Document:

Exhibit 10.22

 

 

 

MORGANS HOTEL GROUP CO.

 

 

2006 OMNIBUS STOCK
INCENTIVE PLAN

 

 

SECTION 1.              GENERAL PURPOSE OF PLAN.

 

The name of this plan is the Morgans Hotel Group Co. 2006 Omnibus Stock
Incentive Plan (the “Plan”).  The purpose
of the Plan is to enable the Company to attract and retain highly qualified
personnel who will contribute to the Company’s success and to provide
incentives to Participants (hereinafter defined) that are linked directly to
increases in stockholder value and will therefore inure to the benefit of all
stockholders of the Company.  To
accomplish the foregoing, the Plan provides that the Company may grant awards
of Stock, Incentive Stock Options, Non-Qualified Stock Options, Stock
Appreciation Rights, Restricted Stock and Other Awards (each as hereinafter
defined).

 

SECTION 2.              DEFINITIONS.

 

For purposes of the Plan, the following terms shall be defined as set
forth below:

 

(a)           “Additional
IPO Shares” means any shares of Stock that the Company issues and sells to the
IPO Underwriters pursuant to the underwriting agreement relating to the Initial
Public Offering in excess of the Initial IPO Shares, but excluding any
Overallotment IPO Shares.

 

(b)           “Administrator”
means the Board, or if and to the extent the Board does not administer the Plan,
the Committee in accordance with Section 3 below.

 

(c)           “Automatic
Non-Employee Director Stock Awards” has the meaning set forth in Section 10
hereof.

 

(d)           “Award”
means an award of Incentive Stock Options, Non-Qualified Stock Options, Stock
Appreciation Rights, Restricted Stock, Stock or Other Awards under the Plan.

 

(e)           “Beneficial
Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange
Act.

 

(f)            “Board”
means the Board of Directors of the Company.

 

 

(g)           “Change
in Control” means the occurrence of any one of the following events:

 

(i)            individuals
who, on the Effective Date, constitute the Board (the “Incumbent Directors”)
cease for any reason to constitute at least a majority of the Board, provided
that any person becoming a director subsequent to the Effective Date, whose
election or nomination for election was approved by a vote of at least
two-thirds of the Incumbent Directors then on the Board (either by a specific
vote or by approval of the proxy statement of the Company in which such person
is named as a nominee for director, without written objection to such
nomination) shall be an Incumbent Director; provided, however, that no
individual initially elected or nominated as a director of the Company as a
result of an actual or threatened election contest with respect to directors or
as a result of any other actual or threatened solicitation of proxies by or on
behalf of any person other than the Board shall be deemed to be an Incumbent
Director;

 

(ii)           any
Person is or becomes a Beneficial Owner, directly or indirectly, of securities
of the Company representing 35% or more of the combined voting power of the
Company’s then outstanding securities eligible to vote for the election of the
Board (the “Company Voting Securities”); provided, however, that the event
described in this paragraph (ii) shall not be deemed to be a Change in
Control by virtue of any of the following acquisitions:  (A) by the Company or any Subsidiary, (B) by
any employee benefit plan (or related trust) sponsored or maintained by the
Company or any Subsidiary, (C) by any underwriter temporarily holding
securities pursuant to an offering of such securities, (D) pursuant to a
Non-Qualifying Transaction (as defined in paragraph (iii)), (E) pursuant
to any acquisition by a Participant or any group of persons including a Participant
(or any entity controlled by a Participant or any group of persons including a Participant);
(F) a transaction (other than one

 

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described
in (iii) below) in which Company Voting Securities are acquired from the
Company, if a majority of the Incumbent Directors approve a resolution
providing expressly that the acquisition pursuant to this clause (F) does
not constitute a Change in Control under this paragraph (ii); or (G) by
NCIC or NorthStar Partnership, L.P. or any of their majority-owned or
controlled subsidiaries, partnerships or affiliates;

 

(iii)          the
consummation of a merger, consolidation, statutory share exchange or similar
form of corporate transaction involving the Company or any of its Subsidiaries
that requires the approval of the Company’s stockholders, whether for such
transaction or the issuance of securities in the transaction (a “Business
Combination”), unless immediately following such Business Combination:  (A) at least 50% of the total voting
power of (x) the corporation resulting from such Business Combination (the “Surviving
Corporation”), or (y) if applicable, the ultimate parent corporation that
directly or indirectly has beneficial ownership of at least 80% of the voting
securities eligible to elect directors of the Surviving Corporation (the “Parent
Corporation”), is represented by Company Voting Securities that were
outstanding immediately prior to such Business Combination (or, if applicable,
is represented by shares into which such Company Voting Securities were
converted pursuant to such Business Combination), and such voting power among
the holders thereof is in substantially the same proportion as the voting power
of such Company Voting Securities among the holders thereof immediately prior
to the Business Combination, (B) no person (other than NCIC or NorthStar
Partnership, L.P. or any of their majority-owned or controlled subsidiaries,
partnerships or affiliates or any employee benefit plan (or related trust)
sponsored or maintained by the Surviving Corporation or the Parent
Corporation), is or becomes the beneficial owner, directly or indirectly, of 35%
or more of the total voting power of the outstanding

 

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voting
securities eligible to elect directors of the Parent Corporation (or, if there
is no Parent Corporation, the Surviving Corporation) and (C) at least half
of the members of the board of directors of the Parent Corporation (or, if
there is no Parent Corporation, the Surviving Corporation) following the
consummation of the Business Combination were Incumbent Directors at the time
of the Board’s approval of the execution of the initial agreement providing for
such Business Combination (any Business Combination which satisfies all of the
criteria specified in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying
Transaction”); or

 

(iv)          the
stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company or the consummation of a sale of all or
substantially all of the Company’s assets.

 

(h)           “Code”
means the Internal Revenue Code of 1986, as amended from time to time, or any
successor thereto.

 

(i)            “Committee”
means any committee the Board may appoint to administer the Plan.  To the extent necessary and desirable, the
Committee shall be composed entirely of individuals who meet the qualifications
referred to in Section 162(m) of the Code and Rule 16b-3 under the
Exchange Act.  If at any time or to any
extent the Board shall not administer the Plan, then the functions of the Board
specified in the Plan shall be exercised by the Committee.

 

(j)            “Company”
means Morgans Hotel Group Co., a Delaware corporation (or any successor corporation).

 

(k)           “Effective
Date” has the meaning set forth in Section 15 hereof.

 

(l)            “Eligible
Recipient” means an officer, director (including a Non-Employee Director),
employee, co-employee, consultant or advisor of the Company or of any Parent or
Subsidiary who provide services to the Company.

 

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(m)          “Exchange
Act” means the Securities Exchange Act of 1934, as amended from time to time.

 

(n)           “Fair
Market Value” means, as of any given date, the fair market value of a share of
Stock as determined by the Administrator using any reasonable method and in
good faith; provided that (i) if shares of Stock are admitted to trading
on a national securities exchange, the fair market value of a share of Stock on
any date shall be the closing sale price reported for such share on the exchange
on such date on which a sale was reported; (ii) if shares of Stock are admitted
to quotation on the National Association of Securities Dealers Automated
Quotation System (“NASDAQ”) or a successor quotation system and has been
designated as a National Market System (“NMS”) security, fair market value of a
share of Stock on any date shall be the closing sale price reported for such
share on the system on such date on which a sale was reported; and (iii) if
shares of Stock are admitted to quotation on the NASDAQ but have not been
designated as an NMS security, fair market value of a share of Stock on any
such date shall be the average of the highest bid and lowest asked prices for
such share of Stock on the system on such date on which both the bid and asked
prices were reported.

 

(o)           “Free
Standing Rights” has the meaning set forth in Section 8 hereof.

 

(p)           “Free
Standing Stock Appreciation Rights” has the meaning set forth in Section 8
hereof.

 

(q)           “Immediate
Family” means any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law or sister-in-law, and shall include adoptive
relationships of the Participant.

 

(r)            “Incentive
Stock Option” means any Stock Option intended to be designated as an “incentive
stock option” within the meaning of Section 422 of the Code.

 

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(s)           “Initial
IPO Shares” means the initial [NUMBER] shares of Stock that the Company issues
and sells to the IPO Underwriters pursuant to the underwriting agreement.

 

(t)            “Initial
Offering Price” means the “Price to Public” of the Initial IPO Shares set forth
on the cover page of the IPO Prospectus.

 

(u)           “Initial
Public Offering” means the initial underwritten public offering of Stock
pursuant to the IPO Prospectus.

 

(v)           “IPO
Prospectus” means the Company’s prospectus relating to the Initial Public
Offering as filed with the Securities and Exchange Commission pursuant to Rule 424(b) under
the Securities Act and deemed a part of the Company’s registration statement on
Form S-1 (No. 333-129277) at the time such registration statement is
declared effective by the Securities and Exchange Commission.

 

(w)          “IPO
Underwriters” means the underwriters of the Initial Public Offering.

 

(x)            “LLC
Unit” or “LLC Units” means a membership interest or membership interests in
Morgans Group LLC, a Delaware limited liability company and the entity through
which the Company conducts a significant portion of its business.

 

(y)           “Non-Employee
Director” means a director of the Company who is not an employee of the Company.

 

(z)            “Non-Qualified
Stock Option” means any Stock Option that is not an Incentive Stock Option,
including any Stock Option that provides (as of the time such Stock Option is
granted) that it will not be treated as an Incentive Stock Option.

 

(aa)         “NCIC”
means NorthStar Capital Investment Corp., a Maryland corporation.

 

(bb)         “Other
Awards” means an award granted pursuant to Section 11 hereof.

 

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(cc)         “Overallotment
IPO Shares” means any shares of Stock that the Company issues and sells to the
IPO Underwriters as a result of any exercise of the overallotment option
granted by the Company to the IPO Underwriters pursuant to the underwriting
agreement relating to the Initial Public Offering.

 

(dd)         “Parent”
means any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company, if each of the corporations in the chain
(other than the Company) owns stock possessing 50% or more of the combined
voting power of all classes of stock in one of the other corporations in the
chain.

 

(ee)         “Participant”
means any Eligible Recipient selected by the Administrator, pursuant to the
Administrator’s authority in Section 3 below, to receive an Award.

 

(ff)           “Person”
means an individual, corporation, partnership, limited liability company, joint
venture, association, trust, unincorporated organization, other entity or “group”
(as defined in the Exchange Act).

 

(gg)         “Plan”
has the meaning set forth to it in Section 1 hereof.

 

(hh)         “Related
Rights” has the meaning set forth in Section 8 hereof.

 

(ii)           “Related
Stock Appreciation Rights” has the meaning set forth in Section 8 hereof.

 

(jj)           “Restricted
Period” has the meaning set forth in Section 9 hereof.

 

(kk)         “Reserved
Shares” has the meaning set forth in Section 4 hereof.

 

(ll)           “Restricted
Stock” means shares of Stock subject to certain restrictions granted pursuant
to Section 9 below.

 

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

 

(nn)         “Stock”
means the common stock, par value $0.01 per share, of the Company.

 

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(oo)         “Stock
Appreciation Right” means the right pursuant to an award granted under Section 8
below to receive an amount equal to the excess, if any, of (A) the Fair
Market Value, as of the date such Stock Appreciation Right or portion thereof
is surrendered, of the shares of Stock covered by such right or such portion
thereof, over (B) the aggregate exercise price of such right or such
portion thereof.

 

(pp)         “Stock
Option” means an option to purchase shares of Stock granted pursuant to Section 7
below.

 

(qq)         “Subsidiary”
means any corporation or other entity (other than the Company) in which the
Company has a controlling interest, either directly or indirectly.

 

SECTION 3.              ADMINISTRATION.

 

(a)           The
Plan shall be administered in accordance with the requirements of Section 162(m)
of the Code (but only to the extent necessary and desirable to maintain
qualification of Awards under the Plan under Section 162(m) of the Code)
and, to the extent applicable, Rule 16b-3 under the Exchange Act by the Board
or, at the Board’s sole discretion, by the Committee, which shall be appointed
by the Board, and which shall serve at the pleasure of the Board.

 

(b)           The
Administrator shall have the power and authority to grant Stock Options, Stock
Appreciation Rights, Restricted Stock, Stock, Other Awards or any combination
of the foregoing hereunder to Eligible Recipients pursuant to the terms of the
Plan.  In particular, but without
limitation, the Administrator shall have the authority:

 

(i)            to
select those Eligible Recipients who shall be Participants;

 

(ii)           to
determine whether and to what extent Awards are to be granted hereunder to
Participants;

 

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(iii)          to
determine the number of shares of Stock to be covered by each Award granted
hereunder;

 

(iv)          to
determine the terms and conditions, not inconsistent with the terms of the
Plan, of each Award granted hereunder, including the waiver or modification of
any such terms or conditions;

 

(v)           to
determine the terms and conditions, not inconsistent with the terms of the
Plan, which shall govern all written instruments evidencing Awards granted
hereunder, including the waiver or modification of any such terms or conditions;

 

(vi)          to
adopt, alter and repeal such administrative rules, guidelines and practices
governing the Plan as it shall from time to time deem advisable; and

 

(vii)         to
construe, interpret and implement the terms and provisions of the Plan and any
Award issued under the Plan (and any award agreements relating thereto) and to otherwise
supervise the administration of the Plan.

 

(c)           The
Administrator may, in its absolute discretion, without amendment to the Plan, (i) accelerate
the date on which any Stock Option granted under the Plan becomes exercisable,
waive or amend the operation of Plan provisions respecting exercise after
termination of employment or otherwise adjust any of the terms of such Stock
Option, and (ii) accelerate the lapse of restrictions, or waive any
condition imposed hereunder, with respect to any share of Restricted Stock or
otherwise adjust any of the terms applicable to any such Award; provided,
however, that no action under this Section 3(c) shall adversely affect
any outstanding Award without the consent of the holder thereof.

 

(d)           All
decisions made by the Administrator pursuant to the provisions of the Plan
shall be final, conclusive and binding on all persons, including the Company
and the Participants.  No member of the
Board or the Committee, nor any officer or employee of

 

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the Company acting
on behalf of the Board or the Committee, shall be personally liable for any
action, determination, or interpretation taken or made in good faith with
respect to the Plan, and all members of the Board or the Committee and each and
any officer or employee of the Company acting on their behalf shall, to the
extent permitted by law, be fully indemnified and protected by the Company in
respect of any such action, determination or interpretation.

 

SECTION 4.              SHARES RESERVED FOR ISSUANCE UNDER THE PLAN.

 

(a)           The
total number of shares of Stock reserved and available for issuance under the
Plan (the “Reserved Shares”) shall initially be [3,620,000](1) shares of Stock.
 The number of Reserved Shares shall be
automatically increased (without any further action by the Board or the
stockholders of the Company) by the number of shares of Stock that is equal to [ten]
percent ([10]%) of any Additional IPO Shares or Overallotment IPO Shares;
provided, however, that the maximum number of Reserved Shares shall not exceed [NUMBER],
subject to adjustment as set forth in Section 5 below.  Such shares of Stock may consist, in whole or
in part, of authorized and unissued shares of Stock or treasury shares.

 

(b)           Subject
to the provisions of Section 162(m) of the Code, as from time to time
applicable, to the extent that (i) a Stock Option expires or is otherwise
cancelled or terminated without being exercised, or (ii) any shares of Stock
subject to any Awards granted hereunder are cancelled, terminated, forfeited or
withheld to pay taxes, such shares of Stock shall again be available for
issuance in connection with future awards granted under the Plan.

 

(c)           The
aggregate number of shares of Stock as to which Awards may be granted to any
individual during any calendar year may not, subject to adjustment as provided
in Section 5, exceed [1,000,000].

 

(1)           [Number equal to 10% of
expected shares outstanding after IPO.]

 

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(d)           The
aggregate number of shares of Stock that may be delivered pursuant to the
exercise of Incentive Stock Options may not, subject to adjustment as provided
in Section 5, exceed [2,000,000].

 

SECTION 5.              EQUITABLE ADJUSTMENTS.

 

Upon the occurrence of any merger, reorganization, consolidation, recapitalization,
stock dividend or other change in corporate structure affecting the Stock, the
Administrator shall make appropriate equitable adjustments, which may include,
without limitation, adjustments to: (i) the aggregate number of shares of
Stock reserved for issuance under the Plan, (ii) the kind, number and
exercise price of outstanding Stock Options and Stock Appreciation Rights
granted under the Plan, and (iii) the kind, number and purchase price of
shares of Stock subject to outstanding awards of Restricted Stock granted under
the Plan, in each case as may be determined by the Administrator, in its sole
discretion.  Such other substitutions or
adjustments shall be made as may be determined by the Administrator, in its
sole discretion.  In connection with any
event described in this paragraph, the Administrator may provide, in its sole
discretion, for the cancellation of any outstanding Awards in exchange for
payment in cash or other property equal to the Fair Market Value of the Stock
covered by such Awards, reduced by the option or exercise price, if any.

 

SECTION 6.              ELIGIBILITY.

 

Eligible Recipients shall be eligible to be granted Stock Options,
Stock Appreciation Rights, Restricted Stock, Stock, Other Awards or any
combination of the foregoing hereunder.  The Participants under the Plan shall be
selected from time to time by the Administrator, in its sole discretion, from
among the Eligible Recipients, and the Administrator shall determine, in its
sole discretion, the number of shares of Stock covered by each such Award.

 

SECTION 7.              STOCK OPTIONS.

 

Stock Options may be granted alone or in addition to other Awards
granted under the Plan.  Any Stock Option
granted under the Plan shall be in such form as the

 

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Administrator
may from time to time approve, and the provisions of Stock Option awards need
not be the same with respect to each Participant.  Participants who are granted Stock Options
shall enter into an award agreement with the Company, in such form as the
Administrator shall determine, which shall set forth, among other things, the
option price of the Stock Option, the term of the Stock Option and provisions
regarding exercisability of the Stock Option granted thereunder.

 

The Stock Options granted under the Plan may be of two types: (i) Incentive
Stock Options and (ii) Non-Qualified Stock Options.

 

The Administrator shall have the authority to grant to any officer or employee
of the Company or of any Parent or Subsidiary (including directors who are also
officers of the Company) Incentive Stock Options, Non-Qualified Stock Options,
or both types of Stock Options (in each case with or without Stock Appreciation
Rights).  Directors who are not also
employees or officers of the Company or of any Parent or Subsidiary,
consultants or advisors to the Company or to any Parent or Subsidiary may only
be granted Non-Qualified Stock Options (with or without Stock Appreciation
Rights).  To the extent that any Stock
Option does not qualify as an Incentive Stock Option, it shall constitute a
separate Non-Qualified Stock Option.  More than one Stock Option may be granted to
the same Participant and be outstanding concurrently hereunder.

 

Stock Options granted under the Plan shall be subject to the following terms
and conditions and to the award agreement evidencing each Award which shall
contain such additional terms and conditions, not inconsistent with the terms
of the Plan, as the Administrator shall deem desirable:

 

(a)           Option
Price.  The option price per share of
Stock purchasable under a Stock Option shall be determined by the Administrator
in its sole discretion at the time of grant but shall not, in the case of
Incentive Stock Options, be less than 100% of the Fair Market Value of the
Stock on such date (110% of the Fair Market Value per share on such date if, on
such date, the Eligible Recipient owns, or is deemed to own under the

 

12

 

Code, stock
possessing more than ten percent (a “Ten Percent Owner”) of the total combined
voting power of all classes of Stock).

 

(b)           Option
Term.  The term of each Stock Option
shall be fixed by the Administrator, but no Stock Option shall be exercisable
more than ten years after the date such Stock Option is granted; provided,
however, that if the Eligible Recipient is a Ten Percent Owner, an Incentive
Stock Option may not be exercisable after the expiration of five years from the
date such Incentive Stock Option is granted.

 

(c)           Exercisability.
 Stock Options shall be exercisable at
such time or times and subject to such terms and conditions as shall be
determined by the Administrator at or after the time of grant; provided,
however, that no action following the time of grant shall adversely affect any
outstanding Stock Option without the consent of the holder thereof.  The Administrator may provide at the time of
grant, in its sole discretion, that any Stock Option shall be exercisable only
in installments, and the Administrator may waive such installment exercise provisions
at any time, in whole or in part, based on such factors as the Administrator
may determine, in its sole discretion, including but not limited to in
connection with any Change in Control of the Company.

 

(d)           Method
of Exercise.  Subject to Section 7(c),
Stock Options may be exercised in whole or in part at any time during the
option term, by giving written notice of exercise to the Company specifying the
number of shares of Stock to be purchased, accompanied by payment in full of
the purchase price in cash or its equivalent, as determined by the
Administrator.  As determined by the Administrator,
in its sole discretion, payment in whole or in part may also be made (i) in
the form of unrestricted Stock already owned by the Participant which, (x) in
the case of unrestricted Stock acquired upon exercise of an option, have been
owned by the Participant for more than six months on the date of surrender, and
(y) has a Fair Market Value on the date of surrender equal to the aggregate
option price of the Stock as to which such Stock Option shall be exercised; (ii) in
the case of the exercise of a Non-Qualified Stock Option, in the form of
Restricted Stock subject to an award hereunder (based, in each case, on the
Fair

 

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Market Value of
the Stock on the date the Stock Option is exercised); provided, however, that
in the case of an Incentive Stock Option, the right to make payment in the form
of already owned shares of Stock may be authorized only at the time of grant; (iii) any
other form of consideration approved by the Administrator and permitted by
applicable law; or (iv) any combination of the foregoing.  If payment of the option price of a
Non-Qualified Stock Option is made in whole or in part in the form of Restricted
Stock, the shares of Stock received upon the exercise of such Stock Option
shall be restricted in accordance with the original terms of the Restricted
Stock award in question, except that the Administrator may direct that such
restrictions shall apply only to that number of shares of Stock equal to the
number of shares surrendered upon the exercise of such Stock Option.

 

(e)           Rights
as Stockholder.  A Participant shall
generally have the rights to dividends and any other rights of a stockholder
with respect to the Stock subject to the Stock Option only after the
Participant has given written notice of exercise, has paid in full for such
shares of Stock, and, if requested, has given the representation described in
paragraph (b) of Section 14 below.

 

(f)            Non-Transferability
of Stock Options.  Except as otherwise
provided by the Administrator, Stock Options may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will, by the laws of descent or distribution, by instrument to an inter vivos
or testamentary trust in which the Stock Options are to be passed to
beneficiaries upon the death of the Participant, or by gift to Immediate
Family, and may be exercised, during the lifetime of the Participant, only by the
Participant or the Participant’s legal representative.

 

(g)           Termination
of Employment or Service.  In the event
that a Participant ceases to be employed by or to provide services to any of
the Company, any Parent or any Subsidiary, any outstanding Stock Options
previously granted to such Participant shall be exercisable at such time or
times and subject to such terms and conditions as set forth in the award
agreement governing such Awards.  Unless otherwise
provided in the

 

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award agreement,
Stock Options granted to such Participant, to the extent they were not vested
and exercisable at the time of such termination, shall expire on the date of
such termination.

