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EXHIBIT
 

 

 

 
Prepared by and after recording return to:
 
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attention: Leila Rachlin, Esq.

 

MORTGAGE, ASSIGNMENT OF RENTS, SECURITY AGREEMENT
AND FIXTURE FINANCING STATEMENT

FROM

KANSAS STAR CASINO, LLC

TO

U.S. BANK NATIONAL ASSOCIATION, AS COLLATERAL AGENT

______________________
 
Dated as of May 19, 2011
 
Relating to Premises in:
Sumner County, Kansas

 
NOTICE:  THE AGGREGATE MAXIMUM PRINCIPAL AMOUNT OF INDEBTEDNESS THAT MAY BE
SECURED BY THIS INSTRUMENT IS $21,125,000.00 AS SET FORTH IN SECTION 6.19
HEREOF.
 

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MORTGAGE, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FINANCING
STATEMENT

 
This Mortgage, Assignment of Rents, Security Agreement and Fixture Financing
Statement (this “Mortgage”) is made as of May 19, 2011, by Kansas Star Casino,
LLC, a Kansas limited liability company (the “Company”), in favor of U.S. Bank
National Association, as collateral agent (the “Collateral Agent”) under the
Indenture dated as of August 6, 2009 (as it may be amended, restated or
otherwise supplemented from time to time, the “Indenture”) among Peninsula
Gaming, LLC, a Delaware limited liability company (“PGL”), Peninsula Gaming
Corp., a Delaware corporation (“PGC” and, together with PGL, the “Issuers”),
each Subsidiary Guarantor (as defined therein) party thereto, and U.S. Bank
National Association, as Trustee and Collateral Agent.
 
RECITALS
 
WHEREAS, the Company is the sole owner of a fee simple interest for certain
premises located in Sumner County, Kansas and more particularly described on
Exhibit A attached hereto (hereinafter referred to as the “Real Property”);
 
WHEREAS, pursuant to the Indenture the Issuers have issued their 8.375% Senior
Secured Notes due 2015 (together with any replacements thereof provided in the
Indenture, any other senior secured notes issued from time to time under the
Indenture and as the same may be amended or supplemented from time to time
hereafter, the “Notes”) in the aggregate principal amount of $320,000,000,
subject to increase as provided in the Indenture and maturing on August 15,
2015;
 
WHEREAS, pursuant to the Third Supplemental Indenture dated as of January 31,
2011 among the Company, the Issuers and U.S. Bank National Association, as
Trustee and Collateral Agent, the Company has become a “Subsidiary Guarantor”
under the Indenture with the same force and effect as if originally named
therein as a “Subsidiary Guarantor”; and
 
WHEREAS, the Indenture provides that to secure performance by the Company of its
obligations under the Indenture, including the guarantee of payment of the
Notes, the Company will execute and deliver this Mortgage to the Collateral
Agent.  The Indenture, this Mortgage, the Security Documents and any other
document referred to in or made with reference to the Notes are hereby
incorporated by reference, and are sometimes collectively referred to as
“Transaction Documents.”  Capitalized terms used but not defined herein shall
have the meanings ascribed to such terms in the Indenture.
 
GRANTING CLAUSES
 
NOW, THEREFORE, in consideration of ten dollars and other good and valuable
consideration, the receipt of and sufficiency of which are hereby acknowledged,
and to secure the Obligations, including, without limitation, the following:
 
(i) the Company’s guarantee of the prompt and complete payment or performance in
full when due, whether at stated maturity, by required redemption, by
 

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(ii) prepayment, declaration, acceleration, demand or otherwise (including the
payment of amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Law, 11 U.S.C. §362(a) (and any
successor provision thereof)), of all Obligations (as defined in the Indenture)
under the Notes and all other present and future obligations, contingent or
otherwise of the Company arising under or pursuant to the Indenture Documents
(as defined in the Indenture);
 
(iii) the Company’s guarantee of payment if and when due of (a) the Change of
Control Payment (as defined in the Indenture), in an amount not to exceed such
amount calculated in accordance with Section 4.15 of the Indenture, and (b)
amounts due in connection with an Excess Proceeds Offer (as defined in the
Indenture) in an amount not to exceed such amount calculated in accordance with
Section 4.13 of the Indenture, in either case together with interest thereon as
set forth in the Indenture, and premiums and penalties, if any, thereon,
 
(iv) all other sums that may or shall become due hereunder, in connection with
the Notes or under the other Transaction Documents, including the costs and
expenses of enforcing any provision of any of the foregoing documents or any
extensions or modifications of the Notes or any substitutions therefor,
 
(v) the reimbursement to the Collateral Agent of all monies which may be
advanced as herein provided and of any and all costs and expenses (including
reasonable attorneys’ fees and expenses) incurred or paid on account of any
litigation at law or in equity that may arise in respect of this Mortgage or the
obligations secured hereby or the lands and premises and other property herein
mentioned or in obtaining possession of said lands and premises and other
property after any sale that may be made as hereinafter provided,
 
(vi) the payment by the Company to the Collateral Agent of all sums, if any, as
may be duly expended or advanced by the Collateral Agent in the performance of
any obligation of the Company as provided hereunder,
 
(vii) the payment of any and all other indebtedness that this Mortgage by its
terms secures and
 
(viii) the performance and observance of the covenants, agreements and
obligations of the Company contained herein and in the other Transaction
Documents
 
(all obligations and sums included in the foregoing clauses (i), (ii), (iii),
(iv), (v), (vi) and (vii) being hereinafter collectively referred to as the
“Secured Obligations”), and in order to charge with such performance and with
such payments said lands and premises and other property hereinafter described
and the rents, revenues, issues, income and profits thereof, the Company does
hereby mortgage and warrant, affect, hypothecate, to inure to the use and
benefit of the Collateral Agent (as collateral agent under the Indenture), and
its successors and assigns, all right, title and interest of the Company now or
hereafter owned or leased, in, to or under, or derived from each and all of the
following properties, estates, rights, titles and interests (collectively, the
“Mortgaged Property”):
 

 
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the Real Property and all tenements, hereditaments, appurtenances, estates and
rights in and to any of the Real Property and all component parts of the Real
Property;
 
(a) all buildings, improvements and other structures now or hereafter located on
any of the Real Property (the “Improvements”);
 
(b) all of the Company’s right, title and interest in and to all servitudes,
easements, rights-of-way, gores of land, streets, ways, alleys, passages, sewer
rights, waters, water courses, water rights and powers, and all estates, rights,
title, interests, privileges, liberties, prescriptions, advantages and
appurtenances of any nature whatsoever, in any way belonging, relating or
pertaining to any of the Real Property or the Improvements;
 
(c) all of the Company’s right, title and interest in and to any right to
purchase, or to use and occupy, any land adjacent to any of the Real Property
and any land lying in the bed of any street, road or avenue, opened or proposed,
in front of or adjoining any of the Real Property;
 
(d) all of the Company’s right, title and interest, to all machinery, apparatus,
equipment, fittings, fixtures and other property of every kind and nature
whatsoever now or hereafter located upon any of the Real Property or the
Improvements, and all component parts of any building or other construction
located on any of the Real Property or appurtenances thereto, and used in
connection with the operation and occupancy of any of the Real Property or the
Improvements, and all building equipment, material and supplies of any nature
whatsoever now or hereafter located in or upon any of the Real Property or the
Improvements, including, without limitation, all metals, lumber and lumber
products, bricks, stones, building blocks, sand, cement, roofing materials,
paint, doors, windows, hardware, wires, wiring and other building materials and
any building equipment, materials and supplies obtained for use in connection
with any of the Real Property or the Improvements and all additions,
replacements, modifications and alterations of any of the foregoing, including,
but without limiting the generality of the foregoing, all heating, lighting
incinerating and power equipment, engines, pipes, tanks, motors, conduits,
switchboards, plumbing, lifting, cleaning, fire prevention, fire extinguishing,
refrigerating, ventilating and communications apparatus, air cooling and air
conditioning apparatus, elevators, ducts and compressors and all other equipment
and fixtures (collectively, the “Fixtures”).  The Company acknowledges that all
Fixtures are part and parcel of the real estate and appropriated to the use of
the real estate and, whether or not affixed or annexed to the Improvements,
shall for the purpose of this Mortgage be deemed conclusively to be real estate
and mortgaged hereby;
 
