Exhibit 10.1
THIRD AMENDED AND RESTATED LOAN AGREEMENT
Dated as of December 24, 2009
Among
HRHH HOTEL/CASINO, LLC,
as Hotel/Casino Borrower
and
HRHH CAFE, LLC,
as Café Borrower
and
HRHH DEVELOPMENT, LLC,
as Adjacent Borrower
and
HRHH IP, LLC,
as IP Borrower
and
HRHH GAMING, LLC,
as Gaming Borrower
and
VEGAS HR PRIVATE LIMITED,
as Lender

 

 

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EXHIBITS AND SCHEDULES

         
Schedule I-A
  —   Legal Description of Hotel/Casino Property
Schedule I-B
  —   Legal Description of Café Property
Schedule I-C
  —   Legal Description of Adjacent Property
Schedule II
  —   Description of Project
Schedule III
  —   Intentionally Deleted
Schedule IV
  —   Allocated Loan Amounts
Schedule V
  —   FF&E, Capital & Equipment Leases
Schedule VI
  —   Organizational Structure
Schedule VII
  —   Form of Cash Profit and Loss Statement
Schedule VIII
  —   Litigation
Schedule IX
  —   Operating Permits
Schedule X
  —   Rent Roll
Schedule XI
  —   IP
Schedule XII
  —   Morton Indemnification Claims
Schedule XIII
  —   Schedule and Budget for Initial Renovations
Schedule XIV
  —   Intentionally Deleted
Schedule XV
  —   Net Worth Requirements
Schedule XVI
  —   Intentionally Deleted
Schedule XVII
  —   Intentionally Deleted
Schedule XVIII
  —   Intentionally Deleted
Schedule XIX
  —   Intentionally Deleted.
Schedule XX
  —   Intentionally Deleted
Schedule XXI
  —   Intentionally Deleted
Schedule XXII
  —   Allocated Principal Balance

 

 

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Exhibit A
  Advance Request
Exhibit B
  Anticipated Cost Report
Exhibit C
  Architect’s Consent
Exhibit D
  Annual Budget
Exhibit E
  Construction Schedule
Exhibit F
  General Contractor’s Consent
Exhibit G
  Major Contractor’s Consent
Exhibit H
  Application and Certificate for Payment
Exhibit I
  Architect’s Certificate
Exhibit J
  Loan Budget
Exhibit K
  Contractor’s Certificate
Exhibit L-1
  Lien Waiver — Progress Payment/Conditional
Exhibit L-2
  Lien Waiver — Progress Payment/Unconditional
Exhibit L-3
  Lien Waiver — Final Payment/Conditional
Exhibit L-4
  Lien Waiver — Final Payment/Unconditional
Exhibit M
  Affirmation of Payment
Exhibit N
  General Contractor’s Certificate
Exhibit O
  Intentionally Deleted
Exhibit P
  Letter of Credit Reduction Notice
Exhibit Q
  Intentionally Deleted
Exhibit R
  Intentionally Deleted

 

 

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THIRD AMENDED AND RESTATED LOAN AGREEMENT
THIS THIRD AMENDED AND RESTATED LOAN AGREEMENT, dated as of December 24, 2009
(as amended, restated, replaced, supplemented or otherwise modified from time to
time, this “Agreement”), among VEGAS HR PRIVATE LIMITED, a Singapore
corporation, having an address c/o GIC Real Estate, Inc., 156 W. 56th Street,
Suite 1900, New York, New York 10019 (together with its successors and assigns,
“Lender”), as successor to Column Financial, Inc. (“Original Lender”), and HRHH
HOTEL/CASINO, LLC, a Delaware limited liability company, having its principal
place of business c/o Morgans Hotel Group Co., 475 Tenth Avenue, New York, New
York 10018, Attention: Marc Gordon, Chief Investment Officer (“Hotel/Casino
Borrower”), HRHH CAFE, LLC, a Delaware limited liability company, having its
principal place of business c/o Morgans Hotel Group Co., 475 Tenth Avenue, New
York, New York 10018, Attention: Marc Gordon, Chief Investment Officer (“Café
Borrower”), HRHH DEVELOPMENT, LLC, a Delaware limited liability company, having
its principal place of business c/o Morgans Hotel Group Co., 475 Tenth Avenue,
New York, New York 10018, Attention: Marc Gordon, Chief Investment Officer
(“Adjacent Borrower”), HRHH IP, LLC, a Delaware limited liability company,
having its principal place of business c/o Morgans Hotel Group Co., 475 Tenth
Avenue, New York, New York 10018, Attention: Marc Gordon, Chief Investment
Officer (“IP Borrower”), and HRHH GAMING, LLC, a Nevada limited liability
company, having its principal place of business c/o Morgans Hotel Group Co., 475
Tenth Avenue, New York, New York 10018, Attention: Marc Gordon, Chief Investment
Officer (“Gaming Borrower”; and each of Hotel/Casino Borrower, Café Borrower,
Adjacent Borrower, IP Borrower and Gaming Borrower, individually, a “Borrower”,
and collectively, “Borrowers”), jointly and severally.
WITNESSETH:
WHEREAS, pursuant to that certain Loan Agreement dated as of February 2, 2007 by
and between Borrowers and Original Lender (the “Original Loan Agreement”) and
that certain Promissory Note dated as of February 2, 2007 in the principal
amount of up to $1,360,000,000.00 made by Borrowers in favor of Original Lender
(the “Original Note”), Borrowers obtained a loan in the original principal
amount of up to $1,360,000,000.00 (the “Loan”);
WHEREAS, Borrowers and Original Lender entered into that certain Amended and
Restated Loan Agreement dated as of November 6, 2007 (the “First Amended and
Restated Loan Agreement”), pursuant to which (i) Borrowers prepaid
$350,000,000.00 of the Loan from the proceeds of three (3) mezzanine loans made
to the direct and/or indirect owners of equity interests in Borrowers (each a
“Mezzanine Prepayment”), and (ii) Original Lender increased the maximum amount
of the Loan that may be funded in the future under the Construction Loan (as
defined in the Original Loan Agreement) by $20,000,000.00, and, in connection
with both of the foregoing, (a) certain terms and conditions of the Original
Loan Agreement were modified in accordance with the terms and conditions of the
First Amended and Restated Loan Agreement; (b) the Original Note was replaced by
the following two (2) replacement promissory notes: (i) that certain Replacement
Construction Loan Promissory Note dated November 6, 2007 in the principal amount
of up to $620,000,000.00 made by Borrowers in favor of Original Lender (the
“Original Construction Loan Note”), and (ii) that certain Replacement Reduced
Acquisition

 

 

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Loan Promissory Note dated November 6, 2007 in the principal amount of
$410,000,000.00 made by Borrowers in favor of Original Lender (the “Original
Reduced Acquisition Loan Note”; the Original Reduced Acquisition Loan Note and
the Original Construction Loan Note are collectively referred to herein as the
“Original Reduced Notes”), both of the foregoing resulting in the original
principal amount of the Loan being $1,030,000,000; (c) certain terms and
conditions of the Loan Documents (as defined in the Original Loan Agreement)
were modified in accordance with the terms and conditions of (i) that certain
Modification of Construction Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Financing Statement (Fixture Filing) and Other Loan
Documents dated as of November 6, 2007 by and among Borrowers and Original
Lender (the “First Loan Document Modification Agreement”); (ii) that certain
Modification of HRHI Loan Documents and Ratification of HRHI Guaranty dated as
of November 6, 2007 by and among HRHI (as hereinafter defined) and Original
Lender (the “First HRHI Modification Agreement”); (iii) that certain
Modification and Ratification of Guaranties dated as of November 6, 2007 by and
among Guarantors (as hereinafter defined) and Original Lender (the “First
Guaranty Modification Agreement”); and (iv) that certain Amended and Restated
Cash Management Agreement dated as of November 6, 2007 by and among Borrowers,
HRHI and Original Lender and acknowledged and agreed to by Manager (as
hereinafter defined) (the “First Amended and Restated Cash Management
Agreement”);
WHEREAS, Borrowers and Lender entered into that certain Second Amended and
Restated Loan Agreement, dated as of April 25, 2008 (the “Second Amended and
Restated Loan Agreement”) in connection with Borrowers’ qualification for the
Initial Construction Loan Advance, which Second Amended and Restated Loan
Agreement amended and restated the First Amended and Restated Loan Agreement in
its entirety;
WHEREAS, on August 1, 2008, Borrowers prepaid a portion of the Loan with the
Release Parcel Release Price (as hereinafter defined) received in connection
with the sale of certain property by Adjacent Borrower and additional
Construction Loan proceeds have been advanced from and after the date of such
Partial Release, resulting in (i) a Reduced Acquisition Loan Outstanding
Principal Balance (as hereinafter defined) of $364,810,499.71 as of the date
hereof and (ii) a Construction Loan Outstanding Principal Balance (as
hereinafter defined) of $467,443,347.38 as of the date hereof;
WHEREAS, Borrowers and Lender both desire to amend and restate the Second
Amended and Restated Loan Agreement in the manner set forth herein to, among
other things, provide for certain additional extension options; and
WHEREAS, in connection with this Agreement and the modification of the Loan,
Borrowers, HRHI, Guarantors and Lender (as applicable) are herewith executing
and delivering, among other things, (i) that certain Second Modification of
Construction Deed of Trust, Assignment of Leases and Rents, Security Agreement
and Financing Statement (Fixture Filing) and Second Modification of Assignment
of Leases and Rents (as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time, the “Second Mortgage
Modification”), (ii) that certain Omnibus Amendment of Loan Documents (as the
same may be amended, restated, replaced, supplemented or otherwise modified from
time to time, the “Second Loan Document Modification Agreement”), (iii) that
certain Second

 

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Modification and Ratification of Guaranties (as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time, the
“Second Guaranty Modification Agreement”), (iv) that certain Second Modification
of HRHI Loan Documents and Ratification of HRHI Guaranty (as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time, the “Second HRHI Modification Agreement”), (v) that certain Amended and
Restated Replacement Reduced Acquisition Loan Promissory Note of even date
herewith in the principal amount of Four Hundred Ten Million and No/100 Dollars
($410,000,000.00) made by Borrowers in favor of Lender (as the same may be
amended, restated, replaced, severed, assigned, supplemented or otherwise
modified from time to time, the “Reduced Acquisition Loan Note”), which Reduced
Acquisition Loan Note replaces, amends and restates the Original Reduced
Acquisition Loan Note in its entirety, (vi) that certain Amended and Restated
Replacement Construction Loan Promissory Note of even date herewith in the
principal amount of up to Six Hundred Twenty Million and No/100 Dollars
($620,000,000.00) made by Borrowers in favor of Lender (as the same may be
amended, restated, replaced, severed, assigned, supplemented or otherwise
modified from time to time, the “Construction Loan Note”; each of the
Construction Loan Note and the Reduced Acquisition Loan Note are referred to
herein individually as a “Note,” and together, the “Notes”), which Construction
Loan Note replaces, amends and restates the Original Construction Loan Note in
its entirety, and (vii) that certain Second Amended and Restated Cash Management
Agreement, by and among Borrowers, HRHI and Lender and acknowledged and agreed
to by Manager (as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time, the “Cash Management Agreement”), which
Cash Management Agreement amends and restates the First Amended and Restated
Cash Management Agreement in its entirety. The Notes do not create any new or
additional indebtedness, but evidence the same indebtedness evidenced by the
Original Reduced Notes, as applicable.
NOW, THEREFORE, in consideration of the foregoing and the covenants, agreements,
representations and warranties set forth in this Agreement, and for Ten Dollars
($10.00) and other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, the parties hereto hereby
covenant, agree, represent and warrant that the Second Amended and Restated Loan
Agreement is hereby amended and restated in its entirety to read as follows:
ARTICLE I.
DEFINITIONS; PRINCIPLES OF CONSTRUCTION
Section 1.1. Definitions. For all purposes of this Agreement, except as
otherwise expressly required or unless the context clearly indicates a contrary
intent:
“Acceptable Counterparty” shall mean any counterparty to the Interest Rate Cap
Agreement that has and shall maintain, until the expiration of the applicable
Interest Rate Cap Agreement, a long-term unsecured debt rating of at least “A+”
by S&P and “A1” from Moody’s, which rating shall not include a “t” or otherwise
reflect a termination risk.
“Accrual Amounts” shall mean, as of the date of determination, the aggregate
outstanding balance as of such date of the First Mezzanine Initial Accrual
Amount, the First Mezzanine Subsequent Accrual Amount, the Second Mezzanine
Initial Accrual Amount, the

 

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Second Mezzanine Subsequent Accrual Amount, the Third Mezzanine Initial Accrual
Amount and the Third Mezzanine Subsequent Accrual Amount.
“Acquisition Costs” shall mean $932,576,584.29, representing the costs paid
directly or indirectly in connection with the acquisition of the Properties and
the IP and/or in making the Loan (including, without limitation, required
deposits to Reserve Funds).
“Additional Insolvency Opinion” shall have the meaning set forth in
Section 4.1.30(d) hereof.
“Additional Interest Reserve Contributions” shall mean, in the aggregate, any
and all contributions to the Interest Reserve Account made under the provisions
of Section 3.23, 7.5.5 and 7.7.3 hereof together with any amounts withdrawn
under Section 7.7.2 with respect to “Pre-Opening Funds” and “Property
Reimbursement Funds” (each as determined by Lender) and applied to the Interest
Reserve Account (it being acknowledged and agreed that (a) Borrowers have
requested that the above-referenced advance with respect to such “Pre-Opening
Funds” be made on or about the date hereof in accordance with the provisions of
Section 7.7.2 hereof in the amount of $2,464,513.36, and (b) Lender has agreed
to fund such amounts into the Interest Reserve Account contemporaneous with the
execution of this Agreement and the Borrowers funding of the Working Capital
Reserve Account in accordance with the provisions of Section 7.1.1 hereof, with
such $2,464,513.36 being credited against the Additional Interest Reserve
Contributions).
“Administrative Agent” shall have the meaning set forth in Section 3.19.1
hereof.
“Administrative Agent Fee” shall mean an annual fee payable to the
Administrative Agent equal to $200,000.00, payable in equal quarterly
installments, in advance.
“Adjacent Borrower” shall have the meaning set forth in the introductory
paragraph hereto, together with its successors and assigns.
“Adjacent Property” shall mean that or those certain parcel(s) of real property
more particularly described on Schedule I-C attached hereto and made a part
hereof, the Improvements thereon and all personal property owned by Adjacent
Borrower and encumbered by the Mortgage, together with all rights pertaining to
such property and Improvements, as more particularly described in the granting
clause of the Mortgage and referred to therein as the “Adjacent Property”.
“Adjacent Property IP License” shall have the meaning set forth in
Section 5.1.26(b) hereof.
“Advance Request” shall mean that certain form of Advance Request attached
hereto as Exhibit A.
“Affiliate” shall mean, as to any Person, any other Person that, directly or
indirectly, is in Control of, is Controlled by or is under common Control with
such Person or is a director or officer of such Person or of an Affiliate of
such Person.

 

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“Affiliate IP License” shall have the meaning set forth in Section 5.1.26(d)
hereof.
“Affiliate Joint Venture Counterparty” shall mean any party to an Affiliate
Joint Venture who is a Restricted Party or any Affiliate thereof.
“Affiliate Release Parcel Purchaser” shall have the meaning set forth in Section
2.5.1(a).
“Affiliate Release Parcel Release Price” shall have the meaning set forth in
Section 2.5.1(a)(vi) hereof.
“Affiliated IP Party” shall mean any subsidiary of any Borrower hereafter formed
with Lender’s consent to hold the IP.
“Affiliated Manager” shall mean any Manager in which any Borrower or any
Guarantor has, directly or indirectly, any legal, beneficial or economic
interest.
“Affirmation of Payment” shall have the meaning set forth in
Section 3.3(b)(iii).
“Aggregate Outstanding Principal Balance” shall mean, as of any date, the sum of
the Outstanding Principal Balance, the First Mezzanine Loan Outstanding
Principal Balance, the Second Mezzanine Loan Outstanding Principal Balance and
the Third Mezzanine Loan Outstanding Principal Balance.
“Aggregate Monthly Amount” shall have the meaning set forth in
Section 2.6.2(b)(xiv) hereof.
“Aggregate Monthly Interest Payment” shall mean, collectively, the Reduced
Acquisition Loan Monthly Interest Payment, the Construction Loan Monthly
Interest Payment, the First Mezzanine Monthly Interest Payment, the Second
Mezzanine Monthly Interest Payment and the Third Mezzanine Monthly Interest
Payment.
“Agreement Regarding Morton Indemnification and Escrow” shall mean that certain
Collateral Assignment and Acknowledgment (Morton Indemnification), dated as of
February 2, 2007, made by PM Realty, LLC, Red, White and Blue Pictures, Inc.,
Peter A. Morton, 510 Development Corporation, Morgans Hotel Group Co., Morgans
Group LLC and Chicago Title Agency of Nevada, Inc. in favor of Lender,
(i) acknowledging that Lender is a third party beneficiary of the Morton
Indemnification and the PWR/RWB Escrow Agreement, and (ii) consenting to
Lender’s rights under Section 5.2.11 hereof.
“Allocated Loan Amount” shall mean, with respect to the Adjacent Property (on a
per acre basis) and the IP, the aggregate amount of the Loan, the First
Mezzanine Loan, the Second Mezzanine Loan and the Third Mezzanine Loan allocated
to each of the Adjacent Property (on a per acre basis) and the IP as set forth
on Schedule IV attached hereto and made a part hereof.
“Alteration Threshold Amount” shall mean (i) prior to Substantial Completion of
the Project (but excluding any portion of the Project), Two Million and No/100
Dollars

 

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($2,000,000.00), and (ii) following Substantial Completion of the Project, Three
Million and No/100 Dollars ($3,000,000.00).
“Alternative Minimum Rating Requirement” shall mean a long term unsecured debt
rating at least equal to the greater of (a) A1 by Moody’s, AA- by Fitch and A+
by S&P or (b) the long term unsecured debt rating of the second bank or
financial institution listed below assuming such banks are at the time of
determination listed in descending order of their respective long term unsecured
debt ratings by S&P: Deutsche Bank AG, Credit Suisse International, Barclays
Bank PLC, JP Morgan Chase Bank, N.A., and Wells Fargo Bank, N.A.
“Annual Budget” shall mean the operating budget, including all planned Capital
Expenditures, for all of the Properties, collectively, prepared by Borrowers or
the applicable Manager(s) for the applicable Fiscal Year or other period. The
current Annual Budget is attached hereto as Exhibit D.
“Anticipated Cost Report” shall mean a report in the form set forth in Exhibit B
executed by the General Contractor which sets forth the anticipated costs to
complete construction of the Project, after giving effect to costs incurred
during the previous month and any anticipated Change Orders.
“Applicable Contribution” shall have the meaning set forth in Section 15.5
hereof.
“Applicable Interest Rate” shall mean (i) with respect to the Reduced
Acquisition Loan, the rate or rates at which the Reduced Acquisition Loan
Outstanding Principal Balance bears interest from time to time in accordance
with the provisions of Section 2.2.3 hereof, and (ii) with respect to the
Construction Loan, the rate or rates at which the Construction Loan Outstanding
Principal Balance bears interest from time to time in accordance with the
provisions of Section 2.2.3 hereof.
“Appraised Value” shall mean the appraised value of the applicable Property or
the applicable portion thereof based on one or more appraisals reasonably
acceptable to Lender conducted by one or more licensed appraisers.
“Approved Bank” shall mean a bank or other financial institution which has a
minimum long term unsecured debt rating of at least “AA” by S&P and Fitch and
“Aa2” by Moody’s, provided that in the event (a) the issuer of any existing
Letter of Credit no longer satisfies such minimum long term unsecured debt
rating or (b) Borrower is unable to locate a bank or financial institution that
satisfies such minimum long term unsecured debt rating in connection with the
issuance of any new or replacement Letter of Credit required to be issued
hereunder, an Approved Bank shall mean a bank or other financial institution
which has a minimum long term unsecured debt rating at least equal to the
Alternative Minimum Rating Requirement.
“Architect” shall mean each of (i) Klai Juba Architects, the architect engaged
by (or on behalf of) one or more Borrowers or an Affiliate thereof with respect
to the Project on the date hereof, (ii) any other architect engaged by (or on
behalf of) one or more Borrowers with respect to the Project after the date
hereof and approved by Lender in its reasonable discretion, and (iii) any
successor of any of the foregoing, in each case as approved by Lender in its
reasonable discretion; provided, that in no event shall any Architect (a) be an
Affiliate of any Restricted

 

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Party or (b) have any equity interest or any equivalent thereof in any of the
Properties or in any Restricted Party.
“Architect’s Certificate” shall mean a certificate from the Architect in
substantially the form attached hereto as Exhibit I.
“Architect’s Contract” shall mean a contract for architectural services to be
entered into by and between one or more Borrowers and Architect in respect of
the Project and approved by Lender in its reasonable discretion.
“Architect’s Consent” shall mean an Architect Certification and Consent
Agreement executed and delivered by the Architect in favor of Lender and
substantially in the form attached as Exhibit C.
“Asbestos Survey” shall have the meaning set forth in Section 3.18(b).
“Assigned Employees” shall have the meaning set forth in the Employee Lease.
“Assignment Agreement” shall have the meaning set forth in Section 10.26.
“Assignment of Contracts” shall mean that certain Assignment of Contracts,
Operating Permits and Construction Permits, dated as of February 2, 2007, from
Borrowers to Lender, as modified by the First Loan Document Modification
Agreement, the Second Loan Document Modification Agreement and as the same
hereafter may be amended, restated, replaced, supplemented or otherwise modified
from time to time.
“Assignment of Leases” shall mean that certain first priority Assignment of
Leases and Rents, dated as of February 2, 2007, from Hotel/Casino Borrower, Café
Borrower, Adjacent Borrower and Gaming Borrower, as assignors, to Lender, as
assignee, assigning to Lender all of each such Borrower’s right, title and
interest in and to the Leases and Rents of its Property as security for the
Loan, as modified by the First Loan Document Modification Agreement and the
Second Mortgage Modification Agreement, and as the same hereafter may be
amended, restated, replaced, supplemented or otherwise modified from time to
time.
“Assignment of Liquor Management Agreement” shall mean that certain Assignment
of Liquor Management Agreement and Subordination of Management Fees, dated as of
February 2, 2007, among Lender, Hotel/Casino Borrower and HRHI, in its capacity
as the Liquor Manager, as modified by the First Loan Document Modification
Agreement, the First HRHI Modification Agreement, the Second HRHI Modification
Agreement and the Second Loan Document Modification Agreement, and as the same
hereafter may be amended, restated, replaced, supplemented or otherwise modified
from time to time.
“Assignment of Management Agreement” shall mean that certain Assignment of
Management Agreement and Subordination of Management Fees (All Properties),
dated as of February 2, 2007, among Lender, Café Borrower, Hotel/Casino
Borrower, Adjacent Borrower and the Affiliated Manager of such Properties, as
modified by the First Loan Document Modification Agreement and the Second Loan
Document Modification Agreement, and as the

 

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same hereafter may be amended, restated, replaced, supplemented or otherwise
modified from time to time.
“Award” shall mean any compensation paid by any Governmental Authority in
connection with a Condemnation of all or any part of any Property.
“Bankruptcy Action” shall mean with respect to any Person (a) such Person filing
a voluntary petition under the Bankruptcy Code or any other Federal or state
bankruptcy or insolvency law; (b) the filing of an involuntary petition against
such Person under the Bankruptcy Code or any other Federal or state bankruptcy
or insolvency law; (c) such Person filing an answer consenting to or otherwise
acquiescing in or joining in any involuntary petition filed against it, by any
other Person under the Bankruptcy Code or any other Federal or state bankruptcy
or insolvency law, or soliciting or causing to be solicited petitioning
creditors for any involuntary petition from any Person; (d) such Person
consenting to or acquiescing in or joining in an application for the appointment
of a custodian, receiver, trustee, or examiner for such Person or any portion of
any Property; or (e) such Person making an assignment for the benefit of
creditors, or admitting, in writing or in any legal proceeding, its insolvency
or inability to pay its debts as they become due.
“Bankruptcy Code” shall mean 11 U.S.C. § 101 et seq., as the same may be amended
from time to time.
“Basic Carrying Costs” shall mean, for any period, with respect to each
Property, the sum of the following costs associated with such Property:
(a) Taxes, (b) Other Charges, and (c) Insurance Premiums.
“Benefit Amount” shall have the meaning set forth in Section 15.4 hereof.
“Bonafide Release Parcel Purchaser” shall have the meaning set forth in Section
2.5.1(a).
“Bonafide Release Parcel Release Price” shall have the meaning set forth in
Section 2.5.1(a)(v).
“Borrower” and “Borrowers” shall have the meanings set forth in the introductory
paragraph hereto, together with its or their successors and permitted assigns.
“Borrower Advance Date” shall have the meaning set forth in Section 3.21 hereof.
“Breakage Costs” shall have the meaning set forth in Section 2.2.3(h) hereof.
“Business Day” shall mean any day other than a Saturday, Sunday or any other day
on which national banks in New York, New York are not open for business.
“Café Borrower” shall have the meaning set forth in the introductory paragraph
hereto, together with its successors and assigns.

 

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“Café Property” shall mean that or those certain parcel(s) of real property more
particularly described on Schedule 1-B attached hereto and made a part hereof,
the Improvements thereon and all personal property owned by Café Borrower and
encumbered by the Mortgage, together with all rights pertaining to such property
and Improvements, as more particularly described in the granting clause of the
Mortgage and referred to therein as the “Cafe Property”.
“Cage Reserve” shall mean the amount of cash funds and reserves then held by the
Gaming Borrower on-site at the Hotel/Casino Property (including, without
limitation, casino chips, tokens, checks and markers, and any funds of Gaming
Borrower or any other Borrower deposited into any of Gaming Borrower’s automated
teller machines located in the Hotel/Casino Property).
“Capital Expenditures” shall mean, for any period, the amount expended for items
capitalized under GAAP and the Uniform System of Accounts (including
expenditures for building improvements or major repairs, leasing commissions and
tenant improvements, but excluding capitalized interest), but specifically
excluding any Pre-Opening Expenses and/or Extraordinary Expenses.
“Cash Management Account” shall have the meaning set forth in Section 2.6.2(a)
hereof.
“Cash Management Agreement” shall have the meaning set forth in the recitals to
this Agreement.
“Cash Profit and Loss Statement” shall have the meaning set forth in
Section 5.1.11(c) hereof.
“Casino Account” shall mean an Eligible Account established with Wells Fargo
Bank, National Association, entitled HRHH Gaming, LLC Operating Account or any
successor Casino Account established in accordance with the provisions of
Section 12.3.1 hereof, which such Casino Account shall be established and
maintained pursuant to, and in accordance with, all applicable Gaming Laws and
shall be subject to a security interest in favor of Lender pursuant to the Loan
Documents (as evidenced by the Casino Account Control Agreement).
“Casino Account Control Agreement” shall mean that certain Restricted Account
and Securities Account Control Agreement dated on or about May 30, 2008 by and
among Gaming Borrower, Lender and Wells Fargo Bank, National Association or any
replacement Casino Account Control Agreement acceptable to Lender as described
in Section 12.3.1 hereof.
“Casino Account Reimbursement Date” shall have the meaning set forth in Section
2.6.2(d) hereof.
“Casino Component” shall mean that portion of the Hotel/Casino Property devoted
to the operation of a casino gaming operation and leased to Gaming Borrower
pursuant to the Casino Component Lease, including, without limitation, those
areas devoted to the conduct of games of chance, facilities associated directly
with gaming operations, including, without limitation, casino support areas such
as surveillance and security areas, cash cages, counting and

 

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accounting areas and gaming back-of-the-house areas, in each case, to the extent
the operation thereof requires a Gaming License under applicable Gaming Laws, as
more particularly described and set forth in the Casino Component Lease as the
“Premises”.
“Casino Component Lease” shall mean the lease dated as of February 29, 2007, by
and between Hotel/Casino Borrower, as lessor, and Gaming Borrower, as lessee,
pursuant to which Hotel/Casino Borrower leases the Casino Component to Gaming
Borrower for the operation of the Casino Component as a casino, as the same may
be amended, restated, replaced, supplemented or otherwise modified from time to
time in accordance with the terms hereof.
“Casualty” shall have the meaning set forth in Section 6.2 hereof.
“Casualty Consultant” shall have the meaning set forth in Section 6.4(c)(iii)
hereof.
“Casualty Retainage” shall have the meaning set forth in Section 6.4(c)(iv)
hereof.
“Certificate of Occupancy” shall mean a permanent or temporary certificate of
occupancy, in either case, for the portion of the Project specified in such
certificate of occupancy issued by the applicable Governmental Authority
pursuant to applicable Legal Requirements which permanent or temporary
certificate of occupancy shall permit such portion of the Project covered
thereby to be lawfully occupied and used for its intended purposes, shall be in
full force and effect and, in the case of a temporary certificate of occupancy,
shall permit full use and lawful occupancy of the portion(s) of the Project
covered thereby, and if such temporary certificate of occupancy shall provide
for an expiration date, any Punch List Items which must be completed in order
for such temporary certificate of occupancy to be renewed or extended shall be
completed no later than fifteen (15) days prior to the applicable expiration
date thereof.
“Change Order” shall mean any change order, amendment, deviation, supplement,
addition, deletion, revision or other modification in any respect to the Plans
and Specifications, the Loan Budget, the Construction Schedule, the Architect’s
Agreement, any Major Contract or any other contract or subcontract with a Trade
Contractor, including minor departures from the Plans and Specifications
pursuant to field orders.
“Closing Completion Guaranty” shall mean that certain Closing Guaranty of
Completion, dated as of February 2, 2007, from Guarantors to Lender, as modified
by the First Guaranty Modification Agreement, the Second Guaranty Modification
Agreement and the Second Loan Document Modification Agreement, and as the same
hereafter may be amended, restated, replaced, supplemented or otherwise modified
from time to time.
“Closing Date” shall mean February 2, 2007.
“Code” shall mean the Internal Revenue Code of 1986, as amended, as it may be
further amended from time to time, and any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto in
temporary or final form.
“Collateral Assignments of Interest Rate Caps” shall mean, collectively,
(i) that certain Collateral Assignment of Interest Rate Cap Agreement
(Acquisition Mortgage Loan), dated as of November 6, 2007, executed by Borrowers
in connection with the Loan for the

 

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benefit of Lender, and acknowledged by the applicable counterparty as the same
may be amended, restated, replaced, supplemented or otherwise modified from time
to time, and (ii) that certain Collateral Assignment of Interest Rate Cap
Agreement (Construction Mortgage Loan), dated as of November 6, 2007, executed
by Borrowers in connection with the Loan for the benefit of Lender, as modified
by the First Loan Document Modification Agreement and the Second Loan Document
Modification Agreement, and as the same may be hereafter amended, restated,
replaced, supplemented or otherwise modified from time to time.
“Comparable Hotel/Casinos” shall mean hotel and casino resorts in Las Vegas,
Nevada which are of a similar nature, quality and scope as the hotel and casino
resort being operated on the Hotel/Casino Property as of the Closing Date,
including, without limitation, Mandalay Bay Resort and Casino, MGM Grand Hotel
and Casino, The Palms Casino Resort and Caesars Palace, in each of the foregoing
instances, as existing and being operated on the Closing Date.
“Component” shall mean each of the Reduced Acquisition Loan and the Construction
Loan.
“Condemnation” shall mean a temporary or permanent taking by any Governmental
Authority as the result or in lieu or in anticipation of the exercise of the
right of condemnation or eminent domain, of all or any part of any Property, or
any interest therein or right accruing thereto, including any right of access
thereto or any change of grade affecting such Property or any part thereof.
“Condemnation Proceeds” shall have the meaning set forth in Section 6.4(c)
hereof.
“Constituent Member” shall mean any direct member or partner in any Borrower or
any Guarantor and any Person that, directly or indirectly through one or more
other partnerships, limited liability companies, corporations or other entities
is a stockholder, member or partner in any Borrower or any Guarantor.
“Construction Completion Guaranty” shall mean that certain Construction Guaranty
of Completion, dated as of May 30, 2008, from Guarantors to Lender, as modified
and ratified by the Second Guaranty Modification Agreement and the Second Loan
Document Modification Agreement, and as the same hereafter may be amended,
restated, replaced, supplemented or otherwise modified from time to time.
“Construction Consultant” shall mean a Person engaged by Lender to inspect the
Project and the Properties as construction progresses and to consult with and to
provide advice to, and to render reports to, Lender which, at Lender’s option,
may be either an officer or employee of Lender or a consulting architect,
engineer or inspector appointed or engaged by Lender at the sole cost and
expense of Borrowers. On the date hereof, the Construction Consultant is
Inspection & Valuation International, Inc.
“Construction Consultant Approval” shall mean, with respect to any Advance
Request delivered hereunder, a certificate or report of the Construction
Consultant approving such Advance Request and confirming the satisfaction (or
waiver in writing by Lender) of the conditions to the applicable Construction
Loan Advance set forth in Section 3.2, 3.3 and/or 3.4, hereof, as applicable,
based upon a site observation of the Project made by the Construction

 

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Consultant not more than thirty (30) days prior to the applicable Requested
Disbursement Date, which shall include, among other things, the following:
(a) a certification that the Construction Consultant has received and approved
(i) with respect to the Initial Construction Loan Advance, all known Plans and
Specifications, or (ii) with respect to all subsequent Construction Loan
Advances, all known Change Orders;
(b) a certification, in the Construction Consultant’s reasonable professional
opinion, that the work performed as of the date thereof is substantially in
accordance with the Plans and Specifications, and the Construction Loan Advance
requested pursuant to the Advance Request is substantially in accordance with
the Loan Budget and the Construction Schedule;
(c) (i) verification of the portion of the Project completed as of the date of
such site observation, and (ii) an estimate of (A) the percentage of the
construction of the Project completed as of the date of such site observation on
the basis of work in place as part of the Project and the approved Loan Budget
and the value of such completed construction, (B) the Hard Costs actually
incurred for work in place as part of the Project as of the date of such site
observation, (C) the sum necessary to complete construction of the Project in
accordance with the Plans and Specifications, and (D) the amount of time from
the date of such site observation that will be required to achieve Substantial
Completion of the Project;
(d) a certification that all amounts requested under the Advance Request that
are for the payment of Hard Costs have been incurred for work and materials
actually performed and delivered and consistent with the Plans and
Specifications for such Project to date, except as set forth in Section 3.11
hereof;
(e) a certification that no Shortfall then exists;
(f) a certification that the Advance Request does not include any amounts in
respect of Stored Materials or, if the Advance Request does include amounts in
respect of Stored Materials, then a certification (i) as to the value of Stored
Materials stored at the Hotel/Casino Property or the Adjacent Property, (ii) as
to the value of Stored Materials stored off-site, and (iii) that the
requirements of Section 3.11 hereof are satisfied with respect to all such
Stored Materials;
(g) a certification, to the best knowledge of the Construction Consultant (for
which purpose it has, to the extent reasonably appropriate in its professional
judgment, relied upon observations, certifications and responses of the
applicable Architect and Persons employed for the construction of the Project),
that the construction of the Project to the date of the Advance Request has been
performed in a good and workmanlike manner, in conformity with good construction
and engineering practices and in compliance in all material respects with the
Plans and Specifications and the Construction Schedule;
(h) a certification that the Construction Consultant has reviewed all Advance
Requests made prior to the date thereof and compared the invoices or other
documentation supporting such prior Construction Loan Advances with the Line
Item categories

 

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presently in effect and that the total advances to date in each such Line Item
category do not exceed the budgeted amount for such category in any material
respect, except as permitted pursuant to Sections 3.9, 3.10 and/or 3.15 hereof;
and
(i) a certification that (i) the Loan Budget fairly represents in all material
respects the Project Costs that it reasonably anticipates will be incurred
through the date of Final Completion in the aggregate and for each Line Item
substantially in accordance with the Plans and Specifications, and (ii) the
Construction Consultant is not aware of any material costs that will be needed
to be paid or incurred by Borrowers in order to cause Substantial Completion or
Final Completion to occur other than the Project Costs identified in the Loan
Budget.
“Construction Loan” shall mean that portion of the Loan (a) previously made by
Original Lender to Borrowers pursuant to the Original Loan Agreement, and (b) to
be made by Lender to Borrowers pursuant to this Agreement in an aggregate
principal amount not to exceed the Construction Loan Amount, which Construction
Loan is evidenced by the Construction Loan Note.
“Construction Loan Advance” shall mean any advance of any portion of the
Construction Loan Amount pursuant to this Agreement, including, without
limitation, (i) the Remaining Construction Loan Advance, if applicable and
(ii) any disbursement out of the Construction Loan Reserve Account of funds
previously advanced into the Construction Loan Reserve Account pursuant to the
Remaining Construction Loan Advance as contemplated under Section 3.1(d) hereof,
if applicable, in each of the foregoing instances, in accordance with the terms
hereof.
“Construction Loan Amount” shall mean $620,000,000.00. As of the date hereof, a
portion of the Construction Loan Amount in the amount of $492,024,170.00 has
been advanced in accordance with the terms hereof and $127,975,830.00 remains to
be advanced subject to and in accordance with the terms hereof.
“Construction Loan Debt” shall mean the aggregate outstanding principal amount
set forth in, and evidenced by, the Construction Loan Note, together with all
interest accrued and unpaid thereon and all other sums (including, the
applicable Unused Advance Fee, Administrative Agent Fee and Exit Fee payable in
connection with the applicable transaction) due to Lender in respect of the
Construction Loan Note.
“Construction Loan Monthly Interest Payment” shall have the meaning set forth in
Section 2.3.1 hereof.
“Construction Loan Note” shall have the meaning set forth in the recitals of
this Agreement.
“Construction Loan Outstanding Principal Balance” shall mean, as of any date,
the then outstanding principal balance of the Construction Loan. For avoidance
of doubt, any disbursement out of the Construction Loan Reserve Account of Third
Mezzanine Construction Funds previously advanced into the Construction Loan
Reserve Account pursuant to Section 3.4.2 of the Third Mezzanine Loan Agreement
shall not comprise a portion of the Construction Loan Outstanding Principal
Balance for any purpose hereunder.

 

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“Construction Loan Reserve Account” shall have the meaning set forth in
Section 7.7.1 hereof.
“Construction Loan Spread” shall mean, subject to application of the Default
Rate, (i) prior to the First Qualified Extended Maturity Date, 4.25%; provided,
however, that if Substantial Completion has not occurred on or before May 1,
2010, the Construction Loan Spread shall increase to 4.75% from and including
May 1, 2010 through but excluding the first Payment Date following Substantial
Completion, following which the Construction Loan Spread shall again be 4.25%
until the First Qualified Extended Maturity Date and (ii) from and after the
First Qualified Extended Maturity Date, 5.65%.
“Construction Qualification Date” shall mean May 30, 2008.
“Construction Schedule” shall mean a schedule for the construction and
completion of the Project, in form and substance acceptable to Lender in its
reasonable discretion, and including, without limitation, (i) a construction
progress schedule reflecting the anticipated dates of completion of specified
subcategories of the Loan Budget, (ii) a trade-by-trade breakdown of the
estimated periods of commencement and completion of the work to be completed in
connection with the Project, and (iii) such other information as the
Construction Consultant shall reasonably require. The approved Construction
Schedule, as of the date hereof, is attached as Exhibit E.
“Contingency” shall mean, collectively, the Contingency (Hard Costs) and the
Contingency (Soft Costs).
“Contingency (Hard Costs)” shall mean the amount allocated as a contingency
reserve in the Loan Budget for Hard Costs, which shall in no event start out
being less than ten percent (10%) of the total amount of the Hard Costs included
in the Loan Budget.
“Contingency Line Item” shall have the meaning set forth in Section 3.10(a).
“Contingency (Soft Costs)” shall mean the amount allocated as a contingency
reserve in the Loan Budget for Soft Costs, which shall in no event start out
being less than five percent (5%) of the total amount of the Soft Costs included
in the Loan Budget.
“Contractor’s Certificate” shall mean a certificate from any Major Contractor
substantially in the form attached hereto as Exhibit K.
“Contribution” shall have the meaning set forth in Section 15.2 hereof.
“Control” shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of management, policies or activities of a Person,
whether through ownership of voting securities, by contract or otherwise.
“Controlled” and “Controlling” shall have correlative meanings.
“Cost Savings” shall have the meaning set forth in Section 3.9(b) hereof.

 

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“Cost Savings Fee” shall mean an amount equal to the lesser of (a) any cost
savings determined and distributed in accordance with the provisions of
Section 3.1(k) hereof multiplied by 3.16337% and (b) $150,000.
“Counterparty” shall mean, with respect to the Interest Rate Cap Agreement, SMBC
Derivative Products Limited, and with respect to any Replacement Interest Rate
Cap Agreement, any substitute Acceptable Counterparty.
“Credit Suisse” shall mean Credit Suisse Securities (USA) LLC and its successors
in interest.
“Current Pay Status” shall mean such time as the Second Mezzanine Applicable
Interest Payment is equal to the Second Mezzanine Monthly Interest Payment and
the Third Mezzanine Applicable Interest Payment is equal to the Third Mezzanine
Monthly Interest Payment.
“Debt” shall mean the aggregate outstanding principal amount set forth in, and
evidenced by, this Agreement and the Notes (which is comprised of both
Components) together with all interest accrued and unpaid thereon and all other
sums (including, if applicable, the Unused Advance Fee, the Administrative Agent
Fee and the Exit Fee) due to Lender in respect of the Loan under the Notes, this
Agreement, the Mortgage and the other Loan Documents.
“Debt Service” shall mean, with respect to any particular period of time,
scheduled interest payments due under this Agreement and each of the Notes
(computed at the contract rate of interest provided for under each Note).
“Debt Service Coverage Ratio” shall mean, as of any date of determination, a
ratio in which:
(a) the numerator is the Net Cash Flow with respect to the immediately preceding
six (6) calendar months as of such date of determination; and
(b) the denominator is the aggregate amount of (a) interest that was due and
payable on the Reduced Acquisition Loan Outstanding Principal Balance and the
Construction Loan Outstanding Principal Balance (computed as if the Construction
Loan has been fully funded), (b) the interest that was due and payable or would
have been due and payable, as applicable, under the First Mezzanine Loan as
determined based on the contract rate of interest set forth in the First
Mezzanine Loan Agreement (without giving effect to any accrual of interest on
the First Mezzanine Loan), (c) the interest that would have been due and payable
under the Second Mezzanine Loan as determined based on the contract rate of
interest set forth in the Second Mezzanine Loan Agreement (without giving effect
to any accrual of interest on the Second Mezzanine Loan), and (d) the interest
that would have been payable under the Third Mezzanine Loan as determined based
on the contract rate of interest set forth in the Third Mezzanine Loan Agreement
(without giving effect to any accrual of interest on the Third Mezzanine Loan),
in all instances as determined based on such interest that was due and payable,
or as applicable, would have been due and payable for the immediately preceding
six (6) calendar months (provided that for purposes of determining the amount of
such denominator all computations of interest shall be made assuming the LIBOR
component of each applicable

 

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interest rate is equal to the greater of actual LIBOR in effect for the
applicable time period and a rate equal to one percent (1.0%)) .
“Debt Yield” shall mean:
(a) for all calculations of Debt Yield except in connection with the
determination of the Second Mezzanine Applicable Interest Payment and Third
Mezzanine Applicable Interest Payment, Debt Yield shall mean a ratio (expressed
as a percentage) in which: (i) the numerator is the Net Cash Flow for the
trailing twelve (12) calendar month period ending with the last calendar month
prior to the date of determination for which financial reports have been
delivered under Section 5.1.11 hereof, as reasonably determined by Lender based
on the financial statements delivered to Lender pursuant to Section 5.1.11
hereof, and (ii) the denominator is the Aggregate Outstanding Principal Balance
as of such date of determination; and
(b) for purposes of determining the Second Mezzanine Applicable Interest Payment
and the Third Mezzanine Applicable Interest Payment, Debt Yield shall mean a
ratio (expressed as a percentage) in which: (i) the numerator is the Net Cash
Flow for the trailing twelve (12) calendar month period ending with the last
calendar month prior to the date of determination for which financial reports
have been delivered under Section 5.1.11 hereof, as reasonably determined by
Lender based on the financial statements delivered to Lender pursuant to
Section 5.1.11 hereof, and (ii) the denominator is the sum of the Reduced
Acquisition Loan Outstanding Principal Balance, the Construction Loan
Outstanding Principal Balance and the First Mezzanine Loan Outstanding Principal
Balance.
“Default” shall mean the occurrence of any event hereunder or under any other
Loan Document which, but for the giving of notice or passage of time, or both,
would be an Event of Default.
“Default Rate” shall mean a rate per annum equal to the lesser of (a) the
Maximum Legal Rate and (b) four percent (4%) above the Applicable Interest Rate.
“Defaulting Borrower” shall have the meaning set forth in Section 15.3 hereof.
“Determination Date” shall mean, with respect to any Interest Period, the date
that is two (2) London Business Days prior to the fifteenth (15th) day of the
calendar month in which such Interest Period commences.
“Disbursement Schedule” shall mean the schedule of the amounts of Construction
Loan Advances anticipated to be requisitioned by Borrowers each month during the
term of the Loan, as certified by Borrower and reasonably approved by Lender and
the Construction Consultant.
“Disclosure Document” shall mean a prospectus, prospectus supplement, private
placement memorandum, offering memorandum, offering circular or other offering
documents, in each case in preliminary or final form, used to offer Securities
in connection with a Securitization.
“DLJ Entities” shall have the meaning set forth in Section 10.16(c) hereof.

 

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“DLJ Guarantor” shall mean DLJ MB IV HRH, LLC, a Delaware limited liability
company, together with its successors and permitted assigns.
“DLJMB Parties” shall have the meaning set forth in Section 9.4 hereof.
“Draw Request” shall mean, with respect to each Construction Loan Advance, an
Advance Request together with all other documents required by this Agreement to
be furnished to Lender as a condition to such Construction Loan Advance.
“Eligible Account” shall mean a separate and identifiable “deposit account”, as
such term is defined in any applicable Uniform Commercial Code, from all other
funds held by the holding institution that is either (a) an account or accounts
maintained with a federal or state-chartered depository institution or trust
company which complies with the definition of Eligible Institution or (b) a
segregated trust account or accounts maintained with a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity which, in the case of a state chartered depository institution or trust
company, is subject to regulations substantially similar to 12 C.F.R. §9.10(b),
having in either case a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by federal and state authority. An
Eligible Account will not be evidenced by a certificate of deposit, passbook or
other instrument.
“Eligible Institution” shall mean a depository institution or trust company, the
short term unsecured debt obligations or commercial paper of which are rated at
least “A-1” by S&P, “P-1” by Moody’s and “F-1+” by Fitch in the case of accounts
in which funds are held for thirty (30) days or less (or, in the case of
accounts in which funds are held for more than thirty (30) days, the long term
unsecured debt obligations of which are rated at least “AA” by Fitch and S&P and
“Aa2” by Moody’s), provided that in the event (a) any depository institution or
trust company in which the Lockbox Account, Cash Management Account, Casino
Account or any Reserve Fund is held is required to be an Eligible Institution in
order to cause any such account to be maintained as an Eligible Account and such
depository institution or trust company does not qualify as an Eligible
Institution because it no longer satisfies the above-stated minimum long term
unsecured debt rating or (b) Borrower is unable to locate a depository
institution or trust company that satisfies the minimum long term unsecured debt
rating in connection with the transfer of any Reserve Funds to a replacement
depository institution or trust company or the replacement of the then existing
Casino Account, Lockbox Account or Cash Management Account, an Eligible
Institution shall mean a depository institution or trust company, the short term
unsecured debt obligations or commercial paper of which are rated at least “A-1”
by S&P, “P-1” by Moody’s and “F-1+” by Fitch in the case of accounts in funds
which are held for thirty (30) days or less or in the case of accounts in which
funds are held for more than thirty (30) days, and the long term unsecured debt
obligations of which are at least equal to the Alternative Minimum Rating
Requirement.
“Embargoed Person” shall have the meaning set forth in Section 4.1.35 hereof.
“Employee Lease” shall mean that certain Employee Lease Agreement, dated as of
February 29, 2008, by and between HRHI and Gaming Borrower, as the same
hereafter may be amended, restated, replaced, supplemented or otherwise modified
from time to time.

 

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“Environmental Indemnity” shall mean that certain Borrowers Environmental
Indemnity Agreement, dated as of February 2, 2007, executed by Borrowers in
connection with the Loan for the benefit of Lender, as modified and ratified by
the First Loan Document Modification Agreement and the Second Loan Document
Modification Agreement, and as the same hereafter may be amended, restated,
replaced, supplemented or otherwise modified from time to time.
“Equipment” shall have the meaning set forth in the granting clause of the
Mortgage.
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended.
“Event of Default” shall have the meaning set forth in Section 8.1(a) hereof.
“Excess Cash Flow” shall have the meaning set forth in Section 2.6.2(b) hereof.
“Excess Cash Termination Condition” shall mean (i) Substantial Completion
(including physical completion of the pool but excluding, however, opening of
the pool to hotel customers and/or the public) and (ii) no Event of Default,
First Mezzanine Event of Default, Second Mezzanine Event of Default or Third
Mezzanine Event of Default shall have occurred and be continuing.
“Excess IP Release Price Proceeds” shall have the meaning set forth in Section
2.4.3(g) hereof.
“Excess Lender Applied Funds” shall have the meaning set forth in Section 7.6.3
hereof.
“Excess Requested Funds” shall have the meaning set forth in Section 7.6.2(b)
hereof.
“Excess Cash Release Date” shall mean the date upon which the Properties have
achieved and maintained a Debt Service Coverage Ratio of not less than 1.20 to
1.00 for the immediately preceding two (2) consecutive calendar quarters.
“Exchange Act” shall have the meaning set forth in Section 9.3 hereof.
“Exchange Act Filing” shall have the meaning set forth in Section 5.1.11(f)
hereof.
“Excluded Taxes” shall mean, with respect to the Administrative Agent, any
Lender or any other recipient of any payment to be made by or on account of any
obligation of Borrowers hereunder, (a) income or franchise taxes imposed on (or
measured by reference to) its net income by the United States of America, or by
the jurisdiction under the laws of which such recipient is organized or in which
its principal office is located or, in the case of any Lender, in which its
applicable lending office is located, or any other jurisdiction in which it is
subject to tax solely as a result of any present or former connection between
the Administrative Agent, such Lender or other recipient, as applicable, and the
jurisdiction imposing such tax other than a present or former connection solely
as a result of the activities and transactions specifically contemplated by this
Agreement, (b) any branch profits taxes imposed by the United States of America
or any

 

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similar tax imposed by any other jurisdiction described in clause (a) of this
definition, and (c) in the case of a Non-U.S. Lender, any withholding tax that
is imposed on amounts payable to such Non-U.S. Lender at the time such Non-U.S.
Lender designates a new lending office, unless the designation of such new
lending office was at the request of Borrowers, or is attributable to such
Non-U.S. Lender’s failure to comply with Section 2.2.3(e)(iii) hereof, except to
the extent that such Non-U.S. Lender was entitled, at the time of designation of
a new lending office, to receive additional amounts from Borrowers with respect
to such withholding tax pursuant to Section 2.2.3(e) hereof.
“Excusable Delay” shall mean a delay due to acts of god, governmental
restrictions, stays, judgments, orders, decrees, enemy actions, civil commotion,
fire, casualty, strikes, work stoppages, shortages of labor or materials or
other causes beyond the reasonable control of any Borrower and not arising out
of (a) the negligence, willful misconduct or illegal act of any Borrower or any
Affiliate of any Borrower, or (b) any cause or circumstance resulting from the
insolvency, bankruptcy or lack of funds of any Borrower, any Guarantor or any
Affiliate of any Borrower or any Guarantor.
“Existing FF&E Leases” shall have the meaning set forth in the definition of
“Special Purpose Entity” set forth below.
“Exit Fee” shall have the meaning set forth in Section 2.8 hereof.
“Extension Option” shall mean any Qualified Extension Option.
“Extension Term” shall mean any Qualified Extension Term.
“Extra Non-Accrued Interest” shall have the meaning set forth in Section 2.4.5
hereof.
“Extraordinary Expenses” shall mean any and all actual out-of-pockets costs and
expenses (a) incurred by any Borrower on an irregular basis and (b) not
associated with the day-to-day operation of the Property, provided that the
following costs and expenses shall not be or be deemed to be Extraordinary
Expenses hereunder: (i) any cost or expense that (A) is a Pre-Opening Expense,
Capital Expenditure, or Project Cost (including, without limitation, any and all
items set forth in the Loan Budget and other costs or expenses incurred in
connection with the construction of the Property or any component thereof) or
any cost or expense that is an actual cash Operating Expense subject to
disbursement in accordance with the applicable terms of Section 2.6.2 hereof,
(B) is incurred by any Manager or HRHI (other than in connection with their
respective obligations under the Management Agreement or Liquor Management
Agreement, respectively), (C) is incurred in connection with the payment of debt
service under any loan (including, without limitation, the Loan) or (D) arises
in connection with any contributions to any reserves required under the Loan
Documents, and (ii) any cost or expense incurred in connection with the
entertainment of any guests, licensees, investors or other Persons.
“FF&E” shall mean all furniture, furnishings, fixtures and equipment required
for the operation of any of the Properties, including, without limitation,
(i) lobby furniture, carpeting, draperies, paintings, bedspreads, television
sets, office furniture and equipment such as safes, cash registers, and
accounting, duplicating and communication equipment, telephone systems, back and
front of the house computerized systems, guest room furniture, specialized hotel

 

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equipment such as equipment required for the operation of kitchens, laundries,
the front desk, dry cleaning facilities, bar and cocktail lounges, restaurants,
recreational facilities as they may exist from time to time, and decorative
lighting, material handling equipment and cleaning and engineering equipment and
all other fixtures, equipment, apparatus and personal property needed for such
purposes, (ii) Gaming Equipment which any Borrower is lawfully permitted to own
or lease, and (iii) rock and roll memorabilia unique to the Hotel/Casino
Property and similar in character to the other rock and roll memorabilia
displayed at the Hotel/Casino Property.
“FF&E Expenditures” shall mean amounts expended for the purchase, replacement
and/or installation of FF&E at the Properties.
“FF&E Expenditures Work” shall mean any labor performed or materials installed
in connection with any FF&E Expenditures.
“Final Completion” shall mean that, in addition to Substantial Completion,
(i) all Punch List Items shall have been completed Lien free and substantially
in accordance with the Plans and Specifications, all Legal Requirements and this
Agreement, (ii) one or more Certificates of Occupancy shall have been issued (if
subject to any conditions, such conditions being acceptable to Lender in its
sole and absolute discretion) for the entire Project, and (iii) reasonably
satisfactory evidence shall have been delivered to Lender confirming that all
other Governmental Approvals have been issued and all other Legal Requirements
have been satisfied in all material respects so as to allow the Project to be
used and operated in accordance with the Loan Documents.
“First Amended and Restated Cash Management Agreement” has the meaning set forth
in the recitals to this Agreement.
“First Full Operating Month” shall mean the calendar month following the month
in which Substantial Completion occurs.
“First Guaranty Modification Agreement” shall have the meaning set forth in the
recitals to this Agreement.
“First HRHI Modification Agreement” shall have the meaning set forth in the
recitals to this Agreement.
“First Loan Document Modification Agreement” shall have the meaning set forth in
the recitals to this Agreement.
“First Mezzanine Applicable Interest Payment” shall mean with respect to the
interest payments on the First Mezzanine Loan commencing on and including the
interest payment due on the Payment Date occurring in (a) January, 2010, shall
be equal to 558,397.29, (b) February, 2010 through and including the interest
payment due on the Payment Date occurring in June, 2010, an interest payment
computed in accordance with the terms of the First Mezzanine Loan Agreement
based on an interest rate equal to “LIBOR” (as defined in the First Mezzanine
Loan Agreement) plus 4.00%, and (c) July, 2010 through the Maturity Date (as the
same may be extended in accordance with the terms of the First Mezzanine Loan
Agreement), an interest payment computed in accordance with the terms of the
First Mezzanine Loan Agreement based

 

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on an interest rate equal to LIBOR plus 5.20%. Without limiting the foregoing,
the interest payments comprising the First Mezzanine Applicable Interest Payment
shall be computed on the then outstanding principal balance of the First
Mezzanine Loan, which for purposes of computing such interest payments shall not
include any First Mezzanine Initial Accrual Amount or First Mezzanine Subsequent
Accrual Amount.
“First Mezzanine Borrower” and “First Mezzanine Borrowers” shall mean,
individually or collectively, as applicable, HRHH Gaming Senior Mezz, LLC, a
Delaware limited liability company, and HRHH JV Senior Mezz, LLC, a Delaware
limited liability company, each in its capacity as a borrower under the First
Mezzanine Loan, together with its or their successors or permitted assigns.
“First Mezzanine Cash Management Account” shall mean the “First Mezzanine Cash
Management Account” established under the First Mezzanine Loan Documents.
“First Mezzanine Debt” shall mean the “Debt” as defined in the First Mezzanine
Loan Agreement.
“First Mezzanine Default” shall mean a “Default” as defined in the First
Mezzanine Loan Agreement.
“First Mezzanine Event of Default” shall mean an “Event of Default” as defined
in the First Mezzanine Loan Agreement.
“First Mezzanine Initial Accrual Amount” shall mean the aggregate amount of all
First Mezzanine Initial Interest Differential Amounts, together with interest
thereon computed at an interest rate equal to (a) “LIBOR” (as defined in the
First Mezzanine Loan Agreement) plus 5.20%, with respect to all time periods
occurring from and after the date hereof through and including the Payment Date
occurring in February, 2011 and (b) “LIBOR” plus 6.50%, with respect to all time
periods occurring after the Payment Date occurring in February, 2011, in all
instances compounded monthly in accordance with the terms of the First Mezzanine
Loan Agreement.
“First Mezzanine Initial Interest Differential Amount” shall mean the positive
difference, if any, between (a) the First Mezzanine Monthly Interest Payment
with respect to any Payment Date occurring from and after the Payment Date
occurring in January, 2010 through and including the Payment Date occurring in
June, 2010 (as the same may be extended in accordance with the terms hereof) and
(b) the First Mezzanine Applicable Interest Payment payable on each such date.
“First Mezzanine Lender” shall mean Brookfield Financial, LLC as to its Series B
(as successor in interest to Column Financial, Inc.), in its capacity as holder
of the First Mezzanine Loan, its successors or assigns.
“First Mezzanine Loan” shall mean a loan in the original principal amount of Two
Hundred Million and No/100 Dollars ($200,000,000.00) made by First Mezzanine
Lender to First Mezzanine Borrowers.

 

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“First Mezzanine Loan Agreement” shall mean that certain First Amended and
Restated First Mezzanine Loan Agreement, date as of the date hereof, between
First Mezzanine Lender and First Mezzanine Borrowers, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time subject to the terms of the Intercreditor Agreement.
“First Mezzanine Loan Documents” shall mean the First Mezzanine Loan Agreement
and all other documents evidencing and/or securing the First Mezzanine Loan, as
the same may be amended, restated, replaced, supplemented or otherwise modified
from time to time subject to the terms of the Intercreditor Agreement.
“First Mezzanine Loan Outstanding Principal Balance” shall mean, as of any date,
the outstanding principal balance of the First Mezzanine Loan.
“First Mezzanine Obligations” shall mean the “Obligations” as defined in the
First Mezzanine Loan Agreement.
“First Mezzanine Monthly Interest Payment” shall mean the “Monthly Interest
Payment” as defined in the First Mezzanine Loan Agreement (which Monthly
Interest Payment shall be computed at the contract rate of interest set forth in
the First Mezzanine Loan Agreement of (a) “LIBOR” (as defined in the First
Mezzanine Loan Agreement) plus 5.20% or, as applicable, the “Prime Rate” plus
the “Prime Rate Spread” (each as defined in the First Mezzanine Loan Agreement),
with respect to all payments due from and including the Payment Date occurring
in January, 2010 through and including the Payment Date occurring in February,
2011 and (b) “LIBOR” plus 6.50% or, as applicable, the “Prime Rate” plus the
“Prime Rate Spread”, with respect to all payments due from and after the Payment
Date occurring in March, 2011). Without limiting the foregoing, the interest
payments comprising the First Mezzanine Monthly Interest Payment shall be
computed on the then outstanding principal balance of the First Mezzanine Loan,
which for purposes of computing such interest payments shall not include any
First Mezzanine Initial Accrual Amount or First Mezzanine Subsequent Accrual
Amount.
“First Mezzanine Subsequent Accrual Amount” shall mean the aggregate amount of
all First Mezzanine Subsequent Interest Differential Amounts, together with
interest thereon computed at an interest rate equal to “LIBOR” (as defined in
the First Mezzanine Loan Agreement) plus 6.50%, compounded monthly in accordance
with the terms of the First Mezzanine Loan Agreement.
“First Mezzanine Subsequent Interest Differential Amounts” shall mean the
positive difference, if any, between (a) the First Mezzanine Monthly Interest
Payment with respect to any Payment Date occurring from and after the Payment
Date occurring in March, 2011 through and including the Maturity Date (as the
same may be extended in accordance with the terms hereof) and (b) the First
Mezzanine Applicable Interest Payment payable on each such date.
“First Modification Agreements” shall mean, collectively, the First Loan
Document Modification Agreement, the First HRHI Modification Agreement and the
First Guaranty Modification Agreement.
“First Qualified Extended Maturity Date” shall mean February 9, 2011.

 

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“First Qualified Extension Option” shall have the meaning set forth in Section
2.7.2(a) hereof.
“First Qualified Extension Term” shall have the meaning set forth in
Section 2.7.2(a) hereof.
“Fiscal Year” shall mean each twelve (12) month period commencing on January 1
and ending on December 31 during each year of the term of the Loan.
“Fitch” shall mean Fitch, Inc.
“Fourth Qualified Extended Maturity Date” shall mean February 9, 2014.
“Fourth Qualified Extension Option” shall have the meaning set forth in Section
2.7.2(d) hereof.
“Fourth Qualified Extension Term” shall have the meaning set forth in
Section 2.7.2(d) hereof.
“Funding Borrower” shall have the meaning set forth in Section 15.3 hereof.
“Future Funding Obligations” shall have the meaning set forth in
Section 10.25(a) hereof.
“GAAP” shall mean generally accepted accounting principles in the United States
of America as of the date of the applicable financial report.
“Gaming Account” shall mean, collectively, the Casino Account and the Cage
Reserve. For purposes of interpretation, references contained herein to amounts
or funds on deposit in the Gaming Account shall refer to the aggregate (without
duplication) of all amounts then on deposit in the Casino Account and all
amounts then comprising the Cage Reserve.
“Gaming Authority” shall mean any of the Nevada Gaming Commission, the Nevada
State Gaming Control Board, the Clark County Liquor and Gaming Licensing Board
and any other Governmental Authority and/or regulatory authority or body or any
agency which has, or may at any time after the Closing Date have, jurisdiction
over the gaming activities or the sale or distribution of liquor at any of the
Properties, or any successor to any such authority.
“Gaming Borrower” shall have the meaning set forth in the introductory paragraph
hereto, together with its successors and assigns.
“Gaming Day” shall mean the 24 hour period commencing at 3:00 a.m. Las Vegas
time on a particular calendar day and ending at 2:59 a.m. Las Vegas time on the
following calendar day or such other 24 hour period under which Gaming Borrower
shall operate the Casino in accordance with applicable Gaming Laws.
“Gaming Equipment” shall mean any and all gaming devices (as defined in NRS
463.0155), gaming device parts, inventory and other related gaming equipment and
supplies used

 

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in connection with the operation of a casino, including, without limitation,
slot machines, gaming tables, cards, dice, chips, tokens (including slot machine
tokens not currently in circulation, and “reserve” chips, if any, not currently
in circulation), player tracking systems, cashless wagering systems (as defined
in NRS 463.014) and associated equipment (as defined in NRS 463.0136), which are
located at any Property, are owned or leased by any Borrower and are used or
useable exclusively in the present or future operation of slot machines and live
games at any Property, together with all improvements and/or additions thereto,
mobile gaming systems (as defined in Regulation 14.010(11) under NRS
Chapter 463), all contracts necessary to own or operate any of the Gaming
Equipment and/or to conduct gaming operations for the Casino Component, all
assignable manufacturers and other warranties applicable to the Gaming
Equipment, all computer hardware and software used to operate the Gaming
Equipment and/or to conduct gaming operations for the Casino Component.
“Gaming Laws” shall mean the provisions of the Nevada Gaming Control Act,
codified as NRS Chapter 463, as amended from time to time, all regulations of
the Gaming Authorities promulgated thereunder, as amended from time to time, the
provisions of the Clark County Code, as amended from time to time, and all other
laws, statutes, rules, rulings, orders, ordinances, regulations and other Legal
Requirements of any Gaming Authority.
“Gaming License” shall mean any license, qualification, franchise,
accreditation, approval, registration, permit, finding of suitability or other
authorization relating to gaming, the gaming business or the operation of a
casino under the Gaming Laws or required by any Gaming Authority or otherwise
necessary under any Gaming Laws for the operation of gaming, the gaming business
or a resort casino at the Hotel/Casino Property.
“Gaming Liquidity Requirement” shall mean the minimum bankroll requirements for
cash and cash equivalents required to be maintained by Gaming Borrower pursuant
to the Gaming Laws in an amount no greater than is mandated by Nevada Gaming
Commission Regulation 6.150.
“Gaming Member” shall mean HRHH Gaming Member, LLC, a Delaware limited liability
company.
“Gaming Operating Condition” shall mean that the gaming operations at the
Hotel/Casino Property are being operated by a Qualified Gaming Operator pursuant
to the Casino Component Lease.
“Gaming Operating Reserve” shall mean such cash funds and reserves that are held
and maintained by Gaming Borrower, in its capacity as the duly licensed operator
of the Casino Component under applicable Gaming Laws, either in the Cage Reserve
or in the Casino Account, including, without limitation, casino chips, tokens,
checks and markers; provided that all such Gaming Operating Reserves (i) are
established and maintained solely for use in the day-to-day operation and
management of the Casino Component in the ordinary course of business, and
(ii) are funded and maintained in accordance with the requirements of all
applicable Gaming Laws and are in the amounts that are reasonable and customary
for casino operations at Comparable Hotel/Casinos (it being agreed that 110% of
statutory or regulatory minimums shall be deemed a reasonable and customary
minimum amount for these purposes).

 

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“Gaming Operator” shall mean a Qualified Gaming Operator who is supervising,
managing and operating all gaming activities at the Hotel/Casino Property.
Gaming Borrower is the Gaming Operator as of the date hereof.
“Gaming Revenue Disbursement Date” shall have the meaning set forth in
Section 2.6.1(c) of this Agreement.
“General Contract” shall mean one or more guaranteed maximum price contracts (or
work authorizations) with the General Contractor entered into by one or more
Borrowers or any Affiliate thereof in connection with the Project and approved
by Lender in its reasonable discretion; provided, that (i) such contract(s) (or
work authorizations under such contract(s)) shall be based on Plans and
Specifications that are at least eighty percent (80%) complete in the
Construction Consultant’s reasonable opinion and have been approved up to such
point of completion by Lender and Construction Consultant in their reasonable
discretion, and (ii) in no event shall allowances applicable to such contract(s)
or work authorization(s) exceed fifteen percent (15%) of the aggregate
guaranteed maximum price for the Project, and provided further, that in no event
shall allowances within any such individual contract or work authorization
exceed thirty percent (30%) of the guaranteed maximum price for each such
individual contract or work authorization.
“General Contractor” shall mean each of (i) M.J. Dean Construction, Inc. or
(ii) any replacement general contractor engaged by (or on behalf of) one or more
Borrowers or any Affiliate thereof with respect to the Project from time to time
after the date hereof and approved by Lender in its reasonable discretion (which
approval may take into account, without limitation, the financial condition and
stability of any proposed general contractor), and (iii) any successor of any of
the foregoing approved by Lender in its reasonable discretion (which approval
may also take into account, without limitation, the financial condition and
stability of any such successor); provided, that in no event shall the General
Contractor (a) be an Affiliate of any Restricted Party or (b) have any equity
interest or any equivalent thereof in any of the Properties or in any Restricted
Party.
“General Contractor’s Certificate” shall mean a certificate from the General
Contractor substantially in the form attached hereto as Exhibit N.
“General Contractor’s Consent” shall mean a General Contractor’s Performance
Letter executed and delivered by the General Contractor in favor of Lender and
substantially in the form attached as Exhibit F.
“General Reserve Account” shall have the meaning set forth in Section 7.6.1
hereof.
“General Reserve Cap” shall have the meaning set forth in Section 7.6.3 hereof.
“General Reserve Fund” shall have the meaning set forth in Section 7.6.1 hereof.
“Governmental Approvals” shall mean all approvals, consents, waivers, orders,
acknowledgments, authorizations, permits and licenses required under applicable
Legal Requirements to be obtained from any Governmental Authority for the
construction of any and

 

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all of the Project and/or the use, occupancy and operation following completion
of construction, as the context requires.
“Governmental Authority” shall mean any court, board, agency, commission, office
or other authority of any nature whatsoever for any governmental unit (federal,
state, county, district, municipal, city or otherwise) whether now or hereafter
in existence, including, without limitation, any Gaming Authority.
“Gross Income from Operations” shall mean, for any period, all Rents and all
other income and proceeds (whether in cash or on credit, and computed in
accordance with GAAP and, to the extent applicable with respect to the
Hotel/Casino Property, the Uniform System of Accounts), received by any Borrower
or by any Manager (on behalf of any Borrower) for the use, occupancy or
enjoyment of any of the Properties, or any part thereof, or received by any
Borrower or any Manager for the sale of any goods, services or other items sold
on or provided from any of the Properties in the ordinary course of such
Property’s operation, including, without limitation: (a) all income and proceeds
received under Leases; (b) all income and proceeds received from rental of rooms
and commercial, meeting, conference and/or banquet space within any of the
Properties including net parking revenue; (c) all income and proceeds received
from food and beverage operations and from catering services conducted from any
of the Properties even though rendered outside of any of the Properties;
(d) Intentionally Deleted; (e) without duplication of the foregoing clause (a),
all income, proceeds and revenue generated from gaming activities at the
Property; (f) Intentionally Deleted; (g) all income and proceeds from business
interruption, rental interruption and use and occupancy insurance with respect
to the operation of any of the Properties (after deducting therefrom all
necessary costs and expenses incurred in the adjustment or collection thereof);
(h) all Awards for temporary use (after deducting therefrom all costs incurred
in the adjustment or collection thereof and in Restoration of any of the
Properties); (i) all income and proceeds from judgments, settlements and other
resolutions of disputes with respect to matters which would be includable in
this definition of “Gross Income from Operations” if received in the ordinary
course of any of the Properties’ operation (after deducting therefrom all
necessary costs and expenses incurred in the adjustment or collection thereof);
(j) interest on credit accounts, rent concessions or credits, and other required
pass-throughs and interest on Reserve Funds; and (k) deposits received for
rental of rooms; and “Gross Income from Operations” shall also include all
licensing fees and other income and receipts generated by the IP; but “Gross
Income from Operations” shall exclude (1) gross receipts received by lessees,
licensees or concessionaires of any of the Properties (but not any percentage
rents or similar payments derived therefrom); (2) income and proceeds from the
sale or other disposition of goods, FF&E, capital assets and other items not in
the ordinary course of the operation of the applicable Property and/or any IP;
(3) federal, state and municipal excise, sales and use taxes collected directly
from customers, patrons or guests of any of the Properties as a part of or based
on the sales price of any goods, services or other items, such as gross
receipts, room, admission, cabaret or equivalent taxes; (4) Awards (except to
the extent provided in clause (h) above); (5) refunds, rebates, discounts and
other similar credits of amounts not included in Operating Expenses at any time
and uncollectible accounts; (6) gratuities collected by the employees at any of
the Properties; (7) the proceeds of any financing, refinancing or sale of any of
the Properties (or all of the membership interests in any Borrower) or the FF&E;
(8) other non-recurring income or proceeds resulting other than from the use or
occupancy of any of the Properties, or any part thereof, or other than from the
sale of goods, services or other items sold on or provided

 

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from any of the Properties in the ordinary course of business; (9) any credits
or refunds made to customers, guests or patrons in the form of allowances or
adjustments to previously recorded revenues; (10) deposits received for rental
of banquet space or business or conference meeting rooms; (11) security deposits
received under any Leases, unless and until the same shall be applied in
accordance with the terms of the applicable Lease(s); (12) all proceeds from
insurance to the extent not included in income pursuant to clause (g) above; and
(13) any disbursements to any Borrower from any of the Reserve Funds and any
interest earned thereon.
“Guarantor” shall mean each of the Morgans Guarantor and the DLJ Guarantor.
“Guarantor Transfer” shall have the meaning set forth in Section 5.2.10(c)(D)
hereof.
“Hard Costs” shall mean, collectively, the costs set forth in the Loan Budget
which are for labor, materials, equipment, furniture and fixtures and fees and
expenses of any construction manager and/or general contractor engaged in
connection with the Project.
“Hotel/Casino Borrower” shall have the meaning set forth in the introductory
paragraph hereto, together with its successors and assigns.
“Hotel/Casino Property” shall mean that or those certain parcel(s) of real
property more particularly described on Schedule I-A attached hereto and made a
part hereof, the Improvements thereon and all personal property owned by
Hotel/Casino Borrower and encumbered by the Mortgage, together with all rights
pertaining to such property and Improvements, as more particularly described in
the granting clause of the Mortgage and referred to therein as the “Hotel Casino
Property”.
“HRCI” shall have the meaning set forth in Section 4.1.36(b) hereof.
“HRHI” shall mean Hard Rock Hotel, Inc., a Nevada corporation, together with its
successors and permitted assigns.
“HRHI Guaranty” shall mean that certain HRHI Guaranty Agreement, dated as of
February 2, 2007, from HRHI to Lender, as modified and ratified by the First
HRHI Modification Agreement, the Second HRHI Modification Agreement and the
Second Loan Document Modification Agreement, and as the same hereafter may be
amended, restated, replaced, supplemented or otherwise modified from time to
time.
“HRHI Release” shall mean that certain Release of HRHI Documents, dated as of
the date hereof, by and between HRHI and Lender, as the same hereafter may be
amended, restated, replaced, supplemented or otherwise modified from time to
time.
“HRHI Security Agreement” shall mean that certain HRHI Security Agreement, dated
as of February 2, 2007, from HRHI to Lender, securing the HRHI Guaranty and
covering certain assets of HRHI described therein, as modified by the First Loan
Document Modification Agreement, the First HRHI Modification Agreement, the
Second Loan Document Modification Agreement and the Second HRHI Modification
Agreement, and as the same hereafter may be amended, restated, replaced,
supplemented or otherwise modified from time to time.