 

(h)           Annual
Limit on Incentive Stock Options.  In
addition to the limitation applicable to Stock Options in Section 4(c) above,
to the extent that the aggregate Fair Market Value (determined as of the date
the Incentive Stock Option is granted) of shares of Stock with respect to which
Incentive Stock Options granted to a Participant under this Plan and all other
option plans of the Company or of any Parent or Subsidiary become exercisable
for the first time by the Participant during any calendar year exceeds $100,000
(as determined in accordance with Section 422(d) of the Code), the
portion of such Incentive Stock Options in excess of $100,000 shall be treated
as Non-Qualified Stock Options.

 

SECTION 8.              STOCK APPRECIATION RIGHTS.

 

Stock Appreciation Rights may be granted either alone (“Free Standing Rights”)
or in conjunction with all or part of any Stock Option granted under the Plan (“Related
Rights”).  In the case of a Non-Qualified
Stock Option, Related Rights may be granted either at or after the time of the
grant of such Stock Option.  In the case
of an Incentive Stock Option, Related Rights may be granted only at the time of
the grant of the Incentive Stock Option.  The Administrator shall determine the Eligible
Recipients to whom, and the time or times at which, grants of Stock Appreciation
Rights shall be made, the number of shares of Stock to be awarded, the exercise
price, and all other conditions of Stock Appreciation Rights.  The provisions of Stock Appreciation Rights
need not be the same with respect to each Participant.

 

Stock Appreciation Rights granted under the Plan shall be subject to
the following terms and conditions and to the award agreement evidencing such
Award which shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Administrator shall deem
desirable:

 

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(a)           Awards.
The prospective recipient of a Stock Appreciation Right shall not have any
rights with respect to such Award, unless and until such recipient has executed
an agreement evidencing the award and delivered a fully executed copy thereof
to the Company, within a period of sixty days (or such other period as the
Administrator may specify) after the award date.  Participants who are granted Stock
Appreciation Rights shall have no rights as stockholders of the Company with
respect to the grant or exercise of such rights.

 

(b)           Exercisability.

 

(i)            Stock
Appreciation Rights that are Free Standing Rights (“Free Standing Stock
Appreciation Rights”) shall be exercisable at such time or times and subject to
such terms and conditions as shall be determined by the Administrator at or
after grant.

 

(ii)           Stock
Appreciation Rights that are Related Rights (“Related Stock Appreciation Rights”)
shall be exercisable only at such time or times and to the extent that the
Stock Options to which they relate shall be exercisable in accordance with the
provisions of Section 7 above and this Section 8 of the Plan;
provided, however, that a Related Stock Appreciation Right granted in connection
with an Incentive Stock Option shall be exercisable only if and when the Fair
Market Value of the Stock subject to the Incentive Stock Option exceeds the
option price of such Stock Option.

 

(c)           Payment
Upon Exercise.

 

(i)            Upon
the exercise of a Free Standing Stock Appreciation Right, the Participant shall
be entitled to receive up to, but not more than, an amount in cash or that
number of shares of Stock (or any combination of cash and shares of Stock, as
determined by the Administrator) equal in value to the excess of the Fair
Market Value of one share of Stock as of

 

16

 

the
date of exercise over the price per share of Stock specified in the Free Standing
Stock Appreciation Right (which price shall be no less than 100% of the Fair
Market Value of the Stock on the date of grant) multiplied by the number of shares
of Stock in respect of which the Free Standing Stock Appreciation Right is
being exercised, with the Administrator having the right to determine the form
of payment.

 

(ii)           A
Related Right may be exercised by a Participant by surrendering the applicable
portion of the related Stock Option.  Upon such exercise and surrender, the
Participant shall be entitled to receive up to, but not more than, an amount in
cash or that number of shares of Stock (or any combination of cash and shares
of Stock) equal in value to the excess of the Fair Market Value of one share of
Stock as of the date of exercise over the option price per share of Stock specified
in the related Stock Option multiplied by the number of shares of Stock in
respect of which the Related Stock Appreciation Right is being exercised, with
the Administrator having the right to determine the form of payment.  Stock Options which have been so surrendered,
in whole or in part, shall no longer be exercisable to the extent the Related
Rights have been so exercised.

 

(d)           Non-Transferability.

 

(i)            Free
Standing Stock Appreciation Rights shall be transferable only when and to the
extent that a Stock Option would be transferable under paragraph (f) of Section 7
of the Plan.

 

(ii)           Related
Stock Appreciation Rights shall be transferable only when and to the extent
that the underlying Stock Option would be transferable under paragraph (f) of
Section 7 of the Plan.

 

17

 

(e)           Termination
of Employment or Service.

 

(i)            In
the event that a Participant ceases to be employed by or to provide services to
any of the Company, any Parent or any Subsidiary, any outstanding Stock Appreciation
Rights previously granted to such Participant shall be exercisable at such time
or times and subject to such terms and conditions as set forth in the award
agreement governing such Awards.  Unless otherwise
provided in the award agreement, Stock Appreciation Rights granted to such
Participant, to the extent they were not vested and exercisable at the time of
such termination, shall expire on the date of such termination.

 

(ii)           In
the event of the termination of employment or service of a Participant who has
been granted one or more Related Stock Appreciation Rights, such rights shall
be exercisable at such time or times and subject to such terms and conditions
as applicable to the related Stock Options.

 

(f)            Term.

 

(i)            The
term of each Free Standing Stock Appreciation Right shall be fixed by the
Administrator, but no Free Standing Stock Appreciation Right shall be
exercisable more than ten years after the date such right is granted.

 

(ii)           The
term of each Related Stock Appreciation Right shall be the term of the Stock
Option to which it relates, but no Related Stock Appreciation Right shall be
exercisable more than ten years after the date such right is granted.

 

SECTION 9.              RESTRICTED STOCK.

 

Awards of Restricted Stock may be issued either alone or in addition to
other Awards granted under the Plan and shall be evidenced by an award agreement.
 The

 

18

 

Administrator
shall determine the Eligible Recipients to whom, and the time or times at
which, Restricted Stock awards shall be made; the number of shares of
Restricted Stock to be awarded; the price, if any, to be paid by the
Participant for the acquisition of Restricted Stock; the Restricted Period (as
defined in Section 9(c)) applicable to Restricted Stock awards; and all
other conditions applicable to Restricted Stock awards.  The provisions of the awards of Restricted
Stock need not be the same with respect to each Participant.

 

(a)           Purchase
Price. The price per share of Restricted Stock, if any, that a Participant must
pay for shares of Restricted Stock purchasable under an award of Restricted
Stock shall be determined by the Administrator in its sole discretion at the
time of grant.

 

(b)           Awards
and Certificates. The prospective recipient of a Restricted Stock award shall
not have any rights with respect to any such Award, unless and until such
recipient has executed an award agreement evidencing the Award and delivered a
fully executed copy thereof to the Company, within such period as the
Administrator may specify after the award date.  Each Participant who is granted an award of
Restricted Stock shall be issued a stock certificate in respect of such shares
of Restricted Stock, which certificate shall be registered in the name of the Participant
and shall bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to any such Award; provided that the Company may
require that the stock certificates evidencing Restricted Stock granted
hereunder be held in the custody of the Company until the restrictions thereon
shall have lapsed, and that, as a condition of any Restricted Stock award, the
Participant shall have delivered a stock power, endorsed in blank, relating to
the shares of Restricted Stock covered by such Award.

 

(c)           Nontransferability.
The Restricted Stock awards granted pursuant to this Section 9 shall be
subject to the restrictions on transferability set forth in this paragraph (c).
 During such period as may be set by the
Administrator in the award agreement (the “Restricted Period”), the Participant
shall not be permitted to sell, transfer, pledge,

 

19

 

hypothecate or
assign shares of Restricted Stock awarded under the Plan except by will or the
laws of descent and distribution; provided that the Administrator may, in its
sole discretion, provide for the lapse of such restrictions in installments and
may accelerate or waive such restrictions in whole or in part based on such
factors and such circumstances as the Administrator may determine in its sole
discretion.  The Administrator may also
impose such other restrictions and conditions, including the achievement of
pre-established corporate performance goals, on awarded Restricted Stock as it
deems appropriate.  Any attempt to
dispose of any Restricted Shares in contravention of any such restrictions
shall be null and void and without effect.

 

(d)           Rights
as a Stockholder. Except as provided in Section 9(b) or as otherwise
provided in an award agreement, the Participant shall possess all incidents of
ownership with respect to shares of Restricted Stock during the Restricted
Period, including the right to receive dividends with respect to such shares
and to vote such shares.  Certificates
for unrestricted shares shall be delivered to the Participant promptly after,
and only after, the Restricted Period shall expire without forfeiture in
respect of such awards of Restricted Stock except as the Administrator, in its
sole discretion, shall otherwise determine.

 

(e)           Termination
of Employment. In the event that a Participant ceases to be employed by or to
provide services to any of the Company, any Parent or any Subsidiary during the
Restricted Period, any rights pursuant to any Award of Restricted Stock
previously granted to such Participant shall be subject to such terms and
conditions as set forth in the award agreement governing such Awards.  Unless otherwise provided in the award
agreement, the Restricted Stock awards granted to such Participant, to the
extent that restrictions have not lapsed or applicable conditions have not been
met at the time of such cessation of employment or provision of services, shall
expire on the date of such termination.

 

20

 

SECTION 10.         AUTOMATIC
GRANTS OF STOCK TO NON-EMPLOYEE DIRECTORS.

 

The Company shall grant awards of Stock, Restricted Stock and Other
Awards to Non-Employee Directors as described in further detail below (the “Automatic
Non-Employee Director Awards”).  Such
grants shall be automatic and non-discretionary and otherwise subject to the
terms and conditions set forth in this Section 10 and the award agreement
evidencing such grant, as well as the terms of the Plan.

 

Each recipient of an Automatic Non-Employee Director Award shall enter
into an award agreement with the Company.  The award agreement shall set forth such terms
and conditions, not inconsistent with the provisions of this Section 10,
with respect to such automatic grant as the Administrator may determine.

 

(a)           Initial Grant. Each Non-Employee
Director shall automatically be granted an Other Award of restricted stock
units having a value as of the date of grant equal to approximately $100,000.  Each such Award shall be granted (i) on
the date of the IPO Prospectus or as soon as practicable thereafter, to each
Person who is a Non-Employee Director on the date of the IPO Prospectus, with
the calculation of the number of shares of Stock covered by the restricted
stock units to be computed by dividing $100,000 by the Initial Offering Price,
rounding down to the nearest whole number or (ii) to each Person who is
not a Non-Employee Director on the date of the IPO Prospectus, the date of the
first Board meeting attended by such 

 

21

 

Non-Employee Director, with the calculation of the
number of shares of Stock covered by the restricted stock units to be computed
by dividing $100,000 by the Fair Market Value of the Stock on the date of grant
and rounding down to the nearest whole number. Forfeiture conditions with respect
to one-third of each such Award shall lapse as of each of the first three
successive anniversaries of the date of the grant and the underlying shares of
Stock which are vested shall be delivered at the time the Non-Employee Director
ceases to be a member of the Board.  No
fractional shares of Restricted Stock shall be included in such Award.

 

(b)           Annual
Grant. On the first business day after the first annual stockholders’ meeting
of the Company, and on the first business day after each such annual stockholders’
meeting of the Company thereafter during the term of the Plan, each
Non-Employee Director shall automatically be granted an Other Award of restricted
stock units having a value equal to approximately $25,000 as of the date of the
grant, provided, however, that each such Person is then a Non-Employee Director
of the Company.  The number of shares of
Stock covered by the restricted stock units shall be computed by dividing $25,000
by the Fair Market

 

22

 

Value of the Stock on the date of grant and rounding down
to the nearest whole number.  Such Awards
shall be fully vested upon grant and the underlying shares of Stock shall be delivered
at the time the Non-Employee Director ceases to be a member of the Board. No
fractional shares of Stock shall be included in any such Award.

 

(c)           Stock
Availability.  Notwithstanding any of the
foregoing, in the event that the number of shares of Stock available for grant
under the Plan is not sufficient to accommodate the Automatic Non-Employee
Director Awards, then the remaining shares of Stock available for such
automatic awards shall be granted to each Non-Employee Director, each of whom
is to receive such an award, on a pro-rata basis.  No further grants shall be made until such
time, if any, as additional shares of Stock become available for grant under
the Plan through action of the Board or the stockholders of the Company to
increase the number of shares of Stock that may be issued under the Plan or
through cancellation or expiration of Awards previously granted hereunder.

 

SECTION 11.            OTHER AWARDS AND LLC UNITS.

 

(a)           Nature
of Other Awards.  Other forms of Awards (“Other
Awards”) that may be granted under the Plan include Awards that are valued in
whole or in part by reference to, or are otherwise calculated by reference to
or based on, shares of Stock, including without limitation, (i) LLC Units,
(ii) convertible preferred stock, convertible

 

23

 

debentures and
other convertible, exchangeable or redeemable securities or equity interests
(including LLC Units), (iii) membership interests in a Subsidiary or
operating partnership and (iv) Awards valued by reference to book value,
fair value or performance parameters relative to the Company or any Subsidiary
or group of Subsidiaries.  For purposes
of calculating the number of shares of Stock underlying an Other Award relative
to the total number of shares of Stock reserved and available for issuance under
Section 4(a), the Administrator shall establish in good faith the maximum
number of shares of Stock to which a grantee of such Other Award may be
entitled upon fulfillment of all applicable conditions set forth in the
relevant Award documentation, including vesting, accretion factors, conversion
ratios, exchange ratios and the like.  If
and when any such conditions are no longer capable of being met, in whole or in
part, the number of shares of Stock underlying such Other Award shall be
reduced accordingly by the Administrator and the related shares of Stock shall
be added back to the shares of Stock available for issuance under the Plan.  Other Awards may be issued either alone or in
addition to other Awards granted under the Plan and shall be evidenced by an award
agreement.  The Administrator shall
determine the Eligible Recipients to whom, and the time or times at which,
Other Awards shall be made; the number of shares of Stock or LLC Units to be
awarded; the price, if any, to be paid by the Participant for the acquisition
of Other Awards; and the restrictions and conditions applicable to Other Awards.
 Conditions may be based on continuing
employment (or other service relationship), computation of financial metrics
and/or achievement of pre-established performance goals and objectives.  The Administrator may require that Other
Awards be held through a limited partnership, or similar “look-through” entity,
and the Administrator may require such limited partnership or similar entity to
impose restrictions on its partners or other beneficial owners that are not
inconsistent with the provisions of this Section 11.  The provisions of the grant of Other Awards
need not be the same with respect to each Participant.

 

24

 

(b)           Rights
as Stockholder.  Until such time as an
Other Award is actually converted into, exchanged for, or paid out in shares of
Stock, a Participant shall have no rights as a holder of Stock.

 

(c)           Non-Transferability.
 Except as otherwise provided by the
Administrator, Other Awards may not be sold, transferred, pledged, hypothecated
or assigned except by will or the laws of descent and distribution.

 

(d)           Termination
of Employment or Service.  In the event
that a Participant ceases to be employed by or to provide services to the
Company, any Parent, or any Subsidiary, any outstanding Other Awards previously
granted to such Participant shall be subject to such terms and conditions as
set forth in the award agreement governing such Other Awards.  Except as may otherwise be provided by the
Administrator either in the award agreement, or, subject to Section 12 below,
in writing after the award agreement is issued, a Participant’s rights in all
Other Awards that have not vested shall automatically terminate upon the Participant’s
termination of employment (or cessation of service relationship) with the
Company, its Parents and its Subsidiaries for any reason.

 

SECTION 12.            AMENDMENT AND TERMINATION.

 

The Board may amend, alter, suspend or discontinue the Plan in whole or
in part, at any time, but no amendment, alteration, or discontinuation that
would impair the rights of a Participant under any Award theretofore granted
shall be made without such Participant’s consent.  Unless the Board determines otherwise, the Board
shall obtain approval of the Company’s stockholders for any amendment that would
require such approval in order to satisfy Sections 162(m) and 422 of the Code,
stock exchange rules or other applicable law or regulation.  The Administrator may amend the terms of any award
theretofore granted, prospectively or retroactively, but, subject to Section 5
of the Plan, no such amendment shall impair the rights of any Participant
without his or her consent.

 

25

 

SECTION 13.            UNFUNDED STATUS OF PLAN.

 

The Plan is intended to constitute an “unfunded” plan for incentive compensation.
 With respect to any payments not yet
made to a Participant by the Company, nothing contained herein shall give any
such Participant any rights that are greater than those of a general creditor
of the Company.

 

SECTION 14.            GENERAL PROVISIONS.

 

(a)           Securities
Laws Compliance.  Shares of Stock shall
not be issued pursuant to the exercise or settlement of any Award granted
hereunder unless the exercise or settlement of such Award and the issuance and
delivery of such shares of Stock pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act,
the Exchange Act and the requirements of any stock exchange upon which the
Stock may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.

 

(b)           Certificate
Legends.  The Administrator may require
each person acquiring shares of Stock hereunder to represent to and agree with
the Company in writing that such person is acquiring the shares of Stock
without a view to distribution thereof.  The certificates for such shares of Stock may
include any legend which the Administrator deems appropriate to reflect any
restrictions on transfer.

 

All certificates for shares of Stock delivered under the Plan shall be subject
to such stock-transfer orders and other restrictions as the Administrator may
deem advisable under the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Stock is
then listed, and any applicable federal or state securities law, and the
Administrator may cause a legend or legends to be placed on any such certificates
to make appropriate reference to such restrictions.

 

(c)           Company
Actions; No Right to Employment.  Nothing
contained in the Plan shall prevent the Board from adopting other or additional
compensation arrangements, subject to stockholder approval, if such approval is
necessary and

 

26

 

desirable; and
such arrangements may be either generally applicable or applicable only in
specific cases.  The adoption of the Plan
shall not confer upon any Eligible Recipient any right to continued employment
or service with the Company or any Parent or Subsidiary, as the case may be,
nor shall it interfere in any way with the right of the Company or any Parent
or Subsidiary to terminate the employment or service of any of its Eligible
Recipients at any time.

 

(d)           Payment
of Taxes.  Each Participant shall, no
later than the date as of which the value of an Award first becomes includible
in the gross income of the Participant for Federal income tax purposes, pay to
the Company, or make arrangements satisfactory to the Administrator regarding
payment of, any federal, state, or local taxes of any kind required by law to
be withheld with respect to such Award.  The obligations of the Company under the Plan
shall be conditional on the making of such payments or arrangements, and the
Company shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind otherwise due to the Participant.

 

(e)           Tax Notifications.
Each Participant shall promptly notify the Company of any election the
Participant makes under Section 83(b) of the Code or any disposition
of shares of Stock delivered pursuant to the exercise of an Incentive Stock
Option under the circumstances described in Section 421(b) of the
Code (relating to certain disqualifying dispositions).

 

SECTION 15.            EFFECTIVE DATE OF PLAN.

 

The Plan was adopted by the Board on [DATE], 2006.  The Plan was approved by the stockholders of
the Company on [DATE], 2006, which date is the date that the Plan shall become
effective (the “Effective Date”).

 

SECTION 16.            TERM OF PLAN.

 

No Award shall be granted pursuant to the Plan on or after the tenth anniversary
of the Effective Date, but Awards theretofore granted may extend beyond that
date.

 

27

 

SECTION 17.            GOVERNING LAW.

 

The Plan and all determinations made and actions taken pursuant hereto shall
be governed by the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.

