fulton
Street, by one hundred and sixteen feet, nine inches and three
lines deep on the line of Lot No. 13, and one hundred and sixteen
feet, eleven inches and one line deep on the line of Lot No. 15.
Lot 15, measures twenty-one feet, eleven inches and five lines
front on Peters Street, by twenty-three feet and six lines front
on Fulton Street, by one hundred and sixteen feet, eleven inches
and one line of Lot 14, and one hundred and seventeen feet and
seven lines on the line of Lot No. 16.
THAT PORTION OF GROUND, together with all the buildings and
improvements thereon, situated in the First District of the City
of New Orleans, Parish of Orleans, State of Louisiana, in SQUARE
NO. 16, bounded by Peters (late New Levee), Fulton, Lafayette and
Poydras Streets, designated as Lot 16 on a plan of J. A. Beard,
certified by H. Grant, Surveyor, on January 12, 1852, and
deposited for reference in the office of H. B. Cenas, late Notary
Public. Said lot measures twenty-two feet, eleven inches and
five lines front on S. Peters Street, twenty-three feet, six
lines front on Fulton Street by a depth in front on Lafayette
Street of one hundred and seventeen feet, two inches and five
lines and a depth of one hundred and seventeen feet, seven inches
on the opposite side line.
Improvements thereon bear the Municipal Number 237 Lafayette
Street, New Orleans, Louisiana (the "Land").
All as more fully described on a survey drawing no. L-15 by
Gandolfo, Kuhn & Associates originally dated August 25, 1992, and
most recently recertified March 10, 1994.
B-1
LIENS:
-----
1. Collateral Mortgage by Louisiana Jazz Co., in favor of
Bearer, in the amount of $25,000,000.00, passed before
L.R. Adler, Notary Public, dated November 30, 1993,
recorded December 1, 1993, under N.A. No. 93-51172, as
Mortgage Office Instrument No. 2350801, in MOB 2991,
folio 15.
2. Assignment of Leases and Rentals by Louisiana Jazz
Company to First National Bank of Commerce, dated
November 30, 1993, recorded December 1, 1993, under
N.A. No. 93-51173, as Conveyance Instrument No. 78945,
in COB 907, folio 477.
PARCEL II.
----------
528 SOUTH PETERS STREET
-----------------------
ONE CERTAIN LOT OF GROUND, together with all rights, ways,
privileges, servitudes, appurtenances and advantages thereunto
belonging, situated in the First District of the City of New
Orleans, Orleans Parish, State of Louisiana, in SQUARE 16
thereof, bounded by South Peters, Lafayette, Fulton and Poydras
Streets, designated as LOT 10 on the survey made by Gilbert,
Kelly & Couturie, Inc., Surveying and Engineering, dated
September 17, 1979, and according to which said lot commences at
a distance of 137 feet, 9 inches and 6 lines from the corner of
South Peters and Lafayette Streets, and also commences at a
distance of 138 feet, 4 inches and 4 lines from the corner of
Fulton and Lafayette Streets, and measures 22 feet, 11 inches and
5 lines front on South Peters Street, a width in the rear and
front on Fulton Street of 23 feet, 0 inches and 6 lines, by a
depth on the sideline nearer to Lafayette Street of 116 feet, 4
inches, by a depth on the opposite sideline of 116 feet, 2 inches
and 1 line.
The improvements thereon bear Municipal No. 528 South Peters
Street and No. 529 Fulton Street.
All as more fully described on a survey by Gandolfo, Kuhn &
Associates originally dated August 25, 1992 and most recently
recertified March 10, 1994.
LIENS:
-----
1. Collateral Mortgage by Louisiana Jazz Co., in favor of
Bearer, in the amount of $25,000,000.00, passed before
L.R. Adler, Notary Public, dated November 30, 1993,
recorded December 1, 1993, under N.A. No. 93-51172, as
B-2
Mortgage Office Instrument No. 2350801, in MOB 2991,
folio 15.
2. Assignment of Leases and Rentals by Louisiana Jazz
Company to First National Bank of Commerce, dated
November 30, 1993, recorded December 1, 1993, under
N.A. No. 93-51173, as Conveyance Instrument No. 78945,
in COB 907, folio 477.
PARCEL III.
-----------
530 S. PETERS STREET
--------------------
THREE CERTAIN LOTS OF GROUND, together with all rights, ways,
privileges, servitudes, appurtenances and advantages thereunto
belonging, situated in the First District of the City of New
Orleans, Orleans Parish, State of Louisiana, in the SQUARE NO.
16, bounded by South Peters (late New Levee), Fulton, Lafayette
and Poydras Streets, said three lots being designated by the NOS.
11, 12 and 13 on print of survey of E.L. Eustis, Civil Engineer,
dated January 15, 1941, and according to which said lots adjoin
each other and measure as follows:
Lot 13 lies nearest to Lafayette Street and begins at a distance
from the intersection of Lafayette and South Peters Streets of
sixty-six feet, ten inches and seven lines (66'10"7''') title
(sixty eight feet, ten inches, and seven lines, 68'10"7'''
actual) and measures on South Peters Street in the direction of
Poydras Street twenty-two feet, eleven inches and five lines
(22'11"5''') by a depth on the side line nearest Lafayette Street
of one hundred sixteen feet, nine inches, and three lines
(116'9"3'''), a depth on the opposite side line nearer Poydras
Street of one hundred sixteen feet, seven inches and five lines
(116'7"5''') with a frontage on Fulton Street of twenty-three
feet, six inches, and no lines (23'6"0''') title (twenty-three
feet, no inches, and six lines 23'0"6''' actual). The nearest
point of said frontage being sixty-nine feet, two inches, and two
lines (69'2"2''') from the intersection of Lafayette and Fulton
Streets.
Lot 12 adjoins Lot 13 and measures twenty-two feet, eleven
inches, and five lines (22'11"5''') front on South Peters Street
by a depth on a side line nearer Lafayette Street side line being
the dividing line between Lots 12 and 13 of one hundred sixteen
feet, seven inches, and five lines (116'7"5'''), a depth on the
opposite side adjoining Lot 11 of one hundred sixteen feet, five
inches, and seven lines (116'5"7''') with a frontage on Fulton
Street of twenty-three feet, six inches, and no lines (23'6"0''')
title (twenty-three feet, no inches and six lines, 23'0"6'''
actual).
B-3
Lot 11 adjoins Lot 12 on the side of Lot 12 nearer Poydras Street
and measures twenty-two feet, eleven inches and five lines
(22'11"5''') front on South Peters Street by a depth on the side
line nearer Lafayette Street, which is the dividing line between
Lots 11 and 12, one hundred sixteen feet, five inches, and seven
lines (116'5"7''') with a depth on the opposite side line nearer
Poydras Street of one hundred sixteen feet, four inches, and no
lines (116'4"0''') with a frontage on Fulton Street of twenty-
three feet, six inches, and no lines (23'6"0''') title (twenty-
three feet, no inches, and six lines, 23'0"6''' actual) (the
"Land").
All as more fully described on a survey by Gandolfo, Kuhn &
Associates originally dated August 25, 1992, and most recently
recertified March 10, 1994.
LIENS:
-----
1. Collateral Mortgage by Louisiana Jazz Co., in favor of
Bearer, in the amount of $25,000,000.00, passed before
L.R. Adler, Notary Public, dated November 30, 1993,
recorded December 1, 1993, under N.A. No. 93-51172, as
Mortgage Office Instrument No. 2350801, in MOB 2991,
folio 15.
2. Assignment of Leases and Rentals by Louisiana Jazz
Company to First National Bank of Commerce, dated
November 30, 1993, recorded December 1, 1993, under
N.A. No. 93-51173, as Conveyance Instrument No. 78945,
in COB 907, folio 477.
PARCEL IV.
----------
MATT I
------
A CERTAIN PARCEL OF LAND, together with all rights, ways,
privileges, servitudes, appurtenances and advantages thereunto
belonging, and any and all buildings, improvements and other
constructions located thereon, situated in the First District of
the City of New Orleans, in SQUARE 4, Orleans Parish, Louisiana,
bounded by Convention Center Boulevard (formerly Front Street),
Lafayette, Fulton and Poydras Streets, which said parcel is
designated as LOT 1 and is the only lot of and comprises the
whole of said Square 4, on plan of subdivision of Stephen L.
Gremillion of Engineering Technology, Inc., dated June 28, 1982,
approved by the City Planning Commission under Subdivision Docket
No. 96/82, registered as a Declaration of Title Change under
Entry No. 466470 in COB 781, folio 237, records of Orleans
Parish. According to survey by John J. Avery, Jr., L.S., dated
August 24, 1990 (the "Survey"), said Lot 1 is described as
follows:
B-4
Commencing at the intersection of the westerly right of way line
of Convention Center Boulevard (late South Front Street) and the
southerly right of way line of Poydras Street and being the POINT
OF BEGINNING; from said POINT OF BEGINNING, thence South 02
degrees, 24 minutes, 03 seconds East along the westerly right of
way line of Convention Center Boulevard a distance of 371 feet, 1
inch, 0 eighths (371.35' Title) to a point on the northerly right
of way line of Lafayette Street; thence North 75 degrees, 59
minutes, 06 seconds West along the northerly right of way line of
Lafayette Street a distance of 117 feet, 7 inches, 4 eights
(117.24' Title) to a point on the easterly right of way line of
Fulton Street; thence North 02 degrees, 01 minutes, 00 seconds
West along the easterly right of way line of Fulton Street a
distance of 369 feet, 10 inches, 1 eighth (370.10' Title) to a
point on the southerly right of way line of Poydras Street;
thence South 76 degrees, 14 minutes, 00 seconds East along the
southerly right of way line of Poydras Street a distance of 114
feet, 10 inches, 6 eighths (114.65' Title) to the POINT OF
BEGINNING.
AND
A CERTAIN LOT OF GROUND, together with all rights, ways,
privileges, servitudes, appurtenances and advantages thereunto
belonging, and any and all buildings, improvements and other
constructions located thereon, situated in the First District of
the City of New Orleans, in SQUARE 16, bounded by Poydras,
Fulton, South Peters and Lafayette Streets, which said lot is
designated as LOT F on a plan of resubdivision by Stephen L.
Gremillion of Engineering Technology, Inc., dated June 28, 1982,
approved by the City Planning Commission under Subdivision Docket
No. 96/82, registered as a Declaration of Title Change under
Entry No. 466470 in COB 781, folio 237, records of Orleans
Parish.