 

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“HR Holdings” shall mean Hard Rock Hotel Holdings, LLC, a Delaware limited
liability company.
“Improvements” shall have the meaning set forth in the granting clause of the
Mortgage with respect to each Property.
“Indebtedness” of a Person, at a particular date, means the sum (without
duplication) at such date of (a) all indebtedness or liability of such Person
(including, without limitation, amounts for borrowed money and indebtedness in
the form of mezzanine debt and preferred equity); (b) obligations evidenced by
bonds, debentures, notes, or other similar instruments; (c) obligations for the
deferred purchase price of property or services (including trade obligations for
which such Person or its assets are liable); (d) obligations under letters of
credit (for which such Person is liable if such amounts were advanced thereunder
or for which such Person is liable to reimburse); (e) obligations under
acceptance facilities; (f) all guaranties, endorsements (other than for
collection or deposit in the ordinary course of business) and other contingent
obligations to purchase, to provide funds for payment, to supply funds, to
invest in any Person or entity, or otherwise to assure a creditor against loss
for which funds are required to be paid; and (g) obligations secured by any
Liens, for which such Person or its assets are liable.
“Indemnified Liabilities” shall have the meaning set forth in Section 10.13(b)
hereof.
“Indemnified Person” shall have the meaning set forth in Section 9.3(b) hereof.
“Indemnified Taxes” shall mean taxes other than Excluded Taxes.
“Independent Director” or “Independent Manager” shall mean a Person who (a) is
not at the time of initial appointment, or at any time while serving as a
director or manager, as applicable, and has not been at any time during the
preceding five (5) years: (i) a stockholder, director (with the exception of
serving as the Independent Director or Independent Manager of a Borrower or
Gaming Member), officer, employee, partner, member (other than a “special
member” or “springing member”), manager, attorney or counsel of any Borrower,
Gaming Member, HRHI or any Affiliate of any of them; (ii) a customer, supplier
or other person who derives any of its purchases or revenues from its activities
with any Borrower, Gaming Member, HRHI or any Affiliate of any of them; (iii) a
Person Controlling or under common Control with any such stockholder, director,
officer, employee, partner, member, manager, customer, supplier or other Person;
or (iv) a member of the immediate family of any such stockholder, director,
officer, employee, partner, member, manager, customer, supplier or other Person
and (b) has (i) prior experience as an independent director or independent
manager for a corporation or limited liability company whose charter documents
required the unanimous consent of all independent directors or independent
managers thereof before such corporation or limited liability company could
consent to the institution of bankruptcy or insolvency proceedings against it or
could file a petition seeking relief under any applicable federal or state law
relating to bankruptcy and (ii) at least three years of employment experience
with one or more nationally-recognized companies that provides, inter alia,
professional independent directors or independent managers in the ordinary
course of their respective business to issuers of securitization or structured
finance instruments, agreements or securities or lenders originating commercial
real estate loans for inclusion in securitization or structured finance
instruments, agreements or

 

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securities and is at all times during his or her service as an Independent
Director or Independent Manager hereunder an employee of such a company. A
natural Person who satisfies the foregoing definition other than subparagraph
(a)(ii) due to such Person’s actions as a hotel guest, casino patron or other
customer of any services provided by a Borrower shall not be disqualified from
serving as an Independent Director or Independent Manager of a Borrower or
Gaming Member, provided that such natural Person satisfies all other criteria
set forth above. Furthermore, a natural Person who satisfies the foregoing
definition except for being (or having been) the independent director or
independent manager of a “special purpose entity” affiliated with any Borrower
or Gaming Member (provided such affiliate does not or did not own a direct or
indirect equity interest in any Borrower or Gaming Member) shall not be
disqualified from serving as an Independent Director or Independent Manager,
provided that such natural Person satisfies all other criteria set forth above.
“Initial Construction Loan Advance” shall mean Lender’s first Construction Loan
Advance funded as of May 30, 2008.
“Initial Maturity Date” shall mean February 9, 2010.
“Initial Renovation Costs” shall mean the costs and expenses of performing the
Initial Renovations as set forth on the Initial Renovations Budget.
“Initial Renovation Reserve Account” shall have the meaning set forth in
Section 7.5.1 hereof.
“Initial Renovation Reserve Fund” shall have the meaning set forth in
Section 7.5.1 hereof.
“Initial Renovations” shall have the meaning set forth in Section 7.5.1 hereof.
“Initial Renovations Budget” shall mean a budget, attached hereto as
Schedule XIII, and all amendments and modifications thereto reasonably approved
by Lender.
“Initial Renovations Shortfall” shall have the meaning set forth in
Section 7.5.2 hereof.
“Insolvency Opinion” shall mean that certain non-consolidation opinion letter
dated February 2, 2007 delivered by Latham & Watkins LLP in connection with the
Loan.
“Insurance Premiums” shall have the meaning set forth in Section 6.1(b) hereof.
“Insurance Proceeds” shall have the meaning set forth in Section 6.4(c) hereof.
“Intellectual Property Security Agreement” shall mean that certain Intellectual
Property Security Agreement, dated as of February 2, 2007, among IP Borrower and
HRHI, as debtors, and Lender, as secured party, as modified by the First Loan
Document Modification Agreement, the First HRHI Modification Agreement, the
Second Loan Document Modification and the HRHI Release and as the same hereafter
may be amended, restated, replaced, supplemented or otherwise modified from time
to time.

 

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“Intercreditor Agreement” shall mean that certain Intercreditor Agreement, dated
as of November 6, 2007, by and among Lender, First Mezzanine Lender, Second
Mezzanine Lender and Third Mezzanine Lender, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time in
accordance with the terms thereof.
“Interest Period” shall mean, with respect to any Payment Date, the period
commencing on the first day of the calendar month that precedes the month in
which such Payment Date occurs and terminating on and including the last day of
the calendar month that precedes the month in which such Payment Date occurs;
provided, however, that (a) the Interest Period in effect on the date of this
Agreement shall be deemed to have commenced on December 9, 2009 and end on
December 31, 2009 and (b) no Interest Period shall end later than the Maturity
Date (other than for purposes of calculating interest at the Default Rate).
“Interest Rate Cap Agreement” shall mean, as applicable, an interest rate cap
agreement (together with the confirmation and schedules relating thereto) in
form and substance reasonably satisfactory to Lender by and among Borrowers and
an Acceptable Counterparty or a Replacement Interest Rate Cap Agreement.
“Interest Reserve Account” shall have the meaning set forth in Section 7.4.1
hereof.
“Interest Reserve Fund” shall have the meaning set forth in Section 7.4.1
hereof.
“IP” shall have the meaning ascribed to such term in Section 4.1.37(a) hereof.
“IP Agreements” shall have the meaning ascribed to such term in
Section 4.1.37(a) hereof.
“IP Borrower” shall have the meaning set forth in the introductory paragraph
hereto, together with its successors and assigns.
“IP License” shall have the meaning set forth in Section 5.1.26(a) hereof.
“IP Material Adverse Effect” shall have the meaning ascribed to such term in
Section 4.1.37(d) hereof.
“IP Release Price” shall have the meaning set forth in Section 2.5.3(a)(v)
hereof.
“IP Sale” shall have the meaning set forth in Section 2.5.3(a) hereof.
“IP Subaccount” shall have the meaning set forth in Section 7.6.4 hereof.
“IP Subaccount Funds” shall have the meaning set forth in Section 2.4.3(g)
hereof.
“Joint Venture” shall mean any Person in which an Affiliate Joint Venture
Counterparty owns a direct and/or indirect ownership interest, whether in the
form of one or more membership interests, one or more partnership interests or
capital stock.
“Junior Holder” shall have the meaning set forth in Section 10.25(a) hereof.

 

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“Junior Participation” shall have the meaning set forth in Section 10.25(a)
hereof.
“Lease” shall mean any lease, sublease or subsublease, letting, license,
concession or other agreement (whether written or oral and whether now or
hereafter in effect) pursuant to which any Person is granted a possessory
interest in, or right to use or occupy all or any portion of any space in any
Property, and (a) every modification, amendment or other agreement relating to
such lease, sublease, subsublease, or other agreement entered into in connection
with such lease, sublease, subsublease, or other agreement, and (b) every
guarantee of the performance and observance of the covenants, conditions and
agreements to be performed and observed by the other party thereto. The
foregoing definition expressly excludes ordinary course hotel room rentals, but
specifically includes the Casino Component Lease.
“Legal Requirements” shall mean, with respect to each Property, all federal,
state, county, municipal and other governmental statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions of Governmental
Authorities affecting such Property or any part thereof, or the construction,
use, alteration or operation thereof, or any part thereof, whether now or
hereafter enacted and in force, including, without limitation, the Gaming Laws
and the Americans with Disabilities Act of 1990, as amended, and all permits,
licenses and authorizations and regulations relating thereto, including, without
limitation, all Governmental Approvals, and all covenants, agreements,
restrictions and encumbrances contained in any instruments, either of record or
known to any Borrower, at any time in force affecting such Property or any part
thereof, including, without limitation, any which may (a) require repairs,
modifications or alterations in or to such Property or any part thereof, or
(b) in any way limit the use and enjoyment thereof.
“Lender” shall have the meaning set forth in the introductory paragraph hereto.
“Lender Monthly Interest Advance” shall have the meaning set forth in
Section 3.20 hereof.
“Lender Successor Owner” shall have the meaning set forth in Section 5.1.23
hereof.
“Letter of Credit” shall mean an irrevocable, unconditional (other than
ministerial conditions), transferable, clean sight draft letter of credit, as
the same may be replaced, split, substituted, modified, amended, supplemented,
assigned or otherwise restated from time to time, (either an evergreen letter of
credit or a letter of credit which does not expire until at least two
(2) Business Days after the Maturity Date or such earlier date as such Letter of
Credit is no longer required pursuant to the terms of this Agreement) in favor
of Lender and entitling Lender to draw thereon based solely on a statement
purportedly executed by an officer of Lender stating that it has the right to
draw thereon, and issued by a domestic Approved Bank or the U.S. agency or
branch of a foreign Approved Bank.
“Letter of Credit Reduction Notice” shall mean a notice, in the form attached
hereto as Exhibit P or in such other form as Lender shall reasonably approve,
requesting that the issuer of any Required Equity Letter of Credit amend such
Required Equity Letter of Credit to evidence a reduction in the amount thereof.
“Liabilities” shall have the meaning set forth in Section 9.3 hereof.

 

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“LIBOR” shall mean, with respect to each Interest Period, the rate (expressed as
a percentage per annum and rounded upward, if necessary, to the next nearest
1/100,000th of 1% (0.00001%)) for deposits in U.S. dollars, for a one-month
period, that appears on Telerate Page 3750 (or the successor thereto) as of
11:00 a.m., London time, on the related Determination Date. If such rate does
not appear on Telerate Page 3750 as of 11:00 a.m., London time, on such
Determination Date, LIBOR shall be the arithmetic mean of the offered rates
(expressed as a percentage per annum) for deposits in U.S. dollars for a
one-month period that appear on the Reuters Screen Libor Page as of 11:00 a.m.,
London time, on such Determination Date, if at least two such offered rates so
appear. If fewer than two such offered rates appear on the Reuters Screen Libor
Page as of 11:00 a.m., London time, on such Determination Date, Lender shall
request the principal London office of any four major reference banks in the
London interbank market selected by Lender in its reasonable discretion to
provide such bank’s offered quotation (expressed as a percentage per annum) to
prime banks in the London interbank market for deposits in U.S. dollars for a
one-month period as of 11:00 a.m., London time, on such Determination Date for
amounts of not less than U.S. $1,000,000. If at least two such offered
quotations are so provided, LIBOR shall be the arithmetic mean of such
quotations. If fewer than two such quotations are so provided, Lender shall
request any three major banks in New York City selected by Lender in its
reasonable discretion to provide such bank’s rate (expressed as a percentage per
annum) for loans in U.S. dollars to leading European banks for a one-month
period as of approximately 11:00 a.m., New York City time on the applicable
Determination Date for amounts of not less than U.S. $1,000,000. If at least two
such rates are so provided, LIBOR shall be the arithmetic mean of such rates.
LIBOR shall be determined conclusively by Lender or its agent, absent manifest
error.
“LIBOR Loan” shall mean the Loan at such time as interest thereon accrues at a
rate of interest based upon LIBOR.
“Licensed IP” shall have the meaning set forth in Section 4.1.37(b) hereof.
“Lien” shall mean, with respect to each Property, any mortgage, deed of trust,
lien, pledge, negative pledge, hypothecation, assignment, security interest, or
any other encumbrance, charge or transfer of, on or affecting any Borrower, the
related Property, any portion thereof or any interest therein, including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, the filing of any financing statement, and mechanic’s, materialmen’s
and other similar liens and encumbrances. For the avoidance of doubt, “Lien”
shall not be deemed to include any Permitted IP Encumbrances.
“Line Item” shall mean a line item of cost or expense set forth in the Loan
Budget, as the same may be adjusted in compliance with the terms hereof.
“Line Item Component” shall have the meaning set forth in Section 3.9(b) hereof.
“Liquor Management Agreement” shall mean, with respect to the Hotel/Casino
Property and, if applicable, the Adjacent Property, that certain Liquor
Management and Employee Services Agreement, dated as of February 2, 2007,
between Hotel/Casino Borrower and HRHI, in its capacity as the Liquor Manager,
as the same may be amended, modified or

 

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supplemented from time to time, pursuant to which the Liquor Manager shall
manage all alcoholic beverage services at the Hotel/Casino Property and, if
applicable, the Adjacent Property, or, if the context requires, a Replacement
Liquor Management Agreement.
“Liquor Manager” shall mean, with respect to the Hotel/Casino Property, HRHI,
or, if the context requires, another Qualified Liquor Manager.
“Loan” shall mean the loan made by Lender to Borrowers pursuant to the Original
Loan Agreement in a maximum principal amount of up to ONE BILLION THREE HUNDRED
SIXTY MILLION and No/100 Dollars ($1,360,000,000.00), which was comprised of the
Original Acquisition Loan and the Construction Loan, and which was evidenced by
the Original Note, which was prepaid with the Mezzanine Loans on November 6,
2007, and the maximum amount of which that may be funded in the future under the
Construction Loan (as defined in the Original Loan Agreement) was increased by
$20,000,000.00 on November 6, 2007, both of the foregoing resulting in a maximum
principal amount of the Loan from and after November 6, 2007 of up to ONE
BILLION THIRTY MILLION and 00/100 Dollars ($1,030,000,000.00), comprised of
(i) the Reduced Acquisition Loan, which is evidenced by the Reduced Acquisition
Loan Note, and (ii) the Construction Loan, which is evidenced by the
Construction Loan Note, and which Loan is otherwise on the terms and conditions
set forth in this Agreement and the other Loan Documents.
“Loan Amount” shall mean a maximum principal amount of up to ONE BILLION THIRTY
MILLION and 00/100 Dollars ($1,030,000,000.00).
“Loan Budget” shall mean the budget for total estimated Project Costs prepared
by Borrowers and approved by Lender in its reasonable discretion, which shall
detail all items of direct and indirect costs estimated to be incurred in
connection with the construction of the Project, and all amendments and
modifications thereto approved by Lender in accordance with this Agreement. The
Loan Budget, as of the date hereof, is attached hereto as Exhibit J.
“Loan Documents” shall mean, collectively, this Agreement, the Notes, the
Mortgage, the Assignment of Leases, the Environmental Indemnity, each O&M
Agreement, the Assignment of Management Agreement, the Assignment of Liquor
Management Agreement, the Intellectual Property Security Agreement, the
Agreement Regarding Morton Indemnification and Escrow, the Assignment of
Contracts, the Non-Recourse Guaranty, the Closing Completion Guaranty, the
Construction Completion Guaranty, the HRHI Guaranty, the HRHI Security
Agreement, the Cash Management Agreement, the Collateral Assignments of Interest
Rate Caps, the Side Letter and all other documents executed and/or delivered in
connection with the Loan, as any of the foregoing are modified by any of the
First Modification Agreements and/or the Second Modification Agreements and as
any of the foregoing hereafter may be amended, restated, replaced, supplemented
or otherwise modified from time to time.
“Loan-to-Value Ratio” shall mean the ratio, as of a particular date, in which
the numerator is equal to the Aggregate Outstanding Principal Balance and the
denominator is equal to the appraised value of the applicable Properties based
on one or more appraisals reasonably acceptable to Lender conducted by one or
more licensed appraisers.

 

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“Lockbox Account” shall have the meaning set forth in Section 2.6.1(a) hereof.
“Lockbox Bank” shall mean Wells Fargo Bank, National Association, or any
successor or permitted assigns thereof.
“London Business Day” shall mean any day other than a Saturday, Sunday or any
other day on which commercial banks in London, England are not open for
business.
“Main Property” shall have the meaning set forth in Section 2.5.1(a)(xii).
“Major Contractor” shall mean the General Contractor and any other contractor
hired by one or more Borrowers or an Affiliate thereof or any subcontractor, in
any of the foregoing instances, approved by Lender in its reasonable discretion,
and either (i) supplying design services, labor and/or materials in connection
with the Project for an aggregate contract price, initially or thereafter by
virtue of Change Orders, equal to or greater than (a) for purposes of the
definition of “Payment and Performance Bonds” set forth below and all provisions
of this Agreement related thereto, and for purposes of all requirements herein
for obtaining Lien waivers (except if a lower amount is otherwise expressly
provided), $2,000,000.00, and (b) for all other provisions of this Agreement,
$5,000,000.00, in each of the foregoing instances, whether pursuant to one
contract or agreement or multiple contracts or agreements, or (ii) which relates
to major design elements such as engineering, traffic flow and landscape
architecture, or (iii) which relates to major project elements such as steel,
concrete, HVAC systems, windows, doors and other similar items; provided, that
in no event shall any Major Contractor (a) be an Affiliate of any Restricted
Party or (b) have any equity interest or any equivalent thereof in any of the
Properties or in any Restricted Party.
“Major Contractor’s Consent” shall mean a Major Contractor Certification and
Consent Agreement executed and delivered by the applicable Major Contractor in
favor of Lender and substantially in the form attached as Exhibit G.
“Major Contracts” shall mean any contract with a Major Contractor.
“Major Lease” shall mean any of the following: (i) any Lease of space at any of
the Properties for retail, restaurant or any other use in excess of 20,000
square feet to a single tenant or by the aggregate of one or more affiliated
tenants, (ii) any Lease of space at any of the Properties for retail, restaurant
or any other use providing for net rental payments (including, without
limitation, percentage rent) in excess of $7,500,000 per annum to a single
tenant or by the aggregate of one or more affiliated tenants, it being
acknowledged and agreed that for purposes of determining whether a new Lease is
a Major Lease, percentage rent shall be estimated based on Lender’s reasonable
underwriting at the time of Lease execution, (iii) any Lease of space at any of
the Properties with an Affiliate of Borrower, or (iv) any Lease that is not the
result of arm’s length negotiations.
“Management Agreement” shall mean, with respect to each Property, the property
management agreement entered into by and between the applicable Borrower or
Borrowers and the applicable Manager, as the same has been and may be amended,
modified or supplemented from time to time, pursuant to which such Manager is to
provide property management and other

 

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services with respect to the Property owned by such Borrower, or, if the context
requires, a Replacement Management Agreement.
“Manager” shall mean Morgans Hotel Group Management LLC or, if the context
requires, a Qualified Manager who is managing any of the Properties.
“Material Action” shall mean any action to consolidate or merge the applicable
Special Purpose Entity with or into any Person, or sell all or substantially all
of the assets of such Special Purpose Entity, or to institute proceedings to
have the Special Purpose Entity be adjudicated bankrupt or insolvent, or consent
to the institution of bankruptcy or insolvency proceedings against the Special
Purpose Entity or file a petition seeking, or consent to, reorganization or
relief with respect to the Special Purpose Entity under any applicable federal
or state law relating to bankruptcy, or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Special Purpose Entity or a substantial part of its property,
or make any assignment for the benefit of creditors of the Special Purpose
Entity, or admit in writing the Special Purpose Entity’s inability to pay its
debts generally as they become due, or declare or effectuate a moratorium on the
payment of any obligation, or take action in furtherance of any such action, or,
to the fullest extent permitted by law, dissolve or liquidate the Special
Purpose Entity.
“Material Change Order” shall mean any Change Order with respect to the Project,
other than with respect to any guaranteed maximum price Major Contract, that,
together with all other Change Orders theretofore entered into with respect to
the Project, (i) increases any Line Item in the Loan Budget in excess of the
greater of (a) ten percent (10%) over the original amount of such Line Item
stated in the Loan Budget, but in no event in excess of $1,000,000.00, or (b)
$500,000.00 over the original amount of such Line Item stated in the Loan
Budget, and/or (ii) increases the aggregate amount of the Loan Budget in excess
of ten percent (10%) over the original amount thereof.
“Maturity Date” shall mean the Initial Maturity Date or, if applicable, the
Qualified Extended Maturity Date, or such other date on which the final payment
of principal of the Notes becomes due and payable as therein or herein provided,
whether at such stated maturity date, by declaration of acceleration, or
otherwise.
“Maximum Legal Rate” shall mean the maximum non-usurious interest rate, if any,
that at any time or from time to time may be contracted for, taken, reserved,
charged or received on the indebtedness evidenced by either Note and as provided
for herein or the other Loan Documents, under the laws of such state or states
whose laws are held by any court of competent jurisdiction to govern the
interest rate provisions of the Loan.
“Merger Agreement” shall mean that certain Agreement and Plan of Merger, dated
as of May 11, 2006, by and among Morgans Hotel Group Co., MHG HR Acquisition
Corp., Hard Rock Hotel, Inc. and Peter A. Morton, as amended by that certain
First Amendment to Agreement and Plan of Merger, dated as of January 30, 2007.
“Mezzanine Prepayment” shall have the meaning set forth in the recitals to this
Agreement.

 

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“Minimum Gaming Account Balance” shall mean $10,000,000.00, as the same may be
increased subject to and in accordance with the provisions of Section 12.3.3
hereof.
“Minor Casualty” shall mean any injury or damage to the Improvements on the
Hotel/Casino Property and/or the Adjacent Property, including any partially
constructed portion of the Project, (i) the cost of which to Restore, together
with any prior such damages which (A) have not yet been Restored or (B) with
respect to which Net Proceeds in an amount sufficient for Restoration have not
yet been received by Borrowers or Lender as required pursuant to this Agreement,
is less than $5,000,000.00, and (ii) is not materially interfering with, and is
not, in Lender’s reasonable judgment, reasonably likely to materially interfere
with, the progress of construction of the Project.
“Moody’s” shall mean Moody’s Investors Service, Inc.
“Monthly Interest Payments” shall mean, collectively, the Reduced Acquisition
Loan Monthly Interest Payment and the Construction Loan Monthly Interest
Payment.
“Monthly Gaming Requirement Certificate” shall have the meaning set forth in
Section 12.2 hereof.
“Morgans Guarantor” shall mean Morgans Group LLC, a Delaware limited liability
company, together with its successors and permitted assigns.
“Morgans Parent” shall mean Morgans Hotel Group Co., a Delaware corporation,
together with its successors and permitted assigns.
“Mortgage” shall mean that certain first priority Construction Deed of Trust,
Assignment of Leases and Rents, Security Agreement and Financing Statement
(Fixture Filing), dated February 2, 2007, executed and delivered by Borrowers as
security for the Loan and encumbering the Properties, as modified by the First
Loan Document Modification Agreement and the Second Mortgage Modification
Agreement, and as the same hereafter may be amended, restated, replaced,
supplemented or otherwise modified from time to time.
“Mortgage and First Mezzanine Debt Service Coverage Ratio” shall mean, as of any
date of determination, a ratio in which:
(a) the numerator is the Net Cash Flow with respect to the immediately preceding
six (6) calendar months as of such date of determination; and
(b) the denominator is the aggregate amount of (a) interest that was due and
payable on the Reduced Acquisition Loan Outstanding Principal Balance and the
Construction Loan Outstanding Principal Balance (computed as if the Construction
Loan has been fully funded), and (b) the interest that was due and payable or
would have been due and payable under the First Mezzanine Loan as determined
based on the contract rate of interest set forth in the First Mezzanine Loan
Agreement without giving effect to any accrual of interest on the First
Mezzanine Loan, in all instances based on such interest that was due and payable
or, as applicable, would have been due and payable for the immediately preceding
six (6) calendar months (provided that for purposes of determining the amount of
such denominator all

 

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computation of interest shall be made assuming the LIBOR component of each
applicable interest rate is equal to the greater of actual LIBOR in effect for
the applicable time period and a rate equal to one percent (1.0%)) .
“Morton” shall mean Peter A. Morton.
“Morton Assigned IP” shall have the meaning set forth in Section 4.1.37(b)
hereof.
“Morton Indemnification” shall mean that certain Indemnification Agreement dated
as of May 11, 2006 between Morgans Hotel Group Co., the indirect parent of each
of the Borrowers, and Morton, as the same has been and may be amended, modified
or supplemented from time to time.
“Named Knowledge Parties” shall have the meaning set forth in Section 4.3
hereof.
“Net Cash Flow” shall mean, for any period, the amount obtained by subtracting
(a)(i) Operating Expenses for the Properties, (ii) monthly contributions to the
Replacement Reserve Fund and (iii) Extraordinary Expenses and/or Pre-Opening
Expenses, in each of the foregoing instances, for such period, from (b) Gross
Income from Operations for such period.
“Net Cash Flow Schedule” shall have the meaning set forth in Section 5.1.11(b)
hereof.
“Net Operating Income” shall mean, for any period, the amount obtained by
subtracting Operating Expenses for the Properties for such period from Gross
Income from Operations for such period.
“Net Proceeds” shall have the meaning set forth in Section 6.4(c) hereof.
“Net Proceeds Deficiency” shall have the meaning set forth in Section 6.4(c)(vi)
hereof.
“Net Worth Requirements” shall mean those requirements set forth on Schedule XV
attached hereto and made a part hereof.
“New Mezzanine Loan” shall have the meaning set forth in Section 9.8 hereof.
“Non-Recourse Guaranty” shall mean that certain Guaranty Agreement, dated as of
February 2, 2007, from Guarantors to Lender, as modified by the First Guaranty
Modification Agreement, the Second Guaranty Modification Agreement and the
Second Loan Document Modification Agreement, and as the same hereafter may be
amended, restated, replaced, supplemented or otherwise modified from time to
time.
“Non-U.S. Lender” shall mean any Lender that is organized under the laws of a
jurisdiction other than laws of the United States of America, any State thereof
or the District of Columbia.
“Note” and “Notes” shall have the meaning set forth in the recitals of this
Agreement.
“Notice” shall have the meaning set forth in Section 10.6 hereof.

 

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“NRS” shall mean the Nevada Revised Statutes, as amended from time to time.
“O&M Agreement” shall mean an Operations and Maintenance Agreement, dated as of
February 2, 2007, by and among a Borrower and Lender given in connection with
the Loan, as modified by the First Loan Document Modification Agreement and the
Second Loan Document Modification Agreement, and as the same hereafter may be
amended, restated, replaced, supplemented or otherwise modified from time to
time. On the Closing Date, O&M Agreements were entered into by each of
Hotel/Casino Borrower and Lender and Adjacent Borrower and Lender.
“Obligations” shall mean, collectively, Borrowers’ obligations for the payment
of the Debt and the performance of the Other Obligations.
“Officer’s Certificate” shall mean a certificate delivered to Lender by a
Borrower or a Guarantor, as applicable, which is signed by an authorized officer
or manager of such Borrower or Guarantor or a Constituent Member thereof, as
applicable, which shall in all events be subject to Section 9.4 hereof.
“Operating Expense Overfunding” shall have the meaning set forth in
Section 5.1.11(d).
“Operating Expense Request” shall have the meaning set forth in Section 2.6.2(b)
hereof.
“Operating Expenses” shall mean, for any period, the total of all expenditures,
computed in accordance with GAAP, of whatever kind during such period relating
to the operation, maintenance and/or management of any of the Properties that
are incurred on a regular monthly or other periodic basis, including without
limitation, utilities, ordinary repairs, maintenance, environmental and
engineering (but excluding utilities) (which ordinary repairs, maintenance,
environmental and engineering (but excluding utilities) for the purposes of this
definition shall be no less than an assumed expense of $400,000.00 per month,
and following the First Full Operating Month, such assumed expense shall
increase to $600,000.00 per month, insurance, license fees, property taxes and
assessments, sales tax, room occupancy tax, live entertainment tax, advertising
expenses, base and incentive management fees, payroll and related taxes,
computer processing charges, tenant improvements and leasing commissions,
interest and fees charged in connection with FF&E, capital and equipment leases,
operational equipment or other lease payments as approved by Lender, and other
similar costs, but excluding depreciation and amortization with respect to the
Properties, Debt Service, debt service under the First Mezzanine Loan, debt
service under the Second Mezzanine Loan, debt service under the Third Mezzanine
Loan, Capital Expenditures, items that would otherwise constitute Project Costs,
Extraordinary Expenses, Pre-Opening Expenses, the cost of any items incurred at
any Manager’s expense pursuant to any Management Agreement, non-recurring
expenses and contributions to the Replacement Reserve Fund, the Tax and
Insurance Escrow Fund and any other reserves required under the Loan Documents.
Operating Expenses shall also include the cost (computed in accordance with
GAAP) of any complimentary food, beverages, hotel room and/or other amenities
provided to any customers or guests of the Hotel/Casino Property, including,
without limitation, under the Casino Component Lease, under the Liquor
Management Agreement and/or

 

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under any Management Agreement. Notwithstanding the foregoing, references herein
to Operating Expenses that are to be funded from amounts on deposit in the Cash
Management Account or from any reserve established hereunder shall refer to
actual Operating Expenses incurred by Borrower in lieu of cash Operating
Expenses computed in accordance with GAAP.
“Operating Permits” shall have the meaning set forth in Section 4.1.22 hereof.
“Original Acquisition Loan” shall mean that portion of the Loan made by Original
Lender to Borrowers on the Closing Date pursuant to the Original Loan Agreement
in the principal amount of $760,000,000.00.
“Original Acquisition Loan Advance” shall mean the advance of the Original
Acquisition Loan made on the Closing Date pursuant to the provisions of the
Original Loan Agreement.
“Original Construction Loan Note” shall have the meaning set forth in the
recitals to this Agreement.
“Original Loan Agreement” shall have the meaning set forth in the recitals to
this Agreement.
“Original Note” shall have the meaning set forth in the recitals to this
Agreement.
“Original Reduced Acquisition Loan Note” shall have the meaning set forth in the
recitals to this Agreement.
“Original Reduced Notes” shall have the meaning set forth in the recitals to
this Agreement.
“Other Charges” shall mean all ground rents, maintenance charges, impositions
other than Taxes, and any other charges, including, without limitation, vault
charges and license fees for the use of vaults, chutes and similar areas
adjoining any Property, now or hereafter levied or assessed or imposed against
such Property or any part thereof.
“Other Obligations” shall mean (a) the performance of all obligations of each
Borrower contained herein; (b) the performance of each obligation of each
Borrower contained in any other Loan Document; and (c) the performance of each
obligation of each Borrower contained in any renewal, extension, amendment,
modification, consolidation, change of, or substitution or replacement for, all
or any part of this Agreement, either of the Notes or any other Loan Documents.
“Other Taxes” means any and all stamp or documentary taxes or any other excise
or property taxes, or similar governmental charges or levies imposed, enacted or
to become effective after the date hereof, arising from any payment made
hereunder or from the execution, delivery or enforcement of, or otherwise with
respect to, this Agreement. Other Taxes shall not include Excluded Taxes.

 

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“Outstanding Principal Balance” shall mean, as of any date, the outstanding
principal balance of the Loan (which shall be comprised of the Reduced
Acquisition Loan Outstanding Principal Balance and the Construction Loan
Outstanding Principal Balance).
“Owned IP” shall have the meaning set forth in Section 4.1.37(b) hereof.
“Partial Release Parcel” shall have the meaning set forth in Section 2.5.1(a)
hereof.
“Payment and Performance Bonds” shall mean dual-obligee payment and performance
bonds relating to each Major Contractor other than the General Contractor,
issued by a surety company or companies and in form and content reasonably
acceptable to Lender, in each case in an amount not less than the full contract
price, together with a dual obligee and modification rider in form reasonably
acceptable to Lender which shall be attached thereto.
“Payment Date” shall mean the first (1st) day of each calendar month during the
term of the Loan or, if such day is not a Business Day, the immediately
preceding Business Day. The first Payment Date was February 9, 2007 for all
purposes of this Agreement other than the payment of the Monthly Interest
Payments (because Borrowers and Lender acknowledge that stub interest through
February 9, 2007 was paid on the Closing Date) and the required deposits to the
Tax and Insurance Escrow Fund (because Borrowers and Lender acknowledge that the
required initial deposit to the Tax and Insurance Escrow Fund through
February 9, 2007 was deposited on the Closing Date), and the first Payment Date
for purposes of the Monthly Interest Payments and the required deposits to the
Tax and Insurance Escrow Fund was March 9, 2007.
“Permitted Adjacent/Café Uses” shall have the meaning set forth in
Section 4.1.11 hereof.
“Permitted Encumbrances” shall mean, with respect to a Property, collectively
(a) the Liens and security interests created by the Loan Documents, (b) all
Liens, encumbrances and other matters disclosed in the Title Insurance Policy
relating to such Property, (c) Liens, if any, for Taxes imposed by any
Governmental Authority not yet delinquent, (d) such other title and survey
exceptions, documents, agreements or instruments as Lender has approved or may
approve in writing in Lender’s reasonable discretion, (e) easements,
restrictions, covenants and/or reservations which are necessary for the
operation of such Property that do not and would not have a material adverse
effect on (i) the business operations, economic performance, assets, financial
condition, equity, contingent liabilities, material agreements or results of
operations of any Borrower, any Guarantor or any Property or (ii) the value of,
or cash flow from, any Property, (f) zoning restrictions and/or laws affecting
such Property that do not and would not have a material adverse effect on (i)
the business operations, economic performance, assets, financial condition,
equity, contingent liabilities, material agreements or results of operations of
any Borrower, any Guarantor or any Property or (ii) the value of, or cash flow
from, any Property, (g) the Liens securing any Existing FF&E Leases and/or any
Permitted Future FF&E Leases, and (h) any other Liens which are being duly
contested in accordance with the provisions of Section 5.1.1 or 5.1.2 hereof or
Section 3.6(b) of the Mortgage, but only for so long as such contest shall be
permitted pursuant to said Section 5.1.1 or 5.1.2 hereof or Section 3.6(b) of
the Mortgage, as applicable.

 

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“Permitted Future FF&E Leases” shall have the meaning set forth in the
definition of “Special Purpose Entity” set forth below.
“Permitted Gaming Expense” shall have the meaning set forth in Section 12.3.2
hereof.
“Permitted Investments” shall have the meaning set forth in the Cash Management
Agreement.
“Permitted IP Encumbrances” shall mean, with respect to the IP, collectively
(a) the Liens and security interests created by the Loan Documents, (b) such
other Liens or security interests as Lender may approve in writing in Lender’s
sole discretion, (c) the Liens on the IP set forth on Schedule XI hereto, which
were extinguished on or prior to the Closing Date, and (d) any other IP
Agreements permitted under this Agreement.
“Person” shall mean any individual, corporation, partnership, joint venture,
limited liability company, estate, trust, unincorporated association, any
federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.
“Personal Property” shall have the meaning set forth in the granting clause of
the Mortgage with respect to each Property.
“Physical Conditions Report” shall mean, with respect to each Property, a report
prepared by a company reasonably satisfactory to Lender regarding the physical
condition of such Property, reasonably satisfactory in form and substance to
Lender.
“Pink Taco IP” shall have the meaning set forth in Section 4.1.37(b) hereof.
“Pink Taco License” shall have the meaning set forth in Section 4.1.37(b)
hereof.
“Plans and Specifications” shall mean the plans and specifications for the
Project prepared by the Architect and reasonably approved by Lender in
accordance with the terms hereof, as the same may be amended and supplemented
from time to time in accordance with the terms of this Agreement (including by
Change Orders).
“Policies” shall have the meaning specified in Section 6.1(b) hereof.
“Pre-Opening Expenses” shall mean any and all actual out-of-pocket costs and
expenses incurred by any Borrower prior to the opening of any separate and
distinct income producing component of the Property, provided that the following
costs and expenses shall not be or be deemed to be a Pre-Opening Expense
hereunder: (a) any Hard Costs and Soft Costs (it being agreed that solely for
purposes of interpreting this definition, Soft Costs shall not include costs of
the nature or scope set forth on the Line Item of the Loan Budget denominated
“Pre-Opening Expenses”) or other costs or expenses incurred in connection with
the construction of the Project and/or such income producing component, (b) any
costs or expenses that support in any manner or are in any way related to the
operation or improvement (beyond the initial opening of any such income
producing component) of any other income producing component of the Property,
(c) any costs or expenses incurred or to be incurred in providing entertainment
to guests,

 

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investors or other Persons in connection with such income producing component
(regardless of when such cost or expense was or is to be incurred), and (d) any
cost or expense (i) constituting an Operating Expense, Capital Expenditure or
Extraordinary Expense, (ii) incurred by any Manager or HRHI (other than in
connection with their respective obligations under the Management Agreement or
Liquor Management Agreement, respectively), (iii) incurred in connection with
the payment of Debt Service and/or debt service under any or all of the First
Mezzanine Loan, Second Mezzanine Loan and/or Third Mezzanine Loan or
(iv) arising in connection with any contributions to any reserves required under
the Loan Documents.
“Prescribed Laws” shall mean, collectively, (a) the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001 (Public Law 107-56) (The USA PATRIOT Act), (b) Executive
Order No. 13224 on Terrorist Financing, effective September 24, 2001, and
relating to Blocking Property and Prohibiting Transactions With Persons Who
Commit, Threaten to Commit, or Support Terrorism, (c) the International
Emergency Economic Power Act, 50 U.S.C. §1701 et. seq., and (d) all other Legal
Requirements relating to money laundering or terrorism.
“Prime Rate” shall mean the annual rate of interest publicly announced by
Citibank, N.A. in New York, New York, as its base rate, as such rate shall
change from time to time. If Citibank, N.A. ceases to announce a base rate,
Prime Rate shall mean the rate of interest published in The Wall Street Journal
from time to time as the “Prime Rate”. If more than one “Prime Rate” is
published in The Wall Street Journal for a day, the average of such “Prime
Rates” shall be used, and such average shall be rounded up to the nearest
one-hundredth (100th) of one percent (1%). If The Wall Street Journal ceases to
publish the “Prime Rate”, Lender shall select an equivalent publication that
publishes such “Prime Rate”, and if such “Prime Rates” are no longer generally
published or are limited, regulated or administered by a governmental or
quasigovernmental body, then Lender shall select a comparable interest rate
index.
“Prime Rate Loan” shall mean the Loan at such time as interest thereon accrues
at a rate of interest based upon the Prime Rate.
“Prime Rate Spread” shall mean the difference (expressed as the number of basis
points) between (a) LIBOR plus the Reduced Acquisition Loan Spread or the
Construction Loan Spread, as applicable, on the date LIBOR was last applicable
to the Loan and (b) the Prime Rate on the date that LIBOR was last applicable to
the Loan; provided, however, in no event shall such difference be a negative
number.
“Prior Day’s Cash Receipts” shall have the meaning set forth in
Section 2.6.1(c).
“Project” shall mean those renovations and improvements (exclusive of the
Initial Renovations) expected to be constructed and performed on the
Hotel/Casino Property and the Adjacent Property in accordance with the terms of
this Agreement and the other Loan Documents, including, without limitation, a
parking facility, an expansion of the hotel and casino on the Hotel/Casino
Property and the construction of an approximately 440 room hotel facility, as
generally described on Schedule II attached hereto and as more particularly
described in the Plans and Specifications.

 

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“Project Costs” shall mean, collectively, all Hard Costs and Soft Costs incurred
or to be incurred in connection with the financing, development, design,
engineering, procurement, installation and construction of the Project until
Final Completion thereof, in each case as set forth in the Loan Budget.
“Property” and “Properties” shall mean, individually and collectively, each and
every one of the Hotel/Casino Property, the Café Property and the Adjacent
Property that, as of any particular date, is subject to the terms of this
Agreement, the Mortgage and the other Loan Documents.
“Provided Information” shall mean any and all financial and other information
prepared and provided by any Borrower, any Manager, HRHI or any Guarantor or
under the supervision or control of any Borrower, any Manager, HRHI or any
Guarantor (but excluding third party independent reports) with respect to one or
more of the Properties, the IP, any Borrower, any First Mezzanine Borrower, any
Second Mezzanine Borrower, any Third Mezzanine Borrower, any Manager, HRHI
and/or any Guarantor.
“Publicly Traded Company” shall mean any Person with a class of securities
traded on a national or international securities exchange and/or registered
under Section 12(b) or 12(g) of the Securities Exchange Act or 1934.
“Punch List Items” shall mean, collectively, minor or insubstantial details of
construction, decoration, mechanical adjustment or installation, which do not
materially hinder or impede the use, operation, or maintenance of the Project.
“Purchaser Licensed IP” shall have the meaning set forth in Section 2.5.3(a)(xi)
hereof.
“PWR/RWB Escrow Agreement” shall mean that certain Escrow Agreement dated as of
May 11, 2006 between PM Realty, LLC, Red, White and Blue Pictures, Inc., Morton,
510 Development Corporation, Morgans Hotel Group Co., the indirect parent of
each of the Borrowers, Morgans Group LLC and Chicago Title Agency of Nevada,
Inc., as the same has been and may be amended, modified or supplemented from
time to time.
“Qualified Extended Maturity Date” shall have the meaning set forth in
Section 2.7.2 hereof.
“Qualified Extension Option” shall have the meaning set forth in Section 2.7.2
hereof.
“Qualified Extension Term” shall have the meaning set forth in Section 2.7.2
hereof.
“Qualified Gaming Operator” shall mean (a) Gaming Borrower or (b) a reputable
and experienced gaming operator (which may be an Affiliate of any Borrower)
possessing experience in supervising, operating and managing gaming activities
at properties similar in size, scope, use and value as the Hotel/Casino
Property, provided, that with respect to any Person under any of the foregoing
clauses (a) or (b), such Person shall have, at all times during its engagement
as Gaming Operator, all required approvals and licenses from all applicable
Governmental Authorities, including, without limitation, all Gaming Authorities,
and provided, further, that with respect to the foregoing clause (b): (i) such
Person shall be reasonably acceptable to Lender

 

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and such Person shall agree to operate the gaming operations at the Hotel/Casino
Property pursuant to one or more written agreements previously approved by
Lender in its reasonable discretion (including, by way of example but without
limitation, a new lease and/or sublease and related recognition agreement),
(ii) after a Securitization has occurred, Borrowers shall have obtained prior
written confirmation from the applicable Rating Agencies that the supervision,
operation and management of the gaming activities at the Hotel/Casino Property
by such Person will not cause a downgrade, withdrawal or qualification of the
then current ratings of the Securities or any class thereof, and (iii) if such
Person is an Affiliate of any Borrower, (A) if such Affiliate was covered in the
Insolvency Opinion or in any subsequent Additional Insolvency Opinion, Borrowers
shall have obtained and delivered to Lender an update of such Insolvency Opinion
or Additional Insolvency Opinion, as applicable, which addresses the new
relationship between such Affiliate and Borrowers, or (B) if such Affiliate was
not covered in the Insolvency Opinion or in any subsequent Additional Insolvency
Opinion, Borrowers shall have obtained and delivered to Lender an Additional
Insolvency Opinion with respect to such Affiliate and Borrowers.
“Qualified Guarantor Transferee” shall mean any one or more of the following:
(a) an investment trust, bank, saving and loan association, insurance company,
trust company, commercial credit corporation, pension plan, pension fund or
pension advisory firm, mutual fund, government entity or plan;
(b) an investment company, money management firm or “qualified institutional
buyer” within the meaning of Rule 144A under the Securities Act, as amended, or
an entity that is an “accredited investor” within the meaning of Regulation D
under the Securities Act, as amended;
(c) an institution substantially similar to any of the entities described in the
foregoing clause (i) or (ii);
(d) any entity Controlling or Controlled by or under common Control with any of
the entities described in the foregoing clause (i) or (ii);
(e) any Person (a) with a long-term unsecured debt rating from the Rating
Agencies of at least Investment Grade or (b) who, together with its Affiliates,
(A)(x) owns in its entirety, or (y) owns a general partnership interest,
managing membership interest or other equivalent ownership and management
interest in, an entity that owns, or (z) operates, at least ten (10) full
service hotels exclusive of the Properties totaling in the aggregate no less
than 3,500 rooms; or
(f) any other Person (including opportunity funds) that has been approved as a
Qualified Guarantor Transferee by the Rating Agencies.
“Qualified Liquor Manager” shall mean either (a) HRHI, (b) Gaming Borrower,
(c) Hotel Casino Borrower, or (d) a reputable and experienced liquor management
organization (which may be an Affiliate of any Borrower) possessing experience
in managing all or substantially all alcoholic beverage services at properties
similar in size, scope, use and value as the Hotel/Casino Property, provided,
that (i) any Person referred to in the foregoing clause (a)

 

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through (d) shall have, at all times during its engagement as the Liquor
Manager, all Governmental Approvals necessary to provide all alcoholic beverage
services at the Hotel/Casino Property, and (ii) with respect to clause (d)
above, (A) after a Securitization has occurred, Borrowers shall have obtained
prior written confirmation from the applicable Rating Agencies that management
of all alcoholic beverage services at the Hotel/Casino Property by such Person
will not cause a downgrade, withdrawal or qualification of the then current
ratings of the Securities or any class thereof, and (B) if such Person is an
Affiliate of any Borrower, (1) if such Affiliate was covered in the Insolvency
Opinion or in any subsequent Additional Insolvency Opinion, Borrowers shall have
obtained and delivered to Lender an update of such Insolvency Opinion or
Additional Insolvency Opinion, as applicable, which addresses the new
relationship between such Affiliate and Borrowers, or (2) if such Affiliate was
not covered in the Insolvency Opinion or in any subsequent Additional Insolvency
Opinion, Borrowers shall have obtained and delivered to Lender an Additional
Insolvency Opinion with respect to such Affiliate and Borrowers.
“Qualified Manager” shall mean either (a) any Manager with respect to the
Property it is managing on the date hereof, or (b) in the reasonable judgment of
Lender, a reputable and experienced property management organization (which may
be an Affiliate of any Borrower or Guarantor) possessing experience in managing
properties similar in size, scope, use and value as the applicable Property,
provided, that with respect to clause (b) above, (i) after a Securitization has
occurred, Borrowers shall have obtained prior written confirmation from the
applicable Rating Agencies that management of the applicable Property by such
Person will not cause a downgrade, withdrawal or qualification of the then
current ratings of the Securities or any class thereof, and (ii) if such Person
is an Affiliate of any Borrower, (A) if such Affiliate was covered in the
Insolvency Opinion or in any subsequent Additional Insolvency Opinion, Borrowers
shall have obtained and delivered to Lender an update of such Insolvency Opinion
or Additional Insolvency Opinion, as applicable, which addresses the new
relationship between such Affiliate and Borrowers, or (B) if such Affiliate was
not covered in the Insolvency Opinion or in any subsequent Additional Insolvency
Opinion, Borrowers shall have obtained and delivered to Lender an Additional
Insolvency Opinion with respect to such Affiliate and Borrowers.
“Qualified Real Estate Guarantor” shall mean (i) Morgans Group LLC or (ii) a
Qualified Guarantor Transferee that is regularly engaged in (x) the business of
making or owning commercial real estate loans (including mezzanine loans with
respect to commercial real estate), (y) operating hospitality properties, or
(z) employing executive level employees with at least ten (10) years of
experience with regard to the same as part of a business segment or business
sector of a Qualified Guarantor Transferee.
“Rank” shall have the meaning set forth in Section 4.1.37(b) hereof.
“Rank IP” shall have the meaning set forth in Section 4.1.37(b) hereof.
“Rank License” shall have the meaning set forth in Section 4.1.37(b) hereof.
“Rating Agencies” shall mean, prior to the final Securitization of the Loan,
each of S&P, Moody’s and Fitch, or any other nationally recognized statistical
rating agency which has been

 

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designated by Lender and, after the final Securitization of the Loan, shall mean
any of the foregoing that have rated any of the Securities.
“Re-Dating” shall have the meaning set forth in Section 9.2 hereof.
“Reduced Acquisition Loan” shall have the meaning set forth in Section 2.1.2
hereof.
“Reduced Acquisition Loan Debt” shall mean the aggregate outstanding principal
amount set forth in, and evidenced by, the Reduced Acquisition Loan Note,
together with all interest accrued and unpaid thereon and all other sums
(including, the applicable Unused Advance Fee, Administrative Agent Fee and Exit
Fee) payable in connection with the applicable transaction due to Lender in
respect of the Reduced Acquisition Loan Note.
“Reduced Acquisition Loan Monthly Interest Payment” shall have the meaning set
forth in Section 2.3.1 hereof.
“Reduced Acquisition Loan Note” shall have the meaning set forth in the recitals
of this Agreement.
“Reduced Acquisition Loan Outstanding Principal Balance” shall mean, as of any
date, the outstanding principal balance of the Reduced Acquisition Loan.
“Reduced Acquisition Loan Spread” shall mean, subject to application of the
Default Rate, 2.3536585366%; provided, however, that if Substantial Completion
has not occurred on or before May 1, 2010, the Reduced Acquisition Loan Spread
shall increase to 2.6305595409% from and including May 1, 2010 through but
excluding the first Payment Date following Substantial Completion, following
which the Reduced Acquisition Loan Spread shall again be 2.3536585366%.
“Refinancing Loan” shall mean a loan or loans (i) the proceeds of which is/are
used in whole or in part to refinance the Loan, and/or (ii) is/are secured by a
lien on any of the Properties and/or the IP and/or the direct or indirect
ownership interests in one or more Borrowers.
“Register” shall have the meaning set forth in Section 10.26.
“Registered,” with respect to any IP, means any IP issued by, registered with,
renewed by or the subject of a pending application before, any Governmental
Authority or Internet domain name registrar.
“Regulation AB” shall mean Regulation AB under the Securities Act and the
Exchange Act, as such Regulation may be amended from time to time.
“Reimbursement Contribution” shall have the meaning set forth in Section 15.2
hereof.
“Related Loan” shall mean a loan to an Affiliate of any Borrower or secured by a
Related Property, that is included in a Securitization with the Loan or any
Component.

 

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“Related Property” shall mean a parcel of real property, together with
improvements thereon and personal property related thereto, that is “related”
within the meaning of the definition of Significant Obligor, to any Property.
“Release Parcel Release Price” shall have the meaning set forth in Section
2.5.1(a)(vi) hereof.
“Release Parcel Purchaser” shall have the meaning set forth in Section 2.5.1(a)
hereof.
“Release Parcel Sale” shall have the meaning set forth in Section 2.5.1(a)
hereof.
“Remaining Adjacent Property” shall mean that portion of the Adjacent Property
that does not constitute the Partial Release Parcel.
“REMIC Requirements” shall have the meaning set forth in Section 2.5.1(a)
hereof.
“Remaining Construction Loan Advance” shall have the meaning set forth in
Section 3.1 hereof.
“Rents” shall mean, with respect to each Property, all rents (including, without
limitation, percentage rents), rent equivalents, moneys payable as damages
(including payments by reason of the rejection of a Lease in a Bankruptcy
Action) or in lieu of rent or rent equivalents, royalties (including, without
limitation, all oil and gas or other mineral royalties and bonuses), income,
receivables, receipts, revenues (including liquor revenues), deposits
(including, without limitation, security deposits, utility deposits and deposits
for rental of rooms, but excluding deposits for rental of banquet space or
business or conference meeting rooms), accounts, cash, issues, profits, charges
for services rendered, all other amounts payable as rent under any Lease or
other agreement relating to any Property (including without limitation the
Liquor Management Agreement or Replacement Liquor Management Agreement and any
future gaming lease or sublease), and other payments and consideration of
whatever form or nature received by or paid to or for the account of or benefit
of any Borrower, any Manager or any of their respective agents or employees from
any and all sources arising from or attributable to any Property and/or the
Improvements thereon, and proceeds, if any, from business interruption or other
loss of income insurance, including, without limitation, all hotel receipts,
revenues and net credit card receipts collected from guest rooms, restaurants,
bars, meeting rooms, banquet rooms and recreational facilities, revenues from
telephone services, internet services, laundry services and television, all
receivables, customer obligations, installment payment obligations and other
obligations now existing or hereafter arising or created out of the sale, lease,
sublease, license, concession or other grant of the right of the use and
occupancy of any Property or rendering of services by any Borrower or any
operator or manager of the hotel or the commercial space located in any of the
Improvements or acquired from others (including, without limitation, from the
rental of any office space, retail space, guest rooms or other space, halls,
stores, and offices, and deposits securing reservations of such space), net
license, lease, sublease and net concession fees and rentals, health club
membership fees, food and beverage wholesale and retail sales, service charges
and vending machine sales.
“Replacement Collateral Assignment of Interest Rate Cap” shall mean any
collateral assignment of Interest Rate Cap Agreement executed by Borrowers for
the benefit of Lender in

 

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connection with any of the Qualified Extension Terms, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time.
“Replacement Interest Rate Cap Agreement” shall mean an interest rate cap
agreement from an Acceptable Counterparty with terms substantially identical to
the Interest Rate Cap Agreement except that the same shall be effective in
connection with replacement of the Interest Rate Cap Agreement following a
downgrade of the long-term unsecured debt rating of the Counterparty; provided,
that with respect to any Replacement Interest Rate Cap Agreement to be delivered
by Borrowers to Lender in connection with Borrower’s exercise of any Extension
Option, the strike price shall be the Strike Price applicable to such Extension
Option being exercised; and, provided, further, that to the extent any such
interest rate cap agreement does not meet the foregoing requirements, a
“Replacement Interest Rate Cap Agreement” shall be such interest rate cap
agreement reasonably approved in writing by Lender.
“Replacement Liquor Management Agreement” shall mean, collectively, (a) either
(i) a management agreement with a Qualified Liquor Manager substantially in the
same form and substance as the Liquor Management Agreement being replaced, or
(ii) a liquor management agreement with a Qualified Liquor Manager, which liquor
management agreement shall be reasonably acceptable to Lender in form and
substance, provided, with respect to this subclause (ii), after the occurrence
of a Securitization, Lender, at its option, may require that Borrowers obtain
confirmation from the applicable Rating Agencies that such liquor management
agreement will not cause a downgrade, withdrawal or qualification of the then
current rating of the Securities or any class thereof; and (b) an assignment of
liquor management agreement and subordination of liquor management fees in a
form reasonably acceptable to Lender, executed and delivered to Lender by
Borrowers and such Qualified Liquor Manager at Borrowers’ expense.
“Replacement Management Agreement” shall mean, collectively, (a) either (i) a
management agreement with a Qualified Manager substantially in the same form and
substance as the Management Agreement being replaced, or (ii) a management
agreement with a Qualified Manager, which management agreement shall be
reasonably acceptable to Lender in form and substance, provided, with respect to
this subclause (ii), after the occurrence of a Securitization, Lender, at its
option, may require that Borrowers obtain confirmation from the applicable
Rating Agencies that such management agreement will not cause a downgrade,
withdrawal or qualification of the then current rating of the Securities or any
class thereof; and (b) an assignment of management agreement and subordination
of management fees substantially in the form then used by Lender (or such other
form and substance reasonably acceptable to Lender), executed and delivered to
Lender by Borrowers and such Qualified Manager at Borrowers’ expense.
“Replacement Reserve Account” shall have the meaning set forth in Section 7.3.1
hereof.
“Replacement Reserve Fund” shall have the meaning set forth in Section 7.3.1
hereof.
“Replacements” shall have the meaning set forth in Section 7.3.1 hereof.

 

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“Requested Disbursement Date” shall have the meaning set forth in Section 3.6
hereof.
“Required Equity Amount” shall mean $130,410,044.52, which was delivered to
Lender by Guarantors on behalf of Borrowers in the form of a Required Equity
Letter of Credit on the Construction Qualification Date.
“Required Equity Letter of Credit” shall mean a Letter of Credit delivered by
Borrowers (or one or more Guarantors on behalf of Borrowers) to satisfy the
requirement to fund the Required Equity Amount or any Subsequent Required Equity
Amount, and which may include certain Letters of Credit delivered previously by
Borrower in connection with certain pre-construction work that was commenced
prior to the Construction Qualification Date, in each case which satisfies the
conditions set forth in Section 3.3(d) hereof.
“Reserve Funds” shall mean, collectively, the Tax and Insurance Escrow Fund, the
Replacement Reserve Fund, the Working Capital Reserve Fund, the Initial
Renovation Reserve Fund, the Interest Reserve Fund, the General Reserve Fund,
any funds on deposit in the Construction Loan Reserve Account, any Shortfall
Funds and any other escrow fund established pursuant to the Loan Documents.
“Restoration” shall mean the repair and restoration of a Property after a
Casualty or Condemnation as nearly as possible to the condition such Property
was in immediately prior to such Casualty or Condemnation, with such alterations
as may be reasonably approved by Lender to the extent required hereunder.
“Restoration Threshold” shall mean Ten Million Dollars ($10,000,000.00).
“Restoration Value Threshold” shall mean that (i) in the case of a Condemnation,
the Net Proceeds are less than 15% of the then current fair market value of the
applicable Property, and (ii) in the case of a Casualty, the Net Proceeds are
less than 30% of the then current fair market value of the applicable Property.
“Restricted Party” shall mean, collectively, each Borrower, each First Mezzanine
Borrower, each Second Mezzanine Borrower, each Third Mezzanine Borrower, HRHI,
HR Holdings and each Guarantor.
“Retainage” shall mean, for each construction contract and subcontract, the
greater of (i) ten percent (10%) of all Hard Costs funded to the Trade
Contractor (or any General Contractor to the extent any General Contractor is
performing the work) under such contract or subcontract until such time as the
work to be provided thereunder is fifty percent (50%) complete as reasonably
determined and certified by the Construction Consultant, at which time the
retainage holdback upon each subsequent payment under such contract or
subcontract shall be reduced to such amount as is necessary to maintain a
retainage holdback, taking into account the amount already being held back,
equal to at least five percent (5%) of the total amount of the applicable
contract or subcontract, including any increases thereto, and (ii) the actual
retainage under such contract or subcontract.
“S&P” shall mean Standard & Poor’s Ratings Group, a division of the McGraw-Hill
Companies.

 

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“Sale or Pledge” shall mean a voluntary or involuntary sale, conveyance,
assignment, transfer, encumbrance or pledge of, or a grant of option with
respect to, a legal or beneficial interest.
“Sale Request” shall have the meaning set forth in Section 2.5.1(a)(i) hereof.
“Second Guaranty Modification Agreement” shall have the meaning set forth in the
recitals of this Agreement.
“Second HRHI Modification Agreement” shall have the meaning set forth in the
recitals of this Agreement.
“Second Loan Document Modification Agreement” shall have the meaning set forth
in the recitals of this Agreement.
“Second Mezzanine Applicable Interest Payment” shall mean (a) with respect to
(i) the interest payment due under the Second Mezzanine Loan on the Payment Date
occurring in January, 2010, $300,207.38, and (ii) each interest payment due
under the Second Mezzanine Loan commencing on and including the interest payment
due on the Payment Date occurring in February, 2010 through and including the
interest payment due on the Payment Date occurring in February, 2011, monthly
interest payments on the Second Mezzanine Loan Outstanding Principal Balance
based on an interest rate equal to “LIBOR” (as defined in the Second Mezzanine
Loan Agreement) plus 2.25%, and (b) with respect to each interest payment due
under the Second Mezzanine Loan on each Payment Date occurring on or after
March, 2011, monthly interest payments on the Second Mezzanine Loan Outstanding
Principal Balance based on an interest rate equal to “LIBOR” plus 2.25%, unless
either (i) the Mortgage and First Mezzanine Debt Service Coverage Ratio is then
equal to or greater than 1.50 to 1.00 or (ii) the Debt Yield is then equal to or
greater than 9.0%, and in either such event, the Second Mezzanine Applicable
Interest Payment shall be equal to the Second Mezzanine Monthly Interest
Payment. Without limiting the foregoing, the interest payments comprising the
Second Mezzanine Applicable Interest Payment shall be computed on the then
outstanding principal balance of the Second Mezzanine Loan, which for purposes
of computing such interest payments shall not include any Second Mezzanine
Initial Accrual Amount or Second Mezzanine Subsequent Accrual Amount.
“Second Mezzanine Borrower” and “Second Mezzanine Borrowers” shall mean,
individually or collectively, as applicable, HRHH Gaming Junior Mezz, LLC, a
Delaware limited liability company, and HRHH JV Junior Mezz, LLC, a Delaware
limited liability company, each in its capacity as a borrower under the Second
Mezzanine Loan, together with its or their successors or permitted assigns.
“Second Mezzanine Cash Management Account” shall mean the “Second Mezzanine Cash
Management Account” established under the Second Mezzanine Loan Documents.
“Second Mezzanine Debt” shall mean the “Debt” as defined in the Second Mezzanine
Loan Agreement.

 

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“Second Mezzanine Default” shall mean a “Default” as defined in the Second
Mezzanine Loan Agreement.
“Second Mezzanine Event of Default” shall mean an “Event of Default” as defined
in the Second Mezzanine Loan Agreement.
“Second Mezzanine Initial Accrual Amount” shall mean the aggregate of all Second
Mezzanine Initial Interest Differential Amounts, together with interest thereon
computed at a rate of interest equal to “LIBOR” (as defined in the Second
Mezzanine Loan Agreement) plus 7.20%, compounded monthly in accordance with the
terms of the Second Mezzanine Loan Agreement.
“Second Mezzanine Initial Interest Differential Amount” shall mean the positive
difference, if any, between (a) the Second Mezzanine Monthly Interest Payment
due on any Payment Date occurring from and after the Payment Date occurring in
January, 2010 through and including the Payment Date occurring in November, 2011
and (b) the Second Mezzanine Applicable Interest Payment payable on each such
date.
“Second Mezzanine Lender” shall mean NRFC WA Holdings, LLC (as successor in
interest to Column Financial, Inc.), in its capacity as holder of the Second
Mezzanine Loan, its successors and assigns.
“Second Mezzanine Loan” shall mean a loan in the original principal amount of
One Hundred Million and No/100 Dollars ($100,000,000.00) made by Second
Mezzanine Lender to Second Mezzanine Borrowers.
“Second Mezzanine Loan Agreement” shall mean that certain First Amended and
Restated Second Mezzanine Loan Agreement dated as of the date hereof between
Second Mezzanine Lender and Second Mezzanine Borrowers, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time subject to the terms of the Intercreditor Agreement.
“Second Mezzanine Loan Documents” shall mean the Second Mezzanine Loan Agreement
and all other documents evidencing and/or securing the Second Mezzanine Loan, as
the same may be amended, restated, replaced, supplemented or otherwise modified
from time to time subject to the terms of the Intercreditor Agreement.
“Second Mezzanine Loan Outstanding Principal Balance” shall mean, as of any
date, the outstanding principal balance of the Second Mezzanine Loan.
“Second Mezzanine Obligations” shall mean the “Obligations” as defined in the
Second Mezzanine Loan Agreement.
“Second Mezzanine Monthly Interest Payment” shall mean the “Monthly Interest
Payment” as defined in the Second Mezzanine Loan Agreement (which Monthly
Interest Payment shall be computed at the contract rate set forth in the Second
Mezzanine Loan Agreement of “LIBOR” (as defined in the Second Mezzanine Loan
Agreement) plus 7.20% or, as applicable, the “Prime Rate” plus the “Prime Rate
Spread” (each as defined in the Second Mezzanine Loan Agreement). Without
limiting the foregoing, the interest payments comprising

 

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the Second Mezzanine Monthly Interest Payment shall be computed on the then
outstanding principal balance of the Second Mezzanine Loan, which for purposes
of computing such interest payments shall not include any Second Mezzanine
Initial Accrual Amount or Second Mezzanine Subsequent Accrual Amount.
“Second Mezzanine Subsequent Accrual Amount” shall mean the aggregate of all
Second Mezzanine Subsequent Interest Differential Amounts, together with
interest thereon computed at a rate of interest equal to “LIBOR” (as defined in
the Second Mezzanine Loan Agreement) plus 7.20%, compounded monthly in
accordance with the terms of the Second Mezzanine Loan Agreement.
“Second Mezzanine Subsequent Interest Differential Amount” shall mean the
positive difference, if any, between (a) the Second Mezzanine Monthly Interest
Payment with respect to any Payment Date occurring from and after the Payment
Date occurring in December, 2011 through and including the Maturity Date (as the
same may be extended in accordance with the terms hereof) and (b) the Second
Mezzanine Applicable Interest Payment payable on each such date.
“Second Modification Agreements” shall mean, collectively, the Second Loan
Document Modification Agreement, the Second Mortgage Modification Agreement, the
Second HRHI Modification Agreement and the Second Guaranty Modification
Agreement.
“Second Mortgage Modification Agreement” shall have the meaning set forth in the
recitals of this Agreement.
“Second Qualified Extended Maturity Date” shall mean February 9, 2012.
“Second Qualified Extension Option” shall have the meaning set forth in Section
2.7.2(b) hereof.
“Second Qualified Extension Term” shall have the meaning set forth in
Section 2.7.2(b) hereof.
“Section 2.6.2(b) Priority Funds” shall have the meanings set forth in Section
2.6.2(b) hereof.
“Section 2.6.2(c) Priority Funds” shall have the meanings set forth in Section
2.6.2(c) hereof.
“Section 7.6.2(b) Accrual/Equity Funds” shall have the meaning set forth in
Section 7.6.2(b) hereof.
“Section 7.6.3 Accrual/Equity Funds” shall have the meaning set forth in
Section 7.6.3 hereof.
“Securities” shall have the meaning set forth in Section 9.1(a) hereof.
“Securities Act” shall have the meaning set forth in Section 9.3 hereof.