 

28EXHIBIT 10.23

 

MORGANS LAS VEGAS, LLC

 

LIMITED LIABILITY COMPANY
AGREEMENT

 

dated as of

 

January 3, 2006

 

between

 

MORGANS/LV INVESTMENT LLC

 

and

 

ECHELON RESORTS CORPORATION

 

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
  PAGE

  
	
  Article 1 DEFINITIONS

  	
  1

  
	
  Section 1.01

  	
  Definitions

  	
  1

  
	
  Section 1.02

  	
  Certain Other Terms

  	
  14

  
	
  Section 1.03

  	
  Accounting Terms

  	
  15

  
	
   

  	
   

  	
   

  
	
  Article 2 FORMATION AND PURPOSE OF THE COMPANY

  	
  15

  
	
  Section 2.01

  	
  Formation of the Company

  	
  15

  
	
  Section 2.02

  	
  Name of the Company

  	
  15

  
	
  Section 2.03

  	
  Purpose of the Company

  	
  15

  
	
  Section 2.04

  	
  Place of Business of the Company

  	
  16

  
	
  Section 2.05

  	
  Registered Office and Registered Agent

  	
  16

  
	
  Section 2.06

  	
  Duration of the Company

  	
  16

  
	
  Section 2.07

  	
  Title to the Company Property

  	
  16

  
	
  Section 2.08

  	
  Filing of Certificates

  	
  16

  
	
  Section 2.09

  	
  Limitation on Liability

  	
  16

  
	
  Section 2.10

  	
  No Responsibility for Liability of Other Member

  	
  16

  
	
   

  	
   

  	
   

  
	
  Article 3 REPRESENTATIONS AND WARRANTIES
  

  	
  16

  
	
  Section 3.01

  	
  Representations and Warranties of Morgans

  	
  16

  
	
  Section 3.02

  	
  Representations and Warranties of Boyd

  	
  17

  
	
   

  	
   

  	
   

  
	
  Article 4 PREDEVELOPMENT MATTERS

  	
  19

  
	
  Section 4.01

  	
  Predevelopment

  	
  19

  
	
  Section 4.02

  	
  Echelon Place Master Plan and Components

  	
  20

  
	
  Section 4.03

  	
  Outside Start Date

  	
  22

  
	
   

  	
   

  	
   

  
	
  Article 5 CAPITAL CONTRIBUTIONS

  	
  22

  
	
  Section 5.01

  	
  Initial Capital Contributions

  	
  22

  
	
  Section 5.02

  	
  Additional Capital Contributions

  	
  23

  
	
  Section 5.03

  	
  Procedures for Capital Contributions

  	
  24

  
	
  Section 5.04

  	
  Failure to Fund Capital Contributions

  	
  24

  
	
  Section 5.05

  	
  Dilution

  	
  25

  
	
  Section 5.06

  	
  Payment of Cost Overruns

  	
  25

  
	
  Section 5.07

  	
  Withdrawals of Capital

  	
  26

  
	
  Section 5.08

  	
  Negative Capital Accounts

  	
  26

  
	
   

  	
   

  	
   

  
	
  Article 6 CAPITAL ACCOUNTS AND ALLOCATIONS

  	
  27

  
	
  Section 6.01

  	
  Capital Accounts

  	
  27

  
	
  Section 6.02

  	
  Allocations of Profits and Losses

  	
  27

  
	
   

  	
   

  	
   

  
	
  Article 7 DISTRIBUTIONS

  	
  28

  
	
  Section 7.01

  	
  Net Operating Cash Flow

  	
  28

  
	
  Section 7.02

  	
  Net Capital Proceeds

  	
  28

  

 

i

 

	
   

  	
   

  	
  PAGE

  
	
  Section 7.03

  	
  Amounts Withheld

  	
  28

  
	
  Section 7.04

  	
  Assignment of Distributions

  	
  28

  
	
  Section 7.05

  	
  Dissolution

  	
  29

  
	
   

  	
   

  	
   

  
	
  Article 8 MANAGEMENT

  	
  29

  
	
  Section 8.01

  	
  Morgans Duties

  	
  29

  
	
  Section 8.02

  	
  Affiliate Agreement Control

  	
  29

  
	
  Section 8.03

  	
  Morgans’ Additional Duties

  	
  29

  
	
  Section 8.04

  	
  Bank Accounts

  	
  30

  
	
  Section 8.05

  	
  Duties and Conflicts

  	
  30

  
	
  Section 8.06

  	
  Financing

  	
  31

  
	
  Section 8.07

  	
  Expenses of Members

  	
  31

  
	
  Section 8.08

  	
  Removal of Morgans as a Managing Member

  	
  32

  
	
   

  	
   

  	
   

  
	
  Article 9 DEVELOPMENT DURING CONSTRUCTION
  PERIOD

  	
  32

  
	
  Section 9.01

  	
  General

  	
  32

  
	
  Section 9.02

  	
  Budget, Schedule and Plans

  	
  32

  
	
  Section 9.03

  	
  Monitoring of Development

  	
  32

  
	
  Section 9.04

  	
  Changes

  	
  34

  
	
  Section 9.05

  	
  Participation of Boyd

  	
  34

  
	
  Section 9.06

  	
  Loan Guaranties

  	
  35

  
	
  Section 9.07

  	
  Activities Following Disputes

  	
  35

  
	
   

  	
   

  	
   

  
	
  Article 10 ACCOUNTING, BOOKS AND RECORDS AND
  TAX MATTERS

  	
  36

  
	
  Section 10.01

  	
  Books and Records

  	
  36

  
	
  Section 10.02

  	
  Reports

  	
  36

  
	
  Section 10.03

  	
  Company Accountant

  	
  37

  
	
  Section 10.04

  	
  Reserves

  	
  37

  
	
  Section 10.05

  	
  Fiscal Year

  	
  37

  
	
  Section 10.06

  	
  Partnership for Tax Purposes

  	
  37

  
	
  Section 10.07

  	
  Tax Matters

  	
  37

  
	
  Section 10.08

  	
  Audit Rights

  	
  38

  
	
   

  	
   

  	
   

  
	
  Article 11 LIMITATION OF LIABILITY AND
  INDEMNIFICATION

  	
  38

  
	
  Section 11.01

  	
  Limitation of Liability

  	
  38

  
	
  Section 11.02

  	
  Indemnification

  	
  38

  
	
  Section 11.03

  	
  Certain Waivers

  	
  39

  
	
   

  	
   

  	
   

  
	
  Article 12 TRANSFERS

  	
  40

  
	
  Section 12.01

  	
  General

  	
  40

  
	
  Section 12.02

  	
  Permitted Transfers of Interests

  	
  40

  
	
  Section 12.03

  	
  Transferees

  	
  41

  
	
  Section 12.04

  	
  Admission of Additional Members

  	
  41

  
	
  Section 12.05

  	
  Boyd Right to Purchase

  	
  42

  

 

ii

 

	
   

  	
   

  	
  PAGE

  
	
  Article 13 TERMINATION, DISSOLUTION AND
  LIQUIDATION

  	
  44

  
	
  Section 13.01

  	
  Term

  	
  44

  
	
  Section 13.02

  	
  Liquidating Events

  	
  44

  
	
  Section 13.03

  	
  Winding Up

  	
  44

  
	
  Section 13.04

  	
  Acts in Furtherance of Liquidation

  	
  45

  
	
   

  	
   

  	
   

  
	
  Article 14 MISCELLANEOUS

  	
  45

  
	
  Section 14.01

  	
  Notices

  	
  45

  
	
  Section 14.02

  	
  Amendments; No Waivers; Entire Agreement

  	
  46

  
	
  Section 14.03

  	
  Expenses

  	
  47

  
	
  Section 14.04

  	
  Consents and Approvals

  	
  47

  
	
  Section 14.05

  	
  Successors and Assigns

  	
  47

  
	
  Section 14.06

  	
  Governing Law

  	
  47

  
	
  Section 14.07

  	
  Counterparts

  	
  48

  
	
  Section 14.08

  	
  Severability

  	
  48

  
	
  Section 14.09

  	
  Further Assurances

  	
  48

  
	
  Section 14.10

  	
  Publicity

  	
  48

  
	
  Section 14.11

  	
  Confidentiality

  	
  48

  
	
  Section 14.12

  	
  Third Parties Not Benefited

  	
  49

  
	
  Section 14.13

  	
  Time of the Essence

  	
  49

  
	
  Section 14.14

  	
  Waiver of Jury Trial

  	
  49

  
	
  Section 14.15

  	
  Jurisdiction; Choice of Forum

  	
  49

  

 

iii

 

LIMITED
LIABILITY COMPANY AGREEMENT

 

This LIMITED LIABILITY
COMPANY AGREEMENT dated as of January 3, 2006 (this “Agreement”),
between Morgans/LV Investment LLC, a Delaware limited liability company having
an address at 475 Tenth Avenue, New York, New York 10018 (“Morgans”),
and Echelon Resorts Corporation, a Nevada limited liability company having an
address at 2950 Industrial Road, Las Vegas, Nevada 89109 (“Boyd”), each
in its capacity as a Member (as hereinafter defined).

 

WITNESSETH:

 

WHEREAS, Morgans Las Vegas,
LLC, a Delaware limited liability company (the “Company”), has been formed
under the Delaware Limited Liability Company Act (the “Delaware Act”) by filing
a Certificate of Formation with the Delaware Secretary of State on January 3,
2006 (the “Certificate”); and

 

WHEREAS, the Members desire
to enter into this Agreement to govern the operations of the Company;

 

NOW, THEREFORE, for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

 

ARTICLE 1

DEFINITIONS

 

Section 1.01 Definitions.
As used herein, the following terms shall have the respective meanings set
forth below:

 

“Affiliate” shall mean, when used with
respect to any Person, any other Person controlling, controlled by or under
common control with such Person. For purposes of this definition, (a) the
term “control” shall mean, with respect to any Person, possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise, and (b) a Person shall specifically
be deemed to have “control” over a partnership or limited liability
company (as the case may be) if such Person is a general partner of a
partnership or a managing member of a limited liability company.

 

“Annual Plan” shall mean the annual budget
and forecast of operations prepared by the Hotel Manager in accordance with Section 9.4
of the Morgans Hotel Management Agreement and approved by Boyd on behalf of the
Company.

 

“Approved Cost Overruns” shall mean unbudgeted
Development Costs that (a) are not Permitted Cost Overruns and (b) are
approved by the Members.

 

“approve,” “approved” or “approval”
shall mean, as to the subject matter thereof and as the context may require or
permit, an express consent or approval contained in a written statement signed
by the approving Person.

 

 

“Architects” shall mean architects and/or
designers performing work on the Project.

 

“Bankruptcy Code” shall mean Title 11 of
the United States Code entitled “Bankruptcy,” as now and hereafter in effect,
or any successor statute.

 

“Boyd Controlled Affiliate” shall mean any
Person, directly or indirectly, 100 percent owned and controlled by the Boyd
Parent or any successor thereto.

 

“Boyd Parent” shall mean Boyd Gaming
Corporation, a Nevada corporation.

 

“Budgeted Development Costs” shall mean
aggregate amount of the Development Costs shown on the Development Budget
including the amount of all contingencies and reserves set forth in the
Development Budget but specifically excluding (i) any Financing Costs
contained therein or (ii) the Company’s allocable share of the costs of
the Echelon Place Master Plan Improvements.

 

“Business Day” shall mean any day other than
a Saturday, a Sunday or a day on which banking institutions in the City of New York,
New York are authorized by law, regulation or executive order to remain closed.

 

“Capital Call” shall mean a written notice
from a Member to both Members requesting a Capital Contribution.

 

“Capital Contribution” shall mean, with
respect to any Member, a contribution of capital made by such Member to the
Company pursuant to Article 5.

 

“Cash Disbursements” shall mean, for any
period, (a) all cash payments made by or on behalf of the Company (other
than from reserve or escrow accounts, if any, maintained by the Company) during
such period, excluding expenses incurred which are a deduction from proceeds or
receipts in determining Net Capital Proceeds, plus (b) the amount, if any,
added during such period to reserve or escrow accounts maintained by the Company.

 

“Cash Receipts” shall mean, for any period, (a) cash
received by or on behalf of the Company from any source during such period,
excluding proceeds or receipts which are used in determining Net Capital
Proceeds, plus (b) the amount
of any cash released to the Company during such period from reserve and escrow
accounts (or no longer set aside by the Company in a reserve or escrow
account), if any, maintained by the Company.

 

“Code” shall mean the Internal Revenue Code
of 1986, as amended from time to time.

 

“Company Accountant” shall mean a nationally
recognized accounting firm approved by the Members to act as accountants for
the Company.

 

2

 

“Completion” shall mean the occurrence of the
following:

 

(a) issuance by all applicable Governmental
Authorities of a certificate of occupancy (which may be a temporary certificate
of occupancy), certificate of completion or similar document authorizing the
occupancy of the Hotels and the opening of the Hotels for business;

 

(b) final completion of all construction work
for the Improvements, including punchlist items and other non-material items, (i) in
accordance with the Plans and Specifications, (ii) in accordance with the
Construction Loan Documents, and (iii) consistent and in compliance with
all Legal Requirements;

 

(c) final payment for all work and materials
involved in the construction of all portions of the Project as evidenced by a
final affidavit and lien release from the general contractor and all other
trade contractors, subcontractors, material suppliers and vendors furnishing
services or materials to the Company in connection with the construction of the
Project, or any similar document under Nevada law which has the effect of
removing from the title to the Project all liens, inchoate or otherwise, which
could have arisen on account of work done on, or materials delivered to, the
Property in connection with the construction of the Project, including payment
for all punchlist items, excepting affidavits and/or lien releases for
non-material amounts that the Company has not been able to obtain
notwithstanding Morgans’ good faith efforts to do so;

 

(d) receipt by Boyd of a title examination
certificate from the Company’s title examiner that, as of the date of the
latest to occur of (a), (b) or (c) above, no liens have been filed
against the Project which have not been satisfied in full, discharged from the
Project by bonding or insured over by the title insurance company; and

 

(e) the Opening Date of both Hotels has
occurred.

 

“Completion Date” shall mean the date on
which Completion shall have occurred.

 

“Construction Lender” shall mean the lender
(or lending group or syndicate) providing the Construction Loan.

 

“Construction Loan” shall mean the construction
loan, and (if applicable) permanent loan from the Construction Lender to the
Company to finance property taxes, insurance, the design, construction,
installation, furnishing and equipping of the Improvements and the payment of
certain pre-opening expenses to be incurred by the Company during the
Construction Period, on the terms for such loan set forth in the Construction
Loan Documents.

 

“Construction Loan Agreement” shall mean the
loan agreement between the Company and the Construction Lender relating to the
Construction Loan.

 

“Construction Loan Documents” shall mean,
collectively, the Construction Loan Agreement, the promissory notes evidencing
the Company’s indebtedness in respect of the Construction Loan, the Mortgage
securing such indebtedness, the Construction Loan Guaranty, and all other
instruments and documents executed by the Company or any Member evidencing,
securing, guaranteeing or otherwise relating to the Construction Loan.

 

3

 

“Construction Loan Guaranty” shall mean,
collectively, any guaranty executed by Morgans or any Affiliate thereof, in
favor of the Construction Lender, guaranteeing (i) lien-free completion
(or, if applicable, substantial completion) of the Project in accordance with the
Plans and Specifications and the Construction Schedule and (ii) customary
carve outs for fraud and other “bad boy” acts, environmental matters arising
after the Contribution Date and interest carry in connection with otherwise
non-recourse financing.

 

“Construction Period” shall mean the period
commencing on the Contribution Date and ending on the Completion Date.

 

“Construction Schedule” shall mean the
preliminary design and construction timetable for the Project as approved,
amended, modified or supplemented pursuant to the terms of this Agreement.

 

“Contributed Assets” shall mean the Land.

 

“Contribution Date” shall mean the date on or
after the closing of the Construction Loan that all conditions for the initial
funding under the Construction Loan are satisfied.

 

“Cost Overruns” shall mean an amount equal to
the excess of (i) the total Development Costs for the Project actually
incurred by the Company over (ii) the sum of (A) the Budgeted
Development Costs, (B) Approved Cost Overruns to the extent such costs are
not included in the Budgeted Development Costs as a result of any amendment,
modification or supplement to the Development Budget approved by the Members
and (C) Permitted Cost Overruns to the extent such costs are not included
in the Budgeted Development Costs as a result of any amendment, modification or
supplement to the Development Budget approved by the Members. For purposes of
this definition, and of any guaranties of Cost Overruns hereunder by Morgans
Parent, the terms “Cost Overruns” and “Development Costs” shall not include (i) any
Financing Costs incurred by the Company for the period commencing on the date
hereof and ending six months after the Target Opening Date or (ii) the
Company’s allocable share of the costs of the Echelon Place Master Plan
Improvements.

 

“Development Budget” shall mean the final
development budget for the Project, setting forth by line item all Development
Costs and indicating the Budgeted Development Costs, as such final budget shall
be approved, amended, modified or supplemented pursuant to the terms of this
Agreement. The proposed form of Development Budget is attached hereto as Exhibit A.

 

“Development Costs” shall mean all
Predevelopment Costs, Financing Costs and all other direct and indirect costs
and expenses actually incurred by or on behalf of the Company through the
Completion Date with respect to the acquisition and carrying costs for the
Property, designing, constructing, permitting installing, furnishing and
equipping the Hotels and the Improvements, and opening the Hotels for business,
and pre-opening sales, marketing and training costs, the Company’s allocable
share (as approved by the Members) of the costs of the Echelon Place Master
Plan Improvements, including all costs and expenses of the types enumerated as
line items in the Development Budget and all other costs and expenses of any

 

4

 

kind
or nature incurred to cause Completion of the Project in accordance with the
Plans and Specifications and the Pre-Opening Plan.

 

“Echelon Place” shall mean a master plan
development on the Echelon Place Parcel comprising the Echelon Place Components
and the Echelon Place Master Plan Improvements.

 

“Echelon Place Components” shall mean each of
the individual projects developed on the Echelon Place Parcel, including the
Hotels, a casino, casino-hotels, convention center, theater, retail, dining
area, parking facilities and any other projects pursued by Boyd or an Affiliate
thereof on the Echelon Place Parcel.

 

“Echelon Place Components Site Plan” shall
mean the preliminary site plan for the Echelon Place Parcel, showing each of
the Echelon Place Components as currently configured, which is attached hereto
as Exhibit B.

 

“Echelon Place Cost Overrun” shall mean the
amount, if any, by which the Company’s actual allocable share of the costs of
the Echelon Place Master Plan Improvements through the Completion Date exceed
the amount budgeted for such costs as set forth in the Development Budget.
Notwithstanding the foregoing, such excess shall not include and there shall be
no Echelon Place Cost Overrun to the extent such excess costs (i) arise
from acts of God, (ii) would not have otherwise been incurred but for
delays in the Completion Date occurring after the date specified in the
Construction Schedule, or (iii) arise from changes to the Echelon Master
Plan or the Plans and Specifications approved by both Members.

 

“Echelon Place Master Plan” shall mean the
engineering, design and specifications for (i) the entirety of the infrastructure
and other improvements that will jointly benefit or be used in common by the
Echelon Place Components, including without limitation, all common amenities,
landscaping, irrigation, signage, lighting and fencing, all roads leading to
and from the porte-cochères and the preparation of sub-grade up to the
underside of the porte-cochère road paving surface, all traffic, shared
parking, and circulation improvements (including, without limitation, roads,
bridges, walkways, monorail systems and other means of transportation within,
adjoining or servicing the Echelon Place Parcel and all landscaping, lighting
and fencing related thereto); and (ii) all Government Improvements;
excluding only the engineering and design of those improvements that specifically,
solely, and individually comprise each Echelon Place Component. The Echelon
Place Master Plan, as currently configured, is attached hereto as Exhibit C.

 

“Echelon Place Master Plan Improvements”
shall mean any and all improvements included in or built or to be built
pursuant to the Echelon Place Master Plan.

 

“Echelon Place Parcel” shall mean
approximately 63 acres of land located at 3000 Las Vegas Boulevard South, Las
Vegas more specifically described on Exhibit D.

 

“Emergency Costs” shall mean costs and
expenses required to (a) correct a condition that if not corrected would
endanger the preservation or safety of the Hotel or the Property or the safety
of tenants, guests, employees or other persons at or using the Hotel or the
Property, (b) avoid the imminent suspension of any necessary service in or
to the Hotel or the

 

5

 

Property,
or (c) prevent any of the Members from being subjected to criminal or
substantial civil penalties or damage.

 

“Entitlements” shall mean any and all present
and future approvals, permits, licenses and other entitlements, whether
discretionary or of a ministerial or administrative nature, now or hereafter
given or issued by any Governmental Authority, including, without limitation,
any development agreement and all related conditions of approval and mitigation
measures, in connection with or relating in any respect to the development,
construction, opening, use, ownership, management, marketing, operation or
occupancy of the Hotel, the Improvements or the Project.

 

“Event of Bankruptcy” shall mean, with
respect to any Person, (a) the commencement by such Person of a proceeding
seeking relief under any provision or chapter of the Bankruptcy Code or any
other federal or state law relating to insolvency, bankruptcy or
reorganization; (b) an adjudication that such Person is insolvent or
bankrupt; (c) the entry of an order for relief under the Bankruptcy Code
with respect to such Person; (d) the filing of any such petition or the
commencement of any such case or proceeding against such Person, unless such
petition and the case or proceeding initiated thereby are dismissed within
ninety (90) days from the date of such filing; (e) the filing of an
answer by such Person admitting the material allegations of any such petition; (f) the
appointment of a trustee, receiver or custodian for all or substantially all of
the assets of such Person unless such appointment is vacated or dismissed
within ninety (90) days from the date of such appointment but not less
than five (5) days before the proposed sale of any assets of such Person; (g) the
insolvency of such Person or the execution by such Person of a general
assignment for the benefit of creditors; (h) the convening by such Person
of a meeting of its creditors, or any class thereof, for purposes of effecting
a moratorium upon or composition of its debts or an extension of its debts; (i) the
failure of such Person to pay its debts generally as they mature; (j) the
levy, attachment, execution or other seizure of substantially all of the assets
of such Person where such seizure is not discharged within ten (10) days
thereafter; or (k) the admission by such Person in writing of its
inability to pay its debts generally as they mature or that it is generally not
paying its debts as they become due.

 

“FF&E” shall mean all furniture,
furnishings, fixtures and equipment, systems, apparatus, goods and other
personal property used in, or held in storage for use in or required in
connection with the operation of the Hotels, and shall include Operating
Equipment, specialized hotel equipment, guest room, corridor, restaurant, and
lounge furnishings, office furniture and equipment, carpets, electrical
appliances, kitchen appliances and apparatus, floor coverings, soft
furnishings, artwork, decorative lighting, beverage and bar apparatus and
appliances, telephones and telephone systems, television receivers and other
electrical and electronic equipment, computer hardware and software, laundry
apparatus and appliances, maintenance and engineering apparatus and appliances,
function, banquet and conference furniture and apparatus, exterior and interior
signage, office and back of house apparatus and appliances, motor vehicles and
courtesy vehicles, and all alterations, substitutions, additions and
replacements therefor.

 

“Financing Costs” shall mean all costs of
obtaining financing for the Company including, interest carry, origination
fees, commitment fees, interest rate swap and lock fees, reimbursement of
lender expenses, closing costs, title insurance premiums, lender and borrower

 

6

 

attorneys
fees, transaction or recording taxes, agent or syndication fees and mortgage
brokerage fees.

 

“Governmental Authority” shall mean the
United States of America or any State thereof, and any agency,
quasi-governmental agency, department, commission, board, bureau,
instrumentality or political subdivision (including any city, county or
district) of any of the foregoing, now existing or hereafter created, having
jurisdiction over the Company, any of the Members or their Affiliates, the
Hotel or the Property or any portion thereof, including, without limitation,
the Nevada Gaming Control Board and the Nevada Gaming Commission.

 

“Government Improvements” shall mean all
off-site and on-site improvements required by any federal, state, county,
municipal or other governmental or quasi-governmental agency or by any utility
provider, in order to enable the construction of each of the Echelon Place
Components, including without limitation, the construction or relocation of any
required common air and water quality infrastructure, solid waste, ground water
and storm water runoff facilities and other similar improvements or projects,
and the construction of all improvements required to bring all necessary
utilities to Echelon Place (including without limitation, water, gas,
electricity, sewer and telephone), and the relocation of any existing utility
service or installation located upon the Echelon Place Parcel that would
obstruct the intended development thereof.

 

“Hotels” shall mean the two full service
hotels to be developed on the Land consisting of (1) the Delano Las Vegas,
an approximately 600-room hotel to be similar in design, service, and market
position to the Delano hotel operated by MHG in South Beach, Miami Beach,
Florida, and (2) an as-yet untitled approximately 1000-room
business-focused hotel, which shall be similar in design, service, and market
position to the “Mondrian” hotel brand, together with all meeting space,
business centers, restaurants, spas, retail stores, concessions, pools,
recreational facilities, driveways, parking areas, FF&E, Operating
Supplies, and other facilities and equipment contained therein or appurtenant
thereto, as any of the foregoing may be improved, modified, altered or expanded
during the term hereof. The Members acknowledge and agree that (i) the
Company is not the owner of the “Delano” brand and proprietary marks or the
Morgans’ to be developed business brand and proprietary marks and (ii) the
Company’s entitlement to use such brands and other proprietary marks shall be
as provided in the Morgans Hotel Management Agreement.

 

“Hotel Management Agreement” shall mean (a) the
Morgans Hotel Management Agreement, or (b) in the event that the agreement
described in the preceding clause (a) shall no longer be in effect, any
new management agreement between the Company and any other manager or operator
of the Hotel.

 

“Hotel Manager” shall mean (a) for so
long as the Morgans Hotel Management Agreement shall be in effect, Morgans/LV
Management LLC, a Delaware limited liability company, and its permitted
successors and assigns under the Morgans Hotel Management Agreement, or (b) if
the Morgans Hotel Management Agreement shall no longer be in effect, any other
Person operating or managing the Hotels pursuant to a new hotel management
agreement with the Company.