According to the Survey, said Lot F is more fully described and
measures as follows:
Commencing at the intersection of the westerly right of way line
of Fulton Street and the southerly right of way line of Poydras
Street and being the POINT OF BEGINNING; from said POINT OF
BEGINNING, thence South 02 degrees, 01 minutes, 00 seconds East
along the westerly right of way line of Fulton Street a distance
of 92 feet, 4 inches, 5 eighths (91.93' Title) to a point; thence
North 76 degrees, 07 minutes, 00 seconds West a distance of 46
feet, 9 inches, 7 eighths (46.82' Title) to a point; thence North
02 degrees, 01 minutes, 00 seconds West a distance of 23 feet, 6
inches, 0 eighths (23.50' Title) to a point; thence South 76
degrees, 07 minutes, 00 seconds East a distance of 0 feet, 8
inches, 0 eighths (0.44' Title) to a point; thence North 01
degrees, 53 minutes, 46 seconds West a distance of 68 feet, 9
inches, 0 eighths (68.85' Title) to a point on the southerly
B-5
right of way line of Poydras Street; thence South 76 degrees, 14
minutes, 00 seconds East along the southerly right of way line of
Poydras Street a distance of 45 feet, 11 inches, 6 eighths
(45.92' Title) to the POINT OF BEGINNING (the "Land and
Improvements").
All as more fully described on a survey by Gandolfo, Kuhn &
Associates originally dated August 25, 1992, and most recently
recertified March 10, 1994.
LIENS:
-----
1. Collateral Mortgage by Louisiana Jazz Co., in favor of
Bearer, in the amount of $25,000,000.00, passed before
L.R. Adler, Notary Public, dated November 30, 1993,
recorded December 1, 1993, under N.A. No. 93-51172, as
Mortgage Office Instrument No. 2350801, in MOB 2991,
folio 15.
2. Assignment of Leases and Rentals by Louisiana Jazz
Company to First National Bank of Commerce, dated
November 30, 1993, recorded December 1, 1993, under
N.A. No. 93-51173, as Conveyance Instrument No. 78945,
in COB 907, folio 477.
PARCEL V.
---------
508-510 SOUTH PETERS STREET
---------------------------
A CERTAIN LOT OF GROUND, together with all the buildings and
improvements thereon, and all the rights, ways, privileges,
servitudes, appurtenances and advantages thereunto belonging or
in anywise appertaining, situated in the First District of New
Orleans, in SQUARE NO. 16, bounded by South Peters, Poydras,
Fulton and Lafayette Streets, designated by the LETTER "H" and
measuring 22 feet, 11 inches front on South Peters Street, about
the same width in the rear, by about 70 feet in depth. And which
said lot is designated as part of original Lot 4 on survey made
by Guy J. Seghers, Engineer and Surveyor, dated May 31, 1938, a
print of which is attached to act passed before Louis H. Yarrut,
Notary Public, on July 1, 1938, and according to which said lot
measures a distance of 69 feet, 1 inch, 4 lines from the corner
of South Peters and Poydras Streets, 22 feet, 11 inches, 6 lines
front on South Peters Street, by a depth on the side line nearest
Poydras Street of 69 feet, 2 inches, 7 lines and a depth on the
other side line nearest Lafayette Street of 69 feet, 3 inches, 7
lines, and a width in the rear of 23 feet, being composed of the
greater portion of original Lot 4.
The improvements bear the Municipal Nos. 508-510 South Peters
Street.
B-6
In accordance with survey by Gandolfo, Kuhn & Associates, Land
Surveyors, originally dated August 25, 1992, recertified March
10, 1994, said lot measures 23 feet, 1 inch and 2 eighths front
on South Peters Street, and a width in the rear of 23 feet, 1
inch, by a depth on the side line nearest Poydras Street of 69
feet, 2 inches and 7 eighths by a depth on the other side line
nearest Lafayette Street of 69 feet, 3 inches and 7 eighths.
LIENS:
-----
1. Collateral Mortgage by Celebration Park Casino, Inc.,
in favor of future holder or holders of the collateral
mortgage note thereby secured, in the amount of
$50,000,000.00, passed before Margaret T. Alphonso,
Notary Public, dated December 15, 1992, recorded
December 16, 1992, under N.A. No. 962316, as Mortgage
Office Instrument No. 190775; in MOB 2923, folio 400,
as supplemented by Act of Supplement to Collateral
Mortgage by Celebration Park Casino, Inc., passed
before Kay W. Eagan, Notary Public, dated January 15,
1993, recorded January 19, 1993, under N.A. No. 93-
03466, as Mortgage Office Instrument No. 194606,
records of Orleans Parish Louisiana; as supplemented by
Act of Supplement to Collateral Mortgage by Celebration
Park Casino, Inc., dated February 1, 1993, recorded
February 1, 1993, under N.A. No. 93-05848, as Mortgage
Office Instrument No. 196614; as supplemented by Act of
Supplement to Collateral Mortgage by Celebration Park
Casino, Inc., dated April 27, 1993, recorded April 27,
1993, under N.A. No. 93-18039, as Mortgage Office
Instrument No. 206500, in MOB 2950, folio 478; as
supplemented by Act of Supplement to Collateral
Mortgage dated February 23, 1994, recorded at N.A. No.
94-11052 on March 3, 1994.
2. Collateral Assignment of Leases and Rents by
Celebration Park Casino, Inc. to The Connecticut
National Bank, as Trustee, dated December 15, 1992,
recorded December 16, 1992, under N.A. No. 962317, as
Conveyance Office Instrument No. 62223; as amended by
Act of Amendment of Collateral Assignment of Leases and
Rents by Celebration Park Casino, Inc., in favor of
Shawmut Bank Connecticut, National Association
(formerly known as The Connecticut National Bank), as
Trustee, dated January 28, 1993, recorded January 29,
1993, under N.A. No. 93-05563, as Conveyance Office
Instrument No. 64215.
3. Collateral Assignment of Assignment of Agreements of
Purchase and Sale and Option Agreement by Celebration
Park Casino, Inc., to The Connecticut National Bank, as
Trustee, dated December 15, 1992, recorded December 16,
B-7
1992, under N.A. No. 962318, as Conveyance Office
Instrument No. 62224, as supplemented by Supplement to
Collateral Assignment of Agreements of Purchase and
Sale and Option Agreement by Celebration Park Casino,
Inc., to Shawmut Bank Connecticut, National Association
(formerly known as The Connecticut National Bank), as
Trustee, dated January 15, 1993, recorded January 19,
1993, under N.A. No. 93-03468, as Conveyance Office
Instrument No. 63716, COB 891, folio 329-332; as
amended by Act of Amendment to (1) Collateral
Assignment of Agreements of Purchase and Sale and
Option Agreement, and (2) Supplement to Collateral
Assignment of Purchase and Sale and Option Agreement by
Celebration Park Casino, Inc., in favor of Shawmut Bank
Connecticut, National Association (formerly known as
The Connecticut National Bank), as Trustee, dated
January 28, 1993, recorded January 29, 1993, under N.A.
No. 93-05565, as Conveyance Office Instrument No.
64217; as amended by Second Supplement to Collateral
Assignment of Agreements of Purchase and Sale and
Option Agreement by Celebration Park Casino, Inc., in
favor of Shawmut Bank Connecticut, National Association
(formerly known as The Connecticut National Bank), as
Trustee and Collateral Agent, dated April 7, 1993,
recorded April 8, 1993, as under N.A. No. 93-15549,
Conveyance Office Instrument No. 67309; as partially
released by Act of Partial Release of Collateral
Assignment of Agreements of Purchase and Sale and
Option Agreement by Shawmut Bank Connecticut, National
Association (formerly known as The Connecticut National
Bank), dated November 30, 1993, recorded December 1,
1993, under N.A. No. 93-51163, Conveyance Office
Instrument No. 78936.
4. Collateral Assignment of Additional Leases and Rents by
Celebration Park Casino, Inc., to Shawmut Bank
Connecticut, National Association (formerly known as
The Connecticut National Bank), as Trustee, dated
January 15, 1993, recorded January 19, 1993, under N.A.
No. 93-03467, as Conveyance Office Instrument No.
63715, COB 891, folio 320-328; as amended by Act of
Amendment of Collateral Assignment of Additional Leases
and Rents by Celebration Park Casino, Inc., in favor of
Shawmut Bank Connecticut, National Association
(formerly known as The Connecticut National Bank), as
Trustee, dated January 28, 1993, recorded January 29,
1993, under N.A. No. 93-05564, as Conveyance Office
Instrument No. 64216.
B-8
PARCEL VI.
----------
MATT II
-------
A CERTAIN SQUARE OF GROUND, together with all the buildings and
improvements thereon, and all the rights, ways, privileges,
servitudes, appurtenances and advantages thereunto belonging or
in anywise appertaining, situated in the First District of the
City of New Orleans, and designated by the NO. 5, which said
square is bounded by Front, Fulton, Lafayette and Girod Streets
and measures 117 feet, 6 inches, 2 lines front on Lafayette
Street, 120 feet, 1 inch, 2 lines front on Girod Street, 363
feet, 7 inches, 1 line front on Fulton Street and 364 feet, 5
inches, 5 lines front on Front Street, all more or less, said
property being particularly described as follows, to-wit:
1. SIX CERTAIN LOTS OF GROUND, together with all the buildings
and improvements thereon, and all the rights, ways, privileges,
servitudes, appurtenances and advantages thereunto belonging or
in anywise appertaining, situated in the First District of New
Orleans, in SQUARE NO. 5, bounded by Front, Fulton, Lafayette and
Girod Streets, and designated by the NOS. 2 TO 7, INCLUSIVE, on a
plan by F.A. Beard, certified unto Hugh Grant, Surveyor, under
date of January 12, 1853, deposited for reference in the office
of H.B. Conas, then a notary in the City of New Orleans. Said
lots adjoin each other and measure each 24 feet, 2 inches, 7
lines front on Fulton Street, 24 feet, 3 inches, 3 lines front on
Front Street, by the following depths, viz: 117 feet, 8 inches, 3
lines on the side of Lot 2 adjoining Lot 1, 117 feet, 10 inches,
4 lines on the dividing line between Lots 2 and 3, 118 feet, 5
lines on the dividing line between Lots 3 and 4, 118 feet, 2
inches, 6 lines on the dividing line between Lots 4 and 5, and
118 feet, 4 inches, 7 lines on the dividing line between Lots 5
and 6, and 118 feet, 7 inches on the dividing line between Lots 6
and 7, and 118 feet, 9 inches, 2 lines on the side line of Lot 7,
adjoining Lot 8.
2. THREE CERTAIN LOTS OF GROUND, together with all the
buildings and improvements thereon, and all the rights, ways,
privileges, servitudes, appurtenances and advantages thereunto
belonging or in anywise appertaining, situated in the same
District and Square as the property hereinabove described
designated by the NOS. 8, 9 AND 10, and measuring, in American
Measure, as follows, to-wit:
Lot 8 measures 24 feet, 2 inches, 7 lines front on Fulton Street,
24 feet, 3 inches, 3 lines front on Front Street, by 118 feet, 9
inches, 2 lines in depth on the line dividing it from Lot 7 and
118 feet, 11 inches, 2 lines in depth on the line dividing it
from Lot 9, and Lot 9 measures 24 feet, 2 inches, 7 lines front
on Fulton Street, 24 feet, 3 inches, 3 lines front on Front
Street, by 118 feet, 11 inches, 2 lines in depth on the line
B-9
dividing it from Lot 8 and 119 feet, 1 inch, 2 lines in depth on
the line dividing it from Lot 10, and Lot 10 measures 24 feet, 2
inches, 7 lines front on Fulton Street, 24 feet, 3 inches, 3
lines front on Front Street, by 119 feet, 1 inch, 2 lines on the
line dividing it from Lot 9 and 119 feet, 3 inches, 2 lines in
depth on the line dividing it from Lot 11.