(e) all of the Company’s right, title and interest to all plans and
specifications for the Real Property and the Improvements, all contracts with
architects and engineers responsible for the design of the Improvements, the
preparation or evaluation of any of such plans and specifications or the
supervision of the construction of any of the Improvements, all contracts to
which
 

 
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(f) the Company is now or hereafter a party providing for the connection
therewith or the furnishing or installation of any Fixtures or other personal
property in connection therewith, all contracts to which the Company is now or
hereafter a party providing for the management of the construction of any of the
Improvements, all rights of the Company as a third party beneficiary under all
contracts and subcontracts pertaining to the Real Property or the Improvements
as to which the Company is not a party, all payment and performance bonds
relating to the Real Property or the Improvements and all other contracts and
agreements related to the design, management, construction, equipping and
development of the Real Property or the Improvements (collectively, the
“Construction Documents”);
 
(g) all of the Company’s right, title and interest to all awards or payments,
and any interest paid or payable with respect thereto, that may be made with
respect to all or any portion of the Real Property, the Improvements or the
Fixtures, whether from the exercise of right of condemnation, eminent domain or
similar proceedings (including any transfer made in lieu of the exercise of said
right), or from any taking for public use, or for any other injury to or
decrease in the value of all or any portion of the Real Property, the
Improvements or the Fixtures, or as a result of the exercise by any governmental
authority of any right or option to purchase any of the Real Property, all of
the foregoing to be held, applied and paid in accordance with the provisions of
this Mortgage (collectively, the “Eminent Domain Awards”);
 
(h) all of the Company’s right, title and interest to all proceeds of, and any
unearned premiums on, any insurance policies covering all or any portion of the
Real Property, the Improvements or the Rents (as hereinafter defined),
including, without limitation, the right to receive and apply the proceeds of
any insurance, judgments, or settlements made in lieu thereof, for damage to all
or any portion of the Real Property or the Improvements and any interest
actually paid with respect thereto, all of the foregoing to be held, applied and
paid in accordance with the provisions of this Mortgage (collectively, the
“Insurance Proceeds”);
 
(i) all of the Company’s right, title and interest as lessor or landlord to all
leases and other agreements affecting the use or occupancy of any of the Real
Property or the Improvements now in effect or hereafter entered into (including,
without limitation, subleases (including licenses, concessions, tenancies and
other occupancy agreements covering or encumbering all or any portion of the
Real Property or the Improvements), but excluding any licenses and permits to
the extent not assignable under applicable law, including without limitation,
liquor and gaming licenses, together with any modifications, extensions or
renewals of the same (collectively, the “Space Leases”) and the rents, revenues,
issues, income, products and profits of the Real Property and the Improvements,
including, without limitation, any security deposits or other funds deposited
with the Company pursuant to the Space Leases (collectively, the “Rents”),
together with any guarantees of the Space Leases or Rents delivered to the
Company from
 

 
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(j) time to time, and any modifications, extensions and renewals of any such
guarantees, together with the right, but not the obligation, to exercise
options, to give consents and to collect, receive and receipt for the Rents and
apply the Rents to the payment of the Secured Obligations and to demand, sue for
and recover the Rents (when due and payable), subject to a license in favor of
the Company in respect thereof prior to the occurrence of an Event of Default
(as defined in Section 5.1 hereof); and
 
(k) any and all other, further or additional rights, title, estates and
interests of the Company in and to any of the Real Property or the Improvements
or the Fixtures, and all renewals, substitutions and replacements of and all
additions and appurtenances to any of the Real Property or the Improvements or
the Fixtures or constructed, assembled or placed on any of the Real Property or
the Improvements, and all conversions of the assemblage, placement or
conversion, as the case may be, and in each such case without any further
mortgage, conveyance, assignment or other act by the Company, shall become
subject to the lien of this Mortgage as fully and completely, and with the same
effect, as though now owned by the Company, the Company expressly agreeing that
if the Company shall at any time acquire any other right, title, estate or
interest in and to any of the Real Property, the Improvements or the Fixtures,
the lien of this Mortgage shall automatically attach to and encumber such other
right, title, estate or interest as a lien thereon.
 
AND, as additional security, the Company hereby grants to the Collateral Agent a
continuing security interest in (a) the Fixtures, (b) the Construction
Documents, (c) the Insurance Proceeds, (d) the Eminent Domain Awards, (e) the
Space Leases, (f) the Rents, (g) all proceeds of the foregoing, (h) all proceeds
of any of the Real Property and the Improvements, and (i) the rights described
in clauses “c” and “d” of the definition of Mortgaged Property herein ((a)-(i),
collectively, the “Security Interests Property”) and this Mortgage shall be
effective as a security agreement pursuant to the Uniform Commercial Code as
enacted and in effect in the state in which any of the Real Property is located
(the “Code”).
 
HABENDUM
 
TO HAVE AND TO HOLD the Mortgaged Property, the rights and privileges hereby
conveyed or assigned, or intended so to be, unto the Collateral Agent (as
collateral agent under the Indenture), its successors and assigns, forever for
the uses and purposes and subject to the terms and conditions herein set forth.
 
SUBJECT, HOWEVER, to Permitted Liens.
 
PROVIDED NEVERTHELESS, should the Company pay and perform all the Secured
Obligations in accordance with the Indenture and the Security Documents, then
these presents will be of no further force and effect, and this Mortgage shall
be satisfied by the Collateral Agent, at the expense of the Company.
 
The Company FURTHER agrees as follows:
 

 
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COVENANTS
 
1.1. Performance of Obligations.  The Company shall pay and perform the Secured
Obligations.  Time is of the essence hereof.
 
1.2. Further Assurances.  If the Collateral Agent requests, the Company shall
sign and deliver and cause to be recorded as the Collateral Agent shall
reasonably direct any further mortgages, instruments of further assurance,
certificates and other documents as the Collateral Agent may consider reasonably
necessary or desirable in order to perform, perfect, continue, and preserve the
obligations of the Company under the Transaction Documents.  The Company further
agrees to pay to the Collateral Agent, upon demand, all costs and expenses
incurred by the Collateral Agent in connection with the preparation, execution,
recording, filing and refiling of any such documents, including attorneys’ fees
that are reasonable and title opinion or title insurance costs.
 
1.3. Operation and Maintenance; Compliance with Laws.  The Company shall cause
the Mortgaged Property to be maintained in normal working order and condition,
reasonable wear and tear excepted, and the Company shall make all necessary
repairs, renewals, replacements, additions, betterments and improvements
thereto, as shall be reasonably necessary for the proper conduct of the business
of the Company.  The Company shall comply or cause compliance with all laws,
ordinances and regulations of any governmental authority with reference to the
Mortgaged Property and the manner of using or operating the same, including any
Environmental Laws or Regulations and Accessibility Regulations, as hereafter
defined, and with any restrictive covenants affecting the title to the Mortgaged
Property, and with the terms of all insurance policies relating to the Mortgaged
Property.
 
1.4. Payment of Utilities, Impositions, Liens.  The Company shall pay or cause
to be paid when due all charges or fees for utilities and services supplied to
the Mortgaged Property.  The Company, at least five (5) days before any penalty
attaches thereto, shall pay and discharge, or cause to be paid and discharged,
all taxes, assessments and governmental charges or levies (collectively,
“Impositions”) imposed upon or against it, its income or profits, the Mortgaged
Property or rents therefrom, or upon or against the Secured Obligations, or upon
or against the interest of the Collateral Agent in the Mortgaged Property or the
Secured Obligations, except Impositions measured by the income of the Collateral
Agent.  The Company shall provide evidence of such payment at the Collateral
Agent’s request.  This Mortgage is and shall be maintained by the Company as a
valid mortgage lien and security interest in the Mortgaged Property, subject
only to the Permitted Liens and such other matters as may be expressly permitted
under the Indenture.  Except as otherwise provided in the Indenture, the Company
shall not, directly or indirectly, create or suffer, or permit to be created or
suffered, against the Mortgaged Property or any part thereof, and the Company
will promptly discharge any Lien or other Imposition that may affect the
Mortgaged Property or any part thereof, or any interest therein, except the
Permitted Liens.  If any Lien not permitted hereunder is filed, the Company will
cause the same to be discharged pursuant to the terms of the Indenture.
 

 
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Insurance.
 
(a) The Company shall maintain insurance on the Mortgaged Property as specified
in Section 4.18 of the Indenture.
 
