**Exhibit 10.3**

 

**Execution Version**

 

TRANSFER RESTRICTION AGREEMENT

 

This Transfer Restriction Agreement (this “Agreement”) is made as of June 18, 2004 among Thomas J. Barrack, Jr. (“Mr.Barrack” or the “VoteCo Member”), Colony Resorts LVH VoteCo, LLC, a Delaware limited liability company (“VoteCo”), and Colony Resorts LVH Holdings, LLC (“Colony”), a Delaware limitedliability company and a wholly owned subsidiary of Colony Investors VI, L.P., a Delaware limited partnership (“Colony VI”). 

 

RECITALS

 

WHEREAS, as of the date hereof (the “Closing Date”), Colony Resorts LVH Acquisitions, LLC, a Delaware limited liability company (the“Company”) purchased (the “Acquisition”) substantially all of the assets of LVH Corporation, a Nevada corporation (“LVH”) pursuant to a Purchase and Sale Agreement dated as of December 24, 2003 (asamended through the date hereof, the “Purchase Agreement”); 

 

WHEREAS, the Company was authorized to issue membership units consisting of (i) Class A Membership Units (the “Class A Units”), and (ii) Class B Membership Units (the “Class B Units”and, together with the Class A Units, the “Membership Units”); 

 

WHEREAS, immediately prior to the Acquisition, VoteCo was the record owner of 0.60 Class A Units and no other Membership Units, and Colony was the record owner of 600,000 Class B Units and no other Membership Units;

 

WHEREAS, from time to time, VoteCo may acquire additionalClass A Units or other equity interests of the Company’s convertible into, exchangeable for or otherwise providing VoteCo with the right to acquire Class A Units, and Colony may acquire additional Class B Units or other equity interests of theCompany’s convertible into, exchangeable for or otherwise providing Colony with the right to acquire Class B Units; 

 

WHEREAS, the VoteCo Member is the record and beneficial owner of all the issued and outstanding limited liability company interests of VoteCo (the“VoteCo Interests”); 

 

WHEREAS, the partieshereto believe it is desirable and in their mutual best interests to provide for procedures regarding the ownership of the Class A Units owned by VoteCo and the VoteCo Interests owned by the VoteCo Member; and 

 

WHEREAS, the parties hereto further believe that the execution of thisAgreement will help facilitate the continuous, harmonious and effective management of Colony’s investment in the Company. 

 

NOW, THEREFORE, in consideration of the recitals and the mutual covenants, promises, agreements, representations and warranties of the parties hereto, theparties hereto hereby agree as follows: 

 

Section 1. CertainDefinitions. As used herein, the following terms have the respective meanings set forth below: 

 

“Acquisition” has the meaning given to such term in the recitals set forth above. 

“Agreement” has the meaning given to such term in the introduction hereof. 

 

“Approved Purchaser” means a proposed purchaser ofMembership Units or Membership Units Equivalents, who, in connection with its proposed purchase of Membership Units or Membership Units Equivalents, has obtained all licenses, permits, registrations, authorizations, consents, waivers, orders,findings of suitability or other approvals required to be obtained from, and has made all filings, notices or declarations required to be made with, all Gaming Authorities under all applicable Gaming Laws. 

 

“Approved Sale” has the meaning given to such term inSection 3(a) hereof. 

 

“Approved Sale Date” hasthe meaning given to such term in Section 3(b) hereof. 

 

“Call Notice” has the meaning given to such term in Section 3(b) hereof 

 

“Class A Equivalents” means any securities of the Company convertible into, exchangeable for or otherwise providing the holder thereofany right to acquire Class A Units. 

 

“Class AHolder” means a holder of Class A Units or Class A Equivalents; *provided*that Colony shall not be considered a Class A Holder, regardless of whether Colony holds any Class A Units. 

 

“Class A Units” has the meaning given to such term in therecitals set forth above. 

 

“Class BEquivalents” means any securities of the Company convertible into, exchangeable for or otherwise providing the holder thereof any right to acquire Class B Units, which securities are substantially equivalent in designations, preferences,limitations, restrictions and relative rights, but not as to voting, to a class or series of Class A Equivalents. 

 

“Class B Units” has the meaning given to such term in the recitals set forth above. 

 

“Colony” has the meaning given to such term in theintroduction hereof. 

 

“Colony VI” has themeaning given to such term in the introduction hereof. 

 

“Colony VI Advisory Committee” means the advisory committee comprised of certain limited partners of Colony VI. 

 

“ColonyGP IV” has the meaning given to such term in Section 2(b) hereof. 