3. TWO CERTAIN LOTS OF GROUND, together with all the buildings
and improvements thereon, and all the rights, ways, privileges,
servitudes, appurtenances and advantages thereunto belonging or
in anywise appertaining, situated in the same District and Square
as the property hereinabove firstly described, designated by the
NOS. 11 AND 12 on a plan by J.A. Beard, duly certified by H.
Grant, dated January 12, 1852, and deposited in the office of
H.B. Conas, then a Notary Public, which said lots measure as
follows:
Lot 11 measures 24 feet, 2 inches, 7 lines front on Fulton
Street, 24 feet, 3 inches, 3 lines front on Front Street, by 119
feet, 5 inches, 2 lines in depth on the line dividing it from Lot
12, and 119 feet, 3 inches, 2 lines in depth on the line dividing
it from Lot 10, all American Measure; and Lot 12 measures 24
feet, 2 inches, 7 lines front on Fulton Street; 24 feet, 3
inches, 2 lines front on Front Street, by 119 feet, 5 inches, 2
lines in depth on the line dividing it from Lot 11 and 119 feet,
7 inches, 2 lines on the line dividing it from Lot 13.
4. THREE CERTAIN LOTS OF GROUND, together with all the
buildings and improvements thereon, and all the rights, ways,
privileges, servitudes, appurtenances and advantages thereunto
belonging or in anywise appertaining, situated in the First
District of New Orleans, in SQUARE NO. 5, bounded by Fulton,
Girod, Front and Lafayette Streets, designated by the NOS. 15,
13, AND 14.
Lot 15 measures 24 feet, 2 inches, 7 lines front on Fulton
Street, 120 feet, 1 inch and 2 lines front on Girod Street, 24
feet, 3 inches, 3 lines front on Front Street, and 119 feet, 11
inches, 2 lines on the line of Lot 14; Lot 13 measures 24 feet, 2
inches and 7 lines front on Fulton Street; 24 feet, 3 inches and
3 lines on Front Street, by 119 feet, 7 inches and 2 lines in
depth on the line dividing it from Lot 12, and 119 feet, 9 inches
and 2 lines in depth on the line dividing it from Lot 14; Lot 14
measures 24 feet, 2 inches and 7 lines on Fulton Street, 24 feet,
3 inches and 3 lines on Front Street, by 119 feet, 9 inches and 2
lines in depth on the line dividing it from Lot 13, and 119 feet,
11 inches, 2 lines in depth on the line dividing it from Lot 15.
5. A LOT OF GROUND, together with all the buildings and
improvements thereon, and all the rights, ways, privileges,
servitudes, appurtenances and advantages thereunto belonging or
in anywise appertaining, situated in the First District of New
B-10
Orleans, in SQUARE NO. 5, bounded by Front, Fulton, Lafayette and
Girod Streets, designated as LOT NO. 1, on a plan certified by
Hugh Grant, late Surveyor of Municipality No. 1, under date of
January 12, 1852, and deposited for reference in the office of
H.B. Conas, then Notary, which said lot forms the corner of
Fulton and Lafayette Streets, and measures 24 feet, 3 inches, 3
lines front on Front Street, 24 feet, 2 inches, 7 lines front on
Fulton Street, by 117 feet, 6 inches, 2 lines in depth and front
on Lafayette Street, and 117 feet, 8 inches, 3 lines in depth on
the line dividing it from Lot 2, all American Measure.
In accordance with survey by Gandolfo, Kuhn & Associates, Land
Surveyors, originally dated November 23, 1992, and recertified
March 10, 1994, said square measures 363 feet, 6 inches, 2 eights
front on Fulton Street; 364 feet, 0 inches and 6 eighths front on
Convention Center Boulevard (formerly S. Front Street); 120 feet,
2 inches and 6 eighths front on Girod Street and 118 feet, 1 inch
and 1 eighth front on Lafayette Street.
LIENS:
-----
1. Collateral Mortgage by Celebration Park Casino, Inc.,
in favor of future holder or holders of the collateral
mortgage note thereby secured, in the amount of
$50,000,000.00, passed before Margaret T. Alphonso,
Notary Public, dated December 15, 1992, recorded
December 16, 1992, under N.A. No. 962316, as Mortgage
Office Instrument No. 190775; in MOB 2923, folio 400,
as supplemented by Act of Supplement to Collateral
Mortgage by Celebration Park Casino, Inc., passed
before Kay W. Eagan, Notary Public, dated January 15,
1993, recorded January 19, 1993, under N.A. No. 93-
03466, as Mortgage Office Instrument No. 194606,
records of Orleans Parish Louisiana; as supplemented by
Act of Supplement to Collateral Mortgage by Celebration
Park Casino, Inc., dated February 1, 1993, recorded
February 1, 1993, under N.A. No. 93-05848, as Mortgage
Office Instrument No. 196614; as supplemented by Act of
Supplement to Collateral Mortgage by Celebration Park
Casino, Inc., dated April 27, 1993, recorded April 27,
1993, under N.A. No. 93-18039, as Mortgage Office
Instrument No. 206500, in MOB 2950, folio 478; as
supplemented by Act of Supplement to Collateral
Mortgage dated February 23, 1994, recorded at N.A. No.
94-11052 on March 3, 1994.
2. Collateral Assignment of Leases and Rents by
Celebration Park Casino, Inc. to The Connecticut
National Bank, as Trustee, dated December 15, 1992,
recorded December 16, 1992, under N.A. No. 962317, as
Conveyance Office Instrument No. 62223; as amended by
B-11
Act of Amendment of Collateral Assignment of Leases and
Rents by Celebration Park Casino, Inc., in favor of
Shawmut Bank Connecticut, National Association
(formerly known as The Connecticut National Bank), as
Trustee, dated January 28, 1993, recorded January 29,
1993, under N.A. No. 93-05563, as Conveyance Office
Instrument No. 64215.
3. Collateral Assignment of Assignment of Agreements of
Purchase and Sale and Option Agreement by Celebration
Park Casino, Inc., to The Connecticut National Bank, as
Trustee, dated December 15, 1992, recorded December 16,
1992, under N.A. No. 962318, as Conveyance Office
Instrument No. 62224, as supplemented by Supplement to
Collateral Assignment of Agreements of Purchase and
Sale and Option Agreement by Celebration Park Casino,
Inc., to Shawmut Bank Connecticut, National Association
(formerly known as The Connecticut National Bank), as
Trustee, dated January 15, 1993, recorded January 19,
1993, under N.A. No. 93-03468, as Conveyance Office
Instrument No. 63716, COB 891, folio 329-332; as
amended by Act of Amendment to (1) Collateral
Assignment of Agreements of Purchase and Sale and
Option Agreement, and (2) Supplement to Collateral
Assignment of Purchase and Sale and Option Agreement by
Celebration Park Casino, Inc., in favor of Shawmut Bank
Connecticut, National Association (formerly known as
The Connecticut National Bank), as Trustee, dated
January 28, 1993, recorded January 29, 1993, under N.A.
No. 93-05565, as Conveyance Office Instrument No.
64217; as amended by Second Supplement to Collateral
Assignment of Agreements of Purchase and Sale and
Option Agreement by Celebration Park Casino, Inc., in
favor of Shawmut Bank Connecticut, National Association
(formerly known as The Connecticut National Bank), as
Trustee and Collateral Agent, dated April 7, 1993,
recorded April 8, 1993, as under N.A. No. 93-15549,
Conveyance Office Instrument No. 67309; as partially
released by Act of Partial Release of Collateral
Assignment of Agreements of Purchase and Sale and
Option Agreement by Shawmut Bank Connecticut, National
Association (formerly known as The Connecticut National
Bank), dated November 30, 1993, recorded December 1,
1993, under N.A. No. 93-51163, Conveyance Office
Instrument No. 78936.
4. Collateral Assignment of Additional Leases and Rents by
Celebration Park Casino, Inc., to Shawmut Bank
Connecticut, National Association (formerly known as
The Connecticut National Bank), as Trustee, dated
January 15, 1993, recorded January 19, 1993, under N.A.
No. 93-03467, as Conveyance Office Instrument No.
B-12
63715, COB 891, folio 320-328; as amended by Act of
Amendment of Collateral Assignment of Additional Leases
and Rents by Celebration Park Casino, Inc., in favor of
Shawmut Bank Connecticut, National Association
(formerly known as The Connecticut National Bank), as
Trustee, dated January 28, 1993, recorded January 29,
1993, under N.A. No. 93-05564, as Conveyance Office
Instrument No. 64216.
PARCEL VII.
-----------
228 POYDRAS STREET
------------------
TWO CERTAIN LOTS OF GROUND, together with all the buildings and
improvements thereon, and all the rights, ways, privileges,
servitudes, appurtenances and advantages thereunto belonging or
in anywise appertaining, situated in the First District of the
City of New Orleans, in SQUARE NO. 16, bounded by Poydras, South
Peters, Lafayette and Fulton Streets, designated as LOTS NOS. 4
AND 5 on a survey made by F.C. Gandolfo, Jr., Surveyor, dated
July 20, 1940, redated December 17, 1941, and according to which
said lots adjoin and together measure 46 feet, 0 inches and 2
lines front on Poydras Street, 46 feet, 3 inches and 3 lines in
width in the rear, by a depth and front on South Peters Street of
68 feet, 10 inches and 2 lines, title measurement, 68 feet, 11
inches and 4 lines, actual measurement, and a depth on the other
side, nearer to Fulton Street, of 68 feet, 10 inches and 2 lines,
title measurement, 69 feet, 1 inch and 2 lines, actual
measurement.
The above is also in accordance with survey by Gandolfo, Kuhn &
Associates, Land Surveyors, originally dated August 25, 1992,
recertified March 10, 1994.
Improvements thereon bear the Municipal Number 228 Poydras
Street.
LIENS:
-----
1. Collateral Mortgage by Celebration Park Casino, Inc.,
in favor of future holder or holders of the collateral
mortgage note thereby secured, in the amount of
$50,000,000.00, passed before Margaret T. Alphonso,
Notary Public, dated December 15, 1992, recorded
December 16, 1992, under N.A. No. 962316, as Mortgage
Office Instrument No. 190775; in MOB 2923, folio 400,
as supplemented by Act of Supplement to Collateral
Mortgage by Celebration Park Casino, Inc., passed
before Kay W. Eagan, Notary Public, dated January 15,
1993, recorded January 19, 1993, under N.A. No. 93-
03466, as Mortgage Office Instrument No. 194606,
records of Orleans Parish Louisiana; as supplemented by
Act of Supplement to Collateral Mortgage by Celebration
Park Casino, Inc., dated February 1, 1993, recorded
B-13
February 1, 1993, under N.A. No. 93-05848, as Mortgage
Office Instrument No. 196614; as supplemented by Act of
Supplement to Collateral Mortgage by Celebration Park
Casino, Inc., dated April 27, 1993, recorded April 27,
1993, under N.A. No. 93-18039, as Mortgage Office
Instrument No. 206500, in MOB 2950, folio 478; as
supplemented by Act of Supplement to Collateral
Mortgage dated February 23, 1994, recorded at N.A. No.