(b) In the event that the Company fails to keep the Real Property and the
Improvements insured in compliance with this Section, the Collateral Agent may,
but shall not be obligated to, obtain insurance and pay the premiums therefor,
and the Company shall, on demand, reimburse the Collateral Agent for all sums
advanced and expenses incurred in connection therewith.  Such sums and expenses,
together with interest thereon at the Additional Interest Rate, shall be deemed
part of the Secured Obligations and secured by the lien of this Mortgage.
 
(c) Subject to the provisions of Section 3.1 hereof, nothing contained in this
Section or elsewhere in this Mortgage shall relieve the Company of its duty to
maintain, repair, replace or restore the Improvements or the Fixtures or rebuild
the Improvements, from time to time, in accordance with the applicable
provisions of the Transaction Documents, and nothing in this Section or
elsewhere in this Mortgage shall relieve the Company of its duty to pay the
Secured Obligations, which shall be absolute, regardless of the occurrence of
damage to, destruction of or condemnation of all or any portion of the Mortgaged
Property.
 
1.5. Books and Records: Financial Information
 
.  The Company shall (i) keep complete and accurate books and records with
respect to the Mortgaged Property; (ii) permit the Collateral Agent to inspect
such books and records during normal business hours and make copies thereof at
the Collateral Agent’s expense; and (iii) provide the Collateral Agent such
information as the Collateral Agent may from time to time reasonably request
concerning the operations and financial affairs of the Company and the Mortgaged
Property, including, if requested, audited annual financial statements and
quarterly operating statements.
 
1.6. Mortgage, Sale, Lease of the Mortgaged Property.
 
(a) Except as otherwise expressly permitted under the Transaction Documents or
as otherwise expressly permitted hereunder, the Company will not, now or in the
future, mortgage, pledge or encumber or place any Lien or encumbrance (or permit
the same to exist) on the Mortgaged Property, or any part thereof, without the
prior written consent of the Collateral Agent, except for Permitted Liens.
 
(b) Except as otherwise expressly permitted under the Transaction Documents or
as otherwise expressly permitted hereunder, the Company shall not sell, convey,
transfer or otherwise alienate in any manner, whether directly or indirectly,
any right, title or interest in the Mortgaged Property, or any part thereof
except as expressly permitted under the Indenture, without obtaining in each
such instance the prior written consent of the Collateral Agent based upon a
direction from a majority of Holders.
 

 
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(c) Except as otherwise expressly permitted under the Transaction Documents or
as otherwise expressly permitted hereunder, the Company shall not, without the
Collateral Agent’s prior consent (based upon a direction of a majority of
Holders), enter into any agreement with or conveyance to any other person or
entity permitting the use of any excess development rights that might otherwise
be used by the Company in expanding, altering, reconstructing, replacing or
otherwise improving the Improvements or making any other improvements on the
Mortgaged Property, or otherwise permit or suffer any change of the zoning of
the Mortgaged Property or the use that may be made thereof.
 
1.7. Environmental - ADA.  The Company agrees:
 
(a) Except for substances normally used for maintenance or operation of the
Mortgaged Property which are used, stored and disposed of in compliance with all
applicable Environmental Laws or Regulations (as defined below), the Company
shall not, nor shall it permit others to, place, store, locate, generate,
produce, create, process, treat, handle, transport, incorporate, discharge,
emit, spill, release, deposit or dispose of any Hazardous Substance (as defined
below) in, upon, under, over or from the Mortgaged Property.  The Company shall
cause all Hazardous Substances found on or under the Mortgaged Property, which
are not permitted under the foregoing sentence, and which exist in quantities or
locations which violate applicable Environmental Laws or Regulations, to be
properly removed therefrom and properly disposed of at another location at the
Company’s cost and expense.  The Company shall not install or permit to be
installed any underground storage tanks on or under the Mortgaged Property.  If
the Collateral Agent shall reasonably request, the Company shall at its cost
obtain and deliver to the Collateral Agent an environmental review, audit,
assessment and/or report relating to the Mortgaged Property or shall have any
previously delivered materials updated and/or amplified, by an engineer or
scientist acceptable to the Collateral Agent; provided, however, that so long as
no Default or Event of Default has occurred and is continuing, the Company shall
not be required to obtain and deliver to the Collateral Agent such environmental
review, audit, assessment and/or report relating to the Mortgaged Property or
have any previously delivered materials updated and/or amplified more frequently
than once per calendar year.
 
(b) The Company shall comply in all material respects with all Accessibility
Regulations (as defined below) which are applicable to the Mortgaged
Property.  If the Collateral Agent shall reasonably request (based upon a
direction of a majority of Holders), the Company shall at its cost obtain and
deliver to the Collateral Agent an Accessibility Regulation compliance report
relating to the Mortgaged Property or shall have any previously delivered
materials updated and/or amplified, by a qualified consultant acceptable to the
Collateral Agent; provided, however, that so long as no Default or Event of
Default has occurred and is continuing, the Company shall not be required to
obtain and deliver to the Collateral Agent such Accessibility Regulation
compliance report relating to the Mortgaged Property or have any previously
 

 
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(c) delivered materials updated and/or amplified more frequently than once per
calendar year.
 
(d) The Company shall, promptly after obtaining actual knowledge thereof, give
notice to the Collateral Agent of: (i) any activity in violation of any
applicable Environmental Laws or Regulations on or relating to the Mortgaged
Property, (ii) any governmental or regulatory actions instituted or threatened
under any Environmental Laws or Regulations or any Accessibility Regulations
affecting the Mortgaged Property, (iii) all claims made or threatened by any
third party against the Mortgaged Property relating to any Hazardous Substance
or a violation of any Environmental Laws or Regulations or any Accessibility
Regulations, and (iv) any discovery by the Company of any occurrence or
condition on or under the Mortgaged Property or on or under any real property
adjoining or in the vicinity of the Mortgaged Property which could subject the
Company, the Collateral Agent or the Mortgaged Property to a claim under any
Environmental Laws or Regulations or Accessibility Regulations.  Any such notice
shall include copies of any written materials received by the Company.
 
(e) Any investigation, remedial or corrective action taken with respect to the
Mortgaged Property shall be done under the supervision of a qualified
consultant, engineer or scientist acceptable to the Collateral Agent who shall,
at the Company’s cost and expense and at the completion of such investigation or
action, provide a written report of such investigation or action to the
Collateral Agent.
 
(f) If the Mortgaged Property has, or is suspected to have, asbestos or asbestos
containing materials (“ACM”) which, due to its condition, location and/or
planned building renovation or demolition, is recommended to be abated by
repair, encapsulation, removal or other action, the Company shall at its cost
and expense promptly carry out the recommended abatement action.  If the
recommended abatement includes removal of ACM, the Company shall cause the same
to be removed and disposed of offsite by a licensed and experienced asbestos
removal contractor, all in accordance with Environmental Laws or
Regulations.  Upon completion of the recommended abatement action, the Company
shall deliver to the Collateral Agent a certificate, signed by an officer of the
Company and the consultant overseeing the abatement action, certifying to the
Collateral Agent that the work has been completed in compliance with all
applicable laws, ordinances, codes and regulations (including without limitation
those regarding notification, removal and disposal) and that no airborne fibers
beyond permissible exposure limits remain on site.  The Company shall develop
and implement an Operations and Maintenance Program (as contemplated by
Environmental Protection Agency guidance document entitled “Managing Asbestos In
Place: A Building Owner’s Guide to Operations and Maintenance Programs for
Asbestos—Containing Materials”) for managing in place any ACM in the Mortgaged
Property.  The Company shall deliver a complete copy of such Operations and
Maintenance Program to the Collateral Agent and certify to the Collateral Agent
that such Program has been implemented.
 

 
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(g) After the occurrence and during the continuance of an Event of Default, or
if at any time there is a reasonable basis to believe that a violation of
Environmental Laws or Regulations may have occurred on the Mortgaged Property or
pursuant to Section 1.8(a) of this Mortgage, the Collateral Agent shall have the
right, but not the obligation, after ten (10) days’ prior written notice to the
Company, to have an environmental review, audit, assessment, testing program
and/or report with respect to the Mortgaged Property performed or prepared by an
environmental engineering firm selected by the Collateral Agent.  The Company
shall reimburse the Collateral Agent for the cost incurred for each such action
within ten (10) days following demand therefor by the Collateral Agent.  The
amount shall accrue interest at the Additional Interest Rate (as defined in
Section 5.2) from and including the date of disbursement by the Collateral Agent
through the date of payment by the Company.
 