 

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“Securitization” shall have the meaning set forth in Section 9.1(a) hereof.
“Servicer” shall have the meaning set forth in Section 9.7 hereof.
“Servicing Agreement” shall have the meaning set forth in Section 9.7 hereof.
“Severed Loan Documents” shall have the meaning set forth in Section 8.2(c)
hereof.
“Shortfall” shall mean, at any given time, the amount by which the sum of
(i) the unfunded portion of the Construction Loan Amount, taking into account
the existing unapplied Contingency Line Items and applying a percentage of
completion analysis with respect thereto, (ii) any General Reserve Funds then on
deposit in the General Reserve Account, if any, and (iii) any funds then on
deposit in the Construction Loan Reserve Account, is less than the actual sum,
as reasonably estimated by Lender (based on advice of Construction Consultant
with respect to construction related costs), which will be required to complete
the Project in accordance with the Plans and Specifications, the Loan Budget and
all Legal Requirements, and to pay all unpaid Project Costs in connection
therewith, excluding, however, the payment of Debt Service, debt service on the
First Mezzanine Loan, debt service on the Second Mezzanine Loan and debt service
on the Third Mezzanine Loan.
“Shortfall Account” shall have the meaning set forth in Section 3.12(b) hereof.
“Shortfall Funds” shall have the meaning set forth in Section 3.12(a) hereof.
“Side Letter” shall mean that certain letter agreement dated as of the date
hereof by and among Borrowers, First Mezzanine Borrowers, Second Mezzanine
Borrowers, Third Mezzanine Borrowers, Lender, First Mezzanine Lender, Second
Mezzanine Lender and Third Mezzanine Lender.
“Significant Obligor” shall have the meaning set forth in Item 1101(k) of
Regulation AB under the Securities Act.
“Soft Costs” shall mean, collectively, the costs set forth in the Loan Budget
which are not Hard Costs, including, without limitation, fees and expenses of
any architect or engineer engaged in connection with the Project, fees and
expenses of Borrowers’ counsel and Lender’s counsel, fees and expenses of the
Construction Consultant and the Administrative Agent, Debt Service, Pre-Opening
Expenses, operating supplies and equipment and such other costs as are set forth
in the Loan Budget.
“Special Purpose Entity” shall mean a limited partnership or limited liability
company that since the date of its formation and at all times on and after the
date thereof, has complied with and shall at all times comply with the following
requirements:
(a) was, is and will be organized solely for the purpose of (i)(A) acquiring,
developing, constructing, owning, holding, selling, leasing, transferring,
exchanging, managing and operating one of the Properties or the IP and
incidental personal and intangible property related thereto, (B) with respect to
Adjacent Borrower, owning all of the membership interests in one or more
Subsidiary Transferees, (C) operating the gaming and/or liquor operations at the

 

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Hotel/Casino Property and owning incidental personal and intangible property
related thereto, (D) entering into the Loan Documents (as and when executed),
including any predecessor loan agreement and documents related thereto,
(E) refinancing its Property or the IP in connection with repayment of the Loan,
and/or (F) transacting lawful business that is incident, necessary and
appropriate to accomplish any of the foregoing; or (ii) acting as a general
partner of the limited partnership that owns one of the Properties or the IP or
that acts as the gaming operator and/or liquor manager at the Hotel/Casino
Property or managing member of the limited liability company that owns one of
the Properties or the IP or that acts as the gaming operator and/or liquor
manager at the Hotel/Casino Property;
(b) has not been and is not engaged in, and will not engage in, any business
unrelated to (i)(A) the construction, financing, acquisition, development,
ownership, management or operation of one of the Properties or the IP and
incidental personal and intangible property related thereto, (B) with respect to
Adjacent Borrower, owning all of the membership interests in one or more
Subsidiary Transferees, or (C) operating the gaming operations and/or liquor
operations at the Hotel/Casino Property and owning incidental personal and
intangible property related thereto, (ii) acting as general partner of the
limited partnership that owns one of the Properties or the IP or that acts as
the gaming operator and/or liquor manager at the Hotel/Casino Property, or
(ii) acting as managing member of the limited liability company that owns one of
the Properties or the IP or that acts as the gaming operator and/or liquor
manager at the Hotel/Casino Property;
(c) has not had, does not have and will not have any assets other than those
related to one of the Properties or the IP or the gaming and/or liquor
operations at the Hotel/Casino Property or, with respect to Adjacent Borrower,
the membership interests in one or more Subsidiary Transferees, or, if such
entity is a general partner in a limited partnership, its general partnership
interest in the limited partnership that owns one of the Properties or the IP or
that acts as the gaming operator and/or liquor manager at the Hotel/Casino
Property, or, if such entity is a managing member of a limited liability
company, its membership interest in the limited liability company that owns one
of the Properties or the IP or that acts as the gaming operator and/or liquor
manager at the Hotel/Casino Property;
(d) has not engaged, sought or consented to, and to the fullest extent permitted
by law, will not engage in, seek or consent to, any: (i) dissolution, winding
up, liquidation, consolidation, merger or sale of all or substantially all of
its assets outside of its ordinary course of business and other than as
expressly permitted in this Agreement; (ii) other than as expressly permitted in
this Agreement, transfer of partnership or membership interests (if such entity
is a general partner in a limited partnership or a managing member in a limited
liability company); or (iii) amendment of its limited partnership agreement,
articles of organization, certificate of formation or operating agreement (as
applicable) with respect to the matters set forth in this definition unless
Lender issues its prior written consent, which consent shall not be unreasonably
withheld, and, after the occurrence of a Securitization, the confirmation in
writing from the applicable Rating Agencies that such amendment will not, in and
of itself, result in a downgrade, withdrawal or qualification of the then
current ratings assigned to any Securities or any class thereof in connection
with any Securitization;

 

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(e) if such entity is a limited partnership, has had, now has, and will have, as
its only general partners, Special Purpose Entities that are limited liability
companies;
(f) if such entity is a limited liability company with more than one member, has
had, now has and will have at least one member that is a Special Purpose Entity
that is a corporation that has at least two (2) Independent Directors that will
not cause or allow the taking of any Material Action with respect to the limited
liability company or its subsidiary(ies) without the unanimous consent of each
Independent Director or a limited liability company that has at least two (2)
Independent Managers that will not cause or allow the taking of any Material
Action with respect to the limited liability company or its subsidiary(ies)
without the unanimous consent of each Independent Manager and that, in either
instance, owns at least one-tenth of one percent (.10%) of the equity of the
limited liability company;
(g) if such entity is a limited liability company with only one member, has
been, now is, and will be, a limited liability company organized in the State of
Delaware that (i) has as its only member a non-managing member; (ii) has at
least two (2) Independent Managers and has not caused or allowed and will not
cause or allow the taking of any “Material Action” (as defined in such entity’s
operating agreement) without the unanimous affirmative vote of one hundred
percent (100%) of the member and such entity’s two (2) Independent Managers;
(iii) at least one (1) springing member (or two (2) springing members if such
springing members are natural persons who will replace a member of such entity
seriatim not simultaneously) that will become a member of such entity upon the
occurrence of an event causing the member to cease to be a member of such
limited liability company; and (iv) whose membership interests constitute and
will constitute “certificated securities”(as defined in the Uniform Commercial
Code of the States of New York and Delaware);
(h) if such entity is (i) a limited liability company, has had, now has and will
have an operating agreement, or (ii) a limited partnership, has had, now has and
will have a limited partnership agreement, that, in each case, provides that
such entity will not: (A) to the fullest extent permitted by law, take any
actions described in Subsection (d)(i) above; (B) engage in any other business
activity, or amend its organizational documents with respect to the matters set
forth in this definition, in each instance, without the prior written consent of
Lender, which consent shall not be unreasonably withheld, and, after the
occurrence of a Securitization, confirmation in writing from the applicable
Rating Agencies that engaging in such other business activity or such amendment,
as applicable, will not, in and of itself, result in a downgrade, withdrawal or
qualification of the then current ratings assigned to any Securities or any
class thereof in connection with any Securitization; or (C) without the
affirmative vote of two (2) Independent Managers and of all the partners or
members of such entity, as applicable (or the vote of two (2) Independent
Managers of its general partner or managing member, if applicable), file a
bankruptcy or insolvency petition or otherwise institute insolvency proceedings
with respect to itself or to any other entity in which it has a direct or
indirect legal or beneficial ownership interest;
(i) has been, is and will remain solvent and has paid and will pay its debts and
liabilities (including, as applicable, shared personnel and overhead expenses)
from its assets as the same have or shall become due, and has maintained, is
maintaining and will maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and

 

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character and in light of its contemplated business operations; provided,
however, this provision shall not require the equity owner(s) of such entity to
make any additional capital contributions; and provided further that in the
event a Funding Borrower makes any Contribution to any other Borrower by paying
any of the debts and liabilities of such other Borrower such Contribution shall
not in and of itself be deemed to violate the provisions of this clause (i) and
shall entitle such Funding Borrower to the benefits set forth in Article XV of
this Agreement;
(j) has not failed and will not fail to correct any known misunderstanding
regarding the separate identity of such entity;
(k) other than as provided in the Cash Management Agreement or in any Management
Agreement with respect to one or more other Borrowers, has maintained and will
maintain its accounts, books and records separate from any other Person (except
other Borrowers) and has filed and will file its own tax returns, except to the
extent that it has been or is (i) required to file consolidated tax returns by
law; or (ii) treated as a “disregarded entity” for tax purposes and is not
required to file tax returns under applicable law;
(l) has maintained and will maintain its own (except with other Borrowers)
records, books, resolutions (if any) and agreements;
(m) other than as provided in the Cash Management Agreement or in any Management
Agreement with respect to one or more other Borrowers, (i) has not commingled
and will not commingle its funds or assets with those of any other Person; and
(ii) has not participated and will not participate in any cash management system
with any other Person;
(n) has held and will hold its assets in its own name;
(o) has conducted and will conduct its business in its name or in a name
franchised or licensed to it by an entity other than an Affiliate of any
Borrower, except for services rendered under a business management services
agreement with an Affiliate that complies with the terms contained in Subsection
(dd) below, so long as the manager, or equivalent thereof, under such business
management services agreement holds itself out as an agent of such Borrower;
(p) has maintained and will maintain its financial statements, accounting
records and other entity documents separate from any other Person and has not
permitted and will not permit its assets to be listed as assets on the financial
statement of any other entity except as required by GAAP (or such other
accounting basis acceptable to Lender); provided, however, that a Borrower’s
assets may be included in a consolidated financial statement of its Affiliate,
provided, that (i) an appropriate notation shall be made on such consolidated
financial statements to indicate its separateness from such Affiliate and to
indicate that its assets and credit are not available to satisfy the debts and
other obligations of such Affiliate or of any other Person and (ii) such assets
shall also be listed on such Special Purpose Entity’s own separate balance
sheet;
(q) has paid and will pay its own liabilities and expenses, including the
salaries of its own employees (if any), out of its own funds and assets, and has
maintained and will maintain, or will enter into a contract with an Affiliate to
maintain, which contract shall be

 

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reasonably satisfactory to Lender in form and substance and shall be subject to
the requirements of clause (dd) below, a sufficient number of employees (if any)
in light of its contemplated business operations; provided, however, this
provision shall not require the equity owner(s) of such entity to make any
additional capital contributions; and provided further that in the event any
Funding Borrower makes any Contribution to any Borrower by paying any of the
liabilities and expenses of such other Borrower such Contribution shall not in
and of itself be deemed to violate the provisions of this clause (q) and shall
entitle such Funding Borrower to the benefits set forth in Article XV of this
Agreement;
(r) has observed and will observe all Delaware or Nevada, as applicable,
partnership or limited liability company formalities, as applicable;
(s) has not incurred and will not incur any Indebtedness other than (i) the
Debt, Taxes and Other Charges, (ii) unsecured trade payables and operational
debt not evidenced by a note and in an aggregate amount not exceeding two
percent (2%) of the then Outstanding Principal Balance (not including any trade
payables in an amount not to exceed $200,000 that are the subject of a good
faith dispute by a Borrower, in appropriate proceedings therefor, and for which
adequate reserves have been established by such Borrower); provided that any
Indebtedness incurred pursuant to subclause (ii) shall be (A) paid within sixty
(60) days of the date incurred (other than attorneys’ and other professional
fees) and (B) incurred in the ordinary course of business, (iii) the FF&E,
capital and equipment leases shown on Schedule V(A) attached hereto and made a
part hereof, provided, that amounts due thereunder shall be paid within sixty
(60) days of the date when due (collectively, the “Existing FF&E Leases”),
(iv) any FF&E, capital and equipment leases hereinafter entered into in
connection with any of the Properties in the ordinary course of business
(including, without limitation, the capital and equipment leases shown on
Schedule V(B)) (such leases, the “Preapproved Equipment Leases”), provided that
the aggregate principal amount payable thereunder (which aggregate principal
amount shall include at all times while the same are outstanding the aggregate
principal amount payable under the PreApproved Equipment Leases) does not exceed
$16,957,739 and shall be paid within sixty (60) days of the date when due (any
such leases, collectively, the “Permitted FF&E Leases”) (it being agreed,
however, that (A) with respect to any Preapproved Equipment Lease with PDS
Gaming as disclosed on Schedule V(B), Borrowers shall be required to deposit
into the Construction Loan Reserve Account in accordance with Section 7.7.1
hereof the gross sales proceeds payable in connection with the sale-leaseback
transaction that will result in the execution of any such Preapproved Equipment
Lease and (B) with respect to any FF&E, capital or equipment lease entered into
prior to, on or after the date hereof, in which the value of the property leased
(as of the date of such lease as reasonably determined by Lender) is equal to or
in excess of $1,000,000, Borrower shall (1) deliver to Lender a subordination,
non-disturbance and attornment agreement reasonably acceptable to Lender
simultaneous with, and as a condition to, the execution of any such lease, in
the event of any such lease which is entered into on or after the date hereof or
(2) use good faith efforts to deliver to Lender on or prior to the date which is
sixty (60) days after the date hereof, a subordination, non-disturbance and
attornment agreement reasonably acceptable to Lender in connection with any such
lease entered into prior to the date hereof) , and (v) any Letters of Credit
required or permitted to be furnished hereunder or any reimbursement obligation
with respect thereto;

 

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(t) except as contemplated under Article XV with respect to any other Borrower,
has not assumed or guaranteed or become obligated for, and will not assume or
guarantee or become obligated for, the debts of any other Person and has not
held out and will not hold out its credit or assets as being available to
satisfy the obligations of any other Person except as permitted pursuant to this
Agreement; except, if such entity is a general partner of a limited partnership,
in such entity’s capacity as general partner of such limited partnership;
(u) has not acquired and will not acquire obligations or securities of its
partners, members or shareholders or any other Affiliate except with respect to
the ownership of the limited liability company interests or partnership
interests (as applicable) of the Special Purpose Entities as shown on the
organizational chart attached to this Agreement as Schedule VI;
(v) has allocated and will allocate fairly and reasonably any overhead expenses
that are shared with any Affiliate, including, but not limited to, paying for
shared office space and services performed by any employee of an Affiliate;
provided, however, to the extent invoices for such services are not allocated
and separately billed to each entity, there is a system in place that provides
that the amount thereof that is to be allocated among the relevant parties will
be reasonably related to the services provided to each such party; and provided
further in the event any Funding Borrower makes any Contribution to any other
Borrower by paying any such overhead expenses of any other Borrower such
Contribution shall not in and of itself be deemed to violate the provisions of
this clause (v) and shall entitle such Funding Borrower to the benefits set
forth in Article XV of this Agreement;
(w) has maintained and used, now maintains and uses and will maintain and use
separate invoices and checks bearing its name. The invoices and checks utilized
by the Special Purpose Entity or utilized to collect its funds or pay its
expenses have borne and shall bear its own name and have not borne and shall not
bear the name of any other entity unless such entity is clearly designated as
being the Special Purpose Entity’s agent;
(x) except as provided in the Loan Documents, First Mezzanine Loan Documents,
Second Mezzanine Loan Documents or Third Mezzanine Loan Documents, as
applicable, has not pledged and will not pledge its assets to secure the
obligations of any other Person;
(y) has held itself out and identified itself and will hold itself out and
identify itself as a separate and distinct entity under its own name or in a
name franchised or licensed to it by an entity other than an Affiliate of any
Borrower and not as a division or department of any other Person, except for
services rendered under a business management services agreement with an
Affiliate that complies with the terms contained in Subsection (dd) below, so
long as the manager, or equivalent thereof, under such business management
services agreement holds itself out as an agent of such Borrower;
(z) except as provided in the Cash Management Agreement or in any Management
Agreement, has maintained and will maintain its assets in such a manner that it
will not be costly or difficult to segregate, ascertain or identify its
individual assets from those of any other Person;

 

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(aa) has not made and will not make loans to, or own or acquire any stock or
securities of, any Person or hold evidence of indebtedness issued by any other
Person or entity (other than cash and investment grade securities issued by an
entity that is not an Affiliate of or subject to common ownership with such
entity;
(bb) has not identified and will not identify its partners, members or
shareholders, or any Affiliate of any of them, as a division or department of
it, and has not identified itself and shall not identify itself as a division of
any other Person;
(cc) except for capital contributions and capital distributions expressly
permitted under the terms and conditions of its organizational documents and
properly reflected in its books and records, has not entered into or been a
party to and will not enter into or be a party to, any transaction with its
partners, members, shareholders or Affiliates except in the ordinary course of
its business and on terms which are commercially reasonable and are no less
favorable to it than would be obtained in a comparable arm’s length transaction
with an unrelated third party;
(dd) except with respect to any indemnity provided to the Independent Managers
(it being acknowledged and agreement that any such indemnification obligations
as may be owed to the Independent Managers shall be expressly subject and
subordinated to the payment in full of the Construction Loan and the Reduced
Acquisition Loan), has not had and will not have any obligation to indemnify,
and has not indemnified and will not indemnify, its partners, officers,
directors or members, as the case may be, unless such an obligation was and is
fully subordinated to the Debt and will not constitute a claim against it in the
event that cash flow in excess of the amount required to pay the Debt is
insufficient to pay such obligation;
(ee) does not and will not have any of its obligations guaranteed by any
Affiliate except for (i) Guarantors pursuant to the Non-Recourse Guaranty, the
Closing Completion Guaranty and the Construction Completion Guaranty, and
(ii) HRHI pursuant to the HRHI Guaranty; provided, that if such entity is a
limited partnership, such entity’s general partner will be generally liable for
its obligations;
(ff) has complied and will comply with all of the terms and provisions contained
in its organizational documents since its formation;
(gg) has not and will not form, acquire or hold any subsidiary or own any equity
interest in any other entity except that Adjacent Borrower may own one or more
Subsidiary Transferees; and
(hh) has no material contingent or actual obligations not related to its purpose
set forth in subparagraph (a) of this definition of Special Purpose Entity.
“State” shall mean the State of Nevada.
“Stored Materials” shall have the meaning set forth in Section 3.11 hereof.
“Strike Price” shall mean, as applicable, with respect to:

 

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(a) the period commencing on the Closing Date through and including the Initial
Maturity Date, five and one-half percent (5.5%) per annum; and
(b) for each Extension Term, a rate to be selected by Borrowers no later than
ten (10) days prior to the first day of such Extension Term, which shall in no
event exceed one percent (1%) in excess of LIBOR as of the most recent
Determination Date.
“Subsequent Construction Loan Reserve Disbursements” shall have the meaning set
forth in Section 3.1(f) hereof.
“Subsequent Required Equity Amount” shall have the meaning set forth in
Section 3.3(d) hereof.
“Subsidiary Transferee” shall have the meaning set forth in Section 2.5.1(f)
hereof.
“Substantial Completion” shall mean the Lien free (subject to Borrowers’ rights
to contest certain Liens as provided in Sections 5.1.1 and 5.1.2 hereof and
Section 3.6(b) of the Mortgage) substantial completion of the Project
substantially in accordance with the Plans and Specifications, all Legal
Requirements and this Agreement, such compliance to be evidenced to the
reasonable satisfaction of Lender and the Construction Consultant, together with
the delivery to Lender of one or more Certificates of Occupancy (if subject to
any conditions, such conditions being reasonably acceptable to Lender) for the
Project (except to the extent third parties under Leases who are not Affiliates
of any Restricted Party have not obtained their Certificate(s) of Occupancy) and
evidence that all other Governmental Approvals have been issued and all other
Legal Requirements have been satisfied as necessary to permit the commencement
at the Project of substantially all gaming, hotel, food and beverage operations
contemplated in the space constituting the Project in accordance with the Plans
and Specifications other than immaterial portions thereof.
“Survey” shall mean a current survey of each of the Properties, certified to the
Title Company and Lender and their successors and assigns, in form and content
reasonably satisfactory to Lender.
“Tax and Insurance Escrow Fund” shall have the meaning set forth in Section 7.2
hereof.
“Taxes” shall mean all real estate and personal property taxes, assessments,
water rates or sewer rents, now or hereafter levied or assessed or imposed
against any Property or part thereof, together with all interest and penalties
thereon.
“Terrorism Cap” shall have the meaning set forth in Section 6.1(a)(x) hereof.
“Terrorism Insurance” shall have the meaning set forth in Section 6.1(a)(x)
hereof.
“Third Mezzanine Applicable Interest Payment” shall mean (a) with respect to
(i) the interest payment due under the Third Mezzanine Loan on the Payment Date
occurring in January, 2010, $207,424.90, and (ii) each interest payment due
under the Third Mezzanine Loan commencing on and including the interest payment
due on the Payment Date occurring in

 

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February, 2010 through and including the interest payment due on the Payment
Date occurring in February, 2011, monthly interest payments on the Third
Mezzanine Loan Outstanding Principal Balance based on an interest rate equal to
“LIBOR” (as defined in the Third Mezzanine Loan Agreement) plus 1.00%, and
(b) with respect to each interest payment due under the Third Mezzanine Loan on
each Payment Date occurring on or after March, 2011, monthly interest payments
on the Third Mezzanine Loan Outstanding Principal Balance based on an interest
rate equal to “LIBOR” (as defined in the Third Mezzanine Loan Agreement) plus
1.00% unless either (i) the Mortgage and First Mezzanine Debt Service Coverage
Ratio is then equal to or greater than 1.50 to 1.00 or (B) the Debt Yield is
then equal to or greater than 9.0%, and in either such event, the Third
Mezzanine Applicable Interest Payment shall be to equal the Third Mezzanine
Monthly Interest Payment. For avoidance of doubt, the interest payments
comprising the Third Mezzanine Applicable Interest Payment shall be computed on
the then outstanding principal balance of the Third Mezzanine Loan, which for
purposes of computing such interest payments shall not include any Third
Mezzanine Initial Accrual Amount or Third Mezzanine Subsequent Accrual Amount.
“Third Mezzanine Borrower” and “Third Mezzanine Borrowers” shall mean,
individually or collectively, as applicable, HRHH Gaming Junior Mezz Two, LLC, a
Delaware limited liability company, and HRHH JV Junior Mezz Two, LLC, a Delaware
limited liability company, each in its capacity as a borrower under the Third
Mezzanine Loan, together with its or their successors or permitted assigns.
“Third Mezzanine Cash Management Account” shall mean the “Third Mezzanine Cash
Management Account” established under the Third Mezzanine Loan Documents.
“Third Mezzanine Construction Funds” shall mean the $10,000,000.00 in proceeds
of the Third Mezzanine Loan funded into the Construction Loan Reserve Account
pursuant to Section 3.4.2 of the Third Mezzanine Loan Agreement on or about
November 30, 2007.
“Third Mezzanine Debt” shall mean the “Debt” as defined in the Third Mezzanine
Loan Agreement.
“Third Mezzanine Default” shall mean a “Default” as defined in the Third
Mezzanine Loan Agreement.
“Third Mezzanine Event of Default” shall mean an “Event of Default” as defined
in the Third Mezzanine Loan Agreement.
“Third Mezzanine Initial Accrual Amount” shall mean the aggregate of all Third
Mezzanine Initial Interest Differential Amounts, together with interest thereon
computed at a rate of interest equal to “LIBOR” (as defined in the Third
Mezzanine Loan Agreement) plus 8.75%, compounded monthly in accordance with the
terms of the Third Mezzanine Loan Agreement.
“Third Mezzanine Initial Interest Differential Amount” shall mean the positive
difference, if any, between (a) the Third Mezzanine Monthly Interest Payment
with respect to any Payment Date occurring from and after the Payment Date
occurring in January, 2010 through and including the Payment Date occurring in
November, 2011 and (b) the Third Mezzanine Applicable Interest Payment payable
on each such date.

 

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“Third Mezzanine Initial Renovation Funds” shall mean the $2,894,363.08 in
proceeds of the Third Mezzanine Loan funded into the Initial Renovation Reserve
Account on November 6, 2007 pursuant to Section 2.1.3.(a) of the Third Mezzanine
Loan Agreement.
“Third Mezzanine Lender” shall mean Hard Rock Mezz Holdings LLC (as successor in
interest to Column Financial, Inc.), in its capacity as holder of the Third
Mezzanine Loan, its successors or assigns.
“Third Mezzanine Loan” shall mean a loan in the original principal amount of up
to Sixty-Five Million and No/100 Dollars ($65,000,000.00) made by Third
Mezzanine Lender to Third Mezzanine Borrowers.
“Third Mezzanine Loan Agreement” shall mean that certain First Amended and
Restated Third Mezzanine Loan Agreement dated as of the date hereof between
Third Mezzanine Lender and Third Mezzanine Borrowers, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time subject to the terms of the Intercreditor Agreement.
“Third Mezzanine Loan Documents” shall mean the Third Mezzanine Loan Agreement
and all other documents evidencing and/or securing the Third Mezzanine Loan, as
the same may be amended, restated, replaced, supplemented or otherwise modified
from time to time subject to the terms of the Intercreditor Agreement.
“Third Mezzanine Loan Outstanding Principal Balance” shall mean, as of any date,
the outstanding principal balance of the Third Mezzanine Loan.
“Third Mezzanine Monthly Interest Payment” shall mean the “Monthly Interest
Payment” as defined in the Third Mezzanine Loan Agreement (which Monthly
Interest Payment shall be computed at the contract rate of interest set forth in
the Third Mezzanine Loan Agreement of LIBOR or Prime Rate, as applicable, plus
8.75%). Without limiting the foregoing, the interest payments comprising the
Third Mezzanine Monthly Interest Payment shall be computed on the then
outstanding principal balance of the Third Mezzanine Loan, which for purposes of
computing such interest payments shall not include any Third Mezzanine Initial
Accrual Amount or Third Mezzanine Subsequent Accrual Amount.
“Third Mezzanine Subsequent Accrual Amount” shall mean the aggregate of all
Third Mezzanine Subsequent Interest Differential Amounts, together with interest
thereon computed at a rate of interest equal to “LIBOR” (as defined in the Third
Mezzanine Loan Agreement) plus 8.75%, compounded monthly in accordance with the
terms of the Third Mezzanine Loan Agreement.
“Third Mezzanine Subsequent Interest Differential Amount” shall mean the
positive difference, if any, between (a) the Third Mezzanine Monthly Interest
Payment with respect to any Payment Date occurring from and after the Payment
Date occurring in December, 2011 through and including the Maturity Date (as the
same may be extended in accordance with the terms hereof) and (b) the Third
Mezzanine Applicable Interest Payment payable on each such date.

 

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“Third Party IP License” shall have the meaning set forth in Section 5.1.26(c)
hereof.
“Third Party Lenders” shall mean third party institutional lenders which are in
the business of providing loans similar to the Refinancing Loans.
“Third Qualified Extended Maturity Date” shall mean February 9, 2013.
“Third Qualified Extension Option” shall have the meaning set forth in Section
2.7.2(c) hereof.
“Third Qualified Extension Term” shall have the meaning set forth in
Section 2.7.2(c) hereof.
“Title Company” shall mean First American Title Insurance Company, or any
successor title company reasonably acceptable to Lender and licensed to issue
title insurance in the State of Nevada.
“Title Insurance Policy” shall mean one or more ALTA mortgagee title insurance
policies in a form reasonably acceptable to Lender (or, if the Properties are in
a State which does not permit the issuance of such ALTA policy, such form as
shall be permitted in such State and reasonably acceptable to Lender) issued
with respect to the Properties and insuring the lien of the Mortgage as against
such Properties, together with any endorsements thereto issued since the Closing
Date or from time to time in accordance with the terms hereof.
“Total Cost Ratio” shall mean, as of any date of determination, a ratio,
expressed as a percentage, in which (i) the numerator is the Aggregate
Outstanding Principal Balance as of such date of determination (less any
Remaining Construction Loan Advance advanced into the Construction Loan Reserve
Account but not yet advanced for payment of Project Costs), and (ii) the
denominator is the Total Costs as of such date of determination.
“Total Costs” shall mean, as of any date of determination, (i) the sum of all
Acquisition Costs and all Project Costs, less (ii) any Release Parcel Release
Price and/or IP Release Price prior to such date of determination.
“Trade Contractor” shall mean any contractor, subcontractor or supplier that
provides labor, materials, equipment or services in connection with the
construction of the Project, including specifically any Major Contractor, but
excluding specifically the Architect.
“Transfer” shall have the meaning set forth in Section 5.2.10(a) hereof.
“Transfer Restricted Party” shall mean, collectively, each Borrower, each First
Mezzanine Borrower, each Second Mezzanine Borrower, each Third Mezzanine
Borrower, each Constituent Member of each Borrower, HRHI, HR Holdings and each
Guarantor.
“Trust” shall have the meaning set forth in Section 10.25(a) hereof.
“Twenty-Five Percent Distribution Provisions” shall have the meaning set forth
in Section 7.6.2(b) hereof.

 

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“Unaffiliated Joint Venture Counterparty” shall mean any party to any Affiliate
Joint Venture other than any Affiliate Joint Venture Counterparty.
“Uniform System of Accounts” shall mean the most recent edition of the Uniform
System of Accounts for Hotels, as adopted by the American Hotel and Motel
Association.
“Unused Advance Fee” shall have the meaning set forth in Section 2.9 hereof.
“U.S. Obligations” shall mean non-redeemable securities evidencing an obligation
to timely pay principal and/or interest in a full and timely manner that are
direct obligations of the United States of America for the payment of which its
full faith and credit is pledged.
“Working Capital Reserve Fund” shall have the meaning set forth in Section 7.1
hereof.
“Working Capital Reserve Account” shall have the meaning set forth in
Section 7.1 hereof.
Section 1.2. Principles of Construction.
(a) All references to sections, subsections, clauses, exhibits and schedules are
to sections, subsections, clauses, exhibits and schedules in or to this
Agreement unless otherwise specified. All uses of the word “including” shall
mean “including, without limitation” unless the context shall indicate
otherwise. Unless otherwise specified, the words “hereof,” “herein” and
“hereunder” and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. All uses in this Agreement of the phrase “any Borrower” shall be
deemed to mean “any one or more of the Borrowers including all of the
Borrowers”. All uses in this Agreement of the phrase “any Property” or “any of
the Properties” shall be deemed to mean “any one or more of the Properties
including all of the Properties”. All uses in this Agreement of the phrase “the
IP” shall be deemed to mean “all or any part of the IP”. Unless otherwise
specified, all meanings attributed to defined terms herein shall be equally
applicable to both the singular and plural forms of the terms so defined.
(b) Without limiting any other provisions contained herein or in the
Intercreditor Agreement, all references herein to terms and/or provisions set
forth in any First Mezzanine Loan Document, Second Mezzanine Loan Document or
Third Mezzanine Loan Document, as applicable, shall refer to such documents as
in effect on the date hereof (taking into consideration the amendments to such
documents being entered into simultaneous with the execution of this Agreement),
without regard to any modifications to any First Mezzanine Loan Document, Second
Mezzanine Loan Document or Third Mezzanine Loan Document (unless and to the
extent such modifications have been expressly consented to by Lender in
writing).
ARTICLE II.
GENERAL TERMS
Section 2.1. Loan Commitment; Disbursement to Borrowers.

 

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2.1.1. Agreement to Lend and Borrow. Subject to and upon the terms and
conditions set forth in the Original Loan Agreement, Lender agreed to make and
Borrowers jointly and severally agreed to accept the Loan.
2.1.2. Acquisition Loan. Borrowers hereby acknowledge and agree that, on the
Closing Date, Lender made the Original Acquisition Loan Advance to Borrowers in
the principal amount of $760,000,000.00, which Original Acquisition Loan Advance
represented a full disbursement of all proceeds of the Original Acquisition
Loan. As a result of the application of the Mezzanine Prepayments to the partial
prepayment of the Original Acquisition Loan on November 6, 2007, and the partial
prepayment made with the Release Parcel Release Price in connection with the
sale of certain property by Adjacent Borrower, the Original Acquisition Loan is
now in the reduced amount of $364,810,499.71 (the “Reduced Acquisition Loan”).
The Reduced Acquisition Loan is evidenced by the Reduced Acquisition Loan Note
and this Agreement, is secured by the Mortgage and the other Loan Documents and
shall be repaid with interest, costs and charges as more particularly set forth
in the Reduced Acquisition Loan Note, this Agreement, the Mortgage and the other
Loan Documents. Principal amounts of the Original Acquisition Loan or the
Reduced Acquisition Loan which are repaid for any reason may not be reborrowed.
Lender did not fund any portion of the Original Acquisition Loan from any
account holding “plan assets” of one or more plans within the meaning of 29
C.F.R. 2510.3-101 unless such Original Acquisition Loan did not constitute a
non-exempt prohibited transaction under ERISA. Borrowers used the proceeds of
the Original Acquisition Loan to (a) directly or indirectly acquire the
Properties and the IP, (b) repay and discharge existing loans relating, directly
or indirectly, to the Properties and/or the IP, (c) make deposits into the
Reserve Funds on the Closing Date in the amounts provided herein, (d) pay costs
and expenses incurred in connection with the closing of the Loan, as reasonably
approved by Lender, as set forth on a sources and uses of funds schedule
executed by Borrowers and Lender on the Closing Date, and (e) for such other
purposes as were reasonably approved by Lender, as set forth on a sources and
uses of funds schedule executed by Borrowers and Lender on the Closing Date.
2.1.3. Construction Loan. Subject to the conditions and upon the terms provided
in the Original Loan Agreement and herein, Lender agreed and hereby agrees to
lend to Borrowers, and Borrowers agreed and hereby agree to borrow from Lender,
the Construction Loan in a maximum principal amount not to exceed the
Construction Loan Amount. As a result of the partial prepayment of the
Construction Loan made in connection with the sale of certain property by
Adjacent Borrower and accounting for advances of the Construction Loan to date,
the Construction Loan Outstanding Principal Balance is $467,443,347.38. The
Construction Loan is evidenced by the Construction Loan Note and this Agreement,
is secured by the Mortgage and the other Loan Documents and shall be repaid with
interest, costs and charges as more particularly set forth in the Construction
Loan Note, this Agreement, the Mortgage and the other Loan Documents. Principal
amounts of the Construction Loan which are repaid for any reason may not be
reborrowed. Lender shall not fund any portion of the Construction Loan from any
account holding “plan assets” of one or more plans within the meaning of 29
C.F.R. 2510.3-101 unless such Construction Loan will not constitute a non-exempt
prohibited

 

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transaction under ERISA. Borrowers have used and shall use the proceeds of the
Construction Loan to pay Project Costs as contemplated hereunder. The
Construction Loan shall be advanced in accordance with the provisions of
Article III hereof.
2.1.4. Maximum Aggregate Loan Amount. Notwithstanding anything contained herein
or in any other Loan Document to the contrary, the aggregate amount advanced
under the Reduced Acquisition Loan and the Construction Loan shall not under any
circumstances exceed the Loan Amount. Other than the disbursement of the
Original Acquisition Loan Advance made on the Closing Date and any Construction
Loan Advances made pursuant to the Original Loan Agreement or this Agreement,
Lender shall have no obligation to loan any additional funds in respect of the
Loan.
Section 2.2. Interest Rate.
2.2.1. Interest Generally. Interest on each of the Reduced Acquisition Loan
Outstanding Principal Balance and the Construction Loan Outstanding Principal
Balance shall accrue from the Closing Date to but excluding the Maturity Date at
the Applicable Interest Rate. Borrowers shall pay to Lender on each Payment Date
the interest accrued on the Loan for the preceding Interest Period.
2.2.2. Interest Calculation. Interest on each of the Reduced Acquisition Loan
Outstanding Principal Balance and the Construction Loan Outstanding Principal
Balance shall be calculated by multiplying (a) the actual number of days elapsed
in the period for which the calculation is being made by (b) a daily rate
determined in accordance with Section 2.2.3 below and based on a three hundred
sixty (360) day year by (c) the Reduced Acquisition Loan Outstanding Principal
Balance or the Construction Loan Outstanding Principal Balance, as applicable.
If, at any time, Lender or Borrowers determine that Lender has miscalculated any
Applicable Interest Rate (whether because of a miscalculation of LIBOR or
otherwise), such party shall notify the other of the necessary correction. Upon
the agreement of the parties as to the correction, if the corrected Applicable
Interest Rate represents an increase in the applicable monthly payment,
Borrowers shall, within ten (10) days after receipt of notice from Lender, pay
to Lender the corrected amount. Upon the agreement of the parties as to the
correction, if the corrected Applicable Interest Rate represents an overpayment
by Borrowers to Lender and no Event of Default then exists, Lender shall
promptly refund the overpayment to Borrowers or, at Borrowers’ option, credit
such amounts against Borrowers’ payment next due hereunder. Without limiting the
foregoing, the parties hereto hereby agree that the Debt Service payment due on
the Payment Date occurring in January, 2010 shall be $1,941,773.03.
2.2.3. Determination of Interest Rate. (a) The Applicable Interest Rate with
respect to each Component shall be: (i) LIBOR plus the Reduced Acquisition Loan
Spread or the Construction Loan Spread, as applicable, with respect to the
applicable Interest Period for a LIBOR Loan or (ii) the Prime Rate plus the
applicable Prime Rate Spread for a Prime Rate Loan if the applicable
Component(s) is/are converted to a Prime Rate Loan pursuant to the provisions of
Section 2.2.3(c) or (f) hereof.

 

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(b) Subject to the terms and conditions of this Section 2.2.3, each Component
shall be a LIBOR Loan and Borrowers shall pay interest on each of the Reduced
Acquisition Loan Outstanding Principal Balance and the Construction Loan
Outstanding Principal Balance at LIBOR plus the Reduced Acquisition Loan Spread
or the Construction Loan Spread, as applicable, for the applicable Interest
Period. Any change in any Applicable Interest Rate hereunder due to a change in
LIBOR shall become effective as of the opening of business on the first day of
the applicable Interest Period.
(c) In the event that Lender shall have determined in good faith (which
determination shall be conclusive and binding upon Borrowers absent manifest
error) that by reason of circumstances affecting the interbank eurodollar
market, adequate and reasonable means do not exist for ascertaining LIBOR, then
Lender shall forthwith give notice by telephone of such determination, confirmed
in writing, to Borrowers at least one (1) Business Day prior to the last day of
the related Interest Period. If such notice is given, any related outstanding
LIBOR Loan shall be converted, on the first day of the next occurring Interest
Period, to a Prime Rate Loan.
(d) If, pursuant to the terms of this Agreement, any portion of the Loan has
been converted to a Prime Rate Loan and Lender shall determine in good faith
(which determination shall be conclusive and binding upon Borrowers absent
manifest error) that the event(s) or circumstance(s) which resulted in such
conversion shall no longer be applicable, Lender shall give notice by telephone
of such determination, confirmed in writing, to Borrowers at least one
(1) Business Day prior to the last day of the related Interest Period. If such
notice is given, each related outstanding Prime Rate Loan shall be converted to
a LIBOR Loan on the first day of the next occurring Interest Period.
(e) (i) Except as otherwise expressly provided in this Section 2.2.3(e), with
respect to a LIBOR Loan, all payments made by Borrowers hereunder shall be made
free and clear of, and without reduction for or on account of, any Indemnified
Taxes or Other Taxes; provided that if Borrowers shall be required to deduct any
Indemnified Taxes or Other Taxes from such payments, then (A) the sum payable
shall be increased as necessary so that after making all such required
deductions (including deductions applicable to additional sums payable under
this Section 2.2.3) the Administrative Agent or Lender (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (B) Borrowers shall make such deductions, and
(C) Borrowers shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law. If Lender gives Borrowers written
notice that any such amounts are payable by Borrowers, Borrowers shall pay all
such amounts to the relevant Governmental Authority in accordance with
applicable Legal Requirements by the later of (1) five (5) Business Days after
receipt of demand from Lender and (2) their due date, and, as promptly as
possible thereafter, such Borrower shall send to Lender an original official
receipt, if available, or certified copy thereof showing payment of such
Indemnified Taxes or Other Taxes.
(ii) Without duplication of any additional amounts paid pursuant to this Section
2.2.3(e), each Borrower shall indemnify the Administrative Agent and Lender,
within ten (10) days after written demand therefor, for the full amount of any
Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes
imposed or

 

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asserted on or attributable to amounts payable under this Section) paid by the
Administrative Agent or Lender, as the case may be, and any penalties, interest
and reasonable expenses arising therefrom or with respect thereto, whether or
not such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority, provided that, if Borrowers
determine that any such Indemnified Taxes or Other Taxes were not correctly or
legally imposed or asserted, the Administrative Agent or the Lender, as
applicable, shall, upon payment by Borrowers of the full amount of any
Indemnified Taxes or Other Taxes, allow Borrowers to contest (and shall
cooperate in such contest), the imposition of such tax upon the reasonable
request of Borrowers and at Borrowers’ expense; provided, however, that the
Administrative Agent or Lender shall not be required to participate in any
contest that would, in its reasonable judgment, expose it to a material
commercial disadvantage or require it to disclose any information it considers
confidential or proprietary. A certificate as to the amount of such payment or
liability delivered to Borrowers by a Lender, or by the Administrative Agent on
its own behalf or on behalf of a Lender (together with any supporting detail
reasonably requested by Borrowers), shall be conclusive, provided that such
amounts are determined on a reasonable basis.
(iii) Any Non-U.S. Lender that is entitled to an exemption from or reduction of
withholding tax under U.S. law, the law of the jurisdiction in which Borrowers
are located (if other than the U.S.), or any treaty to which such jurisdiction
is a party, with respect to payments under this Agreement shall deliver to
Borrowers (with a copy to the Administrative Agent), at the time or times
prescribed by applicable law, or as reasonably requested by Borrowers, such
properly completed and executed documentation prescribed by applicable law or
reasonably requested by Borrowers as will permit such payments to be made
without withholding or at a reduced rate of withholding. Each Non-U.S. Lender
shall deliver to Borrowers and the Administrative Agent (or, in the case of a
participant, to the Lender from which the related participation shall have been
purchased), on or before the date that such Non-U.S. Lender becomes a party to
this Agreement, two (2) properly completed and duly executed copies of U.S.
Internal Revenue Service Form W-8BEN, Form W-8IMY, Form W-8EXP or Form W-8ECI,
as applicable (or successor forms thereto), claiming a complete exemption from,
or reduction of, U.S. federal withholding tax on all payments by Borrowers under
this Agreement. Each Non-U.S. Lender shall promptly provide such forms upon
becoming aware of the obsolescence, expiration or invalidity of any form
previously delivered by such Non-U.S. Lender (unless it is legally unable to do
so as a result of a change in law) and shall promptly notify Borrowers at any
time it determines that any previously delivered forms are no longer valid.
(iv) Lender or any successor and/or assign of Lender that is incorporated under
the laws of the United States of America or a state thereof agrees that, on or
before it becomes a party to this Agreement and from time to time thereafter
before the expiration or obsolescence of the previously delivered form, it will
deliver to Borrowers a United States Internal Revenue Service Form W-9 or
successor applicable form, as the case may be, to establish exemption from
United States backup withholding tax. If required by applicable law, Borrowers
are hereby authorized to deduct from any payments due to Lender pursuant to
Section 2.2.3 hereof the amount of any withholding taxes resulting from Lender’s
failure to comply with this Section 2.2.3(e)(iv).

 

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(v) If the Administrative Agent or a Lender determines, in its reasonable
discretion, that it has received a refund of or will receive a credit for
Indemnified Taxes or Other Taxes with respect to which Borrowers have paid
additional amounts pursuant to this Section 2.2.3(e), it shall pay over to
Borrowers an amount equal to the additional amounts paid by Borrowers under this
Section 2.2.3(e) (with respect to the Indemnified Taxes or Other Taxes giving
rise to such refund or credit), net of all out-of-pocket expenses of the
Administrative Agent or such Lender and without interest (other than any
interest paid by the relevant Governmental Authority with respect to such
refund); provided that Borrowers, upon the request of the Administrative Agent
or such Lender, agrees to repay the amount paid over to Borrowers (plus any
interest to the extent accrued from the date such refund is paid over to
Borrowers) to the Administrative Agent or such Lender in the event the
Administrative Agent or such Lender is required to repay such refund to such
Governmental Authority or is unable to claim the credit. This
Section 2.2.3(e)(v) shall not be construed to require the Administrative Agent
or any Lender to make available its tax returns (or any other information
relating to its taxes which it deems confidential) to Borrowers or any other
Person.
(f) Except as otherwise expressly provided in Section 2.2.3(e) hereof, if any
requirement of law or any change therein or in the interpretation or application
thereof, shall hereafter make it unlawful for Lender to make or maintain a LIBOR
Loan as contemplated hereunder (i) the obligation of Lender hereunder to make a
LIBOR Loan or to convert a Prime Rate Loan to a LIBOR Loan shall be canceled
forthwith and (ii) any outstanding LIBOR Loan shall be converted automatically
to a Prime Rate Loan on the next succeeding Payment Date or within such earlier
period as required by law. Borrowers hereby agree promptly to pay Lender, upon
demand, any additional amounts necessary to compensate Lender for any actual
out-of-pocket costs incurred by Lender in making any conversion in accordance
with this Agreement, including, without limitation, any interest or fees payable
by Lender to lenders of funds obtained by it in order to make or maintain any
LIBOR Loan hereunder; provided that such additional amount is generally charged
by Lender to other borrowers with loans similar to the Loan.
(g) Except as otherwise expressly provided in Section 2.2.3(e) hereof, in the
event that any change in any requirement of law or in the interpretation or
application thereof, or compliance by Lender with any request or directive
having the force of law hereafter issued from any central bank or other
Governmental Authority:
(i) shall hereafter impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by, or
deposits or other liabilities in or for the account of, advances or loans by, or
other credit extended by, or any other acquisition of funds by, any office of
Lender which is not otherwise included in the determination of LIBOR hereunder;
(ii) shall hereafter have the effect of reducing the rate of return on Lender’s
capital as a consequence of its obligations hereunder to a level below that
which Lender could have achieved but for such adoption, change or compliance
(taking into consideration Lender’s policies with respect to capital adequacy)
by any material amount; or

 

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(iii) shall hereafter impose on Lender any other condition and the result of any
of the foregoing is to increase the actual out-of-pocket cost to Lender of
maintaining loans or extensions of credit or to reduce any amount receivable
hereunder;
then, in any such case, Borrowers shall promptly pay Lender, upon demand, any
additional amounts necessary to compensate Lender for such additional cost or
reduced amount receivable; provided that such additional amount is generally
charged by Lender to other borrowers with loans similar to the Loan. If Lender
becomes entitled to claim any additional amounts pursuant to this
Section 2.2.3(g), Lender shall provide Borrowers with not less than ninety
(90) days notice specifying in reasonable detail the event by reason of which it
has become so entitled and the additional amount required to fully compensate
Lender for such additional cost or reduced amount.
(h) Each Borrower agrees to pay to Lender and to hold Lender harmless from any
actual out-of-pocket expense which Lender sustains or incurs as a consequence of
(i) any default by Borrowers in payment of the principal of or interest on any
LIBOR Loan, including, without limitation, any such loss or expense arising from
interest or fees payable by Lender to lenders of funds obtained by it in order
to maintain any LIBOR Loan hereunder, (ii) any prepayment (whether voluntary or
mandatory) of any LIBOR Loan on a day that (A) is not the Payment Date
immediately following the last day of an Interest Period with respect thereto or
(B) is the Payment Date immediately following the last day of an Interest Period
with respect thereto if Borrowers did not give the prior notice of such
prepayment required pursuant to the terms of this Agreement, including, without
limitation, such loss or expense arising from interest or fees payable by Lender
to lenders of funds obtained by it in order to maintain any LIBOR Loan
hereunder, and (iii) the conversion (for any reason whatsoever, whether
voluntary or involuntary) of any Applicable Interest Rate from LIBOR plus the
Reduced Acquisition Loan Spread or the Construction Loan Spread, as applicable,
to the Prime Rate plus the applicable Prime Rate Spread with respect to any
portion of the Reduced Acquisition Loan Outstanding Principal Balance or the
Construction Loan Outstanding Principal Balance, as applicable, then bearing
interest at LIBOR plus the Reduced Acquisition Loan Spread or the Construction
Loan Spread, as applicable, on a date other than the Payment Date immediately
following the last day of an Interest Period, including, without limitation,
such actual out-of-pocket expenses arising from interest or fees payable by
Lender to lenders of funds obtained by it in order to maintain any LIBOR Loan
hereunder (the amounts referred to in clauses (i), (ii) and (iii) are herein
referred to collectively as the “Breakage Costs”); provided, however, that
Borrowers shall not indemnify Lender from any loss or expense arising from
Lender’s willful misconduct, fraud, illegal acts or gross negligence. No
Breakage Costs shall be due or payable if, in connection with any prepayment of
the Loan by Borrowers, Borrowers pay interest through the next Payment Date as
provided in Section 2.4.1 hereof.
(i) Subject to Section 2.2.3(e) above, Lender shall not be entitled to claim
compensation pursuant to this Section 2.2.3 for any Indemnified Taxes or Other
Taxes, increased cost or reduction in amounts received or receivable hereunder,
or any reduced rate of return, which was incurred or which accrued more than
ninety (90) days before the date Lender notified Borrowers in writing of the
change in law or other circumstance on which such claim of compensation is based
and delivered to Borrowers a written statement setting forth in reasonable
detail the basis for calculating the additional amounts owed to Lender under
this Section 2.2.3,

 

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which statement, made in good faith, shall be conclusive and binding upon all
parties hereto absent manifest error.
2.2.4. Additional Costs. Lender will use reasonable efforts (consistent with
legal and regulatory restrictions) to maintain the availability of all LIBOR
Loans and to avoid or reduce any increased or additional costs payable by
Borrowers under Section 2.2.3 hereof, including, if requested by Borrowers, a
transfer or assignment of the Loan to a branch, office or Affiliate of Lender in
another jurisdiction, or a redesignation of its lending office with respect to
the Loan, in order to maintain the availability of all LIBOR Loans or to avoid
or reduce such increased or additional costs, provided that the transfer or
assignment or redesignation (a) would not result in any additional costs,
expenses or risk to Lender that are not separately agreed to by Borrowers to be
reimbursed by Borrowers and (b) would not be disadvantageous in any other
material respect to Lender as determined by Lender in its reasonable discretion.
2.2.5. Default Rate. In the event that, and for so long as, any Event of Default
shall have occurred and be continuing, each of the Reduced Acquisition Loan
Outstanding Principal Balance and the Construction Loan Outstanding Principal
Balance and, to the extent permitted by law, all accrued and unpaid interest in
respect of the Loan and any other amounts due pursuant to the Loan Documents,
shall accrue interest at the Default Rate, calculated from the date such payment
was due without regard to any grace or cure periods contained herein.
2.2.6. Usury Savings. This Agreement, the Notes and the other Loan Documents are
subject to the express condition that at no time shall any Borrower be obligated
or required to pay interest on any portion of the Outstanding Principal Balance
at a rate which could subject Lender to either civil or criminal liability as a
result of being in excess of the Maximum Legal Rate. If, by the terms of this
Agreement or the other Loan Documents, any Borrower is at any time required or
obligated to pay interest on any portion of the Outstanding Principal Balance at
a rate in excess of the Maximum Legal Rate, the Applicable Interest Rate or the
Default Rate, as the case may be, shall be deemed to be immediately reduced to
the Maximum Legal Rate and all previous payments in excess of the Maximum Legal
Rate shall be deemed to have been payments in reduction of principal and not on
account of the interest due hereunder. All sums paid or agreed to be paid to
Lender for the use, forbearance, or detention of the sums due under the Loan,
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full stated term of the Loan until payment
in full so that the rate or amount of interest on account of the Loan does not
exceed the Maximum Legal Rate of interest from time to time in effect and
applicable to the Loan for so long as the Loan is outstanding.
2.2.7. Interest Rate Cap Agreement. (a) Prior to the date hereof, Borrowers
shall have entered into one or more Interest Rate Cap Agreements for each of the
Components with a blended LIBOR strike price equal to the Strike Price. Each
Interest Rate Cap Agreement (i) shall be in a form and substance reasonably
acceptable to Lender, (ii) shall be with an Acceptable Counterparty, (iii) shall
direct such Acceptable Counterparty to deposit directly into the Lockbox Account
any amounts due Borrowers

 

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under such Interest Rate Cap Agreement so long as any portion of the Debt
exists, provided that the Debt shall be deemed to exist even if one or more of
the Properties or the IP is transferred by judicial or non-judicial foreclosure
or deed-in-lieu thereof, (iv) shall be for a period equal to the current term of
the Loan, and (v) when aggregated with all other Interest Rate Cap Agreements,
shall have an initial notional amount equal to the Reduced Acquisition Loan
Outstanding Principal Balance or the Construction Loan Outstanding Principal
Balance, as applicable, as of the date hereof. Borrowers shall collaterally
assign to Lender, pursuant to the Collateral Assignments of Interest Rate Caps,
all of its right, title and interest to receive any and all payments under all
Interest Rate Cap Agreements, and shall deliver to Lender an executed
counterpart of such Interest Rate Cap Agreements (which shall, by their
respective terms, authorize the assignment to Lender and require that payments
be deposited directly into the Lockbox Account).
(b) Borrowers shall comply with all of their obligations under the terms and
provisions of each Interest Rate Cap Agreement. All amounts paid by the
Counterparty under each Interest Rate Cap Agreement to Borrowers or Lender shall
be deposited immediately into the Lockbox Account. Borrowers shall take all
actions reasonably requested by Lender to enforce Lender’s rights under each
Interest Rate Cap Agreement in the event of a default by the Counterparty and
shall not waive, amend or otherwise modify any of its rights thereunder.
(c) In the event of any downgrade of the rating of the Acceptable Counterparty
below “A+” by S&P or “A1” by Moody’s, Borrowers shall replace the applicable
Interest Rate Cap Agreement(s) with one or more Replacement Interest Rate Cap
Agreements not later than ten (10) Business Days following receipt of notice
from Lender of such downgrade.
(d) In the event that Borrowers fail to purchase and deliver to Lender any
Interest Rate Cap Agreement or fail to maintain each Interest Rate Cap Agreement
in accordance with the terms and provisions of this Agreement, after ten
(10) Business Days notice to Borrowers and Borrowers’ failure to cure, Lender
may purchase the required Interest Rate Cap Agreement(s) and the actual
out-of-pocket cost incurred by Lender in purchasing such Interest Rate Cap
Agreement(s) shall be paid by Borrowers to Lender with interest thereon at the
Default Rate from the date such cost was incurred by Lender until such actual
out-of-pocket cost is reimbursed by Borrowers to Lender.
(e) In connection with each Interest Rate Cap Agreement, Borrowers shall obtain
and deliver to Lender an opinion from counsel (which counsel may be in-house
counsel for the Counterparty) for the Counterparty (upon which Lender and its
successors and assigns may rely) which shall provide, in relevant part, that:
(i) the Counterparty is duly organized, validly existing, and in good standing
under the laws of its jurisdiction of incorporation and has the organizational
power and authority to execute and deliver, and to perform its obligations
under, such Interest Rate Cap Agreement;

 

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(ii) the execution and delivery of such Interest Rate Cap Agreement by the
Counterparty, and any other agreement which the Counterparty has executed and
delivered pursuant thereto, and the performance of its obligations thereunder
have been and remain duly authorized by all necessary action and do not
contravene any provision of its certificate of incorporation or by-laws (or
equivalent organizational documents) or any law, regulation or contractual
restriction binding on or affecting it or its property;
(iii) all consents, authorizations and approvals required for the execution and
delivery by the Counterparty of such Interest Rate Cap Agreement, and any other
agreement which the Counterparty has executed and delivered pursuant thereto,
and the performance of its obligations thereunder have been obtained and remain
in full force and effect, all conditions thereof have been duly complied with,
and no other action by, and no notice to or filing with any governmental
authority or regulatory body is required for such execution, delivery or
performance; and
(iv) such Interest Rate Cap Agreement, and any other agreement which the
Counterparty has executed and delivered pursuant thereto, has been duly executed
and delivered by the Counterparty and constitutes the legal, valid and binding
obligation of the Counterparty, enforceable against the Counterparty in
accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors’ rights generally, and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
(f) At such time as the Loan is repaid in full, all of Lender’s right, title and
interest in all Interest Rate Cap Agreements shall terminate and Lender shall,
at Borrowers’ reasonable expense, promptly execute and deliver such documents as
may be reasonably required and prepared by the Counterparty and/or Borrowers to
evidence release of each Interest Rate Cap Agreement.
Section 2.3. Loan Payment.
2.3.1. Payments Generally. Borrowers shall pay to Lender on each Payment Date
(a) the interest accrued on the Reduced Acquisition Loan for the preceding
Interest Period (the “Reduced Acquisition Loan Monthly Interest Payment”), and
(b) the interest accrued on the Construction Loan for the preceding Interest
Period (the “Construction Loan Monthly Interest Payment”), except that Borrowers
paid to Lender an amount equal to the interest accrued on the Outstanding
Principal Balance for the initial Interest Period on the Closing Date. For
purposes of making payments hereunder, but not for purposes of calculating
Interest Periods, if the day on which such payment (including, without
limitation, payments due on the Maturity Date) is due is not a Business Day,
then amounts due on such date shall be due on the immediately preceding Business
Day. With respect to payments of principal due on the Maturity Date, interest
shall be payable at the Applicable Interest Rate or the Default Rate, as the
case may be, through and including the day immediately preceding such Maturity
Date. All amounts due pursuant to this Agreement and the other Loan Documents
shall be payable without setoff, counterclaim, defense or any other deduction
whatsoever, except as otherwise expressly provided in Section 2.2.3(e) hereof.

 

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Lender shall have the right from time to time, in its sole discretion, upon not
less than ten (10) days prior written notice to Borrowers, to change the monthly
Payment Date to a different calendar day and to correspondingly adjust the
Interest Period and Lender and Borrowers shall promptly execute an amendment to
this Agreement to evidence any such changes.
2.3.2. Payment on Maturity Date. Borrowers shall pay to Lender on the Maturity
Date the Outstanding Principal Balance, all accrued and unpaid interest, the
Exit Fee and all other amounts due hereunder and under the Notes, the Mortgage
and the other Loan Documents.
2.3.3. Late Payment Charge. If any principal, interest or any other sums due
under the Loan Documents (other than the payment of principal due on the
Maturity Date) is not paid by Borrowers by the date on which it is due,
Borrowers shall pay to Lender upon demand an amount equal to the lesser of
(a) four percent (4%) of such unpaid sum or (b) the maximum amount permitted by
applicable law, in order to defray the expense incurred by Lender in handling
and processing such delinquent payment and to compensate Lender for the loss of
the use of such delinquent payment. Any such amount shall be secured by the
Mortgage and the other Loan Documents to the extent permitted by applicable law.
2.3.4. Method and Place of Payment. Except as otherwise specifically provided
herein, all payments and prepayments under this Agreement and the Notes shall be
made to Lender not later than 2:00 P.M., New York City time, on the date when
due and shall be made in lawful money of the United States of America in
immediately available funds at Lender’s office at 156 West 56th Street,
Suite 1900, New York, New York 10019, Attention: Jesse Hom, or as otherwise
directed by Lender, and any funds received by Lender after such time shall, for
all purposes hereof, be deemed to have been paid on the next succeeding Business
Day.
Section 2.4. Prepayments.
2.4.1. Voluntary Prepayments.
(a) From and after the date hereof, so long as no Event of Default has occurred
and is continuing, Borrowers may, at their option and upon at least ten
(10) days prior written notice to Lender (or such shorter period as may be
permitted by Lender), prepay the Debt in whole or in part, but in no event shall
any partial prepayment be less than $1,000,000.00; provided that any prepayment
is accompanied by (i) if such prepayment occurs on a date other than a Payment
Date, all interest which would have accrued on the amount of each Component paid
(in accordance with Section 2.4.3(a) hereof) through, but not including, the
first (1st) day of the next succeeding calendar month, or, if such prepayment
occurs on a Payment Date, through and including the last day of the Interest
Period that commenced immediately prior to the applicable Payment Date; (ii) the
Exit Fee; and (iii) all other sums due and payable under this Agreement, the
Notes, and the other Loan Documents, including, but not limited to, the Breakage
Costs, if any, and all of Lender’s costs and expenses (including reasonable
attorney’s fees and disbursements) incurred by Lender in connection with such
prepayment. If a notice of prepayment is given by Borrowers to Lender pursuant
to this Section 2.4.1, the amount

 

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designated for prepayment and all other sums required under this Section 2.4
shall be due and payable on the proposed prepayment date; provided, however,
Borrowers shall have the right to postpone or revoke such prepayment upon
written notice to Lender not less than two (2) Business Days prior to the date
such prepayment is due so long as Borrowers pay Lender and/or Servicer all
actual out-of-pocket third party costs and expenses incurred by Lender and/or
Servicer in connection with such postponement or revocation.
(b) Notwithstanding anything to the contrary contained herein, Borrowers and
Lender expressly acknowledge and agree that on November 6, 2007, Borrowers, with
the permission of Lender, made Mezzanine Prepayments of the Loan in the
aggregate amount of $350,000,000.00 and that no portion of such prepaid amount
of the Loan shall be readvanced to Borrowers or any other Person.
2.4.2. Application of Net Proceeds.
(a) On the next occurring Payment Date following the date on which Lender
actually receives any Net Proceeds, if Lender is not obligated to, and does not
otherwise elect in its sole discretion to, make such Net Proceeds available to
Borrowers for Restoration in accordance with Section 6.4 hereof, Borrowers shall
prepay, or authorize Lender to apply Net Proceeds as a prepayment of, the
Outstanding Principal Balance in an amount equal to one hundred percent (100%)
of such Net Proceeds. No penalty or premium shall be due in connection with any
prepayment made pursuant to this Section 2.4.2(a) (but the Exit Fee and any
related Breakage Costs shall be payable in connection with any such prepayment).
Any prepayment under this Section 2.4.2(a) shall be applied in accordance with
Section 2.4.3(c) hereof. Any Net Proceeds in excess of the amount required to
pay the Debt in full (including the Exit Fee and any related Breakage Costs)
shall be (a) disbursed by Lender to First Mezzanine Lender for application in
accordance with the terms of the First Mezzanine Loan Documents if the First
Mezzanine Debt (or any portion thereof) is then outstanding, until the First
Mezzanine Debt is paid in full, and then (b) disbursed by First Mezzanine Lender
to Second Mezzanine Lender for application in accordance with the terms of the
Second Mezzanine Loan Documents if the Second Mezzanine Debt (or any portion
thereof) is then outstanding, until the Second Mezzanine Debt is paid in full,
and then (c) disbursed by Second Mezzanine Lender to Third Mezzanine Lender for
application in accordance with the terms of the Third Mezzanine Loan Documents
if the Third Mezzanine Debt (or any portion thereof) is then outstanding, until
the Third Mezzanine Debt is paid in full, and then (d) the balance disbursed
shall be disbursed by Third Mezzanine Lender to Borrowers.
(b) Intentionally Deleted.
(c) Intentionally Deleted.
(d) Intentionally Deleted.
(e) Intentionally Deleted.
(f) Intentionally Deleted.

