Exhibit 10.8


 


DATE 18 JUNE 1998


 


IAN SCHRAGER HOTELS LLC


 


AND


 


BURFORD HOTELS LIMITED


 










 


RESTATED JOINT VENTURE AGREEMENT


RELATING TO


I.S. EUROPE LIMITED


 










 


 


CLIFFORD CHANCE


 





















 


CONTENTS


 


	
  CLAUSE

  	
   

  
	
   

  	
   

  	
   

  
	
  1.

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  2.

  	
  UNDERTAKINGS

  	
   

  
	
   

  	
   

  	
   

  
	
  3.

  	
  BUSINESS OF THE COMPANY

  	
   

  
	
   

  	
   

  	
   

  
	
  4.

  	
  PREMISES

  	
   

  
	
   

  	
   

  	
   

  
	
  5.

  	
  BOARD OF DIRECTORS

  	
   

  
	
   

  	
   

  	
   

  
	
  6.

  	
  MAJOR DECISIONS IN RELATION
  TO THE COMPANY

  	
   

  
	
   

  	
   

  	
   

  
	
  7.

  	
  ADDITIONAL FUNDINGS AND
  FINANCINGS

  	
   

  
	
   

  	
   

  	
   

  
	
  8.

  	
  INDEMNITY

  	
   

  
	
   

  	
   

  	
   

  
	
  9.

  	
  ACCOUNTS AND FINANCIAL
  INFORMATION

  	
   

  
	
   

  	
   

  	
   

  
	
  10.

  	
  RESTRICTIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  11.

  	
  RESTRICTIVE TRADE PRACTICES
  ACT 1976

  	
   

  
	
   

  	
   

  	
   

  
	
  12.

  	
  TRANSFER OF SHARES

  	
   

  
	
   

  	
   

  	
   

  
	
  13.

  	
  CONFLICT WITH ARTICLES

  	
   

  
	
   

  	
   

  	
   

  
	
  14.

  	
  TERMINATION

  	
   

  
	
   

  	
   

  	
   

  
	
  15.

  	
  OFFER TO BUY SHARES

  	
   

  
	
   

  	
   

  	
   

  
	
  16.

  	
  ANNOUNCEMENTS

  	
   

  
	
   

  	
   

  	
   

  
	
  17.

  	
  CONFIDENTIALITY

  	
   

  
	
   

  	
   

  	
   

  
	
  18.

  	
  GENERAL

  	
   

  
	
   

  	
   

  	
   

  
	
  19.

  	
  SEVERABILTTY

  	
   

  
	
   

  	
   

  	
   

  
	
  20.

  	
  WAIVER AND REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  21.

  	
  COSTS

  	
   

  
	
   

  	
   

  	
   

  
	
  22.

  	
  ENTIRE AGREEMENT AND VARIATION

  	
   

  
	
   

  	
   

  	
   

  
	
  23.

  	
  NOTICES

  	
   

  
	
   

  	
   

  	
   

  
	
  24.

  	
  GOVERNING LAW AND JURISDICTION

  	
   

  



 





















 


	
  JOINT VENTURE AGREEMENT

  	
   

  



 


DATE 18 June, 1998


 


PARTIES


 


1.             Ian Schrager Hotels LLC, a New York limited
liability company, having an address at 235 West 46th Street, New York, New York,
10036, U.S.A. (together with its assignees
“Schrager”).


 


2.            Burford Hotels Limited, a private limited
liability company incorporated in England and Wales, (registered number
3437353), having its registered office at 20 Thayer Street, London W1M 6DD (together with its
assignees “Burford”).


 


RECITALS


 


A.            Schrager LLC and Burford Group Plc entered into
that certain Joint Venture Agreement dated 28 May 1997 (as subsequently
amended on 28 August 1997 by a Supplemental Agreement, superseded by a
Modification Agreement dated 21 October 1997 (the “Original
Agreement”)) in order to regulate the relationship between them as
shareholders in I.S. Europe Limited (previously known as Burford (Covent Garden)
Limited) (registered number 3203996) (the “Company”) from
and after the date on which they agreed that all the conditions from time to
time contained herein had been either satisfied or waived.


 


B.            Schrager LLC and Burford Group Plc have
assigned absolutely all of their rights, obligations, duties and liabilities
respectively under this Agreement to Schrager and Burford respectively as confirmed by a Deed
of Novation executed on 18 March 1998.


 


C.            On the date referred to in Recital B above,
the Company transferred at full market value two real properties (known as St
Martin’s Lane and Sanderson) to Ian Schrager London Limited (registered number 3462675) (a subsidiary of the Company
previously known as Basketdrift Limited) in total consideration of the issue of
48 shares of £1 each in the
capital of Ian Schrager London Limited, credited as fully paid up and having an implied market value of
£35 million, in addition to £10,912,390 to remain outstanding on inter-company loan account in favour of the
Company. Burford Group Plc has
agreed to transfer or procure the transfer of the legal estate to the real properties (and to seek any
necessary consents) as soon as practicable.


 


D.            Immediately prior to the subscription for
shares in the capital of the Company, the Company declared an interim dividend
of £9,915,290 in favour of its sole shareholder, Burford, and Schrager and
Burford Group Plc each advanced £6,100,000 by way of a temporary, unsecured and
subordinated loan to the Company for the purposes of paying the dividend
declared by the Company, meeting the working capital requirements of the
Company and making an immediate repayment to Burford


 





















 


Group Plc of an amount of £507,234, being part of the total
inter-company loan  account
in favour of Burford Group Plc of £34,642,025.


 


E.             Following the assignment of the rights and
obligations referred to in Recital B above. Burford subscribed for 1 Preferred
Ordinary Share, following which it subscribed for 2,499,997 B Ordinary Shares
in total consideration of the discharge of the benefit of a debt in the principal sum of £17,500,000
(such benefit having been assigned to it by Burford Group Plc by way of an
assignment executed on 18 March 1998 and the 2 Ordinary Shares held by
Burford were re-designated as 2 B Ordinary Shares.


 


F.             Following the subscription and
re-designation of shares referred to in Recital E above, Schrager subscribed
for 2,499,999 A Ordinary Shares at a total subscription price of £16,634,791 (being
£17,500,000, less expenses previously advanced by Ian Schrager LLC in the
amount of £865,209).


 


G.            On the date referred to in Recital A above,
the Company held a Board Meeting and an Extraordinary General Meeting. Ian
Schrager (who is also Chairman and Chief Executive Officer) and David Hamamoto
(both being designated A Directors) and John Anderson and Julian Gleek (both
being designated B Directors) were appointed as Directors of the Company. Such
persons were also appointed directors of Ian Schrager London Limited. Subsequently
David Hamamoto was replaced as a director by Ed Scheetz in respect of both the
Company and Ian Schrager London Limited. Katerina Angliss was appointed
Secretary and subsequently Michael Overington as Joint Company Secretary of the Company and Ian Schrager
London Limited. The Project Documents were executed.


 


H.            It is agreed that the Company shall be the joint venture vehicle for the
purpose, directly or through one or more subsidiaries, of carrying on the
business of acquiring, developing and managing hotels in Europe.


 


I.              The Company is a private company limited by
shares incorporated in England and Wales on 28 May 1996 under the
Companies Act 1985. The Company has an authorised share capital of £5,000,000
of which 2,499,999 fully-paid A Ordinary Shares of £1 each are issued and held
by Schrager and 2,499,999 fully-paid B Ordinary Shares of £1 each and 1
Preferred Ordinary Share of £1 are issued and held by Burford.


 


J.             By way of a letter dated 18 March 1998
from Burford to Schrager, countersigned by Schrager, Burford and Schrager have
agreed that as at the date of the letter all the conditions to completion of
the joint venture have either been satisfied or waived. Details of those
conditions satisfied have been recorded in these Recitals.


 





















 


AGREEMENT


 


1.             DEFINITIONS


 


1.1           The Recitals and Schedules form part of this Agreement and shall have
the same force and effect as if set out in the body of this Agreement. Any
reference to this Agreement shall include the Recitals and Schedules.


 


1.2           The Original Agreement is hereby modified so that all of the terms and
provisions thereof shall be restated as set forth in this Restated Joint
Venture Agreement (this “Agreement”).


 


1.3           Any reference to the Original Agreement (by whatever expression)
contained in the Project Documents or any other document executed in connection
with this Agreement shall be deemed a reference to this Agreement.


 


1.4           In this Agreement the following words and expressions shall have the
following meanings:


 


Acceptable
Finance: means
finance with a recognised bank or other lending institution which finance shall
be:


 


(a)           on reasonable commercial terms;


 


(b)           secured by no more than a fixed charge over the Company’s or, as
applicable, the Company’s subsidiary’s interest in the Hotel Properties and a
floating charge over its other assets but otherwise without recourse to the Shareholders;


 


(c)           on terms such that the Debt Service Coverage is not less than two to
one and the Loan to Value is not greater than seventy percent (70%).