 

7

 

“Improvements” shall mean the Hotels,
together with all roads, sidewalks, parking areas, landscaping, utilities and
related equipment and other infrastructure set forth on the Plans and
Specifications or subsequently constructed on, at or underneath the Property.

 

“Initial Capital Contributions” shall mean
the Capital Contributions of the Members funded pursuant to Section 5.01.

 

“Interest” shall mean, with respect to any
Member, such Member’s beneficial ownership interest in the Company as provided
in this Agreement.

 

“Interior Designer” shall mean the interior
design firm or firms retained by the Company in connection with the Project.

 

“Joint Decisions” shall mean those decisions
or actions, to be jointly approved by Morgans and Boyd, which are set forth on Exhibit E.

 

“Land” shall mean the real property (including
any easements, rights of way, access rights, approvals and Entitlements, and
any other rights, benefits or obligations appurtenant thereto) located on an
approximately 6.5 acre parcel of land (which acreage amount shall be subject to
modification as provided in the next sentence) at the southernmost boundary of
Echelon Place as more particularly described on the Preliminary Site Plan. The
Members acknowledge that the site shape and area of the Land may change during
the Predevelopment Period, such changes to be subject to the approval of both
Members, but the area of the Land will not be less than a minimum of 6 acres or
such other area as mutually agreed by the Members.

 

“Landscape Architect” shall mean the
landscape architect(s) or landscape planner(s) retained by the Company in
connection with the Project.

 

“Legal Requirements” shall mean any and all
laws, rules, regulations, constitutions, orders, ordinances, charters,
statutes, codes, executive orders and requirements, (including any
Entitlements) of any Governmental Authority having jurisdiction over a Person
(as applicable) and/or the Property or any street, road, avenue or sidewalk
comprising a part of, or lying in front of, the Property or any vault in, or
under the Property (including, without limitation, any of the foregoing
relating to handicapped or disabled access, accommodations, or parking, and the
laws, rules, regulations, orders, ordinances, statutes, codes and requirements
of any applicable fire rating bureau or other body exercising similar
functions).

 

“Loan Documents” shall mean, collectively,
the Construction Loan Documents and any other documents, instruments or
agreements evidencing, securing or guaranteeing any other indebtedness or
financing obtained by the Company.

 

“Managing Member” shall mean Morgans and its
successors and permitted assigns.

 

“Management Fee” shall mean, with respect to
any period, the management fee paid by the Company to the Hotel Manager with
respect to such period, in the amount set forth in the Hotel Management
Agreement.

 

8

 

“Material Vendor” shall mean each of the
following: (i) any lobbyist engaged by the Company, (ii) any supplier
or vendor receiving payments from the Company in excess of $500,000 during any twelve
month period, (iii) any consultant receiving payments from the Company in
excess of $50,000 during any twelve month period and (iv) any lessee or
tenant of the Company if aggregate rental due during the term of the lease,
including renewals, exceeds $350,000. Notwithstanding the foregoing, term “Material
Vendor shall not include any licensed attorney, certified public accountant,
law firm, accounting firm, financial institution regulated by any federal or
state law, investment banker regulated by any state and any licensed real
estate broker).

 

“Member” shall mean Morgans, Boyd or any
other Person who, at such time, is admitted to the Company as a member in
accordance with the terms of this Agreement.

 

“Morgans Capital Commitment” shall mean an
amount equal to the Capital Contribution funded by Morgans pursuant to Section 5.01(b),
and which amount shall equal the fair market value of the Land contributed by
Boyd to the Company on the Contribution Date, as determined pursuant to Section 5.01(c).

 

“Morgans Competitive Hotel” shall mean the
following hotels or hotel brands, and other hotels that are substantially
similar to the following hotels or hotel brands: Mondrian, Delano, W Hotels, 60
Thompson, Soho Grand, Tribeca Grand or Hotel Gansevoort. The Members agree that
the following hotel brands, and those substantially similar thereto, are not
substantially similar to the foregoing hotel brands and shall not be deemed a
Morgans Competitive Hotel: Ritz Carlton, Fairmont, St. Regis, Four Seasons,
Solis, Capella, Bulgari, Rosewood, and Raffles.

 

“Morgans Controlled Affiliate” shall mean any
Person, directly or indirectly, 100 percent owned and controlled by the Morgans
Parent.

 

“Morgans Hotel Management Agreement” shall
mean the Hotel Management Agreement between the Company and Morgans/LV
Management LLC, dated as of the date hereof, as amended, modified or
supplemented.

 

“Morgans Parent” shall mean Morgans Hotel
Group LLC, a Delaware limited liability company, or any successor thereto,
including any successor arising from or in connection with the pending initial
public offering of substantially all of the assets owned or controlled by
Morgans Hotel Group LLC.

 

“Mortgage” shall mean any mortgage, deed of
trust, security agreement or other instrument in the nature thereof at any time
and from time to time constituting a lien or grant of security title or a
security interest in and upon any interest or estate in the Property or any
portion thereof.

 

“Necessary Expenditures” shall mean (a) all
Emergency Costs, and (b) all other expenditures whether or not of a
recurring nature that are necessary for the Company to preserve, operate,
maintain, improve or protect the Property consistent with the Annual Plan,
including payments in respect of liens, payments of principal, interest and any
other amounts pursuant to any Loan Documents, payments of mechanics’ liens
(unless the Company is diligently and continuously prosecuting a proceeding
contesting the payment of the lien by a proper legal

 

9

 

proceeding
which operates to suspend collection of such lien, the Company has sufficient
funds reserved for such payment and such contest shall not be prohibited by the
Loan Documents), insurance payments, real estate tax payments, utility costs,
repair and maintenance costs, costs of compliance with federal, state and local
laws, codes, rules or regulations, and any other operating expenses or
capital expenses set forth in the Annual Plan or otherwise approved by the
Members.

 

“Net Capital Proceeds” shall mean any Net
Disposition Proceeds or Net Refinancing Proceeds.

 

“Net Disposition Proceeds” shall mean the
gross receipts (including condemnation and casualty insurance proceeds) from
the sale, exchange, transfer, conveyance, lease, or other disposition of a
Hotel, the Property, FF&E, or any other assets of the Company other than in
the ordinary course of business, less (a) any indebtedness relating to or
secured by such assets (other than Priority Loans) which is repaid out of such
gross receipts, (b) the costs and expenses incurred by the Company in
connection with the sale, exchange, transfer, conveyance, lease or other
disposition, including brokerage commissions, and (c) in the case of
condemnation or casualty, the costs incurred by the Company in connection with
any collection of condemnation or casualty proceeds, or repair or restoration
of the Property.

 

“Net Operating Cash Flow” shall mean, for any
period, the excess of Cash Receipts for such period over Cash Disbursements for
such period.

 

“Net Refinancing Proceeds” shall mean, with
respect to any financing or refinancing of any loan or encumbrance now or
hereafter placed on the Property, all cash received by the Company from such
financing or refinancing, less the sum of (a) all costs incurred by the
Company in connection with such financing or refinancing, (b) all amounts
paid to the holder of any Mortgage or other encumbrance on the Property, or to
the holder of any other indebtedness of the Company (other than Priority
Loans), as a consequence of such financing, (c) all amounts which are
required to be held in reserve by the Company, or which are otherwise not made
unconditionally available to the Company for distribution to the Members
pursuant to the terms of such financing or refinancing, and (d) amounts
applied by the Company to pay its costs and expenses or set aside in connection
with such financing or refinancing as a reserve and/or escrow by the Company
for its reasonably anticipated expenses and obligations.

 

“Opening Date” shall mean the date on which
all of the following has occurred (i) the Hotel is opened for business to
the public, (ii) the Company has obtained all material licenses and
permits required by Legal Requirements, the Hotel Management Agreement and this
Agreement for the occupancy and operation of the Hotel (including, without
limitation, certificates of occupancy (which may be temporary), restaurant
licenses, and liquor licenses); (iii) all FF&E and Operating Supplies
reasonably required to operate the Hotel in accordance with the Hotel
Management Agreement and this Agreement have been delivered to and, as
applicable, installed in the Hotel and are in working order; (iv) all
elements of the building comprising the Hotel and all other structures
necessary for operation, access to, and use of the Hotel in accordance with
this Agreement and the Hotel Management Agreement, shall have been
substantially completed and the Company shall have obtained certificates of
occupancy (which may be temporary) and all other licenses and permits required
by applicable Legal Requirements for the operation and management thereof, with
respect to same; (v) the Company has received

 

10

 

all
consents and approvals from all governmental and regulatory authorities and all
other Persons as are necessary for the operation of the Hotel in accordance
with this Agreement and the Hotel Management Agreement.

 

“Operating and Capital Budget” shall mean,
collectively, the consolidated operating and capital budgets for the Company
for any Fiscal Year (or portion thereof) following the Opening Date, as set
forth in the Annual Plan for such Fiscal Year and as approved by Boyd.

 

“Operating Equipment” means all cooking
utensils, chinaware, glassware, linens, silverware, uniforms, menus and other
similar items used at the Hotels.

 

“Operating Supplies” means all paper
supplies, cleaning materials, fuel, food and beverages, light bulbs and other
consumable and expendable items used at, or stored for usage at, the Hotels.

 

“Outside Start Date” shall mean June 30,
2008.

 

“Percentage Interest” shall mean, with
respect to any Member, such Member’s Percentage Interest as set forth in Section 5.01(d),
as such Percentage Interest may be modified from time to time in accordance
with the terms hereof.

 

“Permitted Cost Overruns” shall mean
unbudgeted Development Costs (i) arising from acts of God or (ii) that
would not have otherwise been incurred but for changes made by Boyd or its
Affiliates in Echelon Place following the approval of the Development Budget.

 

“Permitted Encumbrances” shall means the
title exceptions set forth in Exhibit F attached hereto, but only
to the extent that such title exceptions do not, individually or in the
aggregate, have a material adverse effect on the use, utility or value of the
Land for the purposes of the development and operation of the Hotels and the
other Project improvements thereon.

 

“Person” shall mean an individual,
corporation, partnership, association, trust, limited liability company or any
other entity or organization, including a government or political subdivision
or an agency or instrumentality thereof.

 

“Plans and Specifications” shall mean the
drawings, plans and specifications for the Project (including any applicable site
plan, master plan or similar document) prepared by the Architects and Project
Consultants, as approved, amended, modified or supplemented pursuant to the
terms of this Agreement.

 

“Predevelopment Budget” shall mean the
predevelopment budget for the Project, setting forth by line item all
Predevelopment Costs, a copy of which is attached hereto as Exhibit G,
as such budget shall be amended, modified or supplemented pursuant to the terms
of this Agreement.

 

“Predevelopment Costs” shall mean all costs
incurred in connection with (i) the Plans and Specifications and
construction documents for the Project including, without limitation, all
architectural, engineering, attorneys’ and other professionals’ fees relating
thereto; (ii) obtaining all construction permits; (iii) obtaining the
Construction Loan, including, without

 

11

 

limitation,
all application fees, discount points, commitment fees, appraisal fees,
documentary stamp and intangible taxes, recording costs, marketing, equity
requirements, and other costs of meeting the lender’s requirements to funding
the Construction Loan and lender’s attorneys’ fees; and (iv) obtaining all
Entitlements and satisfying all Legal Requirements for the Project together
with any other development approvals and permits necessary to pursue the
Project, including, without limitation, the cost of all presentations and
presentation materials, architectural, engineering, and attorneys’, consultants’
and other professionals’ fees relating thereto.

 

“Predevelopment Period” shall mean the period
commencing on the date of this Agreement and ending on the Contribution Date.

 

“Preliminary Site Plan” shall mean the
preliminary site plan for the Project attached hereto as Exhibit H.

 

“Pre-Opening Plan” shall mean the written
statement, prepared by Hotel Manager and approved by Boyd on behalf of the
Company detailing a program of pre-opening activities to be undertaken by the
Hotel Manager through and including the Opening Date to prepare the Hotel for
the Opening Date and which will include, without limitation: (i) using
commercially reasonable efforts to recruit, relocate, train, and compensate
employees (including the executive staff); (ii) pre-opening advertising,
promotion and literature; (iii) using commercially reasonable efforts to
assist the Company in obtaining all necessary licenses and permits for the
operation of the Hotel; (iv) preparing the administrative offices
including telephone, telex and fax services; (v) entertaining prospective
business clients (including opening celebrations and ceremonies); (vi) purchasing
Operating Supplies and FF&E necessary for the Hotel to commence operations;
and (vii) other activities deemed reasonably necessary by the Hotel
Manager to ensure that the Hotel and its operation will be in accordance with
the applicable brand standard.

 

“Project” shall mean the design, development,
construction, financing, equipping, furnishing, pre-opening and opening of the
Hotels and the other new Improvements as provided in the Plans and
Specifications and the Pre-Opening Plan.

 

“Project Consultant” shall mean,
collectively, any design consultant, engineering consultant or other consultant
retained by the Company in connection with the Project.

 

“Property” shall mean the Land and all
improvements existing or constructed thereon from time to time (including the
Hotel and other Improvements).

 

“Pro Rata” shall mean, with respect to the
Members as of any relevant date, in proportion to such Members’ respective
Percentage Interests as of such date.

 

“REA” shall mean a reciprocal easement
agreement and/or master covenants and restrictions recorded by Boyd or its
Affiliate against the Echelon Place Parcel detailing (i) the obligation of
the Affiliate of Boyd that owns the Echelon Place Parcel to construct and
operate the Echelon Place Components and the infrastructure and improvements
set forth in the Echelon Place Master Plan (which obligation shall be subject
to the limitations set forth in the REA), (ii) the services and amenities
that will be provided to the Echelon Place Components in accordance with the
Echelon Place Master Plan and (iii) the allocable share of the each
Echelon Place Component of the expenses and costs associated with such services
and amenities. The REA

 

12

 

shall
be consistent with the terms and conditions set forth on Exhibit I
and shall be subject to the approval of Morgans (acting on behalf of the
Company).

 

“Regulations” shall mean the Treasury
Regulations, including Temporary or Proposed Regulations, promulgated under the
Code, as such regulations are in effect from time to time. References to
specific provisions of the Regulations include references to corresponding
provisions of successor regulations.

 

“Reserve Parcel” shall mean the area
identified on the Echelon Place Components Site Plan as the Reserve Parcel.

 

“Structural Engineer” shall mean the
structural engineer or engineers retained by the Company in connection with the
Project.

 

“Target Opening Date” shall mean the date
approved by the Members in the Construction Schedule as the projected date
of the opening of the Hotels to the public, as such date may be modified with
the approval of the Members.

 

“Transfer” shall mean any direct or indirect
sale, assignment, conveyance, disposition, exchange, mortgage, pledge or
granting of a security interest.

 

“Uniform System” shall mean the “Uniform
System of Accounts for the Lodging Industry (9th revised edition, Copyright
1996)” by the Hotel Association of New York City, Inc. and published by
the Educational Institute of the American Hotel & Motel Association,
as the same may be revised from time to time.

 

Each of the following terms is defined in the Section set
forth opposite such term:

 

	
  Term

  	
   

  	
  Section

  
	
  Act

  	
   

  	
  Recitals

  
	
  Additional Member

  	
   

  	
  12.04(a)

  
	
  Affiliate Agreement

  	
   

  	
  8.02

  
	
  Agreement

  	
   

  	
  Preamble

  
	
  Appointment Notice

  	
   

  	
  12.05(e)

  
	
  Boyd

  	
   

  	
  Preamble

  
	
  Boyd Cost Overrun

  	
   

  	
  5.06(a)

  
	
  Boyd Default Loan

  	
   

  	
  5.06(b)

  
	
  Capital Account

  	
   

  	
  6.01(a)

  
	
  Capital Call Due Date

  	
   

  	
  5.03

  
	
  Capital Call Notice

  	
   

  	
  5.03

  
	
  CERCLA

  	
   

  	
  3.02(k)

  
	
  Certificate

  	
   

  	
  Recitals

  
	
  Change

  	
   

  	
  9.04

  
	
  Company

  	
   

  	
  Recitals

  

 

13

 

	
  Term

  	
   

  	
  Section

  
	
  Confidential Information

  	
   

  	
  14.11

  
	
  Contributing Member

  	
   

  	
  5.04(a)

  
	
  Conversion Notice

  	
   

  	
  5.04(c)

  
	
  Defaulting Member

  	
   

  	
  5.04(d)

  
	
  Environmental Laws

  	
   

  	
  3.02(k)

  
	
  Environmental Liabilities

  	
   

  	
  3.02(k)

  
	
  Failed Contribution

  	
   

  	
  5.04(a)

  
	
  Fair Market Value

  	
   

  	
  12.05(d)

  
	
  Fiscal Year

  	
   

  	
  10.05

  
	
  Funded Amount

  	
   

  	
  5.04(a)

  
	
  Hazard Materials

  	
   

  	
  3.02(k)

  
	
  Indemnified Party

  	
   

  	
  11.02(a)

  
	
  Laws

  	
   

  	
  3.02(k)

  
	
  Liquidating Event

  	
   

  	
  13.02

  
	
  Morgans

  	
   

  	
  Preamble

  
	
  Morgans Cost Overrun Funding

  	
   

  	
  5.06(b)

  
	
  Morgans Default Loan

  	
   

  	
  5.06(a)

  
	
  Morgans Indemnified Party

  	
   

  	
  11.02(b)

  
	
  Morgans Transfer Closing Date

  	
   

  	
  12.05(c)

  
	
  Non-Contributing Member

  	
   

  	
  5.04(a)

  
	
  Permitted Transfer

  	
   

  	
  12.02

  
	
  Priority Loan

  	
   

  	
  5.04(b)

  
	
  Sophisticated Purchaser

  	
   

  	
  12.05(d)

  
	
  Substitute Member

  	
   

  	
  12.03

  
	
  Tax Matters Member

  	
   

  	
  10.07(a)

  

 

Section 1.02 Certain
Other Terms. In this Agreement, unless otherwise specified (a) singular
words include the plural and plural words include the singular; (b) words
which include a number of constituent parts, things or elements, including the
terms “Project” or “Property” shall be construed as referring separately to
each constituent part, thing or element thereof, as well as to all such
constituent parts, things or elements as a whole; (c) words importing any
gender include the other gender; (d) references to any Member include such
Member’s permitted successors and assigns; (e) references to any statute
or other law include all applicable rules, regulations and orders adopted or
made thereunder and all statutes or other laws amending, consolidating or
replacing the statute or law referred to; (f) references to any agreement
or other document, including this Agreement, include all subsequent amendments,
modifications, or supplements to such agreement or document; (g) the words
“include” and “including” and words of similar import, shall be deemed to be
followed by the words “without limitation”; (h) the words “hereto,” “herein,”
“hereof,” “hereunder” and words of similar import, refer to this Agreement in
its entirety; (i) references to Articles, Sections, paragraphs, Schedules

 

14

 

and Exhibits are to the Articles, Sections,
paragraphs, Schedules and Exhibits of this Agreement; (j) numberings and
headings of Articles, Sections, paragraphs, Schedules and Exhibits are inserted
as a matter of convenience and shall not affect the construction of this
Agreement; and (k) all Schedules and Exhibits to this Agreement are
incorporated herein by this reference thereto as if fully set forth herein, and
all references herein to this Agreement shall be deemed to include all such
incorporated Schedules and Exhibits.

 

Section 1.03 Accounting
Terms. Unless otherwise specified, (a) all accounting terms used
herein shall be interpreted, (b) all accounting determinations hereunder
shall be made and (c) all financial statements required to be delivered
hereunder shall be prepared, in accordance with generally accepted accounting
principles as modified by the Uniform System, as in effect from time to time,
consistently applied.

 

ARTICLE 2

FORMATION
AND PURPOSE OF THE COMPANY

 

Section 2.01 Formation
of the Company. The Company has been formed and established under the
provisions of the Act. Effective as of the date hereof, the rights and
liabilities of the Members shall be as provided in this Agreement and, except
as herein otherwise expressly provided, in the Act.

 

Section 2.02 Name of
the Company. The name of the Company shall be “Morgans Las Vegas, LLC.”

 

Section 2.03 Purpose
of the Company. The purpose of the Company is to engage in any lawful
activity permitted under the Act, including, without limitation, the following:

 

(a) entering into and performing its obligations
and exercising its rights under the agreements with Architects and Project
Consultants, the Construction Loan Documents, the Hotel Management Agreement
and any other agreements or contracts contemplated by the foregoing or this
Agreement or required in connection with the development, design, construction,
operation, financing, maintenance, management, improvement, repair, renovation,
alteration, leasing and/or sale of the Hotels and the Property, and carrying
out the terms of and engaging in the transactions contemplated by such
agreements, in each case either directly or through subsidiaries;

 

(b) owning, designing, developing,
constructing, managing, servicing, maintaining, repairing, renovating,
improving, leasing, restructuring, financing (including entering into and
performing its obligations and exercising its rights under any loan financing
documents), refinancing, selling or otherwise dealing with and disposing of the
Hotels and the Property and any proceeds of the Hotels and the Property, in
each case either directly or through subsidiaries; and

 

(c) entering into, making and performing all
contracts and undertakings, and engaging in any activity and executing any
powers permitted under the Act that are incidental to, or connected with, the foregoing
and necessary, suitable or convenient to accomplish the foregoing.

 

15

 

Section 2.04 Place
of Business of the Company. The principal place of business of the Company
shall be located c/o Morgans, 475 Tenth Avenue, 11th Floor, New York, New York 10018; provided, however, that as soon as
reasonably practicable the Company shall establish its principal place of
business on the Land.

 

Section 2.05 Registered
Office and Registered Agent. The Company shall establish and maintain a
registered office and agent for the Company in the State of Delaware.

 

Section 2.06 Duration
of the Company. The Company shall continue until its termination in
accordance with the provisions of Article 13.

 

Section 2.07 Title
to the Company Property. All property of the Company, whether real or
personal, tangible or intangible, shall be deemed to be owned by the Company as
an entity, and no Member, individually, shall have any direct ownership
interest in such property.

 

Section 2.08 Filing
of Certificates. Morgans shall file and publish all such certificates,
notices, statements or other instruments required by law for the formation and
operation of a limited liability company in all jurisdictions where the Company
may elect to do business.

 

Section 2.09 Limitation
on Liability. Except as required by the Act or as expressly provided in
this Agreement, the debts, obligations and liabilities of the Company, whether
arising in contract, tort or otherwise, shall be solely the debts, obligations
and liabilities of the Company, and no Member shall be obligated personally for
any such debt, obligation or liability of the Company solely by reason of being
a Member.

 

Section 2.10 No
Responsibility for Liability of Other Member. Except as expressly provided
herein, neither the Company nor any Member shall be responsible or liable for
any indebtedness or obligation of another Member incurred either before or
after the execution of this Agreement, except as to those responsibilities,
liabilities and obligations incurred pursuant to the terms of this Agreement,
and each Member shall indemnify and hold each other Member harmless from such
obligations and indebtedness incurred or assumed by the indemnifying Member
except as aforesaid. This Agreement shall not be deemed to create a joint
venture between the Members with respect to any activities or enterprises
whatsoever other than those within the purposes of the Company as specified in Section 2.03.