 

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2.4.3. Application of Payments of Principal. Notwithstanding anything to the
contrary contained in this Agreement, the following principal payments shall be
allocated among the Loan (without limiting any other provisions set forth
herein, Borrowers hereby acknowledge and agree that an Exit Fee shall be payable
in connection with any principal prepayment of all or any portion of the Loan),
the First Mezzanine Loan, the Second Mezzanine Loan and the Third Mezzanine Loan
as follows:
(a) so long as no Event of Default shall have occurred and be continuing, any
voluntary prepayment, including, without limitation, any prepayment pursuant to
Section 2.7.3 or Section 3.3(d) hereof, shall be applied in the following order
(i) first, to the Reduced Acquisition Loan Debt, until such Reduced Acquisition
Loan Debt is paid in full, (ii) then, to the Construction Loan Debt, until such
Construction Loan Debt is paid in full, (iii) then, any remaining amounts shall
be disbursed by Lender to First Mezzanine Lender to be applied to the First
Mezzanine Debt, until the First Mezzanine Debt is paid in full, (iv) then, any
remaining amounts shall be disbursed by First Mezzanine Lender to Second
Mezzanine Lender to be applied to the Second Mezzanine Debt, until the Second
Mezzanine Debt is paid in full, (v) then, any remaining amounts shall be
disbursed by Second Mezzanine Lender to Third Mezzanine Lender to be applied to
the Third Mezzanine Debt, until the Third Mezzanine Debt is paid in full;
provided, however, that upon the occurrence and during the continuance of an
Event of Default, Lender shall apply any voluntary prepayment first, to payment
of the Debt (including, without limitation, the Exit Fee), in any order,
priority and proportion as Lender shall elect in its sole discretion from time
to time, until the Debt (including, without limitation, the Exit Fee) is paid in
full, and (A) Lender shall then disburse any remainder to First Mezzanine Lender
for application in accordance with the terms of the First Mezzanine Loan
Documents if the First Mezzanine Debt (or any portion thereof) is then
outstanding, until the First Mezzanine Debt is paid in full, and then (B) First
Mezzanine Lender shall then disburse any remainder to Second Mezzanine Lender
for application in accordance with the terms of the Second Mezzanine Loan
Documents if the Second Mezzanine Debt (or any portion thereof) is then
outstanding, until the Second Mezzanine Debt is paid in full, and then
(C) Second Mezzanine Lender shall then disburse any remainder to Third Mezzanine
Lender for application in accordance with the terms of the Third Mezzanine Loan
Documents if the Third Mezzanine Debt (or any portion thereof) is then
outstanding, until the Third Mezzanine Debt is paid in full, and then (D) Third
Mezzanine Lender shall then disburse the balance, if any, to Borrowers;
(b) Intentionally Deleted;
(c) all Net Proceeds not required to be made available for Restoration, and as
to which Lender has not otherwise elected in its sole discretion to make
available for Restoration, shall be applied first, to the Debt (including,
without limitation, the Exit Fee and any related Breakage Costs), in such order,
priority and proportion as Lender shall elect in its discretion from time to
time, until the Debt (including, without limitation, the Exit Fee) is paid in
full, and (i) then, Lender shall disburse any remaining amounts to First
Mezzanine Lender to be applied to the First Mezzanine Debt, until the First
Mezzanine Debt is paid in full, (ii) then, First Mezzanine Lender shall disburse
any remaining amounts to Second Mezzanine Lender to be applied to the Second
Mezzanine Debt, until the Second Mezzanine Debt is paid in full, (iii) then,
Second Mezzanine Lender shall disburse any remaining amounts to Third Mezzanine

 

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Lender to be applied to the Third Mezzanine Debt, until the Third Mezzanine Debt
is paid in full, and (vi) then, Third Mezzanine Lender shall disburse any
remaining amounts to Borrowers;
(d) any Reserve Funds or other cash collateral held by or on behalf of Lender,
whether in the Cash Management Account, the Tax and Insurance Escrow Account,
the Replacement Reserve Account, the Working Capital Reserve Account, the
Initial Renovation Reserve Account, the Interest Reserve Account, the General
Reserve Account, the Construction Loan Reserve Account, the Shortfall Account or
otherwise, including, without limitation, any Net Proceeds and/or any Excess
Cash Flow then being held by Lender, shall, upon the occurrence and during the
continuance of an Event of Default, be applied by Lender as follows or may
continue to be held by Lender as additional collateral for the Loan, all in
Lender’s sole discretion: first, to the Debt (including, without limitation, the
Exit Fee), in any order, priority and proportions as Lender shall elect in its
sole discretion from time to time, until the Debt (including, without
limitation, the Exit Fee) is paid in full, and then (i) disbursed by Lender to
First Mezzanine Lender for application in accordance with the terms of the First
Mezzanine Loan Documents if the First Mezzanine Debt (or any portion thereof) is
then outstanding, until the First Mezzanine Debt is paid in full, and then
(ii) disbursed by First Mezzanine Lender to Second Mezzanine Lender for
application in accordance with the terms of the Second Mezzanine Loan Documents
if the Second Mezzanine Debt (or any portion thereof) is then outstanding, until
the Second Mezzanine Debt is paid in full, and then (iii) disbursed by Second
Mezzanine Lender to Third Mezzanine Lender for application in accordance with
the terms of the Third Mezzanine Loan Documents if the Third Mezzanine Debt (or
any portion thereof) is then outstanding, until the Third Mezzanine Debt is paid
in full, and then (iv) the balance, if any, disbursed by Third Mezzanine Lender
to Borrowers;
(e) the proceeds of any Release Parcel Release Price shall be applied in the
following order (i) first, to the Reduced Acquisition Loan Debt, until such
Reduced Acquisition Loan Debt is paid in full, (ii) then, to the Construction
Loan Debt, until such Construction Loan Debt is paid in full, (iii) then, any
remaining amounts shall be disbursed by Lender to First Mezzanine Lender to be
applied to the First Mezzanine Debt, until the First Mezzanine Debt is paid in
full, (iv) then, any remaining amounts shall be disbursed by First Mezzanine
Lender to Second Mezzanine Lender to be applied to the Second Mezzanine Debt,
until the Second Mezzanine Debt is paid in full, (v) then, any remaining amounts
shall be disbursed by Second Mezzanine Lender to Third Mezzanine Lender to be
applied to the Third Mezzanine Debt, until the Third Mezzanine Debt is paid in
full, and (vi) then any remaining amounts shall be disbursed by Third Mezzanine
Lender to Borrowers;
(f) Intentionally Deleted;
(g) the proceeds of any IP Release Price shall be allocated as follows: (i) the
first $60,000,000 of any such IP Release Price payable in connection with each
IP Sale, shall be applied in the following order (A) first, to the Reduced
Acquisition Loan Debt, until such Reduced Acquisition Loan Debt is paid in full,
(B) then, to the Construction Loan Debt, until such Construction Loan Debt is
paid in full, (C) then, any remaining amounts shall be disbursed to First
Mezzanine Lender to be applied to the First Mezzanine Debt, until the First
Mezzanine Debt is paid in full, (D) then, any remaining amounts shall be
disbursed to Second Mezzanine Lender to be applied to the Second Mezzanine Debt,
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Debt is paid in full, and (E) then, any remaining amounts shall be disbursed to
Third Mezzanine Lender to be applied to the Third Mezzanine Debt, until the
Third Mezzanine Debt is paid in full; and (ii) in the event the proceeds of any
IP Release Price payable in connection with any IP Sale exceed $60,000,000 (the
“Excess IP Release Price Proceeds”), such Excess IP Release Price Proceeds shall
be applied as follows: (A) seventy-five percent (75%) of such Excess IP Release
Price Proceeds shall be applied to the payment of the Loan in the following
order: (1) first, to the Reduced Acquisition Loan Debt, until such Reduced
Acquisition Loan Debt is paid in full and (2) second, to the Construction Loan
Debt, until such Construction Loan Debt is paid in full, and (B) the balance of
such Excess IP Release Price Proceeds after application in accordance with the
foregoing clause (1), shall be applied as follows: (1) first, an amount equal to
the lesser of (I) twelve and one-half percent (12.5%) of the Excess IP Release
Price Proceeds or (II) the amount which when added to the then current balance
of the General Reserve Fund would cause the General Reserve Fund Cap to be met,
shall be deposited in the General Reserve Fund to be held and applied in
accordance with the terms hereof and (2) after deposit of the amounts described
in clause (1) above, the balance of the Excess IP Release Price Proceeds (such
amounts described in subclauses (1) and (2) of this Section 2.4.3(g), the “IP
Subaccount Funds”) shall be deposited in the IP Subaccount to be held and
applied in accordance with the terms of Section 7.6.4 hereof;
(h) all Rents received by Lender upon the occurrence and during the continuance
of an Event of Default pursuant to Section 3.1 of the Assignment of Leases shall
be applied by Lender as follows or may continue to be held by Lender as
additional collateral for the Loan, all in Lender’s sole discretion: first,
(i) to the expenses of managing and securing any of the Properties, as
contemplated by clause (a) of said Section 3.1 of the Assignment of Leases,
and/or (ii) to the Reduced Acquisition Loan Debt, until the Reduced Acquisition
Loan Debt is paid in full, then to the Construction Loan Debt, until the
Construction Loan Debt is paid in full, and then (A) disbursed to First
Mezzanine Lender for application in accordance with the terms of the First
Mezzanine Loan Documents if the First Mezzanine Debt (or any portion thereof) is
then outstanding, until the First Mezzanine Debt is paid in full, and then
(B) disbursed to Second Mezzanine Lender for application in accordance with the
terms of the Second Mezzanine Loan Documents if the Second Mezzanine Debt (or
any portion thereof) is then outstanding, until the Second Mezzanine Debt is
paid in full, and then (C) disbursed to Third Mezzanine Lender for application
in accordance with the terms of the Third Mezzanine Loan Documents if the Third
Mezzanine Debt (or any portion thereof) is then outstanding, until the Third
Mezzanine Debt is paid in full, and then (D) the balance disbursed by Third
Mezzanine Lender to Borrowers;
(i) Intentionally Deleted; and
(j) Intentionally Deleted.
Upon payment in full of the Debt (including, without limitation, the Exit Fee),
Lender’s sole obligation under this Section 2.4.3 shall be to disburse any
remaining funds described herein and then held by Lender to the First Mezzanine
Lender for application in accordance with the terms of the First Mezzanine Loan
Agreement.
2.4.4. Prepayments After Default. If during the continuance of an Event of
Default payment of all or any part of the Debt is tendered by Borrowers or
otherwise recovered by Lender (including through application of any Reserve
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any Net Proceeds), (a) such tender or recovery shall be deemed made on the next
occurring Payment Date together with the monthly Debt Service amount calculated
at the Default Rate from and after the date of such Event of Default,
(b) Intentionally Deleted, (c) Borrower shall also pay an amount equal to one
percent (1%) of the amount of the Loan being prepaid or satisfied, and
(d) Borrower shall also pay the Exit Fee (or the applicable portion thereof).
2.4.5. Prepayments Made on Dates Other Than Payment Dates. With respect to any
provision herein or in any other Loan Document providing that if a payment or
prepayment of the Loan is made on a date other than a Payment Date such payment
or prepayment shall be accompanied by any and all related Breakage Costs and all
interest which would have accrued on the amount of each Component so paid or
prepaid through, but not including, the next succeeding first (1st) day of a
calendar month, Borrowers shall be entitled to a credit toward the following
month’s Monthly Interest Payments or any other amounts due under the Loan in an
amount equal to the amount of interest actually earned by Lender on the portion
of such interest payment in excess of the amount of interest actually accrued on
the date of such payment or prepayment (the “Extra Non-Accrued Interest”). In
order to effectuate the foregoing, upon any prepayment resulting in any Extra
Non-Accrued Interest pursuant to the terms hereof, Lender shall deposit such
Extra Non-Accrued Interest in an interest-bearing account for the benefit of
Lender until the next Payment Date in order to determine the credit against the
next Monthly Interest Payments due to Borrowers under this Section 2.4.5,
following which Payment Date (a) Lender may withdraw such Extra Non-Accrued
Interest, together with all interest accrued thereon, from such account and
apply the amount of the interest accrued on such Extra Non-Accrued Interest to
amounts due and payable to Lender on such Payment Date, (b) such Extra
Non-Accrued Interest, together with all interest accrued thereon, shall
constitute the sole and exclusive property of Lender, and (c) Lender shall have
no further obligations to Borrowers with respect to such Extra Non-Accrued
Interest and/or the interest accrued thereon. Lender shall not be responsible
for obtaining any particular interest rate with respect to any Extra Non-Accrued
Interest.
2.4.6. Intentionally Deleted.
Section 2.5. Release of Property. Except as set forth in this Section 2.5, no
repayment or prepayment of all or any portion of either of the Notes shall
cause, give rise to a right to require, or otherwise result in, the release of
the Lien of the Mortgage or any other Loan Document on any Property or the IP.
2.5.1. Releases of Adjacent Property.
(a) Conditions for Release. Notwithstanding anything to the contrary set forth
in this Agreement or the other Loan Documents, Adjacent Borrower shall have the
right, without the prior consent of Lender and without violating the Loan
Documents, to (1) sell one or more portions of the Adjacent Property (each,
including the entire Adjacent Property, a “Partial Release Parcel”) either to a
bonafide third party purchaser (a “Bonafide Release Parcel Purchaser”) or to an
Affiliate of Borrower or any other Restricted Party (an “Affiliate Release
Parcel Purchaser”; and together with a Bonafide Release Parcel Purchaser,

 

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individually, a “Release Parcel Purchaser”), or (2) refinance one or more
Partial Release Parcels (each of the foregoing, including a sale or refinancing
of the entire Adjacent Property, a “Release Parcel Sale”, it being agreed that,
for purposes of this Section 2.5.1, a refinancing of a Partial Release Parcel,
including the entire Adjacent Property, shall be treated as a Release Parcel
Sale thereof to an Affiliate Release Parcel Purchaser), and obtain a release of
such Partial Release Parcel from the Liens of the Mortgage and the other Loan
Documents encumbering such Partial Release Parcel, provided that all of the
following conditions shall be satisfied with respect to each such Release Parcel
Sale:
(i) At least ten (10) Business Days prior to the anticipated date of such
Release Parcel Sale, Adjacent Borrower shall have submitted to Lender a written
request for release (a “Sale Request”), specifically identifying and legally
describing the Partial Release Parcel that Adjacent Borrower intends to sell,
which proposed Partial Release Parcel shall, unless it is the entire Adjacent
Property, be reasonably acceptable to Lender taking into account its potential
impact on the value of the Remaining Adjacent Property, which Sale Request shall
include a copy of the contract of sale relating to such Release Parcel Sale and
an Officer’s Certificate providing a certification that (A) as of the date of
such Sale Request, no monetary Default, monetary First Mezzanine Default,
monetary Second Mezzanine Default or monetary Third Mezzanine Default, and no
Event of Default, First Mezzanine Event of Default, Second Mezzanine Event of
Default or Third Mezzanine Event of Default, shall have occurred and be
continuing, (B) the proposed purchaser is a Bonafide Release Parcel Purchaser or
an Affiliate Release Parcel Purchaser, as applicable, and (C) the copy of the
contract of sale relating to such Release Parcel Sale attached to such
certification is true, correct and complete;
(ii) Adjacent Borrower shall have delivered to Lender reasonably detailed
information regarding the terms of, and the actual and reasonably anticipated
costs and expenses associated with, such Release Parcel Sale in order to enable
Lender to reasonably determine the Release Parcel Release Price with respect
thereto, all of which shall be certified by Adjacent Borrower to Lender as true,
complete and correct;
(iii) All accrued and unpaid interest and any unpaid or unreimbursed amounts in
respect of the Reduced Acquisition Loan and/or the Construction Loan and/or the
First Mezzanine Loan and/or the Second Mezzanine Loan and/or the Third Mezzanine
Loan and any other sum then due hereunder or under any of the other Loan
Documents and/or under any of the First Mezzanine Loan Documents and/or under
any of the Second Mezzanine Loan Documents and/or under any of the Third
Mezzanine Loan Documents, including, without limitation, the Exit Fee and any
applicable Breakage Costs, shall have been paid in full or shall have been
arranged to be paid in full contemporaneously with the closing of such Release
Parcel Sale; provided, however, if such Release Parcel Sale closes on a date
which is not a Payment Date, Borrowers shall also have paid or shall have
arranged to be paid contemporaneously with the closing of such Release Parcel
Sale interest on the Release Parcel Release Price to, but not including, the
next succeeding first (1st) day of a calendar month;
(iv) Intentionally Deleted;
(v) If the Release Parcel Purchaser is a Bonafide Release Parcel Purchaser, in
addition to the amounts set forth in the foregoing clause (iii), Borrowers

 

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shall have paid, or shall have arranged to be paid contemporaneously with the
closing of such Release Parcel Sale, to Lender a release price with respect to
the sale of such Partial Release Parcel equal to the greater of the following
(whichever of the following subclause (A) or (B) is greater, such Partial
Release Parcel’s “Bonafide Release Parcel Release Price”), which Bonafide
Release Parcel Release Price shall be applied as contemplated by Section 2.4.3
hereof:
(A) (1) the gross sales price for such Partial Release Parcel, less (2) the
amount of all reasonable and customary closing costs in connection with such
Release Parcel Sale actually paid by any Borrower to any Person who is not a
Restricted Party or any Affiliate thereof; provided, however, that in no event
shall such closing costs exceed eight percent (8%) of such gross sales price; or
(B) one hundred twenty-five percent (125%) of the per acre Allocated Loan Amount
for such portion of the Adjacent Property;
(vi) If the Release Parcel Purchaser is an Affiliate Release Parcel Purchaser,
in addition to the amounts set forth in the foregoing clause (iii), Borrowers
shall have paid, or shall have arranged to be paid contemporaneously with the
closing of such Release Parcel Sale, to Lender a release price with respect to
the sale of such Partial Release Parcel equal to the greater of the following
(whichever of the following subclause (A) or (B) is greater, the “Affiliate
Release Parcel Release Price”; and whichever of the Bonafide Release Parcel
Release Price or the Affiliate Release Parcel Release Price shall be applicable
in any instance, the “Release Parcel Release Price”), which Affiliate Release
Parcel Release Price shall be applied as contemplated by Section 2.4.3 hereof:
(A) Eighty-five percent (85%) of the Appraised Value of such Partial Release
Parcel; or
(B) one hundred twenty-five percent (125%) of the per acre Allocated Loan Amount
for such portion of the Adjacent Property;
(vii) If the Release Parcel Purchaser is an Affiliate Release Parcel Purchaser,
simultaneously with the closing of such Release Parcel Sale, (A) if such Release
Parcel Purchaser is a Joint Venture, at Lender’s election, the ownership
interest(s) of any Affiliate Joint Venture Counterparty shall be pledged to
Lender as additional collateral for the Obligations, which pledge shall
constitute a first priority Lien thereon, and Borrowers shall have (1) obtained
the consent of each Unaffiliated Joint Venture Counterparty to such pledge, and
(2) executed and delivered, and caused any such Affiliate Joint Venture
Counterparty and Unaffiliated Joint Venture Counterparty to execute and deliver,
such documents and instruments, and taken such further actions, and caused any
such Affiliate Joint Venture Counterparty and Unaffiliated Joint Venture
Counterparty to take any such further actions, as reasonably requested by Lender
to evidence, secure and perfect such pledge of the ownership interest(s) of any
Affiliate Joint Venture Counterparty, or (B) if such Release Parcel Purchaser is
an Affiliate Release Parcel Purchaser of any kind, whether or not a Joint
Venture, at Lender’s election, which in the case of a Release Parcel Purchaser
who is a Joint Venture, would be in lieu of the foregoing clause (A), a security
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Release Parcel shall be pledged to Lender as additional collateral for the
Obligations, which pledge shall constitute a first priority Lien thereon, and
Borrowers shall have executed such documents and instruments, and taken such
further actions, as reasonably requested by Lender to evidence, secure and
perfect such pledge; provided, however, that in the case of either clause (A) or
clause (B) above, such pledge (y) shall not prohibit, or require Lender’s
consent to, a subsequent sale by the Release Parcel Purchaser of such Partial
Release Parcel, but shall only require that the net proceeds of any such
subsequent sale, which are payable to such Release Parcel Purchaser be delivered
to Lender and be used as a prepayment of the Loan pursuant to the same terms and
conditions as governed the payment of the Release Parcel Release Price that was
paid in connection with such Partial Release Parcel (it being understood that
any such net proceeds of any such subsequent sale shall be deemed a part of the
previously-paid Release Parcel Release Price for such Partial Release Parcel for
all purposes under this Agreement), provided, however that such pledge agreement
shall provide that any transfer by Affiliate Release Parcel Purchaser to an
affiliate thereof for the sole purpose of avoiding the payment of the future
sales proceeds which would otherwise be payable to Lender in connection with a
subsequent sale of the Partial Release Parcel or the equity interests therein in
accordance with such pledge shall be void ab initio, and (z) shall terminate
upon the earlier of (I) one (1) year from the date of such Release Parcel Sale
or (II) the repayment in full of the Debt;
(viii) Intentionally Deleted;
(ix) Intentionally Deleted;
(x) Borrowers shall have paid all of the actual out-of-pocket reasonable third
party legal fees and actual out-of-pocket reasonable third party expenses
incurred by Lender in connection with (A) reviewing and processing any Sale
Request with respect to a Release Parcel Sale, whether or not the Release Parcel
Sale which is the subject of a Sale Request actually closes, (B) the
satisfaction of any of the conditions set forth in this Section 2.5.1(a), and
(C) providing all release documents in connection with any Release Parcel Sale
as provided in Section 2.5.1(d) hereof;
(xi) No monetary Default, monetary First Mezzanine Default, monetary Second
Mezzanine Default or monetary Third Mezzanine Default, and no Event of Default,
First Mezzanine Event of Default, Second Mezzanine Event of Default or Third
Mezzanine Event of Default, shall have occurred and be continuing at the time of
the submission by Adjacent Borrower of a Sale Request or at the time of the
closing of such Release Parcel Sale;
(xii) After giving effect to the sale and release of such Partial Release
Parcel, each of the Remaining Adjacent Property, the Hotel/Casino Property and
the Café Property (the Hotel Casino Property and Café Property, collectively,
the “Main Property”) will (A) comply, in all material respects, with all zoning
ordinances, including, without limitation, those related to parking, lot size
and density, (B) constitute one or more separate tax parcels, and not be subject
to any lien for taxes due or not yet due attributable to such Partial Release
Parcel, and (C) comply, in all material respects, with all applicable Legal
Requirements, including, without limitation, those relating to land use and
certificates of occupancy, except to the extent of any legal non-conforming use
permitted as of the Closing Date;

 

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(xiii) Adjacent Borrower shall have certified to Lender that, with respect to
the Remaining Adjacent Property and the Main Property, it continues to have or
has obtained through one or more reciprocal easement or other agreements
approved by Lender in its reasonable judgment, substantially the same (A) access
for all of the Improvements on such remaining portions of the Remaining Adjacent
Property and the Main Property to parking, vehicular and pedestrian ingress and
egress from public roads and common areas, and (B) utility services in all of
the Improvements on the Remaining Adjacent Property and the Main Property, in
each instance as exists as of the date immediately preceding such Release Parcel
Sale, it being agreed that Lender will subordinate the lien of the Mortgage to
any such reciprocal easement agreement or other agreement approved by Lender in
its reasonable judgment;
(xiv) Borrowers shall deliver to Lender, at Borrowers’ sole cost and expense,
new or updated ALTA/ASCM surveys of the Remaining Adjacent Property and such
Partial Release Parcel, which surveys shall substantially conform to Lender’s
then-current requirements for surveys to be delivered in connection with its
loans;
(xv) The Title Company shall issue an endorsement to the Title Insurance Policy
regarding the validity of Lender’s lien on the Remaining Adjacent Property after
such Release Parcel Sale and any other endorsements reasonably requested by
Lender in connection with such Release Parcel Sale;
(xvi) If a Securitization has occurred and the Release Parcel Sale covers less
than the entire Adjacent Property, Borrowers shall have provided to Lender an
opinion letter from counsel reasonably satisfactory to Lender confirming that
such Release Parcel Sale shall not constitute a “significant modification” of
the Loan within the meaning of Section 1.1001-3 of the regulations of the United
States Department of the Treasury or would otherwise violate any of the
provisions of the federal income tax law relating to real estate mortgage
investment conduits, which appear at Section 860A through 860G of Subchapter M
of Chapter 1 of the Code, as amended, and related provisions and regulations
(including any applicable proposed regulations) and rulings promulgated
thereunder, as the foregoing may be in effect from time to time (collectively,
the “REMIC Requirements”), and Lender shall not otherwise have any reasonable
belief (based on an opinion of counsel or a certified public accountant) that
such Release Parcel Sale will constitute such a “significant modification” or
otherwise violate such REMIC Requirements; and
(xvii) Borrowers shall have delivered to Lender (A) any amendments to the Loan
Documents deemed reasonably necessary by Lender in order to effectuate the
release of such Partial Release Parcel and/or to continue to retain all of its
rights in the Remaining Adjacent Property and the Main Property, and (B) all
documents and information reasonably requested by Lender in order to verify the
satisfaction of the foregoing conditions.
(b) With respect to any proposed Release Parcel Sale that does not close for any
reason, on the earlier to occur of (i) five (5) Business Days after the date on
which Lender is notified that such Release Parcel Sale will not close, or
(ii) the one hundred thirty-fifth (135th) day following the delivery to Lender
of the related Sale Request, Lender shall be reimbursed for all reasonable
out-of-pocket costs and expenses (including reasonable attorneys’ fees) incurred
in connection therewith.

 

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(c) In the event that a Release Parcel Sale with respect to which a Sale Request
was submitted to Lender does not close within one hundred thirty-five (135) days
after the date of such Sale Request, if Adjacent Borrower wishes to proceed with
such Release Parcel Sale, Adjacent Borrower shall be required to re-submit an
updated Sale Request to Lender and satisfy the conditions set forth in
Section 2.5.1(a) hereof with respect to the Release Parcel Sale which is the
subject of such resubmitted Sale Request as of the date of such resubmission.
(d) With respect to any Release Parcel Sale, upon satisfaction of the conditions
set forth in Section 2.5.1(a) hereof, Lender, at the sole cost and expense of
Borrowers, shall execute and deliver to Borrowers releases, satisfactions,
reconveyances, discharges, terminations and/or assignments, as applicable and as
reasonably requested by Borrowers, of the Mortgage and the other Loan Documents
relating to the applicable Partial Release Parcel.
(e) With respect to a Release Parcel Sale, upon the full execution, delivery
and, as appropriate, recordation or filing of the applicable documents
contemplated under Section 2.5.1(d) hereof, all references in this Agreement to
the term “Adjacent Property” shall be deemed to exclude the applicable Partial
Release Parcel for all purposes hereunder. In the event that the entire Adjacent
Property is sold in accordance with the terms hereof, then the terms and
provisions of this Section 2.5.1 are deemed of no further force and effect.
(f) With respect to any Release Parcel Sale, Lender hereby acknowledges and
agrees that Adjacent Borrower shall have the right to consummate such a Release
Parcel Sale through the following process: (i) the formation of a Special
Purpose Entity that is a wholly-owned, Delaware limited liability company
subsidiary of Adjacent Borrower, the organizational documentation with respect
to which shall be reasonably satisfactory to Lender (a “Subsidiary Transferee”);
provided, however, that no Subsidiary Transferee shall be required to have any
springing member or any Independent Director or Independent Manager; and,
provided, further, that such Subsidiary Transferee shall only be required to
satisfy all of the other requirements of a Special Purpose Entity when Adjacent
Borrower owns all or any portion of the membership interests therein, and
(ii) the occurrence of the following events, all of which shall occur
substantially contemporaneously through an escrow established with an escrow
agent reasonably acceptable to Lender and pursuant to escrow instructions
reasonably acceptable to Lender: (A) the transfer by deed of the applicable
Partial Release Parcel from Adjacent Borrower to such Subsidiary Transferee
subject to the Mortgage and the other Loan Documents, (B) the immediately
subsequent purchase of all of the equity interests held by Adjacent Borrower in
such Subsidiary Transferee by the applicable Bonafide Release Parcel Purchaser
or Affiliate Release Parcel Purchaser, as the case may be, and (C) the payment
of the applicable Release Parcel Release Price and all other amounts due under
Section 2.5.1(a) hereof in connection with such Release Parcel Sale. In
connection with the foregoing, Lender and Borrowers hereby agree that, with
respect to any Release Parcel Sale consummated in accordance with this
Section 2.5.1(f), (1) the applicable Bonafide Release Parcel Purchaser or
Affiliate Release Parcel Purchaser, as the case may be, shall refer to the
ultimate purchaser of the equity interests held by Adjacent Borrower in the
Subsidiary Transferee, rather than to the Subsidiary Transferee, (2) the gross
sales price used in the calculation of the applicable Release Parcel Release
Price with respect to a Bonafide Release Parcel Purchaser shall refer to the
gross sales price for the purchase of the equity interests held by Adjacent
Borrower in the Subsidiary Transferee, rather than to any consideration paid by
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(3) without limiting the generality of the foregoing, for purposes of the
satisfaction of the conditions set forth in Section 2.5.1(a), all references to
such Release Parcel Sale and/or to the related contract of sale, gross sales
price, Release Parcel Purchaser, Release Parcel Release Price and all other
related terms and items shall be deemed to be references to, and shall include,
the sale of the equity interests held by Adjacent Borrower to the ultimate
Bonafide Release Parcel Purchaser or Affiliate Release Parcel Purchaser, as the
case may be, rather than to the transfer by deed of the applicable Partial
Release Parcel from Adjacent Borrower to the Subsidiary Transferee.
2.5.2. Intentionally Deleted.
2.5.3. Release of IP.
(a) Conditions for Release. Notwithstanding anything to the contrary set forth
in this Agreement or the other Loan Documents, in the event that IP Borrower
shall desire to sell the IP (in whole but not in part) (an “IP Sale”) to a
bonafide third party purchaser (a “IP Purchaser”), IP Borrower shall have the
right, without the prior consent of Lender and without violating the Loan
Documents, to sell the entire IP and obtain a release of the IP from the Liens
of the Mortgage and the other Loan Documents encumbering the IP to an IP
Purchaser, provided that all of the following conditions shall be satisfied with
respect to such IP Sale:
(i) IP Borrower shall have submitted a Sale Request to Lender at least ten
(10) Business Days prior to the anticipated date of such IP Sale, which shall
include a copy of the contract of sale relating to such IP Sale and an Officer’s
Certificate providing a certification that (A) as of the date of such Sale
Request, no monetary Default, monetary First Mezzanine Default, monetary Second
Mezzanine Default or monetary Third Mezzanine Default, and no Event of Default,
First Mezzanine Event of Default, Second Mezzanine Event of Default or Third
Mezzanine Event of Default, shall have occurred and be continuing and (B) the
copy of the contract of sale relating to such IP Sale attached to such
certification is true, correct and complete;
(ii) IP Borrower shall have delivered to Lender reasonably detailed information
regarding the terms of, and the actual and reasonably anticipated costs and
expenses associated with, such IP Sale in order to enable Lender to reasonably
determine the IP Release Price with respect thereto, all of which shall be
certified by IP Borrower to Lender as true, complete and correct;
(iii) All accrued and unpaid interest and any unpaid or unreimbursed amounts in
respect of the Reduced Acquisition Loan and/or the Construction Loan and/or the
First Mezzanine Loan and/or the Second Mezzanine Loan and/or the Third Mezzanine
Loan and any other sum then due hereunder or under any of the other Loan
Documents and/or under any of the First Mezzanine Loan Documents and/or under
any of the Second Mezzanine Loan Documents and/or under any of the Third
Mezzanine Loan Documents, including, without limitation, any applicable Breakage
Costs, shall have been paid in full or shall have been arranged to be paid in
full contemporaneously with the closing of such IP Sale; provided, however, if
such IP Sale closes on a date which is not a Payment Date, Borrowers shall also
have paid or shall have arranged to be paid contemporaneously with the closing
of such IP Sale,

 

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interest on the IP Release Price to, but not including, the next succeeding
first (1st) day of a calendar month;
(iv) Intentionally Deleted;
(v) In addition to the amounts set forth in the foregoing clause (iii),
Borrowers shall have paid, or shall have arranged to be paid contemporaneously
with the closing of the IP Sale, to Lender a release price with respect to the
IP equal to the greater of the following (whichever of the following subclause
(A) or (B) is greater, the “IP Release Price”), which IP Release Price shall be
applied as contemplated by Section 2.4.3 hereof:
(A) (1) the gross sales price for the IP, less (2) the amount of all reasonable
and customary closing costs in connection with such IP Sale actually paid by any
Borrower to any Person who is not a Restricted Party or any Affiliate thereof;
provided, however, that in no event shall such closing costs exceed three
percent (3%) of such gross sales price; or
(B) one hundred twenty-five percent (125%) of the Allocated Loan Amount for the
IP;
(vi) Intentionally Deleted;
(vii) Intentionally Deleted;
(viii) Borrowers shall have paid all of the actual out-of-pocket reasonable
third party legal fees and actual out-of-pocket reasonable third party expenses
incurred by Lender in connection with (A) reviewing and processing any Sale
Request with respect to an IP Sale, whether or not the IP Sale which is the
subject of a Sale Request actually closes, (B) the satisfaction of any of the
conditions set forth in this Section 2.5.3(a), and (C) providing all release
documents in connection with any IP Sale as provided in Section 2.5.3(d) hereof;
(ix) No monetary Default, monetary First Mezzanine Default, monetary Second
Mezzanine Default or monetary Third Mezzanine Default, and no Event of Default,
First Mezzanine Event of Default, Second Mezzanine Event of Default or Third
Mezzanine Event of Default, shall have occurred and be continuing at the time of
the submission by IP Borrower of a Sale Request or at the time of the closing of
an IP Sale;
(x) There shall only be one (1) IP Sale;
(xi) The IP Purchaser shall enter into one or more royalty free license
agreements, in form and substance reasonably satisfactory to Borrowers and
Lender, applying the standards of a prudent commercial mortgage loan lender,
pursuant to which such IP Purchaser shall license to each Borrower all of the IP
that is reasonably necessary or desirable to operate its Property as then being
operated and as then contemplated to be operated in the future (collectively,
the “Purchaser Licensed IP”), and each applicable Borrower, at Borrowers’ sole
cost and expense, shall execute and deliver, or cause to be executed and
delivered, to and for the benefit of Lender, a security interest agreement
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with such other financing statements, documents and/or instruments reasonably
required by Lender in order to perfect its security interest in the Purchaser
Licensed IP and to enable Lender to foreclose on such Purchaser Licensed IP upon
the occurrence and during the continuance of an Event of Default, all of the
foregoing to be in form and substance reasonably satisfactory to Lender; and
(xii) Borrowers shall have delivered to Lender (A) any amendments to the Loan
Documents deemed reasonably necessary by Lender in order to effectuate the
release of the IP, and (B) all documents and information reasonably requested by
Lender in order to verify the satisfaction of the foregoing conditions.
(b) With respect to any proposed IP Sale that does not close for any reason, on
the earlier to occur of (i) five (5) Business Days after the date on which
Lender is notified that such IP Sale will not close, or (B) the one hundred
thirty-fifth (135th) day following the delivery to Lender of the related Sale
Request, Lender shall be reimbursed for all reasonable out-of-pocket costs and
expenses (including reasonable attorneys’ fees) incurred in connection
therewith.
(c) In the event that an IP Sale with respect to which a Sale Request was
submitted to Lender does not close within one hundred thirty-five (135) days
after the date of such Sale Request, if IP Borrower wishes to proceed with such
IP Sale, IP Borrower shall be required to re-submit an updated Sale Request to
Lender and satisfy the conditions set forth in Section 2.5.3(a) hereof with
respect to the IP Sale which is the subject of such resubmitted Sale Request as
of the date of such resubmission.
(d) With respect to an IP Sale, upon satisfaction of the conditions set forth in
Section 2.5.3(a) hereof, Lender, at the sole cost and expense of Borrowers,
shall execute and deliver to Borrowers releases, satisfactions, discharges
and/or assignments, as applicable and as reasonably requested by Borrowers, of
the Mortgage and the other Loan Documents relating to the IP.
2.5.4. Sale of Properties or IP during Event of Default. Notwithstanding the
provisions of the foregoing Sections 2.5.1 and 2.5.3 or any other provision to
the contrary in this Agreement or the other Loan Documents, it is expressly
acknowledged and agreed by Borrowers that, upon the occurrence and during the
continuance of an Event of Default: (i) no Borrower shall have any right to sell
any Property or any portion thereof or any IP without, in each instance,
Lender’s prior written consent, which consent may be given or withheld in
Lender’s sole discretion, (ii) any such sale of one or more of the Properties or
any portion thereof and/or any IP shall be on such terms and conditions as to
which Lender and Borrowers shall agree, Lender, however, having the right to
impose such terms and conditions as it shall elect in its sole discretion,
(iii) Intentionally Deleted, (iv) Intentionally Deleted and (v) in the event any
such sale shall occur, without limiting any other provisions set forth herein,
the proceeds of such sale shall be applied in accordance with the applicable
provisions of Section 2.4.4 hereof.

 

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2.5.5. Release on Payment in Full. Upon the written request and payment by
Borrowers of the customary recording fees and the actual out-of-pocket
third-party costs and expenses of Lender and upon payment in full of all
principal and interest due on the Loan and all other amounts due and payable
under the Loan Documents in accordance with the terms and provisions of the
Notes and this Agreement, Lender shall release the Lien of the Mortgage and the
other Loan Documents.
Section 2.6. Cash Management.
2.6.1. Lockbox Account. (a) Borrowers shall establish and maintain a segregated
Eligible Account (the “Lockbox Account”) with Lockbox Bank in trust for the
benefit of Lender, which Lockbox Account shall be under the sole dominion and
control of Lender. The Lockbox Account shall be entitled “HRHH Hotel/Casino,
LLC, HRHH Cafe, LLC, HRHH Development, LLC, HRHH IP, LLC and HRHH Gaming, LLC,
for the benefit of Vegas HR Private Limited and Trimont Real Estate Advisors,
Inc. as Agent, their respective successors and/or assigns — Lockbox Account” or
such other title as shall be reasonably acceptable to Lender and the applicable
Lockbox Bank. Each Borrower hereby grants to Lender a first priority security
interest in the Lockbox Account and all deposits at any time contained therein
and the proceeds thereof, and will take all actions requested by Lender that are
necessary to maintain in favor of Lender a perfected first priority security
interest in the Lockbox Account, including, without limitation, executing and
filing UCC-1 Financing Statements and continuations thereof. Lender shall have
the sole right to make withdrawals from the Lockbox Account for application
pursuant to the terms of this Agreement and all reasonable costs and expenses
for establishing and maintaining the Lockbox Account shall be paid by Borrowers.
(b) Each Borrower shall, or shall cause its Manager and HRHI , to (i) deliver
irrevocable written instructions to (A) all non-residential tenants under Leases
of space at such Borrower’s Property, instructing such tenants to deliver all
Rents payable thereunder directly to the Lockbox Account and (B) each of the
credit card companies or credit card clearing banks with which such Borrower,
Manager or HRHI has entered into merchant’s agreements, instructing such credit
card companies or credit card clearing banks to deliver all receipts payable
with respect to any Property directly to the Lockbox Account and (ii) direct
(A) all licensors or sublicensors of the IP (or any portion thereof) and any
party to a sponsorship agreement with any Borrower pursuant to which such party
pays such Borrower(s) certain amounts in exchange for certain rights granted to
such party by such Borrower(s) and (B) all Persons that maintain open accounts
with such Borrower, Manager or HRHI, as applicable, or with whom such Borrower,
Manager or HRHI, as applicable, does business on an “accounts receivable” basis
with respect to any Property or HRHI’s liquor management services at the
Hotel/Casino Property, to deliver all payments due under such accounts directly
to the Lockbox Account (and neither any Borrower, Manager nor HRHI shall direct
any such Person to make payments due under such account in any other manner).
Without the prior written consent of Lender or Servicer, neither Manager, any
Borrower nor HRHI, as applicable, shall (x) terminate, amend, revoke or modify
any direction letter described in clause (i)(A) above, any credit card company
direction letter or credit card bank payment direction letter described in
clause (i)(B) above and/or any other direction letter described in clause
(ii) above or (y) direct or cause any Person (including, without limitation, any
Tenant, any credit card company or credit card

 

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clearing bank, any licensor or sublicensor of the IP (or any portion thereof),
any party to any sponsorship agreement, or any other Person that maintains open
accounts with any Borrower, Manager or HRHI (or with whom such Borrower, Manager
or HRHI does business on an “accounts receivable” basis) to pay any Rent or
other amounts payable to such Borrower, Manager or HRHI in any manner other than
by wire transfer to the Lockbox Account.
(c) Without limiting the provisions of the preceding clause (b), Gaming Borrower
shall collect and account for all cash receipts attributable to gaming
activities at the Property at the end of each Gaming Day (such cash receipts,
the “Prior Day’s Cash Receipts”). All such Prior Day’s Cash Receipts shall be
held by Gaming Borrower in the Gaming Account, provided that on or prior to 4:00
p.m. Las Vegas time on the calendar day on which such Gaming Day shall end (or
if such calendar day is not a Business Day the first Business Day immediately
following the Gaming Day on which the applicable Prior Day’s Cash Receipts were
collected) (any such day, the “Gaming Revenue Disbursement Date”) Gaming
Borrower shall deposit into the Lockbox Account the amount by which the sum of
all Prior Day’s Cash Receipts together with the balance of funds on deposit in
the Gaming Account exceeds the Minimum Gaming Account Balance. For avoidance of
doubt and for illustration purposes only, in the event the Prior Day’s Cash
Receipts relate to cash receipts attributable to gaming activities at the
Property on the Gaming Day commencing at 3:00 a.m. Las Vegas time on Tuesday,
January 12, 2010 and ending at 2:59 a.m. Las Vegas time on Wednesday,
January 13, 2010, then on or prior to 4:00 p.m. Las Vegas time on January 13,
2010 Borrower shall deposit into the Lockbox Account the amount by which the sum
of all Prior Day’s Cash Receipts together with the balance of funds on deposit
in the Gaming Account exceeds the Minimum Gaming Account Balance.
(d) Hotel/Casino Borrower shall deliver irrevocable written instructions to
HRHI, as the Liquor Manager, to deliver an amount equal to all revenues earned
by Liquor Manager pursuant to the Liquor Management Agreement to the Lockbox
Account on account of the payments due from HRHI to Hotel/Casino Borrower.
(e) Notwithstanding the foregoing, in the event any Borrower, Manager or HRHI
receives any Rents (including, without limitation, Rents from tenants under any
residential Lease and/or any forfeited security deposits under any Lease and/or
any payments due under any IP license or sublicense) or other Gross Income from
Operations (other than Gaming Borrower’s receipt of cash attributable to gaming
activities at the Property which cash is to be applied in accordance with the
provisions of clause (c) above), then such amounts shall be deemed to be
collateral for the Loan and each Borrower hereby grants and shall cause Manager
or HRHI to hereby grant Lender a security interest in such amounts and each
Borrower shall or shall cause Manager and HRHI, as applicable, to (i) hold the
same in trust for the benefit, and as the property, of Lender, (ii) not
commingle the same with any other funds or property of such Borrower or of
Manager or HRHI, as applicable and (iii) deposit all amounts into the Lockbox
Account within one (1) Business Day after receipt by such Borrower or Manager or
HRHI, as applicable.
(f) Borrowers shall obtain from Lockbox Bank its agreement to transfer to the
Cash Management Account in immediately available funds by federal wire

 

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transfer all amounts on deposit in the Lockbox Account once every Business Day
throughout the term of the Loan.
2.6.2. Cash Management Account. (a) There shall be established and maintained a
segregated Eligible Account (the “Cash Management Account”), which Cash
Management Account shall be under the sole dominion and control of Lender. The
Cash Management Account shall be entitled “HRHH Hotel/Casino, LLC, HRHH Cafe,
LLC, HRHH Development, LLC, HRHH IP, LLC and HRHH Gaming, LLC Cash Management
Account for the benefit of Vegas HR Private Limited and TriMont Real Estate
Advisors, Inc. as Agent” or such other title as shall be reasonably acceptable
to Lender and the bank holding the Cash Management Account. Each Borrower hereby
grants to Lender a first priority security interest in the Cash Management
Account and all deposits at any time contained therein and the proceeds thereof,
and will take all actions requested by Lender that are necessary to maintain in
favor of Lender a perfected first priority security interest in the Cash
Management Account, including, without limitation, executing and filing UCC-1
Financing Statements and continuations thereof. Lender shall have the sole right
to make withdrawals from the Cash Management Account for application pursuant to
the terms of this Agreement and the other Loan Documents and all reasonable
costs and expenses for establishing and maintaining the Cash Management Account
shall be paid by Borrowers.
(b) Subject to Section 2.6.2(c) hereof, provided no Event of Default shall have
occurred and is then continuing, on each Wednesday occurring during any Interest
Period (or such other date as is expressly set forth in the Cash Management
Agreement) all funds on deposit in the Cash Management Account shall be credited
towards payment of items (i) through (xv) below in the order indicated below
(but except as expressly provided herein none of the same shall be disbursed
prior to the Payment Date occurring on the day immediately following the end of
such Interest Period), it being acknowledged and agreed by Borrowers and Lender,
however, that subject to Section 2.6.2(c) and provided no Event of Default shall
have occurred and is then continuing (1) in the event any amounts described
under the provisions of Section 2.6.2(d) hereof and/or the provisions of the
last sentence of Section 2.6.2(h) hereof shall then be required to be deposited
into the Gaming Account, Interest Reserve Account and/or General Reserve
Account, as applicable, any funds on deposit in the Cash Management Account (and
in the event such funds are not sufficient to fund such amounts, any funds
credited but not disbursed to the payment of items (i) through (xv) below),
shall be deposited into the Gaming Account, Interest Reserve Account and/or
General Reserve Account on, as applicable, the Casino Account Reimbursement Date
or the Operating Expense Overfunding Reimbursement Date (or the earliest day
thereafter on which any funds shall be deposited into the Cash Management
Account), (2) subject to the provisions of the immediately preceding clause (1),
as soon as there are sufficient funds available in the Cash Management Account
to satisfy the amounts that will be due under clauses (i) and (ii) below on the
Payment Date immediately following the end of the then current Interest Period
(such funds together with any funds then required to be applied in accordance
with the provisions of clause (1) above, the “Section 2.6.2(b) Priority Funds”),
on any Wednesday occurring during the applicable Interest Period, Lender shall
upon Borrowers’ written request therefor (which request may be made
electronically in a manner and to a recipient acceptable to Lender) disburse to
Borrowers all or a portion of the funds on deposit in the Cash Management
Account in excess of the Section

 

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2.6.2(b) Priority Funds to the extent such funds would otherwise be
distributable to Borrower under clauses (iii) and (iv) below on the Payment Date
immediately following the end of such Interest Period, for application by
Borrowers to the applicable cash Operating Expenses, Pre-Opening Expenses and/or
Extraordinary Expenses detailed in such written request (it being acknowledged
and agreed that any such written request shall be in the form of an Operating
Expense Request, shall be delivered at least one (1) Business Day prior to the
requested disbursement date and shall include a Borrower certification that the
amounts requested therein are in Borrower’s good faith estimate limited to such
amounts as are then necessary to pay Operating Expenses, Extraordinary Expenses
and Pre-Opening Expenses that are then due and payable and that Borrower would
otherwise be entitled to receive under clauses (iii) and (iv) below on the
Payment Date immediately following the date of such request), and (3) all
remaining funds in the Cash Management Account shall be disbursed on the
applicable Payment Date in accordance with the following order indicated, except
to the extent already disbursed in accordance with the provisions of clauses (1)
— (2) above:
(i) First, payments to Lender in respect of the Tax and Insurance Escrow Fund in
accordance with the terms and conditions of Section 7.2 hereof;
(ii) Second, payment to Lender in respect of the Replacement Reserve Fund in
accordance with the terms and conditions of Section 7.3 hereof;
(iii) Third, subject to Section 2.6.2(i) hereof, payment to Borrowers of an
amount sufficient to pay (A) the actual cash monthly Operating Expenses,
including base management fees payable to any Manager but excluding incentive
management fees payable to any Manager, and Capital Expenditures and
(B) Extraordinary Expenses and Pre-Opening Expenses (provided that Borrower
shall not be entitled to any disbursements under this clause (iii) with respect
to Extraordinary Expenses and/or Pre-Opening Expenses in the event such amounts
in any particular month shall exceed $586,000.00 in the aggregate), but in
either case specifically excluding any reimbursements to Borrowers, Sponsor or
any Affiliates thereof of any such amounts previously paid or advanced as
capital contributions or otherwise, in each instance as requested by Borrowers
in a written request (which request may be made electronically in a manner and
to a recipient acceptable to Lender) (each, an “Operating Expense Request”)
delivered to Lender no later than three (3) Business Days prior to such Payment
Date (which shall not include (A) Taxes and Insurance Premiums to be paid for
out of the Tax and Insurance Escrow Funds, and (B) Operating Expenses, Capital
Expenditures and/or other expenses to be paid for out of any Reserve Funds);
provided, however that if, without limiting the foregoing, Borrowers shall have
failed to deliver the Cash Profit and Loss Statement for the immediately
preceding month on or prior to the date on which such statement is due in
accordance with Section 5.1.11(c) hereof, then Borrowers shall not be entitled
to any disbursement under this subclause (iii) until the date on which Borrowers
deliver such Cash Profit and Loss Statement to Lender as required by
Section 5.1.11(c) hereof;
(iv) Fourth, payment to Borrowers for Extraordinary Expenses in excess of any
such Extraordinary Expenses disbursed pursuant to subclause (iii) above, if any,
as approved by Lender pursuant to the provisions of Section 5.11(e) hereof,;

 

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(v) Fifth, on the first Payment Date in each calendar quarter, payment to the
Administrative Agent of the Administrative Agent Fee then due and payable;
(vi) Sixth, payment to Lender of the Unused Advance Fee then due and payable, if
any;
(vii) Seventh, payment to Lender of the Reduced Acquisition Loan Monthly
Interest Payment calculated at the Applicable Interest Rate and the Construction
Loan Monthly Interest Payment computed at the Applicable Interest Rate;
(viii) Eighth, payment to Lender of (or reimbursement of Lender for) any
reasonable miscellaneous fees or expenses (including, without limitation, any
“protective advances” made by Lender in respect of the Loan) then due and
payable pursuant to the terms of the Loan Documents;
(ix) Ninth, a transfer by Lender to the First Mezzanine Cash Management Account
in the amount of the First Mezzanine Applicable Interest Payment indicated in
the then most recent written payment notice letter delivered pursuant to the
Intercreditor Agreement by First Mezzanine Lender to Lender at least five
(5) days prior to such Payment Date, to be applied in accordance with the terms
of the First Mezzanine Loan Documents;
(x) Tenth, a transfer by Lender to the Second Mezzanine Cash Management Account
in the amount of the Second Mezzanine Applicable Interest Payment indicated in
the then most recent written payment notice letter delivered pursuant to the
Intercreditor Agreement by Second Mezzanine Lender to Lender at least five
(5) days prior to such Payment Date, to be applied in accordance with the terms
of the Second Mezzanine Loan Documents;
(xi) Eleventh, a transfer by Lender to the Third Mezzanine Cash Management
Account in the amount of the Third Mezzanine Applicable Interest Payment
indicated in the then most recent written payment notice letter delivered
pursuant to the Intercreditor Agreement by Third Mezzanine Lender to Lender at
least five (5) days prior to such Payment Date, to be applied in accordance with
the terms of the Third Mezzanine Loan Documents;
(xii) Intentionally Deleted;
(xiii) Twelfth, payment to Borrowers of any incentive management fees payable to
any Manager (the aggregate sum of the amounts required to fully fund items (i)
through (xii) above and this item (xiii), collectively, the “Aggregate Monthly
Amount”; and such amounts as remain after application to fully fund the
Aggregate Monthly Amount, the “Excess Cash Flow”);
(xiv) Thirteenth, payment to First Mezzanine Lender in an amount equal to the
First Mezzanine Initial Accrual Amount until such time as the same is paid in
full; and

 

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(xv) Fourteenth, as applicable, either (A) prior to the date on which the Excess
Cash Termination Condition has been satisfied, payment of all Excess Cash Flow
for deposit into the General Reserve Account, or (B) from and after the date on
which the Excess Cash Termination Condition has been satisfied, payment of all
Excess Cash Flow for deposit into the Working Capital Reserve Account until the
amount on deposit therein equals $7,000,000, then payment of all remaining
Excess Cash Flow for deposit into the General Reserve Account.
(c) Notwithstanding the provisions of Section 2.6.2(b) hereof, from and after
the earlier to occur of (A) the Interest Period in which the amount on deposit
in the Interest Reserve Account shall equal zero and (B) the Excess Cash Release
Date, and provided no Event of Default shall have occurred and be continuing, on
each Wednesday during any Interest Period (or such other date as is expressly
set forth in the Cash Management Agreement) all funds on deposit in the Cash
Management Account shall be credited towards payment of items (i) through
(xv) below in the order indicated below (but except as expressly provided herein
none of the same shall be disbursed prior to the Payment Date occurring on the
day immediately following the end of such Interest Period), it being
acknowledged and agreed by Borrowers and Lender, however, that provided no Event
of Default shall have occurred and is then continuing (1) in the event any
amounts described under the provisions of Section 2.6.2(d) hereof and/or the
provisions of the last sentence of Section 2.6.2(h) hereof shall then be
required to be deposited into the Gaming Account, Interest Reserve Account
and/or General Reserve Account, as applicable, any funds on deposit in the Cash
Management Account (and in the event such funds are not sufficient to fund such
amounts, any funds credited but not disbursed to the payment of items
(i) through (xv) below), shall be deposited into the Gaming Account, Interest
Reserve Account and/or General Reserve Account on, as applicable, the Casino
Account Reimbursement Date or the Operating Expense Overfunding Reimbursement
Date (or the earliest day thereafter on which any funds shall be deposited into
the Cash Management Account), (2) subject to the provisions of the preceding
clause (1), as soon as there are sufficient funds in the Cash Management Account
to satisfy the amounts that will be due under clauses (i), (ii), (iii) and (iv)
below on the Payment Date immediately following the end of the applicable
Interest Period (such funds together with any funds then required to be applied
in accordance with the provisions of clause (1) above, the “Section 2.6.2(c)
Priority Funds”), on any Wednesday occurring during the applicable Interest
Period, Lender shall at Borrowers’ written request therefor (which request may
be made electronically in a manner and to a recipient acceptable to Lender)
disburse to Borrowers all or a portion of the funds on deposit in the Cash
Management Account in excess of the Section 2.6.2(c) Priority Funds to the
extent such funds would otherwise be distributable to Borrowers under clause (v)
and (vi) on the Payment Date immediately following the end of such Interest
Period, for application by Borrowers to the applicable Operating Expenses,
Pre-Opening Expenses and/or Extraordinary Expenses detailed in such written
request (which request shall be in the form of an Operating Expense Request,
shall be delivered at least one (1) Business Day prior to the requested
disbursement date and shall include a Borrower certification that the amounts
requested therein are in Borrower’s good faith estimate limited to such amounts
as are then necessary to pay Operating Expenses, Extraordinary Expenses and
Pre-Opening Expenses that are then due and payable and that Borrower would
otherwise be entitled to receive under clauses (v) and (vi) below on the Payment
Date immediately following the date of such request), and (3) subject to there
being sufficient funds on deposit in the Cash Management Account to make any
deposits described in clauses

 

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(1)-(2) above as and when required above, on each Payment Date, all remaining
funds in the Cash Management Account shall be disbursed in accordance with the
following in the order indicated, except to the extent already disbursed in
accordance with the provisions of clauses (1) — (2) above:
(i) First, payments to Lender in respect of the Tax and Insurance Escrow Fund in
accordance with the terms and conditions of Section 7.2 hereof;
(ii) Second, payment to Lender of the Reduced Acquisition Loan Monthly Interest
Payment calculated at the Applicable Interest Rate and the Construction Loan
Monthly Interest Payment computed at the Applicable Interest Rate;
(iii) Third, payment to Lender of (or reimbursement of Lender for) any
reasonable miscellaneous fees or expenses (including, without limitation, any
“protective advances” made by Lender in respect of the Loan) then due and
payable pursuant to the terms of the Loan Documents;
(iv) Fourth, payment to Lender in respect of the Replacement Reserve Fund in
accordance with the terms and conditions of Section 7.3 hereof;
(v) Fifth, payment to Borrowers of an amount sufficient to pay (A) the actual
cash monthly Operating Expenses, including base management fees payable to any
Manager but excluding incentive management fees payable to any Manager, and
Capital Expenditures and (B) Extraordinary Expenses and Pre-Opening Expenses
(provided that Borrower shall not be entitled to any disbursements under this
clause (v) with respect to Extraordinary Expenses and/or Pre-Opening Expenses in
the event such amounts in any particular month shall exceed $586,000.00 in the
aggregate), in each instance as requested by Borrowers in an Operating Expense
Request (which request may be made electronically in a manner and to a recipient
acceptable to Lender) delivered to the Servicer (with a copy to Lender) no later
than three (3) Business Days prior to such Payment Date (which shall not include
(A) Taxes and Insurance Premiums to be paid for out of the Tax and Insurance
Escrow Funds, and (B) Operating Expenses, Capital Expenditures and/or other
expenses to be paid for out of any Reserve Funds); provided, however that if
Borrowers shall have failed to deliver the Cash Profit and Loss Statement for
the immediately preceding month on or prior to the date on which such statement
is due in accordance with Section 5.1.11(c) hereof, then Borrowers shall not be
entitled to any disbursement under this subclause (iii) until the date on which
Borrowers deliver such Cash Profit and Loss Statement to Lender as required by
Section 5.1.11(c) hereof;
(vi) Sixth, payment to Borrowers for Extraordinary Expenses in excess of any
such Extraordinary Expenses disbursed pursuant to subclause (iii) above, if any
approved by Lender pursuant to the provisions of Section 5.11(e) hereof;
(vii) Seventh, on the first Payment Date in each calendar quarter, payment to
the Administrative Agent of the Administrative Agent Fee then due and payable,
if any;
(viii) Eighth, payment to Lender of the Unused Advance Fee then due and payable,
if any;

 

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(ix) Ninth, a transfer by Lender to the First Mezzanine Cash Management Account
in the amount of the First Mezzanine Applicable Interest Payment indicated in
the then most recent written payment notice letter delivered pursuant to the
Intercreditor Agreement by First Mezzanine Lender to Lender at least five
(5) days prior to such Payment Date, to be applied in accordance with the terms
of the First Mezzanine Loan Documents;
(x) Tenth, a transfer by Lender to the Second Mezzanine Cash Management Account
in the amount of the Second Mezzanine Applicable Interest Payment indicated in
the then most recent written payment notice letter delivered pursuant to the
Intercreditor Agreement by Second Mezzanine Lender to Lender at least five
(5) days prior to such Payment Date, to be applied in accordance with the terms
of the Second Mezzanine Loan Documents;
(xi) Eleventh, a transfer by Lender to the Third Mezzanine Cash Management
Account in the amount of the Third Mezzanine Applicable Interest Payment
indicated in the then most recent written payment notice letter delivered
pursuant to the Intercreditor Agreement by Third Mezzanine Lender to Lender at
least five (5) days prior to such Payment Date, to be applied in accordance with
the terms of the Third Mezzanine Loan Documents;
(xii) Intentionally Deleted;
(xiii) Twelfth, payment to Borrowers of any incentive management fees payable to
any Manager;
(xiv) Thirteenth, payment to First Mezzanine Lender in an amount equal to the
First Mezzanine Initial Accrual Amount until such time as the same is paid in
full; and
(xv) Fourteenth, as applicable, either (A) prior to the date on which the Excess
Cash Termination Condition has been satisfied, payment of all Excess Cash Flow
for deposit into the General Reserve Account, or (B) from and after the date on
which the Excess Cash Termination Condition has been satisfied, payment of all
Excess Cash Flow for deposit into the Working Capital Reserve Account until the
amount on deposit therein equals $7,000,000, then payment of all remaining
Excess Cash Flow for deposit into the General Reserve Account.
(d) In the event that the amounts on deposit in the Gaming Account are at any
time less than the Minimum Gaming Account Balance as a result of (i) the
application of amounts previously on deposit therein to Permitted Gaming
Expenses and/or (ii) the increase of such Minimum Gaming Account Balance in
accordance with and subject to the provisions of Section 12.3.3 hereof,
Borrowers may submit a written request that funds equal to the positive
difference, if any, between the Minimum Gaming Account Balance less the funds
then on deposit in the Gaming Account be transferred from the Cash Management
Account to the Casino Account, and provided that no Event of Default has then
occurred and is continuing and there is then sufficient funds available in the
Cash Management Account, Lender shall in accordance

 

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with and subject to the provisions of Sections 2.6.1(b)(1) or 2.6.1(c)(1), as
applicable, use good faith efforts to transfer available funds on deposit in the
Cash Management Account to the Casino Account on the Business Day immediately
following the date on which Lender receives such request in accordance with the
terms hereof, provided that Lender shall receive such request on or prior to
2:00 pm New York City time on the preceding Business Day (the applicable date
described in (a) and (b) above on which such transfer is to occur, the “Casino
Account Reimbursement Date”).
(e) Subject to Sections 2.6.3, 3.20 and 7.4.2 hereof, the insufficiency of funds
on deposit in the Cash Management Account shall not relieve Borrowers from the
obligation to make any payments, as and when due pursuant to this Agreement and
the other Loan Documents, including, without limitation, the payments set forth
in clauses (i) through (xi), inclusive, in Section 2.6.2(b) or 2.6.2(c) hereof,
as applicable, and such obligations shall be separate and independent, and not
conditioned on any event or circumstance whatsoever.
(f) All funds on deposit in the Cash Management Account following the occurrence
and during the continuation of an Event of Default may be applied by Lender to
the Debt, and applied to the Debt in any order, priority and proportions as
Lender shall elect in its sole discretion from time to time until the Debt is
paid in full, with any amounts remaining being disbursed to (i) First Mezzanine
Lender for application in accordance with the terms of the First Mezzanine Loan
Documents if the First Mezzanine Debt (or any portion thereof) is then
outstanding, until the First Mezzanine Debt is paid in full, and then
(ii) Second Mezzanine Lender for application in accordance with the terms of the
Second Mezzanine Loan Documents if the Second Mezzanine Debt (or any portion
thereof) is then outstanding, until the Second Mezzanine Debt is paid in full,
and then (iii) Third Mezzanine Lender for application in accordance with the
terms of the Third Mezzanine Loan Documents if the Third Mezzanine Debt (or any
portion thereof) is then outstanding, until the Third Mezzanine Debt is paid in
full, and then (iv) any balance to Borrowers. Borrowers and Lender hereby agree
and acknowledge that if (A) all of the Obligations have been satisfied,
(B) there are funds remaining in any of the Reserve Funds, and (C) the First
Mezzanine Debt (or any portion thereof) is outstanding, then Lender will not pay
any such remaining funds in any of the Reserve Funds to Borrowers, but rather
shall deliver such funds to First Mezzanine Lender to be held and applied in
accordance with the terms of the First Mezzanine Loan Documents until the First
Mezzanine Debt is paid in full, and then deliver any remaining funds to Second
Mezzanine Lender to be applied in accordance with the Second Mezzanine Loan
Documents, until the Second Mezzanine Debt is paid in full, and then deliver any
remaining funds to Third Mezzanine Lender to be applied in accordance with the
Third Mezzanine Loan Documents, until the Third Mezzanine Debt is paid in full,
with any balance delivered to Borrowers.
(g) Transfers of Borrowers’ funds from any of the Reserve Funds or any other
source to or for the benefit of any First Mezzanine Borrower(s) or any Second
Mezzanine Borrower(s) or any Third Mezzanine Borrower(s) shall constitute
distributions to such First Mezzanine Borrower(s), and deemed distributions by
such First Mezzanine Borrower(s) to such Second Mezzanine Borrower(s), or by
such First Mezzanine Borrower(s) to such Second Mezzanine Borrower(s) to such
Third Mezzanine Borrower(s), as applicable, and, in each case, must comply with
the requirements as to distributions in the Delaware Limited Liability Company
Act. The provisions of this Agreement, the Cash Management Agreement

 

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and the other Loan Documents shall not create a debtor-creditor relationship
between any Borrower and First Mezzanine Lender, Second Mezzanine Lender and/or
Third Mezzanine Lender.
(h) If the Cash Profit and Loss Statement for any calendar month demonstrates
that (i) the amount of Operating Expenses, Capital Expenditures, Extraordinary
Expenses or Pre-Opening Expenses disbursed by Lender in accordance with
Section 2.6.2(b)(iii) or 2.6.2(c)(v) hereof was (A) in excess of the actual
amounts needed to pay actual cash expenses payable in the applicable calendar
month for Operating Expenses, Capital Expenditures, Extraordinary Expenses or
Pre-Opening Expenses (as applicable), (ii) the amount of Extraordinary Expenses
or Pre-Opening Expenses distributed by Lender was in excess of the amounts
Borrower were entitled to receive under the applicable provisions of
Sections 2.6.2(b)(iii) or 2.6.2(c)(v) hereof and/or (ii) the amount of
Extraordinary Expenses disbursed by Lender in accordance with Section
2.6.2(b)(iv) or 2.6.2(c)(vi) hereof was in excess of the actual amounts needed
to pay that actual Extraordinary Expenses, then, within two (2) Business Days
after the date on which such Cash Profit and Loss Statement was delivered to
Lender (such date, the “Operating Expense Overfunding Reimbursement Date”),
Borrowers shall deposit any such excess disbursed amount (the “Operating Expense
Overfunding”) into the Interest Reserve Account up to the amount of the
depletion of the Interest Reserve Fund (calculated in Lender’s reasonable
discretion) as a result of any such Operating Expense Overfunding during the
immediately preceding month, and, if no such depletion of the Interest Reserve
Fund has so occurred then the amount of any such Operating Expense Overfunding
shall be deposited into the General Reserve Account. If Borrower shall fail to
deposit such excess on or prior to the Operating Expense Overfunding
Reimbursement Date, then Lender shall have the right to apply any funds then on
deposit in the Cash Management Account in an amount not to exceed the applicable
Operating Expense Overfunding into, as applicable, the Interest Reserve Account
and/or the General Reserve Account.
(i) Notwithstanding anything to the contrary herein, in addition to the monthly
Operating Expense Requests submitted by Borrower pursuant to Section 2.6.2(b)
and Section 2.6.2(c) hereof in connection with disbursements to be made on a
Payment Date or otherwise on any Wednesday occurring during any Interest Period,
Borrower shall have the right to submit additional Operating Expense Requests to
Lender for disbursements from the Cash Management Account on dates other than a
Payment Date, to the extent Borrower requires additional funds necessary to pay
actual cash monthly Operating Expenses, Extraordinary Expenses and Pre-Opening
Expenses (subject to the limitations set forth in Section 2.6.2(b) and
Section 2.6.2(c)). Borrower shall submit any such Operating Expense Request
(which request may be made electronically in a manner and to a recipient
acceptable to Lender) to Lender no later than one (1) Business Day prior to the
requested disbursement for such Operating Expenses (which request shall include
a Borrower certification that the amounts requested therein are in Borrower’s
good faith estimate limited to such amounts as are then necessary to pay
Operating Expenses that are then due and payable and that Borrower would
otherwise be entitled to receive under Section 2.6.2(b) hereof or
Section 2.6.2(c) hereof on the Payment Date immediately following the date of
such request). Each Operating Expense Request shall include a Borrower
certification that the amounts requested therein are in Borrower’s good faith
estimate limited to such amounts as are then necessary to pay actual cash
monthly Operating Expenses, Extraordinary Expenses and Pre-Opening Expenses that
are then due and payable and that

 

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Borrower would otherwise be entitled to receive under Section 2.6.2(b) or
Section 2.6.2(c) on the Payment Date immediately following the date of such
request.
2.6.3. Payments Received Under the Cash Management Agreement. Notwithstanding
anything to the contrary contained in this Agreement and the other Loan
Documents, and provided no Event of Default has occurred and is continuing,
Borrowers’ obligations with respect to amounts due for the Tax and Insurance
Escrow Fund, the Replacement Reserve Fund and any other payment reserves
established pursuant to this Agreement or any other Loan Document shall be
deemed satisfied to the extent sufficient amounts (together with any amounts
paid by or on behalf of Borrowers) are deposited in the Cash Management Account
established pursuant to the Cash Management Agreement to satisfy such
obligations on the dates each such payment is required and are available for the
payment of such amounts in accordance with the applicable provisions of
Section 2.6.2 hereof and the Cash Management Agreement (i.e. are not applied to
other amounts in accordance with the provisions of said Section 2.6.2),
regardless of whether any of such available funds are so applied by Lender.
Provided that sufficient funds are on deposit in the Tax and Insurance Escrow
Fund, Lender shall be responsible for any penalty or interest resulting from a
failure to pay Taxes or Insurance Premiums when due.
2.6.4. Intentionally Deleted.
Section 2.7. Extensions of the Initial Maturity Date.
2.7.1. Intentionally Deleted.
2.7.2. Qualified Extensions. As provided in this Section 2.7.2, Borrowers shall
have the option (each, a “Qualified Extension Option”) to extend the term of the
Loan beyond the Initial Maturity Date for four (4) successive terms (each, a
“Qualified Extension Term”) of one (1) year each (the Initial Maturity Date
following the exercise of each Qualified Extension Option being the “Qualified
Extended Maturity Date”).
(a) First Qualified Extension Option. Borrowers shall have the right to extend
the Initial Maturity Date to the First Qualified Extended Maturity Date (the
“First Qualified Extension Option”; and the period commencing on the first (1st)
day following the Initial Maturity Date and ending on the First Qualified
Extended Maturity Date being referred to herein as the “First Qualified
Extension Term”), provided that all of the following conditions are satisfied:
(i) no monetary Default, Event of Default, monetary First Mezzanine Default,
First Mezzanine Event of Default, monetary Second Mezzanine Default, Second
Mezzanine Event of Default, monetary Third Mezzanine Default or Third Mezzanine
Event of Default shall have occurred and be continuing at the time the First
Qualified Extension Option is exercised or on the date that the First Qualified
Extension Term commences;
(ii) Borrowers shall notify Lender of their irrevocable election to exercise the
First Qualified Extension Option not earlier than six (6) months, and not later
than thirty (30) days, prior to the Initial Maturity Date;

 

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(iii) if any Interest Rate Cap Agreement is scheduled to mature prior to the
First Qualified Extended Maturity Date, Borrowers shall obtain and deliver to
Lender not later than one (1) Business Day immediately preceding the first day
of the First Qualified Extension Term, one or more Replacement Interest Rate Cap
Agreements (or extension(s) of the existing Interest Rate Cap Agreement(s)) from
an Acceptable Counterparty, which Replacement Interest Rate Cap Agreement(s) (or
extension(s) of the existing Interest Rate Cap Agreement(s)) shall (i) be
effective commencing on the first day of the First Qualified Extension Term,
(ii) have a LIBOR strike price equal to the applicable Strike Price, (iii) have
a maturity date not earlier than the First Qualified Extended Maturity Date and
(iv) shall have a notional amount equal to the Reduced Acquisition Loan
Outstanding Principal Balance and the Construction Loan Outstanding Principal
Balance. Borrowers shall (x) assign to Lender, as collateral for the Loan,
pursuant to a Replacement Collateral Assignment of Interest Rate Cap, all of its
right, title and interest to receive any and all payments under such Replacement
Interest Rate Cap Agreement, and the Counterparty shall execute an
acknowledgment to such Replacement Collateral Assignment of Interest Rate Cap
agreeing to make deposits directly into the Lockbox Account and (y) obtain and
deliver to Lender an opinion from counsel (which counsel may be in-house counsel
for the Counterparty) for the Counterparty (upon which Lender and its successors
and assigns may rely), which opinion shall comply with Section 2.2.7(e) hereof;
(iv) not later than one (1) Business Day immediately preceding the first day of
the First Qualified Extension Term, all accrued and unpaid interest and any
unpaid or unreimbursed amounts in respect of the Loan and any other sums then
due to Lender hereunder or under any of the other Loan Documents shall have been
paid in full;
(v) Intentionally Deleted;
(vi) not later than one (1) Business Day immediately preceding the first day of
the First Qualified Extension Term, Borrowers shall have deposited with Lender
in immediately available funds, for deposit by Lender into the applicable
Reserve Fund(s) (other than the Interest Reserve Fund), any shortfalls in such
Reserve Fund(s) with respect to the First Qualified Extension Term, if any, as
reasonably estimated and underwritten by Lender based on (A) the Annual Budget
then in effect and (B) underwriting criteria consistent with that used by Lender
to determine the amount of the deposit to the applicable Reserve Fund(s) on the
Closing Date (and throughout the term of the Loan), which amount thereafter
shall constitute a part of the applicable Reserve Fund(s) and shall be held and
disbursed by Lender as set forth in Article VII hereof;
(vii) Intentionally Deleted;
(viii) the maturity date of the First Mezzanine Loan, if the First Mezzanine
Loan is then outstanding, shall be extended to not earlier than the First
Qualified Extended Maturity Date on the same terms and conditions as in effect
on the date hereof;
(ix) the maturity date of the Second Mezzanine Loan, if the Second Mezzanine
Loan is then outstanding, shall be extended to not earlier than the First
Qualified Extended Maturity Date on the same terms and conditions as in effect
on the date hereof;

 

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(x) the maturity date of the Third Mezzanine Loan, if the Third Mezzanine Loan
is then outstanding, shall be extended to not earlier than the First Qualified
Extended Maturity Date on the same terms and conditions as in effect on the date
hereof;
(xi) there shall exist no Shortfall as of the Business Day immediately preceding
the first day of the First Qualified Extension Term; and
(xii) Borrowers shall have reimbursed Lender for all costs reasonably incurred
by Lender in processing the extension request, including, without limitation,
reasonable legal fees and expenses provided, however, that in no event shall
Borrowers be required to pay any such fees, costs or expenses in excess of
Twenty Thousand Dollars ($20,000).
(b) Second Qualified Extension Option. Borrowers shall have the right to extend
the First Qualified Extended Maturity Date to the Second Qualified Extended
Maturity Date (the “Second Qualified Extension Option”; and the period
commencing on the first (1st) day following the First Qualified Extended
Maturity Date and ending on the Second Qualified Extended Maturity Date being
referred to herein as the “Second Qualified Extension Term”), provided that all
of the following conditions are satisfied:
(i) no monetary Default, Event of Default, monetary First Mezzanine Default,
First Mezzanine Event of Default, monetary Second Mezzanine Default, Second
Mezzanine Event of Default, monetary Third Mezzanine Default or Third Mezzanine
Event of Default shall have occurred and be continuing at the time the Second
Qualified Extension Option is exercised or on the date that the Second Qualified
Extension Term commences;
(ii) Borrowers shall notify Lender of their irrevocable election to exercise the
Second Qualified Extension Option not earlier than six (6) months, and not later
than thirty (30) days, prior to the First Qualified Extended Maturity Date;
(iii) if any Interest Rate Cap Agreement is scheduled to mature prior to the
Second Qualified Extended Maturity Date, Borrowers shall obtain and deliver to
Lender not later than one (1) Business Day immediately preceding the first day
of the Second Qualified Extension Term, one or more Replacement Interest Rate
Cap Agreements (or extension(s) of the existing Interest Rate Cap Agreement(s))
from an Acceptable Counterparty, which Replacement Interest Rate Cap
Agreement(s) (or extension(s) of the existing Interest Rate Cap Agreement(s))
shall (i) be effective commencing on the first day of the Second Qualified
Extension Term, (ii) have a LIBOR strike price equal to the applicable Strike
Price, (iii) have a maturity date not earlier than the Second Qualified Extended
Maturity Date and (iv) shall have a notional amount equal to the Reduced
Acquisition Loan Outstanding Principal Balance and the Construction Loan
Outstanding Principal Balance. Borrowers shall (x) assign to Lender, as
collateral for the Loan, pursuant to a Replacement Collateral Assignment of
Interest Rate Cap, all of its right, title and interest to receive any and all
payments under such Replacement Interest Rate Cap Agreement, and the
Counterparty shall execute an acknowledgment to such Replacement Collateral
Assignment of Interest Rate Cap agreeing to make deposits directly into the
Lockbox Account and (y) obtain and deliver to Lender an opinion from counsel
(which

 

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counsel may be in-house counsel for the Counterparty) for the Counterparty (upon
which Lender and its successors and assigns may rely), which opinion shall
comply with Section 2.2.7(e) hereof;
(iv) not later than one (1) Business Day immediately preceding the first day of
the Second Qualified Extension Term, all accrued and unpaid interest and any
unpaid or unreimbursed amounts in respect of the Loan and any other sums then
due to Lender hereunder or under any of the other Loan Documents shall have been
paid in full;
(v) Intentionally Deleted;
(vi) not later than one (1) Business Day immediately preceding the first day of
the Second Qualified Extension Term, Borrowers shall have deposited with Lender
in immediately available funds, for deposit by Lender into the applicable
Reserve Fund(s) (other than the Interest Reserve Fund), any shortfalls in such
Reserve Fund(s) with respect to the Second Qualified Extension Term, if any, as
reasonably estimated and underwritten by Lender based on (A) the Annual Budget
then in effect and (B) underwriting criteria consistent with that used by Lender
to determine the amount of the deposit to the applicable Reserve Fund(s) on the
Closing Date (and throughout the term of the Loan), which amount thereafter
shall constitute a part of the applicable Reserve Fund(s) and shall be held and
disbursed by Lender as set forth in Article VII hereof;
(vii) there shall exist no Shortfall as of the Business Day immediately
preceding the first (1st) day of the Second Qualified Extension Term, provided,
however, that this condition shall be of no further force or effect after the
date on which Final Completion is achieved;
(viii) the maturity date of the First Mezzanine Loan, if the First Mezzanine
Loan is then outstanding, shall be extended to not earlier than the Second
Qualified Extended Maturity Date on the same terms and conditions as in effect
on the date hereof;
(ix) the maturity date of the Second Mezzanine Loan, if the Second Mezzanine
Loan is then outstanding, shall be extended to not earlier than the Second
Qualified Extended Maturity Date on the same terms and conditions as in effect
on the date hereof;
(x) the maturity date of the Third Mezzanine Loan, if the Third Mezzanine Loan
is then outstanding, shall be extended to not earlier than the Second Qualified
Extended Maturity Date on the same terms and conditions as in effect on the date
hereof;
(xi) Intentionally Deleted;
(xii) Intentionally Deleted;
(xiii) Borrowers shall have paid to Lender an extension fee equal to one-quarter
of one percent (0.25%) of the Outstanding Principal Balance not later than one
(1) Business Day immediately preceding the first day of the Second Qualified
Extension Term; and

 