 


ACT: Advance Corporation Tax;


 


A
Directors: A
Directors of the Company appointed under the Articles;


 


the
Agreed Form: the
form hereafter agreed between and signed by or on behalf of Schrager and
Burford;


 


Appraisal: means, with respect to each Hotel
Property, the independent valuation (appraisal) prepared and delivered, by a reputable valuer (appraiser)
of hotel properties of similar type, location and value of the Hotel Properties
(or any of them, as applicable), to the Company at its request; 


 


Appraised
Value: means the
value of any Hotel Property as indicated on the most recent Appraisal thereof, or, if no such
Appraisal exists, the value agreed upon by the Shareholders;


 





















 


the
Articles: the
Articles of Association of the Company adopted at Completion and thereafter as amended from time to time;


 


A Shares: A Ordinary Shares in the capital of the
Company owned by Schrager;


 


Auditors: the firm appointed by the Company;


 


B
Directors: B
Directors of the Company appointed under the Articles;


 


B Shares: B Ordinary Shares in the capital of the
Company owned by Burford;


 


the
Board: the Board of
Directors of the Company for the time being;


 


the
Burford Loan: the
loan, in the principal sum of £6,100,000 made available to the Company by
Burford Group Plc pursuant to and on the terms set out in the Loan Agreement;


 


the
Business: the
business of the Company as described in Clause 3 and such other business as the
Parties may agree pursuant to Clause 6.1 from time to time in writing should be
carried on by the Company;


 


the
Business Plan: the
business plan for the Company hereafter agreed to by the Shareholders prior to
the Completion Date;


 


Capital
Expenditures:
means, determined in accordance with the Determination Guidelines, for any
period, the sum of all expenditures (whether paid in cash or accrued as a
liability) by the Company which are capitalized on the consolidated balance
sheet of the Company in conformity with GAAP, but excluding (i) all expenditures
made with respect to the acquisition by the Company of any direct or indirect
interest in real property, (ii) all expenditures made in the initial
construction, rehabilitation or renovation of any Hotel Property and (iii) capital
expenditures made from the proceeds of insurance or compulsory purchase awards
(or payments in lieu thereof) or indemnity payments received during such period
by the Company from third parties;


 


the
Companies Acts: the
Companies Act 1985, the Companies Consolidation (Consequential Provisions) Act
1985 and the Companies Act 1989;


 


the
Completion Date:
means 18 March 1998, upon which date the Shareholders agreed that the
conditions to the effectiveness of the Original Agreement had been either
satisfied or waived and that the Original Agreement was to have full force and effect;


 


Contingent
Obligation: as to
any Person means, without duplication, (i) any contingent obligation of
such Person required to be shown on such Person’s balance sheet in accordance
with generally accepted accounting principles, and (ii) any obligation
required to be disclosed in the footnotes to such Person’s financial statements
guaranteeing partially or in whole any non-recourse Debt, lease, dividend


 





















 


or other obligation, exclusive of contractual indemnities (including,
without limitation, any Indemnity or price-adjustment provision relating to the
purchase or sale of securities or other assets) and guarantees of non-monetary
obligations (other than guarantees of completion) which have not yet been
called on or quantified, of such Person or of any other Person. The amount of
any Contingent Obligation described in clause (ii) shall be deemed to be (a) with
respect to a guarantee of interest or interest and principal, or operating
income guarantee, the sum of all payments required to be made thereunder (which
in the case of an operating income guarantee shall be deemed to be equal to the
debt service for the note secured thereby), calculated at the applicable
interest rate, through (i) in the case of an interest or interest and
principal guarantee, the stated date of maturity of the obligation (and
commencing on the date interest could first be payable thereunder), or (ii) in
the case of an operating income guarantee, the date through which such
guarantee will remain in effect, and (b) with respect to all guarantees
not covered by the preceding clause (a), an amount equal to the stated or
determinable amount of the primary obligation in respect of which such  guarantee is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as recorded on the balance sheet and on the
footnotes to the most recent financial statements of the Company. Notwithstanding
anything contained herein to the contrary, guarantees of completion shall not
be deemed to be Contingent Obligations unless and until a claim for payment or
performance has been made thereunder, at which time any such guarantee of
completion shall be deemed to be a Contingent Obligation in an amount equal to
any such claim;


 


Control: means, for the purposes of the definition
of “Group Company” and similar uses of the term “control” made herein, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person or entity, whether through
ownership of voting securities, by contract or otherwise;


 


Debt: of any Person means, without duplication, (A) as
shown on such Person’s consolidated balance sheet (i) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property
and, (ii) all indebtedness of such Person evidenced by a note, bond,
debenture or similar instrument (whether or not disbursed in full in the case
of a construction loan), (B) the face amount of all letters of credit issued
for the account of such Person and, without duplication, all un-reimbursed amounts
drawn thereunder, (C) all Contingent Obligations of such Person, (D) all
payment obligations of such Person under any interest rate protection agreement
(including, without limitation, any interest rate swaps, caps, floors, collars
and similar agreements) and currency swaps and similar agreements which were
not entered into specifically in connection with Debt set forth in clauses (A),
(B) or (C) hereof. For purposes of hereof, Debt (other than
Contingent Obligations) of the Company shall be deemed to include only the
Company’s pro rata share (such share being based upon the Company’s percentage
ownership interest as shown on the Company’s annual audited financial statements)
of the Debt of any Person in which the Company,


 





















 


directly or indirectly, owns an interest, provided that such Debt is
non-recourse, both  directly
and indirectly, to the Company:


 


Debt
Service: means,
determined in accordance with the Determination Guidelines, measured as of the last day of each
calendar quarter, an amount equal to the aggregate amount of interest and
principal actually due and payable by the Company or any subsidiary of the
Company, as applicable, on its Debt for the previous four consecutive quarters
including the quarter then ended;


 


Debt
Service Coverage:
means, measured as of the last day of each calendar quarter, the ratio of (i) Net
Operating Cash Flow to (ii) Debt Service;


 


Determination
Guidelines: means
the intention of the Parties to this Agreement that all calculations and distributions to be
made under this Agreement be determined and distributed as if all Hotel
Properties were owned directly by the Company and not through one or more
intermediaries;  


 


Director: any director for the time being of the
Company including, where applicable,
any alternate director;  


 


GAAP: means generally accepted accounting
principles in effect from time to time in the United Kingdom;


 


Group
Company: in
relation to any Shareholder, a company controlled by that Shareholder, a
subsidiary (company, limited liability company, limited partnership or other
entity) of a company controlled by that Shareholder or a subsidiary owned by the
owners of that Shareholder, provided that Shareholder owns beneficially at
least fifty-one per cent (51%) of the controlled company or such controlling
company owns beneficially at least fifty-one percent (51%) of that Shareholder,
as the case may be;


 


Group
Member: in relation
to any Party, a group member of that Party within the meaning of Section 406(l)(c)ICTA;


 


Group
Relief: the relief
given pursuant to Section 402(2) ICTA 1988;


 


Hotel: means any lodging facility acquired wholly
or in part, directly or indirectly, by the Company in Europe, including all
management and operations systems thereof which, to the extent it is operated
by the Operator, shall be operated to the standard required in the Master
Management Agreement and the Property Management Agreements;


 


Hotel
Properties Value:
means the aggregate of the Appraised Value of each of the Hotel Properties;


 


Hotel
Property: means, in
respect of any Hotel, the land, buildings, appurtenances, easements, rights of
way, fixtures, equipment, furnishings and any and all other real and personal
property rights and capital items in connection therewith;


 





















 


ICTA
1988: Income and
Corporation Taxes Act 1988;


 


Loan
Agreement: means
the Loan Agreement dated 18 March 1998 pursuant to which loans in the amount of £6,100,000
each have been advanced to the Company by each of Burford and Schrager in
accordance with the terms thereof;


 


Loan to
Value: means, as of
any date of determination, the percentage of the aggregate amount of the Debt of the Company outstanding as of such date
to the Hotel Properties Value as of such date;


 


the
Loans: the Schrager
Loan and the Burford Loan;


 


The
London Stock Exchange:
London Stock Exchange Limited;


 


the
Master Development Agreement: means that certain Master Development Agreement entered into on the
date hereof by and between the Company and I.S. U.K. Developments Limited attached hereto as Document “B”, to be
amended from time to time as agreed between the parties thereto;


 


the
Master Management Agreement: means that certain Master Management Agreement entered into on the
date hereof by and between Company and Ian Schrager Hotel Management LLC, attached
hereto as Document “C”, to be amended from time to time as agreed between the parties
thereto;


 


Net
Operating Cash Flow:
means, determined in accordance with the Determination Guidelines, as of any date of
determination, with respect to all Hotel Properties, Operating Income for the
previous four consecutive quarters including the quarter then ended, but less
(x) Operating Expenses with respect to all such Hotel Properties for the
previous four consecutive quarters including the quarter then ended, and (y) Capital
Expenditures for the previous four consecutive quarters including the quarter then
ended;