For purposes of this Mortgage, the following definitions shall apply:
 
“Environmental Laws or Regulations” means and includes the Federal Comprehensive
Environmental Response, Compensation and Liability Act as amended by the
Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.;
the Federal Resource Conservation and Recovery Act of 1976, 42 U.S.C. §§ 6901 et
seq.; the Clean Water Act, 33 U.S.C. §§ 1321 et seq.; the Toxic Substances
Control Act, 15 U.S.C. § 2601 et seq.; the Safe Drinking Water Act, 42 U.S.C. §
3803 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq.; the
Emergency Planning and the Community Right-to-Know Act of 1986, 42 U.S.C. §
11001 et seq.; the Hazardous Material Transportation Act, 49 U.S.C. § 1801 et
seq.; the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq. (to the
extent it regulates occupational exposure to Hazardous Substances); and the
Clean Air Act, 42 U.S.C. §§ 7401 et seq., all as the same may be from time to
time amended, and any other federal, state, county, municipal, local or other
statute, code, law, ordinance, regulation, requirement or rule which may relate
to or protect human health or the environment, including, without limitation,
all regulations promulgated by a regulatory body pursuant to any such statute,
code, law or ordinance, and all as previously and in the future to be amended.
 
“Hazardous Substances” means asbestos, asbestos containing materials, urea
formaldehyde, polychlorinated biphenyls, nuclear fuel or materials, chemical
waste, radioactive materials, explosives, known carcinogens, petroleum products
including but not limited to crude oil or any fraction thereof, natural gas,
natural gas liquids, gasoline or synthetic gas, and any other waste, material,
substance, pollutant or contaminant which would subject the owner of the
Mortgaged Property to any damages, penalties, liabilities, or obligations under
any applicable Environmental Laws or Regulations.
 
“Accessibility Regulations” means any law ordinance or regulation relating to
accessibility of a facility or property for disabled, handicapped and/or
physically challenged persons, including, without limitation, the Americans With
Disabilities Act of 1991, as amended.
 

 
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REPRESENTATIONS AND WARRANTIES
 
The Company makes the following representations and warranties:
 
1.8. Existence and Powers.  The Company is a limited liability company duly
created and validly existing and in good standing under the laws of the State of
Kansas.  The Company has the power to own its property, to carry on its business
and to execute and perform the Transaction Documents.  The Company has obtained
all licenses and permits necessary to conduct its business in the manner
presently conducted.
 
1.9. Ownership, Liens, Compliance with Laws.  The Company owns the Mortgaged
Property free from all Liens and encumbrances except for the Permitted Liens and
except for defects in title that do not interfere in any material respect with
its ability to conduct its business or to utilize the Mortgaged Property for its
intended purpose.  All applicable zoning and environmental, land use,
subdivision, building, fire, safety or health laws, ordinances and regulations
affecting the Mortgaged Property permit the current use and occupancy thereof,
and the Company has obtained all necessary consents, permits and licenses
required for such use.  The Company will comply with and satisfy all applicable
formalities and provisions of the laws and regulations of the United States of
America and the laws of the State of Kansas in order to perfect, establish and
maintain this Mortgage, and any supplement or amendment hereto.
 
1.10. Authority, Consents.  The execution, delivery and performance of the
Transaction Documents have been duly authorized by all necessary action of the
Company.  Except for consents and approvals previously obtained, no consent or
approval of, or exemption by, any person or entity, governmental or private, is
required to authorize the execution, delivery and performance of the Transaction
Documents or the validity thereof.
 
1.11. Binding Agreement.  The Transaction Documents are the valid and legally
binding obligations of the Company enforceable against the Company in accordance
with their respective terms, except to the extent limited by equitable
principles or bankruptcy, insolvency or similar laws affecting the rights of
creditors generally.
 
1.12. No Conflict, Default.  The execution, delivery and performance by the
Company of the Transaction Documents will not violate or cause default under or
permit acceleration of any material agreement to which the Company is a party or
by which it or the Mortgaged Property is bound.  To the Company’s knowledge, it
is not in default (beyond any applicable grace period) in the performance of any
agreement, order, writ, injunction, decree or demand to which it is a party or
by which it is bound.
 
1.13. Litigation.  There is no litigation, arbitration or other proceeding in
process or to the Company’s knowledge pending or threatened against the
Mortgaged Property or the Company except for (a) matters that are fully covered
by insurance (subject to customary deductibles), and (b) matters arising after
the date hereof that if decided adversely to the Company, reasonably could not
be expected to have a materially adverse effect on the ability of the Company to
fulfill its obligations under the Transaction Documents or on the condition,
financial or otherwise, of the Company’s business, properties or assets.
 

 
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Use.  The Mortgaged Property is not homestead property nor is it agricultural
property in agricultural use.
 
1.14. Utilities.  The Mortgaged Property is serviced by all necessary public
utilities, and all such utilities are operational and have sufficient capacity.
 
1.15. Environmental.  To the Company’s knowledge:
 
(a) There is not located on, in, about, or under the Mortgaged Property any
Hazardous Substances except for Hazardous Substances of the type ordinarily
used, stored, or manufactured in connection with the ownership or operation of
the Mortgaged Property as it is presently operated and such existing Hazardous
Substances have been used, stored and manufactured in compliance with all
Environmental Laws or Regulations.
 
(b) The Mortgaged Property is not presently used, and has not in the past been
used as a landfill, dump, disposal facility, gasoline station or for the
storage, generation, production, manufacture, processing, treatment, disposal,
handling, transportation, or deposit of any Hazardous Substances, where such
production, storage, generation, manufacturing, processing, treatment, disposal,
handling, transportation or deposit was in violation, in any material respect,
of applicable Environmental Law.
 
(c) There has not in the past been, and no present threat now exists of, a
spill, discharge, emission or release of a Hazardous Substance in, upon, under,
over or from the Mortgaged Property or from any other property which would have
an impact on the Mortgaged Property.
 
(d) There are no past or present investigations, administrative proceedings,
litigation, regulatory hearings or other action completed, proposed, threatened
or pending, alleging noncompliance with or violation of any Environmental Laws
or Regulations respecting the Mortgaged Property, relating to Hazardous
Materials on, in, about or under the Mortgaged Property, or relating to any
required environmental permits covering the Mortgaged Property.
 
(e) The Company has disclosed to the Collateral Agent all reports and
investigations commissioned by the Company and relating to Hazardous Substances
and the Real Property and the Improvements.
 
(f) There are not now, nor have there ever been, any above ground or underground
storage tanks located in or under the Mortgaged Property.  There are no wells on
or under the Mortgaged Property.
 
1.16. Mortgage Lien.  This Mortgage constitutes a valid mortgage and, upon
proper recording hereof, will constitute a valid and perfected mortgage lien,
and security interest in the Mortgaged Property (subject only to the Permitted
Liens), and there are no defenses or offsets to the Company’s obligations
pursuant to this Mortgage or the other
 

 
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Transaction Documents, including without limitation, the Company’s applicable
obligations to pay and perform the Secured Obligations.
 
1.17. Tax Liens; Bankruptcy.  There are no federal, state or local tax claims or
liens assessed or filed against the Company or the Mortgaged Property for taxes
which are due and payable, unsatisfied of record or docketed in any court of the
state in which the Real Property is located or in any other court located in the
United States, and no petition in bankruptcy has ever been filed by the Company,
or, to the Company’s knowledge, against the Company, and the Company has never
made any assignment for the benefit of creditors or taken advantage of any
insolvency act or any act for the benefit of debtors.
 
1.18. Damage; Eminent Domain Proceedings.  The Mortgaged Property has not been
damaged or destroyed by fire or other casualty, and no condemnation or eminent
domain proceedings have been commenced and none are pending with respect to the
Mortgaged Property, and, to the Company’s knowledge, no such condemnation or
eminent domain proceedings are about to be commenced.
 