94-11052 on March 3, 1994.
2. Collateral Assignment of Leases and Rents by
Celebration Park Casino, Inc. to The Connecticut
National Bank, as Trustee, dated December 15, 1992,
recorded December 16, 1992, under N.A. No. 962317, as
Conveyance Office Instrument No. 62223; as amended by
Act of Amendment of Collateral Assignment of Leases and
Rents by Celebration Park Casino, Inc., in favor of
Shawmut Bank Connecticut, National Association
(formerly known as The Connecticut National Bank), as
Trustee, dated January 28, 1993, recorded January 29,
1993, under N.A. No. 93-05563, as Conveyance Office
Instrument No. 64215.
3. Collateral Assignment of Assignment of Agreements of
Purchase and Sale and Option Agreement by Celebration
Park Casino, Inc., to The Connecticut National Bank, as
Trustee, dated December 15, 1992, recorded December 16,
1992, under N.A. No. 962318, as Conveyance Office
Instrument No. 62224, as supplemented by Supplement to
Collateral Assignment of Agreements of Purchase and
Sale and Option Agreement by Celebration Park Casino,
Inc., to Shawmut Bank Connecticut, National Association
(formerly known as The Connecticut National Bank), as
Trustee, dated January 15, 1993, recorded January 19,
1993, under N.A. No. 93-03468, as Conveyance Office
Instrument No. 63716, COB 891, folio 329-332; as
amended by Act of Amendment to (1) Collateral
Assignment of Agreements of Purchase and Sale and
Option Agreement, and (2) Supplement to Collateral
Assignment of Purchase and Sale and Option Agreement by
Celebration Park Casino, Inc., in favor of Shawmut Bank
Connecticut, National Association (formerly known as
The Connecticut National Bank), as Trustee, dated
January 28, 1993, recorded January 29, 1993, under N.A.
No. 93-05565, as Conveyance Office Instrument No.
64217; as amended by Second Supplement to Collateral
Assignment of Agreements of Purchase and Sale and
Option Agreement by Celebration Park Casino, Inc., in
favor of Shawmut Bank Connecticut, National Association
(formerly known as The Connecticut National Bank), as
Trustee and Collateral Agent, dated April 7, 1993,
B-14
recorded April 8, 1993, as under N.A. No. 93-15549,
Conveyance Office Instrument No. 67309; as partially
released by Act of Partial Release of Collateral
Assignment of Agreements of Purchase and Sale and
Option Agreement by Shawmut Bank Connecticut, National
Association (formerly known as The Connecticut National
Bank), dated November 30, 1993, recorded December 1,
1993, under N.A. No. 93-51163, Conveyance Office
Instrument No. 78936.
4. Collateral Assignment of Additional Leases and Rents by
Celebration Park Casino, Inc., to Shawmut Bank
Connecticut, National Association (formerly known as
The Connecticut National Bank), as Trustee, dated
January 15, 1993, recorded January 19, 1993, under N.A.
No. 93-03467, as Conveyance Office Instrument No.
63715, COB 891, folio 320-328; as amended by Act of
Amendment of Collateral Assignment of Additional Leases
and Rents by Celebration Park Casino, Inc., in favor of
Shawmut Bank Connecticut, National Association
(formerly known as The Connecticut National Bank), as
Trustee, dated January 28, 1993, recorded January 29,
1993, under N.A. No. 93-05564, as Conveyance Office
Instrument No. 64216.
5. Mortgage by 288 Poydras Street Parking Limited
Partnership, in favor of Risert Income Investors, dated
August 27, 1992, in the amount of $580,000.00, recorded
at Mortgage Office Instrument No. 179275.
PARCEL VIII.
------------
RIVERFRONT INVESTORS
--------------------
A CERTAIN PLOT OF GROUND, together with all the buildings and
improvements thereon, and all the rights, ways, privileges,
servitudes, appurtenances and advantages thereunto belonging or
in anywise appertaining, situated in the Parish of Orleans in the
First District of the City of New Orleans, SQUARE NO. 26, bounded
by Peters (New Levee), Front, Gaiennie and Calliope (late Louisa)
Streets, measuring 191 feet, 10 inches front on Peters Street and
about 306 feet front on each Calliope and Gaiennie Street.
And in accordance with survey made by Gandolfo, Kuhn &
Associates, Surveyors, originally dated May 7, 1992, recertified
March 10, 1994, said property is shown to be the whole of Square
26 of the First District of the City of New Orleans, said square
being bounded by South Peters, Calliope, Gaiennie Streets and
Convention Center Boulevard (formerly S. Front Street), and
measures a distance of 192.14 feet front on South Peters Street,
a distance of 307.14 feet front on Calliope Street, a distance of
B-15
192.14 feet front on Convention Center Boulevard (formerly S.
Front Street) and a distance of 307.14 feet front on Gaiennie
Street.
LIENS:
-----
1. Collateral Mortgage by Celebration Park Casino, Inc.,
in favor of future holder or holders of the collateral
mortgage note thereby secured, in the amount of
$50,000,000.00, passed before Margaret T. Alphonso,
Notary Public, dated December 15, 1992, recorded
December 16, 1992, under N.A. No. 962316, as Mortgage
Office Instrument No. 190775; in MOB 2923, folio 400,
as supplemented by Act of Supplement to Collateral
Mortgage by Celebration Park Casino, Inc., passed
before Kay W. Eagan, Notary Public, dated January 15,
1993, recorded January 19, 1993, under N.A. No. 93-
03466, as Mortgage Office Instrument No. 194606,
records of Orleans Parish Louisiana; as supplemented by
Act of Supplement to Collateral Mortgage by Celebration
Park Casino, Inc., dated February 1, 1993, recorded
February 1, 1993, under N.A. No. 93-05848, as Mortgage
Office Instrument No. 196614; as supplemented by Act of
Supplement to Collateral Mortgage by Celebration Park
Casino, Inc., dated April 27, 1993, recorded April 27,
1993, under N.A. No. 93-18039, as Mortgage Office
Instrument No. 206500, in MOB 2950, folio 478; as
supplemented by Act of Supplement to Collateral
Mortgage dated February 23, 1994, recorded at N.A. No.
94-11052 on March 3, 1994.
2. Collateral Assignment of Leases and Rents by
Celebration Park Casino, Inc. to The Connecticut
National Bank, as Trustee, dated December 15, 1992,
recorded December 16, 1992, under N.A. No. 962317, as
Conveyance Office Instrument No. 62223; as amended by
Act of Amendment of Collateral Assignment of Leases and
Rents by Celebration Park Casino, Inc., in favor of
Shawmut Bank Connecticut, National Association
(formerly known as The Connecticut National Bank), as
Trustee, dated January 28, 1993, recorded January 29,
1993, under N.A. No. 93-05563, as Conveyance Office
Instrument No. 64215.
3. Collateral Assignment of Assignment of Agreements of
Purchase and Sale and Option Agreement by Celebration
Park Casino, Inc., to The Connecticut National Bank, as
Trustee, dated December 15, 1992, recorded December 16,
1992, under N.A. No. 962318, as Conveyance Office
Instrument No. 62224, as supplemented by Supplement to
Collateral Assignment of Agreements of Purchase and
Sale and Option Agreement by Celebration Park Casino,
Inc., to Shawmut Bank Connecticut, National Association
B-16
(formerly known as The Connecticut National Bank), as
Trustee, dated January 15, 1993, recorded January 19,
1993, under N.A. No. 93-03468, as Conveyance Office
Instrument No. 63716, COB 891, folio 329-332; as
amended by Act of Amendment to (1) Collateral
Assignment of Agreements of Purchase and Sale and
Option Agreement, and (2) Supplement to Collateral
Assignment of Purchase and Sale and Option Agreement by
Celebration Park Casino, Inc., in favor of Shawmut Bank
Connecticut, National Association (formerly known as
The Connecticut National Bank), as Trustee, dated
January 28, 1993, recorded January 29, 1993, under N.A.
No. 93-05565, as Conveyance Office Instrument No.
64217; as amended by Second Supplement to Collateral
Assignment of Agreements of Purchase and Sale and
Option Agreement by Celebration Park Casino, Inc., in
favor of Shawmut Bank Connecticut, National Association
(formerly known as The Connecticut National Bank), as
Trustee and Collateral Agent, dated April 7, 1993,
recorded April 8, 1993, as under N.A. No. 93-15549,
Conveyance Office Instrument No. 67309; as partially
released by Act of Partial Release of Collateral
Assignment of Agreements of Purchase and Sale and
Option Agreement by Shawmut Bank Connecticut, National
Association (formerly known as The Connecticut National
Bank), dated November 30, 1993, recorded December 1,
1993, under N.A. No. 93-51163, Conveyance Office
Instrument No. 78936.
4. Collateral Assignment of Additional Leases and Rents by
Celebration Park Casino, Inc., to Shawmut Bank
Connecticut, National Association (formerly known as
The Connecticut National Bank), as Trustee, dated
January 15, 1993, recorded January 19, 1993, under N.A.
No. 93-03467, as Conveyance Office Instrument No.
63715, COB 891, folio 320-328; as amended by Act of
Amendment of Collateral Assignment of Additional Leases
and Rents by Celebration Park Casino, Inc., in favor of
Shawmut Bank Connecticut, National Association
(formerly known as The Connecticut National Bank), as
Trustee, dated January 28, 1993, recorded January 29,
1993, under N.A. No. 93-05564, as Conveyance Office
Instrument No. 64216.
5. Act of Credit Sale and Mortgage, in favor of Riverfront
Investors Group, dated July 27, 1992, recorded at
Mortgage Office Instrument No. 177803, Conveyance
Office Instrument No. 56490.
B-17
PARCEL IX.
----------
512 SOUTH PETERS STREET
-----------------------
A CERTAIN PORTION OF GROUND, together with all the buildings and
improvements thereon, and all the rights, ways, privileges,
servitudes, appurtenances and advantages thereunto belonging or
in anywise appertaining, situated in the First District of New
Orleans, Orleans Parish, State of Louisiana, in SQUARE
NO. SIXTEEN, bounded by Fulton, Lafayette, South Peters and
Poydras Street, designated by the LETTER "A" on a sketch and
certificate of survey by F.C. Gandolfo, Jr., Surveyor, dated June
7th, 1946, annexed to an act before Leon Sarpy, Notary Public in
the City of New Orleans, dated June 15, 1946, registered in COB
547, folio 132, which said sketch and certificate of survey is
made a part thereof, according to which said Lot "A" commences at
a distance of ninety-one feet, eleven inches and one line
(91'11"1 ''') from the corner of Poydras and South Peters
Streets, at a distance of ninety-two feet, four inches and five
lines (92'4"5''') from the corner of Poydras and Fulton Streets,
and has the following measurements:
Lot "A" measures one hundred fifteen feet, two inches and two
lines (115'2"2''') front on South Peters Street, by actual
measurement, one hundred fourteen feet, nine inches and six lines
114'9"6') according to title measurement, by a depth on the side
line nearest Poydras Street running through said square from
South Peters to Fulton Street, of one hundred fifteen feet, six
inches and five lines (115'6"5''') by actual measurement, and one
hundred fifteen feet, four inches and six lines (115'4"6''')
according to title measurements, and thence has a front on Fulton
Street of one hundred fifteen feet, no inches and two lines
(115'0"2''') according to actual measurement, one hundred fifteen
feet, three inches and six lines (115'3"6''') according to title
measurements, by a depth on the side line nearest Lafayette
Street, running through said square from South Peters to Fulton
Street, of one hundred sixteen feet, two inches and one line
(116'2"1''') actual and title measurement, one hundred sixteen
feet, three inches, four lines (116'3"4''') according to
Gandolfo's measurements. Said Lot "A" is composed of original
Lots Five, Six, Seven, Eight and Nine (5, 6, 7, 8 and 9).