 

“Company” has the meaning given to such term in the recitals set forth above. 

 

“Corresponding Class A Equivalents” means, with respect toany referenced Class B Equivalents, the Class A Equivalents that are substantially equivalent in designations, preferences, limitations, restrictions and relative rights, but not as to voting, to such specified Class B Equivalents. 

 

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“Corresponding Class B Equivalents” means, with respect to any referenced Class AEquivalents, the Class B Equivalents that are substantially equivalent in designations, preferences, limitations, restrictions and relative rights, but not as to voting, to such specified Class A Equivalents. 

 

“Gaming Authorities” means all governmental authorities oragencies with regulatory control or jurisdiction over the gaming or gambling operations of the Company and its subsidiaries, including without limitation, the Nevada Gaming Commission. 

 

“Gaming Laws” means any U.S. Federal, state, local or foreign statute, ordinance, rule, regulation, permit,consent, approval, license, judgment, order, decree, injunction or other authorization governing or relating to the current or contemplated manufacturing, distribution, casino gambling and gaming activities and operations of the Company, including,without limitation, the gaming laws and regulations of the State of Nevada. 

 

“LVH” has the meaning given to such term in the recitals set forth above. 

 

“Membership Units Equivalents” means the Class A Units, Class A Equivalents, Class B Units or Class B Equivalents of the Company.

 

“Membership Units” has the meaning given tosuch term in the recitals set forth above. 

 

“Mr.Barrack” has the meaning given to such term in the introduction hereto. 

 

“Required Number” means the number of Class A Units or Class A Equivalents to be purchased by Colony from VoteCo pursuant to the exercise by Colony of its option to purchase Class A Units or Class AEquivalents pursuant to the provisions of Section 3 hereof, in connection with an Approved Sale, as specified by Colony in a Call Notice delivered by Colony to VoteCo; *provided*that unless otherwise approved by the Colony VI AdvisoryCommittee, such specified number shall be equal to the product of (i) the number of Class A Units or Class A Equivalents, as applicable, held by VoteCo immediately prior to the consummation of such Approved Sale times (ii) a fraction, the numeratorof which is the number of Class B Units or Corresponding Class B Equivalents, as applicable, to be Transferred by Colony to such Approved Purchaser pursuant to such Approved Sale and the denominator of which is the total number of Class B Units orCorresponding Class B Equivalents, as applicable, held by Colony immediately prior to consummation of such Approved Sale. 

 

“Securities Act” means the Securities Act of 1933, as amended. 

 

“Transfer” means to voluntarily or involuntarily sell, assign, exchange or in any other manner transferwith or without consideration, except pursuant to a distribution of equity interests by Colony to its partners. “Transferred” has the correlative meaning. 

 

“VoteCo” has the meaning given to such term in the introduction hereof. 

 

“VoteCo Interest” has the meaning given to such term in therecitals set forth above. 

 

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“VoteCo Member” has the meaning given to such term in the introduction hereof.

 

Section 2. Restriction on Transfer. 

 

(a) So long as VoteCo holds Class A Units or Class AEquivalents, VoteCo shall not Transfer ownership of any or all such Membership Units or equivalents owned by it except as contemplated by Section 3 hereof. The Transfer of record or beneficial ownership of any Class A Units or Class A Equivalents,by operation of law or otherwise, by or upon the direction or authorization of VoteCo shall be deemed invalid, null and void, and of no force or effect, unless such Transfer is made pursuant to the provisions of Section 3 hereof. 

 

(b) No VoteCo Member shall Transfer record or beneficialownership of any or all VoteCo Interests owned by such VoteCo Member, unless such Transfer is approved in writing by the Colony VI Advisory Committee. The Transfer of record or beneficial ownership of any VoteCo Interests, by operation of law orotherwise, by or upon the direction or authorization of any VoteCo Member shall be deemed invalid, null and void, and of no force or effect, and the transferee of any such VoteCo Interests shall not be entitled to vote such VoteCo Interests orreceive distributions on such VoteCo Interests or have any other rights in or respecting such VoteCo Interests, unless such Transfer is approved in writing by the Colony VI Advisory Committee. 

 

Section 3. Call Option. 