ARTICLE 2
 
CASUALTY — CONDEMNATION
 
2.1. Damage or Destruction
 
.  During the period the Secured Obligations remain outstanding, in the event
that the Real Property, the Improvements, or the Fixtures shall be damaged or
destroyed in whole or in part, by fire or other casualty covered by insurance,
the Company shall give prompt written notice thereof to the Collateral
Agent.  At such time as such damage, destruction or casualty shall occur, the
Insurance Proceeds shall be treated as an Event of Loss and shall be payable to
the Collateral Agent and shall be released, applied and/or distributed in
accordance with Sections 4.13 and 10.4 of the Indenture.  Upon the occurrence of
an Event of Default which has not been waived in writing by the Holders in
accordance with Section 9.2 of the Indenture, the Collateral Agent shall have
the right to apply such Insurance Proceeds in accordance with Section 6.10 of
the Indenture.  The Collateral Agent shall have the right to participate in any
insurance proceeding at the Company’s expense, including reasonable attorneys’
fees and disbursements.
 
2.2. Condemnation.
 
(a) During the period the Secured Obligations remain outstanding, in the event
that the Mortgaged Property, or any part thereof, shall be taken in condemnation
proceedings or by exercise of the right of eminent domain, or by conveyance in
lieu of condemnation, or as a result of the exercise by any governmental
authority of any right or option to purchase (hereinafter collectively called
“Proceedings”), the Collateral Agent shall have the right to participate in any
such Proceedings at the Company’s expense, including reasonable attorneys’ fees
and disbursements, and any Eminent Domain Awards that may be made or any
proceeds thereof shall be released, applied and/or distributed in accordance
with the terms of the Indenture.  The parties agree to execute any and all
further documents that may be required in order to facilitate collection of any
Eminent Domain Award and the making of any such deposit.
 

 
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(b) During the period the Secured Obligations remain outstanding, if there
occurs a Proceeding, any Eminent Domain Awards payable in connection therewith
shall be considered an Asset Sale and shall be released, applied and/or
distributed in accordance with Sections 4.13 and 10.4 of the Indenture.
 
(c) Upon the occurrence of an Event of Default which has not been waived in
writing by the Holders in accordance with Section 9.2 of the Indenture, the
Collateral Agent shall have the right to apply such Eminent Domain Awards in
accordance with Section 6.10 of the Indenture.
 
ARTICLE 3
 
LEASES AND RENTS
 
3.1. Space Leases, Rents and Cash Collateral.
 
(a) As additional collateral security for payment of the Secured Obligations,
and cumulative of any and all rights and remedies herein provided, the Company
hereby bargains, sells, transfers, assigns and sets over to the Collateral Agent
for the benefit of the Holders, any and all Space Leases and Rents and any and
all cash collateral to be derived from the Mortgaged Property, or the use and
occupation thereof, or under any contract or bond relating to the construction
or reconstruction of the Mortgaged Property, including all Rents, royalties,
revenues rights, deposits (including security deposits) and benefits accruing to
the Company under all Space Leases, and the right to receive the same and apply
them against the Secured Obligations or against the Company’s other obligations
hereunder or the Company’s obligations under the Transaction Documents, together
with all Space Leases, contracts, bonds, leases and other documents evidencing
the same now or hereafter in effect and all right of the Company
thereunder.  Nothing contained in the preceding sentence shall be construed to
bind the Collateral Agent to the performance of any of the provisions of any
such Space Lease, contract, bond, lease or other documents or otherwise impose
any obligation upon the Collateral Agent, except that the Collateral Agent shall
be accountable for any money actually received pursuant to such assignment to
the extent of its disposition thereof in a manner inconsistent with this
Mortgage or the Transaction Documents.  The Company shall deliver to the
Collateral Agent upon the Collateral Agent’s request an executed counterpart of
each such Space Lease, contract, bond or other documents.  The assignment of
said Space Leases, Rents, income profits, proceeds and cash collateral, and any
of the aforesaid rights with respect thereto and to the contracts, bonds, leases
and other documents evidencing the same, is intended to be and is an absolute
present assignment from the Company to the Collateral Agent and not merely the
passing of a security interest.
 
(b) So long as there shall exist no Event of Default hereunder which has not
been waived in writing by the Holders in accordance with the Indenture, the
Company shall have the right and license to exercise all rights, options and
privileges extended to the lessor under the terms of the Space Leases,
including,
 

 
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(c) without limitation, the right to collect all Rents.  The Company agrees to
hold the same in trust and to use the same, first, in payment of the Secured
Obligations, second, the Taxes and insurance premiums payable hereunder and all
other charges on or against the Mortgaged Property and, third, to the expenses
of the Company’s business in or on the Mortgaged Property.
 
(d) In the event of any such Event of Default which has not been so waived, the
right and license set forth in subparagraph (b) of this Section shall be
automatically revoked, and, thereafter, the Collateral Agent shall have the
right and authority to exercise any of the rights or remedies referred to or set
forth herein.  In addition, upon such an Event of Default, the Company shall
promptly pay to the Collateral Agent (i) all rent prepayments and security or
other deposits paid to the Company pursuant to any Space Leases and (ii) all
charges for services or facilities or for escalations which were paid pursuant
to any Space Leases to the extent allocable to any period from and after such
Event of Default and any such sums received by the Collateral Agent shall be
applied by the Collateral Agent in accordance with Section 6.10 of the
Indenture.
 
(e) If the Company is not required to surrender possession of the Mortgaged
Property hereunder in the event of any such Event of Default which has not been
so waived, the Company will pay monthly in advance to the Collateral Agent, or
to any receiver appointed to collect the same, the income, profits or proceeds
received by the Company under any of the Space Leases.
 
(f) The Company will, upon the Collateral Agent’s request, execute, acknowledge
and deliver to the Collateral Agent, in form approved by the Collateral Agent,
one or more general or specific assignments of the lessor’s interest under any
Space Lease (which are consistent with the foregoing provisions).  The Company
will, on demand, pay to the Collateral Agent, or reimburse the Collateral Agent
for the payment of, all reasonable costs or expenses incurred in connection with
the preparation or recording of any such assignment.
 
(g) The Company will (i) perform or cause to be performed the lessor’s
obligations under any Space Lease, (ii) enforce the performance by the lessee
under its respective Space Lease of all of said lessee’s material obligations
thereunder and (iii) give the Collateral Agent prompt notice and a copy of any
notice of default, event of default, termination or cancellation sent or
received by the Company.
 
(h) Except to the extent expressly permitted herein or under the other
Transaction Documents, the Company will not, without the Collateral Agent’s
written consent (based upon a direction of a majority of Holders), (i) assign,
mortgage, pledge or otherwise transfer, dispose of or encumber, whether by
operation of law or otherwise, any Space Lease or the Rents or other income
thereunder or therefrom, (ii) accept or permit the acceptance of a prepayment of
any Rents for more than one month in advance of the due dates therefor, (iii)
 

 
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(i) amend, modify or otherwise alter any Space Lease or (iv) cancel, terminate
or accept a surrender of any Space Lease.
 
(j) The Company will from time to time, promptly upon the Collateral Agent’s
request, prepare and deliver to the Collateral Agent such information concerning
the Space Leases as the Collateral Agent shall request.
 
ARTICLE 4
 
DEFAULTS AND REMEDIES
 
4.1. Events of Default.  Each of the following shall constitute an Event of
Default hereunder:
 
(a) the occurrence of an “Event of Default” as defined in Section 6.1 of the
Indenture; or
 
(b) the failure of the Company to observe and perform any covenant, condition or
agreement on its part to be observed or performed in this Mortgage (other than
an occurrence which may sooner constitute an “Event of Default” under the
Indenture) including, without limitation, the covenants contained in Article I
herein for a period of thirty (30) days after written notice specifying such
failure and requesting that it be remedied, given to the Company by the
Collateral Agent.
 
4.2. Remedies.  Upon the occurrence of an Event of Default, all Secured
Obligations, at the option of the Collateral Agent, shall be accelerated and
become immediately due and payable upon notice to the Company.  The outstanding
principal amount and the interest accrued thereon of the Secured Obligations
shall be due and payable without presentment, demand or further notice of any
kind, all of which are hereby expressly waived by the Company.  The Company will
pay to the Collateral Agent the entire Secured Obligations or portions thereof,
as applicable, and to the extent permitted by law, the premiums and penalties,
if any, provided in this Mortgage and each other Transaction Document, as
applicable, and such payment shall be applied in accordance with Section 6.10 of
the Indenture.
 
In the event of any Event of Default, whether or not an acceleration shall
occur, the Collateral Agent shall have the right to proceed to protect and
enforce its rights by one or more of the following remedies:
 
(a) THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO BRING SUIT either for damages,
specific performance of any agreement contained in any Transaction Document, or
for the foreclosure of this Mortgage, or for the enforcement of any other
appropriate legal or equitable remedy.
 