 


Operating
Expenses: means,
determined in accordance with the Determination Guidelines, when used with respect to any Hotel Property, for any
period, without duplication, all expenses paid or to be paid by the Company, or
as applicable, a subsidiary of the Company, during such period in connection
with the operation, management, maintenance, ownership, repair and use of the
Hotel Property, determined on an accrual basis, and, except to the extent
otherwise provided in this definition, in accordance with GAAP. Operating
Expenses specifically shall include without duplication (i) all expenses
incurred in the immediately preceding twelve (12) month period, (ii) all
payments required to be made pursuant to any operating agreements, (iii) management
fees, whether or not actually paid, equal to fees actually paid to the Hotel
Property manager, and (iv) the real property taxes and assessments with
respect to the Hotel Property. Notwithstanding the foregoing, Operating Expenses
shall not include (1) depreciation or amortization, (2) income taxes
or other impositions in the nature of income taxes, (3) any expenses
(including legal, accounting and other professional fees, expenses and
disbursements) incurred in


 





















 


connection with any financing or the sale, exchange, transfer,
financing or refinancing of all or any portion of the Hotel Property or in
connection with the recovery of insurance or condemnation proceeds, (4) any
expenses which the Auditors consider should be capitalized, (5) Debt
Service, and (6) any item of expense which would otherwise be considered
within Operating Expenses pursuant to the provisions above but is paid directly
by any retail tenant or reimbursed by the tenant to Company;


 


Operating
Income: means,
determined in accordance with the Determination Guidelines, when used with
respect to any Hotel Property, for any period without duplication, all income
of the Company or, as applicable, a subsidiary of the Company, during such
period from the operation of the Hotel Property as follows:


 


(i)            all income, computed on an accrual basis in
accordance with GAAP, derived from the ownership and operation of the Hotel
Property during such period from whatever source, including all guest room
revenues, all food, beverage, and merchandise sales receipts, all interest
income, if any, rent, utility charges, forfeited security deposits, service
fees or charges, license fees, parking fees and business interruption insurance
proceeds (but excluding Value Added Tax, refunds and uncollectible accounts,
safes of furniture, fixtures and equipment, proceeds of casualty insurance and
compulsory purchase awards, interest on credit accounts and payments made on
interest rate protection agreements entered into in connection with any
financing);


 


(ii)           all other amounts which in accordance with GAAP are included in the Company’s
(or its applicable subsidiary’s) annual financial statements as operating
income attributable to the Hotel Property, excepting therefrom amounts
collected for onetime, nonrecurring reimbursements.


 


(iii)          “Operating Income” shall not include (a) any compulsory purchase
or insurance proceeds, (b) any proceeds resulting from the sale or other disposition
of all or any portion of the Hotel Property, (c) any rent attributable to
any retail lease at the Hotel Property prior to the date on which the actual payment
of rent is required to commence thereunder, (d) any item of income otherwise
includable in Operating Income but paid directly by any tenant to a Person
other than the Company (or its applicable subsidiary), provided such item of
income is an item of expense (such as payments for utilities paid directly to a
utility company) and is otherwise excluded from the definition of Operating
Expenses, or (e) security deposits received from any retail tenants until
forfeited;


 


the
Operator: means the
“Operator” as defined in the Master Management Agreement;


 


the
Parties: the
parties to this Agreement;


 





















 


the
Preferred Ordinary Share: means the issued Preferred Non-Voting Ordinary Share in the capital of
the Company of £1;


 


Project
Documents: means
the Master Development Agreement, the Master Management Agreement, the Property
Management Agreements and the Property Development Agreements;


 


Property
Development Agreements: the property specific development agreements to be entered into in
relation to each Hotel Property pursuant to the Master Development Agreement,
attached hereto as Document “E”, to be amended from time to time as agreed
between the parties thereto;


 


Property
Management Agreements:
the property specific management agreements to be entered into in relation to
each Hotel Property pursuant to the Master Management Agreement, attached
hereto as Document “D”, to be amended from time to time as agreed between the
parties thereto;


 


the
Schrager Loan: the
loan, in the principal sum of £6,100,000 made available to the Company by Ian
Schrager LLC pursuant to and on the terms set out in the Loan Agreement;


 


the
Shareholders:
Schrager and Burford, or, in respect of each of them, any person to whom shares
in the Company may have been transferred by them in accordance with the
provisions of this Agreement, and any other person to whom shares in the Company
are issued in accordance with the provisions of this Agreement;


 


the
Shares: the A Shares,
the B Shares, the Preferred Ordinary Share and any new shares in the capital of
the Company created from time to time;


 


subsidiary
and holding company:
means a subsidiary or holding company as those expressions are defined in Section 736
of the Companies Act 1985;


 


Value
Added Tax: means
value added tax at the rate in force when the relevant supply is made, and
includes any similar tax from time to time replacing it or supplementing it or
of a similar fiscal nature.


 


1.5           In this Agreement (unless the context requires otherwise):


 


1.5.1        words and expressions which are defined in the Companies Acts shall
have the same meanings as are ascribed to them in the Companies Acts;


 


1.5.2        any question as to whether a person is connected with any other person
shall be determined in accordance with the provisions of Section 839 ICTA
1988;


 


1.5.3        any reference to any statute or statutory provision shall be construed
as including a reference to any modification, re-enactment or extension of such
statute or statutory provision for the time being in force, to any subordinate
legislation made under the


 





















 


same and to any former statute or statutory provision which it
consolidated or re-enacted;


 


1.5.4        any reference to a Recital, Clause or Schedule is to a Recital, Clause
or Schedule (as the case may be) of or to this Agreement; and


 


1.5.5        “directly or indirectly” shall (without limiting the expression) mean
either alone or jointly with any other person, firm or body corporate and
whether on his own account or
in partnership with another or others or as the holder of any interest in or as
officer, employee or agent of or consultant to any other person, firm or body corporate.


 


1.6           The headings contained in this Agreement are for the purposes of
convenience only and do not
form part of and shall not affect the construction of this Agreement or any part
of it.


 


2.             UNDERTAKINGS


 


2.1           Without prejudice to any other provision in this Agreement, Schrager
and Burford hereby severally undertake and covenant that as to any Acceptable
Finance, or, upon the agreement of the Shareholders to obtain third-party
financing which is not Acceptable Finance, as to such other third-party
financing, Schrager and Burford will each use its best efforts to satisfy, or
cause to be satisfied, all the conditions to such financing which are within
its control, and its good faith, diligent, reasonable efforts to satisfy, or
cause to be satisfied, all conditions to such financing which are not within
its control.


 


2.2           Schrager and Burford hereby agree to
proceed to investigate and undertake a Float (as defined in Clause 14.A.4
below) as soon as practicable on mutually acceptable terms.


 


2.3           Schrager and Burford each hereby undertakes to the other Party that it
shall (so far as it is lawfully able) exercise all of its rights (whether
arising by virtue of its being a Shareholder in the Company or howsoever
otherwise arising) so as to procure that where a Shareholder or a person
controlled by or connected with any such Shareholder (for the purposes of this
Clause “a relevant person”) is a party to a contract with the Company and such
relevant person is in breach of such contract the Company shall be entitled to
enforce the Company’s rights under such contract and to that end Schrager and
Burford shall each procure that any directors of the Company appointed by such
relevant person which is the defaulting party to such contract shall have no part
(whether through the exercise of voting rights at Board Meetings or otherwise)
in the conduct of any proceedings taken by the Company for the purposes of such
enforcement.


 


2.4           Each Shareholder who is a party to a Project Document shall observe and
perform its obligations thereunder pursuant to the terms contained therein. Each
Shareholder whose affiliate is a party to a Project Document shall procure that
the relevant affiliate


 





















 


observes and performs its obligations in the relevant Project Document
pursuant to the terms contained therein.


 


3.             BUSINESS
OF THE COMPANY


 


The business of the Company shall be, directly or indirectly through
subsidiaries, to acquire, develop, refurbish and operate a hotel chain in
Europe in accordance with the terms of this Agreement and the Business Plan in
such a manner as shall be for the  mutual benefit of the Shareholders and so as to produce the best
returns reasonably obtainable from such activities.


 


4.             PREMISES


 


The principal place of business of the Company shall be located as
mutually agreed upon by the Shareholders from time to time.


 


5.             BOARD
OF DIRECTORS


 


5.1           The maximum number of Directors holding office at any time shall be
four (4) unless otherwise expressly agreed in writing by each of the
Shareholders.


 


5.2           The quorum necessary for the transaction of business at a Board meeting
shall include at least one (1) A
Director and one (1) B Director.