 

(a) Right to Call Class A Units and Class AEquivalents. Notwithstanding any other provision hereof, on each occasion that Colony proposes to Transfer (including, without limitation, by operation of law or pursuant to any merger, consolidation, reorganization or recapitalization) any ofthe Class B Units or Class B Equivalents held by it to an Approved Purchaser (any such transaction, an “Approved Sale”), then Colony shall have an option, which, unless Colony otherwise receives approval from Gaming Authorities,Colony shall assign to such Approved Purchaser (such Approved Purchaser or Colony, as applicable, hereinafter referred to as the “Optionholder”), to purchase from VoteCo upon such Approved Sale the Required Number of Class A Units,in the case of an Approved Sale of Class B Units, or Corresponding Class A Equivalents, in the case of an Approved Sale of Class B Equivalents, at a cash price per unit equal to the sum of (a) the amount in cash or fair market value of any otherconsideration originally paid by VoteCo for such Required Number of Class A Units or Corresponding Class A Equivalents, as applicable, plus (b) the amount equivalent to a six percent (6%) annual rate of interest on such amount or fair market value,compounded annually, calculated from the date VoteCo acquired such Class A Units or Corresponding Class A Equivalents, as applicable, on the basis of a 360-day year comprised of twelve 30-day months, to and excluding the Approved Sale Date.

 

(b) Call Notice. Prior to consummatingany Approved Sale, if the Optionholder elects to exercise the options granted to it under this Section 3, Colony shall provide each of the Class A Holders with a written notice (the “Call Notice”) not less than five (5) days priorto the proposed date of the Approved Sale (the “Approved Sale Date”). The Call Notice shall state that the Optionholder is exercising its option to purchase Class A Units or Class A Equivalents pursuant to this Section 3 and shallset forth: (i) the name and address of 

 

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the Optionholder, (ii) the aggregate number of Class B Units and Class B Equivalents held of record byColony as of the date of the Call Notice, (iii) the number of Class B Units or Class B Equivalents to be sold by Colony to the Approved Purchaser pursuant to such Approved Sale, (iv) the Required Number of Class A Units or Class A Equivalents to bepurchased by the Optionholder in connection with such Approved Sale, (v) the Approved Sale Date and (vi) the address for delivery of the certificates representing the Class A Units or Class A Equivalents to be purchased by the Optionholder.

 

(c) Delivery of Certificates. On theApproved Sale Date, VoteCo shall deliver to the Optionholder the certificates for the Class A Units or Class A Equivalents being sold by it to the Optionholder, duly endorsed for transfer with signatures guaranteed, in the manner and at the addressindicated in the Call Notice against delivery of immediately available funds in the amount of the purchase price for such Class A Units or Class A Equivalents. 

 

Section 4. Legends. VoteCo shall use its reasonable efforts to cause each certificate representing Class A Units or Class A Equivalents owned ofrecord and beneficially by VoteCo to contain the following legends: 

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, HYPOTHECATED OR OTHERWISE DISPOSED OF (A “TRANSFER”) EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF THE AMENDED ANDRESTATED LIMITED LIABILITY COMPANY AGREEMENT DATED AS OF JUNE 18, 2004. ANY TRANSFEREE OF THESE SECURITIES TAKES SUBJECT TO THE TERMS OF SUCH AGREEMENT, A COPY OF WHICH IS ON FILE WITH THE COMPANY. 

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEENREGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) OR STATE SECURITIES LAWS, AND NO TRANSFER OF THESE SECURITIES MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR (B) PURSUANT TO AN EXEMPTIONTHEREFROM WITH RESPECT TO WHICH THE COMPANY MAY, UPON REQUEST, REQUIRE A SATISFACTORY OPINION OF COUNSEL FOR THE HOLDER THAT SUCH TRANSFER IS EXEMPT FROM THE REQUIREMENTS OF THE ACT. 

 

THE OWNERSHIP AND TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AND RESTRICTEDBY THE TERMS AND CONDITIONS OF A CERTAIN TRANSFER RESTRICTION AGREEMENT DATED JUNE 18, 2004. THE COMPANY WILL FURNISH A COPY OF SUCH TRANSFER RESTRICTION AGREEMENT WITHOUT CHARGE TO ANY MEMBER ON REQUEST. 

 

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Section 5. Recapitalization, etc.; After-Acquired Stock. 

 

(a) The provisions of this Agreement (including anycalculation of ownership interests) shall apply to any and all equity interests of the Company or any capital stock, partnership interests or any other security evidencing ownership interests in any successor of the Company (whether by merger,consolidation, sale of assets or otherwise) that may be issued in respect of, in exchange for, or in substitution of the Membership Units by reason of any stock dividend, split, reverse split, combination, recapitalization, liquidation,reclassification, merger, consolidation or otherwise. 