Together with all the buildings, improvements and other
constructions situated on the above described immovable property
and all appurtenances, rights, ways, privileges, servitudes,
prescriptions and advantages thereunto belonging or in anywise
appertaining, including, but without limitation, all component
parts of the above-described immovable property, and all
component parts of any building, improvement, or other
construction located on the abovedescribed immovable property.
B-18
The improvements bear the Municipal Nos. 512-526 South Peters
Street.
And according to a survey dated November 30, 1979, redated June
22, 1981, and recertified July 27, 1992, January 13, 1993 and
March _____, 1994, by John E. Walker, Civil Engineer.
LIENS:
-----
1. Collateral Mortgage by Celebration Park Casino, Inc.,
in favor of future holder or holders of the collateral
mortgage note thereby secured, in the amount of
$50,000,000.00, passed before Margaret T. Alphonso,
Notary Public, dated December 15, 1992, recorded
December 16, 1992, under N.A. No. 962316, as Mortgage
Office Instrument No. 190775; in MOB 2923, folio 400,
as supplemented by Act of Supplement to Collateral
Mortgage by Celebration Park Casino, Inc., passed
before Kay W. Eagan, Notary Public, dated January 15,
1993, recorded January 19, 1993, under N.A. No. 93-
03466, as Mortgage Office Instrument No. 194606,
records of Orleans Parish Louisiana; as supplemented by
Act of Supplement to Collateral Mortgage by Celebration
Park Casino, Inc., dated February 1, 1993, recorded
February 1, 1993, under N.A. No. 93-05848, as Mortgage
Office Instrument No. 196614; as supplemented by Act of
Supplement to Collateral Mortgage by Celebration Park
Casino, Inc., dated April 27, 1993, recorded April 27,
1993, under N.A. No. 93-18039, as Mortgage Office
Instrument No. 206500, in MOB 2950, folio 478; as
supplemented by Act of Supplement to Collateral
Mortgage dated February 23, 1994, recorded at N.A. No.
94-11052 on March 3, 1994.
2. Collateral Assignment of Leases and Rents by
Celebration Park Casino, Inc. to The Connecticut
National Bank, as Trustee, dated December 15, 1992,
recorded December 16, 1992, under N.A. No. 962317, as
Conveyance Office Instrument No. 62223; as amended by
Act of Amendment of Collateral Assignment of Leases and
Rents by Celebration Park Casino, Inc., in favor of
Shawmut Bank Connecticut, National Association
(formerly known as The Connecticut National Bank), as
Trustee, dated January 28, 1993, recorded January 29,
1993, under N.A. No. 93-05563, as Conveyance Office
Instrument No. 64215.
3. Collateral Assignment of Assignment of Agreements of
Purchase and Sale and Option Agreement by Celebration
Park Casino, Inc., to The Connecticut National Bank, as
Trustee, dated December 15, 1992, recorded December 16,
1992, under N.A. No. 962318, as Conveyance Office
B-19
Instrument No. 62224, as supplemented by Supplement to
Collateral Assignment of Agreements of Purchase and
Sale and Option Agreement by Celebration Park Casino,
Inc., to Shawmut Bank Connecticut, National Association
(formerly known as The Connecticut National Bank), as
Trustee, dated January 15, 1993, recorded January 19,
1993, under N.A. No. 93-03468, as Conveyance Office
Instrument No. 63716, COB 891, folio 329-332; as
amended by Act of Amendment to (1) Collateral
Assignment of Agreements of Purchase and Sale and
Option Agreement, and (2) Supplement to Collateral
Assignment of Purchase and Sale and Option Agreement by
Celebration Park Casino, Inc., in favor of Shawmut Bank
Connecticut, National Association (formerly known as
The Connecticut National Bank), as Trustee, dated
January 28, 1993, recorded January 29, 1993, under N.A.
No. 93-05565, as Conveyance Office Instrument No.
64217; as amended by Second Supplement to Collateral
Assignment of Agreements of Purchase and Sale and
Option Agreement by Celebration Park Casino, Inc., in
favor of Shawmut Bank Connecticut, National Association
(formerly known as The Connecticut National Bank), as
Trustee and Collateral Agent, dated April 7, 1993,
recorded April 8, 1993, as under N.A. No. 93-15549,
Conveyance Office Instrument No. 67309; as partially
released by Act of Partial Release of Collateral
Assignment of Agreements of Purchase and Sale and
Option Agreement by Shawmut Bank Connecticut, National
Association (formerly known as The Connecticut National
Bank), dated November 30, 1993, recorded December 1,
1993, under N.A. No. 93-51163, Conveyance Office
Instrument No. 78936.
4. Collateral Assignment of Additional Leases and Rents by
Celebration Park Casino, Inc., to Shawmut Bank
Connecticut, National Association (formerly known as
The Connecticut National Bank), as Trustee, dated
January 15, 1993, recorded January 19, 1993, under N.A.
No. 93-03467, as Conveyance Office Instrument No.
63715, COB 891, folio 320-328; as amended by Act of
Amendment of Collateral Assignment of Additional Leases
and Rents by Celebration Park Casino, Inc., in favor of
Shawmut Bank Connecticut, National Association
(formerly known as The Connecticut National Bank), as
Trustee, dated January 28, 1993, recorded January 29,
1993, under N.A. No. 93-05564, as Conveyance Office
Instrument No. 64216.
B-20
PARCEL X.
---------
224 POYDRAS
-----------
THAT PORTION OF GROUND, together with all the buildings and
improvements thereon, and all of the rights, ways, privileges,
servitudes, appurtenances and advantages thereunto belonging or
in anywise appertaining, situated in the First District of the
City of New Orleans, State of Louisiana, in SQUARE NO. 16,
bounded by South Peters Street, Fulton Street, Lafayette Street
and Poydras Street, designated by the NO. 3 on plan or sketch
marked "A" annexed to an act passed on May 13, 1852, before H. P.
Cenas, late Notary Public, said lot measures 22 feet, 11 inches,
4 lines front on Poydras Street by a depth of 68 feet, 6 inches,
2 lines, all more or less.
The improvements thereon bear Municipal No. 224 Poydras Street,
New Orleans, Louisiana.
In accordance with survey of James H. Couturie, dated September
22, 1982, the property is described as follows:
Lot 3 begins 46.02 feet from the intersection of South Peters and
Poydras Streets and measures thence 22 feet, 11 inches, 4 lines
front on Poydras Street, same width in the rear, by a depth of 69
feet, 1 inch 2 lines (actual) 68 feet, 6 inches, 2 lines, more or
less, (title), on the South Peters Street side, and 69 feet, 2
inches, 1 line (actual) 68 feet, 6 inches, 2 lines, more or less
(title) on the Fulton Street side.
All in accordance with the plat of survey of Gandolfo, Kuhn &
Associates bearing Drawing No. L-15, originally dated August 25,
1992, and most recently recertified March 10, 1994, a print of
which is annexed hereto and made a part hereof.
LIENS:
-----
1. Collateral Mortgage by Celebration Park Casino, Inc.,
in favor of future holder or holders of the collateral
mortgage note thereby secured, in the amount of
$50,000,000.00, passed before Margaret T. Alphonso,
Notary Public, dated December 15, 1992, recorded
December 16, 1992, under N.A. No. 962316, as Mortgage
Office Instrument No. 190775; in MOB 2923, folio 400,
as supplemented by Act of Supplement to Collateral
Mortgage by Celebration Park Casino, Inc., passed
before Kay W. Eagan, Notary Public, dated January 15,
1993, recorded January 19, 1993, under N.A. No. 93-
03466, as Mortgage Office Instrument No. 194606,
records of Orleans Parish Louisiana; as supplemented by
B-21
Act of Supplement to Collateral Mortgage by Celebration
Park Casino, Inc., dated February 1, 1993, recorded
February 1, 1993, under N.A. No. 93-05848, as Mortgage
Office Instrument No. 196614; as supplemented by Act of
Supplement to Collateral Mortgage by Celebration Park
Casino, Inc., dated April 27, 1993, recorded April 27,
1993, under N.A. No. 93-18039, as Mortgage Office
Instrument No. 206500, in MOB 2950, folio 478; as
supplemented by Act of Supplement to Collateral
Mortgage dated February 23, 1994, recorded at N.A. No.
94-11052 on March 3, 1994.
2. Collateral Assignment of Additional Leases and Rents by
Celebration Park Casino, Inc., to Shawmut Bank
Connecticut, National Association (formerly known as
The Connecticut National Bank), as Trustee and
Collateral Agent, dated February 1, 1993, recorded
February 1, 1993, under N.A. No. 93-05849, as
Conveyance Office Instrument No. 64332, in COB 892,
folio 137, and as Mortgage Office Instrument No.
196615, in MOB 2934, folio 17.
PARCEL XI.
----------
LOT 3CP
-------
A CERTAIN PIECE OR PORTION OF GROUND, together with all the
buildings and improvements thereon, situated in the Second
District, City of New Orleans, designated as Lot 3CP of Canal
Place, on a plan of resubdivision by the office of Gandolfo,
Kuhn, Luecke & Associates, dated March 15, 1982, (Dwg. No. E-170-
12), approved by the City Planning Commission on July 8, 1982,
registered as Declaration of Title Change under COB 783, folio 63
and more particularly described as follows in accord with a plan
of Gandolfo, Kuhn & Associates, bearing Dwg. No. E-170-13A dated
May 13, 1985, and Drawing No. T-144-31, dated November 23, 1992,
as follows:
Commence at the intersection of the northerly line of Canal
Street and the easterly line of No. Peters Street, said point
being designated by the letter B; thence along the northerly line
of Canal Street, S52 44'02"E, 398.18 feet to the division line
between Lots 2CP and 3CP and the point of beginning; thence along
said division line N37 15'58"E, 169.50 feet; thence along said
division line S52 44'02"E, 129.37 feet to the division line
between Lots 3CP and S-1; thence along said division line
S8 17'09"W, 193.76 feet to the northerly line of Canal Street,
thence along said line, N52 44'02"W, 223.25 feet to the point of
beginning, containing 29,885 square feet.