 


5.3           The first Chairman of the Board shall be Ian Schrager until he shall
resign or by reason of death or legal incapacity no longer be able to serve in
such capacity and thereafter the Chairman of the Board shall be appointed
alternately by the holders of a majority of the A Shares and the holders of a
majority of the B Shares in accordance with the provisions of Article 17
of the Articles.


 


5.4           Board meetings shall be held at regular intervals determined upon
mutual agreement by the Shareholders.


 


5.5           Subject only to the provisions of Clause 6, matters of business arising
at any meeting of the Board shall be decided by a majority of votes and, in
accordance with the Articles,
in the case of an equality of votes the Chairman shall not have a second or casting
vote. Notwithstanding any disproportionate
ownership in the Company, (i) with respect to decisions to be made by the
directors, the A Directors collectively shall have one vote and the B Directors
collectively shall have one vote, and (ii) with respect to decisions to be
made by the Shareholders, the owners of the A Shares collectively shall have
one vote and the owners of the B Shares collectively shall have one vote. Except
with respect to a Major Decision, upon an equality of votes, Schrager shall
have a second or casting vote.


 


5.6           The Board shall have the right to constitute an executive committee for
the purposes of making any Major Decision (as hereinbelow defined) provided
that such executive


 





















 


committee has equal representation of each of Schrager and Burford (i.e.
one member representing Schrager and one member representing Burford).


 


6.             MAJOR
DECISIONS IN RELATION TO THE COMPANY


 


6.1           Each of the Parties hereby undertakes to the other Parties that it
shall (so far as it is lawfully able) exercise all of its rights (whether
arising by virtue of its being a shareholder in the Company or howsoever
otherwise arising) so as to procure that the following matters shall only be
undertaken with the approval of, subject to Clause 5.6, the Board (each of the
following, a “Major Decision”):


 


6.1.1        The alteration of the Memorandum of Association of the Company or the Articles:


 


6.1.2        A change in the capital structure of the Company, including the
creation, issuance or allotment by the Company of any shares or any right or
instrument convertible into shares in the capital of the Company, the creation
of options for new shares, the effectuation of an offering of equity in or debt
of the Company and any requirement to fund additional capital or debt to the
Company by Schrager or Burford;


 


6.1.3        The grant of, or agreement to grant, any option or right to subscribe
for shares in the capital of the Company, save for the following (the exact
terms of which being subject to agreement by the Parties):


 


(a)           the grant of an option to Philippe Starck (who shall also be executing
an exclusivity agreement with Schrager in connection therewith) to acquire a direct
interest in a maximum aggregate of 5 per
cent. of the total issued share capital of the Company from time to time;


 


(b)           the grant by Burford to Mike Pemberton (in respect of Burford’s own
issued share capital) of an indirect interest in a maximum aggregate of 5 per
cent of the total issued share capital of the Company from time to time; and


 


(c)           the grant of an option or right to Nigel Wray and Nick Leslau (acting
together or through any company in which they are interested) to acquire a
direct interest in a maximum aggregate of 5 per cent. of the total issued share
capital of the Company from time to time;


 


6.1.4        The alteration of rights attaching to shares or to any class of Shares
in the capital of the Company;


 


6.1.5        The purchase or redemption of its own Shares by the Company;


 


6.1.6        Any appointment of or change of auditors or investment bankers of the
Company;


 


6.1.7        The entering into of any corporate reconstruction, sale of assets or
stock, merger, acquisition or amalgamation by the Company;


 





















 


6.1.8        The obtaining or modification of any borrowings or other financings or
refinancings by the Company other than Acceptable Finance;


 


6.1.9        The creation of any mortgage, charge, lien or other encumbrance over
the assets of the Company or any subsidiary of the Company, as applicable,
other than liens and other encumbrances arising (y) by operation of law in the
ordinary course of business of the Company or any subsidiary of the Company, as
applicable, or (z) pursuant to the requirements of a lender in connection with
Acceptable Finance;


 


6.1.10      The giving of any guarantee or indemnity by the Company or any
subsidiary of the Company, as applicable, in respect of the obligations of
third parties or otherwise outside the ordinary course of business of the
Company or any subsidiary of the Company, as applicable;


 


6.1.11      The sale or disposal of all or substantially all of the Company’s
assets by the Company or all or substantially all of the assets of any
subsidiary of the Company by such subsidiary:    


 


6.1.12      The making by the Company or any subsidiary of the Company of an
acquisition of, or an investment in, another company or business;


 


6.1.13      The making of any material change in the nature of the Business of the
Company or any subsidiary of the Company;


 


6.1.14      The entering into of any transaction or arrangement (a) which is
not in the normal and ordinary course of business of the Company or any
subsidiary of the Company and is materially outside the scope of the Business
Plan or (b) which is with a Shareholder (or a person controlled by or
connected with any such Shareholder) other than the execution of the Project
Documents;


 


6.1.15      The entering into of any joint venture or partnership by the Company or
any subsidiary of the Company;


 


6.1.16      The entering into of any voluntary winding up, dissolution, receivership,
administration procedure or analogous proceeding of the Company or any
subsidiary of the Company;


 


6.1.17      The making of any alteration to or the non-enforcement of the terms of any
agreement between the Company or any subsidiary of the Company and any
Shareholder (or any person controlled by or connected with any such
Shareholder);


 


6.1.18      The purchase, sale, lease or disposal of any freehold or leasehold
property;


 


6.1.19      The approval of annual Hotel budgets and any material changes thereto;


 


6.1.20      The approval of development budgets for any Hotel Property and any
material changes thereto;


 





















 


6.1.21      The entering into of any transaction for a new Hotel Property;


 


6.1.22      The making of any material capital improvement or repair to a Hotel
after the initial construction or renovation of such Hotel by the Company;


 


6.1.23      The decision to make any distributions to the Shareholders; and


 


6.1.24      The creation of any subsidiary company of the Company. For the
avoidance of doubt the creation of Ian Schrager London Limited and the transfer
of two properties from the Company to Ian Schrager London Limited occurred
before the Completion Date and is hereby ratified by the Shareholders.


 


7.             ADDITIONAL FUNDINGS AND FINANCINGS


 


7.1           Save as specifically provided in this Agreement neither Schrager nor
Burford shall be under any obligation to contribute (either directly or through
the provision of guarantees or security to third parties) to the provision of
any additional funding which may be required by the Company.


 


7.2           It is the intention of the Shareholders that the Business of the
Company shall be financed so far as possible by Acceptable Finance and the
Shareholders’ equity contributions. Schrager shall be entitled to seek on
behalf of the Company to obtain, and shall be permitted to require the Company
to complete and execute documents for the Company to receive, Acceptable
Finance.


 


7.3           Schrager and Burford have made available to the Company on the
Completion Date the Schrager Loan and the Burford Loan respectively.


 


7.3.1        The Schrager Loan and the Burford Loan shall be used by the Company
exclusively to pay for the acquisition and development of one or more Hotel
Properties and otherwise to meet the working capital requirements of the
Company from time to time.


 


7.3.2        In the event that the Schrager Loan and the Burford Loan are repaid
using the proceeds of third party financing and, in connection with the
development of the Sanderson and St. Martin’s Lane properties as hotels the
aggregate of £12,200,000 (or any portion thereof) needs to be re-funded by the
Shareholders in order to provide sufficient development funds, (i) each
Shareholder will be obliged to fund its pro rata share of such amount and (ii) to
the extent that a Shareholder fails to fund such amount, the non-defaulting
Shareholder shall have the right to fund such amount and to dilute the interest
of the defaulting Shareholder in the Company on the basis of a rate and other
terms to be agreed by the Shareholders.


 


7.3.3        The amounts, terms and conditions of the Schrager Loan and the Burford
Loan shall be identical (other than one shall be made by Schrager and the other
shall be made by Burford).


 





















 


7.3.4        Subject to the provisions of Clause 15 the Loans shall be repaid by the
Company on a pari passu basis so that a repayment under one of the Loans shall
give rise to a corresponding repayment of the same amount and at the same time
under the other Loan.


 


8.             INDEMNITY


 


Burford shall indemnify and keep indemnified Schrager in respect of any
losses, liabilities, costs, claims, damages, expenses or demands which may at
any time following 28 May 1997 be made against or incurred by Schrager as
a result of or in consequence of any liability of the Company incurred, or
relating to the period on or prior to 18 March 1998 (including any
liability etc, whenever arising, which results from the declaration and payment
of any dividends on such date). Further, it is the  intention of the Parties that Schrager be
admitted as a shareholder of the Company as if the Company had no liabilities
as of the date of Schrager being admitted as a shareholder of the Company
(including any liabilities arising on that Date and any liabilities arising from the declaration and
subsequent payment of any dividends prior to or on 18 March 1998, other
than the liability actually to pay any dividends to Burford) and, to the extent
the Company has any such liabilities, Burford shall pay to the Company the
amount (grossed up for tax if necessary) of any such liability; provided that
it is agreed that this indemnity does not relate to any ongoing liabilities, arising
in the course of the Company’s business from and after the Completion Date,relating to the ownership and
management of any real property which is the subject of any Project Documents.