 

ARTICLE 3

REPRESENTATIONS
AND WARRANTIES

 

Section 3.01 Representations
and Warranties of Morgans. Morgans represents and warrants to Boyd as
follows:

 

(a) It is duly organized, validly existing and
in good standing under the laws of its jurisdiction of formation with all
requisite power and authority to enter into this Agreement and to conduct the
business of the Company.

 

(b) This Agreement constitutes the legal, valid
and binding obligation of Morgans enforceable in accordance with its terms,
subject to the application of principles of equity and laws governing
insolvency and creditors’ rights generally.

 

16

 

(c) No consents or approvals are required from
any Governmental Authority or other Person for Morgans to enter into this
Agreement. All limited liability company, corporate or partnership action on
the part of Morgans necessary for the authorization, execution and delivery of
this Agreement, and the consummation of the transactions contemplated under
this Agreement, have been duly taken.

 

(d) The execution and delivery of this
Agreement by Morgans, and the consummation of the transactions contemplated
under this Agreement, do not conflict with or contravene any provision of
Morgans’ organizational documents or any agreement or instrument by which it or
its properties are bound or any law, rule, regulations, order or decree to
which it or its properties are subject.

 

(e) Morgans has not retained any broker, finder
or other commission or fee agent, and no such person has acted on its behalf in
connection with the execution and delivery of this Agreement or the acquisition
(directly or indirectly) by the Company of the Property.

 

(f) Morgans is an indirect wholly-owned
subsidiary of the Morgans Parent.

 

Section 3.02 Representations
and Warranties of Boyd. Boyd represents and warrants to Morgans as follows:

 

(a) It is duly organized, validly existing and
in good standing under the laws of its jurisdiction of formation with all
requisite power and authority to enter into this Agreement and to conduct the
business of the Company.

 

(b) This Agreement constitutes the legal, valid
and binding obligation of Boyd enforceable in accordance with its terms,
subject to the application of principles of equity and laws governing
insolvency and creditors’ rights generally.

 

(c) No consents or approvals are required from
any Governmental Authority or other Person for Boyd to enter into this
Agreement. All limited liability company, corporate or partnership action on
the part of Boyd necessary for the authorization, execution and delivery of
this Agreement, and the consummation of the transactions contemplated under
this Agreement, have been duly taken.

 

(d) The execution and delivery of this
Agreement by Boyd, and the consummation of the transactions contemplated under
this Agreement, do not conflict with or contravene any provision of Boyd’s
organizational documents or any agreement or instrument by which it or its
properties are bound or any law, rule, regulations, order or decree to which it
or its properties are subject.

 

(e) Boyd has not retained any broker, finder or
other commission or fee agent, and no such person has acted on its behalf in
connection with the execution and delivery of this Agreement or the acquisition
(directly or indirectly) by the Company of the Property.

 

(f) Boyd is a wholly-owned subsidiary of the
Boyd Parent.

 

17

 

(g) Boyd or an Affiliate holds good and
marketable fee simple title to the Echelon Place Parcel and the Land, in each
case free and clear of all liens, except for the Permitted Encumbrances.

 

(h) Boyd will, prior to the Contribution Date,
operate and maintain the Land in a reasonable commercial manner and
substantially in accordance with the past practices of Boyd and its Affiliates
with respect to the Land, and shall not further encumber the Land or permit the
Land to be further encumbered.

 

(i) There is no litigation pending or, to the
best knowledge of Boyd, threatened in writing against the Land, the Echelon
Place Parcel or Boyd or its Affiliates which would affect the Land or the
Echelon Place Parcel. No petition in bankruptcy (voluntary or otherwise),
assignment for the benefit of creditors, or petition seeking reorganization or
arrangement or other action under Federal or state bankruptcy or insolvency law
is pending against or contemplated by Boyd or its Affiliates.

 

(j) There are no existing condemnation proceedings
affecting the Land or the Echelon Place Parcel (or any portion thereof) and
neither Boyd nor any Affiliate of Boyd has received written notice of the
threatened commencement of any such action affecting the Land or the Echelon
Place Parcel (or any portion thereof). To the best of Boyd’s knowledge, there
are no proffers, development agreements or other restrictions affecting the use
or development of the Land or the Echelon Place Parcel other than the Project.

 

(k) The Land and the Echelon Place Parcel are in
compliance in all material respects with all Legal Requirements of any
Governmental Authority or any insurance carrier (“Laws”) affecting the
Land, the Echelon Place Parcel or any portion thereof (including, without
limitation, Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (“CERCLA”), 42 U.S.C. 9601(14), or any Laws regulating
pollutants or contaminants as defined in CERCLA, 42 U.S.C. 9601(33), or
hazardous waste as defined by the Resource Conservation and Recovery Act, 42
U.S.C. 6903(5), or other Laws regulating or relating to Hazardous Materials (as
defined below) or human health or safety or the environment (collectively, the “Environmental
Laws”)), and neither Boyd nor any Affiliate of Boyd has received notice of
any violations of any of the foregoing Laws with respect to the Land or the
Echelon Place Parcel. In connection with or relating to the Land or the Echelon
Place Parcel, no written notice, notification, demand, request for information,
citation, summons or order has been received, no complaint has been filed, no
penalty has been assessed and no suit or action is pending or, to Boyd’s knowledge,
threatened by any Governmental Authority or other Person with respect to any
matters relating to or arising out of any Environmental Law, except to the
extent any of the foregoing has been withdrawn, rescinded, dismissed,
overruled, terminated, expired, completed, resolved, satisfied, discharged or
otherwise rendered inoperative or ineffective. In connection with or relating
to the Land or the Echelon Place Parcel, to Boyd’s knowledge, there are no
Environmental Liabilities or facts, events, conditions, situations or set of
circumstances which would reasonably be expected to result in or be the basis
for any Environmental Liabilities. “Environmental Liabilities,” as used
in this subparagraph, means any and all liabilities to the extent arising in connection
with or relating to the Land or the Echelon Place Parcel or any activities or
operations occurring or conducted thereon (including offsite disposal), whether
accrued, contingent, absolute, determined, determinable or otherwise, which
arise under or relate

 

18

 

to
any applicable Environmental Law. For purposes of this Agreement, the term “Hazardous
Materials” includes, without limitation, (a) any chemical, material or
other substance defined as or included within the definition of “hazardous
substances,” “hazardous wastes,” “extremely hazardous substances,” “toxic
substances,” “toxic material,” “restricted hazardous waste,” “special waste,”
or words of similar import under any Environmental Law; (b) any oil,
petroleum, or petroleum-derived substances, any flammable substances or
explosives, any radioactive materials, any asbestos or any substances
containing more than 0.1 percent asbestos, any oil or dielectric fluid
containing levels of polychlorinated biphenyls in excess of 50 parts per
million, and any urea formaldehyde insulation; and (c) any other chemical,
material or substance, exposure to which is prohibited, limited or regulated
under any Environmental Law.

 

(l) To the best of Boyd’s knowledge, no work has
been performed at the Land, and no materials have been furnished to the Land,
which though not presently the subject of a lien, might give rise to mechanics’,
materialmen’s or other liens against Boyd’s interest in the Land or any portion
thereof if not paid as agreed.

 

(m) Boyd is not, and as of the Contribution Date
will not be, a party to any agreement or undertaking of any kind whatsoever,
written or oral, which will be binding upon the Company from and after the
Contribution Date or which will adversely affect the Land, other than those
furnished to Morgan and approved by Morgan in writing.

 

(n) There are no commercial or residential leases,
subleases, licenses, occupancy agreements, or any other agreements or licenses
in effect as of the date of this Agreement, nor shall there be as of the
Contribution Date, granting to any person, entity or party a right to possess,
occupy, use or purchase the Land or any portion thereof.

 

(o) Except as otherwise expressly set forth in this
Agreement, the Land is being contributed in an “AS IS, WHERE IS” condition and “WITH
ALL FAULTS” as of the date of this Agreement and the Contribution Date. Except
as expressly set forth in this Agreement, no representations or warranties,
express or implied, have been made or are being made and no responsibility has
been or is being assumed by Boyd or by any partner, officer, employee,
director, shareholder, person, firm, agent, attorney, or representative acting
or purporting to act on behalf of Boyd as to the condition or fitness for any
particular purpose or merchantability or repair of the Land or the value,
expense of operation, or income potential thereof or as to any other fact or
condition which has or might affect the Land or the condition, repair, value,
expense of operation or income potential of the Land or any portion thereof.
This Agreement has been entered into by the parties after full investigation,
or with the parties satisfied with the opportunity afforded for investigation,
and neither party is relying upon any statement or representation made by, or
made by any person or entity purporting to act on behalf of, the other, unless
such statement or representation is specifically and expressly embodied in this
Agreement.

 

ARTICLE 4

PREDEVELOPMENT
MATTERS

 

Section 4.01 Predevelopment.
During the Predevelopment Period, subject to the approval of Boyd to the extent
required hereunder, Morgans shall use commercially reasonable

 

19

 

efforts to perform all predevelopment duties
customarily performed by a developer of projects of like size and scope in
accordance with the Predevelopment Budget and shall use reasonable commercial
efforts to take or cause to be taken all action and promptly to do or cause to
be done all things necessary, proper or advisable to facilitate the overall
goal of causing (i) the Contribution Date to occur no later than the
Outside Start Date and (ii) the opening the Hotels to the public in the
first quarter of 2010 contemporaneously with completion of Echelon Place,
including, without limitation, the following:

 

(a) Identifying and selecting the Architects,
Interior Designer, Landscape Architects, Structural Engineer and other Project
Consultants and overseeing all such parties;

 

(b) Together with Boyd, interfacing with all
Governmental Authorities and determining all Entitlements required in order to
pursue the Project and the timeline for obtaining the same;

 

(c) Approving, on behalf of the Company, those
provisions of the REA affecting the Company and/or the Property;

 

(d) Taking all action necessary, proper or
advisable to plan, design and obtain Entitlements for the construction of the
Project;

 

(e) Preparing or causing to be prepared for
approval by Boyd, (i) the concept and program development and specific
site boundaries for the Land consistent with the Preliminary Site Plan with the
goal of obtaining Boyd’s approval on or before, March 31, 2006, (ii) schematic
designs and timeline with the goal of obtaining Boyd’s approval on or before, July 31,
2006, (iii) the Plans and Specifications, the Pre-Opening Plan, the
Development Budget and the Construction Schedule with the goal of
obtaining Boyd’s approval on or before January 1, 2007 and both parties
agree to use reasonable commercial, good faith efforts to obtain such approvals
on or prior to such dates, and any such approvals shall not be unreasonably
delayed, withheld or conditioned;

 

(f) Obtaining clearance from Boyd’s
governmental compliance committee for any Person that may be a Material Vendor
before engaging such Person;

 

(g) On or before the Outside Start Date,
identifying Construction Lenders and identifying, completing and endeavoring to
cause the Company to satisfy all requirements in order for the Company to
commence construction of the Project and close the Construction Loan and
receive funding thereunder.

 

Section 4.02 Echelon
Place Master Plan and Components.

 

(a) Boyd and its Affiliates shall use
commercially reasonable efforts to assist and cooperate with Morgans in
connection with the performance of Morgans’ predevelopment duties set forth in Section 4.01.
During the Predevelopment Period, Boyd and its Affiliates shall also use
commercially reasonable efforts to proceed with the expeditious design and
planning of Echelon Place, and to complete timely and provide to Morgans, the
planning of the material components of the Echelon Place Master Plan that are
reasonably necessary for Morgans to satisfy its predevelopment obligations as
set forth in Section 4.02. In amplification of, and not in

 

20

 

limitation
of, the foregoing, during the Predevelopment Period, Boyd and its Affiliates
shall use reasonable commercial efforts to take or cause to be taken all action
and promptly to do or cause to be done all things necessary, proper or
advisable to facilitate the overall goal of closing the Construction Loan no
later than the Outside Start Date and opening the Hotels to the public in the
first quarter of 2010 contemporaneously with completion of the other material
components of the Echelon Place Master Plan and the Echelon Place Components,
including, without limitation, the following:

 

(i) provide assistance and advice as reasonably
requested by Morgans, and otherwise fully cooperate in all respects with
Morgans, to apply for and obtain the Entitlements for the Project;

 

(ii) take all action necessary, proper or
advisable to plan, design and obtain Entitlements for the construction of the
Echelon Place Components and the Echelon Place Master Plan Improvements,
including obtaining all approvals, licenses and permits in connection
therewith;

 

(iii) take all action necessary, proper or
advisable to safely demolish and remove the existing structures on the Land and
to remove and or remediate, in accordance with applicable Laws, any Hazardous
Materials on the Land and to convey the Land to the Company on the Contribution
Date vacant of any and all structures and debris.

 

(b) Without limiting any of the foregoing,
during the Predevelopment Period Boyd shall not and shall not permit any
Affiliate to (i) sell, contribute, assign or create any right, title or
interest in or to the Land or cause any additional Lien or liability to be
placed in record against the Land that is inconsistent with the Project or that
would materially affect the ability of Boyd or its Affiliates to comply with
its obligations hereunder, (ii) enter into any new (or extend or renew any
existing) permit, covenant, restriction, agreement or obligation affecting the
Land that is inconsistent with the Project or that would materially affect the
ability of Boyd or its Affiliates to comply with its obligations hereunder or (iii) take
or commit any action that could likely result in a violation or breach of any
agreement, covenant, representation or warranty contained in this Agreement.

 

(c) Boyd and its Affiliates and Morgans (on
behalf of the Company) shall use all reasonable commercial efforts, and shall
work expeditiously and in good faith, to finalize, execute and record against
the Echelon Place Parcel (as soon as reasonably practicable after the execution
of this Agreement, which the Members understand may take 12 to 18 months) an
REA on terms and conditions consistent with the terms set forth in Exhibit I
hereof.

 

(d) Notwithstanding the foregoing or anything
in this Agreement to the contrary and although it is the present intention of
Boyd and its Affiliates to proceed in good faith with the planning, development
and ultimate construction of Echelon Place, each of the Members acknowledge and
agree: (i) the development of Echelon Place as currently proposed is in a
preliminary stage, (ii) there are many factors both within and outside of
the control of the Members that could preclude the successful development of
Echelon Place, (iii) there is no assurance that the Boyd or any Affiliate
of Boyd will ultimately develop, construct and/or

 

21

 

operate
Echelon Place; (iv) there is no assurance that the Boyd or any Affiliate
of Boyd will not materially modify Echelon Place as it is presently proposed
and (v) in the event Boyd or its Affiliate elects, in its sole discretion,
to modify Echelon Place in any manner or not to proceed with the construction
of any portion of Echelon Place, nothing in this Agreement shall be deemed to
bind Boyd or any Affiliate thereof to complete Echelon Place or any part
thereof, nor shall such election by Boyd or its Affiliate give rise to any
cause of action against Boyd, or any Affiliate thereof, by Morgans under this Agreement;
provided, however, that (A) if the Company and an Affiliate of Boyd
approve an REA and the development and construction of Echelon Place proceeds,
then the obligations of Boyd and its Affiliates to the Company with respect to
the design (including any modifications thereto), construction, completion and
operation of Echelon Place shall be as set forth in, and governed by, the REA,
and (B) in the event that any failure of Boyd or its Affiliates to proceed
with the development of Echelon Place, or any modification by Boyd or its
Affiliates of the master plan or site plan for Echelon Place, shall result in a
failure of the Company to obtain or close the Construction Loan or to satisfy
any conditions to the Construction Loan or the Contribution Date prior to the
Outside Start Date, then the provisions of Section 4.03 shall apply.

 

Section 4.03 Outside
Start Date. Notwithstanding anything to the contrary contained herein, if
for any reason the Contribution Date has not occurred on or prior to the Outside
Start Date, then, as provided in Section 13.02(d), either Member may
dissolve the Company and upon such dissolution this Agreement shall terminate,
and neither Member shall have any claim against the other Member for any costs
or expenses incurred or spent as of such dissolution date, including but not
limited to the Predevelopment Costs funded by such Member and any other pursuit
costs incurred by such Member nor shall either Member have any other liability
or obligation to each other of any kind pursuant to this Agreement, excepting
any obligations or liabilities that expressly survive the termination of this
Agreement as provided in this Section 4.03; provided, however, if the
failure to satisfy this condition is specifically due to the actions of a Member
in material breach of this Agreement, then the non breaching Member shall have
claim against the other Member for any out of pocket costs or expenses incurred
by the non-breaching Member as of the dissolution date. In the event of any
dissolution of the Company and termination of this Agreement pursuant to this Section 4.03,
neither Member shall have the right to use the plans, specifications, reports,
test results or other work product prepared in connection with the Project
without the consent of the other Member. The provisions of this Section 4.03
shall survive the dissolution of the Company or the termination or expiration
of this Agreement.

 

ARTICLE 5

CAPITAL
CONTRIBUTIONS

 

Section 5.01 Initial
Capital Contributions.

 

(a) During the Predevelopment Period, Boyd and
Morgans shall be required to make Capital Contributions, on a Pro Rata basis,
from time to time for funding Predevelopment Costs in accordance with the
Predevelopment Budget.

 

(b) On the Contribution Date and provided as of
such date (i) the representations and warranties of Boyd herein shall be
true and correct in all material respects as

 

22

 

if
made on the Contribution Date and Boyd is not in breach of any material
provision of this Agreement, (ii) the Members have approved the Plans and
Specifications, the Development Budget, the Construction Schedule and the
Pre-Opening Plan, and (iii) the REA has been executed, delivered and
recorded in the local land records, Morgans shall fund to the Company by wire
transfer of immediately available funds an amount equal to the excess of (A) the
Morgans Capital Commitment over (B) the Predevelopment Costs previously
funded by Morgans.

 

(c) Contemporaneously with Morgans funding the
Capital Contribution required of Morgans pursuant to Section 5.01(b) and
provided, as of such date, (i) the representations and warranties of
Morgans herein shall be true and correct in all material respects as if made on
the Contribution Date and Morgans is not in breach of any material provision of
this Agreement, (ii) the Members have approved the Plans and
Specifications, the Development Budget, the Construction Schedule and the
Pre-Opening Plan, and (iii) the REA has been executed, delivered and
recorded in the local land records, Boyd shall convey the Land to the Company
pursuant to normal and customary deeds and other conveyance instruments
consistent with local practices and subject only to the Permitted Encumbrances,
and with all improvements thereon having been demolished and removed at Boyd’s
cost. Boyd shall be deemed to have made a Capital Contribution to the Company
in an amount equal to the fair market value of Land. The Members acknowledge
and agree that the fair market value of the Land shall be equal to $15 Million
for each acre (or proportionate share thereof for any fractional acre)
comprising Land that is conveyed to the Company. For example, and for
illustration purposes only, if the Land consists of 6.5 acres then the Capital
Contribution of Boyd would equal Ninety Seven Million Five Hundred Thousand
Dollars ($97,500,000) and, in such event, the Morgans Capital Commitment would
equal Ninety Seven Million Five Hundred Thousand Dollars ($97,500,000). The
Company, out of the Capital Contribution funded by Morgans pursuant to Section 5.01(b) and
simultaneously with the conveyance of the Land to the Company, shall reimburse
Boyd the amount of Predevelopment Costs funded by Boyd through such date.

 

(d) As of the Contribution Date, the Percentage
Interests of the Members shall be as follows:

 

	
  Name

  	
   

  	
  Percentage Interest

  	
   

  
	
  Morgans

  	
   

  	
  50

  	
  %

  
	
  Boyd

  	
   

  	
  50

  	
  %

  

 

Section 5.02 Additional
Capital Contributions. From and after the Contribution Date, Morgans and
Boyd shall be required to make additional Capital Contributions, on a Pro Rata
basis, from time to time during the Construction Period for the following
purposes: (a) Capital Contributions for Permitted Cost Overruns; and (b) Capital
Contributions for Approved Cost Overruns. Subsequent to the Construction
Period, Morgans and Boyd shall be required to make Capital Contributions, on a
Pro Rata basis, for Necessary Expenditures. All such Capital Contributions
shall be made in accordance with the procedures set forth in this Article 5.

 

23

 

Section 5.03 Procedures
for Capital Contributions.

 

Morgans shall issue Capital Calls to the Members in
writing (a “Capital Call Notice”) to fund any Capital Contributions
required pursuant to Section 5.01(a) or Section 5.02. Each such
Capital Call Notice shall set forth the amount of the required Capital
Contribution, and shall specify a date (the “Capital Call Due Date”) for
contribution of such funds. Morgans shall make Capital Calls for Predevelopment
Costs consistent with the Predevelopment Budget. Upon receipt of a Capital Call
Notice, each Member shall be required to fund its Pro Rata share of the total
funds specified in the Capital Call Notice. The Capital Call Due Date shall be
at least (x) two (2) Business Days after receipt of the Capital Call Notice,
for Emergency Costs and (y) ten (10) Business Days after receipt of
the Capital Call Notice, for all other funds, unless a shorter time is
reasonably designated by Morgans. All Capital Contributions shall be made by
wire transfer of immediately available funds to an account of the Company
specified by Morgans in the Capital Call Notice. If, for any reason, Morgans
fails to issue a Capital Call as required in this Section 5.03, then Boyd
shall also have the right to issue a Capital Call if Morgans fails to make a
Capital Call for such items within ten (10) Business Days after notice
from Boyd of such failure.

 

Section 5.04 Failure
to Fund Capital Contributions.

 

(a) Subject to Section 5.04(d) hereof,
if any Member shall fail to timely make a Capital Contribution required
pursuant to this Article 5 in the amount specified in the applicable
Capital Call Notice (such Member is hereinafter referred to as a “Non-Contributing
Member”), Morgans or Boyd shall give notice of such failure to the other
Member and the amount of the Capital Contribution not funded by the
Non-Contributing Member (such amount is hereinafter referred to as the “Failed
Contribution”), and the Member that shall have funded its Capital
Contribution may, at its sole election and as the sole and exclusive remedy of
the Company and any Member under this Agreement on account of the failure of
any Member to make a Capital Contribution (other than as set forth in Section 5.05
hereof), fund, at any time thereafter, all or part of such Failed Contribution
(any such funded amount is hereinafter referred to as the “Funded Amount,”
and each such funding Member is hereinafter referred to as a “Contributing
Member”).

 

(b) The Funded Amount will be treated as a
recourse loan (a “Priority Loan”) by the Contributing Member to the
Non-Contributing Member, which Priority Loan shall bear interest at the rate of
15% per annum, compounded monthly, prorated for any partial year. Any such
Priority Loan (to the extent of unpaid principal and interest), shall be repaid
directly by the Company to the Contributing Member from the share of
distributions of Net Operating Cash Flow and Net Capital Proceeds as set forth
in Sections 7.01 and 7.02 hereof to which the Non-Contributing Partner
would otherwise be entitled.