All in accordance with the plat of survey of Gandolfo, Kuhn,
Luecke & Associates, Dwg. No. E170-13B, originally dated July 29,
B-22
1993, and recertified March 10, 1994, annexed hereto and made a
part hereof.
LIENS:
-----
1. Collateral Assignment of Assignment of Agreements of
Purchase and Sale and Option Agreement by Celebration
Park Casino, Inc., to The Connecticut National Bank, as
Trustee, dated December 15, 1992, recorded December 16,
1992, under N.A. No. 962318, as Conveyance Office
Instrument No. 62224, as supplemented by Supplement to
Collateral Assignment of Agreements of Purchase and
Sale and Option Agreement by Celebration Park Casino,
Inc., to Shawmut Bank Connecticut, National Association
(formerly known as The Connecticut National Bank), as
Trustee, dated January 15, 1993, recorded January 19,
1993, under N.A. No. 93-03468, as Conveyance Office
Instrument No. 63716, COB 891, folio 329-332; as
amended by Act of Amendment to (1) Collateral
Assignment of Agreements of Purchase and Sale and
Option Agreement, and (2) Supplement to Collateral
Assignment of Purchase and Sale and Option Agreement by
Celebration Park Casino, Inc., in favor of Shawmut Bank
Connecticut, National Association (formerly known as
The Connecticut National Bank), as Trustee, dated
January 28, 1993, recorded January 29, 1993, under N.A.
No. 93-05565, as Conveyance Office Instrument No.
64217; as amended by Second Supplement to Collateral
Assignment of Agreements of Purchase and Sale and
Option Agreement by Celebration Park Casino, Inc., in
favor of Shawmut Bank Connecticut, National Association
(formerly known as The Connecticut National Bank), as
Trustee and Collateral Agent, dated April 7, 1993,
recorded April 8, 1993, as under N.A. No. 93-15549,
Conveyance Office Instrument No. 67309; as partially
released by Act of Partial Release of Collateral
Assignment of Agreements of Purchase and Sale and
Option Agreement by Shawmut Bank Connecticut, National
Association (formerly known as The Connecticut National
Bank), dated November 30, 1993, recorded December 1,
1993, under N.A. No. 93-51163, Conveyance Office
Instrument No. 78936.
2. Collateral Mortgage by Grand Palais Casino, Inc., in
favor of future holders (payable at First National Bank
of Commerce), dated July 30, 1993, filed August 2,
1993, under N.A. No. 93-31984, in MOI No. 217805.
3. Assignment of Leases and Rentals by Grand Palais
Casino, Inc., to First National Bank of Commerce),
B-23
dated July 30, 1993, filed August 2, 1993, under N.A.
No. 93-31985, in COI No. 73060.
4. Collateral Assignment of Leases and Rents by Grand
Palais Casino, Inc., to Shawmut Bank Connecticut,
National Association (formerly known as The Connecticut
National Bank), as Trustee and Collateral Agent, dated
July 30, 1993, filed August 2, 1993, under N.A. No. 93-
31987, in COI No. 73061.
5. Collateral Mortgage by Grand Palais Casino, Inc., in
favor of future holders (payable at Shawmut Bank
Connecticut, National Association (formerly known as
The Connecticut National Bank), as Trustee and
Collateral Agent), dated july 30, 1993, filed August 2,
1993, under N.A. No. 93-31986, in MOI No. 217806.
PARCEL XII.
-----------
RIVERGATE SITES
---------------
THAT CERTAIN LEASEHOLD ESTATE to be created by Lease Agreement by
and between City of New Orleans, as lessor, and Rivergate
Development Corporation, as lessee, dated April 27, 1993, filed
April 27, 1993, under N.A. No. 93-18035, as Conveyance Instrument
No. 68199, as amended by Agreement dated ____________, 1994,
filed _____________-, 1994, under N.A. No. 94-__________, as
Conveyance Instrument No. _________ (the "City Lease"), as
subleased per Lease Agreement by and between Rivergate
Development Corporation, as lessor, and Celebration Park Casino,
Inc. (n/k/a Grand Palais Casino, Inc.), as lessee, dated April
27, 1993, filed April 27, 1993, under N.A. No. 93-018036, as
Conveyance Instrument No. 68200, as assigned to Harrah's Jazz
Company by Assignment and Assumption of Lease, dated ___________,
1994, filed __________, 1994, under N.A. No. 94-_________, as
Conveyance Instrument No. ________, and as amended by Amendment
of Lease Agreement, dated __________, 1994, filed ___________,
1994, under N.A. No. 94-________, as Conveyance Instrument No.
___________ (Collectively, the "Lease"), affecting the following
described property, to-wit:
PROPERTY DESCRIPTION BEGINS ON NEXT PAGE
B-24
Casino Premises
---------------
A certain portion of ground, together with all
the buildings and improvements, thereon, and
all of the rights, ways, privileges, servitudes
and advantages thereunto belonging or in
anywise appertaining, situated in the FIRST
MUNICIPAL DISTRICT OF THE CITY OF NEW ORLEANS
bounded by CANAL, SOUTH PETERS, and POYDRAS
STREETS and CONVENTION CENTER BOULEVARD (PLACE
DE FRANCE); being comprised of SQUARES 1, 2,
13, 14, 1A or 1B; portions of former Squares 3,
15, 2A or 2B; together with former streets
(which were closed by Ordinances 13-439 CCS
dated February 3, 1932 and 2767 MCS dated
December 5, 1963) which include Common,
Gravier, Fulton, Front, and Delta Streets, all
shown as proposed Square RS on a Plan of
Resubdivision by the office of Gandolfo, Kuhn &
Associates dated January 25,1993, Drawing No.
E60-2, approved by the City Planning Commission
in Subdivision Docket No. 3/93 dated April 23,
1993, being more particularly described as
follows: Commence at point A, being the
southeast intersection of South Peters and
Canal Streets and the Point of Beginning. From
the Point of Beginning, measure thence along
the east or river side line of South Peters
Street South 1 degree 39 minutes 1 second East,
a distance of 727.65 feet to the northerly line
of Poydras Street and point B; thence along
said line of Poydras Street South 76 degrees 14
minutes 24 seconds East a distance of 540.52
feet to the westerly or land side line of
Convention Center Boulevard (Place De France)
and Point C, also being the easterly line of
former Delta Street; thence North 2 degrees 24
minutes 29 seconds West, a distance of 455.48
feet to the southerly line of Canal Street and
point K; thence along said line of Canal
Street, North 52 degrees 44 minutes 2 seconds
West, a distance of 661.98 feet to Point A and
the Point of Beginning. Said square contains
7.016 Acres.
Together with the existing tunnel portions in
the following described subsurface areas:
Canal Street Portion:
--------------------
The portion of the following real property
which lies between two horizontal planes, the
B-25
lower plane lying and being at an elevation
of -5 feet Cairo Datum and the upper plane
lying and being at an elevation of 30 feet
Cairo Datum (approximate street grade), both as
referenced to United States Coast and Geodetic
Survey Benchmark B-96 having an elevation of
28.72 feet Cairo Datum, which property forms a
portion of the Canal Street right of way, FIRST
MUNICIPAL DISTRICT, CITY OF NEW ORLEANS,
ORLEANS PARISH, LOUISIANA, the horizontal
boundaries of which are more fully described as
follows:
Commencing at point K being the intersection of
the easterly line of Former Delta Street and
the southerly line of Canal Street, and also
being the northeast corner of proposed Lot RS,
measure thence along the southerly line of
Canal Street N 52 degrees 44 minutes 02 seconds
W, a distance of 87.04 feet to the Point of
Beginning. From the Point of Beginning,
measure thence along the southerly line of
Canal Street N 52 degrees 44 minutes 02 seconds
W, a distance of 129.11 feet to the westerly
line of the former I-310 Tunnel; thence along
said line along a curve to the right having a
radius of 1689.02 feet, a distance of 78.94
feet to the northerly line of said Tunnel;
thence along said line S 85 degrees 05 minutes
17 seconds E, a distance of 104 feet to the
easterly line of the former I-310 Tunnel;
thence along said line along a curve to the
left having a radius of 1585.02 feet, a
distance of 148.4 feet to the Point of
Beginning. Containing 11,774 square feet as
shown on a map of Lot 3CP and Proposed Roadway
by Gandolfo, Kuhn & Associates last dated April
12, 1993, drawing no. E-170-13 C.
Poydras Street Portion:
----------------------
That portion of the following real property
which lies between two horizontal planes, the
lower plane lying and being at an elevation
of -5 feet Cairo Datum and the upper plane
lying and being at an elevation of 30 feet
Cairo Datum (approximate street grade), both as
referenced to United States Coast and Geodetic
Survey Benchmark B-96 having an elevation of
28.72 feet Cairo Datum, which property forms a
portion of the Poydras Street right of way,
FIRST MUNICIPAL DISTRICT, CITY OF NEW ORLEANS,
ORLEANS PARISH, LOUISIANA, the horizontal
boundaries of which are more fully described as
follows:
B-26
Commencing at point B being the intersection of
the northerly line of Poydras Street and the
easterly line of S. Peters Street, and also
being the southwest corner of proposed Lot RS,
measure thence along the northerly line of
Poydras Street S 76 degrees 14 minutes 24
seconds E, a distance of 361.51 feet to the
Point of Beginning. From the Point of
Beginning, measure thence along the northerly
line of Poydras Street, S 76 degrees 14 minutes
24 seconds E, a distance of 108.29 feet to the
easterly line of the former I-310 Tunnel;
thence along said line S 2 degrees 24 minutes
52 seconds E, a distance of 31.08 feet to the
southerly line of said Tunnel; thence along
said line S 87 degrees 35 minutes 08 seconds W,
a distance of 104 feet to the westerly line of
the former I-310 Tunnel; thence along said line
N 2 degrees 24 minutes 52 seconds W, a distance
of 61.24 feet to the Point of Beginning.
Containing 4,800.6 square feet as shown on a
map of Celebration Park Casino Parking Garage
Site by Gandolfo, Kuhn & Associates last dated
April 12, 1993, drawing no. L-17-1.
B-27
CITY LEASED EMPLOYEE AND
BUS PARKING SUPPORT FACILITY PREMISES
-------------------------------------
Four certain street parcels located in the Second Municipal
District of the City of New Orleans designated as Toulouse
Street, Treme Street, N. Villere Street and Marais Street, all as
shown on a Lease Map prepared for Grand Palais Casino, Inc. dated
June 16, 1993; revised December 29, 1993 (Dwg. No. T-131-2A) and
each parcel is more particularly described as follows, to wit:
TOULOUSE STREET
---------------
A certain parcel of Street R/W, 58.54 feet wide, lying between
Marais Street and Treme Street, more particularly described as
follows:
Begin at point b at the intersection of the east line of Marais
Street with the south line of Toulouse Street; thence along the
line of Marais Street, N 37 -13'-40" E, 58.54 feet to point z on
the north line of Toulouse Street; thence along same, S 53 -3'-
55" E, 256.73 feet to the west line of Treme Street at point p;
thence along the projection of said west line of Treme Street,
S 37 -14' W, 58.54 feet to the south line of Toulouse Street and
north line of Lot N.O.T.C.-1; thence along said line N 53 -3'-55"
W, 256.73 feet to Marais Street at point b and the point of
beginning, containing 15,029 square feet.