(b) THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO OBTAIN A RECEIVER at any time
after an Event of Default, whether or not an action for foreclosure has been
commenced.  Any court having jurisdiction shall at the request of the Collateral
Agent following an Event of Default appoint a receiver to take immediate
possession of the Mortgaged Property and to rent or
 

 
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(c) operate the same as he may deem best for the interest of all parties
concerned, and such receiver shall be liable to account to the Company only for
the net profits, after application of rents, issues and profits upon the costs
and expenses of the receivership and upon the Secured Obligations.
 
The Collateral Agent shall have the right, at any time to advance money to the
receiver to pay any part or all of the items which the receiver should otherwise
pay if cash were available from the Mortgaged Property and sums so advanced,
with interest (“Additional Interest”) at the per annum rate equal to the
interest rate then borne by the Notes (the “Additional Interest Rate”), shall be
secured hereby, or if advanced during the period of redemption shall be a part
of the sum required to be paid to redeem from the sale.
 
(d) THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO COLLECT THE RENTS from the
Mortgaged Property and apply the same in the manner hereinbefore provided with
respect to a receiver.  For that purpose, the Collateral Agent may enter and
take possession of the Mortgaged Property and manage and operate the same and
take any action which, in the Collateral Agent’s judgment, is necessary or
proper to collect the Rents and to conserve the value of the Mortgaged
Property.  The Collateral Agent may also take possession of, and for these
purposes use, any and all of the Security Interests Property.  The expense
(including any receiver’s fees, attorneys’ fees, costs and agent’s compensation)
incurred pursuant to the powers herein contained shall be secured by this
Mortgage.  The Collateral Agent shall not be liable to account to the Company
for any action taken pursuant hereto other than to account for any Rents
actually received by the Collateral Agent.  Enforcement hereof shall not cause
the Collateral Agent to be deemed a Collateral Agent in possession unless the
Collateral Agent elects in writing to be a Collateral Agent in possession.
 
(e) THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO ENTER AND TAKE POSSESSION of
the Mortgaged Property and manage and operate the same in conformity with all
applicable laws and take any action which, in the Collateral Agent’s judgment,
is necessary or proper to conserve the value of the Mortgaged Property.
 
(f) THE COLLATERAL AGENT SHALL HAVE ALL OF THE RIGHTS AND REMEDIES PROVIDED IN
THE KANSAS UNIFORM COMMERCIAL CODE, including Kansas Code Chapter 84, including
the right to proceed under the Kansas Uniform Commercial Code provisions
governing default as to any Security Interests Property separately from the real
estate included within the Mortgaged Property, or to proceed as to all of the
Mortgaged Property in accordance with its rights and remedies in respect of said
real estate.  If the Collateral Agent should elect to proceed separately as to
such Security Interests Property, the Company agrees to make such Security
Interests Property available to the Collateral Agent at a place or places
acceptable to the Collateral Agent, and if any notification of intended
disposition of any of such Security Interests Property is required by law, such
notification shall be deemed reasonably
 

 
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(g) and properly given if given at least ten (10) days before such disposition
in the manner hereinafter provided.
 
(h) THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO FILE PROOF OF CLAIM and other
documents as may be necessary or advisable in order to have its claims allowed
in any receivership, insolvency, bankruptcy, reorganization, arrangement,
adjustment, composition or other judicial proceedings affecting the Company, its
creditors or its property, for the entire amount due and payable by the Company
under the Secured Obligations, this Mortgage and any other instrument securing
the Secured Obligations, at the date of the institution of such proceedings, and
for any additional amounts which may become due and payable by the Company after
such date.
 
Each remedy herein specifically given shall be in addition to every other right
now or hereafter given or existing at law or in equity, and each and every right
may be exercised from time to time and as often and in such order as may be
deemed expedient by the Collateral Agent and the exercise or the beginning of
the exercise of one right shall not be deemed a waiver of the right to exercise
at the same time or thereafter any other right.  The Collateral Agent shall have
all rights and remedies available under the law in effect now and/or at the time
such rights and remedies are sought to be enforced, whether or not they are
available under the law in effect on the date hereof.
 
4.3. Expenses of Exercising Rights, Powers and Remedies.  The reasonable expense
(including any receiver’s fees, attorneys’ fees, appraisers’ fees, environmental
engineers’ and/or consultants’ fees, costs incurred for documentary and expert
evidence, stenographers’ charges, publication costs, costs (which may be
estimated as to items to be expended after entry of the decree of foreclosure)
of procuring all abstracts of title, continuations of abstracts of title, title
searches and examinations, title insurance policies and commitments and
extensions therefor, Torrens duplicate certificates of title, Uniform Commercial
Code and chattel lien searches, and similar data and assurances with respect to
title as the Collateral Agent may deem reasonably necessary either to prosecute
any foreclosure action or to evidence to bidders at any sale which may be had
pursuant to any foreclosure decree the true condition of the title to or the
value of the Mortgaged Property, and agent’s compensation) incurred by the
Collateral Agent after the occurrence of any Event of Default under this
Mortgage and/or in pursuing the rights, powers and remedies contained in this
Mortgage shall be immediately due and payable by the Company, with interest
thereon at the Additional Interest Rate, and shall be added to the indebtedness
secured by this Mortgage.
 
4.4. Restoration of Position.  In case the Collateral Agent shall have proceeded
to enforce any right under this Mortgage by foreclosure, sale, entry or
otherwise, and such proceedings shall have been discontinued or abandoned for
any reason or shall have been determined adversely, then, and in every such
case, the Company and the Collateral Agent shall be restored to their former
positions and rights hereunder with respect to the Mortgaged Property subject to
the lien hereof.
 
4.5. Marshalling.  The Company, for itself and on behalf of all persons, parties
and entities which may claim under the Company, hereby waives all
 

 
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requirements of law relating to the marshalling of assets, if any, which would
be applicable in connection with the enforcement by the Collateral Agent of its
remedies for an Event of Default hereunder, absent this waiver.  The Collateral
Agent shall not be required to sell or realize upon any portion of the Mortgaged
Property before selling or realizing upon any other portion thereof.
 
4.6. Waivers.  No waiver of any provision hereof shall be implied from the
conduct of the parties.  Any such waiver must be in writing and must be signed
by the party against which such waiver is sought to be enforced.  The waiver or
release of any breach of the provisions set forth herein to be kept and
performed shall not be a waiver or release of any preceding or subsequent breach
of the same or any other provision.  No receipt of partial payment after
acceleration of any of the Secured Obligations shall waive the acceleration.  No
payment by the Company or receipt by the Collateral Agent of a lesser amount
than the full amount secured hereby shall be deemed to be other than on account
of the sums due and payable hereunder, nor shall any endorsement or statement on
any check or any letter accompanying any check or payment be deemed an accord
and satisfaction, and the Collateral Agent may accept any check or payment
without prejudice to the Collateral Agent’s right to recover the balance of such
sums or to pursue any other remedy provided in this Mortgage.  The consent by
the Collateral Agent to any matter or event requiring such consent shall not
constitute a waiver of the necessity for such consent to any subsequent matter
or event.
 
4.7. The Collateral Agent’s Right to Cure Defaults.  If the Company shall fail
to comply with any of the terms hereof with respect to the procuring of
insurance, the payment of taxes, assessments and other charges, the keeping of
the Mortgaged Property in repair, the payment and satisfaction of Liens and
encumbrances against the Mortgaged Property, the payment of any other sum or
deposit required under this Mortgage, or any other term herein contained, the
Collateral Agent may, but shall not be obligated to, make advances or take other
actions to perform the same without releasing the Company from any Secured
Obligations and may enter upon the Mortgaged Property for any such purpose and
take all such action thereon as the Collateral Agent or any of its duly
appointed agents may deem necessary or appropriate therefor.  The Company agrees
to repay upon demand all sums so advanced and all sums expended by the
Collateral Agent in connection with such performance, including without
limitation reasonable attorneys’ fees, with Additional Interest at the
Additional Interest Rate from the dates such advances are made, and all sums so
advanced and/or expenses incurred, with Additional Interest at the Additional
Interest Rate, shall be secured hereby as Secured Obligations, but no such
advance and/or incurring of expense by the Collateral Agent, shall be deemed to
relieve the Company from any default hereunder, or to release the Company from
any Secured Obligations.  The Collateral Agent shall not be bound to inquire
into the validity of any Imposition or Lien which the Company fails to pay as
and when required by this Mortgage and which the Company does not contest in
strict accordance with the terms of this Mortgage.
 