 

(c) With respect to any Priority Loan made in
connection with a Failed Contribution, in the event that a Contributing Member
shall have made a Priority Loan and the Priority Loan (plus all accrued and
unpaid interest thereon) shall not have been repaid in full (either by the
Non-Contributing Member and/or by the Company out of distributions to which the
Non-Contributing Member would otherwise be entitled) within one hundred eighty
(180) days after the making of such Priority Loan, such Contributing Member
may, by delivering a

 

24

 

notice
(the “Conversion Notice”) to the Non-Contributing Member at any time
after the expiration of such 180-day period, elect to terminate such Priority
Loan, convert the Priority Loan to equity and have the Non-Contributing Member’s
Percentage Interest reduced as set forth in Section 5.05; provided,
however, that the Non-Contributing Member shall have the right during
the ten (10) day period following the delivery by the Contributing Member
of the Conversion Notice to repay in full the Priority Loan or the unpaid
portion thereof (together with all accrued and unpaid interest thereon), and if
such repayment shall occur within such ten (10) day period, the
Contributing Member shall have no further rights under this Section 5.04(c) with
respect to such Priority Loan.

 

(d) Notwithstanding anything to the contrary
contained herein, if either Member shall fail to make any Capital Contribution
required of it under Section 5.01 (the “Defaulting Member”), then
the other Member, at its sole election, in addition to exercising any of the
other remedies set forth in Sections 5.04 and 5.05, may cause the Company to be
dissolved in accordance with Article 13 hereof, and in connection
therewith the Defaulting Member shall be deemed to have no Percentage Interest,
Interest or Capital Account hereunder.

 

Section 5.05 Dilution.
If a Contributing Member elects to terminate a Priority Loan pursuant to Section 5.04(c) hereof
and the Non-Contributing Member shall fail to repay in full to the Contributing
Member the unpaid portion of the Funded Amount (plus all accrued and unpaid
interest on the Priority Loan) within the ten (10) day period referred to
in such Section 5.04(c), the Percentage Interest of the Contributing
Member shall be increased by an amount equal to the percentage equivalent of a
fraction, the numerator of which is equal to 150% of the unpaid portion of the
Priority Loan (plus all accrued and unpaid interest thereon) and the
denominator of which is equal to the aggregate amount of the Capital
Contributions made by all Members through and including the date such
Contributing Member contributed the Funded Amount. The Percentage Interest of
the Non-Contributing Member shall be reduced by the percentage by which the
Contributing Member’s Percentage Interest is increased pursuant to the
preceding sentence. Exhibit J attached hereto illustrates the
manner in which the Members intend this dilution formula to be calculated.

 

Section 5.06 Payment
of Cost Overruns.

 

(a) Within fifteen (15) Business Days
after receipt of the written notice from Boyd, Morgans shall pay any
Development Costs giving rise to a Cost Overrun. Morgans shall not be entitled
to any reimbursement or other benefit for funding any Cost Overrun. Any Cost
Overrun payment which is required to be made by Morgans under this Section 5.06
shall not constitute a Capital Contribution, a loan to the Company or any other
entitlement for any purpose of this Agreement. The obligations of Morgans
pursuant to this Section 5.06 shall be guaranteed by the Morgans Parent
pursuant to the form of guaranty agreement attached as Exhibit K to
be entered into on or before the Contribution Date. If Morgans fails to pay any
Development Costs giving rise to a Cost Overrun within fifteen
(15) Business Days after receipt of written notice from Boyd of such
failure then, in addition to any other remedies at law or equity available to
Boyd, Boyd may, in its sole and absolute discretion, elect to fund to the
Company all or any portion of the amount of the Cost Overrun that Morgans
failed to fund (the “Boyd Cost Overrun Funding”). Upon the occurrence of
a Boyd Cost Overrun Funding then (i) the amount of the Boyd Cost Overrun
Funding shall be deemed a loan to Morgans (a “Morgans Default Loan”)

 

25

 

bearing
interest at fifteen percent (15%) per annum and payable out of Morgans
share of any distributions under this Agreement to which it may be entitled and
(ii) if the Morgans Default Loan (together with all accrued interest
thereon) shall not have been repaid in full (either by Morgans and/or by the
Company out of distributions to which Morgans would otherwise be entitled)
within thirty (30) days after the making of such Morgans Default Loan,
Boyd may, by delivering a notice to Morgans at any time after the expiration of
such 30 day period, elect to terminate such Morgans Default Loan in which case
the Percentage Interest of Boyd shall increase, and the Percentage Interest of
Morgans shall decrease by an amount equal to the product of (A) Morgans’
Percentage Interest and (B) a fraction, the numerator of which is 150
percent of the Boyd Cost Overrun Funding and the denominator of which is the
aggregate Capital Contributions funded by Morgans to the Company.

 

(b) Within fifteen (15) Business Days
after receipt of the written notice from Morgans, Boyd and the Boyd Parent,
jointly and severally, shall be responsible to pay any Development Costs giving
rise to a Echelon Place Cost Overrun. Neither Boyd nor any Affiliate of Boyd
shall be entitled to any reimbursement or other benefit for funding any Echelon
Place Cost Overrun. Any Echelon Place Cost Overrun payment which is required to
be made by Boyd or the Boyd Parent under this Section 5.06 shall not
constitute a Capital Contribution, a loan to the Company or any other
entitlement for any purpose of this Agreement. If Boyd or the Boyd Parent fails
to pay any Development Costs giving rise to an Echelon Place Cost Overrun
within fifteen (15) Business Days after receipt of written notice from
Morgans of such failure then, in addition to any other remedies at law or
equity available to Morgans, Morgans may, in its sole and absolute discretion,
elect to fund to the Company all or any portion of the amount of the Cost
Overrun that Boyd failed to fund (the “Morgans Cost Overrun Funding”).
Upon the occurrence of a Morgans Cost Overrun Funding then (i) the amount
of the Morgans Cost Overrun Funding shall be deemed a loan to Boyd (a “Boyd
Default Loan”) bearing interest at fifteen percent (15%) per annum and
payable out of Boyd’s share of any distributions under this Agreement to which
it may be entitled and (ii) if the Boyd Default Loan (together with all
accrued interest thereon) shall not have been repaid in full (either by Boyd
and/or by the Company out of distributions to which Boyd would otherwise be
entitled) within thirty (30) days after the making of such Boyd Default
Loan, Morgans may, by delivering a notice to Boyd at any time after the expiration
of such 30 day period, elect to terminate such Boyd Default Loan in which case
the Percentage Interest of Morgans shall increase, and the Percentage Interest
of Boyd shall decrease by an amount equal to the product of (A) Boyd’s
Percentage Interest and (B) a fraction, the numerator of which is 150
percent of the Morgans Cost Overrun Funding and the denominator of which is the
aggregate Capital Contributions funded by Boyd to the Company.

 

Section 5.07 Withdrawals
of Capital. Except as expressly provided in this Agreement, (i) no
Member shall be entitled to withdraw any part of its Capital Account, (ii) no
Member shall be entitled to receive any interest on its Capital Account or
distributions from the Company, and (iii) no Member shall be entitled to
demand or receive any property from the Company other than cash.

 

Section 5.08 Negative
Capital Accounts. In no event shall any Member be obligated to make any
Capital Contribution to the Company solely as a result of the existence at any
time of a negative Capital Account balance for such Member.

 

26

 

ARTICLE 6

CAPITAL
ACCOUNTS AND ALLOCATIONS

 

Section 6.01 Capital
Accounts.

 

(a) Separate capital accounts (each, a “Capital
Account”) shall be maintained for each Member in accordance with the rules of
Section 1.704-1(b)(2)(iv) of the Regulations, and this Section 6.01
shall be interpreted and applied in a manner consistent with said Section of
the Regulations. The Company may adjust the Capital Accounts of its Members to
reflect revaluations of the Company property whenever the adjustment would be
permitted under Treasury Regulations Section 1.704-1(b)(2)(iv)(f). In the event that the Capital Accounts
of the Members are so adjusted, (i) the Capital Accounts of the Members
shall be adjusted in accordance with Regulations Section 1.704-1(b)(2)(iv)(g) for
allocations of depreciation, depletion, amortization and gain or loss, as
computed for book purposes, with respect to such property, (ii) the
Members’ distributive shares of depreciation, depletion, amortization and gain
or loss, as computed for tax purposes, with respect to such property shall be
determined so as to take account of the variation between the adjusted tax
basis and book value of such property in the same manner as under Section 704(c) of
the Code, and (iii) the amount of upward and/or downward adjustments to
the book value of the Company property shall be treated as income, gain,
deduction and/or loss for purposes of applying the allocation provisions of this
Section 5.3. In the event that Code Section 704(c) applies to
Company property, the Capital Accounts of the Members shall be adjusted in
accordance with Regulations Section 1.704-1(b)(2)(iv)(g) for
allocations of depreciation, depletion, amortization and gain and loss, as
computed for book purposes, with respect to such property. The Capital Accounts
shall be maintained for the sole purpose of allocating items of income, gain,
loss and deduction among the Members and shall have no effect on the amount of
any distributions to any Members in liquidation or otherwise. The amounts of
all distributions to Members shall be determined pursuant to Article 7.

 

(b) If all or any portion of an Interest is
transferred in accordance with this Agreement, the transferee shall succeed to
the Capital Account of the transferor to the extent such Capital Account
relates to the transferred Interest (or portion thereof).

 

Section 6.02 Allocations
of Profits and Losses. All items of Company income, gain, loss and
deduction as determined for book purposes shall be allocated among the Members
and credited or debited to their respective Capital Accounts in accordance with
Regulations Section 1.704-1(b)(2)(iv), so as to ensure to the maximum
extent possible (i) that such allocations satisfy the economic effect
equivalence test of Regulations Section 1.704-1(b)(2)(ii)(i) (as
provided hereinafter) and (ii) that all allocations of items that cannot
have economic effect (including credits and nonrecourse deductions) are
allocated to the Members in accordance with the Members’ interests in the
Company, which, unless otherwise required by Code Section 704(b) and
the Regulations promulgated thereunder, shall be in proportion to their
Percentage Interests. To the extent possible, items that can have economic
effect shall be allocated in such a manner that the balance of each Member’s
Capital Account at the end of any taxable year (increased by the sum of (a) such
Member’s “share of partnership minimum gain” as defined in Treasury Regulations
Section 1.704-2(g)(1) and (b) such Member’s share of “partner
nonrecourse debt minimum gain” as defined in Treasury Regulations Section 1.704-2(i)(5))
would be positive to the extent of the amount of cash that such Member would
receive (or would be negative to the

 

27

 

extent of the amount of cash that such Member would
be required to contribute to the Company) if the Company sold all of its
property for an amount of cash equal to the book value (as determined pursuant
to Regulations Section 1.704-1(b)(2)(iv)) of such property (reduced, but
not below zero, by the amount of nonrecourse debt to which such property is
subject) and all of the cash of the Company remaining after payment of all
liabilities (other than nonrecourse liabilities) of the Company were
distributed in liquidation immediately following the end of such taxable year
in accordance with Section 7.02.

 

ARTICLE 7

DISTRIBUTIONS

 

Section 7.01 Net
Operating Cash Flow. At such times as are set forth in the Annual Plan or
at such other times as are reasonably determined by the Members, the Company
shall make a distribution of Net Operating Cash Flow of the Company to Morgans
and Boyd, Pro Rata.

 

Section 7.02 Net
Capital Proceeds. Except as otherwise expressly provided in Section 13.03(d),
all Net Capital Proceeds shall be distributed by the Company, as soon as
reasonably practicable following the closing of the event giving rise to the
Net Capital Proceeds to Morgans and Boyd, Pro Rata.

 

Section 7.03 Amounts
Withheld. The Tax Matters Member is authorized to withhold from
distributions to the Members and to pay over to any federal, state, local or
foreign government any amounts which it reasonably determines may be required
to be so withheld pursuant to the Code or any provisions of any other federal,
state, local or foreign law. All amounts withheld pursuant to the Code or any
provision of any state, local or foreign tax law with respect to any allocation
or distribution to any Member shall be treated as amounts distributed to such
Member pursuant to this Article for all purposes under this Agreement.

 

Section 7.04 Assignment
of Distributions. In the event that a Priority Loan has not been fully
satisfied and discharged then, in any such event, a Contributing Member shall
receive directly any distributions under this Article 7 to which the
Non-Contributing Member would otherwise be entitled up to the amount of the
outstanding balance of any such Priority Loan plus accrued and unpaid interest
thereon. Any distributions made pursuant to this Section 7.04 shall be
applied first to interest and then to principal and shall be deemed to have
been made directly to the Non-Contributing Member and then deemed paid by the
Non-Contributing Member to the Contributing Member in repayment of the Priority
Loan. In the event that a Morgans Default Loan has not been fully satisfied and
discharged then, in any such event, Boyd shall receive directly any
distributions under this Article 7 to which Morgans would otherwise be
entitled up to the amount of the outstanding balance of any such Morgans
Default Loan plus accrued and unpaid interest thereon. Any distributions made
pursuant to the preceding sentence shall be applied first to interest and then
to principal and shall be deemed to have been made directly to Morgans and then
deemed paid by Morgans to Boyd in repayment of the Morgans Default Loan. In the
event that a Boyd Default Loan has not been fully satisfied and discharged
then, in any such event, Morgans shall receive directly any distributions under
this Article 7 to which Boyd would otherwise be entitled up to the amount
of the outstanding balance of any such Boyd Default Loan plus accrued and
unpaid interest thereon. Any distributions made pursuant to the

 

28

 

preceding sentence shall be applied first to
interest and then to principal and shall be deemed to have been made directly
to Boyd and then deemed paid by Boyd to Morgans in repayment of the Boyd
Default Loan.

 

Section 7.05 Dissolution.
Upon dissolution and winding up of the Company, the Company shall make
distributions in accordance with Section 13.03(d).

 

ARTICLE 8

MANAGEMENT

 

Section 8.01 Morgans
Duties.

 

(a) Except as otherwise provided herein, and
subject only to the approval by of Joint Decisions by both Members, (i) Morgans
shall have the responsibility for the control of the Company’s business and
affairs and (ii) Morgans shall have the power and authority to take such
action for and on behalf of the Company as Morgans shall from time to time deem
necessary or appropriate to carry on the Company business and to carry out the
purposes for which the Company was organized.

 

(b) Notwithstanding the foregoing provisions of
this Section 8.01 or any other provision of this Agreement to the
contrary, Morgans shall not be empowered to, and shall not (i) undertake
any act in violation of this Agreement or the Construction Loan Documents or
any other Loan Documents, (ii) possess or take title to any assets of the
Company; (iii) take any action that makes it illegal or impossible for the
Company to carry on its business; or (iv) take any action with respect to
a Joint Decision without the approval of Boyd.

 

Section 8.02 Affiliate
Agreement Control. Notwithstanding anything to the contrary contained
herein, with respect to any separate agreement between the Company and any
Member and/or Affiliate of such Member (an “Affiliate Agreement”)
including, without limitation, the Morgans Hotel Management Agreement and the
REA, any and all decisions, actions, and/or enforcement rights, to be made or
taken by the Company with respect to, or arising under, any Affiliate Agreement
(in accordance with the terms of such agreement) including, without limitation
amending, modifying, supplementing, renewing or terminating, enforcing,
exercising any right or remedy, granting any waiver, release, consent or
approval, giving of any notice or the taking of any other action required or
permitted to be taken under the Affiliate Agreement, shall be vested solely and
exclusively with the unaffiliated Member and no prior approval of the
affiliated Member will be necessary prior to making such decisions and/or
taking any such actions. Notwithstanding the foregoing, approval of both
Members shall be required for any Joint Decisions, other than the Joint
Decision described in subparagraph (n) of Exhibit E regarding claims,
suits and actions, decisions with respect to which shall be made by the
unaffiliated Member on behalf of the Company if such claim, suit or action is
against the affiliated Member or its Affiliate pursuant to the Affiliate
Agreement.

 

Section 8.03 Morgans’
Additional Duties. Morgans shall use all reasonable commercial efforts to
perform, or cause to be performed, the following functions in a manner
consistent with the interests of the Company, and with customs and practices
for first-class resort

 

29

 

hotels in the Las Vegas, Nevada area subject to the
Pre-Opening Plan, any applicable Annual Plan and the other provisions of this Agreement:

 

(a) protect and preserve the titles and
interests of the Company with respect to the Project and other assets now or
hereafter owned by the Company;

 

(b) monitor, in accordance with Article 9
hereof, the design and construction of the Project, including the performance
of the Architects and any Project Consultants;

 

(c) when permitted or required by this
Agreement or otherwise approved by the Members, make distributions periodically
to the Members in accordance with the provisions of this Agreement;

 

(d) represent, and exercise any right or
approval or disapproval on behalf of the Company in connection with the REA or
any modifications to the REA and promptly notify Boyd with respect to any
increases in Development Costs that would occur as a result of any
modifications to the REA;

 

(e) obtain clearance from Boyd’s governmental
compliance committee for any Person that may be a Material Vendor before
engaging such Person; and

 

(f) perform any other duties provided elsewhere
in this Agreement to be performed by Morgans.

 

Section 8.04 Bank
Accounts. Morgans shall open and thereafter maintain, for the Company, a
commercial checking account and such other accounts at one or more banks or
trust companies organized and existing under the laws of the United States or
any state thereof, each having combined capital and surplus aggregating at
least $500,000,000 and none of which is an Affiliate of any Member, which
accounts shall be interest-bearing to the extent practicable. All funds of the
Company shall be promptly deposited in such accounts and no funds other than
funds of the Company shall be deposited therein. All withdrawals from any such
bank account or investment account established by Morgans hereunder shall be
made on such signature or signatures as may from time to time be designated by
Morgans.

 

Section 8.05 Duties
and Conflicts.

 

(a) Subject to the provisions of Section 3.5
of the Morgans Hotel Management Agreement and Sections 8.05(b) and
8.05(c), (i) each Member recognizes that the other Members and their
Affiliates have or may have other business interests, activities and
investments, some of which may be in conflict or competition with the business
of the Company, and that such Persons are entitled to carry on such other
business interests, activities and investments; (ii) the Members and their
Affiliates may engage in or possess an interest in any other business or
venture of any kind, independently or with others, on their own behalf or on
behalf of other entities with which they are affiliated or associated, and such
Persons may engage in any activities, whether or not competitive with the
Company, without any obligation to offer any interest in such activities to the
Company or to any Member; and (iii) neither the Company nor any Member
shall have any right, by virtue of this Agreement, in or to such activities, or
the

 

30

 

income
or profits derived therefrom, and the pursuit of such activities, even if
competitive with the business of the Company, shall not be deemed wrongful or
improper.

 

(b) Notwithstanding anything to the contrary
contained herein and as a material inducement to Boyd entering in this
Agreement, Morgans covenants and agrees that, until the fifth anniversary of
the Opening Date (for the Hotel for which the Opening Date occurs the latest),
Morgans or an Affiliate of Morgans shall not, directly or indirectly, within
the greater Las Vegas metropolitan area, including, but not limited to, the
City of Las Vegas and Clark County, Nevada, acquire, manage, license develop,
own, lease or operate any hospitality properties competitive to either of the
Hotels, either for its own account, as a partner, joint venturer, consultant,
employee, manager, agent or independent contractor of any Person, through any
Affiliate, as an officer, director or shareholder of any corporation or
otherwise.

 

(c) Notwithstanding anything to the contrary
contained herein and as a material inducement to Morgans entering in this
Agreement, Boyd covenants and agrees that, until the fifth anniversary of the
Opening Date (for the Hotel for which the Opening Date occurs the latest), Boyd
or an Affiliate of Boyd shall not, directly or indirectly, within the Reserve
Parcel, develop, own, lease or operate, or permit the development or operation
by a third party of, any Morgans Competitive Hotel, either for its own account,
as a partner, joint venturer, consultant, employee, manager, agent or
independent contractor of any Person, through any Affiliate, as an officer,
director or shareholder of any corporation or otherwise.

 

(d) Morgans and Boyd each agrees, for itself
and its Affiliates, to (i) act in good faith, (ii) perform its duties
hereunder diligently and without regard to competing or conflicting projects
not owned by the Company, and (iii) spend such time and effort performing
its duties as hereunder as may be required in order to appropriately and
effectively carry out the obligations of such party as described in this
Agreement.

 

(e) Boyd shall use commercially reasonable
efforts to promptly review for compliance purposes any Material Vendor
submitted to Boyd by Morgans and to promptly advise Morgans of the results of
such compliance review. Morgans shall not engage any Material Vendor unless
such Material Vendor has been cleared by Boyd’s compliance committee.

 

Section 8.06 Financing.
The Members shall jointly, on behalf of the Company, arrange, negotiate and
enter into, on commercially reasonable terms, any borrowing or financing
(including any refinancing) transactions for the Company, including (a) the
Construction Loan, (b) any refinancing of the Construction Loan or other “take
out” financing relating to the Construction Loan, (c) any permanent
financing, (d) any other instruments or obligations required by a lender in
connection with any such financing, and (e) any Mortgage, security
agreement or other document or instrument pursuant to which the Company shall
pledge any of its assets (including the Property) to secure any borrowing or
financing.

 

Section 8.07 Expenses
of Members. The Company shall periodically reimburse each Member for such
Member’s reasonable, actual out-of-pocket costs and expenses such as travel,
incurred by the Member in the performance of its duties and obligations
hereunder, upon notice from the one Member to the other Member accompanied by
reasonably detailed substantiation of

 

31

 

such costs and expenses. Morgans shall be reimbursed
by the Company, in accordance with the Development Budget, for its costs and
expenses incurred in the design, development and pre-opening of the Hotels.

 

Section 8.08 Removal
of Morgans as a Managing Member. In the event that Morgans, or any
Affiliate of Morgans, takes any action which constitutes fraud, willful misconduct,
malfeasance, breach of fiduciary duty or breach of a material provision of this
Agreement (after written notice and an opportunity to cure; provided, however, (i) the
cost of such cure shall be at Morgans’ expense and (ii) the period to cure
shall not exceed 60 days unless the matter in question requires a period in
excess of 60 days to cure, in which case Morgans shall have such longer period,
but not in excess of 120 days, as long as Morgans commences such cure within
the 60 day period and continues to diligently pursue such cure in good faith)
then, in such event and notwithstanding anything to the contrary contained
herein, Boyd, may, in its sole discretion and without the approval or consent
of Morgans, (i) become the Managing Member and perform any duties
otherwise designated under this Agreement to be performed by Morgans and/or (ii) take
any and all actions on behalf of the Company that would otherwise be Joint
Decisions other than those Joint Decisions set forth in the following
paragraphs of Exhibit E which Morgans retains the right to approve (as
modified below):

 

(1) paragraphs (a),
(b), (c) and (d);

 

(2) paragraphs (g) or
(h) but only to the extent such action materially increases Morgan’s
liability under any completion guaranty or other guaranty executed by Morgans
Parent or any Morgans Affiliate in connection with the Construction Loan;

 

(3) paragraph
(k) but only to the extent that the admission does not dilute each of the
Members proportionally; and

 

(4) paragraph
(p) but only to the extent the terms of such agreements or contracts are
not arms-length and consistent with third party market terms and conditions.