 


9.             ACCOUNTS AND FINANCIAL INFORMATION


 


The Parties will take such steps as are necessary to ensure that the
Company and its subsidiaries:


 


9.1           Keep proper accounting books and records relating to the Business and
make such books and records available for inspection on request by each of Schrager
and Burford.


 


9.2           Furnish each of Schrager and Burford with
monthly management accounts (in a format to be agreed by Schrager and Burford)
within fifteen days of the end of each month.


 


9.3           Furnish each of Schrager and Burford with half-yearly unaudited
financial statements (consisting of a balance sheet and profit and loss
account) and audited accounts for each financial year of the Company and any subsidiaries
(such statements and accounts to be provided within sixty (60) days of the end
of the period to which they relate).


 


9.4           Furnish to each of Schrager and Burford such further information as either
of them may from time to time reasonably require in relation to the Business or
the financial


 





















 


position of the Company and any subsidiaries or otherwise relating to
their respective affairs.


 


9.5           The Shareholders shall require that the Operator deliver the Budget
required to be delivered under each of the Property Management Agreements and
shall procure that not later than 30 days before the beginning of each
financial year, the Board will prepare and deliver to them a proposed annual
budget and cash flow forecast for the next financial year and such other
information relating to the financial position and affairs of the Company and any subsidiaries
as each Shareholder may from time to time reasonably require.


 


9.6           Within the 30 day period referred to in
clause 9.5, Burford and Schrager, subject to Clause 6 and any amendments which
they deem appropriate to the proposed budget, shall approve the annual budget for the Company’s financial year and
communicate the annual budget to the Board.


 


9.7           Burford and Schrager shall procure that the Board will review the
annual budget during the course of each financial year of the Company. The
Board may propose changes to Burford and Schrager to which they shall respond
within 15 days of receipt of each proposal. It is the understanding of the
Shareholders that the approval of the Budget will be a Major Decision made in
accordance with Clause 6.1.


 


10.          RESTRICTIONS


 


10.1         Each
Shareholder hereby covenants with the other Shareholder that for so long as
such Shareholder owns an interest in the Company, it will not in Europe during
the term of this Agreement directly or indirectly (and whether for its own
account or in partnership with another or others or as principal, servant or
agent of another) deal with or engage in business with or be interested in any
concern, undertaking, firm or body corporate which engages in or carries on
within any part of Europe any business which competes with the Business in the
acquisition, development, ownership or operation of hotels.


 


10.2         Notwithstanding the provisions of Clause 10.1, if a Shareholder or any
subsidiary of a Shareholder acquires any interest in any person, firm or
company a subsidiary part of whose business at the date of such acquisition
comprises a business which competes with the Business, that Shareholder shall
be deemed not to be in breach of the restriction contained in Clause 10.1 if it
or such subsidiary or such person, firm or company disposes of such interest or
otherwise ceases to commit what would, apart from this Clause 10.2, be the
breach in question within three (3) months after the date of acquisition
of such interest.


 


10.2.1      The provisions of Clause 10.1 shall be subject in any event to the
provisions of this Clause 10.2.1. For so long as Schrager or any affiliate
thereof owns an interest in the Company. Schrager or any affiliate may acquire,
develop, own and operate one or more hotels in any city or municipality in
Europe; provided, that (a) neither the


 


16





















 


Company nor any subsidiary of the Company then owns or operates any
hotel in such city or municipality and is not then developing any property as a
hotel in such city or municipality (in any such case, a “Non-ISE City”), (b) the
Company been presented, on at least two (2) prior occasions, with the
opportunity to acquire a hotel or a property for development as a hotel (each,
an “Opportunity Property”) in such Non-ISE City and (i) Schrager has
favored the acquisition and/or development of at least two (2) of such
hotels or properties by the Company and (ii) the Company has elected not
to acquire such hotels or properties, (c) Schrager and its affiliates may
not acquire, develop, own or operate a hotel unless it has been offered to the
Company as an Opportunity Property and Schrager has voted in favor of the
Company acquiring, developing, owning or operating such hotel or property and (d) once
the Company elects to acquire, develop and operate an Opportunity Property, (i) the
city or municipality in which such Opportunity Property is situate shall no
longer be a Non-ISE City (an “ISE City”), (ii) Schrager and its affiliates
shall continue to be able to develop and operate any hotels theretofore
acquired by them in such ISE City in accordance with the provisions of this
Clause 10.2.1 and (iii) Schrager and its affiliates shall thereafter be
prohibited from acquiring additional hotels (or properties for development as
hotels) in such ISE City.


 


10.2.2      The provisions of Clause 10.1 shall be subject in any event to the
provisions of this Clause 10.2.2. For so long as Burford or any affiliate
thereof owns an interest in the Company, Burford or any affiliate may acquire,
develop, own and operate one or more hotels in any city or municipality in
Europe; provided, that (a) such city or municipality is a Non-ISE City, (b) the
Company has been presented, on at least two (2) prior occasions, with an
Opportunity Property in such Non-ISE City and (i) Burford has favored the
acquisition and/or development of at least two (2) of such hotels or
properties by the Company and (ii) the Company has elected not to acquire such
hotels or properties, (c) Burford and its affiliates may not acquire,
develop, own or operate a hotel unless it has been offered to the Company as an
Opportunity Property and Burford has voted in favor of the Company acquiring,
developing, owning or operating such hotel or property and (d) once the
Company elects to acquire, develop and operate an Opportunity Property, (i) the
city or municipality in which such Opportunity Property is situate shall be an
ISE City, (ii) Burford and its affiliates shall continue to be able to
develop and operate any hotels theretofore acquired by them in such ISE City in accordance with
the provisions of this Clause 10.2.2 and (iii) Burford and its affiliates
shall thereafter be prohibited from acquiring additional hotels (or properties
for development as hotels) in such ISE City.


 


10.2.3      The rights of Schrager and its affiliates, on the one hand, and Burford
and its affiliates, on the other, set forth in Clauses 10.2.1 and 10.2.2, respectively,
shall not impair or limit the rights of the other Party therein set forth and
nothing herein shall prevent
each of both Schrager and its affiliates and Burford and its affiliates from acquiring,
developing and operating a hotel in the same city or municipality as the other
which such person has acquired and is developing and/or operating in


 





















 


accordance with the provisions of Clauses 10.2.1 or 10.2.2 hereof, as
the case may be.


 


10.3         For the avoidance of doubt, the restrictions set out in clause 10.1
shall not apply to completely passive investments such as the acquisition by
Schrager or Burford or any affiliate of Schrager or Burford of a direct or
indirect freehold or leasehold interest in real property used for hotel
purposes provided (a) such property is leased in its entirety to an unrelated
third party, (b) such Shareholder’s and its affiliates’ interest in such
real property is limited to the mere receipt of income, and (c) such
Shareholder and its affiliates are not involved at any level in the
development, management or operation of such properties.


 


10.3.1      While the restrictions contained in Clause 10.1 are considered by the
Parties to be fair and reasonable in all the circumstances, it is agreed that,
if any of those restrictions shall be held to be void or ineffective for any
reason but would be held to be valid and effective if part of its wording were
deleted or its period reduced or its area reduced in scope, that restriction
shall apply with such modifications as may be necessary to make it valid and
effective.


 


10.3.2      The restrictions contained in Clauses 10.1 shall be construed as
separate and individual restrictions and shall each be capable of being severed
without prejudice to the other restrictions or to the remaining provisions of this
Agreement.


 


10.3.3      Each Shareholder shall procure that every subsidiary of that
Shareholder shall comply with the restrictions imposed upon that Shareholder
pursuant to Clause 10.1 as if
such subsidiary were itself a Party and bound by such restrictions.


 


10.3.4      Each Shareholder agrees that, having regard to the facts and matters
above, the restrictive covenants given by it in this Clause 10 are reasonable
and necessary for the protection of the legitimate interests of the
beneficiaries of such covenants and that, having regard to all the circumstances,
such covenants do not work harshly on it.


 


11.          RESTRICTIVE TRADE PRACTICES ACT 1976


 


No party to this Agreement which carries on business within the United
Kingdom shall give effect to, or enforce or purport to enforce any provision of
this Agreement (including any provision in any schedule or recitals to it),
or any provision of any document which may be executed pursuant to this
Agreement, or in connection with it, which is/are or may be registrable under
the Restrictive Trade Practices Act 1976 (as amended) (“the RTPA”) until the
day after particulars of this Agreement or the arrangements have been furnished
to the Director General of Fair Trading in accordance with the requirements of
the RTPA.


 


12.          TRANSFER OF SHARES


 


12.1         Each of Schrager and Burford agrees with the other not to sell,
transfer, mortgage, charge or dispose of or agree to sell, transfer, mortgage,
charge or dispose of (a


 





















 


“Transfer”) in whole or in part any interest (and whether separately,
together, in part or in whole) in any Share in the capital of the Company save
pursuant to the provisions of Clauses 6.1.3, 12, 14.2.4, and 15.