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(xiv) Borrowers shall have reimbursed Lender for all costs reasonably incurred
by Lender in processing the extension request, including, without limitation,
reasonable legal fees and expenses; provided, however, that in no event shall
Borrowers be required to pay any such fees, costs or expenses in excess of
Twenty Thousand Dollars ($20,000).
(c) Third Qualified Extension Option. Borrowers shall have the right to extend
the Second Qualified Extended Maturity Date to the Third Qualified Extended
Maturity Date (the “Third Qualified Extension Option”; and the period commencing
on the first (1st) day following the Second Qualified Extended Maturity Date and
ending on the Third Qualified Extended Maturity Date being referred to herein as
the “Third Qualified Extension Term”), provided that all of the following
conditions are satisfied:
(i) no monetary Default, Event of Default, monetary First Mezzanine Default,
First Mezzanine Event of Default, monetary Second Mezzanine Default, Second
Mezzanine Event of Default, monetary Third Mezzanine Default or Third Mezzanine
Event of Default shall have occurred and be continuing at the time the Third
Qualified Extension Option is exercised or on the date that the Third Qualified
Extension Term commences;
(ii) Borrowers shall notify Lender of their irrevocable election to exercise the
Third Qualified Extension Option not earlier than six (6) months, and not later
than thirty (30) days, prior to the Second Qualified Extended Maturity Date;
(iii) if any Interest Rate Cap Agreement is scheduled to mature prior to the
Third Qualified Extended Maturity Date, Borrowers shall obtain and deliver to
Lender not later than one (1) Business Day immediately preceding the first day
of the Third Qualified Extension Term, one or more Replacement Interest Rate Cap
Agreements (or extension(s) of the existing Interest Rate Cap Agreement(s)) from
an Acceptable Counterparty, which Replacement Interest Rate Cap Agreement(s) (or
extension(s) of the existing Interest Rate Cap Agreement(s)) shall (i) be
effective commencing on the first day of the Third Qualified Extension Term,
(ii) have a LIBOR strike price equal to the applicable Strike Price, (iii) have
a maturity date not earlier than the Third Qualified Extended Maturity Date, and
(iv) shall have a notional amount equal to the Reduced Acquisition Loan
Outstanding Principal Balance and the Construction Loan Outstanding Principal
Balance. Borrowers shall (x) assign to Lender, as collateral for the Loan,
pursuant to a Replacement Collateral Assignment of Interest Rate Cap, all of its
right, title and interest to receive any and all payments under such Replacement
Interest Rate Cap Agreement, and the Counterparty shall execute an
acknowledgment to such Replacement Collateral Assignment of Interest Rate Cap
agreeing to make deposits directly into the Lockbox Account and (y) obtain and
deliver to Lender an opinion from counsel (which counsel may be in-house counsel
for the Counterparty) for the Counterparty (upon which Lender and its successors
and assigns may rely), which opinion shall comply with Section 2.2.7(e) hereof;
(iv) not later than one (1) Business Day immediately preceding the first day of
the Third Qualified Extension Term, all accrued and unpaid interest and any
unpaid or unreimbursed amounts in respect of the Loan and any other sums then
due to Lender hereunder or under any of the other Loan Documents shall have been
paid in full;

 

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(v) the maturity date of the First Mezzanine Loan, if the First Mezzanine Loan
is then outstanding, shall be extended to not earlier than the Third Qualified
Extended Maturity Date on the same terms and conditions as in effect on the date
hereof;
(vi) the maturity date of the Second Mezzanine Loan, if the Second Mezzanine
Loan is then outstanding, shall be extended to not earlier than the Third
Qualified Extended Maturity Date on the same terms and conditions as in effect
on the date hereof;
(vii) the maturity date of the Third Mezzanine Loan, if the Third Mezzanine Loan
is then outstanding, shall be extended to not earlier than the Third Qualified
Extended Maturity Date on the same terms and conditions as in effect on the date
hereof;
(viii) Borrowers shall have reimbursed Lender for all costs reasonably incurred
by Lender in processing the extension request, including, without limitation,
reasonable legal fees and expenses; provided, however, that in no event shall
Borrowers be required to pay any such fees, costs or expenses in excess of
Twenty Thousand Dollars ($20,000);
(ix) not later than one (1) Business Day immediately preceding the first day of
the Third Qualified Extension Term, Borrowers shall have deposited with Lender
in immediately available funds, for deposit by Lender into the applicable
Reserve Fund(s) (other than the Interest Reserve Fund), any shortfalls in such
Reserve Fund(s) with respect to the Third Qualified Extension Term, if any, as
reasonably estimated and underwritten by Lender based on (A) the Annual Budget
then in effect and (B) underwriting criteria consistent with that used by Lender
to determine the amount of the deposit to the applicable Reserve Fund(s) on the
Closing Date (and throughout the term of the Loan), which amount thereafter
shall constitute a part of the applicable Reserve Fund(s) and shall be held and
disbursed by Lender as set forth in Article VII hereof; and
(x) there shall exist no Shortfall as of the Business Day immediately preceding
the first (1st) day of the Third Qualified Extension Term, provided, however,
that this condition shall be of no further force or effect after the date on
which Final Completion is achieved.
(d) Fourth Qualified Extension Option. Borrowers shall have the right to extend
the Third Qualified Extended Maturity Date to the Fourth Qualified Extended
Maturity Date (the “Fourth Qualified Extension Option”; and the period
commencing on the first (1st) day following the Third Qualified Extended
Maturity Date and ending on the Fourth Qualified Extended Maturity Date being
referred to herein as the “Fourth Qualified Extension Term”), provided that all
of the following conditions are satisfied:
(i) no monetary Default, Event of Default, monetary First Mezzanine Default,
First Mezzanine Event of Default, monetary Second Mezzanine Default, Second
Mezzanine Event of Default, monetary Third Mezzanine Default or Third Mezzanine
Event of Default shall have occurred and be continuing at the time the Fourth
Qualified

 

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Extension Option is exercised or on the date that the Fourth Qualified Extension
Term commences;
(ii) Borrowers shall notify Lender of their irrevocable election to exercise the
Fourth Qualified Extension Option not earlier than six (6) months, and not later
than thirty (30) days, prior to the Third Qualified Extended Maturity Date;
(iii) if any Interest Rate Cap Agreement is scheduled to mature prior to the
Fourth Qualified Extended Maturity Date, Borrowers shall obtain and deliver to
Lender not later than one (1) Business Day immediately preceding the first day
of the Fourth Qualified Extension Term, one or more Replacement Interest Rate
Cap Agreements (or extension(s) of the existing Interest Rate Cap Agreement(s))
from an Acceptable Counterparty, which Replacement Interest Rate Cap
Agreement(s) (or extension(s) of the existing Interest Rate Cap Agreement(s))
shall (i) be effective commencing on the first day of the Fourth Qualified
Extension Term, (ii) have a LIBOR strike price equal to the applicable Strike
Price, (iii) have a maturity date not earlier than the Fourth Qualified Extended
Maturity Date and (iv) shall have a notional amount equal to the Reduced
Acquisition Loan Outstanding Principal Balance and the Construction Loan
Outstanding Principal Balance. Borrowers shall (x) assign to Lender, as
collateral for the Loan pursuant to a Replacement Collateral Assignment of
Interest Rate Cap, all of its right, title and interest to receive any and all
payments under such Replacement Interest Rate Cap Agreement, and the
Counterparty shall execute an acknowledgment to such Replacement Collateral
Assignment of Interest Rate Cap agreeing to make deposits directly into the
Lockbox Account and (y) obtain and deliver to Lender an opinion from counsel
(which counsel may be in-house counsel for the Counterparty) for the
Counterparty (upon which Lender and its successors and assigns may rely), which
opinion shall comply with Section 2.2.7(e) hereof;
(iv) not later than one (1) Business Day immediately preceding the first day of
the Fourth Qualified Extension Term, all accrued and unpaid interest and any
unpaid or unreimbursed amounts in respect of the Loan and any other sums then
due to Lender hereunder or under any of the other Loan Documents shall have been
paid in full;
(v) not later than one (1) Business Day immediately preceding the first day of
the Fourth Qualified Extension Term, Borrowers shall have deposited with Lender
in immediately available funds, for deposit by Lender into the applicable
Reserve Fund(s) (other than the Interest Reserve Fund) any shortfalls in such
Reserve Fund(s) with respect to the Fourth Qualified Extension Term, if any, as
reasonably estimated and underwritten by Lender based on (A) the Annual Budget
then in effect and (B) underwriting criteria consistent with that used by Lender
to determine the amount of the deposit to the applicable Reserve Fund(s) on the
Closing Date (and throughout the term of the Loan), which amount thereafter
shall constitute a part of the applicable Reserve Fund(s) and shall be held and
disbursed by Lender as set forth in Article VII hereof;
(vi) the maturity date of the First Mezzanine Loan, if the First Mezzanine Loan
is then outstanding, shall be extended to not earlier than the Fourth Qualified
Extended Maturity Date on the same terms and conditions as in effect on the date
hereof;

 

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(vii) the maturity date of the Second Mezzanine Loan, if the Second Mezzanine
Loan is then outstanding, shall be extended to not earlier than the Fourth
Qualified Extended Maturity Date on the same terms and conditions as in effect
on the date hereof;
(viii) the maturity date of the Third Mezzanine Loan, if the Third Mezzanine
Loan is then outstanding, shall be extended to not earlier than the Fourth
Qualified Extended Maturity Date on the same terms and conditions as in effect
on the date hereof;
(ix) Borrowers shall have reimbursed Lender for all costs reasonably incurred by
Lender in processing the extension request, including, without limitation,
reasonable legal fees and expenses; provided, however, that in no event shall
Borrowers be required to pay any such fees, costs or expenses in excess of
Twenty Thousand Dollars ($20,000); and
(x) there shall exist no Shortfall as of the Business Day immediately preceding
the first (1st) day of the Fourth Qualified Extension Term, provided, however,
that this condition shall be of no further force or effect after the date on
which Final Completion is achieved.
2.7.3. Intentionally Deleted.
Section 2.8. Exit Fee.
(a) In all events and under all circumstances, Borrowers shall (in addition to
all other amounts which may then be payable to Lender hereunder) be obligated to
pay to Lender an exit fee (the “Exit Fee”) as follows: (i) subject to the
following clauses (ii) and (iii) upon any (and each) partial prepayment of the
Loan (including, without limitation, any voluntary prepayment pursuant to the
provisions of Section 2.4 (including, without limitation, any prepayment made
from the proceeds of any Release Parcel Price or IP Release Price) or otherwise,
any involuntary prepayment pursuant to the provisions of Section 7.6.3 or
otherwise, and/or any application of amounts to the Debt or any portion thereof
following an Event of Default), Borrowers shall pay an Exit Fee in an amount
equal to two and one half percent (2.50%) of the principal amount prepaid or
repaid; (ii) upon any (and each) application of any Net Proceeds to the Debt in
accordance with the terms of this Agreement, a portion of the Net Proceeds in an
amount equal to two and one half percent (2.50%) of such Net Proceeds shall be
applied to the Exit Fee with the balance of such Net Proceeds being applied to
the Debt; and (iii) upon any repayment in full of the Debt or the acceleration
thereof in accordance with the terms hereof or of any other Loan Documents,
Borrowers shall pay to Lender an Exit Fee equal to the principal amount of the
Debt so repaid multiplied by two and one-half percent (2.50%). In furtherance of
the foregoing, each Borrower expressly acknowledges and agrees that (A) Lender
shall have no obligation to accept any prepayment of the Loan unless and until
Borrowers shall have complied with this Section 2.8, and (B) Lender shall have
no obligation to release any Loan Document upon payment of the Debt unless and
until Lender shall have received the entire Exit Fee. Notwithstanding anything
to the contrary set forth herein, from and after the date on which any portion
of the membership interests in any of the Borrowers, First Mezzanine Borrowers,
Second Mezzanine Borrowers or Third Mezzanine Borrowers is Transferred in
connection with

 

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the First Mezzanine Lender’s, Second Mezzanine Lender’s or Third Mezzanine
Lender’s enforcement of its remedies (whether by judicial foreclosure, strict
foreclosure, public or private sale or any transfer in lieu of foreclosure)
under the applicable loan documents, all references in this Section 2.8 to two
and one-half percent (2.50%) shall thereafter refer instead to four and one-half
percent (4.50%).
(b) Intentionally Deleted.
(c) Each Borrower expressly acknowledges and agrees that the Exit Fee (i) shall
constitute additional consideration for the Loan, and (ii) shall, upon payment,
be the sole and exclusive property of Lender.
Section 2.9. Unused Advance Fee. On each Payment Date Borrowers shall pay the
following fee to Lender (whichever of the following applies at any given time,
the “Unused Advance Fee”): a fee equal to the product of (i) one-quarter of one
percent (0.25%) per annum multiplied by (ii) the difference between (A) the
Construction Loan Amount less (B) the aggregate amount of all Construction Loan
Advances actually advanced from the Closing Date up to such Payment Date
(excluding any Construction Loan Advances made out of the Construction Loan
Reserve Account). The Unused Advance Fee shall be payable on the basis of the
applicable annual rate set forth above and shall be calculated by multiplying
(1) the actual number of days elapsed in the period for which the calculation is
being made by (2) a daily rate based on a three hundred sixty (360) day year by
(3) the amount set forth in the foregoing clause (a)(ii) or (b)(ii), as
applicable. Without limiting the foregoing, the parties hereto hereby agree that
the Unused Advance Fee due on the Payment Date occurring in January, 2010 shall
be $20,440.58.
ARTICLE III.
CONSTRUCTION LOAN.
Section 3.1. Construction Loan Advances.
(a) Provided no monetary Default or Event of Default shall have occurred and be
continuing and subject to the terms and conditions of this Agreement, the
Construction Loan shall be advanced to or for the account of Borrowers in
Construction Loan Advances made in accordance with Section 3.6 hereof.
(b) Intentionally Deleted.
(c) Intentionally Deleted.
(d) Notwithstanding anything to the contrary set forth in this Agreement or the
other Loan Documents, at any time on or after the date hereof, Lender shall have
the right to advance the entire unfunded portion of the Construction Loan into
the Construction Loan Reserve Account (the “Remaining Construction Loan
Advance”), it being agreed that (i) such Remaining Construction Loan Advance
shall accrue interest in accordance with the terms hereof from and after the
date it is so advanced into the Construction Loan Reserve Account (regardless of
whether the same has been advanced from the Construction Loan Reserve Account in
accordance with the terms hereof) and (ii) following which (A) the unfunded

 

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portion of the Construction Loan shall be held in accordance with the provisions
of Sections 7.7 and 7.8 hereof and shall constitute a Reserve Fund for all
purposes under this Agreement and the other Loan Documents, and (B) all
subsequent Construction Loan Advances shall be advanced from the Construction
Loan Reserve Account until there are no funds remaining on deposit therein,
subject, in each instance, to the satisfaction of all conditions to funding with
respect thereto set forth in this Agreement (and shall continue to constitute
Construction Loan Advances for all purposes under this Agreement (except where
specifically excluded) notwithstanding that they are being advanced out of a
Reserve Fund).
(e) Intentionally Deleted.
(f) All Construction Loan Advances (including the Remaining Construction Loan
Advance), excluding, however, (i) any subsequent disbursement out of the
Construction Loan Reserve Account of funds previously advanced into the
Construction Loan Reserve Account pursuant to the Remaining Construction Loan
Advance as contemplated under Section 3.1(d) hereof, if applicable, and (ii) any
subsequent disbursement out of the Construction Loan Reserve Account of the
Third Mezzanine Construction Funds previously advanced into the Construction
Loan Reserve Account pursuant to Section 3.4.2 of the Third Mezzanine Loan
Agreement (the foregoing clauses (i) and (ii), collectively, the “Subsequent
Construction Loan Reserve Disbursements”), shall for all purposes be deemed part
of the Outstanding Principal Balance (and the Construction Loan Outstanding
Principal Balance) upon the making of such Construction Loan Advance by Lender,
it being understood and agreed that the Subsequent Construction Loan Reserve
Disbursements are not to be deemed included in the Outstanding Principal Balance
(and the Construction Loan Outstanding Principal Balance) because (A) in the
case of the foregoing clause (i), the entire amount of the Remaining
Construction Loan Advance will be included in the Outstanding Principal Balance
(and the Construction Loan Outstanding Principal Balance) as of the date of its
advance into the Construction Loan Reserve Account, and (B) in the case of the
foregoing clause (ii), the entire amount of the Third Mezzanine Construction
Funds was included in the Third Mezzanine Loan Outstanding Principal Balance as
of the date of its advance under the Third Mezzanine Loan Agreement.
(g) In no event shall any Construction Loan Advance (excluding the Remaining
Construction Loan Advance) exceed the full amount of Project Costs theretofore
paid or to be paid with the proceeds of such Construction Loan Advance, plus any
Project Costs incurred by Borrowers through the date of the Draw Request for
such Construction Loan Advance, minus (i) with respect to any Hard Costs, the
applicable Retainage for each contract and subcontract, (ii) the aggregate
amount of any Construction Loan Advances (excluding the Remaining Construction
Loan Advance) previously made by Lender, and (iii) any Shortfall payments
required to be made by Borrowers pursuant to Section 3.12 hereof. It is further
understood that, as between Lender and Borrowers, the Retainage described above
is intended to provide a contingency fund protecting Lender against failure of
Borrowers or Guarantors to fulfill any obligations under the Loan Documents, and
that Lender may charge amounts against such Retainage in the event Lender is
required or elects to expend funds to cure any continuing Event of Default.
(h) The Retainage, as applicable, shall be advanced on a contract by contract
basis as follows: (i) with respect to Major Contracts which have been previously

 

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approved by Lender in accordance with the terms hereof, the Retainage shall be
released in accordance with the Retainage release provisions contained therein,
it being acknowledged and agreed by Borrowers, however, that Lender’s consent of
any such Major Contract may reasonably take into account such Retainage release
provisions and their relationship to the progress of the construction work
required under such Major Contract, and (ii) with respect to any other contract
or subcontract, after final completion of all construction work provided for
under such contract or subcontract and pursuant to a Construction Loan Advance
made in accordance with the provisions of Sections 3.3 and/or 3.4 hereof, as
applicable.
(i) No Construction Loan Advance by Lender shall be deemed to be an approval or
acceptance by Lender of any work performed thereon or the materials furnished
with respect thereto.
(j) Lender shall not be required to disburse for any category or Line Item more
than the amount specified therefor in the Loan Budget, subject to Sections 3.9,
3.10 and 3.15 hereof (or other reallocations approved by Lender in its sole and
absolute discretion).
(k) In connection with the final Construction Loan Advance hereunder (which
shall be made under and in accordance with the provisions of Section 3.4
hereof), upon satisfaction of the conditions to such Construction Loan Advance
as set forth in Section 3.4 and payment of a fee to Lender equal to the Cost
Savings Fee, Borrowers shall be entitled to receive a Construction Loan Advance
in an amount not to exceed the lesser of (i) all actual cost savings as
determined by Lender at Final Completion based on Lender’s consultation with the
Construction Consultant (which costs savings shall not be duplicative of costs
savings which any Borrower received or is entitled to receive a reimbursement
for or payment from the General Contractor under the terms of the General
Contract as a result of actual amounts previously paid to such General
Contractor) and (ii) the unadvanced portion of the Construction Loan Amount
(after taking into consideration all other amounts to be advanced in connection
with such final Construction Loan Advance). Any amounts to be advanced in
accordance with the terms of the preceding sentence shall be advanced by Lender
into the General Reserve Fund to be held and applied in accordance with the
terms hereof.
Section 3.2. Initial Construction Loan Advance. Lender hereby acknowledges and
agrees that all conditions precedent to the Initial Construction Loan Advance
were satisfied or waived on the Construction Qualification Date, including,
without limitation, the posting of the Required Equity Letter of Credit in the
Required Equity Amount as determined as of the Construction Qualification Date,
and Borrower hereby acknowledges receipt of such Initial Construction Loan
Advance as well as Advances made subsequent thereto prior to the date hereof.
Section 3.3. Conditions Precedent to Subsequent Construction Loan Advances. The
obligation of Lender to make any Construction Loan Advances from and after the
date hereof shall be subject to the satisfaction by Borrower or written waiver
by Lender (in its sole discretion) of the following conditions precedent with
respect to each subsequent Construction Loan Advance:

 

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(a) Prior Conditions Satisfied. All conditions to any prior Construction Loan
Advances set forth herein or in any predecessor loan agreement (except, with
respect to any Construction Loan Advance requested pursuant to a Draw Request
submitted after the date hereof, to the extent any such conditions have been
specifically modified by this Agreement) shall continue to be satisfied by
Borrower or waived in writing by Lender as of the date of such subsequent
Construction Loan Advance.
(b) Deliveries. The following items or documents shall have been delivered to
Lender:
(i) A Draw Request complying with the provisions of this Agreement which shall
constitute Borrowers’ representation and warranty to Lender that: (A) any
completed construction is substantially in accordance with the Plans and
Specifications, (B) all costs for the payment of which Lender has previously
advanced funds have in fact been paid or are being held by Borrowers pending the
resolution of a bonafide dispute with a Trade Contractor; provided, however,
that (1) in such event, the Draw Request shall include a description of the
dispute, the identity of the Trade Contractor and the maximum amount in dispute,
(2) in no event shall Borrowers be holding, in the aggregate at any one time,
Construction Loan proceeds of more than $1,500,000.00 on account of all such
pending disputes with Trade Contractors, and (3) if the dispute is not resolved
within sixty (60) days following the date on which the Construction Loan Advance
which was intended to pay the disputed cost was advanced, Borrowers shall return
to Lender the amount of Construction Loan proceeds advanced to pay such disputed
cost, which amount may be requested again by Borrowers when the dispute is
resolved, (C) all the representations and warranties contained in Article IV of
this Agreement continue to be true and correct in all material respects (except
to the extent of changes in circumstances or conditions which are not otherwise
prohibited by this Agreement, including a specific statement that all Borrowers
are in compliance with Section 4.1.30 hereof), (D) no monetary Default or any
Event of Default shall have occurred and be continuing hereunder, and
(E) Borrowers continue to be in compliance in all material respects with all of
the other terms, covenants and conditions contained in this Agreement.
(ii) An Advance Request accompanied by a completed and itemized Application and
Certificate for Payment (AIA Document No. G702) attached hereto as Exhibit H or
similar form approved by Lender, containing the certification of the General
Contractor or Trade Contractor to whom such payment is made, as applicable, and
the Architect as to the material accuracy of same, together with invoices
relating to all items of Hard Costs covered thereby and accompanied by a cost
breakdown showing the cost of work on, and the cost of materials incorporated
into, the Project to the date of the requisition. The cost breakdown shall also
show the percentage of completion of each Line Item on the Loan Budget, and the
accuracy of the cost breakdown shall be certified by Borrowers and by the
Architect. All such applications for payment shall also show all Trade
Contractors, including Major Contractors, by name and trade, the total amount of
each contract or subcontract, the amount theretofore paid to each Trade
Contractor as of the date of such application, and the amount to be paid from
the proceeds of the Construction Loan Advance to each Trade Contractor.
(iii) A General Contractor Affirmation of Payment (an “Affirmation of Payment”)
(AIA Form G706) in the form attached hereto as Exhibit M.

 

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(iv) All invoices relating to all items of Soft Costs identified in the Advance
Request or Borrowers’ receipted bills therefor, or other reasonable proof of
expenditure or payments for Soft Costs due reasonably acceptable to Lender.
(v) An Anticipated Cost Report in respect of the Project, which shall be
reasonably satisfactory in form and substance to Lender and the Construction
Consultant.
(vi) An endorsement to the Title Insurance Policy dated the date of such
requested Construction Loan Advance and showing the Mortgage as a prior and
paramount Lien on each of the Properties, subject only to (A) the Permitted
Encumbrances, (B) any other Liens or encumbrances consented to in writing by
Lender, and (C) any other Liens which are then being contested in accordance
with the provisions of Section 3.6(b) of the Mortgage, and which shall have the
effect of increasing the coverage of the Title Insurance Policy by an amount
equal to the amount of the Construction Loan Advance then being made, along with
co-insurance or reinsurance in such forms and amounts as may be reasonably
required by Lender. Any reinsurance agreements shall provide for direct access
with the other title companies satisfactory to Lender.
(vii) (A) An updated lien waiver log, (B) duly executed conditional Lien waivers
in the form set forth in Exhibit L-1 (progress payment) or L-3 (final payment)
hereto, as applicable, from all Major Contractors who have performed work, for
the work so performed, and/or who have supplied labor and/or materials, for the
labor and/or materials so supplied, except for such work or labor and/or
materials for which payment thereof is requested, as to which duly executed
unconditional Lien waivers in the form set forth in Exhibit L-2 (progress
payment) or L-4 (final payment) hereto, as applicable, shall be delivered to
Lender with the next request for a Construction Loan Advance, and (C) duly
executed unconditional Lien waivers in the form set forth in Exhibit L-2
(progress payment) or L-4 (final payment) hereto, as applicable, with respect to
all payments which were requested to be paid with the immediately preceding
Construction Loan Advance and from whom a conditional Lien waiver in the form
set forth in Exhibit L-1 (progress payment) or L-3 (final payment) hereto, as
applicable, was delivered in the immediately preceding request for a
Construction Loan Advance.
(viii) An updated (A) Architect’s Certificate, (B) General Contractor’s
Certificate, and (C) at Lender’s request, an updated Contractor’s Certificate
from any Major Contractor, together with (1) copies of any amendments to the
Architect’s Contract, General Contract, and any Major Contract (all of which
amendments shall be approved by Lender as and to the extent Lender approval is
required in accordance with the terms hereof) and (2) copies of any new
contracts and subcontracts for the Project which do not constitute Major
Contracts entered into subsequent to the date of the immediately preceding Draw
Request.
(ix) A spreadsheet of Loan Budget Line Items in form reasonably satisfactory to
Lender showing amounts expended under each Line Item to date and amounts under
each Line Item remaining to be paid out.

 

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(x) Evidence that all Government Approvals necessary to permit the construction
of that/those portion(s) of the Project to be funded with the proceeds of the
proposed Construction Loan Advance have been obtained, including, without
limitation, one or more acceptable building permits.
(xi) A monthly progress report from the General Contractor and/or the General
Contractor, including, without limitation, a Loan Budget status (with respect to
Hard Costs only), Construction Schedule status, Governmental Approval status, if
applicable, and a description of any issues to be resolved between Borrowers and
any designer or Trade Contractor, which report shall be reasonably satisfactory
to Lender and Construction Consultant.
(xii) Evidence reasonably satisfactory to Lender that the notional amount of the
Interest Rate Cap Agreement(s) with respect to the Construction Loan shall be no
less than the Construction Loan Outstanding Principal Balance, after giving
effect to the proposed Construction Loan Advance, pursuant to one or more
modified or new Interest Rate Cap Agreements complying with the terms of
Section 2.2.7 hereof.
(xiii) Lender and the Construction Consultant shall have received and approved
any changes to the Disbursement Schedule.
(c) Payment of Fees and Expenses. Payment by Borrowers of all fees and expenses
required by this Agreement, to the extent then due and payable, including,
without limitation, (i) any fees and expenses referred to in Section 10.13
hereof then due and payable, (ii) any reasonable fees and expenses then due and
payable to the Construction Consultant, (iii) any Unused Advance Fee then due
and payable, (iv) any Administrative Agent Fee then due and payable, and/or
(v) any title premiums and/or other title charges then due and payable.
(d) Required Equity. In the event that, as of the date of the proposed
Construction Loan Advance, the Total Cost Ratio exceeds eighty-one percent (81%)
(the amount in excess of such eighty-one percent (81%) threshold being referred
to herein as a “Subsequent Required Equity Amount”), Borrowers shall be required
to provide to Lender, as an additional equity contribution, the Subsequent
Required Equity Amount, which may be provided in one of, or by a combination of,
the following manners: (A) a voluntary prepayment of the Loan in accordance with
all of the terms of Section 2.4.1 hereof and to be applied as set forth in
Section 2.4.3(a) hereof (with the Exit Fee payable in connection therewith being
determined in accordance with the provisions of Section 2.8 hereof), (B) the
delivery to Lender of evidence satisfactory to Lender in its reasonable
discretion that Borrowers or one or more Affiliates thereof have previously
expended cash to satisfy Project Costs included on the Loan Budget, which shall
result in a credit against the amount of the Required Equity Amount by the
amount of such cash expended, and/or (C) the delivery of a Required Equity
Letter of Credit.
If Borrowers elect to deliver any Required Equity Letter of Credit, the
following shall apply to each such Required Equity Letter of Credit, including,
without limitation, the Required Equity Letter of Credit on deposit with Lender
as of the date hereof representing the Required Equity Amount and any Required
Equity Letter of Credit delivered to Lender in accordance with the terms hereof
representing any Subsequent Required Equity Amount:

 

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(A) Borrowers shall pay to Lender all of Lender’s reasonable out-of-pocket costs
and expenses in connection therewith, including, without limitation, any costs
or expenses incurred in drawing down on such Required Equity Letter of Credit.
Borrowers shall not be entitled to draw from any such Required Equity Letter of
Credit. Upon five (5) days notice to Lender and provided that no Event of
Default, First Mezzanine Event of Default, Second Mezzanine Event of Default or
Third Mezzanine Event of Default shall have occurred and be continuing,
Borrowers may replace such Required Equity Letter of Credit with a voluntary
prepayment of the Loan, the First Mezzanine Loan, the Second Mezzanine Loan and
the Third Mezzanine Loan in an aggregate amount equal to such Required Equity
Letter of Credit, which prepayment shall be applied in accordance with Section
2.4.3(a) hereof (with the Exit Fee payable in connection therewith being
determined in accordance with the provisions of Section 2.8 hereof), following
which prepayment, Lender shall promptly return such Required Equity Letter of
Credit to Borrowers.
(B) Each Required Equity Letter of Credit delivered under this Agreement shall
be additional security for the payment of the Debt. Upon the occurrence and
during the continuance of an Event of Default, Lender shall have the right, at
its option, to draw on any Required Equity Letter of Credit and to apply all or
any part thereof in accordance with the provisions of Section 2.4.3(a) hereof
applicable to a prepayment following the occurrence and during the continuance
of an Event of Default.
(C) In addition to any other right Lender may have to draw upon a Required
Equity Letter of Credit pursuant to the terms and conditions of this Agreement,
Lender shall have the additional rights to draw in full on any Required Equity
Letter of Credit: (1) with respect to any evergreen Required Equity Letter of
Credit, if Lender has received a notice from the issuing bank that such Required
Equity Letter of Credit will not be renewed and a substitute Required Equity
Letter of Credit is not provided at least ten (10) Business Days prior to the
date on which the outstanding Required Equity Letter of Credit is scheduled to
expire; (2) with respect to any Required Equity Letter of Credit with a stated
expiration date, if Lender has not received a notice from the issuing bank that
it has renewed such Required Equity Letter of Credit at least ten (10) Business
Days prior to the date on which such Required Equity Letter of Credit is
scheduled to expire and a substitute Required Equity Letter of Credit is not
provided at least ten (10) Business Days prior to the date on which the
outstanding Required Equity Letter of Credit is scheduled to expire; (3) upon
receipt of notice from the issuing bank that such Required Equity Letter of
Credit will be terminated and a substitute Required Equity Letter of Credit is
not provided at least ten (10) Business Days prior to the date on which the
outstanding Required Equity Letter of Credit is scheduled to be terminated; or
(4) if Lender has received notice that the bank issuing any Required Equity
Letter of Credit shall cease to be an

 

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Approved Bank and within ten (10) Business Days after Lender notifies Borrowers
in writing of such circumstance, Borrowers shall fail to deliver to Lender a
substitute Required Equity Letter of Credit issued by an Approved Bank or
deposit with Lender into the Construction Loan Reserve Account, cash in an
amount equal to the Required Equity Letter of Credit then in effect less any
amounts previously drawn thereunder or converted with respect thereto (unless
such amounts were previously drawn or converted as a result of any event
specified in clause (1), (2), (3) or (4) above or as a result of the exercise of
remedies with respect to an Event of Default that has occurred and is
continuing). Notwithstanding anything to the contrary contained in the above,
Lender is not obligated to draw upon any Required Equity Letter of Credit upon
the happening of an event specified in clause (1), (2), (3) or (4) above and
shall not be liable for any losses sustained by Borrowers due to the insolvency
of the bank issuing any such Required Equity Letter of Credit if Lender has not
drawn upon such Required Equity Letter of Credit.
(D) With respect to any Required Equity Letter of Credit permitted to be
delivered pursuant to this Section 3.3(d) and/or Section 3.12 hereof, instead of
delivering separate Required Equity Letters of Credit, Borrowers shall have the
right, at any time, to deliver a replacement Required Equity Letter of Credit in
an amount which reflects the aggregate amount of the separate Required Equity
Letters of Credit then in effect and/or then desired by Borrowers to be in
effect and, upon delivery of any such replacement Required Equity Letter of
Credit, Lender shall promptly return to Borrowers that/those previously issued
Required Equity Letter(s) of Credit the amount of which has been included in
such replacement Required Equity Letter of Credit.
(e) Shortfalls. Lender shall have received evidence reasonably satisfactory to
Lender that no Shortfall shall then exist.
(f) Change Orders. Lender shall have approved all Major Contracts and all Change
Orders entered into since the last Construction Loan Advance and, with respect
to Change Orders, that require Lender’s approval pursuant to Section 3.15
hereof.
(g) Certification Regarding Chattels. Lender shall have received, at Borrowers’
expense, a search of the public records that, subject to Section 3.11 hereof and
the Permitted Encumbrances, discloses no conditional sales contracts, chattel
mortgages, leases of personalty, financing statements or title retention
agreements which affect any of the Properties.
(h) Notices. All notices required by any Governmental Authority or by any Legal
Requirement to be filed prior to commencement of construction of that/those
portion(s) of the Project to be funded with the proceeds of the proposed
Construction Loan Advance shall have been filed.

 

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(i) No Monetary Default or Event of Default. On the date of the Construction
Loan Advance there shall exist no monetary Default or any Event of Default.
(j) Representations and Warranties. All representations and warranties made by
Borrowers and/or Guarantors in the Loan Documents or otherwise made by or on
behalf of Borrowers and/or Guarantors in connection therewith or after the date
thereof shall continue to be true and correct in all material respects on the
date of the Construction Loan Advance (except to the extent of changes in
circumstances or conditions which are not otherwise prohibited by this
Agreement).
(k) No Damage. The Improvements (including any partially constructed portion of
the Project) shall not have been injured or damaged by fire, explosion,
accident, flood or other casualty, unless (i) such injury or damage constitutes
a Minor Casualty, or (ii) the damage therefrom shall have been fully Restored,
or (iii) Net Proceeds in an amount sufficient for Restoration shall have been
received by Borrowers or Lender as required pursuant to this Agreement.
(l) Construction Consultant Approval. Lender shall have received a Construction
Consultant Approval with respect to the Construction Loan Advance, it being
expressly agreed by Lender that Lender shall diligently pursue obtaining
Construction Consultant’s response within a commercially reasonable time period
following any Draw Request which includes all the required items as set forth
herein.
(m) Loan Document Modifications. Modifications to any Loan Documents, in form
and substance reasonably satisfactory to Lender, as shall be required in
accordance with the terms of this Agreement, shall have been duly executed and
delivered by the parties thereto and shall be in full force and effect, and
Lender shall have received the originals or fully executed counterparts thereof.
Section 3.4. Conditions of Final Construction Loan Advance. In addition to the
conditions set forth in Section 3.3 hereof, Lender’s obligation to make the
final Construction Loan Advance, including, without limitation, in respect of
any Retainage pursuant to this Agreement, shall be subject to the occurrence of
Final Completion as evidenced by Lender’s receipt (or waiver of receipt by
Lender in its sole discretion) of the following:
(a) Approval by Construction Consultant. Notification from the Construction
Consultant that the Project (including the Punch List Items) has been completed
substantially in accordance with the Plans and Specifications, all Legal
Requirements, all material Permitted Encumbrances and this Agreement.
(b) Certificates. An updated (A) Architect’s Certificate, (B) General
Contractor’s Certificate, and (C) at Lender’s request, an updated Contractor’s
Certificate from any Major Contractor.
(c) Certificates of Occupancy. A copy of the Certificate(s) of Occupancy (it
being agreed that if the same is subject to any conditions, such conditions
shall be acceptable to Lender in its reasonable discretion) and all other
material Governmental Approvals for the Project.

 

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(d) Lien Waivers. (i) An updated lien waiver log, (ii) duly executed conditional
Lien waivers in the form set forth in Exhibit L-3 (final payment) hereto from
all Major Contractors who have performed work, for the work so performed, and/or
who have supplied labor and/or materials, for the labor and/or materials so
supplied, except for such work or labor and/or materials for which payment
thereof is requested, as to which duly executed unconditional Lien waivers in
the form set forth in Exhibit L-4 (final payment) hereto shall be delivered to
Lender within thirty (30) days following such final Construction Loan Advance,
and (iii) duly executed unconditional Lien waivers in the form set forth in
Exhibit L-4 (final payment) hereto with respect to all payments which were
requested to be paid with the immediately preceding Construction Loan Advance
and from whom a conditional Lien waiver in the form set forth in Exhibit L-1
(progress payment) or L-3 (final payment) hereto, as applicable, was delivered
in the immediately preceding request for a Construction Loan Advance.
(e) Final Survey. Final Surveys of the Hotel/Casino Property and the Adjacent
Property acceptable to Lender showing the as-built location of the completed
Project Improvements (all of which shall be within lot lines of the real
property comprising a portion of the applicable Property and in compliance with
all set-back requirements) and all easements appurtenant thereto.
(f) Payment of Costs. Evidence satisfactory to Lender that (i) all sums due in
connection with the construction of the Project have been paid in full (or will
be paid out of the funds requested to be advanced in the final Construction Loan
Advance), as evidenced by (A) with respect to any party with Lien rights, an
executed Lien waiver substantially in the form attached hereto as Exhibit L-3 or
L-4, as applicable (as required under the foregoing clause (d)), or (B) with
respect to any party without Lien rights, an invoice and proof of payment or
such other evidence of payment as shall be reasonably satisfactory to Lender,
and (ii) except for any Lien then being contested pursuant to, and in accordance
with, Section 3.6(b) of the Mortgage, no party claims or has a right to claim
any statutory or common law Lien arising out of the construction of the Project
or the supplying of labor, material and/or services in connection therewith.
(g) “As-Built” Plans and Specifications. A full and complete set of “as built”
Plans and Specifications certified to by the Architect.
(h) Title Insurance Policy. Endorsements to the Title Insurance Policy
referencing the final Surveys and indicating no Liens other than Permitted
Encumbrances and including an update to the Form 9 Comprehensive Endorsement, in
each case in form and substance reasonably acceptable to Lender.
(i) Payment of Fees and Expenses. Payment by Borrowers of all fees and expenses
required by this Agreement, to the extent then due and payable, including,
without limitation, (i) any fees and expenses referred to in Section 10.13
hereof then due and payable, (ii) any reasonable fees and expenses then due and
payable to the Construction Consultant, (iii) any Unused Advance Fee then due
and payable, (iv) any Administrative Agent Fee then due and payable, and/or
(v) any title premiums and/or other title charges then due and payable.

 

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(j) Other Documents. If requested by Lender, a completed AIA Form G704
(Certificate of Substantial Completion) and/or a completed AIA Form G707
(Consent of Surety to Final Payments).
Section 3.5. No Reliance. All conditions and requirements of this Agreement with
respect to any Construction Loan Advance are for the sole benefit of Lender and
no other Person or party (including, without limitation, the Construction
Consultant and Trade Contractors, including Major Contractors and materialmen
engaged in the construction of the Project) shall have the right to rely on the
satisfaction of such conditions and requirements by Borrowers. Lender shall have
the right, in its sole and absolute discretion, to waive any such condition or
requirement.
Section 3.6. Procedures for Construction Loan Advances.
(a) At such time as Borrowers shall desire to obtain a Construction Loan Advance
(other than the Remaining Construction Loan Advance), but in no event more
frequently than twice every thirty (30) days, Borrower shall complete, execute
and deliver to Lender and Construction Consultant a Draw Request not less than
ten (10) Business Days prior to the date of the requested Construction Loan
Advance (the “Requested Disbursement Date”).
(b) In addition to the conditions set forth in Sections 3.3 and 3.4 hereof, as
applicable, each Construction Loan Advance shall be conditioned on satisfaction
of the following conditions precedent:
(i) The amount of any Construction Loan Advance shall not exceed the unfunded
amount of the Construction Loan Amount; and
(ii) Lender shall have received from Borrowers a statement, duly acknowledged,
certifying the Construction Loan Outstanding Principal Balance and the Reduced
Acquisition Loan Outstanding Principal Balance, which may be included in the
applicable Draw Request.
(c) Each Draw Request shall be accompanied by:
(i) a written request of Borrowers for any necessary changes in the Plans and
Specifications, the Loan Budget, the Disbursement Schedule and/or the
Construction Schedule; and
(ii) (A) copies of all executed Change Orders, (B) copies of all executed Major
Contracts, (C) a list of all other contracts and subcontracts which are not
Major Contracts and a copy of any such contract(s) and/or subcontract(s)
requested by Lender, and (D) to the extent reasonably requested by Lender,
copies of all inspection or test reports and other documents relating to the
construction of the Project, in each of the foregoing instances, to the extent
not previously delivered to Lender.
(d) With respect to Construction Loan Advances for a deposit under any contract
or subcontract for the purchase of materials or FF&E, the applicable Draw
Request shall be accompanied by (i) a copy of the executed contract, subcontract
or purchase order which

 

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requires such deposit, which contract or subcontract either (A) shall have been
approved by Lender in its reasonable judgment prior to execution if it is a
Major Contract, or (B) shall contain a deposit which is customary for similar
materials or FF&E, as applicable, in similar projects as the Project (or such
deposit is otherwise reasonably acceptable to Lender), and (ii) an invoice for
payment of such deposit from the applicable contractor or subcontractor.
Additionally, Borrowers shall not have outstanding at any one time aggregate
deposits exceeding $5,000,000.00 (Lender agreeing that it shall not unreasonably
withhold its consent to an increase of such limit), it being acknowledged and
agreed by Lender and Borrowers that once a deposit is used to purchase materials
or FF&E and Borrowers receive a bill of sale with respect thereto and/or the
same are delivered on-site to the Hotel/Casino Property or the Adjacent
Property, the amount thereof shall no longer constitute a deposit for purposes
of the foregoing limit.
(e) Provided that all of the conditions for the disbursement of Construction
Loan Advances set forth in Sections 3.2, 3.3 and/or 3.4 hereof, as applicable,
have been satisfied, Lender shall make the Construction Loan Advance on the
Requested Disbursement Date. Each Construction Loan Advance shall be made by
wire transfer to a checking account of Borrowers or, at the option of Lender, as
provided in Section 3.7 hereof. All proceeds of all Construction Loan Advances
shall be used by Borrowers only for the purposes for which such Construction
Loan Advances were made. Borrowers shall not commingle such funds with other
funds of Borrowers.
Section 3.7. Direct Advances to Third Parties. Lender may make any or all
Construction Loan Advances to (a) General Contractor or any Major Contractor, as
applicable, for construction expenses which shall theretofore have been approved
by Lender and for which Borrowers shall have failed to make payment after
receipt by Borrowers of such applicable Construction Loan Advance, (b) the
Architect, to pay its fees to the extent funds are allocated thereto in the Loan
Budget and for which Borrowers shall have failed to make payment after receipt
by Borrowers of such applicable Construction Loan Advance, (c) the Construction
Consultant, to pay its fees, (d) Lender’s counsel, to pay its fees, (e) the
Administrative Agent, to pay its Administrative Agent Fee, (f) Lender, to pay
(i) the Unused Advance Fee, (ii) any expenses incurred by Lender which are
reimbursable by Borrowers under the Loan Documents, provided that Borrowers
shall theretofore have received notice from Lender that such expenses have been
incurred and Borrowers shall have failed to reimburse Lender for said expenses
beyond any grace periods provided for said reimbursement under this Agreement or
any of the other Loan Documents, and/or (iii) following the occurrence and
during the continuance of an Event of Default, any other sums due to Lender
under the Notes, this Agreement or any of the other Loan Documents, all to the
extent that the same are not paid by the respective due dates thereof (including
any applicable grace periods), and in each case subject to the approval of
Lender, and (g) any other Person to whom Lender determines payment is due to the
extent provided in the Loan Budget, after written notice to Borrowers and
Borrowers failure to make such payment within ten (10) Business Days following
such notice, subject to Borrowers’ right to dispute any such payment in
accordance with the terms and provisions of this Agreement. The execution of
this Agreement by Borrowers shall, and hereby does, constitute an irrevocable
authorization to so advance the proceeds of the Construction Loan directly to
any such Persons described in the foregoing clauses (a) — (g), above, as amounts
become due and payable to them hereunder. No further authorization from
Borrowers or any other Person shall be necessary to warrant such direct
Construction Loan Advances as provided in this Section 3.7, and all such

 

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Construction Loan Advances shall be secured by the Mortgage and the other
applicable Loan Documents as fully as if made directly to Borrowers.
Section 3.8. Construction Loan Advances Do Not Constitute a Waiver. No
Construction Loan Advance shall constitute a waiver of any of the conditions of
Lender’s obligation to make further Construction Loan Advances nor, in the event
Borrowers are unable to satisfy any such condition, which inability also
constitutes a Default or an Event of Default, shall any Construction Loan
Advance have the effect of precluding Lender from thereafter declaring such
inability (following any applicable notice and grace period) to be an Event of
Default hereunder.
Section 3.9. Cost Overruns; Reallocation of Line Items.
(a) Subject to Borrowers’ rights to reallocate (i) among Line Item Components as
provided in this Section 3.9, (ii) from Contingency Line Items as provided in
Section 3.10 hereof, and (iii) with respect to Change Orders as provided in
Section 3.15 hereof, if, at any time after the date of the Initial Construction
Loan Advance, Borrowers become aware of any change in the Project Costs that
will materially increase a category or Line Item reflected in the Loan Budget,
Borrowers shall promptly notify Lender in writing and promptly submit to Lender
for Lender’s and the Construction Consultant’s approval a revised Loan Budget;
provided, however, that only those Line Items and components which are proposed
to be changed shall be subject to Lender’s and the Construction Consultant’s
approval at that time. Any reallocation of any category or Line Items in the
Loan Budget in connection with cost overruns shall be subject to Lender’s
approval in its reasonable discretion, subject to Borrowers’ rights under
Section 3.15 hereof with respect to Change Orders that do not require Lender’s
approval. Lender shall have no obligation to make any further Construction Loan
Advances unless and until the proposed changes to the Loan Budget so submitted
by Borrowers are approved by Lender in its reasonable discretion.
(b) Borrowers, without the consent of Lender but after notice to Lender, may
reallocate to any Line Item all or any portion of any Cost Savings not
previously reallocated, provided that (i) no single Line Item is increased by
more than ten percent (10%), and (ii) except as provided in Section 3.10(b)
hereof, under no circumstances shall Borrowers be entitled to reallocate any
amount allocated to any Contingency Line Item without Lender’s approval, to be
granted or withheld in Lender’s sole and absolute discretion. All other
reallocations of Cost Savings shall require Lender’s prior consent, not to be
unreasonably withheld. Upon any such reallocation of all or any portion of any
such Cost Savings to any Line Item, the amount of such Cost Savings shall no
longer be deemed “Cost Savings” hereunder, but shall be deemed to be part of the
Line Item to which such amount was reallocated and the Loan Budget shall be
deemed automatically amended without further action. As used in this Agreement,
“Cost Savings” shall mean and be determined as follows:
(A) If Lender reasonably determines that any component of the construction of
the Project which is the subject of a Line Item (a “Line Item Component”) has
been completed without the expenditure by Borrowers of the entire amount
allocated in the Loan Budget to such Line Item Component, and all Major
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work performed and materials provided with respect to such Line Item Component,
the difference between the amount of such Line Item Component in the Loan Budget
and the amount so expended for such Line Item Component shall be deemed to be a
“Cost Savings”; or
(B) If prior to the completion of the Line Item Component (other than the Line
Item for interest or any Contingency Line Item), Borrowers shall demonstrate to
Lender’s reasonable satisfaction that upon completion of such Line
Item Component a Cost Savings will be realized pursuant to the foregoing clause
(i) with respect to such Line Item Component, the amount of such Cost Savings
which is demonstrated to Lender’s reasonable satisfaction shall also be deemed
to be a “Cost Savings”. Lender shall not be required to allow such a
reallocation with respect to a Line Item constituting Hard Costs unless (1) such
Line Item has a firm or guaranteed maximum price or fixed price contract or
sub-contract in place, (2) the work has commenced and is proceeding
substantially in accordance with the Construction Schedule, and (3) the
Construction Consultant is satisfied with said contract or sub-contract,
including, without limitation, with regard to the scope of said contract or
sub-contract.
(c) New Line Items may not be created without Lender’s prior written consent in
its reasonable discretion and, if created with Lender’s consent, no portion of
any Contingency Line Item shall be reallocated to any such new Line Item, except
as provided in Section 3.10 hereof. To the extent not paid for by reallocating
Cost Savings among Line Items or by reallocating any Contingency Line Item in
accordance with Section 3.10 hereof, new Line Items must be paid for by
Borrowers from sources other than the Loan.
Section 3.10. Contingency Reallocations.
(a) The amounts allocated as Contingency (Hard Costs) or Contingency (Soft
Costs) in the Loan Budget and that are intended to cover the eventuality of
unforeseen costs or cost overruns (the “Contingency Line Items”) shall be
disbursed from time to time upon request by Borrowers and, subject to
Section 3.10(b) below, upon approval by Lender, not to be unreasonably withheld,
and may be used only for appropriate, as applicable, Hard Costs of, or Soft
Costs associated with, the Project. Any expenditure of Contingency (Hard Costs)
for Soft Costs or Contingency (Soft Costs) for Hard Costs shall be prohibited
unless expressly approved by Lender in its sole and absolute discretion.
(b) Borrowers, without the consent of Lender but after notice to Lender, may
reallocate up to ten percent (10%) of the Contingency (Hard Costs) to any Hard
Cost Line Item and/or may reallocate up to ten percent (10%) of the Contingency
(Soft Costs) to any Soft Cost Line Item, provided that, in either event, (i) no
single Line Item is increased by more than ten percent (10%) in connection with
this or any prior reallocation of any Contingency Line Item and (ii) after
giving effect to any such reallocation, (A) the sum of the aggregate of all
amounts so reallocated and any amounts previously reallocated from the
Contingency (Hard Costs) (including, without limitation, amounts previously
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the contingency required to be maintained under the General Contract) or
Contingency (Soft Costs), as applicable, when added to the remaining amount of
the Contingency (Hard Costs) or Contingency (Soft Costs), as applicable, shall
be equal to or greater than (y) in the instance of a reallocation of amounts
from the Contingency (Hard Costs), at least 10% of the total Hard Costs set
forth in the Loan Budget (including estimated and incurred Hard Costs) and
(z) in the instance of a reallocation of amounts from the Contingency (Soft
Costs), at least 5% of the total Soft Costs set forth in the Loan Budget
(including such estimated and incurred Soft Costs) and (B) the remaining amount
of the Contingency (Hard Costs) shall be equal to or greater than five percent
(5%) of the difference between (y) the total Project Costs estimated in the Loan
Budget (including estimated or incurred Project Costs) less (z) any Project
Costs actually incurred (provided that, in the event such Project Costs
identified in this clause (z) relate to items over which Lender and/or
Construction Consultant has consent rights hereunder, such Project Costs shall
have been approved by Lender and/or Construction Consultant in accordance with
the terms hereof). All other reallocations of any Contingency shall require
Lender’s prior consent, not to be unreasonably withheld. Notwithstanding the
foregoing (and without limiting Lender’s consent rights relative to
reallocations of the Contingency (Hard Costs) and the Contingency (Soft Costs)),
Lender expressly acknowledges that the General Contractor shall have the right
to apply contingency under the General Contract as permitted thereunder. Upon
any such reallocation of all or any portion of any Contingency to any Line Item,
the amount of such Contingency shall no longer be deemed “Contingency”
hereunder, but shall be deemed to be part of the Line Item to which such amount
was reallocated. In giving or withholding its approval to any reallocation of
any Contingency, Lender may take into account the then current state of
completion of the Project, any existing cost overruns and any potential cost
overruns as may then be reasonably foreseen or reasonably anticipated by Lender.
Section 3.11. Stored Materials. Lender shall not be required to authorize any
disbursement of funds for any materials, machinery or other Personal Property
not yet incorporated into the Project (the “Stored Materials”), unless the
following conditions are satisfied or waived in writing by Lender:
(a) Borrowers shall deliver to Lender bills of sale or other evidence reasonably
satisfactory to Lender of the cost of, and, subject to the payment therefor,
Borrowers’ title in and to, such Stored Materials;
(b) The Stored Materials are identified to the Hotel/Casino Property or the
Adjacent Property and Borrowers, are segregated so as to adequately give notice
to all third parties of Borrowers’ title in and to such materials, and are
components in substantially final form ready for incorporation into the Project;
(c) The Stored Materials are stored at the Hotel/Casino Property or the Adjacent
Property or at such other third party owned and operated site as Lender shall
reasonably approve (which shall specifically exclude any site located outside of
the continental United States) and are protected against theft and damage in a
manner reasonably satisfactory to Lender, including, if requested by Lender,
storage in a bonded warehouse in Las Vegas, Nevada;
(d) The Stored Materials will be paid for in full with the funds to be disbursed
and all Lien rights or claims of the supplier will be released upon full
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(e) Lender has or will have upon payment with disbursed funds a perfected, first
priority security interest in the Stored Materials;
(f) The Stored Materials are insured for an amount equal to their replacement
costs in accordance with Section 6.1 hereof;
(g) The aggregate cost of Stored Materials to be stored at the Hotel/Casino
Property and/or the Adjacent Property at any one time shall not exceed
$10,000,000.00; and
(h) The aggregate cost of Stored Materials to be stored off-site from the
Hotel/Casino Property and the Adjacent Property at any one time shall not exceed
$20,000,000.00.
Section 3.12. Loan Balancing and Shortfalls.
(a) Notwithstanding anything contained herein to the contrary, if at any time or
from time to time during the term of this Agreement, Lender shall reasonably
determine that there exists any Shortfall, Lender shall deliver notice of such
determination to Borrowers and thereafter until such Shortfall no longer exists,
Lender will not be obligated to make any Construction Loan Advances (but may or
may not, in its sole discretion, make the Remaining Construction Loan Advance),
and, within ten (10) days of receipt of such notice of determination, Borrowers
shall take any one of, or a combination of, the following actions: (i) deposit
with Lender an amount equal to the Shortfall (such deposited funds, the
“Shortfall Funds”), (ii) deliver a Required Equity Letter of Credit in the
amount of the Shortfall, or (iii) make one or more payments on account of Hard
Costs and/or Soft Costs until the Shortfall has been reduced to zero and deliver
to Lender reasonably satisfactory evidence thereof.
(b) Any payment of Shortfall Funds made to Lender pursuant to Section 3.12(a)(i)
hereof shall be deposited into an account with Lender (the “Shortfall Account”).
Provided no Event of Default has occurred and is continuing, any funds held in
the Shortfall Account will be advanced by Lender to Borrowers as though such
funds were proceeds of the Construction Loan and subject to all of the
conditions with respect thereto set forth in Sections 3.2, 3.3 and/or 3.4
hereof, as applicable, prior to any further Construction Loan Advances. Until so
advanced to Borrowers pursuant to the provisions of Sections 3.2, 3.3 and/or 3.4
hereof, as applicable, all such Shortfall Funds on deposit in the Shortfall
Account shall be held as cash collateral and additional security for the Debt
and the Other Obligations and shall constitute a Reserve Fund in which Lender
shall have a Lien and security interest pursuant to the provisions of
Section 7.8 hereof.
(c) Upon the taking of any of the actions contemplated under Section 3.12(a)
hereof to cure any Shortfall, such Shortfall shall be deemed to no longer exist
for the purposes of this Agreement.
Section 3.13. Quality of Work. No Construction Loan Advance or any portion
thereof shall be made with respect to materially defective work or to any Trade
Contractor that has performed work that is materially defective and that has not
been cured, as confirmed by the report of the Construction Consultant, but
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Loan Advance before the sum shall become due if Lender reasonably believes it
advisable to do so, and all such Construction Loan Advances or parts thereof
shall be deemed to have been made pursuant to this Agreement.
Section 3.14. Imported Materials. No Construction Loan Advance or any portion
thereof shall be made with respect to any materials imported from outside the
domestic United States unless and until such materials clear United States
customs and are either incorporated in the Project or stored in accordance with
the provisions of Section 3.11 hereof.
Section 3.15. Approval of Change Orders. Except as provided in this Section
3.15, Borrowers will not amend, alter or change (pursuant to Change Order,
amendment or otherwise) the Plans and Specifications, the Loan Budget or any
Major Contract unless the same shall have been approved in advance in writing by
Lender, by all applicable Governmental Authorities and by each surety under the
Payment and Performance Bonds (if required thereunder). Borrowers will provide
to Lender upon execution, copies of approved Change Orders with respect to any
Major Contract. Notwithstanding the foregoing, Borrowers shall be allowed to
make changes in the Plans and Specifications without the consent of Lender upon
and subject to all of the following conditions and requirements:
(a) The Change Order is not a Material Change Order;
(b) Intentionally Deleted;
(c) Such proposed Change Order, together with all other Change Orders
theretofore entered into with respect to the Project, will not increase the
guaranteed maximum price of any Major Contract in excess of $2,500,000.00 over
the original amount;
(d) Such proposed Change Order will not cause any Line Item in the Loan Budget
to be exceeded (after taking into account use of the Contingency Line Items to
the extent permitted under Section 3.10 hereof, reallocations under Section 3.9
hereof and any other reallocations approved by Lender in its sole and absolute
discretion), unless Borrowers eliminate the Shortfall caused thereby in
accordance with the provisions of Section 3.12 hereof;
(e) Such proposed Change Order, together with all other Changes Orders in the
aggregate, shall not, in any material fashion, alter or change (i) any
structural components, construction design, layout, scope and/or square footage
of the Project, and/or (ii) the structural integrity, utility, quality of
materials and/or asset quality of the Project;
(f) Such proposed Change Order, together with all other Changes Orders in the
aggregate, shall not result in any material adverse differences in the
Construction Schedule submitted to and approved by Lender;
(g) With respect to any Change Order which does not satisfy one or more of the
foregoing conditions in this Section 3.15, or which pursuant to such provisions
require Lender’s approval, Borrower shall have submitted to Lender and the
Construction Consultant, and the applicable Major Contractors and/or other Trade
Contractors, the requested change, together with changes in the Plans and
Specifications necessary to accomplish such change, a certificate of the
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Trade Contractor reflecting such change; and Lender shall have received the
approval of such change by the Construction Consultant, and the approved and
signed Change Order from the applicable Trade Contractor reflecting the increase
in cost of construction of the Project and/or the extension of time for
completion of the work to be performed under the applicable Major Contract or
other contract or subcontract with a Trade Contractor, and Borrowers shall have
received (i) Lender’s written approval thereof, which approval shall not be
unreasonably withheld and (ii) in the event of a Material Change Order relating
to a change in the design of the Project, First Mezzanine Lender’s approval
thereof, which pursuant to the terms of the First Mezzanine Loan Agreement shall
not be unreasonably withheld; and
(h) If a Change Order is permitted without Lender’s approval as provided in this
Section 3.15 or is approved by Lender as required by this Section 3.15, then the
Loan Budget shall be deemed amended by such Change Order and all references to
the Loan Budget contained in this Agreement and the other Loan Documents shall
be deemed to refer to the Loan Budget as so amended.
Section 3.16. Construction Covenants.
(a) Intentionally Deleted.
(b) General Contract. The construction of the Project shall be managed by the
General Contractor pursuant to the General Contract. The General Contractor and
the General Contract shall be subject to approval by Lender in its reasonable
discretion. Borrowers shall (i) use commercially reasonable efforts to enforce
the General Contract, (ii) waive none of the material obligations of any of the
parties thereunder, (iii) do no act which would relieve the General Contractor
from its material obligations thereunder, and (iv) make no material amendment to
or Change Order under the General Contract, except as permitted under
Section 3.15 hereof, without the prior approval of Lender in its reasonable
discretion.
(c) Architect’s Contract. Borrowers shall (i) enforce the Architect’s Contract,
(ii) waive none of the material obligations of the Architect thereunder,
(iii) do no act which would relieve the Architect from its material obligations
under the Architect’s Contract, and (iv) make no material amendment to or Change
Order under the Architect’s Contract, except as permitted under Section 3.15
hereof, without the prior approval of Lender in its reasonable discretion.
(d) Insurance. In addition to maintaining the Policies required under Section
6.1 hereof, prior to the commencement of any construction on the Project
(including any demolition or site work), Borrowers shall also furnish Lender
with evidence or certificates from insurance companies reasonably acceptable to
Lender indicating that the Architect and the Major Contractors responsible for
the design and/or construction of the Project are covered by professional
liability insurance or other liability insurance, as applicable, as required by
the applicable Architect’s Contract or Major Contract, as applicable, approved
by Lender.
(e) Application of Construction Loan Proceeds. Borrowers shall use the proceeds
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exclusively in accordance with the Loan Budget that shall not be subject to
change, except as permitted hereby.
(f) Project Costs. Borrower shall promptly pay when due all Project Costs,
unless and to the extent any such Project Cost is the subject of a good faith
dispute; provided, however, that in such event (i) Borrowers shall diligently
pursue resolution of such dispute, and (ii) to the extent applicable, Borrowers
shall be contesting such Project Cost in accordance with the provisions of
Section 5.1.1 or 5.1.2 hereof or Section 3.6(b) of the Mortgage.
(g) Completion of Construction. Subject to Lender’s obligation to continue to
fund the Construction Loan as and to the extent set forth in this Agreement,
Borrowers shall diligently pursue construction of the entire Project to
completion and obtain one or more Certificates of Occupancy (and to the extent
the same are conditional or require performance by Borrowers, Borrowers shall
diligently satisfy all conditions to the issuance of, and/or diligently perform
all obligations required for the continued validity of, the same) for the
Project and individual leasable space therein, if required by law, in accordance
with the Plans and Specifications (subject to Change Orders thereto permitted
under Section 3.15 hereof) and in compliance with all restrictions, covenants
and easements affecting the Properties, all applicable Legal Requirements and
all Governmental Approvals, in each case, in all material respects, and with all
terms and conditions of the Loan Documents, free from any Liens (other than
Permitted Encumbrances), claims or assessments (actual or contingent) asserted
against any of the Properties for any material, labor or other items furnished
in connection therewith unless (i) bonded and removed as a Lien on the affected
Property or (ii) being contested in accordance with the provisions of
Section 3.6(b) of the Mortgage. Reasonable evidence of satisfactory compliance
with the foregoing shall be furnished by Borrowers to Lender upon Final
Completion. In addition, if any such Certificate of Occupancy or other
Governmental Approvals are temporary in nature, Borrowers shall diligently
pursue procuring final Certificates of Occupancy and/or Governmental Approvals,
as applicable.
(h) Inspection of Property. Borrowers shall permit Lender, the Construction
Consultant and their respective representatives, upon reasonable advance notice
(which may be given verbally) during business hours when possible, to enter upon
any Property, inspect the progress of the Project and all materials to be used
in the construction thereof and to examine the Plans and Specifications which
are or may be kept at the construction site at all reasonable times and with
reasonable advance written notice (which may be given verbally) and will
cooperate, and use reasonable efforts to cause the General Contractor and the
Major Contractors to cooperate, with the Construction Consultant to enable
him/her to perform his/her functions hereunder.
(i) Construction Consultant. Borrowers acknowledge that (i) the Construction
Consultant has been retained by Lender, at the sole expense of Borrowers, to act
as a consultant and only as a consultant to Lender in connection with the
construction of the Project and has no duty to Borrowers, (ii) the Construction
Consultant shall in no event have any power or authority to give any approval or
consent or to do any other act or thing which is binding upon Lender, (iii)
Lender reserves the right to make any and all decisions required to be made by
Lender under this Agreement and to give or refrain from giving any and all
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required to be given by Lender under this Agreement and to accept or not accept
any matter or thing required to be accepted by Lender under this Agreement, and
without being bound or limited in any manner or under any circumstance
whatsoever by any opinion expressed or not expressed, or advice given or not
given, or information, certificate or report provided or not provided, by the
Construction Consultant with respect thereto, (iv) Lender reserves the right in
its sole and absolute discretion to disregard or disagree, in whole or in part,
with any opinion expressed, advice given or information, certificate or report
furnished or provided by the Construction Consultant to Lender or any other
Person or party, and (v) Lender reserves the right to replace the Construction
Consultant with another inspecting engineer at any time and without prior notice
to or approval by Borrowers (but Lender agrees to provide Borrowers with
reasonably prompt notice of any decision to change the Construction Consultant).
Lender hereby advises Borrowers that it has advised the Construction Consultant
of the restrictions contained in this Section 3.16(i). Construction Consultant
shall perform the following services on behalf of Lender:
(i) review and advise Lender whether, in the opinion of the Construction
Consultant, the Plans and Specifications are satisfactory;
(ii) review Draw Requests, Advance Requests and Change Orders submitted by
Borrowers; and
(iii) make periodic inspections (approximately at the date of each Draw Request)
for the purpose of assuring that construction of the Project to date is in
substantial accordance with the Plans and Specifications and to approve
Borrowers’ then current Draw Request as being consistent with Borrowers’
obligations under this Agreement, including, among other things, an opinion as
to whether a Shortfall exists at any time.
The reasonable fees of the Construction Consultant shall be paid by Borrowers
within ten (10) days after billing therefor and expenses incurred by Lender
shall be reimbursed to Lender within ten (10) days after request therefor, but
neither Lender nor the Construction Consultant shall have any liability to
Borrowers on account of (1) the services performed by the Construction
Consultant, (2) any neglect or failure on the part of the Construction
Consultant to properly perform its services, or (3) any approval by the
Construction Consultant of construction of the Project, except that Construction
Consultant shall be liable for any material physical damage to any Property
caused directly by the actions of Construction Consultant or any agent or
employee thereof. Neither Lender nor the Construction Consultant assumes any
obligation to Borrowers or any other Person concerning the quality of
construction of the Project or the absence therefrom of defects.
(j) Correction of Defects. Borrowers shall promptly correct all defects in the
Project or any departure from the Plans and Specifications not approved by
Lender to the extent required hereunder unless any such departure is required
under applicable Legal Requirements. Borrowers agree that the advance of any
proceeds of the Construction Loan, whether before or after such defects or
departures from the Plans and Specifications are discovered by, or brought to
the attention of, Lender, shall not constitute a waiver of Lender’s right to
require compliance with this covenant. Whether there exists a defect in the
Project or a departure from the Plans and Specifications shall be reasonably
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the Construction Consultant or, if the Architect and the Construction Consultant
cannot reasonably agree, then shall be determined pursuant to the most expedited
form of arbitration available for such disagreement under the rules of the
American Arbitration Association, such arbitration to be held in New York, New
York.
(k) Books and Records. Borrowers shall keep and maintain, or cause to be kept
and maintained, detailed, complete and accurate books, records and accounts
reflecting all items of income and expense of Borrowers in connection with the
construction of the Project and, upon the request of Lender, shall make such
books, records and accounts available to Lender for inspection or independent
audit at reasonable times upon reasonable advance written notice to Borrowers.
Any independent audit conducted hereunder shall be at Lender’s expense unless
such audit shall uncover a material error in statements previously delivered to
Lender, in which case Borrowers shall pay all reasonable costs related thereto.
Lender hereby agrees to keep, and to use reasonable efforts to cause its
employees and consultants to keep, any information acquired hereby confidential
unless already known to the general public or as required by law.
(l) Financing Publicity. Borrowers shall permit Lender to obtain publicity in
connection with the construction of the Project through press releases and
participation in such events as ground-breaking and opening ceremonies, and to
give Lender ample advance notice of such events and to give Lender such
assistance as is reasonable in connection with obtaining such publicity as
Lender may reasonably request.
(m) Default Notice or Notice of Lien. Borrowers shall notify Lender promptly,
and in writing, if any Borrower receives any written default notice or notice of
Lien from any Trade Contractor.
(n) Further Assurance of Title. If at any time Lender has reason to believe in
its reasonable opinion that any Construction Loan Advance is not secured or will
or may not be secured by the Mortgage as a Lien on the Properties (subject only
to the Permitted Encumbrances), then Borrowers shall, within ten (10) days after
written notice from Lender, do all things and matters necessary (including
execution and delivery to Lender of all further documents and performance of all
other acts which Lender reasonably deems necessary or appropriate) to assure to
the reasonable satisfaction of Lender that any Construction Loan Advances
previously made hereunder or to be made hereunder are secured or will be secured
by the Mortgage (subject only to the Permitted Encumbrances). Lender, at
Lender’s option, may decline to make further Construction Loan Advances
hereunder until Lender has received such assurance.
Section 3.17. Intentionally Deleted.
Section 3.18. Work at Adjacent Property.
(a) Borrowers shall notify and reasonably consult with Lender regarding any work
to be undertaken at or on the Adjacent Property and shall conduct all work in
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(b) Notwithstanding anything to the contrary set forth in this Agreement or in
any other Loan Document, (i) Borrowers shall not commence demolition of any
building on the Adjacent Property, whether such demolition is to be funded out
of any Borrower’s own funds, out of the Initial Renovation Reserve Fund, out of
a Construction Loan Advance or otherwise, unless and until Borrowers have
obtained, at their sole cost and expense, and delivered a copy to Lender of, an
asbestos survey with respect to the buildings to be demolished, prepared by a
firm reasonably acceptable to Lender, that complies with the requirements of the
EPA Asbestos Hazard Emergency Response Act, 15 U.S.C. 2641 et seq. promulgated
at 40 CFR 763 (an “Asbestos Survey”), and (ii) if any such Asbestos Survey
discloses the presence of asbestos and/or any asbestos-containing material,
Borrowers, at their sole cost and expense, shall cause all demolition activities
to comply with the requirements of the EPA National Emission Standard for
Hazardous Air Pollutants promulgated at 40 CFR Part 61 for asbestos-containing
materials.
Section 3.19. Administrative Agent.
3.19.1. Appointment of Administrative Agent. At all times throughout the term of
the Loan, including any Extension Terms, there shall be an administrative agent
to administer the Loan and the Advances thereunder (the “Administrative Agent”).
Trimont Real Estate Advisors (“Trimont”) shall be the Administrative Agent as of
the date hereof, but Lender shall have the right, from time to time, without the
consent of any Borrower but upon written notice to Borrowers, to designate a
replacement Administrative Agent, who may or may not own an interest in the
Loan. Upon notice to Borrowers of the identity of a replacement Administrative
Agent for Trimont or any subsequent replacement Administrative Agent and the
address(es) for notice to such replacement Administrative Agent, Borrowers
thereafter shall copy such replacement Administrative Agent on all Notices sent
to Lender.
3.19.2. Responsibilities of Administrative Agent. The Administrative Agent shall
have such responsibilities as shall be delegated by Lender to the Administrative
Agent in a separate agreement between them; provided, however, that upon notice
to Borrowers from Lender as to the identity of the Administrative Agent, such
identified Administrative Agent shall have the right to send notices on behalf
of Lender upon which Borrowers may rely. The Administrative Agent shall
maintain, acting solely for this purpose as an agent of Borrowers, a register
for the recordation of the names and addresses of the Lenders and principal
portion of the Loan owing to each Lender. The entries in the register shall be
conclusive, and the Administrative Agent, Borrowers and any Lender shall treat
each Person whose name is recorded in the register pursuant to the terms hereof
as a Lender for all purposes of this Agreement. Any assignment or transfer of
any interest in the Loan shall be effective only upon proper entries with
respect thereto being made in the register.
3.19.3. Non-Liability of Administrative Agent and Lender. Each Borrower
acknowledges and agrees that with respect to each of Lender and the
Administrative Agent carrying out its responsibilities hereunder and otherwise
with respect to the Loan:

 

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(a) any inspections of the construction of the Project made by or through the
Administrative Agent or Lender are for purposes of administration of the Loan
only and Borrowers are not entitled to rely upon the same with respect to the
quality, adequacy or suitability of materials or workmanship, conformity to the
Plans and Specifications, state of completion or otherwise; Borrowers shall make
their own inspections of such construction to determine that the quality of the
Project and all other requirements of such construction are being performed in a
manner satisfactory to Borrowers and in conformity with the Plans and
Specifications and all other requirements; and Borrowers shall immediately
notify Lender, in writing, should the same not be in conformity in all material
respects with the Plans and Specifications and all other requirements hereunder;
(b) by accepting or approving anything required to be observed, performed,
fulfilled or given to Lender pursuant to the Loan Documents, including any
certificate, statement of profit and loss or other financial statement, survey,
appraisal, lease or insurance policy, neither the Administrative Agent nor
Lender shall be deemed to have warranted or represented the sufficiency,
legality, effectiveness or legal effect of the same, or of any term, provision
or condition thereof and such acceptance or approval thereof shall not
constitute a warranty or representation to anyone with respect thereto by the
Administrative Agent or Lender;
(c) neither the Administrative Agent nor Lender undertake nor assume any
responsibility or duty to Borrowers to select, review, inspect, supervise, pass
judgment upon or inform Borrowers of any matter in connection with any of the
Properties, including, without limitation, matters relating to the quality,
adequacy or suitability of: (i) the Plans and Specifications, (ii) architects,
contractors, subcontractors and materialmen employed or utilized in connection
with the construction of the Project, or the workmanship of or the materials
used by any of them, or (iii) the progress or course of construction and its
conformity or nonconformity with the Plans and Specifications; and Borrowers
shall rely entirely upon their own judgment with respect to such matters, and
any review, inspection, supervision, exercise of judgment or supply of
information to Borrowers by the Administrative Agent or Lender in connection
with such matters is for the protection of the Administrative Agent and/or
Lender only and neither Borrowers nor any third party is entitled to rely
thereon;
(d) neither the Administrative Agent nor Lender owe any duty of care to protect
Borrowers against negligent, faulty, inadequate or defective building or
construction; and
(e) neither the Administrative Agent nor Lender shall be directly or indirectly
liable or responsible for any loss, claim, cause of action, liability,
indebtedness, damage or injury of any kind or character to any Person or
property arising from any construction on, or occupancy or use of, any of the
Properties, including, without limitation, any loss, claim, cause of action,
liability, indebtedness, damage or injury caused by, or arising from: (i) any
defect in any building, structure, grading, fill, landscaping or other
improvements thereon or in any on-site or off-site improvement or other facility
therein or thereon; (ii) any act or omission of any Borrower, the parties
comprising any Borrower or any of any Borrower’s agents, employees, independent
contractors, licensees or invitees; (iii) any accident in or on any of the
Properties or any fire, flood or other casualty or hazard thereon; (iv) the
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Borrower or any of any Borrower’s licensees, employees, invitees, agents,
independent contractors or other representatives to maintain any of the
Properties in a safe condition; and/or (v) any nuisance made or suffered on any
part of any Property, in each of the foregoing instances, except to the extent
directly resulting from the Administrative Agent’s or Lender’s fraud, willful
misconduct or gross negligence (but Lender shall be solely liable for its fraud,
willful misconduct or gross negligence and the Administrative Agent shall be
solely liable for its fraud, willful misconduct or gross negligence).
3.19.4. Administrative Agent Fee. On the Closing Date and on the first Payment
Date occurring in each calendar quarter thereafter, Borrower shall pay the
Administrative Agent the sum of $50,000.00 in respect of the Administrative
Agent Fee.
Section 3.20. Lender’s Right to Make Construction Loan Advance to Pay Monthly
Interest. From and after any Payment Date following the Initial Construction
Loan Advance upon which the Interest Reserve Fund is in an insufficient amount
to pay the Aggregate Monthly Interest Payment due on such Payment Date, if
Borrowers fail to pay, as and when due on any Payment Date, the Reduced
Acquisition Loan Monthly Interest Payment and the Construction Loan Monthly
Interest Payment in accordance with the terms hereof, Lender shall have the
right (but not the obligation), in its sole and absolute discretion, without the
necessity of notifying, or obtaining the approval of, any Borrower or any other
Person, and without any Borrower’s specific request, to advance a portion of the
Construction Loan necessary to pay the Reduced Acquisition Loan Monthly Interest
Payment and the Construction Loan Monthly Interest Payment then due (a “Lender
Monthly Interest Advance”). With respect to the foregoing, Borrowers and Lender
expressly acknowledge and agree that (i) the fact that Lender makes a Lender
Monthly Interest Advance shall not relieve Borrowers, First Mezzanine Borrowers,
Second Mezzanine Borrowers and Third Mezzanine Borrowers from the obligation to
make all future Reduced Acquisition Loan Monthly Interest Payments, Construction
Loan Monthly Interest Payments, First Mezzanine Monthly Interest Payments,
Second Mezzanine Monthly Interest Payments and Third Mezzanine Monthly Interest
Payments, as applicable, (ii) the fact that Lender makes a Lender Monthly
Interest Advance in any instance shall not obligate Lender to make any
subsequent Lender Monthly Interest Advance in the same or in any other instance,
and (iii) a Lender Monthly Interest Advance, when made, shall constitute a
Construction Loan Advance for all purposes under this Agreement and shall
constitute one of the two (2) Construction Loan Advances available to Borrowers
for the subsequent thirty (30) days.
Section 3.21. Construction Loan Advances of Required Equity Amount. Lender and
Borrowers acknowledge and agree that as of the date hereof, Lender has funded
$467,443,347.38 in Construction Loan Advances. Subject to Lender’s right to fund
the Remaining Construction Loan Advance in accordance with Section 3.1(d)
hereof, (a) Lender and Borrowers have agreed that Lender shall not fund any
further Construction Loan Advances until the Required Equity Amount and any
Subsequent Required Equity Amounts, as and to the extent required under this
Agreement, have been fully funded in accordance with the terms and conditions of
this Section 3.21 (such time being referred to herein as the “Borrower Advance
Date”) and (b) from and after the Borrower Advance Date, Lender shall, subject
to the terms and conditions applicable to the making of Construction Loan
Advances (including, without limitation, the delivery of any Subsequent Required
Equity Amounts, as and to the extent required under this Agreement), advance the
remainder of the Construction Loan to Borrowers in accordance with and subject
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the terms of this Agreement. Until the Borrower Advance Date, the following
shall apply to each advance of funds on account of the Required Equity Amount
and/or any Subsequent Required Equity Amounts (and, for purposes of this
Section 3.21 only, each funding of the Required Equity Amount in accordance with
the terms hereof shall be considered a “Construction Loan Advance” solely for
the purposes of determining whether the conditions to the funding of any such
amount have been satisfied as set forth in this Section 3.21 and for no other
purpose under this Agreement):
(a) Conditions to Advances.
(i) Satisfaction of Standard Conditions. Borrowers shall satisfy and/or cause to
be satisfied the conditions to such Construction Loan Advance set forth in
Section 3.3 (other than that relating to title endorsements) and, if applicable,
3.4 hereof.
(ii) Deposit of Funds. Not later than seven (7) days (or the next succeeding
Business Day if such seventh (7th) day is not a Business Day) prior to the
Requested Disbursement Date, Borrowers shall deliver to Lender, for deposit into
the Construction Loan Reserve Account, funds in the amount of the requested
Construction Loan Advance.
(iii) Letter of Credit Reduction Request. Borrowers’ Advance Request shall
include a Letter of Credit Reduction Notice with the amount of the requested
Construction Loan Advance and any other required information (other than
Lender’s signature) filled in.
(b) Funding Construction Loan Advances. Subject to the satisfaction of each of
the foregoing conditions, Lender shall fund the applicable Construction Loan
Advance from the funds on deposit in the Construction Loan Reserve Account and
otherwise in accordance with all of the terms of this Article III.
(c) Delivery of Letter of Credit Reduction Notice. Promptly following the
funding of the applicable Construction Loan Advance from the Construction Loan
Reserve Account, Lender shall deliver or cause Servicer or the Administrative
Agent to deliver, the Letter of Credit Reduction Notice to the applicable
issuing bank; provided, however, that none of Lender, Servicer or the
Administrative Agent shall be liable to Borrowers for any delay in so delivering
any such Letter of Credit Reduction Notice, other than any actual out-of-pocket
losses, costs and damages resulting from their willful misconduct or fraud; and,
provided, further, however, that Lender expressly acknowledges that upon
Borrowers providing the funds to make a particular Construction Loan Advance,
Lender agrees never to seek to recover the amount of such Construction Loan
Advance in the event Lender shall ever draw down on any Required Equity Letter
of Credit and apply the proceeds thereof.
(d) Failure to Deliver Funds for the Construction Loan Reserve Account. With
respect to any Construction Loan Advance, in the event that Borrowers fail to
deliver the applicable funds for deposit in the Construction Loan Reserve
Account not later than seven (7) days (or the next succeeding Business Day if
such seventh (7th) day is not a Business Day) prior to the Requested
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thereafter, in its sole discretion, to draw down on such Required Equity
Letter(s) of Credit in its/their entirety, without the consent of, or notice to,
Borrowers or any other Person other than the issuing bank(s) of any such
Required Equity Letter(s) of Credit, and to deposit the proceeds thereof in the
Construction Loan Reserve Account, following which, all further Construction
Loan Advances shall be funded in accordance with all of the terms of this
Agreement from the Construction Loan Reserve Account.
(e) Provisions of this Agreement Continue to Apply. Borrowers and Lender
expressly acknowledge and agree that the funding of any Construction Loan
Advance in accordance with this Section 3.21 shall not affect the other
provisions of this Article 3, and Borrowers, each Construction Loan Advance and
the construction of the Project shall continue to be governed by the provisions
of this Article III.
Section 3.22. Intentionally Deleted.
Section 3.23. Release of Required Equity Letter of Credit(s) and Cost Savings to
Borrowers. Upon satisfaction of the following conditions: (i) Substantial
Completion has occurred; (ii) Borrower’s equity requirement set forth in
Section 3.3(d) hereof remains satisfied (provided, however, in order to meet
such equity requirement, Borrower may make a voluntary prepayment of the Loan in
accordance with all of the terms of Section 2.4.1 hereof and to be applied as
set forth in Section 2.4.3(a) hereof, with the Exit Fee payable in connection
therewith being determined in accordance with the provisions of Section 2.8
hereof); and (iii) either (A) General Contractor has certified to Lender that
all amounts due under the General Contract (which shall include, without
limitation, all work authorizations entered into under the General Contract and
all amounts payable by General Contractor to any subcontractor in connection
with the General Contract and/or any such work authorization) have been paid in
full and Borrowers have delivered lien waivers or other evidence of such payment
satisfactory to Lender or (B) Lender’s approval has been obtained, simultaneous
with any draw specified in the following sentence Lender shall return to
Borrowers all Required Equity Letters of Credit then held by (or on behalf of)
Lender or the remaining proceeds thereof if Lender has previously drawn down on
the Required Equity Letters of Credit but not applied all of the proceeds
thereof or evidenced thereby, and Lender shall, at Borrowers’ expense, execute
such documents and take such actions as Borrowers shall reasonably request to
evidence its release of the Required Equity Letters of Credit. Such released
Required Equity Letters of Credit shall be drawn in full and the proceeds
thereof (or cash in the amount equal to the face value of such released Required
Equity Letters of Credit) shall be deposited into the Interest Reserve Account,
provided that in the event that the aggregate Additional Interest Reserve
Contributions deposited into the Interest Reserve Account under the provisions
of this sentence and/or any other provision of this Agreement total $8,000,000,
then all such proceeds (or all such remaining proceeds, as the case may be)
shall instead be deposited into the General Reserve Fund and not the Interest
Reserve Account. Additionally, to the extent that Borrowers are entitled to
payment from General Contractor of any cost savings or unused contingency
amounts under the General Contract, Borrower shall have the right to receive the
same from General Contractor (as and to the extent provided in the General
Contract) and any such amounts shall be deposited into the Interest Reserve
Account, provided that in the event that the aggregate Additional Interest
Reserve Contributions deposited into the Interest Reserve Account under the
provisions of this sentence and/or any other provision of this Agreement total
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proceeds, as the case may be) shall instead be deposited into the General
Reserve Fund and not the Interest Reserve Account.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES.
Section 4.1. Representations of Borrowers. Each Borrower represents and warrants
as to itself that as of the date hereof:
4.1.1. Organization. Such Borrower has been duly organized and is validly
existing and in good standing with requisite power and authority to own its
properties and to transact the businesses in which it is now engaged. Such
Borrower is duly qualified to do business and is in good standing in each
jurisdiction where it is required to be so qualified in connection with its
properties, businesses and operations. Such Borrower possesses all material
rights, licenses, permits and authorizations, governmental or otherwise,
necessary to entitle it to own its properties and to transact the businesses in
which it is now engaged, and the sole business of such Borrower is the
ownership, management and operation of its Property or the IP. The ownership
interests of such Borrower are as set forth on the organizational chart attached
hereto as Schedule VI.
4.1.2. Proceedings. Such Borrower has taken all necessary action to authorize
the execution, delivery and performance of this Agreement and the other Loan
Documents. This Agreement and the other Loan Documents have been duly executed
and delivered by or on behalf of such Borrower and constitute legal, valid and
binding obligations of such Borrower enforceable against such Borrower in
accordance with their respective terms, subject only to applicable bankruptcy,
insolvency and similar laws affecting rights of creditors generally, and
subject, as to enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).
4.1.3. No Conflicts. The execution, delivery and performance of this Agreement
and the other Loan Documents by such Borrower will not materially conflict with
or result in a material breach of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of any lien,
charge or encumbrance (other than pursuant to the Loan Documents) upon any of
the property or assets of such Borrower pursuant to the terms of any indenture,
mortgage, deed of trust, loan agreement, partnership agreement, management
agreement or other agreement or instrument to which such Borrower is a party or
by which any of such Borrower’s property or assets is subject, nor will such
action result in any violation of the provisions of any statute or any order,
rule or regulation of any Governmental Authority having jurisdiction over such
Borrower or any of such Borrower’s properties or assets, and any consent,
approval, authorization, order, registration or qualification of or with any
such Governmental Authority necessary to permit the execution, delivery and
performance by such Borrower of this Agreement or any other Loan Documents has
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4.1.4. Litigation. Except as set forth on Schedule VIII attached hereto:
(a) There is no action, suit, claim, proceeding or investigation pending against
such Borrower, HRHI or any Guarantor or, to such Borrower’s actual knowledge,
pending against any Property or the IP or, to such Borrower’s actual knowledge,
threatened in writing against such Borrower, HRHI or any Guarantor or any
Property or the IP in any court or by or before any other Governmental Authority
that would have a material adverse effect on (i) the business operations,
economic performance, assets, financial condition, equity, contingent
liabilities, material agreements or results of operations of such Borrower,
HRHI, any Guarantor, any Property or the IP, (ii) the enforceability or validity
of any Loan Document, the perfection or priority of any Lien created under any
Loan Document or the remedies of Lender under any Loan Document, (iii) the
ability of such Borrower, HRHI or any Guarantor to perform, in all material
respects, its obligations under each of the Loan Documents, or (iv) the value
of, or cash flow from any Property or the IP.
(b) There is no proceeding, investigation or disciplinary action (including,
without limitation, before any Gaming authority, under any Gaming Law or under
any Gaming License or other Operating Permit) pending or, to Borrowers’ actual
knowledge, threatened in writing, either (i) in connection with, or that seeks
to restrain, enjoin, prevent the consummation of or otherwise challenge, any of
the Loan Documents or any of the transactions contemplated therein, or (ii) to
Borrower’s actual knowledge, that, either singly or in the aggregate, could
reasonably be expected to have an adverse effect on any Gaming License currently
in effect with respect to the Casino Component, including, without limitation,
any such proceeding, investigation or disciplinary action pending or, threatened
against Gaming Operator, any Borrower or any of their respective directors,
members, managers, officers, key personnel or Persons holding a five percent
(5%) or greater direct or indirect equity or economic interest in any Borrower.
Additionally, there is no proceeding (including, without limitation, before any
Gaming Authority, under any Gaming Law or under any Gaming License or other
Operating Permit) pending or, to Borrowers’ actual knowledge, threatened in
writing that could reasonably be expected to have a material adverse effect on
any Gaming License or other Operating Permit by Gaming Borrower or any Affiliate
thereof or any officer, director, employee or agent of any Borrower or any
Affiliate of any Borrower.
4.1.5. Agreements. Such Borrower is not a party to any agreement or instrument
or subject to any restriction which would be reasonably likely to materially and
adversely affect such Borrower or its Property or the IP, or such Borrower’s
business, properties or assets, operations or condition, financial or otherwise.
To the best of such Borrower’s actual knowledge, such Borrower is not in default
in any material respect in the performance, observance or fulfillment of any of
the obligations, covenants or conditions contained in any agreement, license or
instrument to which it is a party or by which such Borrower or any of the
Properties or the IP are bound. Such Borrower has no material financial
obligation under any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which such Borrower is a party or by which such
Borrower or its Property or the IP is otherwise bound, other than
(a) obligations incurred in the ordinary course of the operation of the
Properties as permitted pursuant to clause (t) of the definition of “Special
Purpose Entity” set forth in Section 1.1 hereof, (b) obligations under the
Existing FF&E Leases, (c) obligations under the Loan

 

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Documents, (d) obligations pursuant to its Management Agreement, and (e) as to
Hotel/Casino Borrower, obligations pursuant to the Liquor Management Agreement.
4.1.6. Title. Such Borrower has good, marketable and insurable fee simple title
to the real property comprising part of its Property and good title to the
balance of such Property, free and clear of all Liens whatsoever except the
Permitted Encumbrances, such other Liens as are permitted pursuant to the Loan
Documents and the Liens created by the Loan Documents. To the best of each
Borrower’s actual knowledge, the Permitted Encumbrances in the aggregate do not
materially and adversely affect the operation or use of such Borrower’s Property
(as currently used) or Borrowers’ ability to repay the Loan. The Mortgage has
been properly recorded in the appropriate records and, together with the Uniform
Commercial Code financing statements required to be filed in connection
therewith, has created and continues to create (a) a valid, perfected first
priority lien on the real property portion of the Properties, subject only to
Permitted Encumbrances and the Liens created by the Loan Documents, and
(b) together with the filing of the required Uniform Commercial Code financing
statements and the proper recording of the Assignment of Leases, perfected
security interests in and to, and perfected collateral assignments of, all
personalty (including the Leases), all in accordance with the terms thereof, in
each case subject only to any applicable Permitted Encumbrances, such other
Liens as are permitted pursuant to the Loan Documents and the Liens created by
the Loan Documents. To such Borrower’s actual knowledge after due inquiry, there
are no claims for payment for work, labor or materials affecting any of the
Properties that are or may become a Lien prior to, or of equal priority with,
the Liens created by the Loan Documents, except any Lien then being contested
pursuant to, and in accordance with, Section 3.6(b) of the Mortgage.
4.1.7. Solvency. Borrowers have (a) not entered into the transaction or executed
the Notes, this Agreement or any other Loan Documents with the actual intent to
hinder, delay or defraud any creditor and (b) received reasonably equivalent
value in exchange for its obligations under such Loan Documents. Taking into
account the Loan, the aggregate fair saleable value of Borrowers’ assets
collectively exceeds and will exceed Borrowers’ total aggregate liabilities,
including, without limitation, subordinated, unliquidated, disputed and
contingent liabilities. Taking into account the Loan, the aggregate fair
saleable value of Borrowers’ assets collectively is and will be greater than
Borrowers’ probable aggregate liabilities, including the maximum amount of their
contingent liabilities on their debts as such debts become absolute and matured.
Taking into account the Loan, each Borrower’s assets do not and will not
constitute unreasonably small capital to carry out its business as conducted or
as proposed to be conducted. Borrowers do not intend to, and do not believe that
they will, incur Indebtedness and liabilities (including contingent liabilities
and other commitments) beyond their respective abilities to pay such
Indebtedness and liabilities as they mature (taking into account the timing and
amounts of cash to be received by each Borrower and the amounts to be payable on
or in respect of obligations of each Borrower). No petition in bankruptcy has
been filed against any Borrower, HRHI or any Guarantor, and none of any
Borrower, HRHI nor any Guarantor has ever made an assignment for the benefit of
creditors or taken advantage of any insolvency act for the benefit of debtors.
None of any Borrower, HRHI nor any Guarantor are contemplating either the filing
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under any state or federal bankruptcy or insolvency laws or the liquidation of
all or a major portion of its assets or properties, and no Borrower has any
actual knowledge of any Person contemplating the filing of any such petition
against it, HRHI or any Guarantor.
4.1.8. Full and Accurate Disclosure. To such Borrower’s actual knowledge, no
statement of fact made by any Borrower in this Agreement or in any of the other
Loan Documents contains any untrue statement of a material fact or omits to
state any material fact necessary to make statements contained herein or therein
not misleading. There is no fact or circumstance presently known to such
Borrower which has not been disclosed to Lender and which will have a material
adverse effect on (a) the use and operation of any of the Properties or the IP,
(b) the enforceability or validity of any Loan Document, the perfection or
priority of any Lien created under any Loan Document or the remedies of Lender
under any Loan Document, or (c) the ability of any Borrower, HRHI or any
Guarantor to perform, in all material respects, its obligations under each of
the Loan Documents.
4.1.9. No Plan Assets. From the Closing Date and throughout the term of the Loan
(a) no Borrower is nor will any Borrower be an “employee benefit plan,” as
defined in Section 3(3) of ERISA, subject to Title I of ERISA, (b) none of the
assets of any Borrower constitutes or will constitute “plan assets” of one or
more such plans within the meaning of 29 C.F.R. Section 2510.3-101, (c) no
Borrower is nor will any Borrower be a “governmental plan” within the meaning of
Section 3(32) of ERISA, and (d) none of the assets of any Borrower constitute
“plan assets” of a governmental plan within the meaning of 29 C.F.R.
Section 2510.3-101 for purposes of any state law provisions regulating
investments of, or fiduciary obligations with respect to, governmental plans.
4.1.10. Compliance. Except as set forth in the applicable Zoning Report, such
Borrowers and, to the best of such Borrower’s actual knowledge after due
inquiry, the Land and Improvements (including the use thereof) comply in all
material respects with all applicable Legal Requirements, including, without
limitation, building and zoning ordinances and codes and Prescribed Laws. No
Borrower is in default or violation of any order, writ, injunction, decree or
demand of any Governmental Authority. There has not been committed by any
Borrower or, to any Borrower’s actual knowledge, any other Person in occupancy
of or involved with the operation or use of any of the Properties any act or
omission affording the federal government or any other Governmental Authority
the right of forfeiture as against any Property or any part thereof or any
monies paid in performance of Borrowers’ obligations under any of the Loan
Documents.
4.1.11. Financial Information. To such Borrower’s actual knowledge, all
historical financial data, including, without limitation, the statements of cash
flow and income and operating expense, that have been delivered to Lender in
connection with the Loan (i) are true, complete and correct in all material
respects, (ii) accurately represent in all material respects the financial
condition of the Properties (and each Property) as of the date of such reports,
and (iii) to the extent prepared or audited by an independent certified public
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Accounts and reconciled with GAAP throughout the periods covered, except as
disclosed therein. Except for Permitted Encumbrances and except as referred to
or reflected in said financial statements previously delivered to Lender in
connection with the Loan, no Borrower has any contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments that are known to any
Borrower and are reasonably likely to have a materially adverse effect on any
Property or (a) the operation of the Hotel/Casino Property as a hotel and casino
at a standard at least equal to Comparable Hotel/Casinos, including, without
limitation, comparable food and beverage outlets and other amenities, and/or
(b) the operation of the Café Property and the Adjacent Property for a use or
uses that is/are consistent with the operation of the Hotel/Casino Property as a
hotel and casino at a standard at least equal to Comparable Hotel/Casinos, which
use may include, without limitation, expansion of the Hotel/Casino Property,
restaurants, retail and residential complexes (the “Permitted Adjacent/Café
Uses”). Since the date of such financial statements, there has been no material
adverse change in the financial condition, operation or business of any Borrower
or, to each Borrower’s actual knowledge after due inquiry, to the extent not
prohibited by the Merger Agreement, any Property from that set forth in said
financial statements.
4.1.12. Condemnation. No Condemnation or other proceeding has been commenced or,
to each Borrower’s actual knowledge, is threatened in writing received by such
Borrower or contemplated with respect to all or any portion of any Property or
for the relocation of any roadway providing direct access to any Property.
4.1.13. Federal Reserve Regulations. No part of the proceeds of the Loan will be
used for the purpose of purchasing or acquiring any “margin stock” within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
or for any other purpose which would be inconsistent with such Regulation U or
any other Regulations of such Board of Governors, or for any purposes prohibited
by any Legal Requirements or by the terms and conditions of this Agreement or
the other Loan Documents.
4.1.14. Utilities and Public Access. To such Borrower’s actual knowledge after
due inquiry, each Property has rights of access to public ways and is served by
water, sewer, sanitary sewer and storm drain facilities adequate to service such
Property for its intended uses. All public utilities necessary to the continued
current use and enjoyment of each Property are located either in the public
right-of-way abutting such Property (which are connected so as to serve such
Property without passing over other property) or in recorded easements serving
such Property and such easements are set forth in and insured by the Title
Insurance Policy covering such Property. To such Borrower’s actual knowledge
after due inquiry, all roads necessary for the use of each Property for its
current purpose have been completed and dedicated to public use and accepted by
all Governmental Authorities or are located in recorded easements serving such
Property and such easements are set forth in and insured by the Title Insurance
Policy.
4.1.15. Not a Foreign Person. No Borrower is a “foreign person” within the
meaning of §1445(f)(3) of the Code.

 

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4.1.16. Separate Lots. Each Property is comprised of one (1) or more parcels
which constitute a separate tax lot or lots and does not constitute a portion of
any other tax lot not a part of such Property.
4.1.17. Assessments. Except as disclosed in the Title Insurance Policy, to each
Borrower’s actual knowledge, there are no pending or proposed special or other
assessments for public improvements or otherwise affecting any Property, nor are
there any contemplated improvements to any Property that may result in such
special or other assessments.
4.1.18. Enforceability. The Loan Documents are not subject to and no Restricted
Party has any right of rescission, set-off, claim, counterclaim or defense by
any Restricted Party, including the defense of usury, nor would the operation of
any of the terms of such Loan Documents, or the exercise of any right
thereunder, render the Loan Documents unenforceable (subject to principles of
equity and bankruptcy, insolvency and other laws generally affecting creditors’
rights and the enforcement of debtors’ obligations), and no Restricted Party has
asserted any right of rescission, set-off, claim, counterclaim or defense with
respect thereto.
4.1.19. No Prior Assignment. There are no prior assignments by Borrowers of the
Leases or any portion of the Rents due and payable or to become due and payable
which are presently outstanding.
4.1.20. Insurance. Borrowers have obtained and have delivered to Lender
certified copies of all Policies (or “Accord” certificates evidencing coverage
thereof) reflecting the insurance coverages, amounts and other requirements set
forth in this Agreement. No claims have been made under any such Policies, and
no Person, including any Borrower, has done, by act or omission, anything which
would impair the coverage of any such Policies.
4.1.21. Use of the Properties. (a) The Hotel/Casino Property is used exclusively
as a hotel and casino at a standard at least equal to Comparable Hotel/Casinos,
including, without limitation, comparable food and beverage outlets and other
amenities, and otherwise as a top-end hotel and other appurtenant and related
uses, and (b) the Café Property and the Adjacent Property are used for Permitted
Adjacent/Café Uses and other appurtenant and related uses.
4.1.22. Certificate of Occupancy; Operating Permits. To the best of each
Borrower’s actual knowledge after due inquiry, all certifications, permits,
licenses and approvals, including, without limitation, certificates of
completion and occupancy permits, all environmental, health and safety licenses,
gaming licenses and permits and any applicable liquor license necessary to
permit the legal use, occupancy and operation of (a) the Hotel/Casino Property
as a hotel and casino at a standard at least equal to Comparable Hotel/Casinos,
including, without limitation, comparable food and beverage outlets and other
amenities, and (b) the Café Property and the Adjacent Property as currently
operated on the date hereof, or, subsequent to the date hereof, for Permitted
Adjacent/Café Uses (collectively, the “Operating Permits”), have been obtained
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in full force and effect. Each Borrower shall keep and maintain, or cause to be
kept and maintained, all Operating Permits necessary for the operation of
(i) the Hotel/Casino Property as a hotel and casino at a standard at least equal
to Comparable Hotel/Casinos, and (ii) the Café Property and the Adjacent
Property for one or more Permitted Adjacent/Café Purposes. To the best of each
Borrower’s actual knowledge after due inquiry, the use being made of each
Property is in conformity with the Certificate(s) of Occupancy issued for such
Property. Attached hereto as Schedule IX is, to the best of each Borrower’s
actual knowledge after due inquiry, a true and complete list of all current
Operating Permits and those which are subject to renewal.
4.1.23. Flood Zone. None of the Improvements on any Property are located in an
area identified by the Federal Emergency Management Agency as an area having
special flood hazards or, if so located, the flood insurance required pursuant
to Section 6.1(a)(i) hereof is in full force and effect with respect to each
such Property.
4.1.24. Physical Condition. Except as provided in the Physical Conditions
Reports, to the each Borrower’s actual knowledge after due inquiry, (a) each
Property, including, without limitation, all buildings, improvements, parking
facilities, sidewalks, storm drainage systems, roofs, plumbing systems, HVAC
systems, fire protection systems, electrical systems, equipment, elevators,
exterior sidings and doors, landscaping, irrigation systems and all structural
components, are in good condition, order and repair in all material respects;
(b) there exists no material structural or other material defects or damages in
any Property, whether latent or otherwise; and (c) no Borrower has received
notice from any insurance company or bonding company of any defects or
inadequacies in any Property, or any part thereof, which would adversely affect
the insurability of the same or cause the imposition of extraordinary premiums
or charges thereon or of any termination or threatened termination of any policy
of insurance or bond.
4.1.25. Boundaries. Except as disclosed on the Surveys, to each Borrower’s
actual knowledge, all of the Improvements which were included in determining the
appraised value of each Property lie wholly within the boundaries and building
restriction lines of such Property, and no improvements on adjoining properties
encroach upon such Property, and no easements or other encumbrances upon any
Property encroach upon any of the Improvements, so as to materially and
adversely affect the value or marketability of such Property except those which
are insured against by the applicable Title Insurance Policy for such Property.
4.1.26. Leases. To each Borrower’s actual knowledge after due inquiry and except
as set forth on Schedule X attached hereto or as otherwise disclosed in the
estoppel certificates delivered to Lender in connection with the origination of
the Loan, (a) the Properties are not subject to any Leases other than the Leases
described in said Schedule X, (b) each Borrower is the owner and lessor of the
landlord’s interest in each such Lease affecting its Property, (c) no Person has
any possessory interest in any Property or any right to occupy the same except
under and pursuant to the provisions of such Leases, (d) all commercial Leases
are in full force and effect and there are no material defaults thereunder by
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passage of time or the giving of notice, or both, would constitute material
defaults thereunder, (e) the copies of the commercial Leases delivered to Lender
are true and complete, and there are no oral agreements with respect thereto,
(f) no Rent (including security deposits) has been paid more than one (1) month
in advance of its due date, (g) all work to be performed by the landlord under
each Lease has been performed as required in such Lease and has been accepted by
the applicable tenant, and any payments, free rent, partial rent, rebate of rent
or other payments, credits, allowances or abatements required to be given by any
Borrower to any tenant has already been received by such tenant, (h) there has
been no prior sale, transfer or assignment, hypothecation or pledge of any Lease
or of the Rents received therein which is still in effect, (i) no commercial
tenant listed on Schedule X has assigned its Lease or sublet all or any portion
of the premises demised thereby, no such commercial tenant holds its leased
premises under assignment or sublease, nor does anyone except such commercial
tenant and its employees occupy such leased premises, (j) no tenant under any
Lease has a right or option pursuant to such Lease or otherwise to purchase all
or any part of the Property of which the leased premises are a part, and (k) no
tenant under any Lease has any right or option for additional space in the
Improvements.
4.1.27. Intentionally Deleted.
4.1.28. Principal Place of Business; State of Organization. Each Borrower’s
principal place of business as of the date hereof is the address set forth in
the introductory paragraph of this Agreement. Each Borrower (other than Gaming
Borrower) is organized under the laws of the State of Delaware and, with respect
to Gaming Borrower, the State of Nevada.
4.1.29. Filing and Recording Taxes. All transfer taxes, deed stamps, intangible
taxes or other amounts in the nature of transfer taxes required to be paid by
any Person under applicable Legal Requirements currently in effect in connection
with the transfer of the Properties and/or the IP to Borrowers have been paid.
Borrowers and each of their Affiliates have filed or caused to be filed all
reports relating to gaming taxes or fees to any Gaming Authority required to be
filed by them on or prior to the date hereof. All mortgage, mortgage recording,
stamp, intangible or other similar tax required to be paid by any Person under
applicable Legal Requirements currently in effect in connection with the
execution, delivery, recordation, filing, registration, perfection or
enforcement of any of the Loan Documents, including, without limitation, the
Mortgage, have been paid as of the date hereof, and the Mortgage and the other
Loan Documents are enforceable against Borrowers in accordance with their
respective terms by Lender (or any subsequent holder thereof), subject to
principles of equity and bankruptcy, insolvency and other laws generally
applicable to creditors’ rights and the enforcement of debtors’ obligations.
4.1.30. Special Purpose Entity/Separateness. (a) Until the Debt has been paid in
full and the obligations under the First Mezzanine Loan Documents, the Second
Mezzanine Loan Documents and the Third Mezzanine Loan Documents have been paid
in full, each Borrower hereby represents, warrants and covenants that such
Borrower has been, is, shall be and shall continue to be a Special Purpose
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(b) The representations, warranties and covenants set forth in Section 4.1.30(a)
hereof shall survive for so long as any amount remains payable to Lender under
this Agreement or any other Loan Document.
(c) All of the assumptions made in the Insolvency Opinion, including, but not
limited to, any exhibits attached thereto, are true and correct in all respects.
Each Borrower has complied and will comply with all of the assumptions made with
respect to such Borrower in the Insolvency Opinion.
(d) Each Borrower hereby covenants and agrees that (i) any assumptions made in
any subsequent non-consolidation opinion required to be delivered in connection
with the Loan Documents (an “Additional Insolvency Opinion”), including, but not
limited to, any exhibits attached thereto, shall be true and correct in all
respects, (ii) each Borrower will comply with all of the assumptions made with
respect to each Borrower in any Additional Insolvency Opinion, and (iii) each
Person other than any Borrower with respect to which an assumption shall be made
in any Additional Insolvency Opinion will comply with all of the assumptions
made with respect to it in any Additional Insolvency Opinion.
(e) Borrowers hereby agree to provide Lender with at least five (5) Business
Days’ prior written notice prior to the effectiveness of any change (and each
change) in any Independent Director or Independent Manager.
4.1.31. Management Agreement; Liquor Management Agreement.
(a) Each of the Management Agreements is in full force and effect and there is
no default thereunder by any party thereto and no event has occurred that, with
the passage of time and/or the giving of notice would constitute a default
thereunder (other than the non-payment of certain management fees and other
payments under any Management Agreement which non-payment has not given rise to
the exercise or enforcement of remedies under such Management Agreement).
Following the date hereof, there shall be no material default under any
Management Agreement (other than the non-payment of certain management fees and
other payments under any Management Agreement which non-payment has not given
rise to the exercise or enforcement of remedies under such Management
Agreement).
(b) Intentionally Deleted.
(c) The Liquor Management Agreement is in full force and effect and there is no
default thereunder by any party thereto and no event has occurred that, with the
passage of time and/or the giving of notice would constitute a default
thereunder.
4.1.32. Illegal Activity. No portion of any Property or the IP has been or will
be purchased by any Borrower or any other Restricted Party with proceeds of any
illegal activity.
4.1.33. No Change in Facts or Circumstances; Disclosure. To each Borrower’s
actual knowledge, all material information submitted by any Borrower to Lender
and in all financial statements, rent rolls, reports, certificates and other
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statements of fact made by any Borrower in this Agreement or in any other Loan
Document, are accurate, complete and correct in all material respects. To each
Borrower’s actual knowledge, there has been no material adverse change in any
condition, fact, circumstance or event that would make any such information
inaccurate, incomplete or otherwise misleading in any material respect or that
otherwise materially and adversely impairs, or is reasonably likely to do so
after the date hereof, the use or operation of the Properties or the IP or the
business operations or the financial condition of any Borrower. Each Borrower
has disclosed to Lender all material facts actually known to such Borrower and
has not failed to disclose any material fact actually known to such Borrower
that could cause any Provided Information or representation or warranty made
herein to be materially misleading.
4.1.34. Investment Company Act. No Borrower is (a) an “investment company” or a
company “controlled” by an “investment company,” within the meaning of the
Investment Company Act of 1940, as amended; or (b) subject to any other federal
or state law or regulation which purports to restrict or regulate its ability to
borrow money.
4.1.35. Embargoed Person. From the Closing Date and at all times throughout the
term of the Loan, including after giving effect to any Transfers permitted
pursuant to the Loan Documents, (a) none of the funds or other assets of any
Borrower, HRHI or any Guarantor shall constitute property of, or shall be
beneficially owned, directly or indirectly, by, any Person subject to trade
restrictions under United States law, including, but not limited to, the
International Emergency Economic Powers Act, 50 U.S.C. § 1701 et seq., The
Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders
or regulations promulgated under any such United States laws (each, an
“Embargoed Person”), with the result that the Loan made by Lender is or would be
in violation of law; (b) no Embargoed Person shall have any interest of any
nature whatsoever in any Borrower, HRHI or any Guarantor, as applicable, with
the result that the Loan is or would be in violation of law; and (c) none of the
funds of any Borrower, HRHI or any Guarantor, as applicable, shall be derived
from any unlawful activity with the result that the Loan is or would be in
violation of law; provided, however, that Borrowers’ representation in this
clause (c) shall not extend to gaming revenues generated at the Hotel/Casino
Property from the general public unless any Borrower or any other Restricted
Party has actual knowledge that such revenues are derived from any unlawful
activity.
4.1.36. Cash Management Account. (a) This Agreement, together with the other
Loan Documents, creates (and as of the Closing Date, created) a valid and
continuing security interest (as defined in the Uniform Commercial Code of the
State of New York) in the Lockbox Account and the Cash Management Account in
favor of Lender, which security interest is prior to all other Liens and is
enforceable as such against creditors of and purchasers from any Borrower. Other
than in connection with the Loan Documents, no Borrower has sold or otherwise
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(b) Each of the Lockbox Account and the Cash Management Account constitute
“deposit accounts” within the meaning of the Uniform Commercial Code of the
State of New York; and
(c) The Lockbox Account and the Cash Management Account are not in the name of
any Person other than Borrowers, as pledgors, or Lender, as pledgee.
4.1.37. Intellectual Property.
(a) The Intellectual Property Security Agreement created and creates a valid and
continuing security interest (as defined in the Uniform Commercial Code of the
State of New York) in all of IP Borrower’s rights, title and interest in and to
all of the following (collectively, the “IP”):
(i) all trademarks, service marks, domain names, trademark registrations,
service mark registrations, domain name registrations, applications for
trademark registrations, applications for service mark registrations,
applications for domain name registrations, trade names, brand names, product
names and common law marks, and the renewals thereof owned or used by any
Borrower or any Affiliated IP Party in connection with the operation and/or use
of one or more of the Properties;
(ii) all copyrights, and the renewals thereof, owned or used by any Borrower or
any Affiliated IP Party in connection with the operation and/or use of one or
more of the Properties;
(iii) all trade secrets, discoveries, formulae, proprietary processes,
improvements and inventions for which no patent applications are pending and all
other industrial property rights presently owned, in whole or in part, or used,
by any Borrower or any Affiliated IP Party in connection with the ownership,
operation and/or use of one or more of the Properties; and
(iv) all trademark licenses, service mark licenses, copyright licenses, royalty
agreements, assignments, grants and contracts with employees or others relating
in whole or in part to any of the foregoing IP to which any Borrower and/or any
Affiliated IP Party is a party, which is related to the ownership, operation
and/or use of one or more of the Properties (collectively, the “IP Agreements”).
(b) Schedule XI attached hereto is a true, correct and complete list of all the
Registered IP used by any Borrower in connection with the ownership, operation
and/or use of one or more of the Properties. Part I of said Schedule XI is a
true, correct and complete list of all Registered IP owned by IP Borrower or any
Affiliated IP Party, including Registered IP and that has been assigned to
Borrower by Morton pursuant to that certain Trademark Assignment dated as of
February 2, 2007 from Morton in favor of IP Borrower (the “Morton Assigned IP”;
and all of the foregoing, collectively, the “Owned IP”). Part II of said
Schedule XI is a true, correct and complete list of all Registered IP licensed
from Rank Licensing, Inc. (“Rank”) to Morton pursuant to that certain Trademark
License and Cooperation Agreement, dated June 7, 1996, between Rank and Morton
and which has been assigned from Morton to IP Borrower pursuant to that certain
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February 2, 2007 (the “Rank License”) from Morton in favor of IP Borrower and
which has been assigned from Rank to Hard Rock Café International (USA), Inc.
(“HRCI”) (all such IP listed on Part II of said Schedule XI, the “Rank IP”).
Part III of said Schedule XI is a true, correct and complete list of all
Registered IP that is licensed from Morton to IP Borrower pursuant to that
certain License Agreement, dated as of February 2, 2007 (the “Pink Taco
License”) from Morton in favor of IP Borrower (all such IP listed on Part IV of
said Schedule XI, the “Pink Taco IP”; and the Pink Taco IP, together with the
Rank IP, the “Licensed IP”).
(c) Intentionally Deleted.
(d) Except as set forth on Part IV of Schedule XI, Borrowers or an Affiliated IP
Party owns or possesses licenses or other rights in or under all patents,
trademarks, service marks, trade names, domain names, copyrights and any other
IP, which is necessary for the use, ownership, management, promotion and
operation of its Property and associated merchandising as currently so used,
except where the failure to so own or possess such IP, licenses or other rights
could not reasonably be expected to have a material adverse effect on such use,
ownership or operations (a “IP Material Adverse Effect”).
(e) Part V of said Schedule XI hereto sets forth:
(i) any written communications from any Borrower or any Affiliate thereof to one
or more third parties, or from one or more third parties to any Borrower or any
Affiliate thereof, alleging infringement by any third party or any Borrower or
any Affiliate thereof, of any of the IP or alleging related acts of unfair
competition or activities or actions of any anti-competitive nature, together
with all responses to such communications and a description of the status of
each such alleged infringement, in each case, which the failure to resolve such
alleged infringement or competition could reasonably be expected to have a IP
Material Adverse Effect; and
(ii) a complete list of any goods and/or services sold by any Person other than
any Borrower and of whom any Borrower has actual knowledge, which in the opinion
of any Borrower infringes upon any IP listed in said Schedule XI hereof or with
respect to which the failure to resolve such alleged infringement could
reasonably be expected to have an IP Material Adverse Effect.
(f) Except as disclosed in said Schedule XI:
(i) IP Borrower or an Affiliated IP Party owns the Owned IP, and IP Borrower has
a valid and enforceable license to use the Licensed IP, in each case free and
clear of any Liens other than the Permitted IP Encumbrances;
(ii) no Borrower or an Affiliated IP Party has granted nor is obligated to grant
any other Person any rights (including, without limitation licenses) with
respect to any of the Owned IP other than the Permitted IP Encumbrances;
(iii) to Borrowers’ actual knowledge, the trademarks, service marks, domain
names and copyrights included in the Owned IP and in the Licensed IP are valid;

 

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(iv) to Borrowers’ actual knowledge, the trademark registrations, service mark
registrations, domain name registrations and copyright registrations included in
the Owned IP and Licensed IP have been duly issued and have not been canceled,
abandoned or otherwise terminated;
(v) to Borrowers’ actual knowledge, the trademark applications, service mark
applications, domain name applications and copyright applications included in
the Owned IP have been duly filed; and
(vi) to Borrowers’ actual knowledge, all material IP Agreements are valid and
binding in accordance with their terms (except as the enforceability thereof may
be limited by any applicable bankruptcy, reorganization, insolvency or other
laws affecting creditors’ rights generally or by general principles of equity)
and are in full force and effect.
(g) To Borrowers’ actual knowledge, no Borrower or Affiliated IP Party is
obligated to disclose any of the IP to any other Person.
(h) To Borrowers’ actual knowledge, except for the Licensed IP, no Borrower
requires a license or right under or in respect of any intellectual property of
any other Person (except another Borrower) to conduct such Borrower’s business
as presently conducted and no substantial part of such business is carried on
under the agreement or consent of any other Person nor is there any agreement to
which any Borrower is a party which significantly restricts the fields in which
such business may be carried on.
(i) To Borrowers’ actual knowledge, there are and have been no proceedings,
actions or claims and no proceedings, actions or claims are pending or
threatened, impugning the title, validity or enforceability of any of the IP.
(j) To Borrowers’ actual knowledge, none of the processes currently used by any
Borrower or any Affiliated IP Party or any of the properties or products
currently sold by any Borrower or any Affiliated IP Party, and none of the IP or
Licensed IP, infringes the patent, industrial property, trademark, trade name,
domain name, label, other mark, right or copyright or any other similar right of
any other Person, except where such infringement could not reasonably be
expected to have an IP Material Adverse Effect.
(k) To Borrowers’ actual knowledge, no basis exists for any adverse claim by any
third party with respect to any of the IP and no act has been done or has been
omitted to be done by any Borrower or any Affiliate thereof to entitle any
Person to make such a claim or to cancel, forfeit or modify any of the IP in a
manner that could reasonably be expected to have an IP Material Adverse Effect.
(l) Except the Licensed IP, no Borrower requires a license or right under or in
respect of any intellectual property of any other Person (except another
Borrower) to conduct such Borrower’s business as presently conducted and no
substantial part of such business is carried on under the agreement or consent
of any other Person nor is there any agreement to which any Borrower is a party
which significantly restricts the fields in which such business may be carried
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(m) To Borrowers’ actual knowledge, no disclosure has been made to any Person of
the know-how or financial or trade secrets of any Borrower, except properly and
in the ordinary course of business and on condition that such disclosure is to
be treated as being of a confidential nature and except where such disclosure
would not reasonably be expected to have an IP Material Adverse Effect; and to
Borrowers’ actual knowledge, none of the IP is being infringed by any other
Person, except where such infringement could not reasonably be expected to have
an IP Material Adverse Effect.
4.1.38. No Franchise Agreement. None of the Borrowers or Manager has entered
into, and none of the Properties are subject to, any franchise, trademark or
license agreement with any Person with respect to the name and/or operation of
any Property, other than the IP Agreements, the Rank License and the Pink Taco
License.
4.1.39. Merger Agreement. The Acquisition and the Other Transaction Closings (as
such capitalized terms are defined in the Merger Agreement) were consummated in
accordance with all of the material terms and conditions of the Merger Agreement
and the Other Transaction Documents (as defined in the Merger Agreement), with
only such amendments, supplements and/or modifications thereto, and waivers and
extensions thereof, as Lender has approved in writing, to the extent such
approval is required under that certain Commitment Letter dated December 22,
2006 between Morgans Hotel Group Co., MHG HR Acquisition Corp, DLJ Merchant
Banking, Inc. and Lender.
4.1.40. Morton Indemnification and PWR/RWB Escrow Agreement. Borrowers have
delivered to Lender true, correct and complete copies of each of the Morton
Indemnification and the PWR/RWB Escrow Agreement and all amendments thereto.
Except for such amendments thereto as have been delivered to Lender, the Morton
Indemnification and the PWR/RWB Escrow Agreement have not been amended or
modified and are in full force and effect. No Borrower nor any Affiliate thereof
has (a) made any claim under the Morton Indemnification except as set forth in
Schedule XII hereto, or (b) requested any disbursement of funds under the
PWR/RWB Escrow Agreement with respect to any claim under the Morton
Indemnification or otherwise. Neither Borrower nor any Affiliate thereof knows
of any state of facts currently existing that would be reasonably likely to
result in a claim under the Morton Indemnification except as set forth in
Schedule XII hereto.
4.1.41. Gaming Licenses and Other Operating Permits.
(a) HRHI possesses all Operating Permits (including, but not limited to, all
liquor licenses) which are necessary for the execution, delivery and performance
of the Liquor Management Agreement. All of such Operating Permits are in and
will be in full force and effect; Borrowers and each of their Affiliates, as
applicable, including, without limitation, HRHI, are in compliance in all
material respects with all such Operating Permits; and no event, including,
without limitation, any violation of any Legal Requirement, has occurred which
would be reasonably likely to lead to the suspension, revocation or termination
of any such Operating Permit or the imposition of any restriction thereon.

 

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(b) Gaming Borrower possesses all Operating Permits (including, without
limitation, all Gaming Licenses) which are material to the execution, delivery
and performance of the Casino Component Lease and the use, occupation and
operation of the Casino Component; each such Operating Permit and Gaming License
(or any replacement thereof) is and will be in full force and effect; and Gaming
Borrower is in compliance in all material respects with all Gaming Licenses and
all other Operating Permits applicable to the operation of the Casino Component
as contemplated herein. Further, Borrowers hereby represent and warrant as
follows:
(c) Borrowers have no reason to believe that Gaming Borrower will not be able to
maintain in effect all Gaming Licenses and other Operating Permits necessary for
the lawful conduct of its business or operations as now conducted and as planned
to be conducted at the Hotel/Casino Property, including the operation of the
Casino Component, pursuant to all applicable Legal Requirements.
(d) All Gaming Licenses are in full force and effect and have not been amended
or otherwise modified in any material adverse respect or suspended, rescinded or
revoked.
(e) No Borrower is in default in any material respect under, or in violation in
any material respect of, any Gaming License or other Operating Permit, and no
event has occurred, and no condition exists, which, with the giving of notice or
passage of time or both, would constitute such a default thereunder or such a
violation thereof, that has caused or would reasonably be expected to cause the
loss, suspension, revocation, impairment, forfeiture, non-renewal or termination
of any Gaming License or the imposition of any restriction thereon.
(f) Borrowers have not received any notice of any violation of any Legal
Requirement which has caused or would reasonably be expected to cause any Gaming
License or other Operating Permit to be modified in any material adverse respect
or suspended, rescinded or revoked.
(g) The continuation, validity and effectiveness of all Gaming Licenses and
other Operating Permits will not be adversely affected by the transactions
contemplated by this Agreement.
(h) The Casino Component Lease is in full force and effect, neither Borrowers
nor Gaming Borrower is in material default thereof and no event has occurred,
and no condition exists, which, with the giving of notice or passage of time, or
both, would constitute a material default thereunder or material violation
thereof.
(i) The execution, delivery or performance of any of the Loan Documents will not
permit nor result in the imposition of any material penalty under, or the
suspension, revocation or termination of, any Gaming License or other Operating
Permit or any material impairment of the rights of the holder of any Gaming
License.
(j) There are no restrictions on transfer or agreements not to encumber the
ownership interests of any Borrower in any of the Loan Documents that require
the approval of the Gaming Authorities in order to become effective.

 

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(k) (i) Hotel/Casino Borrower meets the suitability standards for a landlord
contemplated or set forth in the Gaming Laws; and (ii) no Borrower shall take
dominion over the Casino Component while such Casino Component continues to be
used for gaming purposes without first obtaining the approvals required by the
Gaming Laws.
4.1.42. Distributions to Affiliates. None of the Borrowers has entered into, and
none of the Properties are subject to, any agreements to pay any amounts to any
Restricted Party, any DLJMB Party or any direct or indirect equity holder in or
Affiliate of any of the foregoing, other than with respect to (a) the fees and
expense reimbursements payable to any Affiliated Manager pursuant to any
Management Agreement reasonably approved by Lender and (b) any monitoring fee
due and payable to the DLJMB Parties pursuant to the limited liability company
agreement of HR Holdings.
Section 4.2. Survival of Representations. Borrowers agree that all of the
representations and warranties of any Borrower set forth in Section 4.1 hereof
and elsewhere in this Agreement and in the other Loan Documents shall survive
for so long as any amount remains owing to Lender under this Agreement or any of
the other Loan Documents by Borrowers. All representations, warranties,
covenants and agreements made in this Agreement or in the other Loan Documents
by any Borrower shall be deemed to have been relied upon by Lender
notwithstanding any investigation heretofore or hereafter made by Lender or on
its behalf.
Section 4.3. Definition of Borrowers’ Knowledge. As used in this Agreement or
any other Loan Document, the phrases “Borrowers’ knowledge”, “any Borrower’s
knowledge”, “Borrowers’ actual knowledge”, “any Borrower’s actual knowledge”,
“Borrowers’ best knowledge” or “any Borrower’s best knowledge” or words of
similar import, shall mean the actual knowledge, after commercially reasonable
due inquiry, of any of Fred Kleisner, Marc Gordon, David Smail, Matt Armstrong,
Arthur Blee, Ana Nekhamkin, Ryan Sprott, and/or Bobby Kelly (the “Named
Knowledge Parties”) and/or any additional individual or individuals who in the
future are delegated or assume any of the responsibilities of any of the
foregoing Named Knowledge Parties with respect to any of the Properties, and the
knowledge of no other Person shall be imputed to any of the Named Knowledge
Parties or any such other individuals, it being expressly represented and
warranted to Lender by Borrowers that it would be unlikely that any material
fact regarding any of the Properties or Borrowers or otherwise covered in the
representations and warranties contained herein or in any other Loan Document
would not come to the attention of one or more of the Named Knowledge Parties,
after commercially reasonable due inquiry. Notwithstanding anything to the
contrary contained in this Agreement or any other Loan Document, none of the
Named Knowledge Parties shall have any personal liability hereunder.
Notwithstanding the foregoing, Borrowers expressly acknowledge and agree that
the Named Knowledge Parties included Jennifer Nellany from the Closing Date
through the last date of her employment with any Person affiliated with any
Borrower, Manager or Guarantor.

 

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ARTICLE V.
COVENANTS OF BORROWERS
Section 5.1. Affirmative Covenants. From the Closing Date and until payment and
performance in full of all obligations of Borrowers under the Loan Documents or
the earlier release of the Lien of the Mortgage encumbering the Properties (and
all related obligations) and the IP in accordance with the terms of this
Agreement and the other Loan Documents, Borrowers hereby jointly and severally
covenant and agree with Lender that:
5.1.1. Existence; Compliance with Legal Requirements. Each Borrower shall do or
cause to be done all things necessary to preserve, renew and keep in full force
and effect its existence, rights, licenses, permits and franchises necessary for
the conduct of its business and comply in all material respects with all Legal
Requirements applicable to such Borrower and its Property or the IP, including,
without limitation, Prescribed Laws. There shall never be committed by any
Borrower, and no Borrower shall knowingly permit any other Person in occupancy
of or involved with the operation or use of any of the Properties to commit, any
act or omission affording the federal government or any state or local
government the right of forfeiture against any Property or any part thereof or
any monies paid in performance of Borrowers’ obligations under any of the Loan
Documents. Each Borrower hereby covenants and agrees not to commit, permit or
suffer to exist any act or omission affording such right of forfeiture. Each
Borrower shall at all times maintain, preserve and protect in all material
respects all franchises and trade names and preserve all the remainder of its
property necessary for the conduct of its business as contemplated hereunder
and, subject to Borrowers’ right to demolish the Improvements on the Adjacent
Property subject to, and in accordance with, the provisions of Section 3.18
hereof, shall keep the Properties in good working order and repair in all
material respects, and from time to time make, or cause to be made, all
reasonably necessary repairs, renewals, replacements, betterments and
improvements thereto, all as more fully provided in the Mortgage. Borrowers
shall keep the Properties insured at all times by financially sound and
reputable insurers, to such extent and against such risks, and maintain
liability and such other insurance, as is more fully provided in this Agreement.
Borrowers shall operate the Properties in accordance with the terms and
provisions of the O&M Agreements in all material respects. After prior notice to
Lender, any Borrower, at its own expense, may contest by appropriate legal
proceeding promptly initiated and conducted in good faith and with due
diligence, the validity of any Legal Requirement, the applicability of any Legal
Requirement to such Borrower or its Property or any alleged violation of any
Legal Requirement, provided that (a) no Event of Default, First Mezzanine Event
of Default, Second Mezzanine Event of Default or Third Mezzanine Event of
Default has occurred and remains uncured; (b) such proceeding shall be permitted
under and be conducted in accordance with the provisions of any instrument to
which such Borrower is subject and shall not constitute a default thereunder and
such proceeding shall be conducted in accordance with all applicable statutes,
laws and ordinances; (c) neither any Property nor any part thereof or interest
therein will be in imminent danger of being sold, forfeited, terminated,
cancelled or lost; (d) such Borrower shall promptly upon final determination
thereof comply with any such Legal Requirement determined to be valid or
applicable or cure any violation of any Legal Requirement; (e) such proceeding
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Requirement against such Borrower and its Property; and (f) such Borrower shall
furnish such security as may be required in the proceeding, or as may be
reasonably requested by Lender, to insure compliance with such Legal
Requirement, together with all interest and penalties payable in connection
therewith. Following any non-compliance with such Legal Requirement as
determined by a court of competent jurisdiction, Lender may apply any such
security, as necessary to cause compliance with such Legal Requirement at any
time when, in the reasonable judgment of Lender, the validity, applicability or
violation of such Legal Requirement is finally established or any Property (or
any part thereof or interest therein) shall be in imminent danger of being sold,
forfeited, terminated, cancelled or lost.
5.1.2. Taxes and Other Charges. Borrowers shall pay all Taxes and Other Charges
now or hereafter levied or assessed or imposed against the Properties or any
part thereof prior to the date upon which any interest or late charges shall
begin to accrue thereon; provided, however, Borrowers’ obligation to directly
pay Taxes shall be suspended for so long as Borrowers comply with the terms and
provisions of Section 7.2 hereof. Borrowers will deliver to Lender receipts for
payment or other evidence satisfactory to Lender that the Taxes and Other
Charges have been so paid or are not then delinquent. Borrowers shall furnish to
Lender receipts for the payment of the Taxes and the Other Charges prior to the
date upon which any interest or late charges shall begin to accrue thereon;
provided, however, Borrowers shall not be required to furnish such receipts for
payment of Taxes in the event that such Taxes have been paid by Lender pursuant
to Section 7.2 hereof. Borrowers shall not suffer and shall promptly cause to be
paid and discharged (or provide reasonable security for) any Lien or charge
against any of the Properties, and shall promptly pay for all utility services
provided to any of the Properties. After prior notice to Lender, any Borrower,
at its own expense, may contest by appropriate legal proceeding, promptly
initiated and conducted in good faith and with due diligence, the amount or
validity or application in whole or in part of any Taxes or Other Charges,
provided that (a) no Event of Default, First Mezzanine Event of Default, Second
Mezzanine Event of Default or Third Mezzanine Event of Default exists; (b) such
proceeding shall be permitted under and be conducted in accordance with the
provisions of any other instrument to which such Borrower is subject and shall
not constitute a default thereunder and such proceeding shall be conducted in
accordance with all applicable statutes, laws and ordinances; (c) neither any
Property nor any part thereof or interest therein will be in imminent danger of
being sold, forfeited, terminated, cancelled or lost; (d) such Borrower shall
promptly upon final determination thereof pay the amount of any such Taxes or
Other Charges, together with all costs, interest and penalties which may be
payable in connection therewith; (e) such proceeding shall suspend the
collection of such contested Taxes or Other Charges from the applicable
Property; and (f) such Borrower shall furnish such security as may be required
in the proceeding, or as may be reasonably requested by Lender, to insure the
payment of any such Taxes or Other Charges, together with all interest and
penalties thereon. Lender may pay over any such cash deposit or part thereof
held by Lender to the claimant entitled thereto at any time when, in the
reasonable judgment of Lender, the entitlement of such claimant is established
or any Property (or part thereof or interest therein) shall be in danger of
being sold, forfeited, terminated, cancelled or lost or there shall be any
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5.1.3. Litigation. Borrowers shall give prompt notice to Lender of any
litigation or governmental proceedings pending or threatened in writing against
any Borrower, HRHI or any Guarantor which, if adversely determined, would have a
material adverse effect on (a) the business operations, economic performance,
assets, financial condition, equity, contingent liabilities, material agreements
or results of operations of any Borrower, HRHI, any Guarantor, any Property or
the IP, (b) the enforceability or validity of any Loan Document, the perfection
or priority of any Lien created under any Loan Document or the remedies of
Lender under any Loan Document, (c) the ability of any Borrower, HRHI or any
Guarantor to perform, in all material respects, its obligations under each of
the Loan Documents, or (d) the value of, or cash flow from, any Property or the
IP.
5.1.4. Access to the Properties. Borrowers shall permit agents, representatives
and employees of Lender to inspect the Properties or any part thereof at
reasonable hours upon reasonable advance notice (which may be given verbally),
subject to the rights of tenants under their Leases (other than the Casino
Component Lease).
5.1.5. Intentionally Deleted.
5.1.6. Cooperate in Legal Proceedings. Borrowers shall reasonably cooperate
fully with Lender with respect to any proceedings before any court, board or
other Governmental Authority which in any way materially affects the rights of
Lender hereunder or any rights obtained by Lender under any of the other Loan
Documents and, in connection therewith, permit Lender, at its election, to
participate in any such proceedings.
5.1.7. Perform Loan Documents. Borrowers shall observe, perform and satisfy all
the terms, provisions, covenants and conditions of, and shall pay when due all
costs, fees and expenses to the extent required under the Loan Documents
executed and delivered by, or applicable to, any Borrower. Payment of the costs
and expenses associated with any of the foregoing shall be in accordance with
the terms and provisions of this Agreement, including, without limitation, the
provisions of Section 10.13 hereof.
5.1.8. Award and Insurance Benefits. Subject to the terms of Article VI hereof,
Borrowers shall reasonably cooperate with Lender in obtaining for Lender the
benefits of any Awards or Insurance Proceeds to which Lender is entitled under
the Loan Documents and which is lawfully or equitably payable in connection with
any Property, and Lender shall be reimbursed for any actual, reasonable expenses
incurred in connection therewith (including attorneys’ fees and disbursements,
and the payment by Borrowers of the expense of an appraisal on behalf of Lender
in case of Casualty or Condemnation affecting any Property or any part thereof)
out of such Insurance Proceeds or Awards.
5.1.9. Further Assurances. Borrowers shall, at Borrowers’ sole cost and expense
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(a) execute and deliver to Lender such documents, instruments, certificates,
assignments and other writings, and do such other acts necessary or desirable,
to evidence, preserve and/or protect the collateral at any time securing or
intended to secure the obligations of Borrowers under the Loan Documents, as
Lender may reasonably require, including, without limitation, if permitted by
applicable law, the execution and delivery of all such writings necessary to
transfer any Operating Permits with respect to any Property into the name of
Lender or its designee after the occurrence of an Event of Default; and
(b) do and execute all and such further lawful and reasonable acts, conveyances
and assurances for the better and more effective carrying out of the intents and
purposes of this Agreement and the other Loan Documents, as Lender shall
reasonably require from time to time.
5.1.10. Mortgage Taxes. Borrowers represent that as of the Closing Date
Borrowers have paid all state, county and municipal recording and all other
taxes imposed upon the execution and recordation of the Mortgage.
5.1.11. Financial Reporting. (a) Borrowers will keep and maintain or will cause
to be kept and maintained on a Fiscal Year basis, in accordance with the Uniform
System of Accounts and reconciled each year in accordance with GAAP (or such
other accounting basis acceptable to Lender), proper and accurate books, records
and accounts reflecting all of the financial affairs of each Borrower and all
items of income and expense in connection with the operation of each Property.
Borrowers shall also keep and maintain or will cause to be kept and maintained,
on a cash accounting basis, proper and accurate books and records reflecting the
information contained in the Cash Profit and Loss Statements. Lender shall have
the right from time to time at all times during normal business hours upon
reasonable notice (which may be verbal) to examine such books, records and
accounts (including without limitation the Cash Profit and Loss Statements) at
the office of any Borrower or any other Person maintaining such books, records
and accounts and to make such copies or extracts thereof as Lender shall desire.
After the occurrence and during the continuance of an Event of Default,
Borrowers shall pay any actual costs and expenses incurred by Lender to examine
Borrowers’ accounting records with respect to the Properties and the IP, as
Lender shall reasonably determine to be necessary or appropriate in the
protection of Lender’s interest.
(b) Borrowers will furnish to Lender annually, within one hundred twenty
(120) days following the end of each Fiscal Year of Borrowers, a complete copy
of each Borrower’s, HRHI’s and each Guarantor’s annual financial statements
audited by a “Big Four” accounting firm or other independent certified public
accountant reasonably acceptable to Lender (it being hereby understood and
agreed that BDO Seidman, LLP is acceptable to Lender) in accordance with the
Uniform System of Accounts (or, in the case of Guarantors, GAAP) and reconciled
each year in accordance with GAAP (or such other accounting basis acceptable to
Lender) covering the Properties for such Fiscal Year and containing statements
of profit and loss for Borrowers, HRHI, each Guarantor and each Property and a
balance sheet for Borrowers, HRHI and each Guarantor; provided, however, that in
the event that any Guarantor is not otherwise required to, and does not, cause
to be prepared such audited financial statements in the ordinary course of its
business, it may deliver the unaudited statements which are delivered to its

 