 

ARTICLE 9

DEVELOPMENT
DURING CONSTRUCTION PERIOD

 

Section 9.01 General.
Subject in all respects to the rights of Boyd set forth in this Article 9,
Morgans shall have the primary responsibility, power and authority, on behalf
of the Company, to monitor the design, development, construction, furnishing
and equipping of the Project, and to monitor the compliance of the Project with
all Legal Requirements, the Development Budget, the Construction Schedule, the
Plans and Specifications, and the requirements of the Construction Loan
Documents.

 

Section 9.02 Budget,
Schedule and Plans. During the Predevelopment Period, the Members
shall have approved the Development Budget, the Construction Schedule and
the Plans and Specifications.

 

Section 9.03 Monitoring
of Development. Morgans shall monitor the development and construction of
the Project, and shall use commercially reasonable efforts to cause
construction to be accomplished in accordance in all material respects with
this Agreement, the Construction

 

32

 

Loan Documents, the Development Budget, the
Construction Schedule, any Legal Requirements, and the Plans and
Specifications. In connection with the foregoing, Morgans shall use
commercially reasonable efforts to perform all duties customarily performed by
a developer of projects of like size and scope, including, without limitation,
the following:

 

(a) assemble and track invoices and direct the
payment or rejection thereof;

 

(b) arrange for the timely issuance of all
necessary governmental permits, licenses, certificates and approvals and the
compliance with all Legal Requirements (including without limitation, zoning,
land use, water, sewer, environmental and other requirements) relating to the
development, construction and occupancy of the Project;

 

(c) coordinate, review, administer and manage
the work and activities of the Architect, Project Consultants, any contractors,
subcontractors, vendors, and all other Persons employed in the design,
development and construction of the Project;

 

(d) maintain books of account and records
(financial and otherwise) with respect to the design, development and
construction of the Project;

 

(e) manage and approve disbursement of funds of
the Company (including draw requests under the Construction Loan) to pay for
the design, development, construction, furnishing and equipping of the Project
in accordance in all material respects with the Development Budget and this
Agreement (it being understood that the Company funds shall be disbursed
subject to and in accordance with protections and conditions that are
substantially similar to those applicable to the disbursement of loan proceeds
under the Construction Loan);

 

(f) make requisitions to the Construction
Lender for the disbursement of Construction Loan proceeds, and otherwise take
necessary and appropriate actions on behalf of the Company to cause the Company
to comply in all material respects with the terms and requirements of the
Construction Loan Documents;

 

(g) arrange for and monitor the bidding,
purchase and installation of all furniture, fixtures, equipment and supplies in
accordance with this Agreement and the Plans and Specifications;

 

(h) inspect each portion of the Project as the
same is substantially completed and create or cause to be created a punchlist
of items requiring additional or corrective work and exercise the Company’s
rights and authority to seek compliance by the contractors and by other parties
rendering services or furnishing materials in connection with the construction
and fit-out of the Improvements, consistent with such party’s obligations to
perform all work necessary to cure all defects or deficiencies;

 

(i) obtain in the name and for the account of
the Company all such insurance as the Members may determine shall be necessary
or appropriate, and all insurance required to be obtained pursuant to the
Construction Loan Documents;

 

33

 

(j) coordinate the preparation of all applications
for, otherwise arrange for, and pay all charges imposed necessary to obtain
commitments for water, sewer, electric, gas, telephone, and other utility services
necessary for the construction and operation of the Project;

 

(k) file all real and personal property tax returns
with respect to the Property and the Project and pay all ad valorem taxes on
and assessments against the Property and the Project;

 

(l) reasonably promptly following the completion of
the development and construction of the Project, (i) arrange for the
preparation of as-built plans for the Project, and (ii) provide the
Company with audited financial statements with respect to such development and
construction;

 

(m) obtain clearance from Boyd’s governmental
compliance committee for any Person that may be a Material Vendor before
engaging such Person; and

 

(n) cause all warranty work and correction work to
be undertaken in accordance with any contract or agreement pertaining to the
construction and installation of the Improvements, whether prior to or
subsequent to the Completion Date.

 

Section 9.04 Changes.
During the Construction Period, Morgans may propose, implement and/or adopt (i) any
change, amendment, modification, supplement, addition, alteration or deletion
to the Development Budget, the Construction Schedule or the Plans and
Specifications (including any revised or more detailed version of any of the
foregoing), or (ii) any modification to the scope of work to be performed
by the Developer, the Architect or any contractor, subcontractor, vendor,
material supplier or Project Consultant in connection with the Project (each, a
“Change”); provided, however, that any Change that is
inconsistent in any material respect with the Plans and Specifications or
Construction Schedule then in effect in accordance with this Agreement
shall be subject to the prior written approval of Boyd.

 

Section 9.05 Participation
of Boyd. Boyd shall have reasonable access to the design, development and
construction process of the Project in order for Boyd to exercise its rights
under this Agreement. In furtherance of the foregoing, Boyd shall have
reasonable rights of inspection, notice, access and review with respect to the
Project (and the documents relating thereto) in order to allow Boyd to exercise
its rights under this Agreement, including, without limitation, the right to
attend any significant meetings of the project team and any significant
meetings with architects, engineers and other consultants. Morgans agrees to
meet and otherwise consult with Boyd, at reasonable intervals and at reasonable
times following a request by Boyd, with respect to the status of the
construction work. In furtherance of the foregoing, Morgans shall make
available to Boyd, at the Property or at Morgans’ offices, the following:

 

(a) all agreements with contractors,
subcontractors, consultants, suppliers and vendors and other Persons supplying
labor, materials and services in connection with the Project;

 

(b) copies of all Plans and Specifications and
modifications and proposed modifications thereto;

 

(c) all working drawings;

 

34

 

(d) all insurance certificates and insurance
contracts required or obtained in connection with the Project;

 

(e) all requisitions for payments received
during the applicable period from any of the Company’s contractors, together
with all supporting documentation provided by such contractors (including,
without limitation, partial lien waivers from all construction contractors and,
to the extent obtainable, from all major construction subcontractors), and an
update of the schedule of values for the Project;

 

(f) prior to submission thereof to the
Construction Lender, all requisitions for the disbursement of Construction Loan
proceeds;

 

(g) all other material documentation with
respect to payments made by the Company for design and construction costs for
the Project, whether such payments were made from drawdowns of equity or from
loan proceeds;

 

(h) monthly construction cost-to-date reports;

 

(i) periodic (but not less than monthly)
updates to the Development Budget and Construction Schedule showing all
variances;

 

(j) all interior design control books;

 

(k) all certificates, authorizations, permits and
licenses which are required to permit the construction and completion of the
Project, as issued by the appropriate Governmental Authorities; and

 

(l) any other documents and information relating to
the design and construction of the Project as may be reasonably requested by
Boyd, provided, however, the same are in Morgans’ possession or
can be obtained without undue effort or expense.

 

Boyd shall provide Morgans with reasonable access to
material documents and information regarding the status of the Echelon Place
development project to the extent reasonably necessary for Morgans to carry out
its duties hereunder.

 

Section 9.06 Loan
Guaranties. To the extent required by the Construction Loan Documents,
Morgans and its creditworthy Affiliates shall provide the Construction Loan
Guaranty with no liability or obligation on the part of Boyd to provide such
guaranty.

 

Section 9.07 Activities
Following Disputes. If the Members cannot agree upon any Change which
pursuant to this Article 9 requires agreement between the Members, Morgans
will have the right to continue the activities of the Company related to
construction of the Project, but only in accordance with the Plans and
Specifications, Construction Schedule and Development Budget then in
effect in accordance with this Article 9, and, without derogating from the
generality of the foregoing, Morgans may, under such circumstances, cause the
Company to continue the development of the Project in accordance with such
Plans and Specifications, Development Budget and Construction Schedule.

 

35

 

ARTICLE 10

ACCOUNTING,
BOOKS AND RECORDS AND TAX MATTERS

 

Section 10.01 Books
and Records. Morgans shall maintain or cause to be maintained, at the
expense of the Company, in a manner customary and consistent with good
accounting principles, practices and procedures, a comprehensive system of
office records, books and accounts (which records, books and accounts shall be
and remain the property of the Company) in which shall be entered fully and
accurately all financial transactions with respect to the operations of the
Company and the ownership and operation of the Project. Bills, receipts and
vouchers shall be maintained on file by the Company. Morgans shall maintain or
caused to be maintained such books and accounts in a safe manner and separate
from any records not having to do directly with the Company or the Project.
Morgans shall cause audits to be performed and audited financial statements and
income tax returns to be prepared as required by Section 10.02. Such books
and records of account shall be prepared and maintained by Morgans at a
location or locations designated by Morgans. Each Member or its duly authorized
representative shall have the right to inspect, examine and copy such books and
records of account at the Company’s office during normal business hours.

 

Section 10.02 Reports.

 

(a) Morgans shall prepare or cause to be
prepared, at the Company’s expense, the financial reports and other
information, including audited financial statements, that the Members may
determine are appropriate. All financial reports shall include (as applicable)
information with respect to the Company as a whole and with respect to the
Project. Unless otherwise determined by the Members, Morgans shall prepare or
cause to be prepared at the expense of the Company and furnish to each of the
Members the following:

 

(i) Within forty five (45) following the
close of each Fiscal Year, audited financial statements, including related
notes to financial statements, a balance sheet of the Company dated as of the
end of such Fiscal Year, a related statement of income and expense, a statement
of cash flow and a statement of changes in Members’ capital for the Company for
such Fiscal Year and information for such Fiscal Year as to the balance in each
Member’s Capital Account, and all other information reasonably required by each
Member (provided such “other information” shall be delivered as soon as
reasonably practicable after the close of each Fiscal Year), all of which shall
be certified by the Company Accountant as being, to the best of its knowledge,
true and correct and prepared in accordance with generally accepted accounting
principles applied on a consistent basis (and which firm shall provide such
balance sheet, statement of income and expense, statement of cash flow,
statement of changes in Members’ capital and other information in draft form to
the Members for review prior to finalization and certification thereof);

 

(ii) Within fifteen (15) days after the
close of each fiscal quarter (other than the last fiscal quarter in any Fiscal
Year), a balance sheet of the Company dated as of the end of such fiscal
quarter, a related statement of income and expense, a statement of cash flow
and a statement of changes in Members’ capital for such fiscal quarter and
information for such fiscal quarter as to the balance in each Member’s Capital
Account,

 

36

 

and
all other information, including a market update, reasonably required by each
Member, all of which shall be certified by Morgans as being, to its actual
knowledge, true and correct in all material respects; and

 

(iii) As soon as practicable after the end of
each month but in all events within seven (7) days after the end of each
month, a monthly profit and loss statement for the Company for the immediately
preceding month (which statements shall not be subject to the requirements of Section 1.03
hereof).

 

(b) All decisions as to accounting principles
shall be made by jointly by the Members, subject to the provisions of this
Agreement. All financial information provided hereunder shall be in the formats
mutually agreed to by the Members.

 

Section 10.03 Company
Accountant. The Company shall retain the Company Accountant as the regular
accountant and auditor for the Company. The fees and expenses of the Company
Accountant shall be a Company expense.

 

Section 10.04 Reserves.
The Company shall not maintain any cash reserves unless otherwise approved by
both Members.

 

Section 10.05 Fiscal
Year. The fiscal year of the Company (the “Fiscal Year”) shall begin
on January 1 and end on December 31 of each year.

 

Section 10.06 Partnership
for Tax Purpose. The Members hereby agree that the Company shall be treated
as a partnership for tax purposes under United States federal, state and local
income tax laws or other laws, and further agree not to take any position or to
make any election, in a tax return or otherwise, inconsistent herewith.

 

Section 10.07 Tax
Matters.

 

(a) Boyd is hereby designated as the “Tax
Matters Member” for the Company (and in such capacity shall act as the “tax
matters partner” as such term is defined in Section 6231(a)(7) of the
Code), and all federal, state and local tax audits and litigation shall be
conducted under the joint direction of Boyd and Morgans in their sole but
reasonable discretion. Boyd shall keep Morgans informed of its activities as
Tax Matters Member, including by promptly providing to Morgans copies of any
correspondence from any taxing authority and permitting Morgans to participate
in conferences or meetings with any taxing authority and in any tax
proceedings. In addition, Boyd shall obtain Morgans approval with respect to
any action taken as Tax Matters Member.

 

(b) All elections required or permitted to be
made by the Code or other applicable tax laws shall be made with the approval
of both Members. All decisions with respect to taxable income or tax loss under
the Code or any other applicable tax laws shall be approved by both Members.

 

(c) Boyd will cause the Company Accountant to
prepare and deliver to each Member, as soon as practicable after the end of the
Company’s Fiscal Year, a report setting forth in sufficient detail all such
information and data as will enable the Company and each Member to

 

37

 

timely
prepare its federal, state and local income tax returns in accordance with the
laws, rules and regulations then prevailing.

 

Section 10.08 Audit
Rights. Boyd shall be entitled, at its own expense, to conduct or cause to
be conducted an audit of the books and records of the Company for the purpose
of verifying the correctness of the information contained in the reports and
financial statements described in Section 10.02 hereof. Any such audit
shall be conducted (a) following reasonable prior notice to Morgans, and (b) during
normal business hours in a manner that does not unduly disrupt the business or
operations of the Company.

 

ARTICLE 11

LIMITATION
OF LIABILITY AND INDEMNIFICATION

 

Section 11.01 Limitation
of Liability. Notwithstanding anything in this Article 11 or elsewhere
in this Agreement to the contrary (but subject to Section 11.02(b)), no
Member shall, in the performance of its obligations under this Agreement,
including its obligations with respect to the development of the Project
pursuant to Article 9 hereof, be liable to any other Member or any other
Person for any act or omission, negligent, tortious, or otherwise, (a) of
any agent or employee of the Company, or (b) of the Member or any of its
Affiliates, unless such act or omission on the part of the Member or its
Affiliates constitutes gross negligence, a material breach of this Agreement,
breach of fiduciary duty or willful misconduct, and then only to the extent
that the damages resulting therefrom are not covered by the insurance carried
by the Company.

 

Section 11.02 Indemnification.

 

(a) The Company shall, to the fullest extent
permitted by applicable law, indemnify, defend and hold harmless each Member,
and each general or limited partner of any Member, shareholder, member or other
holder of any equity interest in such Member or any officer or director of any
of the foregoing (collectively, the “Indemnified Party”), against any losses,
claims, damages or liabilities to which such Indemnified Party may become
subject in connection with any matter arising out of or incidental to any act
performed or omitted to be performed by any such Indemnified Party in
connection with this Agreement or the Company’s business or affairs (including
any claims relating to the design and development of the Project as described
in Article 9 hereof); provided; however, that such act or
omission was taken in good faith, was reasonably believed by the applicable
Indemnified Party to be in the best interest of the Company and was within the
scope of authority granted to such Member or applicable Indemnified Party, and
was not attributable in whole or in part to such Indemnified Party’s fraud, bad
faith, willful misconduct, gross negligence, material breach of this Agreement
or breach of fiduciary duty. If an Indemnified Party becomes involved in any
capacity in any action, proceeding or investigation in connection with any
matter arising out of or in connection with this Agreement or the Company’s
business or affairs, the Company shall reimburse such Indemnified Party for its
reasonable attorneys’ fees and expenses and other reasonable out-of-pocket
expenses (including the cost of any investigation and preparation) as they are
incurred in connection therewith, provided that such Indemnified Party shall
promptly repay to the Company the amount of any such reimbursed expenses paid
to it if it shall ultimately be determined that such Indemnified Party was not
entitled to be indemnified by the Company pursuant to this

 

38

 

Section 11.02
in connection with such action, proceeding or investigation. If for any reason
(other than the gross negligence, material breach of this Agreement or breach
of fiduciary duty, fraud, bad faith or willful misconduct of such Indemnified
Party) the foregoing indemnification is unavailable to such Indemnified Party,
or insufficient to hold it harmless, then the Company shall contribute to the
amount paid or payable by such Indemnified Party as a result of such loss,
claim, damage, liability or expense in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and such
Indemnified Party on the other hand or, if such allocation is not permitted by
applicable law, to reflect not only the relative benefits referred to above but
also any other relevant equitable considerations.

 

(b) Boyd and Boyd Parent, jointly and
severally, shall, to the fullest extent permitted by applicable law, indemnify,
defend and hold harmless Morgans, Morgans Parent, each general or limited
partner of Morgans, any shareholder, member or other holder of any equity
interest in Morgans or any officer or director of any of the foregoing
(collectively, the “Morgans Indemnified Party”), against any losses,
claims, damages or liabilities to which such Morgan Indemnified Party may
become subject in connection with any matter arising out of (i) any
Hazardous Materials on, in or under the Land or the Echelon Place Parcel the
presence of which (x) arose during the period commencing on the date Boyd’s
Affiliate first acquired ownership (or, if earlier, first obtained management
or occupancy) of the applicable portion of the Land and/or the Echelon Place
Parcel and ending on the Contribution Date, or (y) constitutes a breach or
inaccuracy of Boyd’s representation set forth in Section 3.02(k), or (ii) the
ownership, use, occupancy, operation, management, maintenance, construction,
renovation, repair, closure, and demolition of the Stardust Hotel or any other
improvements or facilities on the Land or the Echelon Place Parcel prior to the
Contribution Date, including any claims of employees of the Stardust Hotel.

 

(c) The provisions of this Section 11.02
shall survive the dissolution of the Company or the termination or expiration
of this Agreement.

 

(d) Notwithstanding anything to the contrary
contained in this Agreement, the obligations of the Company or any Member under
this Section 11.02 shall (i) be in addition to any liability which
the Company or such Member may otherwise have and (ii) inure to the
benefit of the other Member, its Affiliates and their respective members,
directors, officers, employees, agents and Affiliates and any successors,
assigns, heirs and personal representatives of such Persons.

 

(e) In no event shall any general or limited
partner of any member, shareholder, member or other holder of an equity
interest in such Member or officer or director of any of the foregoing be
liable for any obligation of any Member under this Agreement.

 

Section 11.03 Certain
Waivers. To the extent that, at law or in equity, a Member has duties
(including fiduciary duties) and liabilities relating thereto to the Company or
to any other Member, a Member acting under this Agreement shall not be liable
to the Company or to any other Member for its good faith reliance on the
provisions of this Agreement. The provisions of this Agreement, to the extent
that they restrict or reduce the duties and liabilities of a Member otherwise
existing at law or in equity, shall replace the other duties and liabilities of
such Member.

 

39

 

ARTICLE 12

TRANSFERS

 

Section 12.01 General.

 

(a) Except for Transfers made or effected
pursuant to Sections 12.02, 12.05 or any other express provision of this
Agreement: (i) no Member may Transfer all or any portion of its Interest,
whether directly or indirectly, or (ii) permit any direct or indirect
ownership interest in the Member to be Transferred, in either case, without the
written consent of the other Member (which may be withheld or granted in the
sole discretion of the other Member).

 

(b) Any Transfer by a Member of its Interest in
contravention of this Article 12 shall be null and void. No Member shall
withdraw from the Company except in connection with a Permitted Transfer.

 

(c) The Members acknowledge and agree that they
are relying on the experience, reputation and financial condition of each other
in entering into this Agreement, that the nature of the relationship between
the Members is personal and that the amount of damages that would be sustained
by the Members in the event of a breach of the restrictions on Transfers
imposed by this Agreement would not be readily ascertainable. Accordingly, upon
any breach of this Article 12 by any Member, the other Member (in addition
to all rights and remedies it may have under this Agreement, at law or in
equity) shall be entitled to a decree or order from a court of competent jurisdiction
specifically enforcing the restrictions on Transfers contained herein. Each
Member further agrees to hold the Company and the other Member (including their
respective directors, officers, employees, Affiliates, successors and assigns)
harmless for, from and against any and all claims, losses, damages, liabilities
and costs, including without limitation, reasonable attorneys’ fees (which
shall be reimbursed as incurred), and liabilities for income taxes and costs of
enforcing this indemnity, incurred by any of such indemnified parties as a
result of a Transfer or purported Transfer in violation of this Agreement.

 

Section 12.02 Permitted
Transfers of Interests. Certain Transfers shall be permitted as follows
(each, a “Permitted Transfer”):

 

(a) Morgans, from time to time and in its sole
discretion, without the consent of Boyd, may Transfer its Interest in whole or
in part, (i) to any Morgans Controlled Affiliate, (ii) to any Person
as part of, or in connection with, a direct or indirect transfer of ownership
or control of Morgans Parent, or (iii) in connection with the pending
initial public offering of all or substantially all of the assets owned or
controlled by the Morgans Parent, provided, however, such
transferee agrees to be bound by all the terms, conditions and provisions of
this Agreement (including the provisions of this Article 12).

 

(b) Boyd, from time to time and in its sole
discretion, without the consent of Morgans, may Transfer its Interest in whole,
but not in part, to (i) any Boyd Controlled Affiliate, or (ii) any
Person as part of, or in connection with, a direct or indirect transfer of
ownership or control of Boyd Parent or a sale of all or substantially all of
the assets owned or controlled by Boyd Parent, provided, however,
such transferee agrees to be bound by all the terms, conditions and provisions
of this Agreement (including the provisions of this Article 12).

 

40

 

(c) Transfers of ownership interests in Boyd
Parent or Morgans Parent are permitted.

 

(d) Any Permitted Transfer shall not relieve
the transferor of any of its obligations prior to such Transfer. Subject to Section 12.03,
any transferee of a direct Interest pursuant to this Section 12.02 shall
become a substitute Member of the Company. Each Member and its permitted
transferees shall be treated as one Member for all purposes of this Agreement.

 

(e) In the event of a Permitted Transfer, the
Member making the Transfer shall notify the other Member of the Transfer and
shall furnish the Company with the transferee’s taxpayer identification number
and sufficient information to determine the transferee’s Interest and tax basis
in the Company and any other information reasonably necessary to permit the
Company to file all required tax returns.