 


12.2         Schrager and Burford shall each be entitled to transfer shares in the
capital of the Company to a Group Company of Schrager and Burford respectively
provided that such transferee enters into a Deed of Adherence in the Agreed Form agreeing
to be bound by the terms of this Agreement (including this Clause) in all
respects as if it had been a Party in the capacity of the transferor of such
Shares and agreeing furthermore to transfer such Shares back to Schrager or
Burford (as the case may be) on ceasing to be a Group Company of Schrager or
Burford (as the case may be).


 


12.3         Any Shareholder transferring its Shares shall simultaneously transfer
its loan stock to the transferee.  


 


12.4         The Parties shall execute all such consents as are required pursuant to
the Articles to permit a
transfer pursuant to the provisions of Clauses 6.1.3, 12, 14.2.4 and Clause 15.


 


12.5         Notwithstanding anything contained herein to the contrary but subject
to the provisions of Clause 12.2 and Clause 12.6, Burford shall not effect a
Transfer of any of its Shares while Schrager retains ownership, directly or
indirectly, of its Shares and any attempt to effectuate such a Transfer shall
be null and void; provided, however, that Burford only shall be entitled to
transfer in the aggregate a percentage of its Shares which is equal to or less
than the percentage of Shares previously or contemporaneously sold by Schrager
determined by dividing the total number of Shares so sold by Schrager by the
total number of Shares owned by Schrager prior to the first such sale of Shares
by Schrager.


 


12.6         In the event that the Company becomes a public company whose shares are
listed on any recognized exchange in England or the United States of America,
the restrictions on Transfers herein contained shall be amended to be based
upon the commercially reasonable requirements of the public markets for a newly
public company so listed.


 


12.7         Notwithstanding anything contained herein to the contrary, a Transfer
which is the result of the death of a Shareholder shall not be a breach of
Clause 12.1, provided that (i) the transferees of Shares pursuant to such
Transfer are limited to members of the immediate family of the deceased
Shareholder, trusts established for the benefit of such family members, Group
Companies and statutory intestate successors, and (ii) such transferees
enter into Deed of Adherence in the Agreed Form agreeing to be bound by
the terms of this Agreement (including this Clause) in all respects as if they had
been Parties in the capacity of the transferor of such Shares.


 


12.8         In the event that a Float is achieved, and thereafter (i) Ian
Schrager is removed as the Chief Executive Officer of the Company, or (ii) a
decision Ian Schrager makes as Chief Executive Officer of the Company is
overruled by the Board or the


 





















 


Shareholders, the Company shall be obligated to the extent that is is
lawful to take all  steps
necessary, as reasonably determined by Ian Schrager, to facilitate the sale by
Ian Schrager of all Shares
beneficially owned by him or all Shares owned by Schrager; provided, that the requirement of transfer
to non-affiliates of 25% of the Company’s share capital shall be inapplicable
in the case of a Float achieved in accordance with this Clause 12.8.


 


12.9         Schrager shall have the right to assign (all but not part only of) its
ownership in the Company to any entity in which Ian Schrager is the Chief
Executive Officer promoted by Schrager or its affiliates for the purpose of
becoming shareholder of the Company. Upon such an assignment the other
shareholder shall execute and deliver prior to completion a deed of novation in
such form as Schrager may reasonably require, in respect of which the
prospective obligations of Schrager under this Agreement shall be novated to
such other shareholder.


 


12.10       Burford shall have the right to assign all of its rights and
obligations to any wholly-owned subsidiary of the ultimate holding company of Burford.
Upon such an assignment, the other shareholder shall deliver and execute a deed
of novation in such form as Burford may reasonably require in respect of which
the prospective obligations of Burford under this Agreement shall be novated to
such other shareholder.


 


13.          CONFLICT WITH ARTICLES


 


In the event of any conflict between the terms of this Agreement and
any provision of the Articles this Agreement shall prevail.


 


14.          TERMINATION


 


14.1         This Agreement shall remain in full force and effect unless and until
terminated in accordance with the provisions of this Clause 14.


 


14.2         This Agreement shall terminate forthwith upon:


 


14.2.1      one Shareholder acquiring all of the Shares in the capital of the
Company held by all of the other Shareholders; or


 


14.2.2      the making of an order or the passing of an effective resolution for
the winding up of the Company; or


 


14.2.3      the execution of a written agreement among all of the then Shareholders
terminating this Agreement.


 


14.2.4      EVENTS OF DEFAULT


 


A.            Definition


 





















 


An “Event of Default”
shall mean in relation to any Shareholder (the “Relevant Person”) any of the
following:


 


1.             the Relevant Person commits a material
breach of its obligations under this Agreement and, if the breach is capable of
remedy, fails to remedy the breach within sixty (60) days of being specifically
required in writing to do so by the other party; provided, that if such breach
is not capable of being remedied within such sixty (60) day period, the same
shall not constitute an Event of Default so long as the Relevant Person
commences to cure such breach within such sixty (60) day period and thereafter
diligently prosecutes such cure to completion;


 


2.             the Company terminates a Project Document
to which the Relevant Person or its affiliate is a party before the expiry of the
contractual term as a remedy for the default of such Relevant Person or its
affiliate thereunder;


 


3.             there is a change of control of the
Relevant Person or its holding company (where for the avoidance of doubt any
exercise by Schrager of its rights to assign pursuant to clause 12.9 above
shall not amount to a change of control);


 


4.             the Relevant Person:


 


If the Relevant Person is not an
individual:


 


a.             passes a winding-up resolution (other than
in connection with a members voluntary winding-up for the purposes of an
amalgamation or reconstruction which has the prior written approval of the investor);


 


b.             calls a meeting of its creditors for the
purpose of considering a resolution that it wound-up voluntarily;


 


c.             resolves to present its own winding-up
petition;


 


d.             is wound-up (whether in England or
elsewhere);


 


e.             calls, or a nominee on its behalf calls, a
meeting of any of its creditors;


 


f.              makes an application to the Court under Section 425
of the Companies Act 1985;


 


g.             submits to any of its creditors a proposal
pursuant to Part I of the Insolvency Act 1986;


 


h.             enters into any arrangement, scheme,
compromise, moratorium or composition with any of its creditors (whether
pursuant to Part I of the insolvency Act 1986 or otherwise);


 





















 


i.              is struck off the Register or otherwise
ceases to exist: or


 


j.              suffers all or a substantial part of its property
to be taken in execution; or


 


If the Relevant Person is an individual:


 


a.             is adjudged bankrupt or sequestrated either
in the United Kingdom or elsewhere;


 


b.             is a party to a Deed of Arrangement with
creditors;


 


c.             enters into any form of voluntary
arrangement with his creditors or otherwise makes a general composition with
his creditors; or


 


d.             has an administration order passed against
him; or


 


5.             the directors or shareholders of the
Relevant Person resolve to present a petition for an administration order in
respect of it or an administration order is made;


 


6.             an administrative receiver, a receiver or a
receiver and manager is appointed in respect of all or a substantial part of
any of the property of the Relevant Person.


 


B.            Termination
on Default


 


Upon the occurrence and during the continuance of an Event of Default,
each Shareholder which is not the Relevant Person with respect to such Event of
Default may terminate this Agreement by notice (“Termination Notice”) in
writing to the other Shareholders provided that such Shareholder simultaneously
therewith delivers a Notice pursuant to Clause 15.1 hereof. Thereafter, upon
the completion of the Transfer of Sale Shares in accordance with Clause 15,
this Agreement shall terminate and be of no further force and effect. Each
Shareholder comprising Burford shall be required to act collectively under this
Clause and a Termination Notice delivered by any Shareholder comprising Burford
shall only be effective if such Termination Notice, and the Notice delivered
together therewith, is (i) signed by all of the Shareholders comprising
Burford, or (ii) signed by Burford and on its face expressly states that
in delivering such notice Burford is acting for itself and the other members of
Burford. Each of the Shareholders comprising Burford hereby agrees that (y) any
notice delivered by Burford in accordance with the foregoing clause (ii) also
shall be deemed to have been delivered and executed by each such Shareholder,
and (z) Burford shall have the right to deliver notices under this Clause
on their behalf.


 


C.            Continuance of Company’s Operations


 


Following service of a Termination Notice until such time as the
completion of the Transfer of the Sale Shares in accordance with the terms
hereof (including any period


 





















 


during which any matter relating to this clause or Clause 15 is the subject of proceedings) each
Shareholder shall do all things in its power to continue to operate the Company
in the ordinary course of its business as it existed at the time at which the
Termination Notice was served.