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investors or otherwise prepared in the ordinary course of its business,
accompanied by the Officer’s Certificate required under subclause (B) below.
Notwithstanding anything to the contrary set forth in this Agreement, the
financial statements of Borrowers may be consolidated with those of (1) HRHI for
so long as (y) HRHI owns no other assets other than the ownership interests in
one or more of the Borrowers and/or other assets related to one or more of the
Borrowers, one or more of the Properties and/or the IP, and (z) engages in no
other business other than those related to owning one or more of the Borrowers
and/or other assets related to one or more of the Borrowers, one or more of the
Properties and/or the IP, and (2) HR Holdings for so long as (x) the provisions
of the foregoing clause (1) remain true, (y) HR Holdings owns no other assets
other than the ownership interests in HRHI and/or one or more of the Borrowers
and/or other assets related to HRHI, one or more of the Borrowers, one or more
of the Properties and/or the IP, and (z) engages in no other business other than
those related to owning HRHI and/or one or more of the Borrowers and/or other
assets related to HRHI, one or more of the Borrowers, one or more of the
Properties and/or the IP. Such statements of Borrowers shall set forth the
financial condition and the results of operations for the Properties on a
property-by-property basis and also on an aggregate basis for all Properties for
such Fiscal Year, and shall include, but not be limited to, amounts representing
annual Net Cash Flow, Net Operating Income, Gross Income from Operations and
Operating Expenses, in each of the foregoing instances on a combined basis for
all Properties as well as for each individual Property. Borrowers’ annual
financial statements shall be accompanied by (i) a comparison of the budgeted
income and expenses and the actual income and expenses for the prior Fiscal
Year, (ii) an unqualified opinion of a “Big Four” accounting firm or other
independent certified public accountant reasonably acceptable to Lender,
(iii) with respect to the Hotel/Casino Property, occupancy statistics for such
Property, (iv) a schedule reviewed by such independent certified public
accountant reconciling Net Operating Income to Net Cash Flow (the “Net Cash Flow
Schedule”), which shall itemize all adjustments made to Net Operating Income to
arrive at Net Cash Flow deemed material by such independent certified public
accountant, (v) a Cash Profit and Loss Statement (as defined below) annualized
for the applicable prior Fiscal Year, which Cash Profit and Loss Statement shall
be prepared on a cash accounting basis, and (vi) an Officer’s Certificate from
each Borrower certifying that each annual financial statement presents fairly
the financial condition and the results of operations of such Borrower and the
Properties being reported upon and that such financial statements have been
prepared in accordance with the Uniform System of Accounts and reconciled in
accordance with GAAP and as of the date thereof whether there exists an event or
circumstance which constitutes a monetary Default or any Event of Default under
the Loan Documents executed and delivered by, or applicable to, any Borrower
(including a specific statement as to Borrowers’ compliance with Section 4.1.30
hereof), and if a monetary Default or any Event of Default exists, the nature
thereof, the period of time it has existed and the action then being taken to
remedy the same. Each Guarantor’s annual financial statements shall be
accompanied by (A) an unqualified opinion of a “Big Four” accounting firm or
other independent certified public accountant reasonably acceptable to Lender,
and (B) an Officer’s Certificate certifying that each annual financial statement
presents fairly the financial condition and the results of operations of such
Guarantor being reported upon and that such financial statements have been
prepared in accordance with GAAP and as of the date thereof whether there exists
an event or circumstance which constitutes a monetary Default or any Event of
Default under the Loan Documents executed and delivered by, or applicable to,
such Guarantor, and if a monetary Default or any Event of Default exists, the
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period of time it has existed and the action then being taken to remedy the
same. HRHI’s annual financial statements shall be accompanied by (I) an
unqualified opinion of a “Big Four” accounting firm or other independent
certified public accountant reasonably acceptable to Lender, and (II) an
Officer’s Certificate certifying that each annual financial statement presents
fairly the financial condition and the results of operations of HRHI being
reported upon and that such financial statements have been prepared in
accordance with GAAP and as of the date thereof whether there exists an event or
circumstance which constitutes a monetary Default or any Event of Default under
the Loan Documents executed and delivered by, or applicable to, HRHI, and if a
monetary Default or any Event of Default exists, the nature thereof, the period
of time it has existed and the action then being taken to remedy the same.
(c) Borrowers will furnish, or cause to be furnished, to Lender on or before
thirty (30) days after the end of each calendar month during the term of the
Loan and on or before forty-five (45) days after the end of each calendar
quarter during the term of the Loan commencing with the first quarter of 2008
and thereafter (for avoidance of doubt, the monthly reports due in any month in
which the end of a calendar quarter shall occur shall be furnished on or before
the date that is thirty (30) days after the end of such month and the quarterly
reports due for the quarter ending in such month shall be furnished on or before
the date that is forty-five (45) days following the end of such calendar
quarter), the following items, accompanied by an Officer’s Certificate stating
that such items are true, correct, accurate, and complete and fairly present the
financial condition and results of the operations of each Borrower and the
Properties on a combined basis as well as each Property individually (subject to
normal year-end adjustments) as applicable: (i) with respect to the Hotel/Casino
Property, an occupancy report for the subject month; (ii) a rent roll for each
Property for the subject month (or quarter, as applicable); (iii) monthly (or
quarterly, as applicable) and year-to-date operating statements (including
Capital Expenditures) prepared on a cash accounting and a GAAP basis, for each
calendar month (or quarter, as applicable), noting Net Operating Income, Gross
Income from Operations, and Operating Expenses (not including any contributions
to the Replacement Reserve Fund), each in substantially the form attached hereto
as Schedule VII (the “Cash Profit and Loss Statement”), and, within thirty
(30) days following Lender’s reasonable written request, other information
necessary and sufficient to fairly represent the financial position and results
of operation of each Property during such period in form reasonably satisfactory
to Lender, and containing a comparison of budgeted income and expenses and the
actual income and expenses together with a detailed explanation of any variances
of five percent (5%) or more between budgeted and actual amounts for such
periods, in each of the foregoing instances on a combined basis for all
Properties; (iv) a calculation reflecting the annual Debt Service Coverage Ratio
for the immediately preceding twelve (12) month period as of the last day of
such month (or quarter, as applicable); (v) a Net Cash Flow Schedule; and (vi) a
reasonably detailed schedule of complimentary food, beverages, hotel room
(including any upgrades), markers and/or other amenities provided to any
customers or guests of the Hotel/Casino Property. In addition, such Officer’s
Certificate shall also state that the representations and warranties of each
Borrower set forth in Section 4.1.30 hereof are true and correct as of the date
of such certificate, that there are no trade payables outstanding for more than
sixty (60) days and that there has been no change in the identity of the
Independent Directors or Independent Managers of any Borrower or, if such a
change has occurred the identity of any such replacement Independent Director or
Independent Manager and a statement that such new Independent Director or
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“Independent Director” or “Independent Manager” herein. On or before forty-five
(45) days after the end of each calendar month, Borrowers also will furnish, or
cause to be furnished, to Lender, with respect to the Hotel/Casino Property, the
most current Smith Travel Research Reports or a locally available equivalent, if
any, identified by Lender, then available to Borrowers reflecting market
penetration and relevant hotel properties competing with the Hotel/Casino
Property. In addition, Borrowers shall cause Guarantors to furnish, within sixty
(60) days after the end of each calendar quarter, certain financial statements
in accordance with the terms of the Closing Completion Guaranty, Construction
Completion Guaranty, and/or Non-Recourse Guaranty, as applicable.
(d) For each Fiscal Year during the term of the Loan, Borrowers shall deliver to
Lender an Annual Budget not later than twenty (20) days prior to the
commencement of such Fiscal Year.
(e) In the event that any Borrower must incur any Extraordinary Expense, then
such Borrower shall promptly deliver to Lender a reasonably detailed explanation
of such proposed Extraordinary Expense for Lender’s approval, provided that
Borrowers shall be permitted to obtain disbursement of funds for payment of
Extraordinary Expenses prior to obtaining Lender approval thereof as and to the
extent provided under the provisions of Section 2.6.2(b)(iii) and
Section 2.6.2(c)(iv) (further provided that, inter alia, the same when combined
with any disbursements made with respect to Pre-Opening Expenses in such
calendar month do not exceed $586,000 in the aggregate) but shall be subject to
the provisions of Section 2.6.2(h) and Borrowers’ obligations thereunder).
Notwithstanding the foregoing, no prior approval by Lender shall be required for
any Extraordinary Expense needed to be incurred immediately to prevent imminent
injury to person or damage to property, provided that within three (3) Business
Days thereafter Borrowers shall provide reasonably satisfactory evidence to
Lender to demonstrate the imminent necessity and reasonableness of the
Extraordinary Expense incurred.
(f) If, at the time a Disclosure Document is being prepared for a
Securitization, Lender expects that any or more Borrowers alone or any one or
more Borrowers and one or more Affiliates of any Borrower collectively, or any
one or more of the Properties alone or any one or more of the Properties and any
one or more Related Properties collectively, will be a Significant Obligor,
Borrowers shall furnish to Lender upon request (i) the selected financial data
or, if applicable, Net Operating Income, required under Item 1112(b)(1) of
Regulation AB, if Lender expects that the principal amount of the Loan together
with any Related Loans as of the cut-off date for such Securitization may, or if
the principal amount of the Loan together with any Related Loans as of the
cut-off date for such Securitization and at any time during which the Loan and
any Related Loans are included in a Securitization does, equal or exceed ten
percent (10%) (but less than twenty percent (20%)) of the aggregate principal
amount of all mortgage loans included or expected to be included, as applicable,
in the Securitization, or (ii) the financial statements required under
Item 1112(b)(2) of Regulation AB, if Lender expects that the principal amount of
the Loan together with any Related Loans as of the cut-off date for such
Securitization may, or if the principal amount of the Loan together with any
Related Loans as of the cut-off date for such Securitization and at any time
during which the Loan and any Related Loans are included in a Securitization
does, equal or exceed twenty percent (20%) of the aggregate principal amount of
all mortgage loans included or expected to be included, as applicable, in the
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furnished to Lender (A) within fifteen (15) Business Days after notice from
Lender in connection with the preparation of Disclosure Documents for the
Securitization, (B) not later than forty-five (45) days after the end of each
calendar quarter of Borrowers, and (C) not later than one hundred twenty
(120) days after the end of each calendar year of Borrowers; provided, however,
that Borrowers shall not be obligated to furnish financial data or financial
statements pursuant to clauses (B) or (C) of this sentence with respect to any
period for which a filing pursuant to the Exchange Act in connection with or
relating to the Securitization (an “Exchange Act Filing”) is not required. If
requested by Lender, Borrowers shall furnish to Lender financial data and/or
financial statements for any tenant of any Property, but only to the extent such
tenant is required to provide such financial data and/or financial statements
under its Lease, if, in connection with a Securitization, Lender expects there
to be, with respect to such tenant or group of Affiliated tenants, a
concentration within all of the mortgage loans included or expected to be
included, as applicable, in the Securitization such that such tenant or group of
affiliated tenants would constitute a Significant Obligor.
(g) All financial data and financial statements provided by Borrowers pursuant
to Section 5.1.11(f) hereof shall be prepared in accordance with GAAP (unless
otherwise specified) and shall meet the requirements of Regulation AB and all
other applicable Legal Requirements. All financial statements referred to in
Section 5.1.11(f) hereof shall be audited by independent accountants of
Borrowers reasonably acceptable to Lender in accordance with Regulation AB and
all other applicable Legal Requirements, shall be accompanied by the manually
executed report of the independent accountants thereon, which report shall meet
the requirements of Regulation AB and all other applicable Legal Requirements,
and shall be further accompanied by a manually executed written consent of the
independent accountants, in form and substance reasonably acceptable to Lender,
to the inclusion of such financial statements in any Disclosure Document and any
Exchange Act Filing and to the use of the name of such independent accountants
and the reference to such independent accountants as “experts” in any Disclosure
Document and Exchange Act Filing, all of which shall be provided at the same
time as the related financial statements are required to be provided. All
financial data and financial statements (audited or unaudited) provided by
Borrowers under Section 5.1.11(f) hereof shall be accompanied by an Officer’s
Certificate of each Borrower, which certification shall state that such
financial statements meet the requirements set forth in the first sentence of
this Section 5.1.11(g).
(h) If requested by Lender, Borrowers shall provide Lender, promptly upon
request, with any other or additional financial statements, or financial,
statistical or operating information, as Lender shall reasonably determine to be
required pursuant to Regulation AB or any amendment, modification or replacement
thereto or other Legal Requirements in connection with any Disclosure Document
or any Exchange Act Filing or as shall otherwise be reasonably requested by
Lender.
(i) In the event Lender reasonably determines, in connection with a
Securitization, that the financial data and financial statements required in
order to comply with Regulation AB or any amendment, modification or replacement
thereto or any other Legal Requirements are other than as provided herein, then
notwithstanding the provisions of Sections 5.1.11(f) and (g) hereof, Lender may
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financial data and financial statements as Lender determines to be necessary or
appropriate for such compliance.
(j) Any reports, statements or other information required to be delivered under
this Section 5.1.11 shall be delivered (i) in paper form, (ii) on a compact disk
or DVD, and (iii) if requested by Lender and within the capabilities of
Borrowers’ data systems without change or modification thereto, in electronic
form and prepared using Microsoft Word for Windows or WordPerfect for Windows
files (which files may be prepared using a spreadsheet program and saved as word
processing files). Borrowers agree that Lender may disclose information
regarding the Properties and Borrowers that is provided to Lender pursuant to
this Section 5.1.11 in connection with any Securitization to such parties
requesting such information in connection with such Securitization.
5.1.12. Business and Operations. Borrowers will continue to engage in the
businesses presently conducted by Borrowers as and to the extent the same are
necessary for the ownership, maintenance, management and operation of the
Properties or the IP. Each Borrower will qualify to do business and will remain
in good standing under the laws of each jurisdiction as and to the extent the
same are required for the ownership, maintenance, management and operation of
the Properties or the IP.
5.1.13. Title to the Properties and the IP. Borrowers will warrant and defend
(a) the title to each Property, the Owned IP and any right in and under all IP
Agreements with respect to Licensed IP, and every part thereof, subject only to
Liens permitted hereunder (including Permitted Encumbrances, Permitted IP
Encumbrances and the asset sales and releases permitted under this Agreement),
and (b) the validity and priority of the Liens of the Mortgage, the Assignment
of Leases and the IP Assignments, subject only to Liens permitted hereunder
(including Permitted Encumbrances and Permitted IP Encumbrances), in each case
against the claims of all Persons whomsoever. Borrowers shall reimburse Lender
for any actual losses, actual costs, actual damages (excluding lost profits,
diminution in value and other consequential damages) or reasonable expenses
(including reasonable attorneys’ fees and court costs) incurred by Lender if an
interest in any Property or the IP, other than as permitted hereunder, is
claimed by another Person.
5.1.14. Costs of Enforcement. In the event (a) that the Mortgage is foreclosed
in whole or in part or that the Mortgage is put into the hands of an attorney
for collection, suit, action or foreclosure, (b) of the foreclosure of any
mortgage prior to or subsequent to the Mortgage in which proceeding Lender is
made a party, or (c) of the bankruptcy, insolvency, rehabilitation or other
similar proceeding in respect of any Borrower or any of its Constituent Members
or an assignment by any Borrower or any of its Constituent Members for the
benefit of its creditors and Lender incurs costs in connection with any such
proceeding as a direct or indirect result of the Loan, then, in any of the
foregoing instances, each Borrower, on behalf of itself and its successors or
assigns, shall be chargeable with and shall pay all actual out-of-pocket costs
of collection and defense, including attorneys’ fees and costs, incurred by
Lender or any Borrower in connection therewith and in connection with any
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5.1.15. Estoppel Statement. (a) After request by Lender from time to time, but
in no event more than two (2) times in any twelve (12) month period except in
connection with a Securitization, Borrowers shall within ten (10) Business Days
furnish Lender with a statement, duly acknowledged and certified, setting forth
(i) the original principal amount of the Loan and each Component, (ii) the
Reduced Acquisition Loan Outstanding Principal Balance and the Construction Loan
Outstanding Principal Balance, (iii) the Applicable Interest Rate of each
Component, (iv) the date an installment of interest was last paid, (v) any
offsets or, to the best of each Borrower’s actual knowledge, defenses to the
payment of the Debt, if any, and (vi) that the Notes, this Agreement, the
Mortgage and the other Loan Documents are valid, legal and binding obligations
of Borrowers and have not been modified or, if modified, giving particulars of
such modification.
(b) After request by Borrowers, but in no event more than two (2) times in any
twelve (12) month period, Lender shall within ten (10) Business Days furnish
Borrowers with a statement, duly acknowledged and certified, stating (i) the
Reduced Acquisition Loan Outstanding Principal Balance and the Construction Loan
Outstanding Principal Balance, (ii) the Applicable Interest Rate of each
Component, (iii) the date an installment of interest was last paid, and
(iv) whether or not Lender has sent any notice of default under the Loan
Documents which remains uncured in the opinion of Lender.
(c) Borrowers shall use commercially reasonable efforts to deliver to Lender
within thirty (30) days of receipt of written request, tenant estoppel
certificates from each commercial tenant leasing space at any of the Properties,
in form and substance reasonably satisfactory to Lender; provided that, except
in connection with a Securitization, Borrowers shall not be required to deliver
such certificates more frequently than once in any calendar year or less
frequently if, and to the extent, so restricted by the terms of any Leases
entered into prior to the Closing Date.
(d) Borrowers shall deliver, within ten (10) Business Days after request by
Lender from time to time, estoppel certificates from First Mezzanine Borrowers,
Second Mezzanine Borrowers and/or Third Mezzanine Borrowers, covering
substantially the same matters as set forth in clause (a) above and any other
matters reasonably requested by Lender.
5.1.16. Loan Proceeds. Borrowers used the proceeds of the Original Acquisition
Loan received by them on the Closing Date only for the purposes set forth in
Section 2.1.2 hereof. Borrowers have used and shall use the proceeds of the
Construction Loan received by them pursuant to any Construction Loan Advances
only for the purposes set forth in Section 2.1.3 hereof.
5.1.17. Performance by Borrowers. Borrowers shall, in a timely manner and in all
material respects, observe, perform and fulfill each and every covenant, term
and provision of each Loan Document executed and delivered by, or applicable to,
any Borrower, and shall not enter into or otherwise suffer or permit any
amendment, waiver, supplement, termination or other modification of any Loan
Document executed and delivered by, or applicable to, any Borrower without the
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5.1.18. Confirmation of Representations. Borrowers shall deliver, in connection
with any Securitization, (a) one or more Officer’s Certificates certifying as to
the accuracy of all representations made by Borrowers in the Loan Documents as
of the date of the closing of such Securitization in all relevant jurisdictions
(or if any such representations are no longer accurate, providing an explanation
as to the reason for such inaccuracy), and (b) certificates of the relevant
Governmental Authorities in all relevant jurisdictions indicating the good
standing and qualification of each Borrower as of the date of the
Securitization.
5.1.19. No Joint Assessment. Borrowers shall not suffer, permit or initiate the
joint assessment of any Property (a) with any other real property constituting a
tax lot separate from such Property, and (b) which constitutes real property
with any portion of such Property which may be deemed to constitute personal
property, or any other procedure whereby the lien of any taxes which may be
levied against such personal property shall be assessed or levied or charged to
such real property portion of the Property.
5.1.20. Leasing Matters. Any Major Leases with respect to any Property executed
after the date hereof shall be subject to Lender’s approval, which approval
shall not be unreasonably withheld, conditioned or delayed, provided, however,
that renewals of any Major Lease by Borrowers initially executed prior to the
Closing Date shall not require the approval of Lender if the terms of any such
Lease provided for renewals at a reasonably determinable rent. Upon request,
Borrowers shall furnish Lender with executed copies of all Leases. All proposed
Major Leases shall be on commercially reasonable terms and no Lease shall not
contain any terms which would materially adversely affect Lender’s rights under
the Loan Documents. All Leases executed after the date hereof shall provide that
they are subordinate to the Mortgage and that the lessee agrees to attorn to
Lender or any purchaser at a sale by foreclosure or power of sale, provided
that, with respect to Major Leases, Lender provides commercially reasonable
non-disturbance language. Borrowers (i) shall observe and perform the
obligations imposed upon the lessor under the Leases in a commercially
reasonable manner; (ii) shall enforce the terms, covenants and conditions
contained in the Leases upon the part of the lessee thereunder to be observed or
performed in a commercially reasonable manner and in a manner not to impair the
value of any Property involved, except that no termination by any Borrower or
acceptance of surrender by a tenant of any Major Lease will be permitted without
the consent of Lender; (iii) shall not collect any of the rents more than one
(1) month in advance (other than security deposits); (iv) shall not execute any
other assignment of lessor’s interest in the Leases or the Rents (except as
contemplated by the Loan Documents); and (v) shall not alter, modify or change
the terms of any Major Lease in any material manner, in each of the foregoing
instances, without the prior written approval of Lender, not to be unreasonably
withheld. To the extent Lender’s approval is required pursuant to this Section
5.1.20, Lender shall endeavor to respond to a request for Lender’s approval
within ten (10) Business Days after Borrowers’ written request therefor,
delivered together with any documents or information required to be provided by
Borrowers hereunder in connection with Lender’s review of the proposed Major
Lease, Major Lease amendment or Major Lease termination. If the correspondence
from Borrowers requesting such approval contains the following statement at the
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first page thereof in capitalized, boldfaced, 14 point type lettering: “IF YOU
FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING
WITHIN TEN (10) BUSINESS DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN”, and if
Lender shall fail to respond to or to expressly deny such request for approval
in writing (stating in reasonable detail the reason for such disapproval) within
ten (10) Business Days after receipt of Borrowers’ written request therefor
together with the documents and information required above and any other
information reasonably requested by Lender in writing prior to the expiration of
such ten (10) Business Day period in order to adequately review the same, then
Borrowers shall re-submit such proposed Major Lease, Major Lease amendment or
Major Lease termination and accompanying information to Lender with a request
for approval containing the following statement at the top of the first page
thereof in capitalized, boldfaced, 14 point type lettering: “IF YOU FAIL TO
RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIVE
(5) BUSINESS DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN”, and if Lender does not
respond to such second request by approving such proposed Major Lease, Major
Lease amendment or Major Lease termination or stating its objection thereto
within five (5) Business Days of Lender’s receipt of such second submission,
Lender’s approval shall be deemed given. Notwithstanding anything to the
contrary contained herein, Borrowers shall not enter into a lease of all or
substantially all of any Property without Lender’s prior consent.
5.1.21. Alterations. Other than the construction of the Project, which shall be
governed by the provisions of Article III hereof, Borrowers shall obtain
Lender’s prior consent to any material alterations to any Improvements, which
consent shall not be unreasonably withheld, conditioned or delayed.
Notwithstanding the foregoing, Lender’s consent shall not be required in
connection with any alterations that will not have a material adverse effect on
any Borrower’s financial condition, the value of the applicable Property or the
Net Operating Income, provided that such alterations (a) are made in connection
with tenant improvement work performed pursuant to the terms of any Lease,
(b) do not materially adversely affect any structural component of any
Improvements, any utility or HVAC system contained in any Improvements or the
exterior of any building constituting a part of any Improvements and the
aggregate cost thereof does not exceed the Alteration Threshold Amount, or
(c) are performed in connection with the Restoration of a Property after the
occurrence of a Casualty or Condemnation in accordance with the terms and
provisions of this Agreement. To the extent Lender’s prior written approval is
required pursuant to this Section 5.1.21, Lender shall have fifteen
(15) Business Days from receipt of written request and any and all reasonably
required information and documentation relating thereto in which to approve or
disapprove such request and such written request shall state thereon in bold
letters of 14 point font or larger that action is required by Lender. If Lender
fails to approve or disapprove the request within such fifteen (15) Business
Days, Lender’s approval shall be deemed given. Should Lender fail to approve any
such request, Lender shall give Borrowers written notice setting forth in
reasonable detail the basis for such disapproval. In no event shall Lender
require any “consent fee” as a condition to any required approval. If the total
unpaid amounts due and payable with respect to alterations to the Improvements
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tenants under the Leases) shall at any time exceed the Alteration Threshold
Amount, Borrowers shall promptly deliver to Lender as security for the payment
of such amounts and as additional security for Borrowers’ obligations under the
Loan Documents any of the following: (A) cash, (B) U.S. Obligations, (C) other
securities having a rating acceptable to Lender and that the applicable Rating
Agencies have confirmed in writing will not, in and of itself, result in a
downgrade, withdrawal or qualification of the then current ratings assigned to
any Securities or any class thereof in connection with any Securitization, (D) a
Letter of Credit, or (E) a completion and performance bond issued by an Approved
Bank. Such security shall be in an amount equal to the excess of the total
unpaid amounts with respect to alterations to the Improvements on the applicable
Property (other than such amounts to be paid or reimbursed by tenants under the
Leases) over the Alteration Threshold Amount and during the continuance of an
Event of Default, Lender may apply such security from time to time at the option
of Lender to pay for such alterations.
5.1.22. Operation of the Properties.
(a) Borrowers shall cause the Properties to be operated, in all material
respects, in accordance with the applicable Management Agreement. In the event
that any Management Agreement expires or is terminated (without limiting any
obligation of Borrowers to obtain Lender’s consent to any termination or
modification of any Management Agreement, if applicable, in accordance with the
terms and provisions of this Agreement), Borrowers shall promptly enter into a
Replacement Management Agreement with the applicable Manager or another
Qualified Manager, as applicable.
(b) Each Borrower shall: (i) promptly perform and/or observe, in all material
respects, all of the covenants and agreements required to be performed and
observed by it under the Management Agreement to which it is a party and do all
things necessary to preserve and to keep unimpaired its material rights
thereunder; (ii) promptly notify Lender of any material default under its
Management Agreement of which it is aware; (iii) promptly deliver to Lender a
copy of each financial statement, business plan, capital expenditures plan,
notice, report and estimate received by it under its Management Agreement; and
(iv) enforce the performance and observance of all of the material covenants and
agreements required to be performed and/or observed by the Manager under its
Management Agreement in a commercially reasonable manner.
(c) Hotel/Casino Borrower shall at all times operate and maintain (or cause to
be operated and maintained) the Hotel/Casino Property and the Casino Component
as a hotel and casino resort in accordance with standards at least equivalent to
the Comparable Hotel/Casinos. The theme of the Hotel/Casino Property and the
Casino Component shall not be materially changed without the prior written
consent of Lender, which consent shall not be unreasonably withheld.
Hotel/Casino Borrower shall cause the Hotel/Casino Property to be at all times
open for business as a hotel and the Casino Component to be open at all times
for business as a casino, other than as provided under the Casino Component
Lease, pursuant to Legal Requirements, temporary closures as a result of
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5.1.23. Liquor Management at Hotel/Casino Property.
(a) Unless and until Hotel/Casino Borrower has obtained all Governmental
Approvals necessary to provide all alcoholic beverage services provided at the
Hotel/Casino Property as of the Closing Date, Hotel/Casino Borrower shall cause
all alcoholic beverage services at the Hotel/Casino Property to be managed by a
Liquor Manager in accordance with a Liquor Management Agreement and Borrowers
shall use commercially reasonable best efforts to conduct and/or to cause to be
conducted the alcoholic beverage services at the Hotel/Casino Property in such a
manner so as to maximize Gross Income from Operations at the Properties in the
aggregate. In the event that a Liquor Management Agreement expires or is
terminated (without limiting any obligation of Hotel/Casino Borrower to obtain
Lender’s consent to any termination or modification of any Liquor Management
Agreement, if applicable, in accordance with the terms and provisions of this
Agreement), Hotel/Casino Borrower shall promptly enter into a Replacement Liquor
Management Agreement with the Liquor Manager or another Qualified Liquor
Manager, as applicable.
(b) Hotel/Casino Borrower shall: (i) promptly perform and/or observe, in all
material respects, all of the covenants and agreements required to be performed
and observed by it under the Liquor Management Agreement and do all things
necessary to preserve and to keep unimpaired its material rights thereunder;
(ii) promptly notify Lender of any material default under the Liquor Management
Agreement of which it is aware; (iii) promptly deliver to Lender a copy of each
financial statement, business plan, capital expenditures plan, notice, report
and estimate received by it under the Liquor Management Agreement; and
(iv) enforce the performance and observance of all of the material covenants and
agreements required to be performed and/or observed by the Liquor Manager under
the Liquor Management Agreement, in a commercially reasonable manner.
(c) Upon the occurrence and during the continuance of an Event of Default,
Borrowers shall, at the request of Lender, cause the Liquor Manager, if one of
the Borrowers or an Affiliate of any Borrower, to continue to perform all
obligations under the Liquor Management Agreement. Additionally, Borrowers
shall, upon and after the foreclosure, deed in lieu of foreclosure or other
similar transfer of the Hotel/Casino Property to Lender, its designee or nominee
(a “Lender Successor Owner”), at the request of Lender, cause the Liquor
Manager, if one of the Borrowers or an Affiliate of any Borrower, to perform all
obligations under the Liquor Management Agreement for the benefit of the Lender
Successor Owner and to maintain all applicable Operating Permits necessary for
the performance thereof for a period not to exceed fifteen (15) months after the
effective date of such transfer to the Lender Successor Owner (which period
shall in all events terminate upon Lender Successor Owner’s appointment of a new
liquor manager possessing all Governmental Approvals necessary to provide all
alcoholic beverage services at the Hotel/Casino Property, subject to Liquor
Manager’s obligation to transfer its responsibilities under the Liquor
Management Agreement to such new liquor manager and to reasonably cooperate with
the transition of the liquor management responsibilities from Liquor Manager to
such new liquor manager), either in accordance with the terms of the Liquor
Management Agreement, including, but not limited to, the obligation to deposit
all revenue derived from liquor sales into an account designated by the Lender
Successor Owner, or pursuant to a replacement liquor services management
agreement in form and substance reasonably acceptable to Lender and such Liquor
Manager; provided that (i) the

 

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Lender Successor Owner shall be obligated to pay a then market rate liquor
management fee which is reasonable and customary for similar hotel and casinos
in Las Vegas, Nevada, and (ii) all other terms and arrangements shall be usual
and customary for similar hotel and casinos in Las Vegas, Nevada.
Notwithstanding the foregoing, at any time after the foreclosure, deed in lieu
of foreclosure or other similar transfer of the Hotel/Casino Property to a
Lender Successor Owner, at the option of such Lender Successor Owner exercised
by written notice to the Liquor Manager, such Lender Successor Owner shall have
the right to terminate the Liquor Management Agreement with any Liquor Manager
without penalty or termination fee and, in connection with the foregoing, Liquor
Manager shall transfer its responsibilities thereunder to a Person selected by
such Lender Successor Owner in its sole discretion.
5.1.24. Gaming Operations at the Hotel/Casino Property.
(a) All gaming operations conducted at the Hotel/Casino Property shall at all
times be operated by a Qualified Gaming Operator and Borrowers shall use
commercially reasonable best efforts to conduct and/or to cause to be conducted
the gaming operations in such a manner so as to maximize Gross Income from
Operations at the Properties in the aggregate.
(b) Hotel/Casino Borrower acknowledges that Lender has the right (but not the
obligation) to cure any default by Gaming Borrower under the Casino Component
Lease. In furtherance of that right, Hotel/Casino Borrower shall promptly
execute, acknowledge and deliver to Lender such instruments as may reasonably be
required to permit Lender to so cure any default under the Casino Component
Lease. Additionally, subject to the Gaming Laws, Hotel/Casino Borrower
irrevocably appoints Lender as its true and lawful attorney-in-fact to do, in
its name or otherwise, any and all acts and to execute any and all documents
that are necessary to preserve any rights of Hotel/Casino Borrower under or with
respect to the Casino Component Lease (and the above powers granted to Lender
are coupled with an interest and shall be irrevocable) to the extent that
Hotel/Casino Borrower fails to do any of the same within five (5) Business Days
following written request by Lender.
5.1.25. Intellectual Property.
(a) Each Borrower shall take all actions reasonably necessary to protect the IP,
subject to, and in compliance with, applicable IP Agreements, including, without
limitation, (i) maintaining all material registrations and applications with
respect to any IP owned by any Borrower, (ii) maintaining and complying with the
terms of all licenses necessary for the use of any IP licensed to any Borrower,
(iii) expeditiously and diligently seeking to stop any acts of infringement or
unfair competition with respect to the Owned IP that are brought to any
Borrower’s attention, and using commercially reasonable efforts to cause HRCI or
Morton, as the case may be, to diligently seek to stop any acts of infringement
or unfair competition with respect to the Licensed IP that are brought to any
Borrower’s attention and (iii) refraining from any act or omission that might
jeopardize any Borrower’s ability to use any of the IP.
(b) Hotel/Casino Borrower shall operate the Hotel/Casino Property as a “Hard
Rock” hotel unless otherwise consented to in writing by Lender and shall refrain
from any act or omission, including, without limitation, any act contemplated
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hereof, that would result in, or would be reasonably likely to result in, the
loss of its ability to so operate the Hotel/Casino Property as a “Hard Rock”
hotel.
5.1.26. Licensing and Sublicensing of the IP.
(a) Except as set forth in Sections 5.1.26(b), (c) and (d) hereof, Borrowers
shall not license any of the Owned IP or sublicense any of the Licensed IP (an
“IP License”) without Lender’s consent in each instance.
(b) Notwithstanding the foregoing or anything else to the contrary set forth in
this Agreement or the other Loan Documents, IP Borrower shall have the right,
without the consent of Lender and without violating the Loan Documents, to
license or sublicense, as applicable, the IP (or any portion thereof) (an
“Adjacent Property IP License”) to any subsequent purchaser of all or any
portion of the Adjacent Property and its successors and assigns, whether or not
any such subsequent purchaser, successor or assign is an Affiliate of any
Borrower or any other Restricted Party; provided that all of the following
conditions shall be satisfied with respect to any such Adjacent Property IP
License:
(i) IP Borrower shall notify Lender in writing of its intent to enter into such
Adjacent Property IP License within five (5) days prior to the execution
thereof, and within ten (10) days following the execution and delivery of such
Adjacent Property IP License, shall deliver to Lender (A) a copy of the Adjacent
Property IP License, and (B) an Officer’s Certificate providing a certification
that such Adjacent Property IP License (1) does not and will not adversely
affect any Borrower’s ownership and/or operation of, or any activities conducted
on, its Property, (2) does not and will not materially diminish any Borrower’s
rights to use any of the Owned IP or Licensed IP that is reasonably necessary or
desirable to operate its Property as then being operated and as then
contemplated to be operated in the future, and (3) does not, and is not
reasonably anticipated in the future to, materially diminish the value of any
Owned IP or Licensed IP;
(ii) Such Adjacent Property IP License shall be granted and used only in
connection with the ownership, development and/or use of improvements and/or
activities on the Adjacent Property or any portion thereof;
(iii) Such Adjacent Property IP License may be granted (A) without consideration
beyond that which is paid to Adjacent Borrower in connection with the sale of
the applicable portion of the Adjacent Property and/or (B) on a royalty free
basis; provided, however, that, notwithstanding the foregoing, any consideration
and/or royalties that is/are paid to IP Borrower in connection with such
Adjacent Property IP License shall constitute Gross Income from Operations for
all purposes under this Agreement and the other Loan Documents and shall be
deposited directly into the Lockbox Account within one (1) Business Day
following receipt by IP Borrower from time to time;
(iv) Such Adjacent Property IP License shall not violate or result in a
violation of Section 5.1.25(b) hereof; and
(v) Such Adjacent Property IP License shall not adversely affect Lender’s Liens
and security interests in the Owned IP and Licensed IP, all of which shall

 

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remain in full force and effect and, at Lender’s request in its sole discretion,
IP Borrower shall collaterally assign to Lender such Adjacent Property IP
License pursuant to a security agreement reasonably satisfactory to Lender and
IP Borrower in form and substance.
(c) Notwithstanding the foregoing or anything else to the contrary set forth in
this Agreement or the other Loan Documents, IP Borrower shall have the right,
without the consent of Lender and without violating the Loan Documents, to
license or sublicense, as applicable, the IP (or any portion thereof) to any
bonafide third party who is not an Affiliate of any Borrower or any other
Restricted Party (a “Third Party IP License”); provided that all of the
following conditions shall be satisfied with respect to any such Third Party IP
License:
(i) IP Borrower shall notify Lender in writing of its intent to enter into such
proposed Third Party IP License within five (5) days prior to the execution
thereof, and within ten (10) days following the execution and delivery of such
Third Party IP License, shall deliver to Lender (A) a copy of the proposed Third
Party IP License, and (B) an Officer’s Certificate providing a certification
that (1) as of the date of such notice, no monetary Default, monetary First
Mezzanine Default, monetary Second Mezzanine Default or monetary Third Mezzanine
Default, and no Event of Default, First Mezzanine Event of Default, Second
Mezzanine Event of Default or Third Mezzanine Event of Default, shall have
occurred and be continuing, (2) the proposed licensee or sublicensee, as
applicable, is a bonafide third party who is not an Affiliate of any Borrower or
any other Restricted Party, (3) the total consideration paid and to be paid
under such proposed Third Party IP License, (4) other than the proposed Third
Party IP License, there are no other written or oral agreements between any
Borrower or any other Restricted Party or any Affiliate of any thereof, on the
one hand, and the proposed licensee or sublicensee, as applicable, on the other
hand, relating to such proposed Third Party IP License or the IP covered
thereunder, (5) the proposed Third Party IP License does not and will not
adversely affect any Borrower’s ownership and/or operation of, or any activities
conducted on, its Property, (6) the proposed Third Party IP License does not and
will not materially diminish any Borrower’s rights to use any of the Owned IP or
Licensed IP that is reasonably necessary or desirable to operate its Property as
then being operated and as then contemplated to be operated in the future, and
(7) the proposed Third Party IP License does not, and is not reasonably
anticipated in the future to, materially diminish the value of any Owned IP or
Licensed IP;
(ii) Such proposed Third Party IP License shall, without limitation, (A) be on
arm’s-length, market terms, (B) require cash consideration only, (C) prohibit
any material amendment thereof without Lender’s prior reasonable approval, other
than any amendment that does not violate any of the requirements of this
Section 5.1.26(c)(ii), (D) prohibit the assignment or sub-licensing thereof
without Lender’s prior reasonable approval, other than an assignment to a
bonafide third party who is not an Affiliate of any Borrower or any other
Restricted Party, and (E) require the proposed licensee or sublicensee, as
applicable, to deposit all consideration payable thereunder or otherwise in
connection therewith from time to time directly into the Lockbox Account;
(iii) All consideration and/or royalties that is/are paid under or otherwise in
connection with such Third Party IP License shall constitute Gross Income from
Operations for all purposes under this Agreement and the other Loan Documents
and, if notwithstanding the provisions of the foregoing Section 5.1.26(c)(ii)(E)
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shall receive any such consideration and/or royalties, the same shall be
deposited directly in the Lockbox Account within one (1) Business Day following
receipt by any Borrower from time to time;
(iv) Such Third Party IP License shall not violate or result in a violation of
Section 5.1.25(b) hereof;
(v) Without limiting the generality of the foregoing, such Third Party IP
License shall in no event prohibit or limit in any manner the use of the “Hard
Rock” name in connection with the operation of the Hotel/Casino Property or any
other Property;
(vi) Such Third Party IP License shall not adversely effect Lender’s Liens and
security interests in the Owned IP and Licensed IP, all of which shall remain in
full force and effect and, at Lender’s request in its sole discretion, IP
Borrower shall collaterally assign to Lender such Third Party IP License
pursuant to a security agreement reasonably satisfactory to Lender and IP
Borrower in form and substance; and
(vii) On the date of the full execution and delivery of such Third Party IP
License, no monetary Default, monetary First Mezzanine Default, monetary Second
Mezzanine Default or monetary Third Mezzanine Default, and no Event of Default,
First Mezzanine Event of Default, Second Mezzanine Event of Default or Third
Mezzanine Event of Default, shall have occurred and be continuing.
(d) Notwithstanding the foregoing or anything else to the contrary set forth in
this Agreement or the other Loan Documents, IP Borrower shall have the right to
license or sublicense, as applicable, the IP (or any portion thereof) to an
Affiliate of any Borrower or any other Restricted Party (an “Affiliate IP
License”); provided that (i) all of the conditions set forth in
Section 5.1.26(c) hereof shall be satisfied with respect to any such Affiliate
IP License, other than the condition set forth in Section 5.1.26(c)(i)(2)
hereof, and (ii) such Affiliate IP License shall have been approved in writing
by Lender, which approval shall not be unreasonably withheld.
(e) With respect to any IP License, Adjacent Property IP License, Third Party IP
License or Affiliate IP License permitted hereunder, upon satisfaction of such
conditions as Lender shall impose with respect to its consent to any IP License,
or upon satisfaction of the conditions set forth in Section 5.1.26(b) hereof
with respect to any Adjacent Property IP License, or upon satisfaction of the
conditions set forth in Section 5.1.26(c) hereof with respect to any Third Party
IP License, or upon satisfaction of the conditions set forth in Section
5.1.26(d) hereof with respect to any Affiliate IP License, Lender, at the sole
cost and expense of Borrowers, shall execute and deliver to Borrowers (for the
benefit of the licensee or sublicensee, as applicable, under such IP License,
Adjacent Property IP License, Third Party IP License or Affiliate IP License, as
applicable), provided that Borrowers cause the applicable licensee or
sublicensee, as applicable, to also execute and deliver, a customary and
mutually acceptable non-disturbance and attornment agreement as reasonably
requested by IP Borrower.
Section 5.2. Negative Covenants. From the Closing Date until payment and
performance in full of all obligations of Borrowers under the Loan Documents or
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release of the Lien of the Mortgage in accordance with the terms of this
Agreement and the other Loan Documents, each Borrower covenants and agrees with
Lender that it will not do, directly or indirectly, any of the following:
5.2.1. Operation of the Properties; Liquor Management.
(a) Borrowers shall not, without Lender’s prior consent (which consent shall not
be unreasonably withheld, conditioned or delayed): (i) subject to Section 9.5.1
hereof, surrender, terminate or cancel any Management Agreement; provided, that
Borrowers may, without Lender’s consent, replace any Manager so long as the
replacement manager is a Qualified Manager pursuant to a Replacement Management
Agreement; (ii) reduce or consent to the reduction of the term of any Management
Agreement; (iii) increase or consent to the increase of the amount of any
charges or fees under any Management Agreement; or (iv) otherwise modify,
change, supplement, alter or amend, or waive or release any of its rights and
remedies under, any Management Agreement in any material respect.
(b) Following the occurrence and during the continuance of an Event of Default,
Borrowers shall not exercise any rights, make any decisions, grant any approvals
or otherwise take any action under any Management Agreement without the prior
consent of Lender, which consent may be withheld in Lender’s sole discretion.
(c) Hotel/Casino Borrower shall not, without Lender’s prior consent (which
consent shall not be unreasonably withheld, conditioned or delayed): (i) subject
to Section 9.5.2 hereof, surrender, terminate or cancel any Liquor Management
Agreement; provided, that Hotel/Casino Borrower may, without Lender’s consent,
replace the Liquor Manager so long as the replacement liquor manager is a
Qualified Liquor Manager pursuant to a Replacement Liquor Management Agreement;
(ii) reduce or consent to the reduction of the term of the Liquor Management
Agreement; (iii) increase or consent to the increase of the amount of any
charges or fees under the Liquor Management Agreement; or (iv) otherwise modify,
change, supplement, alter or amend, or waive or release any of its rights and
remedies under, any Liquor Management Agreement in any material respect.
(d) Following the occurrence and during the continuance of an Event of Default,
Hotel/Casino Borrower shall not exercise any rights, make any decisions, grant
any approvals or otherwise take any action under the Liquor Management Agreement
without the prior consent of Lender, which consent may be withheld in Lender’s
sole discretion.
5.2.2. Liens. No Borrower shall create, incur, assume or suffer to exist any
Lien on any portion of any Property or the IP or knowingly permit any such
action to be taken, except: (i) Permitted Encumbrances and Permitted IP
Encumbrances; (ii) Liens created by or permitted pursuant to the Loan Documents;
and (iii) Liens for Taxes or Other Charges not yet delinquent.
5.2.3. Dissolution. No Borrower shall (a) engage in any dissolution, liquidation
or consolidation or merger with or into any other business entity, (b) engage in
any business activity not related to the ownership and operation of its Property
or the IP, (c) transfer, lease or sell, in one transaction or any combination of
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assets or all or substantially all of the properties or assets of such Borrower
except to the extent permitted by the Loan Documents, or (d) modify, amend,
waive or terminate (i) its organizational documents in any material respect or
in any respect with regard to the provisions concerning any Borrower’s status as
a Special Purpose Entity, or (ii) its qualification and good standing in any
jurisdiction, in each case, without obtaining the prior consent of Lender. In
connection with the foregoing, Lender hereby acknowledges its consent to the
amendments to the organizational documents of each Borrower that were submitted
to Lender in connection with the creation of Third Mezzanine Borrower.
5.2.4. Change in Business. No Borrower shall enter into any line of business
other than the ownership and operation of its Property or the IP, or make any
material change in the scope or nature of its business objectives, purposes or
operations, or undertake or participate in a material manner in activities other
than the continuance of its present business.
5.2.5. Debt Cancellation. No Borrower shall cancel or otherwise forgive or
release any material claim or debt (other than termination of Leases in
accordance herewith) owed to such Borrower by any Person, except for adequate
consideration and in the ordinary course of such Borrower’s business.
5.2.6. Zoning. No Borrower shall initiate or consent to any zoning
reclassification of any portion of any Property or seek any variance under any
existing zoning ordinance or use or permit the use of any portion of any
Property in any manner that could result in such use becoming a non-conforming
use under any zoning ordinance or any other applicable land use law, rule or
regulation, in each case, without the prior consent of Lender not to be
unreasonably withheld.
5.2.7. Removal of FF&E. Except in the ordinary course of business, no Borrower
shall remove or transfer any material article of FF&E or other personal property
owned by any Borrower used in the operation of any Property unless the same is
replaced with substantially similar FF&E or is obsolete, without the prior
written consent of Lender in each instance, which consent shall not be
unreasonably withheld, conditioned or delayed. To the extent Lender’s prior
written approval is required pursuant to this Section 5.2.7, Lender shall
endeavor to respond to a request for Lender’s approval within five (5) Business
Days after Borrowers’ written request therefor, delivered together with any
documents or information required to be provided by Borrowers hereunder in
connection with Lender’s review of the proposed action or matter. Lender’s
approval of any action or matter requiring Lender’s consent under this
Section 5.2.7 shall be deemed to have been given if (i) a request for approval,
together with any documents or information required to be provided by Borrowers
hereunder in connection with Lender’s review of the proposed action or matter,
is submitted to Lender with a request for approval set forth in a written notice
that states clearly (in 14-point type or larger): “THIS IS A REQUEST FOR
APPROVAL AND IF LENDER DOES NOT RESPOND TO OR EXPRESSLY DENY THIS REQUEST FOR
APPROVAL IN WRITING WITHIN FIVE (5) BUSINESS DAYS, BORROWERS MAY DELIVER A
DEEMED APPROVAL NOTICE”, and Lender does not respond by approving such proposed
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such proposed action or matter within five (5) Business Days of Lender’s receipt
thereof, and (ii) after Lender’s failure to respond to the initial request for
approval of such proposed action or matter within the time period set forth in
the foregoing clause (i), Borrowers shall re-submit such request to Lender in a
written notice that states clearly (in 14-point type or larger): “THIS IS A
REQUEST FOR APPROVAL. APPROVAL WILL BE DEEMED GIVEN IF LENDER DOES NOT RESPOND
WITHIN FIVE (5) BUSINESS DAYS”, and Lender does not respond to such second
submission by approving such proposed action or matter or stating in reasonable
detail its objection thereto within five (5) Business Days of Lender’s receipt
of such second submission.
5.2.8. Principal Place of Business and Organization. No Borrower shall change
its principal place of business set forth in the introductory paragraph of this
Agreement without first giving Lender thirty (30) days prior notice. No Borrower
shall change the place of its organization as set forth in Section 4.1.28 hereof
without the consent of Lender, which consent shall not be unreasonably withheld.
Upon Lender’s request, Borrowers shall execute and deliver additional financing
statements, security agreements and other instruments which may be necessary to
effectively evidence or perfect Lender’s security interest in the Properties
and/or the IP as a result of such change of principal place of business or place
of organization.
5.2.9. ERISA. (a) Assuming that Lender is not, and is not lending the assets of,
an “employee benefit plan” as defined in Section 3(3) of ERISA, no Borrower
shall engage in any transaction which would cause any obligation, or action
taken or to be taken, hereunder (or the exercise by Lender of any of its rights
under the Notes, this Agreement or the other Loan Documents) to be a non-exempt
(under a statutory or administrative class exemption) prohibited transaction
under ERISA.
(b) Each Borrower shall deliver to Lender such certifications or other evidence
from time to time throughout the term of the Loan, as requested by Lender in its
reasonable discretion, that (i) such Borrower is not an “employee benefit plan”
as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA, or a
“governmental plan” within the meaning of Section 3(32) of ERISA; (ii) none of
the assets of such Borrower constitute “plan assets” within the meaning of
Section 3(3) of ERISA for purposes of any state law provisions regulating
investments of, or fiduciary obligations with respect to, governmental plans;
and (iii) one or more of the following circumstances is true:
(A) Equity interests in such Borrower are publicly offered securities, within
the meaning of 29 C.F.R. §2510.3 101(b)(2);
(B) Less than twenty five percent (25%) of each outstanding class of equity
interests in such Borrower is held by “benefit plan investors” within the
meaning of 29 C.F.R. §2510.3 101(f)(2); or
(C) Such Borrower qualifies as an “operating company”, a “venture capital
operating company” or a “real estate operating company” within the meaning of 29
C.F.R. §2510.3 101(c), (d) or (e).

 

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5.2.10. Transfers. (a) Borrowers acknowledge that Lender has examined and relied
on the experience of Borrowers and their general partners, members, principals
and (if any Borrower is a trust) beneficial owners, as applicable, in owning and
operating properties such as the Properties and in owning intellectual property
such as the IP, in agreeing to make the Loan, and will continue to rely on
Borrowers’ ownership of the Properties and the IP as a means of maintaining the
value of the Properties and the IP as security for repayment of the Debt and the
performance of the obligations contained in the Loan Documents. Borrowers
acknowledge that Lender has a valid interest in maintaining the value of the
Properties and the IP so as to ensure that, should Borrowers default in the
repayment of the Debt or the performance of the obligations contained in the
Loan Documents, Lender can recover the Debt by a sale of the Properties and the
IP.
Without the prior consent of Lender and except to the extent otherwise set forth
in this Section 5.2.10, Borrowers shall not, and shall not permit any Transfer
Restricted Party to, (i) sell, convey, mortgage, grant, bargain, encumber,
pledge, assign, license, grant options with respect to, or otherwise transfer or
dispose of (directly or indirectly, voluntarily or involuntarily, by operation
of law or otherwise, and whether or not for consideration or of record) any
Property or any part thereof or any legal or beneficial interest therein or any
IP or any part thereof or any legal or beneficial interest therein, or
(ii) permit a Sale or Pledge of any interest in any Transfer Restricted Party
(any of the actions in the foregoing clauses (i) or (ii), a “Transfer”), other
than, notwithstanding anything to the contrary contained in this Section 5.2.10,
(A) pursuant to Leases of space in the Improvements to tenants in accordance
with the provisions of Section 5.1.20 hereof, (B) the pledge of the membership
interests in each Borrower as collateral for the First Mezzanine Loan and, if
applicable, the exercise of remedies by First Mezzanine Lender, including,
without limitation, any Transfer of all or a portion of such membership
interests in connection with a foreclosure, strict foreclosure, public or
private sale or transfer in lieu of foreclosure under the First Mezzanine Loan
Documents, provided that any such exercise of remedies is performed in
accordance with and subject to the conditions and restrictions set forth in the
Intercreditor Agreement and as a condition precedent to any foreclosure, strict
foreclosure, public or private sale or transfer in lieu of foreclosure of such
membership interests the First Mezzanine Lender shall pay to Lender a transfer
fee in an amount equal to 1.00% of the sum of the Reduced Acquisition Loan
Outstanding Principal Balance and the Construction Loan Outstanding Principal
Balance, (C) the pledge of the membership interests in each First Mezzanine
Borrower as collateral for the Second Mezzanine Loan and, if applicable, the
exercise of remedies by Second Mezzanine Lender, including, without limitation,
any Transfer of all or a portion of such membership interests in connection with
a foreclosure, strict foreclosure, public or private sale or transfer in lieu of
foreclosure under the Second Mezzanine Loan Documents, provided that any such
exercise of remedies is performed in accordance with and subject to the
conditions and restrictions set forth in the Intercreditor Agreement and as a
condition precedent to any foreclosure, strict foreclosure, public or private
sale or transfer in lieu of foreclosure of such membership interests the Second
Mezzanine Lender shall pay to Lender a transfer fee in an amount equal to 1.00%
of the sum of the Reduced Acquisition Loan Outstanding Principal Balance and the
Construction Loan Outstanding Principal Balance, (D) the pledge of the
membership interests in each Second Mezzanine Borrower as collateral for the
Third Mezzanine Loan and, if applicable, the exercise of remedies by Third
Mezzanine Lender, including, without limitation, any Transfer of all or a
portion of such membership interests in connection with a foreclosure, strict
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Third Mezzanine Loan Documents, provided that any such exercise of remedies is
performed in accordance with and subject to the conditions and restrictions set
forth in the Intercreditor Agreement and as a condition precedent to any
foreclosure, strict foreclosure, public or private sale or transfer in lieu of
foreclosure of such membership interests the Third Mezzanine Lender shall pay to
Lender a transfer fee in an amount equal to 1.00% of the sum of the Reduced
Acquisition Loan Outstanding Principal Balance and the Construction Loan
Outstanding Principal Balance, (E) any Release Parcel Sale or an IP Sale, in
each instance in accordance with the applicable provisions of Section 2.5
hereof, (F) Intentionally Deleted, (G) any IP License or Adjacent Property IP
License granted in accordance with the provisions of Section 5.1.26 hereof,
(H) Permitted Encumbrances and Permitted IP Encumbrances, (I) the issuance of
new stock in, the merger or consolidation of, and/or the Sale or Pledge of the
stock in, any Publicly Traded Entity who owns a direct or indirect ownership
interest in any Transfer Restricted Party, (J) the transfer of indirect
ownership interests in any Borrower(s) in order to create one or more new
mezzanine borrowers for any New Mezzanine Loan as contemplated hereunder,
including, without limitation, the transfers of ownership interests which were
necessary to create Third Mezzanine Borrowers and the admission of a new member
in each of the Second Mezzanine Borrowers in connection with the creation of the
Third Mezzanine Borrowers, and (K) the transfer by deed of any applicable
Partial Release Parcel to a Subsidiary Transferee and the subsequent transfer of
all of the membership interests held by Adjacent Borrower in such Subsidiary
Transferee, in each instance in accordance with Section 2.5.1(f) hereof, as
applicable; provided, however, that in the case of each of the foregoing clauses
(A) — (K), such Transfer shall only be permitted hereunder if it does not
violate any Legal Requirements, including specifically, but without limitation,
any Gaming Laws, or suspend or terminate any liquor license applicable to a
Property.
(b) A Transfer shall include, but not be limited to, (i) an installment sales
agreement wherein any Borrower agrees to sell a Property or any part thereof or
the IP or any part thereof for a price to be paid in installments; (ii) an
agreement by any Borrower leasing all or a substantial part of a Property for
other than actual occupancy by a space tenant thereunder or a sale, assignment
or other transfer of, or the grant of a security interest in, any Borrower’s
right, title and interest in and to any Leases or any Rents; (iii) if a Transfer
Restricted Party is a corporation, any merger, consolidation or Sale or Pledge
of such corporation’s stock or the creation or issuance of new stock; (iv) if a
Transfer Restricted Party is a limited or general partnership or joint venture,
any merger or consolidation or the change, removal, resignation, admission or
addition of a general partner or the Sale or Pledge of the general partnership
interest of any general partner or any profits or proceeds relating to such
partnership interest, or the Sale or Pledge of limited partnership interests or
any profits or proceeds relating to such limited partnership interest or the
creation or issuance of new limited partnership interests; (v) if a Transfer
Restricted Party is a limited liability company, any merger or consolidation or
the change, removal, resignation, admission or addition of a managing member or
non-member manager (or if no managing member, any member) or the Sale or Pledge
of the membership interest of a managing member (or if no managing member, any
member) or any profits or proceeds relating to such membership interest, or the
Sale or Pledge of non-managing or managing membership interests or the creation
or issuance of new non-managing or managing membership interests; (vi) if a
Transfer Restricted Party is a trust or nominee trust, any merger, consolidation
or the Sale or Pledge of the legal or beneficial interest in a Transfer
Restricted Party or the creation or issuance of new legal or beneficial
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resignation of any Manager (including, without limitation, an Affiliated
Manager) other than in accordance with Section 5.1.22 hereof.
(c) Notwithstanding the provisions of this Section 5.2.10, so long as the
following Transfers do not violate any Legal Requirements in any instance,
including specifically, but without limitation, any Gaming Laws, or cause or
otherwise result in the suspension, termination and/or revocation of any Gaming
License, the Casino Component Lease or any liquor license applicable to a
Property, as applicable, the following Transfers may occur without the consent
of Lender or the payment of any transfer or other fee, excluding, however, any
Transfer of (i) any direct interest in any Borrower for so long as the First
Mezzanine Loan, the Second Mezzanine Loan or the Third Mezzanine Loan is
outstanding, and/or (ii) any direct interest in any First Mezzanine Borrower for
so long as the Second Mezzanine Loan or the Third Mezzanine Loan is outstanding,
and/or (iii) any direct interest in any Second Mezzanine Borrower for so long as
the Third Mezzanine Loan is outstanding:
(A) the Transfer of any direct or indirect interest in any Transfer Restricted
Party, provided that (1) no Event of Default, First Mezzanine Event of Default,
Second Mezzanine Event of Default or Third Mezzanine Event of Default has
occurred and is continuing, (2)(y) one or both Guarantors continue to Control,
directly or indirectly, each Borrower and HRHI, and (z) one or both Guarantors
own, directly or indirectly, at least a fifty-one percent (51%) economic
interest in each Borrower and in HRHI, (3) Lender receives (y) at least ten
(10) days prior written notice of any such voluntary Transfer and copies of the
documents transferring such interest, or (z) written notice of any such
involuntary Transfer and copies of the documents transferring such interest
within thirty (30) days following such involuntary Transfer, (4) if after such
Transfer any Person and its Affiliates collectively would own more than
forty-nine (49%) in the aggregate of the direct and/or indirect interests of any
Borrower and as of the Closing Date such Person and its Affiliates collectively
owned forty-nine percent (49%) or less in the aggregate of the direct and/or
indirect interests of any Borrower, Lender shall have received, prior to such
Transfer, an Additional Insolvency Opinion reasonably satisfactory to Lender and
the Rating Agencies and, if a Securitization has occurred, a confirmation in
writing from the Rating Agencies to the effect that such Transfer will not
result in a re-qualification, reduction or withdrawal of the then current rating
assigned to the Securities or any class thereof in any applicable
Securitization, and (5) Borrowers deliver to Lender a copy of any consents or
approvals required by any Governmental Authority, including specifically, but
without limitation, any Gaming Authority, in connection with such Transfer;
(B) the Transfer of any direct or indirect interest in any Transfer Restricted
Party to any other Person who is, as of the Closing Date, a holder of any direct
or indirect interest in any Transfer Restricted Party, provided that (1) no
Event of Default, First Mezzanine Event of Default, Second Mezzanine Event of
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Default has occurred and is continuing, (2)(y) one or both Guarantors continue
to Control, directly or indirectly, each Borrower and HRHI, and (z) one or both
Guarantors own, directly or indirectly, at least a fifty-one percent (51%)
economic interest in each Borrower and in HRHI, (3) Lender receives (y) at least
ten (10) days prior written notice of any such voluntary Transfer and copies of
the documents transferring such interest, or (z) written notice of any such
involuntary Transfer and copies of the documents transferring such interest
within thirty (30) days following such involuntary Transfer, and (4) Borrowers
deliver to Lender a copy of any consents or approvals required by any
Governmental Authority, including specifically, but without limitation, any
Gaming Authority, in connection with such Transfer;
(C) the Transfer of any direct or indirect interest in any Transfer Restricted
Party by inheritance, devise, bequest or operation of law upon the death of a
natural person who owned such interest, provided that (1) such Transfer is to a
non-minor member of the immediate family of the deceased holder of such interest
or a trust established for the benefit of one or more members of the immediate
family of the deceased holder of such interest, (2)(y) one or both Guarantors
continue to Control, directly or indirectly, each Borrower and HRHI, and (z) one
or both Guarantors own, directly or indirectly, at least a fifty-one percent
(51%) economic interest in each Borrower and in HRHI, (3) such Transfer shall
not result in a change of Control of the day-to-day operations of any of the
Properties, (4) Lender receives written notice of such Transfer and copies of
the documents transferring such interest not later than thirty (30) days
following such Transfer, (5) the legal and financial structure of each Borrower
and the other Transfer Restricted Parties, and the single purpose nature and
bankruptcy remoteness of each Borrower and the other Transfer Restricted
Parties, after such Transfer shall satisfy the applicable provisions of the Loan
Documents, including, without limitation, Section 4.1.30 hereof, (6) if after
such Transfer any Person and its Affiliates would collectively own more than
forty-nine (49%) in the aggregate of the direct and/or indirect interests of any
Borrower and as of the Closing Date such Person and its Affiliates collectively
owned forty-nine percent (49%) or less in the aggregate of the direct and/or
indirect interests of any Borrower, Lender shall have received an Additional
Insolvency Opinion reasonably satisfactory to Lender and the Rating Agencies
and, if a Securitization has occurred, a confirmation in writing from the Rating
Agencies to the effect that such Transfer will not result in a re-qualification,
reduction or withdrawal of the then current rating assigned to the Securities or
any class thereof in any applicable Securitization, and (7) Borrowers deliver to
Lender a copy of any consents or approvals required by any Governmental
Authority, including specifically, but without limitation, any Gaming Authority,
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(D) (1) the merger or consolidation of any Guarantor or any Constituent Member
of any Guarantor with or into any other Person, (2) the sale of any Guarantor or
substantially all of any Guarantor’s assets to any other Person, or (3) the
issuance of new stock or limited partnership or membership interests in, and/or
the Sale or Pledge of stock, limited partnership or membership interests in, any
Guarantor or any Constituent Member thereof (any of the occurrences in the
foregoing clauses (1), (2) or (3), a “Guarantor Transfer”); provided, that, in
each of the foregoing instances, whether or not the applicable Guarantor or the
applicable Constituent Member of a Guarantor is or is not a Publicly Traded
Company, (I) after giving effect to such Guarantor Transfer, when viewed both
individually and together with any prior Guarantor Transfers, (y) the
Guarantors, collectively, shall continue to satisfy the Net Worth Requirements,
and (z) at least one of the Guarantors shall be a Qualified Real Estate
Guarantor, (II) except if the applicable Guarantor or the applicable Constituent
Member of a Guarantor is a Publicly Traded Company, Lender receives at least ten
(10) days prior written notice of any such Guarantor Transfer, (III) if after
such Guarantor Transfer any Person and its Affiliates collectively would own
more than forty-nine (49%) in the aggregate of the direct and/or indirect
interests of any Borrower and as of the Closing Date such Person and its
Affiliates collectively owned forty-nine percent (49%) or less in the aggregate
of the direct and/or indirect interests of any Borrower, Lender shall have
received, prior to such Guarantor Transfer, an Additional Insolvency Opinion
reasonably satisfactory to Lender and the Rating Agencies and, if a
Securitization has occurred, a confirmation in writing from the Rating Agencies
to the effect that such Guarantor Transfer will not result in a
re-qualification, reduction or withdrawal of the then current rating assigned to
the Securities or any class thereof in any applicable Securitization, and (IV)
Borrowers deliver to Lender a copy of any consents or approvals required by any
Governmental Authority, including specifically, but without limitation, any
Gaming Authority, in connection with such Guarantor Transfer.
(d) With respect to any Transfer permitted under this Section 5.2.10 or
otherwise consented to by Lender, Borrower shall pay all fees and expenses
incurred by Lender in connection with such Transfer, including, without
limitation, the cost of any third party reports, reasonable legal fees and
expenses, Rating Agency fees and expenses and required legal opinions.
(e) Notwithstanding anything to the contrary set forth in this Agreement or in
any of the other Loan Documents, Borrowers expressly acknowledge and agree, on
behalf of themselves and the other Transfer Restricted Parties, that any
Transfer or Guarantor Transfer stated to be permitted hereunder or thereunder
shall only be permitted if it does not violate any Legal Requirements, including
specifically, but without limitation, any Gaming Laws.

 

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5.2.11. Morton Indemnification and PWR/RWB Escrow Agreement. Borrowers shall not
do, and Borrowers shall not permit any Affiliate to do, any of the following, in
each instance without the prior approval of Lender, which approval shall not be
unreasonably withheld: (a) modify, amend, waive any right under, or terminate
the Morton Indemnification or the PWR/RWB Escrow Agreement, other than any
ministerial, non-monetary amendment or modification; (b) make any claim or
otherwise exercise any rights or remedies under the Morton Indemnification or
the PWR/RWB Escrow Agreement; or (c) other than the funds released on the
Closing Date pursuant to the express terms of the PWR/RWB Escrow Agreement,
cause any funds escrowed under the PWR/RWB Escrow Agreement to be used for any
purpose other than the satisfaction of indemnification claims pursuant to the
Morton Indemnification until such time as the Morton Indemnification shall
expire by its terms. Subject to Lender’s reasonable approval, Borrowers shall
diligently pursue their rights and remedies under the Morton Indemnification and
the PWR/RWB Escrow Agreement, and following the occurrence and during the
continuance of an Event of Default, Lender shall have the right to pursue the
same on behalf of, and in the name of, any Borrower, and each Borrower hereby
appoints Lender its attorney-in-fact, coupled with an interest, to pursue the
same.
5.2.12. Distributions to Affiliates. Other than (a) the fees and expense
reimbursements payable to any Affiliated Manager pursuant to any Management
Agreement reasonably approved by Lender and (b) any monitoring fee due and
payable to the DLJMB Parties pursuant to the limited liability company agreement
of HR Holdings, no Borrower shall make any distributions to, or otherwise pay
any dividends or make any payments to, any Restricted Party, which payments to
Affiliated Managers and/or the DLJMB Parties, as and to the extent permitted
hereunder, may only be made when no Event of Default, First Mezzanine Event of
Default, Second Mezzanine Event of Default and/or Third Mezzanine Event of
Default shall have occurred and be continuing and only under the circumstances
and up to the limitations specifically provided under Section 7.6.2 and
Section 7.6.3 hereof.
ARTICLE VI.
INSURANCE; CASUALTY; CONDEMNATION; RESTORATION
Section 6.1. Insurance. (a) Borrowers shall obtain and maintain, or cause to be
maintained, insurance for each Borrower and each Property providing at least the
following coverages:
(i) comprehensive all risk insurance on the Improvements and the Personal
Property (including any Stored Materials) (A) in an amount equal to one hundred
percent (100%) of the “Full Replacement Cost,” which for purposes of this
Agreement shall mean actual replacement value (exclusive of costs of
excavations, foundations, underground utilities and footings) with a waiver of
depreciation; (B) containing an Agreed Amount endorsement with respect to the
Improvements and Personal Property waiving all co-insurance provisions;
(C) providing for no deductible in excess of Two Hundred Fifty Thousand Dollars
($250,000) for all such insurance coverage except that the deductible for
earthquake or windstorm insurance shall not exceed five percent (5%) of the
total value of the Properties and the deductible for flood insurance shall not
exceed Two Hundred Fifty Thousand Dollars

 

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($250,000); and (D) containing an “Ordinance or Law Coverage” or “Enforcement”
endorsement if any of the Improvements or the use of any of the Properties shall
at any time constitute legal non-conforming structures or uses. In addition,
Borrowers shall obtain: (x) if any portion of the Improvements is currently or
at any time in the future located in a federally designated “special flood
hazard area”, flood hazard insurance in an amount equal to the lesser of (1) the
Aggregate Outstanding Principal Balance or (2) the maximum amount of such
insurance available under the National Flood Insurance Act of 1968, the Flood
Disaster Protection Act of 1973 or the National Flood Insurance Reform Act of
1994, as each may be amended, or such greater amount as Lender shall reasonably
require; (y) earthquake insurance in a reasonable amount based on the maximum
probable loss and in form and substance reasonably satisfactory to Lender in the
event any Property is located in an area with a high degree of seismic activity;
and (z) windstorm insurance in amounts and in form and substance reasonably
satisfactory to Lender in the event windstorm coverage is excluded from the all
risk insurance coverage required under this subsection (i), provided that the
insurance pursuant to clauses (x), (y) and (z) hereof shall be on terms
consistent with the comprehensive all risk insurance policy required under this
subsection (i);
(ii) commercial general liability insurance against claims for personal injury,
bodily injury, death or property damage occurring upon, in or about any
Property, such insurance (A) to be on the so-called “occurrence” form with a
combined limit of not less than Two Million Dollars ($2,000,000) in the
aggregate and One Million Dollars ($1,000,000) per occurrence, with a deductible
not to exceed One Hundred Thousand Dollars ($100,000) (and, if on a blanket
policy, containing an “Aggregate Per Location” endorsement); (B) to continue at
not less than the aforesaid limit until required to be changed by Lender in
writing by reason of changed economic conditions making such protection
inadequate; and (C) to cover at least the following hazards: (1) premises and
operations; (2) products and completed operations on an “if any” basis;
(3) independent contractors; (4) blanket contractual liability for all legal
contracts; (5) contractual liability covering the indemnities contained in
Article 8 of the Mortgage to the extent the same is available; (6) owner’s and
contractor’s protective liability prior to the commencement and during the
performance of any portion of the Initial Renovations and/or the Project;
(7) owner’s contingent general liability prior to the commencement and during
the performance of any portion of the Initial Renovations and/or the Project;
and (8) dram shop coverage;
(iii) rental loss and/or business income interruption insurance (A) with Lender
named as loss payee; (B) covering all risks required to be covered by the
insurance provided for in Section 6.1(a)(i) above; (C) containing an extended
period of indemnity endorsement which provides that after the physical loss to
the Improvements and Personal Property with respect to the applicable Property
has been repaired, the continued loss of income will be insured until such
income either returns to the same level it was at prior to the loss, or the
expiration of six (6) months from the date that such Property is repaired or
replaced and operations are resumed, whichever first occurs, and notwithstanding
that the policy may expire prior to the end of such period; and (D) in an amount
equal to one hundred percent (100%) of the projected Gross Income from
Operations from each Property for a period of eighteen (18) months from the date
of such Casualty (assuming such Casualty had not occurred) and notwithstanding
that the policy may expire prior to the end of such period. The amount of such
business income insurance shall be determined prior to the date hereof and at
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each year thereafter based on Borrowers’ reasonable estimate of the Gross Income
from Operations from each Property for the succeeding eighteen (18) month
period. Provided that (y) no Event of Default shall have occurred and be
continuing, and (z) Lender has not elected (to the extent Lender has the right
to so elect under Section 6.4 hereof) to apply the Net Proceeds arising from the
Casualty giving rise to insurance proceeds under this Section 6.1(a)(iii) to the
Obligations in accordance with Section 6.4 hereof, all proceeds payable to
Lender under this Section 6.1(a)(iii) shall be deposited in the Cash Management
Account and applied in the manner set forth in Section 2.6.2(b) or 2.6.2(c)
hereof, as applicable, it being expressly acknowledged and agreed by Borrowers
that in the event that the circumstances in the foregoing clause (y) and/or (z)
have occurred (and, in the case of the foregoing clause (y), are continuing),
Lender shall apply all proceeds payable to Lender under this Section 6.1(a)(iii)
in accordance with the provisions of Section 2.4.3(c) hereof (and with respect
to the determination of the Exit Fee payable in connection therewith,
Section 2.8 hereof). Notwithstanding the foregoing, nothing herein contained
shall be deemed to relieve Borrowers of their obligations to pay the Obligations
secured by the Loan Documents on the respective dates of payment provided for in
this Agreement and the other Loan Documents except to the extent such amounts
are actually paid out of the proceeds of such business income insurance;
(iv) at all times during which structural construction, repairs or alterations
are being made with respect to the Improvements on the applicable Property,
including, without limitation, construction of the Initial Renovations and/or
the Project, and only if the property coverage form does not otherwise apply,
(A) contractor’s liability insurance covering claims not covered by or under the
terms or provisions of the above mentioned commercial general liability
insurance policy; and (B) the insurance provided for in subsection (i) above
written in a so-called builder’s risk completed value form (1) on a
non-reporting basis, (2) against all risks insured against pursuant to
subsection (i) above, (3) including permission to occupy such Property, and (4)
with an Agreed Amount endorsement waiving co-insurance provisions;
(v) worker’s compensation insurance with respect to any employees at any of the
Properties, as required by any Governmental Authority or Legal Requirement, and
employers practice liability insurance in an amount not less than One Million
Dollars ($1,000,000) per occurrence with a deductible not to exceed $350,000;
(vi) comprehensive boiler and machinery insurance, if applicable, in amounts as
shall be reasonably required by Lender on terms consistent with the commercial
property insurance policy required under subsection (i) above;
(vii) umbrella liability insurance in an amount not less than Two Hundred Sixty
Million Dollars ($260,000,000) per occurrence on terms consistent with the
commercial general liability insurance policy required under subsection (ii)
above;
(viii) motor vehicle liability coverage for all owned and non-owned vehicles,
including rented and leased vehicles containing minimum limits per occurrence of
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(ix) if a Property is or becomes a legal “non conforming” use, ordinance or law
coverage and insurance coverage to compensate for the cost of demolition or
rebuilding of the undamaged portion of such Property and the increased cost of
construction in amounts as reasonably requested by Lender;
(x) the commercial property, liability and business income insurance required
under Sections 6.1(a)(i), (ii) and (iii) above shall cover perils of terrorism
and acts of terrorism and Borrowers shall maintain commercial property,
liability and business income insurance for loss resulting from perils and acts
of terrorism on terms (including amounts) consistent with those required under
Sections 6.1(a)(i), (ii) and (iii) above at all times during the term of the
Loan (collectively, the “Terrorism Insurance”); provided, however, that
Borrowers shall only be required to maintain Terrorism Insurance in the amount
(the “Terrorism Cap”) that may be purchased by Borrowers at a cost not to exceed
(A) $1,300,000.00 per year until such time as Borrowers are required to carry
so-called builder’s risk coverage with respect to construction of the Project
pursuant to the terms of this Agreement, and (B) $3,900,000.00 per year at all
times following such time as Borrowers are required to carry so-called builder’s
risk coverage with respect to construction of the Project pursuant to the terms
of this Agreement;
(xi) crime coverage in an amount not less than (A) Two Million and No/100
Dollars ($2,000,000) until Substantial Completion of the Project (if the same
shall ever occur), and (B) Twenty-Five Million and No/100 Dollars ($25,000,000)
from and after Substantial Completion of the Project (if the same shall ever
occur), to protect against employee dishonesty, on- and off- premises money,
securities, computer and credit card fraud, robbery and safe burglary; and
(xii) upon sixty (60) days’ notice, such other reasonable insurance and in such
reasonable amounts as Lender from time to time may reasonably request against
such other insurable hazards which at the time are commonly insured against for
properties similar to the applicable Property located in or around the region in
which such Property is located.
(b) All insurance provided for in Section 6.1(a) hereof shall be obtained under
valid and enforceable policies (collectively, the “Policies” or in the singular,
the “Policy”), and shall be subject to the reasonable approval of Lender.
Lender’s approval of any insurance shall be deemed to have been given if (i) a
request for approval, together with a copy of the applicable proposed insurance
and any other documents and information reasonably requested by Lender in
writing in order to adequately review the same, is submitted to Lender with a
request for approval set forth in a written notice that states clearly (in
14-point type or larger): “THIS IS A REQUEST FOR APPROVAL AND IF LENDER DOES NOT
RESPOND TO OR EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN EIGHT
(8) DAYS, BORROWERS MAY DELIVER A DEEMED APPROVAL NOTICE”, and Lender does not
respond by approving such proposed insurance or stating in reasonable detail its
objections to such proposed insurance within eight (8) days of Lender’s receipt
thereof, and (ii) after Lender’s failure to respond to the initial request for
approval of such proposed insurance within the time period set forth in the
foregoing clause (i), Borrowers shall re-submit such request to Lender in a
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point type or larger): “THIS IS A REQUEST FOR APPROVAL. APPROVAL WILL BE DEEMED
GIVEN IF LENDER DOES NOT RESPOND WITHIN SEVEN (7) DAYS”, and Lender does not
respond to such second submission by approving such proposed insurance or
stating in reasonable detail its objection thereto within seven (7) days of
Lender’s receipt of such second submission. The Policies shall be issued by
financially sound and responsible insurance companies authorized to do business
in the State and having a claims paying ability rating of (i) “A-” or better
(and the equivalent thereof) by S&P and by (A) at least two (2) of the Rating
Agencies rating the Securities (provided that if S&P is rating the Securities,
than only by one additional Rating Agency rating the Securities, which shall be
Moody’s if they are rating the Securities), or (B) if only one Rating Agency is
rating the Securities, then only by such Rating Agency; (ii) if there are more
than one, but less than five, insurance companies collectively issuing the
Policies, (y) seventy-five percent (75%) or more of the insured amount shall
have a claims paying ability rating of “A” or better (and the equivalent
thereof) by S&P and by (A) at least two (2) of the Rating Agencies rating the
Securities (provided that if S&P is rating the Securities, than only by one
additional Rating Agency rating the Securities, which shall be Moody’s if
Moody’s is rating the Securities), or (B) if only one Rating Agency is rating
the Securities, then only by such Rating Agency, and (z) the remaining
twenty-five percent (25%) (or lesser remaining amount) of which shall have a
claims paying ability rating of “BBB” or better (and the equivalent thereof) by
S&P and by (A) at least two (2) of the Rating Agencies rating the Securities
(provided that if S&P is rating the Securities, than only by one additional
Rating Agency rating the Securities, which shall be Moody’s if Moody’s is rating
the Securities), or (B) if only one Rating Agency is rating the Securities, then
only by such Rating Agency, or (iii) if there are five or more insurance
companies collectively issuing the Policies, (y) sixty percent (60%) or more of
the insured amount shall have a claims paying ability rating of “A” or better
(and the equivalent thereof) by S&P and by (A) at least two (2) of the Rating
Agencies rating the Securities (provided that if S&P is rating the Securities,
than only by one additional Rating Agency rating the Securities, which shall be
Moody’s if Moody’s is rating the Securities), or (B) if only one Rating Agency
is rating the Securities, then only by such Rating Agency, and (z) the remaining
forty percent (40%) (or lesser remaining amount) of which shall have a claims
paying ability rating of “BBB” or better (and the equivalent thereof) by S&P and
by (A) at least two (2) of the Rating Agencies rating the Securities (provided
that if S&P is rating the Securities, than only by one additional Rating Agency
rating the Securities, which shall be Moody’s if Moody’s is rating the
Securities), or (B) if only one Rating Agency is rating the Securities, then
only by such Rating Agency, and shall also have a rating of “A X” or better by
AM Best’s. The Policies described in Section 6.1(a) hereof (other than those
strictly limited to liability protection) shall designate Lender as loss payee.
Not less than five (5) Business Days prior to the expiration dates of the
Policies theretofore furnished to Lender, certificates of insurance evidencing
the Policies reasonably satisfactory to Lender and accompanied by evidence
reasonably satisfactory to Lender of payment of the premiums due thereunder (the
“Insurance Premiums”), shall be delivered by Borrowers to Lender.
(c) Any blanket insurance Policy shall substantially fulfill the requirements
contained herein and shall otherwise provide the same protection as would a
separate Policy insuring only each Property in compliance with the provisions of
Section 6.1(a) hereof, and shall only be permitted so long as no Event of
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(d) All Policies provided for or contemplated by Section 6.1(a) hereof, except
for the Policy referenced in Section 6.1(a)(v) hereof, shall name the applicable
Borrower(s) as the insured and Lender as an additional insured, as its interests
may appear, and in the case of property damage, boiler and machinery, flood and
earthquake insurance, shall contain a standard non-contributing mortgagee clause
in favor of Lender providing that the loss thereunder shall be payable to
Lender.
(e) All property Policies provided for in Section 6.1 hereof shall contain
clauses or endorsements to the effect that:
(i) no act or negligence of any Borrower, or anyone acting for any Borrower, or
of any tenant or other occupant (including, without limitation, HRHI with
respect to the Hotel/Casino Property), or failure to comply with the provisions
of any Policy, which might otherwise result in a forfeiture of the insurance or
any part thereof, shall in any way affect the validity or enforceability of the
insurance insofar as Lender is concerned;
(ii) the Policies shall not be materially changed (other than to increase the
coverage provided thereby) or canceled without at least thirty (30) days’ notice
to Lender;
(iii) the issuers thereof shall give notice to Lender if the Policies have not
been renewed fifteen (15) days prior to their expiration; and
(iv) Lender shall not be liable for any Insurance Premiums thereon or subject to
any assessments thereunder.
(f) If at any time Lender is not in receipt of written evidence that all
Policies are in full force and effect, Lender shall have the right, upon two
(2) Business Days’ written notice to Borrowers, to take such reasonable action
as Lender deems necessary to protect its interest in any of the Properties,
including, without limitation, the obtaining of such insurance coverage as
Lender in its sole discretion deems appropriate. All premiums incurred by Lender
in connection with such action or in obtaining such insurance and keeping it in
effect shall be paid by Borrowers to Lender within ten (10) days after demand
and, until paid, shall be secured by the Mortgage and shall bear interest at the
Default Rate from the date of demand.
(g) Notwithstanding anything to the contrary set forth herein, proof of all
property coverages required under Section 6.1(a) hereof shall be on an Acord 28
Evidence of Property Form (2003/10 version) or on such other binding form as is
then generally used or is otherwise reasonably acceptable to Lender.
(h) Notwithstanding anything to the contrary set forth in this Agreement or the
other Loan Documents, Lender agrees that by funding the Original Acquisition
Loan on the Closing Date, the existing Policies and coverages covering the
Properties as of the Closing Date are satisfactory to Lender in all respects and
are deemed to fully comply with the requirements of this Agreement and the other
Loan Documents as of the Closing Date; provided, however, that the foregoing
shall not prevent Lender from insisting upon strict compliance with the
requirements of this Section 6.1 with respect to any future Policies or
coverage.