TREME STREET
------------
A certain parcel of Street R/W, 53.29 feet wide, lying between
the northerly line of Lot N.O.T.C.-1 and the Orleans-Basin
Connection, more particularly described as follows:
Begin at point c at the intersection of the southerly line of
Toulouse Street with the easterly line of Treme Street; thence
N 37 -14' E, 162.41 feet to point d on the westerly line of the
Orleans-Basin Connection, thence along said line, N 36 -12'-39"
W, 55.60 feet to point o on the westerly line of Treme Street;
thence along said line S 37 -14' W, 178.53 feet to the southerly
line of Toulouse Street and the northerly line of Lot N.O.T.C.-1;
thence along said line S 53 -3'-55" E, 53.29 feet to the point of
beginning, containing 9,084.3 square feet.
B-28
POYDRAS STREET SUPPORT FACILITY PREMISES
----------------------------------------
SQUARE 16, LOT F
----------------
A CERTAIN PARCEL OF GROUND, together with all the
buildings and improvements thereon and all the rights,
ways, privileges, servitudes, appurtenances and
advantages thereunto belonging or in any way
appertaining, situated in the FIRST DISTRICT OF THE
CITY OF NEW ORLEANS, Orleans Parish, Louisiana in
SQUARE NO. 16, bounded by POYDRAS, FULTON, SOUTH PETERS
and LAFAYETTE STREETS, designated as LOT F on a Plan of
Resubdivision by Stephen L. Gremillion of Engineering
Technology, Inc., dated June 28, 1982, approved by the
City Planning Commission under Subdivision Docket No.
96/82, registered as a Declaration of Title Change
under Entry No. 466470 in COB 781 folio 237, records of
Orleans Parish. According to survey by John J. Avery,
L.S. dated August 24, 1990, recertified November 24,
1992, said Lot F is more fully described and measures
as follows:
Commencing at the intersection of the westerly right-
of-way line of Fulton Street and the southerly right-
of-way line of Poydras Street and being the POINT OF
BEGINNING;
From the POINT OF BEGINNING, thence South 02 degrees 01
minutes 00 seconds East along the westerly right-of-way
line of Fulton Street, a distance of 92 feet 4 inches 5
eighths (92.4.5) to a point;
thence North 76 degrees 07 minutes 00 seconds West, a
distance of 46 feet 9 inches 7 eighths (46.9.7) to a
point;
thence North 02 degrees 01 minutes 00 second West, a
distance of 23 feet 6 inches 0 eighths (23.6.0) to a
point;
thence South 76 degrees 07 minutes 00 seconds East, a
distance of 0 feet 8 inches 0 eighths (0.8.0) to a
point;
thence North 01 degrees 53 minutes 46 seconds West, a
distance of 68 feet 9 inches 0 eighths (68.9.0) to a
point on the southerly right-of-way line of Poydras
Street;
thence South 76 degrees 14 minutes 00 seconds East
along the southerly right-of-way line of Poydras
Street, a distance of 45 feet 11 inches 6 eighths
(45.11.6) to the Point of Beginning.
B-29
Bearing municipal address 216 Poydras Street.
Being the same property acquired by Realty Parking
Properties, L.P. by act dated September 28, 1990,
recorded under Conveyance Office Instrument No. 26556,
Orleans Parish, Louisiana.
SQUARE 4, LOT 1
---------------
A CERTAIN PARCEL OF GROUND, together with all the
buildings and improvements thereon and all the rights,
ways, privileges, servitudes, appurtenances and
advantages thereunto belonging or in any way
appertaining, situated in the FIRST DISTRICT OF NEW
ORLEANS, in SQUARE 4, Orleans Parish, Louisiana,
bounded by CONVENTION CENTER BOULEVARD (formerly SOUTH
FRONT STREET), LAFAYETTE, FULTON and POYDRAS STREETS,
designated as LOT 1 and is the only lot of and
comprises the whole of Square 4, on Plan of Subdivision
of Stephen L. Gremillion of Engineering Technology,
Inc., dated June 28, 1982, approved by the City
Planning Commission under Subdivision Docket No. 96/82,
registered as a Declaration of Title Change under Entry
No. 466470 in COB 781, folio 237, records of Orleans
Parish. According to survey by John J. Avery, Jr.,
L.S. dated August 24, 1990, recertified November 24,
1992, said Lot 1 is described as follows:
Commencing at the intersection of the westerly right-
of-way line of Convention Center Boulevard (late South
Front Street) and the southerly right-of-way line of
Poydras Street and being the POINT OF BEGINNING;
From the POINT OF BEGINNING, thence South 02 degrees 24
minutes 03 seconds East along the westerly right-of-way
line of Convention Center Boulevard, a distance of 371
feet 1 inch 0 eighths (371.1.0) to a point on the
northerly right-of-way line of Lafayette Street;
thence North 75 degrees 59 minutes 06 seconds West
along the northerly right-of-way line of Lafayette
Street, a distance of 117 feet 7 inches 4 eighths
(117.7.4) to a point on the easterly right-of-way line
on Fulton Street;
thence North 02 degrees 01 minutes 00 second West along
the easterly right-of-way line of Fulton Street, a
distance of 369 feet 10 inches 1 eighth (369.10.1) to a
point on the southerly right-of-way line of Poydras
Street;
B-30
thence South 76 degrees 14 minutes 00 seconds East
along the southerly right-of-way line of Poydras
Street, a distance of 114 feet 10 inches 6 eighths
(114.10.6) to the Point of Beginning.
Bearing municipal address 507 South Front Street.
Being the same property acquired by Realty Parking
Properties, L.P. by act dated September 28, 1990,
recorded under Conveyance Office Instrument No. 26556,
Orleans Parish, Louisiana.
SQUARE 5, LOTS 1-15
-------------------
A CERTAIN SQUARE OF GROUND, together with all the
buildings and improvements thereon, and all of the
rights, ways, privileges, servitudes and appurtenances
thereunto belonging or in anywise appertaining,
situated in the FIRST DISTRICT OF NEW ORLEANS, and
designated by the NO. 5, which said square is bounded
by FRONT, FULTON, LAFAYETTE and GIROD STREETS and
measures 117 feet 6 inches 2 lines front on Lafayette
Street, 120 feet 1 inch 2 lines front on Girod Street,
363 feet 7 inches 1 line front on Fulton Street and 364
feet 5 inches 5 lines front on Front Street, all more
or less, said property being particularly described as
follows to-wit:
1. SIX CERTAIN LOTS OF GROUND, together with all the
buildings and improvements thereon, and all of the
rights, ways, privileges, servitudes and appurtenances
thereunto belonging or in anywise appertaining,
situated in the FIRST DISTRICT OF NEW ORLEANS, in
SQUARE NO. 5, bounded by FRONT, FULTON, LAFAYETTE and
GIROD STREETS, and designated by the NOS. 2 to 7,
inclusive, on a plan by J. A. Beard, certified unto
Hugh Grant, Surveyor, under dated of January 12, 1853,
deposited for reference in the office of H. B. Cenas,
then a notary in this City. Said Lots adjoin each
other and measure each 24 feet 2 inches 7 lines front
on Fulton Street, 24 feet 3 inches 3 lines front on
Front Street, by the following depths, viz: 117 feet 8
inches 3 lines on the side of Lot 2 adjoining Lot 1,
117 feet 10 inches 4 lines on the dividing line between
Lots 2 and 3, 118 feet 5 lines on the dividing line
between Lots 3 and 4, 118 feet 2 inches 6 lines on the
dividing line between Lots 4 and 5, and 118 feet 4
inches 7 lines on the dividing line between Lots 5 and
6, and 118 feet 7 inches on the dividing line between
Lots 6 and 7, and 118 feet 9 inches 2 lines on the side
line of Lot 7, adjoining Lot 8.
2. THREE CERTAIN LOTS OF GROUND, together with all the
buildings and improvements thereon, and all the rights,
B-31
ways, privileges, servitudes and appurtenances
thereunto belonging or in anywise appertaining,
situated in the same District and Square as the
property hereinabove described, designated by the NOS.
8, 9 and 10, and measuring, in American measure, as
follows, to-wit: Lot 8 measures 24 feet 2 inches 7
lines front on Fulton Street, 24 feet 3 inches 3 lines
front on Front Street, by 118 feet 9 inches 2 lines in
depth on the line dividing it from Lot 7 and 118 feet
11 inches 2 lines in depth on the line dividing it from
Lot 9, and Lot 9 measures 24 feet 2 inches 7 lines
front on Fulton Street, 24 feet 3 inches 3 lines front
on Front Street, by 118 feet 11 inches 2 lines in depth
on the line dividing it from Lot 8 and 119 feet 1 inch
2 lines in depth on the line dividing it from Lot 10,
and Lot 10 measures 24 feet 2 inches 7 lines front on
Fulton Street, 24 feet 3 inches 3 lines front on Front
Street, by 119 feet 1 inch 2 lines on the line dividing
it from Lot 9 and 119 feet 3 inches 2 lines in depth on
the line dividing it from Lot 11.
3. TWO CERTAIN LOTS OF GROUND, together with all the
buildings and improvements thereon, and all of the
rights, ways, privileges, servitudes and appurtenances
thereunto belonging or in anywise appertaining,
situated in the same District and Square as the
property hereinabove firstly described, designated by
the NOS. 11 and 12, on a plan by J. A. Beard, duly
certified by H. Grant, dated January 12, 1852, and
deposited in the office of H. B. Cenas, then a Notary
Public, which said lots measure as follows: Lot 11
measures 24 feet 2 inches 7 lines front on Fulton
Street, 24 feet 3 inches 3 lines front on Front Street,
by 119 feet 5 inches 2 lines in depth on the line
dividing it from Lot 12, and 119 feet 3 inches 2 lines
in depth on the line dividing it from Lot 10, all
American measure; and Lot 12 measures 24 feet 2 inches
7 lines front on Fulton Street, 24 feet 3 inches 2
lines front on Front Street, by 119 feet 5 inches 2
lines in depth on the line dividing it from Lot 11 and
119 feet 7 inches 2 lines on the line dividing it from
Lot 13.
4. THREE CERTAIN LOTS OF GROUND, together with all the
buildings and improvements thereon, and all the rights,
ways, privileges, servitudes and appurtenances
thereunto belonging or in anywise appertaining,
situated in the FIRST DISTRICT OF NEW ORLEANS, in
SQUARE NO. 5, bounded by FULTON, GIROD, FRONT and
LAFAYETTE STREETS, designated by the NOS. 15, 13, and
14; Lot 15 measures 24 feet 2 inches 7 lines front on
Fulton Street, 120 feet 1 inch 2 lines front on Girod
Street, 24 feet 3 inches 3 lines front on Front Street,
and 119 feet 11 inches 2 lines on the line of Lot 14;
Lot 13 measures 24 feet 2 inches 7 lines front on
Fulton Street; 24 feet 3 inches and 3 lines on Front
Street, by 119 feet 7 inches and 2 lines in depth on
the line dividing it from Lot 12, and 119 feet 9 inches
and 2 lines in depth on the line dividing in from Lot
14; Lot 14 measures 24 feet 2 inches and 7 lines on
Fulton Street, 24 feet 3 inches and 3 lines on Front
Street, by
B-32
119 feet 9 inches and 2 lines in depth on the line
dividing it from Lot 13, and 119 feet 11 inches 2 lines
in depth on the line dividing it from Lot 15.