 


14.3         The termination of this Agreement (howsoever arising);


 


14.3.1      shall be without prejudice to the rights of any Party accrued hereunder
as at the date of termination or to any claim which any Party may have for
damages against or otherwise arising from any antecedent breach thereof by any
other Party;


 


14.3.2      shall not operate to affect such of the provisions hereof as in
accordance with their terms are expressed to operate or have effect thereafter.


 


14A.1      Schrager or Burford may require the Board to appoint an investment bank
to report on the prospects for achieving a Float at any time. The investment bank’s
report should include an appraisal of the range of prices for an ordinary share
of the Company achievable in its opinion through such Float.


 


14A.2      Following receipt of the investment bank’s report, the Board shall
convene a general meeting of the Company to consider such report and the Board’s
recommended course of action. At such meeting, any decision to effect a Float
shall be a Major Decision requiring the approval of the Shareholders in
accordance herewith. No Shareholder shall be liable to any other Shareholder
for voting against a Float.


 


14A.4      “Float” means (i) the admission of all or part of the ordinary
share capital of the Company to listing on The London Stock Exchange, the New
York Stock Exchange or the American Stock Exchange or their quotation on NASDAQ
in connection with a flotation or placing which results in twenty five per cent
(25%) or more of the Company’s ordinary share capital being held by persons
other than those who are holders of the Company’s ordinary share capital
immediately prior to such flotation of placing, or (ii) the admission of
all or part of the Company’s ordinary share capital to the Alternative
Investment Market of The London Stock Exchange. For the purposes of this
definition, Company shall be deemed to include any successor in title.


 


15.          OFFER TO BUY SHARES


 


15.1         In the event that either (a) Schrager and Burford are unable to
reach agreement with respect to a Major Decision at any time after the third
anniversary of the Completion Date, either Burford or Schrager shall have the
right, or (b) a Termination Notice is served pursuant to Clause 14.2.4(B) hereof,
the Shareholder serving such Termination Notice shall have the obligation
concurrently therewith, to serve a written notice (“the Notice”) on the other (“the
Recipient”) offering to buy all (but not some only) of the issued shares of the
class held by (or by a Group Company of) the Recipient (“the Recipient’s Shares”)
or to sell to the Recipient all (but not some only) of the issued shares of the
class held by (or by a Group Company of) the Party who has given notice (“the
Notifier”) (“the Notifier’s Shares”) in accordance with the following


 





















 


provisions of this Clause 15. For purposes hereof, any offer to
purchase by Burford or to sell to Burford
shall encompass all (but not some only) of the A Shares. For purposes hereof,
any offer to purchase by Schrager or to sell to Schrager shall encompass all
(but not some only) of the B Shares.


 


15.2         The Notice shall specify the per share price at which the Notifier is
prepared to buy the Recipient’s Shares (“the Notified Price”) but shall not
include any other conditions whatsoever.


 


15.3         The Notice shall be deemed to:


 


15.3.1      constitute an offer by the Notifier, open for acceptance by the
Recipient for one hundred eighty (180) days from the date of service of the
Notice (“the Offer Period”), to buy all but not some only of the Recipient’s
Shares on the Transfer Terms (as defined below) at the Notified Price; and


 


15.3.2      constitute an alternative offer by the Notifier to sell to the
Recipient all (but not some only) of the Notifier’s Shares after the end of the
Offer Period on the Transfer Terms at the Notified Price if the Recipient does
not elect to sell the Recipient’s Shares to the Notifier before the expiry of
the Offer Period and shall be irrevocable without the written consent of the
Recipient. For the purposes of this Clause “the Transfer Terms” means free from
all claims, equities, liens, charges and encumbrances together with all rights
attaching thereto at the date of service of the Notice and together with, for
the avoidance of doubt, the benefit of the provisions of Clause 15.10 but
subject in any event to the Master Development Agreement and the Master Management
Agreement.


 


15.4         The Recipient may at any time before the expiry of the Offer Period
serve notice in writing upon the Notifier of its desire to sell all (but not
some only) of the Recipient’s Shares on the terms set out in this Clause (“a
Sale Notice”) which may not be expressed to be subject to any condition
whatsoever. On service of a Sale Notice on the Notifier the Notifier shall be
bound to purchase at the Notified Price and the Recipient shall be bound to
sell, on payment of the Notified Price, all the Recipient’s Shares, which the
Recipient shall transfer on the Transfer Terms.


 


15.5         If the Recipient does not serve a Sale Notice during the Offer Period
the Recipient shall be deemed to have declined the offer referred to in Clause
15.3.1 and to have accepted the alternative offer referred to in Clause 15.3.2
and the Notifier shall be bound to sell upon receipt of the Notified Price and
the Recipient shall be bound to purchase at the Notified Price the Notifier’s
Shares, which the Notifier shall transfer on the Transfer Terms.


 


15.6         In the following sub-clauses, “the Sale Shares” means the shares to be
sold, “the Seller” means the seller of the Sale Shares and “the Buyer” means
the person who, in accordance with the foregoing provisions of this Clause, has
become bound to purchase the Sale Shares.


 





















 


15.7         Purchase deposits and the Closing (as hereinafter defined) shall be
made in accordance with the following provisions of this Clause 15.7:


 


15.7.1      Within ten (10) days following the termination of the Offer
Period, the Purchaser shall deliver to the Seller’s nominated solicitor or
stakeholder a deposit in an amount equal to five percent (5%) of the total
price of the Sale Shares. In such event, within twenty (20) days thereafter the
Seller shall effect the Closing and the Shareholders shall procure that the
Board will enter the Purchaser’s name in the register of members of the Company
as the holder of the Sale Shares. Failure to effect the Closing (other than by
reason of default of the Seller) shall result in, without limitation, loss by
the Purchaser of such deposit.


 


15.7.2      If the Purchaser fails to deliver such deposit, (i) the Seller
shall be entitled to withdraw its offer to sell its Shares to the Purchaser
without prejudice to its right to sue for delivery of the deposit from the
Purchaser, or (ii) at the Seller’s option, to be exercised in writing by
the Seller within ten (10) days after the Purchaser’s failure to make the
required deposit, (w) the party which theretofore had been the “Purchaser” shall
thereupon be deemed to be the Seller, (x) the party which theretofore had been the
“Seller” shall be deemed to be the Purchaser, (y) the Sale Shares will be
deemed to comprise the Shares of the deemed Seller and any affiliate thereof,
and (z) the Notified Price shall be reduced by five percent (5%). Upon such an
election by the original Seller, the deemed Seller shall effect the Closing and
the Shareholders shall procure that the Board will enter the Purchaser’s name
in the register of members of the
Company as the holder of the Sale Shares.


 


15.7.3      With respect to an Event of Default described in clause 14.2.4(A)(2),
in the event that the party serving the Termination Notice (the “Non-Defaulting
Shareholder”) is the Seller, failure of the Non-Defaulting Shareholder, as
Seller, to effect the Closing, or, in the event that the Non-Defaulting
Shareholder is the Purchaser, failure of the Non-Defaulting Shareholder, as
Purchaser, to deliver the required deposit, within the applicable prescribed
period shall be deemed to be a waiver by the Non-Defaulting Party of its right
to deliver a Termination Notice (and a Notice) hereunder as to the Event(s) of
Default giving rise to the service of the Termination Notice.


 


15.8         The Closing shall take place at such reasonable time and place (and
otherwise in accordance with all applicable time periods herein specified) as
the Buyer may specify by not less than forty-eight (48) hours written notice to
the Seller whereupon (the following events described in this Clause 15.8 are
herein collectively referred to as the “Closing”):


 


15.8.1      the Seller shall deliver to the Buyer a duly executed transfer or
transfers in favor of the Buyer or as it may direct together with the relative
share certificates in respect of the Sale Shares;


 


15.8.2      against such delivery, the Buyer shall pay the Notified Price to the
Seller in cash or by wire transfer or banker’s draft for value on the date of
completion;


 





















 


15.8.3      the Seller shall do all such other things and execute all such other
documents as the Buyer may require to give effect to the sale and purchase of
the Sale Shares;


 


15.8.4      the Seller shall procure the resignation of all directors appointed by
it and such resignation shall take effect without any liability on the Company
for compensation for loss of office or otherwise.


 


15.9         If the Seller shall fail or refuse to transfer any Sale Shares in
accordance with its obligations hereunder the Company shall authorize some
person to execute and deliver on its behalf the necessary transfer and the
Company shall receive the purchase money in trust for the Seller and cause the
Buyer to be registered as the holder of the Sale Shares. The receipt of the
Company for the purchase money shall be a good discharge to the Buyer (and it
shall not be bound to see to the application thereof).


 


15.10       If each of Schrager and Burford shall receive an effective and properly
delivered Notice, the first such Notice to be properly delivered shall prevail.


 


15.11       Upon a transfer of all the Sale Shares in accordance with this Clause:


 


15.11.1    The Seller shall repay all loans, loan capital, borrowings and
indebtedness in the nature of borrowings outstanding to the Company from the
Seller (or from any person controlled by or connected with the Seller) together
with any accrued interest.