 

Section 12.03 Transferees.
Notwithstanding anything to the contrary contained in this Agreement, no
Transfer of all or any part of any Interest shall be made if, as a result
thereof, any income of the Company will be subject to corporate federal income
tax or would violate any Loan Documents or any other loan commitment or
Mortgage. If any loan commitment or Mortgage precludes, restricts or otherwise
requires a consent for a Transfer of an Interest, the Members agree, upon
written request by the Member desiring such Transfer, to submit a request for
such consent from the applicable lender or other holder of a security interest
provided the desired Transfer of such Interest is expressly permitted under the
terms of this Agreement or is otherwise approved by the other Member. No
transferee of all or any portion of any Interest shall be admitted as a Member
unless such Interest is Transferred in compliance with the applicable
provisions of this Agreement and any applicable Loan Documents, such transferee
shall have furnished evidence of satisfaction of the requirements of Section 12.02
reasonably satisfactory to the other Member, and such transferee shall have
executed and delivered to the Company such instruments necessary to effectuate
the admission of such transferee as a Member and to confirm the agreement of
such transferee to be bound by all of the terms and provisions of this
Agreement with respect to such Interest. At the request of the other Member
prior to such Transfer, each such transferee shall also cause to be delivered
to the Company, at the transferee’s sole cost and expense, a favorable opinion
of legal counsel reasonably acceptable to the Company, to the effect that such
transferee has the legal right, power and capacity to own the Interest proposed
to be Transferred. As promptly as practicable after the admission of any Person
as a Member, the books and records of the Company shall be changed to reflect
such admission. Upon satisfaction of the requirements of this Section 12.03,
such transferee shall be a substitute member (a “Substitute Member”) of
the Company. All reasonable costs and expenses incurred by the Company in
connection with any Transfer of any Interest and, if applicable, the admission
of any transferee as a Member shall be paid by such transferee.

 

Section 12.04 Admission
of Additional Members.

 

(a) No Person may be admitted as an additional
Member (an “Additional Member”) of the Company (in contrast with
admission as a Substitute Member in connection with a Permitted Transfer)
without the prior written consent of each of the Members, which consent may be
given or withheld in the sole discretion of such Member.

 

41

 

(b) Any Additional Member admitted to the
Company shall execute and deliver documentation in form satisfactory to Morgans
accepting and agreeing to be bound by this Agreement, and such other
documentation as Morgans shall require in order to effect such Person’s
admission as an Additional Member. The admission of any person as an Additional
Member shall become effective as of the date upon which the name of such person
is recorded on the books and records of the company following the consent of
Morgans to such admission.

 

Section 12.05 Boyd
Right to Purchase.

 

(a) If Morgans is determined by any gaming
authority, any authority regulating alcoholic beverages or in Boyd’s reasonable
discretion, to be an unsuitable Member of the Company as a consequence of any
criminal or quasi-criminal act committed by Morgans, any Affiliate of Morgans,
or any employee of Morgans or its Affiliate, or as a consequence of the
association by Morgans, any Affiliate of Morgans, or any employee of Morgans or
its Affiliate with a Person deemed in Boyd’s reasonable discretion to be
disreputable occurring (i) after the date of this Agreement or (ii) prior
to the date of this Agreement to the extent (A) Boyd had no knowledge of
such act and could not have obtained such knowledge through the exercise of
reasonable due diligence or (B) attributable to a Person for which Boyd
did not receive a completed compliance questionnaire on or prior to December 20,
2005, then Boyd shall provide Morgans with reasonably prompt written notice of
such determination that Morgans is an unsuitable Member (together with a
reasonable explanation or substantiation therefor), and Morgans will have the
right, within a timeline established by any such authority or, if applicable
within a reasonable timeline established by Boyd, to remedy or cure the offense
or unsuitable conduct to the satisfaction of such authority and Boyd. If such
offense is not remedied or cured within the established timelines, then Boyd,
in its sole discretion, may by written notice to Morgans (the “Morgans
Purchase Notice”), remove Morgans as Member and purchase Morgans Interest
for an amount equal to its Fair Market Value and otherwise in the manner
provided in this Section 12.05. Each of Boyd and Morgans shall be solely
responsible for any fines or fees assessed against the Company but due to the
conduct or dealings of the responsible parties or their personnel.

 

(b) Payment for the Morgans Interest purchased
by Boyd to this Section 12.05 hereof shall be made in lawful money of the
United States by bank cashier’s or certified check or wire transfer delivered
at the time of the closing to be held at 10:00 o’clock a.m. (local time)
at the principal office of Boyd on such date, within one hundred and twenty
(120) days after Boyd shall have delivered the Morgans Purchase Notice. At
the closing of such sale, Morgans shall deliver documents conveying the Morgans
Interest free and clear of any liens or encumbrances. Any closing with respect
to a purchase of the Morgans Interest under this Section 12.05 shall be
subject to receipt of all consents, orders, approvals and authorizations of any
Governmental Authorities applicable to such purchase, which conditions may not
be waived without the consent of all parties to such transactions and which
consents, orders, approvals and authorizations each Member will use
commercially reasonable efforts to obtain.

 

(c) Morgans shall pay to the Company, on the
date it consummates a sale pursuant to this Section 12.05 (the “Morgans
Transfer Closing Date”), any amounts owed, whether or not currently due and
payable, by Morgans to the Company (including accounts payable arising out of
transactions between Morgans or its Affiliates and the Company);

 

42

 

provided, however, that Boyd may (upon prior
notice to and approval by Morgans) elect to deduct such amounts from any
payment due to Morgans on such date from the Company or Boyd in which case such
amounts owed by Morgans shall be deemed paid to the extent of such deductions.
If any such amounts owed to the Company have not yet been established, Boyd
shall be entitled to create reasonable reserves therefor subject to the consent
of Morgans which shall not be unreasonably withheld, conditioned or delayed and
such payments to Morgans shall be net of such reserves until such amount has
been established. To the extent that the actual amount of such obligations owed
by Morgans to the Company is greater than or less than the amount of such
reserves, then Morgans or the Company, as the case may be, shall promptly pay
to the other the amount of such difference. Any amounts owed, and not currently
due and payable, by the Company to Morgans (other than loans from Morgans and
its Affiliates to the Company which have otherwise been taken into account in
determining the purchase price of Morgans’ Interest and are to be transferred
or extinguished in connection therewith) shall, to the extent known, be
accelerated and paid at the time of the closing contemplated by this Section 12.05.

 

(d) The fair market value of the Morgans
Interest (the “Fair Market Value”) shall mean the Net Disposition
Proceeds that would be distributed to Morgans pursuant to this Agreement
following a sale by the Company of the Hotels, the Property and the other
assets of the Company, on the date of the giving of the Morgans Purchase Price
Notice, for a cash price which a Sophisticated Purchaser (as defined below)
would pay for the Hotels, the Property and such other assets. The determination
of such value shall be (i) based on the assumptions that the assets of the
Company are subject to any agreements (other than this Agreement) then in
effect, but recognizing that the transaction is not deemed to be on a forced
liquidation basis, and (ii) without regard to the identity of the
Sophisticated Purchaser or any value that could be attributable to a specific
purchaser or its related interests. A “Sophisticated Purchaser” shall
mean a Person who would, in considering such a purchase, take into account the
entire nature, scope and value of Hotels, the Property and any other assets and
businesses of the Company, and the nature, extent, maturity date, and other
terms of the liabilities of the Company whether fixed or contingent, including
the favorable or unfavorable nature of any financing to which the Company or
its assets are subject, and the prospect that the income from the Company
assets would be sufficient to satisfy such liabilities when due.

 

(e) Boyd and Morgans shall determine Fair
Market Value as follows: each of Boyd and Morgans shall have the opportunity to
appoint, at their own cost, a Qualified Appraiser (as hereinafter defined)
within ten (10) Business Days following the delivery of the Morgans
Purchase Notice by written notice to the other party (the “Appointment
Notice”). If either party shall fail to appoint a Qualified Appraiser
within the later of such ten (10) Business Day period or five (5) Business
Days from receipt of the Appointment Notice, the other Qualified Appraiser
shall unilaterally establish the Fair Market Value for the Morgans Interest in
a written opinion. If both shall appoint a Qualified Appraiser within such
applicable period, such Qualified Appraisers shall forthwith establish the Fair
Market Value in a single written opinion agreed to by both of them. If the two (2) Qualified
Appraisers so chosen cannot agree on the Fair Market Value of the Morgans
Interest within thirty days (30) days of the appointment of the latter of
them, the two (2) appointed Qualified Appraisers shall, within ten (10) days
of the expiration of the above mentioned thirty (30) day period (i) each
submit a written opinion setting forth such Qualified Appraiser’s determination
of the Fair Market Value and (ii) together appoint a third Qualified
Appraiser, whose sole purpose will be select one of the two written opinions as
the

 

43

 

Fair
Market Value based upon such third Qualified Appraiser’s determination that
such selected written opinion most accurately reflects Fair Market Value. If
the Qualified Appraisers shall fail to mutually appoint a third Qualified
Appraiser within such time period, then the American Arbitration Association
shall appoint the third Qualified Appraiser. For purposes of this Section 12.05,
a “Qualified Appraiser” means a nationally known investment banking firm, experienced
in such valuations which at the time of retention is not providing services to
either of the Members or any of their Affiliates, and within the two (2) years
prior to such retention did not receive more than $500,000 (as adjusted for
inflation) of revenues from such Persons.

 

ARTICLE 13

TERMINATION,
DISSOLUTION AND LIQUIDATION

 

Section 13.01 Term.
The term of the Company shall continue until the earlier of (a) December 31,
2055, or (b) the Company is dissolved pursuant to this Article 13.

 

Section 13.02 Liquidating
Events. The Company shall dissolve and commence winding up upon the first
to occur of any of the following events (each a “Liquidating Event”):

 

(a) if, after the resignation, expulsion, or
dissolution of a Member or the occurrence of any other event which terminates
the continued membership of a Member in the Company, the remaining Member
within ninety (90) days following the occurrence of any such event elects
in writing to dissolve the Company, and if such election is not timely made,
the Company shall continue without dissolution;

 

(b) the unanimous vote of the Members to
dissolve, wind up and liquidate the Company;

 

(c) upon the written election of a Member to
dissolve, wind up and liquidate the Company as provided in Section 5.04(d);

 

(d) upon the written election of any Member if
the Contribution Date and the funding of the Capital Contributions specified in
Sections 5.01(b) and 5.01(c) have not occurred by the Outside Start
Date;

 

(e) upon the written election of a Member made
within sixty (60) days following the occurrence of an Event of Bankruptcy
with respect to the other Member;

 

(f) the entry of a decree of judicial
dissolution pursuant to the Act; or

 

(g) the sale or other Transfer of all or
substantially all of the assets of the Company.

 

Section 13.03 Winding
Up. In cases of dissolution of the Company, the business of the Company
shall be wound up and the Company terminated as promptly as practicable
thereafter, and each of the following shall be accomplished:

 

(a) Morgans shall cause to be prepared a
statement setting forth the assets and liabilities of the Company as of the
date of dissolution, a copy of which statement shall be furnished to all of the
Members.

 

44

 

(b) The property and assets of the Company
shall be liquidated by Morgans as promptly as possible, but in an orderly and
businesslike and commercially reasonable manner.

 

(c) Any income, gain, profit or loss realized
by the Company upon the sale or other disposition of its property pursuant to
paragraph (b) above shall be allocated to the Members as and to the extent
required by Article 6 hereof.

 

(d) The proceeds of sale and all other assets
of the Company shall be applied and distributed as follows and in the following
order of priority:

 

(i) To the payment of the Company’s outstanding
liabilities, which shall be set forth on a statement as provided in paragraph (a) above.

 

(ii) To the setting up of any reserves which
the Members shall determine in the exercise of its good faith business judgment
to be necessary for contingent, unliquidated or unforeseen liabilities or
obligations of the Company or the Members arising out of or in connection with
the Company. Such reserves, may, in the discretion of Morgans, be paid over to
a national bank or national title company as escrowee for the purposes of
disbursing such reserves to satisfy the liabilities and obligations described
above, and at the expiration of such period as the Members may reasonably deem
advisable, distribute any remaining balance in the manner set forth below.

 

(iii) To the Members in accordance with Section 7.02.

 

No payment or distribution in any of the foregoing
categories shall be made until all payments in each prior category shall have
been made in full. If the payments due to be made in any of the foregoing
categories exceed the remaining assets available for such purpose, such payment
shall be made to the Persons entitled to receive the same pari  passu
in proportion to the respective amounts due to such Persons.

 

Section 13.04 Acts
in Furtherance of Liquidation. Each Member, upon the request of the other
Member, shall promptly execute, acknowledge and deliver all such documents and
other instruments as such Member shall reasonably request to effectuate the
proper dissolution and termination of the Company, including the winding up of
the business of the Company. Upon the completion of the dissolution of the
Company and the distribution of any proceeds of sale as provided in this Section 13,
this Agreement shall terminate and neither party shall have any further rights
or obligations hereunder, except as specifically provided to the contrary
herein.

 

ARTICLE 14

MISCELLANEOUS

 

Section 14.01 Notices.
All notices, requests and other communications to any party or to the Company
shall be in writing (including facsimile or similar writing) and shall be
given,

 

45

 

if to Morgans, to:

 

c/o Morgans Hotel Group LLC

475 Tenth Avenue

11th Floor

New York, New York 10018

Attention: Marc Gordon

Facsimile: (212) 277-4270

 

With a copy to:

 

Stephen Gellman, Esq.

Wachtell Lipton Rosen & Katz

51 West 52nd Street, 29th Floor

New York, New York 10019-6150

Facsimile: 212-403-2246

 

if to Boyd, to:

 

c/o Boyd Gaming Corporation

2950 Industrial Road

Las Vegas, Nevada 89109-1150

Attention: General Counsel

Facsimile: (702) 792-7335

 

with a copy to:

 

Greenberg Traurig, P.A.

450 S. Orange Avenue, Suite 650

Orlando, Florida 32801

Attention: Joel D. Maser, Esq.

Facsimile: (407) 420-5909

 

or to such other address or facsimile number as such
party or the Company may hereafter specify for the purpose by notice to the
other parties and the Company. Each such notice, request or other communication
shall be sent by certified mail (return receipt requested), recognized
overnight courier service, or by facsimile (immediately followed by transmittal
of such notice by certified mail, return receipt requested or by recognized
overnight courier service). Notices shall be effective when delivered to the respective
addresses specified in this Section.

 

Section 14.02 Amendments;
No Waivers; Entire Agreement.

 

(a) Any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by all the Members, or in the case of a
waiver, by the Member against whom the waiver is to be effective.

 

46

 

(b) No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.

 

(c) This instrument contains all of the
understandings and agreements of whatever kind and nature existing between the
parties hereto with respect to this Agreement and the rights, interests,
understandings, agreements and obligations of the parties pertaining to the
Company.

 

Section 14.03 Expenses.
All costs and expenses incurred by the parties hereto in connection with this
Agreement shall be paid by the party incurring such cost or expense.

 

Section 14.04 Consents
and Approvals.

 

(a) All consents and approvals which may be
given under this Agreement shall, as a condition of their effectiveness, be in
writing. The granting by a party hereto of any consent to or approval of any
act requiring consent or approval under the terms of this Agreement, or the
failure on the part of a party to object to any such action taken without the
required consent or approval, shall not be deemed a waiver by the party whose
consent was required of its right to require such consent or approval for any
other act.

 

(b) Unless expressly provided herein to be in a
Member’s “sole discretion” or otherwise to the contrary, all consents and
approvals which may be given by a Member under this Agreement shall not
(whether or not so indicated elsewhere in this Agreement) be unreasonably
withheld or conditioned by such party and shall be given or denied within the
time period provided, and if no such time period has been provided, within a
reasonable time. Upon disapproval of any request for a consent or approval, the
disapproving party shall, together with notice of such disapproval, submit to
the requesting party a written statement setting forth with reasonable
specificity its reasons for such disapproval.

 

(c) Except as specifically provided herein, no
fees or charges of any kind or amount shall be required by either party hereto
as a condition of the grant of any consent or approval which may be required
under this Agreement.

 

Section 14.05 Successors
and Assigns. The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective permitted
successors and assigns. This Agreement is for the sole benefit of the parties
hereto and, except as otherwise contemplated herein, nothing herein expressed
or implied shall give or be construed to give any Person, other than the
parties hereto, any legal or equitable rights hereunder.

 

Section 14.06 Governing
Law. This Agreement shall be construed in accordance with and governed by
the law of the State of Delaware without giving effect to the principles of
conflicts of laws thereof. This choice of governing law shall not be
determinative of the site of venue for any litigation between the Members
arising out of or connected with this Agreement.

 

47

 

Section 14.07 Counterparts.
This Agreement may be signed in any number of counterparts, each of which shall
be deemed an original.

 

Section 14.08 Severability.
If any provision of this Agreement or the application thereof to any Person or
circumstance shall be invalid or unenforceable to any extent, the remainder of
this Agreement and the application of such provisions to other Persons or
circumstances shall not be affected thereby and shall be enforced to the
greatest extent permitted by law.

 

Section 14.09 Further
Assurances. In connection with this Agreement, as well as all transactions
contemplated by this Agreement, and in compliance with all laws applicable to
this Agreement, each Member agrees to execute and deliver such additional
documents and instruments, and to perform such additional acts as may be
necessary or appropriate to effectuate, carry out and perform all of the terms,
provisions and conditions of this Agreement, and all such transactions.

 

Section 14.10 Publicity.
No Member, nor any of its Affiliates, officers, employees or advisors, may
issue any press release or public statement relating to the Project, or
otherwise publicize the Project or the terms of this Agreement without the
approval of the other Member, except as provided in the Morgans Hotel
Management Agreement.

 

Section 14.11 Confidentiality.
The terms of this Agreement, the identity of any person with whom the Company
may be holding discussions with respect to any investment, acquisition,
disposition or other transaction, and all other business, financial or other
information relating directly to the conduct of the business and affairs of the
Company (including any and all information regarding the customers of the
Hotels) or the relative or absolute rights or interests of any of the Members
(collectively, the “Confidential Information”) that has not been
publicly disclosed pursuant to authorization by the Members is confidential and
proprietary information of the Company, the disclosure of which would cause
irreparable harm to the Company and the Members. Accordingly, each Member
represents that it has not and agrees that it will not direct its members,
shareholders, partnership, directors, officers, agents, advisors and Affiliates
not to, disclose to any Person any Confidential Information or confirm any
statement made by third Persons regarding Confidential Information until the
Company has publicly disclosed the Confidential Information pursuant to
authorization by the Members and has notified each Member that it has done so; provided,
however, that any Member (or its Affiliates) may disclose such
Confidential Information if required by law (it being specifically understood
and agreed that (a) anything set forth in a registration statement or any
other document filed pursuant to law will be deemed required by law (including,
without limitation, any proxy or registration statement filed by the Morgans
Parent or any Affiliate thereof in connection with the pending initial public
offering of all or substantially all of the assets of the Morgans Parent), and (b) before
making any disclosure of Confidential Information required by law, the
disclosing Member will notify the other Members and provide them with a copy of
the proposed disclosure and an opportunity to comment thereon before the
disclosure is made) or necessary for it to perform any of its duties or
obligations hereunder. If a Member receives a request to disclose any
Confidential Information under the terms of a valid and effective order issued
by a court or governmental agency and the order was not sought by or on behalf
of or consented to by such Member, then such Member may disclose the
Confidential Information to the extent required if the Member as promptly as
practicable (i) notifies the other Members of the existence, terms and

 

48

 

circumstances of the of the order, (ii) consults
in good faith with the other Member on the advisability of taking legally
available steps to resist or to narrow the order, and (iii) if disclosure
of the Confidential Information is required, exercises its best efforts to
obtain a protective order or other reliable assurance that confidential
treatment will be accorded to the portion of the disclosed Confidential
Information that the other Member designates. The cost (including, without
limitation, attorneys’ fees and expenses) of obtaining a protective order
covering Confidential Information designated by such other Member will be borne
by the Company. Notwithstanding the foregoing or anything else contained in
this Agreement, the Members may disclose Confidential Information as
appropriate to any prospective or actual purchaser of, investor in, or lender
to the Company or the Hotels, or any consultant, agent, attorney, accountant or
other professional advisor to or for any of the foregoing.

 

Section 14.12 Third
Parties Not Benefited. Nothing contained in this Agreement is intended or
shall be deemed to benefit any creditor of the Company or any Member, and no
creditor of the Company shall be entitled to require the Company or the Members
to solicit or accept any additional Capital Contributions for the Company or to
enforce any right which the Company or any Member may have against any Member
under this Agreement or otherwise. Except as expressly set forth herein,
nothing in this Agreement is intended to confer on any Person other than the
parties any rights or remedies.

 

Section 14.13 Time
of the Essence. Time shall be of the essence with respect to each of the
dates and time periods set forth in this Agreement, other than the time periods
set forth in Section 8.08 hereof.

 

Section 14.14 Waiver
of Jury Trial. Each of the Members hereby waives trial by jury in any
action arising out of matters related to this Agreement, which waiver is
informed and voluntary.

 

Section 14.15 Jurisdiction;
Choice of Forum. Each Member, and party hereto, hereby irrevocably (a) submits
to the exclusive jurisdiction (and agrees not to contest jurisdiction) of any (i) Federal
Court sitting in the Clark County of Nevada or (ii) if for any reason such
Federal Court (on its own initiative) denies jurisdiction, then any State Court
sitting in the County of Nevada, in any action or proceeding arising out of or
relating to this Agreement, the relations between the Members and any matter,
action or transaction described in this Agreement, (b) agrees that any
such courts (as described in the preceding clause (a)) shall have exclusive
jurisdiction over such actions or proceedings, (c) waives the defense of
inconvenient forum to the maintenance and continuation of such action or
proceeding, (d) consents to the service of any and all process in any such
action or proceeding by the mailing of copies (certified mail, return receipt
requested and postage prepaid) of such process to them at their addresses
specified in Article 14 and (e) agrees that a final and
non-appealable judgment rendered by a court of competent jurisdiction in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.

 

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49

 

IN WITNESS WHEREOF, the
parties hereto have entered into this Agreement or have caused this Agreement
to be duly executed by their respective authorized officers, in each case as of
the day and year first above written.

 

	
   

  	
  MORGANS/LV INVESTMENT LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Morgans Hotel Group LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Marc S. Gordon

  
	
   

  	
  Name:

  	
  Marc S. Gordon

  
	
   

  	
  Title:

  	
  Chief Investment Officer and Executive Vice

  President of Capital Markets

  

 

[Signatures
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  AS TO SECTION 5.06(a) ONLY:

  
	
   

  	
   

  
	
   

  	
  Morgans Hotel Group LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Marc S. Gordon

  
	
   

  	
  Name:

  	
  Marc S. Gordon

  
	
   

  	
  Title:

  	
  Chief Investment Officer and Executive Vice

  President of Capital Markets

  

 

[Signatures
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2

 

	
   

  	
  ECHELON RESORTS CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert Boughner

  
	
   

  	
  Name:

  	
  Robert Boughner

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
  AS TO SECTIONS 4.02(c), 5.06(b),

  8.05(c) AND 11.02(b) ONLY:

  
	
   

  	
   

  	
   

  
	
   

  	
  BOYD GAMING CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian A. Larson

  
	
   

  	
  Name:

  	
  Brian A. Larson

  
	
   

  	
  Title:

  	
  Senior Vice President

  

 

3

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