4.8. Suits and Proceedings.  The Collateral Agent shall have the power and
authority, but shall not be obligated, upon prior notice to the Company to
institute and maintain any suits and proceedings as the Collateral Agent may
deem advisable to (i) prevent any impairment of the Mortgaged Property by any
acts which may be unlawful or any violation of this Mortgage, (ii) preserve or
protect its interest in the Mortgaged Property, or (iii) restrain the
enforcement of or compliance with any legislation or other governmental
enactment, rule or
 

 
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order that may be unconstitutional or otherwise invalid, if, in the sole opinion
of the Collateral Agent, the enforcement of or compliance with such enactment,
rule or order might impair the security hereunder or be prejudicial to the
Collateral Agent’s interest.
 
4.9. Waiver of Redemption Rights.
 
The Company expressly waives the benefit of all laws now existing or hereafter
enacted providing for redemption or a right of redemption from any sale made
under this Mortgage, and releases all right of redemption to which the Company
would otherwise be entitled if this Mortgage is at any time foreclosed.
 
4.10. Application of Proceeds.
 
The proceeds from the foreclosure, sale or lease hereunder shall be applied to
the payment of the Secured Obligations in accordance with the Indenture if such
Secured Obligations have been deemed due and payable upon the Event of
Default.  Any surplus of the proceeds shall be paid to the Company.
 
4.11. Personal Property.
 
Any limitation on recovery contained in this Mortgage shall not be construed to
extend to and shall not limit recovery under any other instrument or Transaction
Document that grants a security interest in personal property that is also
conveyed or encumbered pursuant to this Mortgage.
 
4.12. Kansas Foreclosure Proceedings.
 
Notwithstanding anything in this Mortgage that might be construed to the
contrary, any and all foreclosure proceedings or sales hereunder shall be made
pursuant to foreclosure proceedings under applicable Kansas law.
 
ARTICLE 5
 
MISCELLANEOUS
 
5.1. Binding Effect; Survival; Number; Gender.  This Mortgage shall be binding
on and inure to the benefit of the parties hereto, their successors and
assigns.  All representations and warranties contained herein or otherwise
heretofore made by the Company to the Collateral Agent shall survive the
execution, delivery and foreclosure hereof.  The singular of all terms used
herein shall include the plural, the plural shall include the singular, and the
use of any gender herein shall include all other genders, where the context so
requires or permits.
 
5.2. Severability.  The unenforceability or invalidity of any provision of this
Mortgage as to any persons or circumstances shall not render that provision
unenforceable or invalid as to any other persons or circumstances and shall not
affect the enforceability of the remaining provisions hereof.
 
5.3. Notices.  All notices and demands required or permitted to be given to or
made upon any party hereto under any Transaction Document shall be in writing
and shall be personally delivered or sent by certified mail, postage prepaid,
return receipt requested or by a nationally recognized courier, or by
telecopier, and shall be deemed to be given for purposes of this Mortgage on the
day that such writing is delivered or sent to the intended recipient thereof in
accordance with the provisions of this Section.  Notices shall be given to or
made upon the respective parties hereto at their respective addresses set forth
below:
 

 
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If to the Company:
 

Kansas Star Casino, LLC
 
600 Star Brewery Drive, Suite 110
Dubuque, IA 52001
 
Attention:  Natalie Schramm
 
Fax:  (563) 690-1394
 
With a copy to:
 
White & Case LLP
1155 Avenue of the Americas
New York, NY 10036
Attention:  Nazim Zilkha, Esq.
 
Fax:  (212) 354-8113
 
If to the Collateral Agent:
 

 
U.S. Bank National Association
60 Livingston Avenue
St. Paul, Minnesota  55107
 
Attention:  Corporate Trust Department
 
Either party may change the address for notices by a notice given not less than
five (5) business days prior to the effective date of the change.
 
5.4. Survival of Warranties, Etc.  All agreements, representations and
warranties made herein shall survive the execution and delivery of this
Mortgage.
 
5.5. Applicable Law.  The Company and the Collateral Agent agree that the rights
and obligations under this Mortgage regarding the creation, perfection and
enforcement of the liens and security interests herein granted shall be governed
and construed and interpreted in accordance with the internal laws of the State
of Kansas. All other provisions of this Mortgage shall be governed by the laws
of the State of New York, without regard to principles of conflict of laws. In
the event that any provisions or clause of this Mortgage conflict with
applicable laws, such conflict shall not affect other provisions of this
Mortgage which can be given effect without the conflicting provision, and to
this end the provisions of this Mortgage are declared to be severable.
 
5.6. Waiver of Jury Trial.  EACH OF THE COMPANY AND THE COLLATERAL AGENT, BY ITS
ACCEPTANCE OF THIS MORTGAGE, IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS MORTGAGE AND ANY
OF THE OTHER SECURITY DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.
 

 
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Effect.  This Mortgage is in addition to and not in substitution for any other
guaranties, covenants, obligations or other rights now or hereafter held by the
Collateral Agent from any other person or entity in connection with the Secured
Obligations.
 
5.7. Assignability.  The Collateral Agent shall have the right to assign this
Mortgage, in whole or in part or sell participation interests herein, to any
person obtaining an interest in the Secured Obligations.
 
5.8. Headings.  Headings of the Sections of this Mortgage are inserted for
convenience only and shall not be deemed to constitute a part hereof.
 
5.9. Security Interest.
 
(a) An express security interest is hereby granted to the Collateral Agent in
respect to any part of the Mortgaged Property which under Kansas law might now
or hereafter be construed or considered as personal property or fixtures, or
otherwise be considered collateral subject to the Kansas Uniform Commercial
Code, including, without limitation, the collateral described in granting
clauses (e) hereof, and this Mortgage shall constitute a security agreement in
respect thereto.
 
(b) Upon the occurrence of an Event of Default hereunder in addition to the
other rights and remedies available to it, the Collateral Agent may exercise all
other rights and remedies with respect to such property that are available to a
secured party under the Kansas Uniform Commercial Code.  The Company agrees to
pay any reasonable attorney fees and legal expenses incurred by the Collateral
Agent in enforcing or protecting its rights under the security interest created
hereunder.  In the event notice of intended disposition of such property is
required by law in any particular instance, the Company agrees that notice given
in the manner and place provided in Section 6.3 hereof and sent ten (10) days
prior to a disposition of collateral is commercially reasonable notification
within the meaning of the Kansas Uniform Commercial Code.  Information
concerning the security interests may be obtained from the Secured Party (the
Collateral Agent) at the address set forth in Section 6.3 hereof and the mailing
address of the Debtor (Company) is also set forth in Section 6.3 hereof.
 
(c) The Company warrants and agrees that no financing statement or security
agreement covering any of the Mortgaged Property is or will be placed on file in
any public office or delivered to any secured party except pursuant hereto,
except for Permitted Liens.
 
5.10. Fixture Filing.
 
From the date of its recording, this Mortgage shall be effective as a financing
statement filed as a fixture filing with respect to the collateral described in
the Granting Clauses hereof which are fixtures within the meaning of the Kansas
Uniform Commercial Code, and for this purpose the name and address of the Debtor
is the name and address of the Company, as set out in Section 6.3 hereof, the
organizational identification number of the Debtor is 6489132 and the name and
address of the Secured Party is the name and address of the Collateral Agent, as
set out in Section 6.3 hereof.  Pursuant to the provisions of the Kansas Code,
such fixture filing remains in effect until this Mortgage is released or
satisfied of record or its effectiveness otherwise terminates as to the Land.
 

 
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Defined Terms.  All capitalized terms used in this Mortgage and not defined
herein shall have the meanings ascribed to them in the Indenture.
 
5.11. Discharge of Lien.  In accordance with Section 10.4 of the Indenture and
upon the observance and performance of each and every covenant and condition set
forth herein and in the Indenture and the Notes, then and in that case all
property, rights and interest hereby conveyed or assigned or pledged shall
revert to the Company, and the estate, right, title and interest of the
Collateral Agent therein shall thereupon cease, terminate and become void; and
this Mortgage, and the covenants of the Company contained herein, shall be
discharged and the Collateral Agent in such case on demand of the Company and at
the Company’s cost and expense, shall execute and deliver to the Company a
proper instrument or proper instruments acknowledging the satisfaction and
termination of this Mortgage, and shall convey, assign and transfer or cause to
be conveyed, assigned or transferred, and shall deliver or cause to be
delivered, to the Company, all property, including money, then held by the
Collateral Agent hereunder.
 