 

(b) Whenever VoteCo becomes the record or beneficial owner of any additional Class A Units, such units shall be subject to the terms of this Agreement and included in the definition of “Class A Units” hereunder. Whenever VoteCobecomes the record or beneficial owner of any additional Class A Equivalents, such Class A Equivalents shall be subject to the terms of this Agreement and included in the definition of “Class A Equivalents” hereunder. The certificatestherefor shall be surrendered for legending in accordance with Section 4 of this Agreement, unless already so legended. 

 

Section 6. Termination. This Agreement shall terminate upon the earlier of (a) VoteCo owning no Class A Units and no Class A Equivalents or (b)Colony owning no Class B Units and no Class B Equivalents. 

 

Section 7. Notices. Whenever notice is required to be given under the provisions of this Agreement, it shall be given in writing by hand-delivery, telefax, or United States registered or certified mail, return receipt requested, andshall be deemed to have been transmitted on the date such notice is so delivered, transmitted or mailed, if addressed as set forth below or to such other addresses and fax numbers as any of the parties hereto by written notice to the other partieshereto, may from time to time designate. 

 

ifto Mr. Barrack: 

 

c/o Colony Capital, LLC

1999 Avenue of the Stars, Suite 1200 

Los Angeles, California 90067 

 

if to VoteCo: 

 

c/o Colony Capital, LLC 

1999 Avenue of the Stars, Suite 1200 

Los Angeles, California 90067 

Attn: Mr. Barrack 

 

if to Colony or Colony VI: 

 

c/o Colony Capital, LLC 

1999 Avenue of the Stars, Suite 1200 

Los Angeles, California 90067 

Attn: Mr. Jonathan H. Grunzweig 

 

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Section 8. Additional Actions and Documents. Each party hereto shall take or cause to be takensuch further actions and to execute and deliver such documents or instruments as may from time to time be reasonably necessary in order to carry out the purposes of this Agreement. 

 

Section 9. Specific Performance. The parties hereto recognize that the provisions herein contained are of particularimportance for the protection and promotion of their existing and future interests; that the Membership Units of the Company and the VoteCo Interests will be closely held; and that the relationships of the parties to one another are and will be suchthat, in the event of any breach of this Agreement, a claim for monetary damages may not constitute an adequate remedy; and that it may, therefore, be necessary for the protection of all of the parties hereto and for the effectuation of theprovisions of this Agreement, in the event of a breach of this Agreement, to apply for specific performance thereof. It is, accordingly, hereby agreed that no objection to the form of the action or to the form of relief prayed for in any proceedingfor specific performance of this Agreement, shall be raised by any party hereto, in order that such relief may be obtained by the party aggrieved. 

 

Section 10. Construction. Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular, to thesingular include the plural, to the male gender include the female and neuter genders and vice versa, and to the part include the whole. The term “including” is not limiting. The words “hereof,” “herein,”“hereby,” “hereunder” and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. Section and clause references are to this Agreement unless otherwise specified.

 

Section 11. Miscellaneous. 

 

(a) No Waiver. No waiver or modification of any termor condition of this Agreement shall be effective unless in writing signed by all the parties hereto. 

 

(b) Severability. In case any of the provisions contained herein shall, for any reason, be held to be invalid, illegal orunenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, but this Agreement shall be construed as if such invalid, illegal or unenforceable provision or provisions are notcontained herein. 

 

(c) Binding Effect.This Agreement shall be binding and inure to the benefit of the parties hereto, their respective heirs, guardians, personal representatives, successors, successors in interest, and assigns. 

 

(d) Governing Law. This Agreement shall be governedby and construed in accordance with the internal laws of the State of New York. 

 

(e) Counterparts. This Agreement may be executed in counterparts, (including by facsimile) each of which shall be an original, butall of which together shall constitute one document. 

 

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[THE BALANCE OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] 

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal with the intent that thisbe a sealed instrument, as of the day and year first above written. 

 

    /s/    Thomas J. Barrack,Jr.        
THOMAS J. BARRACK, JR.
 
COLONY RESORTS LVH VOTECO, LLCBy: 
    /s/    Thomas J. Barrack, Jr.        
  Name: Thomas J. Barrack, Jr.  Title: Sole Member
 

COLONY RESORTS LVH HOLDINGS, LLC
By: 
COLONY INVESTORS IV, L.P.
  
*  its sole member*

 
By: 
COLONY CAPITAL IV, L.P.
  
*  its general partner*

 
By: 
COLONY GP IV, LLC
  
*  its general partner*

 
By: 
    /s/    Mark M. Hedstrom        
  Name: Mark M. Hedstrom.  Title: Vice President
 

[Signature Pageto VoteCo Transfer Restriction Agreement]