 


15.11.2    The Company shall repay all loans, loan capital, borrowings and
indebtedness in the nature of borrowings outstanding to the Seller (or from any
person controlled by or connected with the Seller) together with any accrued
interest.


 


15.11.3    The Buyer shall use all reasonable endeavours (but, save as provided
below, without involving any financial obligations on its Part) to procure the
release of any guarantees or indemnities given by the seller (or by any person
controlled by or connected with the Seller) to or in respect of the Company
PROVIDED THAT costs in relation thereto shall be borne by the Buyer save where
such guarantee or indemnity given by the Seller (or by any person controlled by
or connected with the Seller) is in form or substance substantially different
from that given by the Buyer in which event the Seller shall bear such costs.


 


15.12       Each Shareholder waives its rights of pre-emption on the transfer of
the Sale Shares contained in this Clause 15 and the Articles to the extent
necessary to effect the provisions of this Clause 15.


 


15.13       For purposes of any Transfer under this Clause 15, each Shareholder
comprising Burford shall be required to act collectively under this Clause and
any Notice delivered hereunder
by any such Shareholder shall only be effective if signed by all of such
Shareholders.


 





















 


16.          ANNOUNCEMENTS


 


16.1         No announcement (other than if and to the extent required by law or by
any governmental or regulatory body) shall be made by or on behalf of Schrager
or Burford or by or on behalf of either of their respective affiliates
concerning the existence or subject matter of this Agreement, or the
transactions contemplated by this Agreement, without the prior written consent
of Schrager and Burford, which consent shall be in the sole and absolute
discretion of Schrager and Burford.


 


17.          CONFIDENTIALITY


 


17.1         Each of the Parties agrees not to make public or reveal to any third
party any commercial, organizational or other information of a confidential
nature concerning the other Parties obtained as a result of such Party’s
participation in this Agreement save insofar as the information in question:


 


17.1.1      is proven to have been known to such Party prior to the discussion
relating to the transactions contemplated hereby between Burford and its
affiliates (and their agents) and
Schrager and its affiliates (and their agents);


 


17.1.2      is proven to have become known to such Party during the term of this
Agreement through the lawful act of a third party;


 


17.1.3      comes into the public domain otherwise than as a result of breach of
this Clause or of law;


 


17.1.4      is required to be given, made or published by law or under the rules and
regulations of the London Stock Exchange or any other recognized investment
exchange (as defined in Section 207 of the Financial Services Act 1986);


 


17.1.5      is made public or revealed with the prior written approval of the other
Parties to the contents thereof and the manner of its presentation and
publication (such approval not to be unreasonably withheld or delayed);


 


17.1.6      is made to a lender in connection with Acceptable Finance in accordance
with the commercially reasonable requirements of such lender.


 


17.2         The Parties shall use their respective best endeavors to agree upon the
form and manner of presentation and publication of information regarding the
Company which shall be given to relevant customers and prospective customers.


 


18.          GENERAL


 


18.1.1      This Agreement shall be binding on and enure for the benefit of the
successors of the Parties and (subject to compliance with Clause 12) the
successors in title to the Shares held by Schrager and Burford.


 





















 


18.1.2      Subject to the provisions of Clause 18.1.1 this Agreement is personal
to the Parties and no Party
shall assign or purport to assign or deal with, in any way, any of its rights
or obligations hereunder.


 


18.2         The headings contained in this Agreement are included for the sake of
convenience and shall not affect the interpretation hereof.


 


18.3         Where any matter or thing herein contained is expressed to be an
obligation on the part of the
Company (whether to do or refrain from doing any such matter or thing) the
Shareholders shall exercise their respective voting rights or other powers of
and in the Company to procure that the Company shall observe the same so far as
such matters are within their power.


 


18.4         The Parties (but without imposing any additional financial obligations
on the Parties) shall and shall use their best endeavors to procure that any
necessary third party shall do and execute and perform all such further deeds
documents assurances acts and things as any of them may reasonably require by
notice in writing to give effect to the terms of this Agreement.


 


18.5         Where this Agreement provides that any matter is subject to the
consent, approval or agreement of any Party then (save as expressly provided
otherwise) it shall be in the absolute discretion of the Party concerned as to
whether (and if so on what terms and conditions) the consent, approval or
agreement is given.


 


18.6         This Agreement shall not constitute a partnership between the Parties
or any of them.


 


18.7         The Parties agree that the Company will be authorised to create
subsidiaries in accordance with the provisions of Clause 6.1.24, and that the
Shareholders will procure that any such subsidiaries shall comply with the
provisions of the Joint Venture Agreement as if it related to the subsidiary
and to the extent otherwise necessary Burford and Schrager shall procure that
the subsidiary’s corporate governance documents are adopted in a form so as to
require any such subsidiary to conduct its business in a manner which will
result in such compliance.


 


19.          SEVERABILITY


 


In the event that any provision of this Agreement or any part thereof
shall for any reason be held by any judicial determination to be invalid or unenforceable
the valid and enforceable portions hereof shall continue to be in full force
and effect and the Parties shall negotiate in good faith a substitute provision
for the provision of this Agreement held to be invalid or unenforceable as
aforesaid to reflect the purpose or intent (as closely as may be possible) of
such provision.


 


20.          WAIVER AND REMEDIES


 


A failure by any Party to exercise or enforce any rights conferred upon
it by this Agreement shall not be deemed to be a waiver of any rights or operate
so as to bar the



 





















 


exercise or enforcement thereof at any subsequent time or times and all
express rights granted to any Party hereunder shall be in addition to any
rights that such Party may have under the general law in respect of a breach
hereof.


 


21.          COSTS


 


Each Party shall bear its own costs and expenses in relation to the
preparation, negotiation and implementation of this Agreement and the
agreements and arrangements of which it forms part. To the extent any approved
annual Hotel budget provides for expenditures being made by either Schrager or
Burford, the Company shall reimburse Schrager or Burford, as the case may be,
for such expenditures. Such reimbursement shall be made by the Company after
Schrager or Burford presents reasonable evidence of the costs so incurred and
shall be made out of Company cash flow.


 


22.          ENTIRE AGREEMENT AND
VARIATION


 


This Agreement (together with any agreement of even date entered into
pursuant hereto or in connection herewith) constitutes the entire agreement between
the Parties in respect of the subject matter hereof and may only be varied by a
written agreement signed on behalf of each of the Parties.


 


23.2        The
Parties hereby expressly confirm that they have not relied upon any representation
or warranty given by any other Party which is not set out in this Agreement and
to the extent that they have they hereby expressly waive all rights in respect
to any such representation or warranty.


 


23.          NOTICES


 


Any notice required to be given by any Party to any other shall be
deemed validly served if delivered by hand, sent by prepaid registered letter
through the post, by internationally reputable overnight courier or by telex or
facsimile machine to the registered office or telex or facsimile number of such
Party for the time being (subject, in the case of telex or facsimile, to
receipt of the appropriate answerback) and (subject as aforesaid) any notice
delivered by hand or sent by telex or facsimile machine shall be deemed to have
been served on the business day next following the day on which it was
delivered or transmitted and any notice so served (i) by overnight courier
shall be deemed to have been served three days (for international) and one day (domestic)
after the time it was deposited with such courier and (ii) posted through
the post shall be deemed to have been served fifteen days (international) and
three days (domestic) after the time it was posted, and in proving such service
it shall be sufficient to prove that the notice was properly addressed and
posted. All notices given hereunder shall be in the English language.


 





















 


24.          GOVERNING LAW AND JURISDICTION


 


(a)           This Agreement shall be governed by and construed in all respects in accordance
with the laws of England and any suit, actions, dispute or proceedings arising
out of or in connection with this Agreement (the “Proceedings”) shall be
subject (and the parties hereby irrevocably submit) to the jurisdiction of the
English courts and for the purposes of Order 10 Rule 3 of the Rules of
the Supreme Court to England and any other Rules thereof each party hereto irrevocably agrees that
any process may be served upon by leaving a copy addressed to it at its address
as stated above or at such other address for service within England and Wales
as may be notified in writing from time to time to the Company and the Company
hereby irrevocably agrees that any process may be served upon it by leaving a
copy addressed to it as its address as stated above or at such other address
for service within England and Wales as may be notified in writing from time to
time to each party hereto.


 


(b)           Each party irrevocably waives any objection which it might at any time
have to the courts to England being nominated as the forum to hear and
determine or settle any Proceedings and agrees not to claim that the courts of
England are not a convenient or appropriate forum.


 


Executed and delivered on
the date set out at the head of this Agreement.


 


	
  Ian
  Schrager Hotels LLC

  	
  Burford Hotels Limited

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Ian Schrager

  	
   

  	
  /s/ [ILLEGIBLE]

  	
   

  
	
   

  	
   

  
	
  By: Ian Schrager, 

  	
  By:

  
	
  Chief Financial Officer