5.12. Conflicts with Security Agreement.  In the event of a conflict between the
provisions of the Security Agreement and the provisions of this Mortgage, the
Mortgage shall govern in all matters relating to the validity and enforceability
of the Lien created hereby on the Real Property, the Improvements, the Fixtures,
and the Rents and (except as expressly set forth to the contrary herein or in
the Security Agreement), the Security Agreement shall govern in all other
respects.
 
5.13. Mortgage Absolute.  The obligations of the Company under this Mortgage are
independent of the obligations of Company under the other Transaction Documents,
and a separate action or actions may be brought and prosecuted against Company
to enforce this Mortgage, irrespective of whether any action is brought against
Company under such other Transaction Documents.  All rights of Collateral Agent
and the mortgage, assignment and security interest hereunder, and all
obligations of Company hereunder, shall be absolute and unconditional,
irrespective of:
 
(a) any lack of validity or enforceability of any other Transaction Document or
any other agreement or instrument relating thereto;
 
(b) any change in the time, manner or place of payment of, or in any other term
of, all or any of the obligations of the Company under the other Transaction
Documents or any other amendment or waiver of or any consent to any departure
from the other Transaction Documents, including, without limitation, any
increase in such obligations resulting from the extension of additional credit
to the Company or otherwise;
 
(c) any taking, exchange, release or non-perfection of any other collateral, or
any taking, release or amendment or waiver of or consent to departure from any
guaranty, for all or any other of the obligations of the Company under the other
Transaction Documents;
 

 
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(d) any manner of application of collateral, or proceeds thereof, to all or any
of the obligations of the Company under the other Transaction Documents, or any
manner of sale or other disposition of any collateral for all or any of such
obligations or any other assets of the Company;
 
(e) any change, restructuring or termination of the corporate restructure or
existence of the Company; or
 
(f) any other circumstance that might otherwise constitute a defense available
to, or a discharge of, the Company or a third party of a security interest or
mortgage.
 
5.14. Interaction with Indenture.  All terms, covenants, conditions, provisions
and requirements of the Indenture are incorporated by reference in this
Mortgage.  Notwithstanding any other provision of this Mortgage, the terms and
provisions of this Mortgage shall be subject and subordinate to the terms of the
Indenture.  To the extent that the Indenture provides the Company with a
particular cure or notice period, or establishes any limitations or conditions
on the Collateral Agent’s actions with regard to a particular set of facts, the
Company shall be entitled to the same cure periods and notice periods, and
Collateral Agent shall be subject to the same limitations and conditions, under
this Mortgage, as under the Indenture, in place of the cure periods, notice
periods, limitations and conditions provided for under this Mortgage; provided,
however, that such cure periods, notice periods, limitations and conditions
shall not be cumulative as between the Indenture and this Mortgage.  In the
event of any conflict or inconsistency between the provisions of this Mortgage
and those of the Indenture, including, without limitation, any conflicts or
inconsistencies in any definitions herein or therein, the provisions or
definitions of the Indenture shall govern.
 
5.15. Excluded Assets.  Notwithstanding anything to the contrary contained
herein, if a portion of the Mortgaged Property becomes an Excluded Asset after
the Issue Date, the Collateral Agent shall, simultaneous with the granting of
the applicable Permitted Lien, without the payment of any partial release for,
or any other prepayment with respect to, the Notes, release the Lien in favor of
the Collateral Agent in such Excluded Asset in accordance with the provisions of
Section 10.4 of the Indenture.  Once any Excluded Asset is released, such
Excluded Asset shall be expressly excluded from and shall no longer be deemed
Mortgaged Property under this Mortgage and shall not be subject to any of the
representations, covenants or obligations under this Mortgage.
 
5.16. Indemnity.  The Company hereby agrees to indemnify, defend and hold the
Collateral Agent (and its directors, officers, agents and employees) and each
Holder harmless from and against any and all loss, liability, damage, claim,
judgment or expense (including reasonable attorneys’ fees and expenses, bond
expenses, printing and automated document preparation and retention expenses and
other ordinary litigation expenses) incurred by it (or such director, officer,
agent or employee) in connection with the acceptance or administration of the
Collateral Agent’s duties under this Mortgage, any action or proceeding to
foreclose this Mortgage or in or to which the Collateral Agent or any Holder may
be made a party due to the existence of this Mortgage or the other Transaction
Documents or to which action or proceeding the Collateral Agent or any Holder
may become a party for the purpose of
 

 
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protecting the lien of this Mortgage.  All sums paid by the Collateral Agent or
any Holder to prosecute or defend the rights herein set forth shall be deemed a
part of the Secured Obligations and shall be paid by the Company to the
Collateral Agent or such Holder within ten (10) days after written demand, and
if not paid within that period, shall accrue interest from and including the
date of disbursement or advance by the Collateral Agent or such Holder to and
including the date of payment by the Company at the Additional Interest Rate.
 
5.17. Maximum Amount of Indebtedness.

(a) The maximum aggregate amount of all indebtedness that is, or under any
contingency may be secured at the date hereof or at any time hereafter by this
Mortgage is $21,125,000.00 (the “Secured Amount”), plus, to the extent permitted
by applicable law and the Indenture, collection costs, sums advanced for the
payment of taxes, assessments, maintenance and repair charges, insurance
premiums and any other costs incurred to protect the security encumbered hereby
or the lien hereof, expenses incurred by the Collateral Agent by reason of any
default by the Company under the terms hereof, together with interest thereon,
all of which amounts shall be secured hereby; provided, however, that the
foregoing limitation shall not operate to limit or diminish the extent of the
Collateral Agent’s security interests created pursuant to, or limit the recovery
by Agent under, any other security instruments, or limit or diminish the
Collateral Agent’s security interests in any other collateral, all as held by
the Collateral Agent as security for the Secured Obligations or any portion
thereof, it being understood and agreed that the limitation on recovery
contained in this Section 6.19 shall apply only to the Mortgaged Property and no
other collateral or security held by Agent.
 
(b) The Collateral Agent shall have the right but not the obligation to obtain
an appraisal of the Mortgaged Property, at the Company’s sole cost and expense,
at any time following the date of this Mortgage, and in the event that one
hundred twenty-five percent (125%) of the fair market value of the Mortgaged
Property as established by such appraisal shall be greater than $21,125,000.00.
The Company shall, upon the Collateral Agent’s request, execute and deliver a
modification to this Mortgage increasing the maximum aggregate amount of all
indebtedness secured by this Mortgage to an amount equal to one hundred
twenty-five percent (125%) of the fair market value of the Mortgaged Property as
established by such appraisal, and any mortgage taxes due upon the recordation
of such mortgage modification shall be payable by the Company at its sole cost
and expense.
 
[Signature Page Follows.]
 

 
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IN WITNESS WHEREOF, the Company has executed this Mortgage as of the date first
written above.
 
IMPORTANT:  READ BEFORE SIGNING.  THE TERMS OF THIS MORTGAGE SHOULD BE READ
CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE.  NO OTHER TERMS
OR ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY
ENFORCED.  YOU MAY CHANGE THE TERMS OF THIS MORTGAGE ONLY BY ANOTHER WRITTEN
AGREEMENT.  THIS NOTICE APPLIES TO ALL AGREEMENTS ENTERED INTO TO WHICH THE
COMPANY AND THE COLLATERAL AGENT ARE PARTIES.
 

  KANSAS STAR CASINO, LLC, a Kansas limited liability company          
 
By:
/s/ Natalie Schramm       Name: Natalie Schramm       Title:   Chief Financial
Officer          

 
                                                                
 

ACKNOWLEDGMENT
 
STATE OF  IOWA               )
COUNTY OF DUBUQUE    )

This instrument was acknowledged before me on  August 4, 2011, by Natalie
Schramm, as CFO of KANSAS STAR CASINO, LLC, a Kansas limited liability company.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the
day and year last above written.

             
 
  /s/ Karen M. Beetem       Print/Type Name:  Karen M. Beetem       Notary
Public          

My commission expires:

10/20/13
 
(Notarial Seal, if any)

 
           

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EXHIBIT A
 
Legal Description
 
 
 
Legal description for Mortgage [legaldescription.jpg]
 
 

 
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