5. A LOT OF GROUND, together with all the buildings
and improvements thereon, and all of the rights, ways,
privileges, servitudes and appurtenances thereunto
belonging or in anywise appertaining, situated in the
FIRST DISTRICT OF NEW ORLEANS, in SQUARE NO. 5, bounded
by FRONT, FULTON, LAFAYETTE AND GIROD STREETS,
designated as LOT NO. 1, on a plan certified to by Hugh
Grant, late Surveyor of Municipality No. 1, under date
of January 12, 1852, and deposited for reference in the
office of H. B. Cenas, then Notary, which said lot
forms the corner of Fulton and Lafayette Streets, and
measures 24 feet 3 inches 3 lines front on Front
Street, 24 feet 2 inches 7 lines front on Fulton
Street, by 117 feet 6 inches 2 lines in depth and front
on Lafayette Street, and 117 feet 8 inches 3 lines in
depth on the line dividing it from Lot 2, all American
measure.
In accordance with survey by Gandolfo, Kuhn &
Associates, Land Surveyors, dated November 23, 1992,
said Square measures 363 feet 6 inches and 2 eighths
front on Fulton Street; 364 feet 0 inches and 6 eighths
front on Convention Center Boulevard (formerly South
Front Street); 120 feet 2 inches and 6 eighths front on
Girod Street and 118 feet 1 inch and 1 eighth front on
Lafayette Street.
Being the same property acquired by Celebration Park
Casino, Inc. by act dated December 15, 1992, registered
December 16, 1992 under Notarial Archives No. 962310
and under Conveyance Office Instrument No. 62217,
Orleans Parish, Louisiana.
B-33
FULTON STREET AIR RIGHTS AREA
-----------------------------
That portion of the following real property which lies
above the horizontal plane at an elevation of 40 feet
Cairo Datum and that portion of the following real
property which lies between two horizontal planes, the
lower plane lying and being at an elevation of - 205
feet Cairo Datum (approximate bottom of pile tip), and
the upper plane lying and being at an elevation of 30
feet Cairo Datum (approximate street grade), all as
referenced to United States Coast and Geodetic Survey
Benchmark B-96 having an elevation of 28.72 feet Cairo
Datum, which property forms a portion of the Fulton
Street right of way, FIRST MUNICIPAL DISTRICT, CITY OF
NEW ORLEANS, ORLEANS PARISH, LOUISIANA, the horizontal
boundaries of which are more fully described as
follows:
Commencing at the northeast corner of Square 16 being
the point of intersection of the westerly line of
Fulton Street with the upper line of Poydras Street and
being the Point of Beginning; From the Point of
Beginning, thence along the upper line of Poydras
Street South 76 degrees 14 minutes 24 seconds East, a
distance of 62 feet 4 inches 1 eighth (62.4.1) to the
easterly line of Fulton Street; thence along the
easterly line of Fulton Street South 2 degrees 0
minutes 19 seconds East, a distance of 207 feet 8
inches 5 eighths (207.8.5) to a point; thence North 75
degrees 59 minutes 17 seconds West, a distance of 62
feet 5 inches (62.5.0) to the westerly line of Fulton
Street; thence along the westerly line of Fulton Street
North 2 degrees 0 minutes 19 seconds West, a distance
of 207 feet 5 inches 1 eighth (207.5.1) to the Point of
Beginning. Containing 12, 455 square feet all in accord
with a map of Poydras Tunnel Area, Lafayette Subsurface
Area and Fulton Street Subsurface and Air Rights Area
(Proposed) by Gandolfo, Kuhn & Associates dated March
5, 1993, revised March 17, 1993; Drawing No. L-17-1.
B-34
POYDRAS TUNNEL AREA
That portion of the following real property which lies
between two horizontal planes, the lower plane lying
and being at an elevation of - 205 feet Cairo Datum
(approximate bottom of pile tip), and the upper plane
lying and being at an elevation of 32.5 feet Cairo
Datum (approximate street grade), both as referenced to
United States Coast and Geodetic Survey Benchmark B-96
having an elevation of 28.72 feet Cairo Datum, which
property forms a portion of the Poydras Street right of
way, FIRST MUNICIPAL DISTRICT, CITY OF NEW ORLEANS,
ORLEANS PARISH, LOUISIANA, the horizontal boundaries of
which are more fully described as follows:
Begin at Northeast corner of Square 4, being
the intersection of the West line of
Convention Center Boulevard with the South
line of Poydras Street, 134 feet wide; thence
go along the North line of Square 4, N 76 -
14'-24" W, 114 feet 10 inches 6 eighths to
the Northwest corner of Square 4, and the
East line of Fulton Street; thence along the
projection of said line, N 2 -0'-19" W, 139
feet 4 inches 1 eighth to the North line of
Poydras Street; thence along said lines S
76 -14'-24" E, 180 feet to a point; thence go
S 25 -14'-37" W, a distance of 136 feet 10
inches 1 eighth to the point of beginning,
containing 19,772, square feet, all as shown
on a plan by Gandolfo, Kuhn & Associates
dated March 5, 1993, last revised on March 3,
1994; Drawing Number L-17-1.
B-35
LAFAYETTE SUBSURFACE AREA
-------------------------
That portion of the following real property which
lies between two horizontal planes, the lower
plane lying and being at an elevation of - 205
feet Cairo Datum (approximate bottom of pile cap)
and the upper plane lying and being at an
elevation of 30 feet Cairo Datum (approximate
street grade), both as referenced to United States
Coast and Geodetic Survey Benchmark B-96 having an
elevation of 28.72 feet Cairo Datum, which
property forms a portion of the Lafayette Street
right of way, FIRST MUNICIPAL DISTRICT, CITY OF
NEW ORLEANS, ORLEANS PARISH, LOUISIANA, the
horizontal boundaries of which are more fully
described as follows:
Commencing at the southwest corner of Square 4
being the northeast intersection of Lafayette and
Fulton Streets and being the Point of Beginning;
From the Point of Beginning, thence along the
lower line of Lafayette Street South 75 degrees 59
minutes 17 seconds East, a distance of 117 feet 9
inches 5 eighths (117.9.5) to a point on the
westerly line of Convention Center Boulevard
(former South Front Street) which lies 2 inches 1
eighth (0.2.1) from the southeast corner of Square
4; thence along the westerly line of Convention
Center Boulevard South 2 degrees 19 minutes 52
seconds East, a distance of 46 feet 10 inches 6
eighths (46.10.6) to the upper line of Lafayette
Street; thence along the upper line of Lafayette
Street North 75 degrees 59 minutes 17 seconds
West, a distance of 118 feet 1 inch 1 eighth
(118.1.1) to the easterly line of Fulton Street;
thence along the easterly line of Fulton Street
North 2 degrees 0 minutes 19 seconds West, a
distance 46 feet 9 inches; 7 eighths (46.9.7) to
the Point of Beginning. Containing 5,308 square
feet all in accord with a map of Poydras Tunnel
Area, Lafayette Subsurface Area and Fulton Street
Subsurface and Air Rights Area (Proposed) by
Gandolfo, Kuhn & Associates dated March 5, 1993,
revised March 17, 1993; Drawing No. L-17-1.
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NORTH VILLERE STREET
--------------------
A certain parcel of Street R/W, 53.29 feet wide, lying between St.
Louis Street and former Street Parcel S-2, more particularly
described as follows:
Beginning at the intersection of the existing westerly line of
North Villere Street with the northerly line of St. Louis Street
at point t, thence along the westerly line of North Villere
Street, N 37 -13'-30" E, 387.70 feet to point xx on the southerly
line of former Street Parcel S-2; thence along said line S 57 -
30'-38" E, 53.47 feet to point yy on the easterly line of North
Villere Street; thence along said line S 37 -13'-30" W, 391.77
feet to point k on the northerly line of St. Louis Street; thence
along said line N 53 -8' W, 53.29 feet to point t and the point of
beginning, containing 20,769 square feet.
MARAIS STREET
-------------
A certain parcel of Street R/W, 53.29 feet wide, lying between St.
Louis Street and the northerly line of Toulouse Street projected,
more particularly described as follows:
Beginning at the intersection of the westerly line of Marais
Street with the northerly line of St. Louis Street at point j;
thence along the westerly line of Marais Street, N 37 -13'-40" E,
378.08 feet to point q on the southerly line of lot C.N.O.-1;
thence along said line S 53 -3'-55" E, 53.29 feet to point z on
the easterly line of Marais Street, thence along said line, S 37 -
13'-40" W, 378.02 feet to point a on the northerly line of St.
Louis Street; thence along said line, N 53 -8' W, 53.29 feet to
point j and the point of beginning, containing 20,146.3 square
feet.
LOT C.N.O.-1
------------
Lot C.N.O.-1 is situated in the Second district, City of New
Orleans, State of Louisiana in Square 162-A, bounded by St. Louis
Street, North Villere Street, Lafitte Ave., Orleans-Basin
Connection, Treme Street, Toulouse Street and Marais Street. Lot
C.N.O.-1 is in accord with a subdivision map by Gandolfo, Kuhn &
Associates dated March 31, 1978 revised May 15, 1978 (Dwg. No. T-
131-2), approved on October 16, 1978 and filed October 25, 1978 in
COB 756 folio 391.
Said Lot C.N.O.-1 is more particularly described in accord with a
Lease Map by Gandolfo, Kuhn & Associates, dated June 16, 1993 with
additions dated December 29, 1993 (Dwg. No. T-131-2A) a print of
which is attached hereto and made a part hereof, as follows:
Begin at point l at the intersection of the easterly line of N.
Villere Street with the southerly line of Lafitte Avenue, thence
along the easterly line of North Villere Street, S 37 -13'-30"
B-37
W, 235.46 feet to a point s on the division line between lots
C.N.O.-1 and N.O.T.C.-2; thence along said line, S 52 -46'-20" E,
256.46 feet to a point r on the westerly line of Marais Street;
thence along said line, N 37 -13'-40" E, 113.92 feet to a point q
on the projected northerly line of Toulouse Street; thence along
said line, S 53 -3'-55" E, 310.02 feet to a point p on the
westerly line of Treme Street; thence along said line, N 37 -14'
E, 119.99 feet to a point o on the westerly line of Orleans-Basin
Connection; thence along said line N 36 -46'-20" W, 36.31 feet to
point n; thence continue along said line of the Orleans-Basin
Connection and the southerly line of Lafitte Ave., N 52 -46'-20"
W, 411 feet to point m; thence N 57 -31'-51" W, 121.01 feet to
point l and the point of beginning, containing 102,731.5 square
feet.
B-38