 

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Section 6.2. Casualty. If any Property shall be damaged or destroyed, in whole
or in part, by fire or other casualty (a “Casualty”), Borrowers shall give
prompt notice of such damage to Lender and shall promptly commence and
diligently prosecute the completion of the Restoration so that such Property
resembles, as nearly as possible, the condition such Property was in immediately
prior to such Casualty, with such alterations as may be reasonably approved by
Lender (to the extent such alterations are of a type that would require Lender’s
approval under Section 5.1.21 hereof) and otherwise in accordance with
Section 6.4 hereof, provided, that if (A) Lender is obligated to make Net
Proceeds available to Borrowers for purposes of Restoration in accordance with
Section 6.4 hereof, (B) Lender has received such Net Proceeds, and (C) Lender
has not made such Net Proceeds available to Borrowers, then Borrowers shall not
be required to repair and restore such Property unless and until such Net
Proceeds are made available to Borrowers. It is expressly understood, however,
that Borrowers shall not be obligated to restore such Property to the precise
condition of such Property prior to such Casualty provided such Property is
restored, to the extent practicable, to be of at least equal value and of
substantially the same character as prior to the Casualty. Borrowers shall pay
all costs of such Restoration whether or not such costs are covered by
insurance. Lender may, but shall not be obligated to make proof of loss if not
made promptly by any Borrower. In addition, Lender may participate in any
settlement discussions with any insurance companies (and shall approve any final
settlement) with respect to any Casualty in which the Net Proceeds or the costs
of completing the Restoration are equal to or greater than the Restoration
Threshold and the applicable Borrower shall deliver to Lender all instruments
reasonably required by Lender to permit such participation. In the event of a
Casualty in which the Net Proceeds and the costs of completing the Restoration
are each less than the Restoration Threshold, Borrowers may settle and adjust
such claim without Lender’s consent or participation.
Section 6.3. Condemnation. Borrowers shall promptly give Lender notice of the
actual or threatened commencement of any proceeding for the Condemnation of any
Property or any part thereof and shall deliver to Lender copies of any and all
papers served in connection with such proceedings. Lender may participate in any
such proceedings with respect to any Condemnation in which Borrowers’ reasonable
estimate (based on any statement of value submitted to the condemning authority
or any other reasonable evidence in Lender’s reasonable judgment) of the Net
Proceeds or the costs of completing the Restoration are equal to or greater than
the Restoration Threshold, and the applicable Borrower shall from time to time
deliver to Lender all instruments reasonably requested by it to permit such
participation. Borrowers shall, at their expense, diligently prosecute any such
proceedings, and shall, to the extent required hereunder, consult with Lender,
its attorneys and experts, and cooperate with them in the carrying on or defense
of any such proceedings. Notwithstanding any taking by any public or
quasi-public authority through Condemnation or otherwise (including, but not
limited to, any transfer made in lieu of or in anticipation of the exercise of
such taking), Borrowers shall continue to pay the Debt at the time and in the
manner provided for its payment in the Notes and in this Agreement and the Debt
shall not be reduced until any Award shall have been actually received and
applied by Lender, after the deduction of expenses of collection, to the
reduction or discharge of the Debt in accordance with the provisions of
Section 2.4.3(c) hereof (and with respect to the determination of the Exit Fee
payable in connection therewith, Section 2.8 hereof). Lender shall not be
limited to the interest paid on the Award by the condemning authority but shall
be entitled to receive out of the Award interest at the rate or rates provided
herein or in the Notes. If any Property or any portion thereof is taken by a
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shall promptly commence and diligently prosecute the Restoration of the
applicable Property and otherwise comply with the provisions of Section 6.4
hereof, provided, that if (A) Lender is obligated to make Net Proceeds available
to Borrowers for purposes of Restoration in accordance with Section 6.4 hereof,
(B) Lender has received such Net Proceeds, and (C) Lender has not made such Net
Proceeds available to Borrowers, then Borrowers shall not be obligated to repair
and restore such Property unless and until such Net Proceeds are made available
to Borrowers. If such Property is sold, through foreclosure or otherwise, prior
to the receipt by Lender of the Award, Lender shall have the right, whether or
not a deficiency judgment on either of the Notes shall have been sought,
recovered or denied, to receive the Award, or a portion thereof sufficient to
pay the Debt (and all components thereof, including, without limitation, the
Exit Fee).
Section 6.4. Restoration. The following provisions shall apply in connection
with the Restoration of any Property:
(a) If the Net Proceeds shall be less than the Restoration Threshold and the
costs of completing the Restoration shall be less than the Restoration
Threshold, provided that no Event of Default shall have occurred and be
continuing, the Net Proceeds will be disbursed by Lender to the Borrower owning
such Property upon receipt and Borrowers shall diligently proceed to Restore the
applicable Property.
(b) If (i) the Net Proceeds shall be equal to or greater than the Restoration
Threshold and/or the costs of completing the Restoration shall be equal to or
greater than the Restoration Threshold, but (ii) the Net Proceeds shall be less
than the Restoration Value Threshold, provided that no Event of Default shall
have occurred and be continuing, the Net Proceeds will be held by Lender and
Lender shall make the Net Proceeds available for the Restoration of the
applicable Property in accordance with the provisions of this Section 6.4,
provided that the conditions set forth in Section 6.4(c)(i)(A), (B), (D), (F),
(G) and (H) hereof are met.
(c) If (i) the Net Proceeds shall be equal to or greater than the Restoration
Threshold and/or the costs of completing the Restoration shall be equal to or
greater than the Restoration Threshold, and (ii) the Net Proceeds shall equal or
exceed the Restoration Value Threshold, the Net Proceeds shall be held by Lender
and Lender shall have the right, in its sole discretion, to (A) apply the Net
Proceeds to the Debt in accordance with the provisions of Section 6.4(d) hereof,
or (B) make the Net Proceeds available for the Restoration of such Property in
accordance with the provisions of this Section 6.4. The term “Net Proceeds” for
purposes of this Agreement shall mean: (i) the net amount of all insurance
proceeds received by Lender pursuant to Sections 6.1(a)(i), (iv), (vi), (ix) and
(x) hereof as a result of such damage or destruction, after deduction of
Lender’s reasonable costs and expenses (including, but not limited to,
reasonable counsel fees), if any, in collecting same (“Insurance Proceeds”), or
(ii) the net amount of the Award, after deduction of Lender’s reasonable costs
and expenses (including, but not limited to, reasonable counsel fees), if any,
in collecting same (“Condemnation Proceeds”), whichever the case may be.

 

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(i) Subject to the provisions of Section 6.4(a) above, the Net Proceeds shall be
made available to the applicable Borrower for Restoration of its Property upon
the approval of Lender in its reasonable discretion that the following
conditions are met:
(A) no Event of Default shall have occurred and be continuing;
(B) (1) in the event the Net Proceeds are Insurance Proceeds, less than thirty
percent (30%) of the total floor area of the Improvements on such Property has
been damaged, destroyed or rendered unusable as a result of such Casualty, or
(2) in the event the Net Proceeds are Condemnation Proceeds, less than fifteen
percent (15%) of the land constituting such Property is taken, and such land is
located along the perimeter or periphery of such Property, and no portion of the
Improvements is located on such land;
(C) Intentionally Deleted;
(D) the applicable Borrower shall commence the Restoration as soon as reasonably
practicable (but in no event later than sixty (60) days after such Casualty or
Condemnation, whichever the case may be, occurs, (subject to Excusable Delay and
delays in the claims adjustments process outside the control of Borrowers)) and
shall diligently pursue the same to satisfactory completion;
(E) Lender shall be satisfied that any operating deficits, including all
scheduled payments of principal and interest under the Notes, which will be
incurred with respect to such Property as a result of the occurrence of any such
Casualty or Condemnation, whichever the case may be, will be covered out of the
aggregate amount of (1) the Net Proceeds, (2) the insurance coverage referred to
in Section 6.1(a)(iii) hereof, if applicable, and (3) other funds of Borrowers;
(F) Lender shall be satisfied that the Restoration will be completed on or
before the earliest to occur of (1) three (3) months prior to the Maturity Date
(as may be extended), (2) with respect to the Hotel/Casino Property, the
earliest date required for such completion under the terms of the Casino
Component Lease, (3) such time as may be required under applicable Legal
Requirements, or (4) the expiration of the insured period provided by the
insurance coverage referred to in Section 6.1(a)(iii) hereof;
(G) such Property and the use thereof after the Restoration will be in
compliance in all material respects with and permitted under all applicable
Legal Requirements;
(H) the Restoration shall be done and completed by the applicable Borrower in an
expeditious and diligent fashion and in compliance with all applicable Legal
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(I) such Casualty or Condemnation, as applicable, does not result in the loss of
access to any portion of such Property or the related Improvements;
(J) Lender shall be satisfied that the Debt Yield, after giving effect to the
Restoration, shall be equal to or greater than the Debt Yield immediately prior
to such Casualty or Condemnation, as applicable, calculated based on the most
recent financial statements delivered to Lender pursuant to Section 5.1.11
hereof prior to such Casualty or Condemnation;
(K) Lender shall be satisfied that the Loan-to-Value Ratio, after giving effect
to the Restoration, shall be equal to or less than the Loan-to-Value-Ratio
immediately prior to such Casualty or Condemnation;
(L) the applicable Borrower shall deliver, or cause to be delivered, to Lender a
signed detailed budget approved in writing by such Borrower’s architect or
engineer stating the entire cost of completing the Restoration of such Property,
which budget shall be reasonably acceptable to Lender; and
(M) the Net Proceeds together with any cash or cash equivalent deposited by
Borrowers with Lender are sufficient in Lender’s reasonable discretion to cover
the cost of the Restoration of such Property.
(ii) In the event the Net Proceeds are equal to or exceed the Restoration
Threshold, the Net Proceeds shall be paid directly to Lender and shall be held
by Lender in an interest-bearing account and, until disbursed in accordance with
the provisions of this Section 6.4(c), shall constitute additional security for
the Debt and the Other Obligations. The Net Proceeds shall be disbursed by
Lender to, or as directed by, the applicable Borrower from time to time during
the course of the Restoration, upon receipt of evidence reasonably satisfactory
to Lender that (A) all materials installed and work and labor performed (except
to the extent that they are to be paid for out of the requested disbursement) in
connection with the Restoration have been paid for in full, and (B) there exist
no notices of pendency, stop orders, mechanic’s or materialman’s liens or
notices of intention to file same, or any other liens or encumbrances of any
nature whatsoever on the affected Property arising out of the Restoration which
have not either been fully bonded to the satisfaction of Lender and discharged
of record or in the alternative fully insured to the satisfaction of Lender by
the Title Company, except for any Lien then being contested pursuant to, and in
accordance with, Section 3.6(b) of the Mortgage.
(iii) In the event the Net Proceeds are equal to or exceed the Restoration
Threshold, all plans and specifications required in connection with the
Restoration shall be subject to prior reasonable approval by Lender and by an
independent consulting engineer selected by Lender (the “Casualty Consultant”).
Lender shall have the use of the plans and specifications and all permits,
licenses and approvals required or obtained in connection with the Restoration.
The identity of the contractors, subcontractors and materialmen engaged in the
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under which they have been engaged, shall be subject to prior review and
reasonable acceptance by Lender and the Casualty Consultant. All out-of-pocket
costs and expenses incurred by Lender in connection with making the Net Proceeds
available for the Restoration, including, without limitation, reasonable counsel
fees and disbursements and the Casualty Consultant’s fees, shall be paid by
Borrowers.
(iv) In the event the Net Proceeds are equal to or exceed the Restoration
Threshold, in no event shall Lender be obligated to make disbursements of the
Net Proceeds in excess of an amount equal to the costs actually incurred from
time to time for work in place as part of the Restoration, as certified by the
Casualty Consultant, minus the Casualty Retainage. The term “Casualty Retainage”
shall mean, as to each contractor, subcontractor or materialman engaged in the
Restoration, an amount equal to ten percent (10%) of the costs actually incurred
for work in place as part of the Restoration, as certified by the Casualty
Consultant, until the Restoration has been completed. The Casualty Retainage
shall be reduced to five percent (5%) of the costs incurred for work upon
receipt by Lender of reasonably satisfactory evidence that fifty percent (50%)
of the Restoration has been completed. The Casualty Retainage shall in no event,
and notwithstanding anything to the contrary set forth above in this
Section 6.4(c), be less than the amount actually held back by the applicable
Borrower from contractors, subcontractors and materialmen engaged in the
Restoration. The Casualty Retainage shall not be released until the Casualty
Consultant certifies to Lender that the Restoration has been completed in
accordance with the provisions of this Section 6.4(c) and that all approvals
necessary to permit the re-occupancy and use of the affected Property have been
obtained from all appropriate Governmental Authorities and quasi-governmental
authorities, and Lender receives evidence reasonably satisfactory to Lender that
the costs of the Restoration have been paid in full or will be paid in full out
of the Casualty Retainage; provided, however, that Lender will release the
portion of the Casualty Retainage being held with respect to any contractor,
subcontractor or materialman engaged in the Restoration as of the date upon
which the Casualty Consultant certifies to Lender that such contractor,
subcontractor or materialman has satisfactorily completed all work and has
supplied all materials in accordance with the provisions of such contractor’s,
subcontractor’s or materialman’s contract, such contractor, subcontractor or
materialman delivers the lien waivers (if the value of the applicable contract
exceeds $175,000.00) and evidence of payment in full of all sums due to such
contractor, subcontractor or materialman as may be reasonably requested by
Lender or by the Title Company, and Lender receives an endorsement to the
applicable Title Insurance Policy insuring the continued priority of the Lien of
the Mortgage and evidence of payment of any premium payable for such
endorsement. If required by Lender, the release of any such portion of the
Casualty Retainage shall be approved by the surety company, if any, which has
issued a payment or performance bond with respect to such contractor,
subcontractor or materialman.
(v) Lender shall not be obligated to make disbursements of the Net Proceeds more
frequently than once every calendar month.
(vi) In the event the Net Proceeds are equal to or exceed the Restoration
Threshold, if at any time the Net Proceeds or the undisbursed balance thereof
shall not, in the good faith opinion of Lender in consultation with the Casualty
Consultant, be sufficient to pay in full the balance of the costs which are
estimated by the Casualty Consultant to be incurred in connection with the
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deficiency (the “Net Proceeds Deficiency”) with Lender before any further
disbursement of the Net Proceeds shall be made. The Net Proceeds Deficiency
deposited with Lender shall be held by Lender and shall be disbursed for costs
actually incurred in connection with the Restoration on the same conditions
applicable to the disbursement of the Net Proceeds, and until so disbursed
pursuant to this Section 6.4(c) shall constitute additional security for the
Debt and the Other Obligations.
(vii) The excess, if any, of the Net Proceeds and the remaining balance, if any,
of the Net Proceeds Deficiency deposited with Lender after the Casualty
Consultant certifies to Lender that the Restoration has been completed in
accordance with the provisions of this Section 6.4(c), and the receipt by Lender
of evidence reasonably satisfactory to Lender that all costs incurred in
connection with the Restoration have been paid in full, shall be applied by
Lender to repayment of the Debt in accordance with Section 2.4.3(c) hereof (with
the determination of the Exit Fee payable in connection therewith being
determined in accordance with the provisions of Section 2.8 hereof).
(d) All Net Proceeds not required to be made available for the Restoration may
be retained and applied by Lender in accordance with Section 2.4.3(c) hereof
(with the determination of the Exit Fee payable in connection therewith being
determined in accordance with the provisions of Section 2.8 hereof).
Notwithstanding anything to the contrary contained herein, if Lender is
obligated under this Agreement to disburse the Net Proceeds to Borrowers for
Restoration, and if Lender fails to do so, then any obligation of Borrowers to
restore or repair such Property under the Loan Documents shall not apply until
such Net Proceeds have been disbursed to Borrowers.
(e) In the event of foreclosure of the Mortgage with respect to any Property, or
other transfer of title to any Property in extinguishment in whole or in part of
the Debt, all right, title and interest of Borrowers in and to the Policies that
are not blanket Policies then in force concerning such Property and all proceeds
payable thereunder shall thereupon vest in the purchaser at such foreclosure or
Lender or other transferee in the event of such other transfer of title.
ARTICLE VII.
RESERVE FUNDS
Section 7.1. Working Capital Reserve Fund.
7.1.1. Deposits to Working Capital Reserve Account. As of the date hereof,
Borrowers have deposited with Lender the amount of $7,000,000 to be held by
Lender as additional collateral for the Loan and to be applied at Borrowers’
direction in accordance with the terms of this Section 7.1. Additionally, from
time to time during the term of the Loan, pursuant to Sections 2.6.2(b)(xv),
2.6.2(c)(xv) and/or 7.4.3, certain additional amounts may be deposited with
Lender with respect to working capital. All amounts so deposited with respect to
working capital with Lender shall hereinafter be referred to as the “Working
Capital Reserve Fund” and the account in which such amount is held shall
hereinafter be referred to as the “Working Capital Reserve Account”.

 

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7.1.2. Withdrawals from Working Capital Reserve Account. Provided that no Event
of Default shall have occurred and be continuing, Borrowers shall have the right
from time to time to request a disbursement of funds from the Working Capital
Reserve Account for Operating Expenses, Extraordinary Expenses, Capital
Expenses, Project Costs, Debt Service, debt service on the First Mezzanine Loan
(but not any Accrual Amounts), debt service on the Second Mezzanine Loan (but
not any Accrual Amounts), debt service on the Third Mezzanine Loan (but not any
Accrual Amounts), Exit Fees, fees due in connection with any Letter of Credit
facilities utilized to post Letters of Credit to be provided hereunder from and
after the date hereof or any other fees or amounts required to be paid to Lender
hereunder in each case without the requirement for Lender approval of any of the
foregoing (which request may be made electronically in a manner and to a
recipient acceptable to Lender); provided, however, that in no event shall funds
on deposit in the Working Capital Reserve Account be disbursed for the
distribution to, or otherwise to pay any dividends to or make any payments to,
any Restricted Party, subject to Section 5.2.12 hereof. Within thirty (30) days
following the date of any withdrawal from the Working Capital Reserve Account,
Borrowers shall provide an accounting to Lender of all funds so withdrawn from
the Working Capital Reserve Account and the application thereof (without regard
to whether such funds were withdrawn by Borrowers or, in accordance with the
penultimate sentence of this Section 7.1.2, DLJ Guarantor), which certification
shall be accompanied by an Officer’s Certificate certifying that such accounting
represents a true, correct and complete accounting of the application of such
funds (it being acknowledged and agreed that in the instance any funds from the
Working Capital Reserve Account were disbursed at DLJ Guarantor’s request in
accordance with the terms of the penultimate sentence of this Section 7.1.2,
then in such instance the Officer’s Certificate shall also be signed by a duly
authorized officer or manager of DLJ Guarantor). Without limiting any other
provisions set forth herein, in the event Borrowers shall fail to provide any
such accounting (and accompanying Officer’s Certificate) or in the event such
accounting shall disclose that Borrowers (or, as applicable, DLJ Guarantor) have
failed to apply such funds to permitted costs in accordance with this
Section 7.1, neither Borrowers nor DLJ Guarantor shall be entitled to any
further advances from the Working Capital Reserve Account if, within fifteen
(15) days after receipt of notice from Lender of any such failure, Borrowers
(or, as applicable, DLJ Guarantor) do not remedy the same. Notwithstanding
anything to the contrary set forth herein, Borrowers hereby acknowledge and
agree that DLJ Guarantor may request disbursement of amounts specified in this
Section 7.1.2 and that in such instance Lender shall be entitled to make such
disbursements to DLJ Guarantor in lieu of any Borrower (and Borrowers hereby
irrevocably waive any claims that may arise as a result of or in connection with
any disbursement to DLJ Guarantor in accordance with the terms of this
sentence). Borrowers further acknowledge and agree that Lender may condition any
such disbursement to DLJ Guarantor upon Borrowers’ written acknowledgment that
Borrowers waive any claims that may arise as a result of or in connection with
any disbursement to DLJ Guarantor in accordance with the terms of this sentence.
Section 7.2. Tax and Insurance Escrow Fund. Borrowers shall pay to Lender on
each Payment Date (a) one twelfth of the Taxes that Lender estimates will be
payable during the next ensuing twelve (12) months in order to accumulate with
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such Taxes at least fifteen (15) days prior to their respective due dates, and
(b) one twelfth of the Insurance Premiums that Lender estimates will be payable
for the renewal of the coverage afforded by the Policies upon the expiration
thereof in order to accumulate with Lender sufficient funds to pay all such
Insurance Premiums at least fifteen (15) days prior to the expiration of the
Policies (said amounts to be deposited pursuant to clauses (a) and (b) above,
being hereinafter called the “Tax and Insurance Escrow Fund”). Lender will apply
the Tax and Insurance Escrow Fund to payments of Taxes and Insurance Premiums
required to be made by Borrowers pursuant to Section 5.1.2 hereof and under the
Mortgage. In making any payment relating to the Tax and Insurance Escrow Fund,
Lender may do so according to any bill, statement or estimate procured from the
appropriate public office (with respect to Taxes) or insurer or agent (with
respect to Insurance Premiums), without inquiry into the accuracy of such bill,
statement or estimate or into the validity of any tax, assessment, sale,
forfeiture, tax lien or title or claim thereof. If the amount of the Tax and
Insurance Escrow Fund shall exceed the amounts due for Taxes and Insurance
Premiums pursuant to Section 5.1.2 hereof, Lender shall, in its sole discretion,
return any excess to Borrowers or credit such excess against future payments to
be made to the Tax and Insurance Escrow Fund. To the extent sufficient amounts
have been deposited into the Tax and Insurance Fund with Lender in compliance
with this Section 7.2, it shall not be an Event of Default if the Insurance
Premiums and/or the Taxes are not paid due to Lender’s failure to apply such
amounts to the payment of the Insurance Premiums and the Taxes on the respective
dates on which each are due provided that Borrowers have not impeded Lender’s
attempt to pay such Insurance Premiums or Taxes. Any amount remaining in the Tax
and Insurance Escrow Fund after the Debt has been paid in full shall be returned
to Borrowers. In allocating such excess, Lender may deal with the Person shown
on the records of Lender to be the owner of each of the Properties. If at any
time Lender reasonably determines that the Tax and Insurance Escrow Fund is not
or will not be sufficient to pay Taxes and Insurance Premiums by the dates set
forth in clauses (a) and (b) above, Lender shall notify Borrowers of such
determination and Borrowers shall increase their monthly payments to Lender by
the amount that Lender reasonably estimates is sufficient to make up the
deficiency at least fifteen (15) days prior to the due date of the Taxes and/or
fifteen (15) days prior to expiration of the Policies, as the case may be.
Section 7.3. Replacements and Replacement Reserve.
7.3.1. Replacement Reserve Fund. Borrowers shall pay to Lender on each Payment
Date an amount equal to three percent (3%) of the Gross Income from Operations
of the Hotel/Casino Property for the immediately preceding calendar month, to be
applied in accordance with this Agreement to the costs of FF&E Expenditures and
FF&E Expenditures Work required to be made to the Hotel/Casino Property during
the calendar year (collectively, the “Replacements”). Amounts so deposited shall
hereinafter be referred to as Borrowers’ “Replacement Reserve Fund” and the
account in which such amounts are held shall hereinafter be referred to as
Borrowers’ “Replacement Reserve Account”.
7.3.2. Disbursements from Replacement Reserve Account. So long as no Event of
Default shall have occurred and be continuing, Lender shall make disbursements
from the Replacement Reserve Fund as requested by Borrowers and reasonably
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withheld or delayed, no more frequently than once in any thirty (30) day period
and of no less than Five Thousand Dollars ($5,000) per disbursement (or a lesser
amount if the total amount in the Replacement Reserve Account at such time is
less than Five Thousand Dollars ($5,000)), upon delivery by Borrowers of
Lender’s or Servicer’s standard form of draw request specifying the Replacements
to be paid for on a Property-by-Property basis and accompanied by copies of paid
invoices for or invoices to be paid with the amounts requested and, if required
by Lender for requests in excess of One Hundred Seventy-Five Thousand Dollars
($175,000) for a single item, lien waivers and releases from all parties
furnishing materials and/or services in connection with the requested payment.
Lender may require an inspection of the applicable Property at Borrowers’
expense prior to making a monthly disbursement in order to verify completion of
replacements and repairs of items in excess of Two Hundred Thousand Dollars
($200,000) for which reimbursement is sought. Lender shall cause any
disbursement from the Replacement Reserve Fund to be made within five
(5) Business Days after receipt of Borrowers’ request and all required
documentation provided that such request is reasonably approved by Lender.
7.3.3. Balance in the Replacement Reserve Account. The insufficiency of any
balance in the Replacement Reserve Account shall not relieve Borrowers from
their obligation to fulfill all preservation and maintenance covenants in the
Loan Documents.
Section 7.4. Interest Reserve Fund.
7.4.1. Deposits to Interest Reserve Account. As of the date hereof, Borrowers
have deposited with Lender the amount of $1,002,235.00, resulting in a total
amount on deposit in the Interest Reserve Account of $10,672,081.54 to be held
by Lender as additional collateral for the Loan and to be applied in accordance
with the terms of this Agreement to the payment of interest due hereunder,
subject to Section 7.8(a). Additionally, from time to time during the term of
the Loan, pursuant to Sections 2.6.2(h), 3.23, 7.5.5, 7.7.2 (to the extent
amounts withdrawn under Section 7.7.2 relate to advances with respect to
“Pre-Opening Funds” and “Property Reimbursement Funds” (each as determined by
Lender), which advances will be applied to the Interest Reserve Account in
accordance with the terms hereof) and/or 7.7.3, certain additional amounts may
be deposited with Lender with respect to the Interest Reserve Fund. All amounts
so deposited with Lender shall hereinafter be referred to as Borrowers’
“Interest Reserve Fund” and the account in which such amounts are held shall
hereinafter be referred to as Borrowers’ “Interest Reserve Account.”
7.4.2. Withdrawals from Interest Reserve Account. Provided that no Event of
Default shall have occurred and be continuing, if on any Payment Date the funds
available in the Cash Management Account are insufficient to pay the Reduced
Acquisition Loan Monthly Interest Payment, the Construction Loan Monthly
Interest Payment, the First Mezzanine Applicable Interest Payment, the Second
Mezzanine Applicable Interest Payment and/or the Third Mezzanine Applicable
Interest Payment due on such Payment Date after satisfying all items with a
higher priority pursuant to Section 2.6.2 hereof, Lender shall automatically,
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obtaining the approval of, any Borrower or any other Person, and without any
Borrower’s request, apply a portion of the Interest Reserve Fund then on deposit
to the payment of the Reduced Acquisition Loan Monthly Interest Payment, the
Construction Loan Monthly Interest Payment, the First Mezzanine Applicable
Interest Payment, the Second Mezzanine Applicable Interest Payment and/or the
Third Mezzanine Applicable Interest Payment or the portion of any of the
foregoing for which funds in the Cash Management Account are insufficient as
aforesaid, as applicable, and the Interest Reserve Fund shall be reduced by an
equal amount (provided that notwithstanding anything to the contrary set forth
herein, no funds on deposit in the Interest Reserve Account shall be applied to
the payment of any Accrual Amounts). Borrowers expressly acknowledge and agree
that no disbursements from the Interest Reserve Fund shall be made at any time
during which an Event of Default has occurred and is continuing. Notwithstanding
the foregoing, Borrowers expressly acknowledge and agree that in the event that
on any day on which a Reduced Acquisition Loan Monthly Interest Payment and/or a
Construction Loan Monthly Interest Payment is/are due and payable (a) an Event
of Default has occurred and is continuing, Borrowers shall remain liable for the
payment of all Reduced Acquisition Loan Monthly Interest Payments and
Construction Loan Monthly Interest Payments as and when due, First Mezzanine
Borrowers shall remain liable for the payment of all First Mezzanine Applicable
Interest Payments as and when due, Second Mezzanine Borrowers shall remain
liable for the payment of all Second Mezzanine Applicable Interest Payments as
and when due, and Third Mezzanine Borrowers shall remain liable for the payment
of all Third Mezzanine Applicable Interest Payments as and when due, or (b) the
amount of such Reduced Acquisition Loan Monthly Interest Payment, Construction
Loan Monthly Interest Payment, First Mezzanine Applicable Interest Payment,
Second Mezzanine Applicable Interest Payment and/or Third Mezzanine Applicable
Interest Payment exceeds the Interest Reserve Fund then on deposit, Borrowers,
First Mezzanine Borrowers and Second Mezzanine Borrowers, as applicable, shall
remain liable for the difference between such Reduced Acquisition Loan Monthly
Interest Payment, Construction Loan Monthly Interest Payment, First Mezzanine
Applicable Interest Payment, Second Mezzanine Applicable Interest Payment and/or
Third Mezzanine Applicable Interest Payment, as applicable, and the Interest
Reserve Fund then on deposit, such difference to be due and payable at the time
the Reduced Acquisition Loan Monthly Interest Payment, the Construction Loan
Monthly Interest Payment, the First Mezzanine Applicable Interest Payment, the
Second Mezzanine Applicable Interest Payment and the Third Mezzanine Applicable
Interest Payment are due and payable. Borrowers shall have the right, but not
the obligation, to apply amounts on deposit in the Working Capital Reserve Fund
with respect to any such difference or to make payments on account of any such
difference with additional equity provided by Borrowers. Lender acknowledges
that if Lender is obligated to apply Interest Reserve Funds to the payment of
any Reduced Acquisition Loan Monthly Interest Payment and/or Construction Loan
Monthly Interest Payment pursuant to this Section 7.4.2, then the failure of
Borrowers to pay such Reduced Acquisition Loan Monthly Interest Payment and/or
Construction Loan Monthly Interest Payment to the extent of such Interest
Reserve Fund shall not be deemed an Event of Default.
7.4.3. Remaining Interest Reserve Fund. Upon the satisfaction of the following
conditions: (a) no Event of Default, First Mezzanine Event of Default, Second

 

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Mezzanine Event of Default or Third Mezzanine Event of Default shall have
occurred and be continuing, (b) the later to occur of (i) Substantial Completion
and (ii) the Loan having been extended in February 9, 2011 in accordance with
Section 2.7.3(b) hereof and (c) the Properties having achieved and maintained a
Debt Service Coverage Ratio of 1.25 to 1:00 for the immediately preceding six
(6) consecutive calendar months as reasonably determined by Lender, any funds
remaining in the Interest Reserve Fund shall be deposited into the Working
Capital Reserve Fund until the amount on deposit therein equals $7,000,000 and
thereafter into the General Reserve Fund.
Section 7.5. Initial Renovation Reserve Fund.
7.5.1. Status of Initial Renovation Reserve Fund. The current balance on deposit
in the Initial Renovation Reserve Fund is $958,319.10 and is being held by
Lender as additional collateral for the Loan for the payment of those initial
renovations to the Properties identified on Schedule XIII attached hereto and
made a part hereof, as the same may be modified from time to time with Lender’s
reasonable approval (the “Initial Renovations”). Additionally, pursuant to
Section 7.5.2 hereof, an additional deposit may hereafter be made with Lender to
be used for the payment of the Initial Renovations. All of the foregoing amounts
so deposited or hereafter deposited shall hereinafter be referred to as the
“Initial Renovation Reserve Fund” and the account in which such amounts are held
shall hereinafter be referred to as the “Initial Renovation Reserve Account.”
7.5.2. Withdrawals from Initial Renovation Reserve Fund.
(a) Lender shall make disbursements from the Initial Renovation Reserve Fund for
Initial Renovation Costs incurred by any Borrower upon satisfaction by Borrowers
of each of the following conditions with respect to each such disbursement:
(i) such disbursement is for Initial Renovation Costs (A) contemplated by the
Initial Renovations Budget, or (B) reasonably approved by Lender;
(ii) prior to commencing any Initial Renovations that consist of constructing or
demolishing any improvements, (A) Lender shall have approved, which approval
shall not be unreasonably withheld, (1) the architect and the architect’s
contract, if any, relating thereto, (2) the construction manager and the
construction management agreement, if any, relating thereto, (3) the general
contractor and the general contract, if any, relating thereto, (4) all Major
Contracts and Major Contractors (except relating to such Initial Renovations
rather than the Project), if any, relating thereto, (5) the plans and
specifications for such Initial Renovations, if any, and (6) a construction
progress schedule reflecting the anticipated dates of completion of specified
subcategories of the Initial Renovations as set forth in the Initial Renovations
Budget; and (B) Borrowers shall have obtained Payment and Performance Bonds
covering each Major Contractor performing such Initial Renovations; provided,
however, that Lender shall, at Borrowers’ request, review the financial
statements of any such Major Contractor and reasonably consider a request by
Borrowers either (A) not to require a Payment and Performance Bond with respect
to such Major Contractor, or (B) to accept, in lieu of a Payment and Performance
Bond with respect to such Major Contractor, a “Subguard Policy” issued by Zurich
North America,

 

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together with a financial interest endorsement, all in form and content
reasonably acceptable to Lender and subject to limits acceptable to Lender in
its sole and absolute discretion;
(iii) Borrowers shall submit Lender’s or Servicer’s standard form of draw
request for payment to Lender at least ten (10) Business Days prior to the date
on which Borrowers request such payment be made, which request shall specify the
Initial Renovation Costs to be paid on a Property-by-Property basis and shall be
accompanied by copies of invoices for the amounts requested;
(iv) on the date such request is received by Lender and on the date such payment
is to be made, no Event of Default shall exist and remain uncured;
(v) all representations and warranties made by Borrowers and/or Guarantors in
the Loan Documents or otherwise made by or on behalf of Borrowers and/or
Guarantors in connection therewith or after the date thereof shall have been
true and correct in all material respects on the date on which made and shall
continue to be true and correct in all material respects on the date of such
disbursement (except to the extent of changes in circumstances or conditions
which are not otherwise prohibited by this Agreement);
(vi) Lender shall have received:
(1) an Officer’s Certificate (A) containing a description of the Initial
Renovation Costs to be funded by such disbursement, (B) stating that all Initial
Renovation Costs to be funded by the requested disbursement have been completed
in a good and workmanlike manner and in accordance in all material respects with
all applicable Legal Requirements, (C) identifying each Person that supplied
materials or labor in connection with the Initial Renovation Costs to be funded
by the requested disbursement, (D) stating that each such Person has been paid
in full or will be paid in full upon such disbursement, (E) stating that the
Initial Renovation Costs to be funded have not been the subject of a previous
disbursement, (F) stating that all previous disbursements of Initial Renovation
Reserve Funds have been used to pay or reimburse Borrowers for the previously
identified Initial Renovation Costs, and (G) stating that, as of the date of
such Officer’s Certificate, no Event of Default has occurred and is continuing
and all representations and warranties made by Borrowers and/or Guarantors in
the Loan Documents or otherwise made by or on behalf of Borrowers and/or
Guarantors in connection therewith or after the date thereof were true and
correct in all material respects on the date on which made and continue to be
true and correct in all material respects on the date of such Officer’s
Certificate (except to the extent of changes in circumstances or conditions
which are not otherwise prohibited by this Agreement);
(2) a copy of any license, permit or other approval by any Governmental
Authority necessary to permit the commencement and/or completion of the Initial
Renovations to be funded or reimbursed by the requested disbursement and not
previously delivered to Lender;
(3) if required by Lender for requests in excess of One Hundred Seventy-Five
Thousand Dollars ($175,000.00) for a single item, lien waivers or other

 

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evidence of payment satisfactory to Lender and releases from all parties
furnishing materials and/or services in connection with the requested payment;
(4) such other evidence as Lender shall reasonably request to demonstrate that
the Initial Renovations to be funded by the requested disbursement have been
completed;
(5) payment by Borrowers of all fees and expenses required by this Agreement, to
the extent then due and payable, including, without limitation, (i) any fees and
expenses referred to in Section 10.13 hereof then due and payable, (ii) any
reasonable fees and expenses then due and payable to the Construction
Consultant, (iii) any Unused Advance Fee then due and payable, (iv) any
Administrative Agent Fee then due and payable, and/or (v) any title premiums
and/or other title charges then due and payable;
(6) at Borrowers’ expense, a search of the public records that, subject to
Section 3.11 hereof and the Permitted Encumbrances, discloses no conditional
sales contracts, chattel mortgages, leases of personalty, financing statements
or title retention agreements which affect any of the Properties; and
(7) Lender shall have received evidence reasonably satisfactory to Lender that
Borrowers have obtained all Policies required by Section 6.1 hereof in
connection with the construction of the Initial Renovations, to the extent not
previously delivered to Lender;
(vii) Construction Consultant shall have reasonably determined that, following
the making of the requested disbursement, there shall be sufficient sums
remaining in the Initial Renovation Reserve Fund to complete all of the Initial
Renovations, it being understood and agreed by Borrowers that, in the event that
Construction Consultant shall reasonably determine that there are not sufficient
sums remaining in the Initial Renovation Reserve Fund to complete all of the
Initial Renovations in accordance with the Initial Renovations Budget (any such
insufficiency, an “Initial Renovations Shortfall”), Lender shall not make any
further disbursements from the Initial Renovations Reserve Fund until Borrowers
have done either one or a combination of the following in an aggregate amount
equal to such Initial Renovations Shortfall: (A) delivered to Lender evidence
satisfactory to Lender in its reasonable discretion that Borrowers or one or
more Affiliates thereof have previously expended cash to satisfy Initial
Renovation Costs included on the Initial Renovations Budget in an amount at
least equal to such Initial Renovations Shortfall, and/or (B) delivered to
Lender for deposit in the Initial Renovations Reserve Account an amount equal to
such Initial Renovations Shortfall, which amount shall thereafter constitute a
portion of the Initial Renovations Reserve Fund for all purposes under this
Agreement;
(viii) Construction Consultant shall have reasonably approved the requested
disbursement, it being expressly agreed by Lender that Lender shall diligently
pursue obtaining Construction Consultant’s response within a commercially
reasonable time period following any such request which includes all the
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(ix) Borrowers shall retain Retainage with respect to each contract or
subcontract relating to the Initial Renovations as provided herein with respect
to the Project.
Lender shall make disbursements as requested by Borrowers not more frequently
than once in any thirty (30) day period and in a minimum amount of no less than
five thousand dollars ($5,000.00) per disbursement (or a lesser amount if the
total amount in the Initial Renovation Reserve Account is less than Five
Thousand Dollars ($5,000), in which case only one disbursement of the amount
remaining in the account shall be made);
(b) Nothing in this Section 7.5.2 shall (i) make Lender responsible for
performing or completing any Initial Renovations; (ii) require Lender to expend
funds in addition to the Initial Renovation Reserve Fund to complete any Initial
Renovations; (iii) obligate Lender to proceed with any Initial Renovations; or
(iv) obligate Lender to demand from any Borrower additional sums to complete any
Initial Renovations.
(c) Each Borrower shall permit Lender and Lender’s agents and representatives
(including Lender’s engineer, architect or inspector) or third parties to enter
onto such Borrower’s Property during normal business hours (subject to the
rights of tenants under their Leases) to inspect the progress of any Initial
Renovations and all materials being used in connection therewith and to examine
all plans and shop drawings relating to such Initial Renovations. Each Borrower
shall cause all contractors and subcontractors to cooperate with Lender or
Lender’s representatives or such other Persons described above in connection
with inspections described in this Section 7.5.2(c).
(d) If a requested disbursement will exceed $200,000.00, Lender may require an
inspection of the applicable Property at Borrowers’ expense prior to making a
disbursement from the Initial Renovation Reserve Fund in order to verify
completion of the Initial Renovations for which reimbursement is sought. Lender
may require that such inspection be conducted by an appropriate independent
qualified professional selected by Lender and may require a certificate of
completion by an independent qualified professional architect acceptable to
Lender prior to the disbursement from the Initial Renovation Reserve Fund.
Borrowers shall pay the expense of the inspection as required hereunder, whether
such inspection is conducted by Lender or by an independent qualified
professional architect.
(e) In addition to any insurance required under the Loan Documents, Borrowers
shall provide or cause to be provided worker’s compensation insurance, builder’s
risk, and public liability insurance and other insurance to the extent required
under applicable law in connection with any Initial Renovations. All such
policies shall be in form and amount reasonably satisfactory to Lender.
7.5.3. Intentionally Deleted.
7.5.4. Balance in the Initial Renovation Reserve Account. The insufficiency of
any balance in the Initial Renovation Reserve Account shall not relieve
Borrowers from their obligation to fulfill all preservation and maintenance
covenants in the Loan Documents.

 

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7.5.5. Release of Initial Renovation Funds. Upon completion of the Initial
Renovations and the payment of all costs in connection therewith, all as
reasonably determined by the Construction Consultant, and provided that no Event
of Default shall have occurred and be continuing, Lender shall deposit any and
all amounts remaining on deposit in the Initial Renovation Reserve Account into
the Interest Reserve Account, provided that in the event that the aggregate
Additional Interest Reserve Contributions deposited into the Interest Reserve
Account under the provisions of this sentence and/or any other provisions of
this Agreement total $8,000,000, then all such amounts (or all such remaining
amounts, as the case may be) shall instead be deposited into the General Reserve
Fund.
Section 7.6. General Reserve Fund.
7.6.1. Deposits to General Reserve Account. From time to time during the term of
the Loan, pursuant to Sections 2.6.2(b)(xv), 2.6.2(c)(xv), 2.6.2(h), 2.4.3(g),
3.23, 7.4.3, 7.5.5 and/or 7.7.3 hereof, certain amounts may be deposited with
Lender for the purpose of establishing a general reserve fund for the purposes
described in this Section 7.6. All amounts so deposited with Lender shall
hereinafter be referred to as the “General Reserve Fund” and the account in
which such amount is held shall hereinafter be referred to as the “General
Reserve Account.”
7.6.2. Withdrawals from General Reserve Account. Borrower shall have the right
from time to time to request a disbursement of funds from the General Reserve
Account for the following purposes:
(a) provided that no monetary Default, Event of Default or First Mezzanine Event
of Default shall have occurred and be continuing, prior to Borrowers’
satisfaction of the Excess Cash Termination Condition, (i) for the payment to
Borrowers, HRHI and/or HR Holdings for the purposes of permitting such parties
to pay federal and state income tax obligations with respect to income allocated
to them from the Properties and/or the IP (but only for so long as any
particular Property or portion thereof or any particular portion of the IP
remains as security for the Loan); provided, however, that in no event shall the
aggregate amount of the General Reserve Fund used for the purposes of this
clause (i) during the entire term of the Loan exceed three million dollars
($3,000,000.00), (ii) for the payment of cost over-runs in connection with the
construction of the Project, as reasonably approved by Lender to the extent
required under Section 3.15 hereof, (iii) for Operating Expenses, Extraordinary
Expenses, Capital Expenses, Project Costs, Debt Service, debt service on the
First Mezzanine Loan (but not any Accrual Amounts, except as and to the extent
specifically provided in Sections 7.6.2(b) and 7.6.3 below)), debt service on
the Second Mezzanine Loan (but not any Accrual Amounts, except as and to the
extent specifically provided in Sections 7.6.2(b) and 7.6.3 below) and debt
service on the Third Mezzanine Loan (but not any Accrual Amounts, except as and
to the extent specifically provided in Sections 7.6.2(b) and 7.6.3 below), Exit
Fees, or any other fees or amounts required to be paid to Lender hereunder (it
being acknowledged and agreed that notwithstanding the occurrence and
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Default Borrowers shall be permitted to apply funds on deposit in the General
Reserve Account to the payment of Debt Service, Exit Fee and/or other amounts
required to be paid to Lender hereunder in the event there is otherwise
insufficient funds available to fund the same in any Account), and Lender shall
approve or withhold the funding of any such amounts in its reasonable discretion
(provided that Lender approval shall not be required for Borrower to apply
amounts to Debt Service, debt service on the First Mezzanine Loan (but not any
Accrual Amounts), debt service on the Second Mezzanine Loan (but not any Accrual
Amounts) and debt service on the Third Mezzanine Loan (but not any Accrual
Amounts) in accordance with the provisions of this clause (a), in the event the
balance in the Interest Reserve Account is then zero) ; provided, however, that
in no event shall funds on deposit in the General Reserve Account be disbursed
for the distribution to, or otherwise to pay any dividends to or make any
payments to, any Restricted Party, subject to Section 5.2.12 hereof;
(b) from and after the date on which Borrowers have satisfied the Excess Cash
Termination Condition and provided (i) no Event of Default shall have occurred
and is then continuing and (ii) the Properties have achieved and maintained a
Debt Service Coverage Ratio of 1.20 to 1.00 for the immediately preceding two
(2) consecutive calendar quarters, in addition to the purposes set forth in the
immediately preceding clause (a), amounts on deposit in the General Reserve
Account may also be disbursed at Borrowers’ direction and in Borrowers’ sole
discretion for the following purposes:
(1) the Excess Requested Funds (which shall be no less than 75% of the amounts
Borrowers have directed to be disbursed under this Section 7.6.2(b)) shall be
applied (A) first, to the Reduced Acquisition Loan Outstanding Principal Balance
until the Reduced Acquisition Loan Outstanding Principal Balance is equal to
zero, and (B) second, to the Construction Loan Outstanding Principal Balance
until the Construction Loan Outstanding Principal Balance is equal to zero (it
being understood and agreed that a portion of all funds described in this
Section 7.6.2(b)(1) shall be applied to the Exit Fee and any related Breakage
Costs payable in connection with any such prepayment, with the balance of such
funds being applied to the Loan as set forth above); and
(2) the Section 7.6.2 Accrual/Equity Funds (as defined below) (which shall in no
event exceed 25% of the amounts Borrower has directed to be disbursed under this
Section 7.6.2(b)), shall be applied as follows: (A) in the event such amounts
are to be disbursed at any time after the Payment Date occurring in November,
2011, the same shall be applied first to the payment of any First Mezzanine
Initial Accrual Amount until such amounts are paid in full, then to the payment
of any Second Mezzanine Subsequent Accrual Amount until such amounts are paid in
full and then to the payment of any Third Mezzanine Subsequent Accrual Amount
until such amounts are paid in full, with the balance of such amounts being paid
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with the following clause (B); and (B) in all other instances, such amounts
shall be paid to the DLJMB Parties (1) on account of the additional equity
invested by such parties as of the date hereof and any preferred return due to
be paid thereon pursuant to the terms and provisions of the HR Holdings limited
liability company agreement as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time and related documents
and/or (2) on account of the monitoring fee due and payable to the DLJMB Parties
pursuant to the terms and provisions of the HR Holdings limited liability
company agreement; provided that without limiting any other provisions set forth
herein, no disbursements shall be made under this Section 7.6.2(b)(2) in the
event (x) the Second Mezzanine Loan and Third Mezzanine Loan are not then in
Current Pay Status, it being acknowledged and agreed that in the instance in
which the Second Mezzanine Loan and Third Mezzanine Loan are not then in Current
Pay Status any amounts specified in sub-clause (B) of this Section 7.6.2(b)(2)
as being paid to the DLJMB Parties shall instead be held in a separate
sub-account of the General Reserve Account as additional security for the Loan
and shall not be distributed (other than upon the application of the same by
Lender following the occurrence and continuance of an Event of Default) until
such time as the Second Mezzanine Loan and Third Mezzanine Loan are in Current
Pay Status, and at any time at which the Second Mezzanine Loan and Third
Mezzanine Loan are in Current Pay Status all such amounts shall be applied first
to the First Mezzanine Initial Accrual Amount, then to the Second Mezzanine
Subsequent Accrual Amount and then to the Third Mezzanine Subsequent Accrual
Amount in accordance with subclause (A) of this Section 7.6.2(b)(2) before being
paid to the DLJMB Parties in accordance with the provisions of subclause (B) of
this Section 7.6.2(b)(2) (and no such amounts shall be applied in accordance
with said clauses (A) or (B) in the event and to the extent any such
disbursement would cause the aggregate amounts disbursed under the Twenty-Five
Percent Distribution Provisions (as defined below) to exceed $35,000,000 and in
such instance all funds in excess of such $35,000,000 cap shall be released from
the sub-account established under this clause (x) and deposited into the General
Reserve Account for application in accordance with the terms hereof), (y) a
First Mezzanine Event of Default, Second Mezzanine Event of Default or Third
Mezzanine Event of Default shall have occurred and is then continuing or (z) to
the extent any such disbursement would cause the aggregate amounts disbursed
under the Twenty-Five Percent Distribution Provisions to exceed $35,000,000.
As used herein, the term (a) “Excess Requested Funds” shall mean a portion of
any funds on deposit in the General Reserve Fund that Borrowers are entitled to
direct and actually direct to be applied in accordance with the provisions of
this Section 7.6.2(b), which amount shall equal the difference between the total
amount Borrowers have so directed to be applied and the related Section 7.6.2(b)
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Funds and (b) “Section 7.6.2(b) Accrual/Equity Funds” shall mean an amount equal
to the lesser of (i) 25% of the total amounts Borrowers are entitled to direct
and actually direct to be applied in accordance with the provisions of this
Section 7.6.2(b) and (ii) the amount that when added to any prior amounts
applied under this Section 7.6.2(b)(2) and/or under Section 7.6.3(b) below (such
provisions, collectively, the “Twenty-Five Percent Distribution Provisions”)
would cause the aggregate amount of funds disbursed pursuant to the Twenty-Five
Percent Distribution Provisions to equal $35,000,000.
Notwithstanding anything to the contrary set forth herein, Lender shall make
disbursements as requested by Borrowers not more frequently than once in any
thirty (30) day period and in a minimum amount of no less than five thousand
dollars ($5,000.00) per disbursement (or a lesser amount if the total amount in
the General Reserve Account is less than Five Thousand Dollars ($5,000), in
which case only one disbursement of the amount remaining in the account shall be
made).
7.6.3. Application of Excess Funds to Loan. In the event the amounts on deposit
in the General Reserve Account less (1) any amounts deposited into the IP
Subaccount in accordance with the terms of Section 7.6.4, (2) any amounts on
deposit in the Excess IP Subaccount, (3) any amounts held in a sub-account
described in sub-clause (x) of either Section 7.6.2(b)(2) or Section 7.6.3(b)
and (4) any amounts that Borrower has requested to be disbursed pursuant to the
provisions of Section 7.6.2 (and with respect to which Borrower is entitled to
receive such a disbursement) shall at any time exceed $20,000,000.00 (such
amount, the “General Reserve Cap”), then at Lender’s election the funds on
deposit in the General Reserve Account in excess of the General Reserve Cap
shall be applied as follows:
(a) the Excess Lender Applied Funds (as defined below) (which shall be no less
than 75% of the amounts Lender has elected to apply in accordance with the
provision of this Section 7.6.3) shall be applied (A) first, to the Reduced
Acquisition Loan Outstanding Principal Balance until the Reduced Acquisition
Loan Outstanding Principal Balance is equal to zero, and (B) second, to the
Construction Loan Outstanding Principal Balance until the Construction Loan
Outstanding Principal Balance is equal to zero (it being understood and agreed
that a portion of all funds described in this Section 7.6.3(a) shall be applied
to the Exit Fee and any related Breakage Costs payable in connection with any
such prepayment, with the balance of such funds being applied to the Loan as set
forth above); and
(b) In the event that as of the date Lender so elects to apply the funds on
deposit in excess of the General Reserve Cap in accordance with the provisions
of the preceding clause (a) and this clause (b) (such date, the “applicable
determination date”), the Properties shall have achieved and maintained a Debt
Service Coverage Ratio of at least 1.20 to 1.00 for the immediately preceding
two (2) fiscal quarters, then the Section 7.6.3 Equity/Accrual Funds (as defined
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the amounts Lender elects to apply in accordance with the provisions of this
Section 7.6.3) shall be applied as follows: (i) in the event such amounts are to
be disbursed at any time after the Payment Date occurring in November, 2011, the
same shall be applied first to the payment of any First Mezzanine Initial
Accrual Amount until such amounts are paid in full, then to the payment of any
Second Mezzanine Subsequent Accrual Amount until such amounts are paid in full
and then to the payment of any Third Mezzanine Subsequent Accrual Amount until
such amounts are paid in full, with the balance of such amounts being paid to
the applicable DLJMB Parties in accordance with the following clause (ii) and
(ii) in all other instances, such amounts shall be disbursed to the DLJMB
Parties (aa) on account of the additional equity invested by such parties as of
the date hereof and any preferred return due to be paid thereon pursuant to the
terms and provisions of the HR Holdings limited liability company agreement as
the same may be amended, restated, replaced, supplemented or otherwise modified
from time to time and related documents and/or (bb) on account of the monitoring
fee due and payable to the DLJMB Parties pursuant to the terms and provisions of
the HR Holdings limited liability company agreement, provided that without
limiting any other provisions set forth herein, no disbursements shall be made
under this Section 7.6.3(b) in the event (x) the Second Mezzanine Loan and Third
Mezzanine Loan are not then in Current Pay Status, it being acknowledged and
agreed that in the instance in which the Second Mezzanine Loan and Third
Mezzanine Loan are not in Current Pay Status any amounts specified in sub-clause
(ii) of this Section 7.6.3 as being paid to the DLJMB Parties shall instead be
held in a separate sub-account of the General Reserve Account as additional
security for the Loan and shall not be distributed (other than upon the
application of the same by Lender following the occurrence and continuance of an
Event of Default) until such time as the Second Mezzanine Loan and Third
Mezzanine Loan are in Current Pay Status, and at any time at which the Second
Mezzanine Loan and Third Mezzanine Loan are in Current Pay Status all such
amounts shall be applied first to the First Mezzanine Initial Accrual Amount,
then to the Second Mezzanine Subsequent Accrual Amount and then to the Third
Mezzanine Subsequent Accrual Amount in accordance with sub-clause (i) of this
Section 7.6.3(b) before being paid to the DLJMB Parties in accordance with the
provisions of sub-clause (ii) of this Section 7.6.3 (and no such amounts shall
be applied in accordance with said clauses (i) or (ii) in the event and to the
extent any such disbursement would cause the aggregate amounts disbursed under
the Twenty-Five Percent Distribution Provisions to exceed $35,000,000 and in
such instance all funds in excess of such $35,000,000 cap shall be released from
the sub-account established under this clause (x) and deposited into the General
Reserve Account for application in accordance with the terms hereof), (y) a
First Mezzanine Event of Default, Second Mezzanine Event of Default or Third
Mezzanine Event of Default shall have occurred and is then continuing or (z) and
to the extent any such disbursement would cause the aggregate amounts disbursed
under the Twenty-Five Percent Distribution Provisions to exceed $35,000,000.
Notwithstanding the foregoing, (A) in the event that as of the applicable
determination date, the Properties have not achieved and maintained a Debt
Service Coverage Ratio of at least 1.20 to 1.00 for the immediately preceding
two (2) fiscal quarters, all Section 7.6.3 Equity/Accrual Funds shall be held as
additional collateral for the Loan in a subaccount of the General Reserve
Account (the “Section 7.6.3

 

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Equity/Accrual Subaccount”) and shall not be available for distribution except
in connection with any application of the same by Lender following the
occurrence and during the continuance of an Event of Default or as otherwise set
forth in this Section 7.6.3; it being acknowledged and agreed that in the event
the Properties shall (y) achieve and maintain such Debt Service Coverage Ratio
at any time within the twelve (12) month period commencing on the applicable
determination date, then provided that no Event of Default, First Mezzanine
Event of Default, Second Mezzanine Event of Default or Third Mezzanine Event of
Default shall have occurred and is then continuing all such funds shall be
immediately applied in accordance with the foregoing provisions of sub-clauses
(i) and (ii) this Section 7.6.3(b) or (z) not achieve and maintain such Debt
Service Coverage Ratio at any time within the twelve (12) month period
commencing on the applicable determination date, such funds shall be deemed to
be Excess Lender Applied Funds and as such at Lender’s election all of such
amounts may be applied to the repayment of the Loan as set forth in Section
7.6.3(a) above. Notwithstanding anything to the contrary set forth herein, the
amounts disbursed under the Twenty-Five Percent Distribution Provisions shall
not exceed $35,000,000 in the aggregate and in the event the same at any time
equal $35,000,000 any funds on deposit in the Section 7.6.3 Equity/Accrual
Subaccount shall be deemed to be Excess Lender Applied Funds and as such at
Lender’s election all of such amounts may be applied to the repayment of the
Loan in accordance with the provisions of Section 7.6.3(a) above.
As used in this Section 7.6.3, the term (a) “Excess Lender Applied Funds” shall
mean a portion of any funds on deposit in the IP Subaccount that Lender elects
to apply in accordance with the provisions of this 7.6.3, which funds shall be
in an amount equal to the difference between the total amount Lender has elected
to apply in accordance with the provisions of this Section 7.6.3. less the
Section 7.6.3 Accrual/Equity Funds an (b) “Section 7.6.3 Accrual/Equity Funds”
shall mean an amount equal to the lesser of (i) 25% of the total amounts Lender
elects to apply in accordance with the provisions of this Section 7.6.3 and
(ii) that when added to any prior amounts applied under the Twenty-Five Percent
Distribution Provisions would cause the aggregate funds distributed pursuant to
the Twenty-Five Percent Distribution Provisions to exceed $35,000,000.
7.6.4. IP Subaccount. Upon the occurrence of any transaction that results in
Excess IP Release Proceeds, Lender shall establish a subaccount of the General
Reserve Account into which any IP Subaccount Funds resultant from such
transaction shall be deposited (such subaccount, the “IP Subaccount”). All funds
on deposit in the IP Subaccount shall constitute additional collateral for the
Loan. Notwithstanding anything to the contrary set forth herein, from and after
the date on which any IP Subaccount Funds are deposited into the IP Subaccount,
half of any and all disbursements made from the General Reserve Account under
Section 7.6.2 shall be funded from the IP Subaccount until the IP Subaccount
Funds on deposit in the IP Subaccount are reduced to zero, with the balance of
any such disbursements being made from funds otherwise on deposit in the General
Reserve Account. In the event funds are disbursed from the IP Subaccount to fund
any distribution under any of the Twenty-Five Percent Distribution Provisions,
then such funds shall be deemed to have been advanced under said Twenty Five
Percent Distributions for all purposes hereunder.

 

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Section 7.7. Construction Loan Reserve Fund.
7.7.1. Deposits to Construction Loan Reserve Account. On or about November 30,
2007, The Third Mezzanine Construction Funds were deposited with Lender in the
Construction Loan Reserve Account. Additionally, (a) contemporaneous with the
closing of any sale-leaseback transaction pursuant to which the applicable
Borrower(s) will enter into any Preapproved Equipment Lease with PDS Gaming (as
any such lease is disclosed in Schedule V(B) hereto), Borrowers shall deposit
into the Construction Loan Reserve Account the gross sale proceeds payable in
connection with the sale-leaseback transaction of which such lease forms a part
and (b) Borrowers shall deposit amounts into the Construction Loan Reserve Fund
in accordance with Section 2.7.3(a), 2.7.3(b), 2.7.3(c), 2.7.3(d), 3.12 and
Section 3.21 hereof. In addition, the Remaining Construction Loan Advance may be
advanced into the Construction Loan Reserve Account in accordance with
Section 3.1(d) hereof. All amounts so deposited with Lender shall hereinafter be
referred to as the “Construction Loan Reserve Fund” and the account in which
such amount is held shall hereinafter be referred to as the “Construction Loan
Reserve Account.”
7.7.2. Withdrawals from Construction Loan Reserve Account. The funds in the
Construction Loan Reserve Account shall be disbursed subject to, and in
accordance with, the provisions of Article III hereof, it being understood and
agreed that in any instance hereunder in which Borrowers would be entitled to a
Construction Loan Advance from the Construction Loan, Borrowers may elect, at
their option, to receive a disbursement from the Construction Loan Reserve
Account in lieu thereof, to the extent of the funds then on deposit therein.
7.7.3. Release of Construction Loan Reserve Fund. Any remaining portion of the
Construction Loan Reserve Fund representing funds on deposit from the Required
Equity Amount shall be deposited into the Interest Reserve Account provided that
at such time as the Additional Interest Reserve Contributions shall total
$8,000,000 any and all of such funds shall be deposited into the General Reserve
Fund, upon satisfaction of the following conditions: (i) Substantial Completion
has occurred; (ii) Borrower’s equity requirement set forth in Section 3.3(d)
hereof remains satisfied (provided, however, in order to meet such equity
requirement, Borrower may make a voluntary prepayment of the Loan in accordance
with all of the terms of Section 2.4.1 hereof and to be applied as set forth in
Section 2.4.3(a) hereof, with the Exit Fee payable in connection therewith being
determined in accordance with the provisions of Section 2.8); and (iii) either
(A) General Contractor has certified to Lender that all amounts due under the
General Contract (which shall include, without limitation, all work
authorizations entered into under the General Contract and all amounts payable
by General Contractor to any subcontractor in connection with the General
Contract and/or any such work authorization) have been paid in full and
delivered lien waivers or other evidence of payment satisfactory to Lender or
(B) Lender’s approval has been obtained.

 

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Section 7.8. Reserve Funds, Generally.
(a) Borrowers hereby grant to Lender a first-priority perfected security
interest in each of the Reserve Funds held by Lender and any and all monies now
or hereafter deposited in each Reserve Fund as additional security for payment
of the Debt. Until expended or applied in accordance herewith, the Reserve Funds
shall constitute additional security for the Debt. Upon the occurrence and
during the continuance of an Event of Default, Lender may, in addition to any
and all other rights and remedies available to Lender, apply any sums then
present in any or all of the Reserve Funds to the reduction of the Debt in
accordance with the provisions of Section 2.4.4 hereof (with the determination
of the Exit Fee payable in connection therewith being made in accordance with
the provisions of Section 2.8), which Section 2.4.4 provides for the application
of such amounts to the Debt in such order, proportion and priority as Lender may
determine in its sole discretion, until the Debt is paid in full, with any
amounts remaining being disbursed to (i) First Mezzanine Lender for application
by First Mezzanine Lender in accordance with the terms of the First Mezzanine
Loan Documents if the First Mezzanine Debt (or any portion thereof) is
outstanding, until the First Mezzanine Debt is paid in full, and then
(ii) Second Mezzanine Lender for application by Second Mezzanine Lender in
accordance with the terms of the Second Mezzanine Loan Documents if the Second
Mezzanine Debt (or any portion thereof) is outstanding, until the Second
Mezzanine Debt is paid in full, and then (iii) Third Mezzanine Lender for
application by Third Mezzanine Lender in accordance with the terms of the Third
Mezzanine Loan Documents if the Third Mezzanine Debt (or any portion thereof) is
outstanding, until the Third Mezzanine Debt is paid in full, and then (iv) any
balance remaining to Borrowers. Any amount remaining in any of the Reserve Funds
after the Obligations have been satisfied shall be released to Borrowers;
provided, however, that Borrowers and Lender hereby agree and acknowledge that
if (A)(1) all of the Obligations have been satisfied, (2) there is any amount
remaining in any of the Reserve Funds, and (3) the First Mezzanine Debt (or any
portion thereof) is outstanding, then Lender will not pay any such remaining
amount in any of the Reserve Funds to Borrowers, but rather shall deliver such
amount to First Mezzanine Lender to be held in accordance with the terms of the
First Mezzanine Loan Documents; or (B)(1) all of the Obligations and the First
Mezzanine Obligations have been satisfied, (2) there is any amount remaining in
any of the Reserve Funds, and (3) the Second Mezzanine Debt (or any portion
thereof) is outstanding, then Lender will not pay any such remaining amount in
any of the Reserve Funds to Borrowers, but rather shall deliver such amount to
Second Mezzanine Lender to be held in accordance with the terms of the Second
Mezzanine Loan Documents; or (C)(1) all of the Obligations, the First Mezzanine
Obligations and the Second Mezzanine Obligations have been satisfied, (2) there
is any amount remaining in any of the Reserve Funds, and (3) the Third Mezzanine
Debt (or any portion thereof) is outstanding, then Lender will not pay any such
remaining amount in any of the Reserve Funds to Borrowers, but rather shall
deliver such amount to Third Mezzanine Lender to be held in accordance with the
terms of the Third Mezzanine Loan Documents. The Reserve Funds shall not
constitute trust funds and may be commingled with other monies held by Lender.
(b) Except to the extent provided in the First Mezzanine Loan Documents, the
Second Mezzanine Loan Documents and/or the Third Mezzanine Loan Documents,
Borrowers shall not, without obtaining the prior consent of Lender, further
pledge, assign or grant any security interest in any Reserve Fund or the monies
deposited therein or permit any lien or encumbrance to attach thereto, or any
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Financing Statements, except those naming Lender as the secured party, to be
filed with respect thereto.
(c) The Reserve Funds shall be held in an Eligible Account in Permitted
Investments pursuant to the Cash Management Agreement. All interest or other
earnings on a Reserve Fund (with the exception of the Tax and Insurance Escrow
Fund) shall be added to and become a part of such Reserve Fund and shall be
disbursed in the same manner as other monies deposited in such Reserve Fund,
except that all interest or other earnings on the Tax and Insurance Escrow Fund
shall be retained by Lender. Borrowers shall have the right to direct Lender to
invest sums on deposit in the Eligible Account in Permitted Investments provided
(i) such investments are then regularly offered by Lender for accounts of this
size, category and type, (ii) such investments are permitted by applicable Legal
Requirements, (iii) the maturity date of the Permitted Investment is not later
than the date on which the applicable Reserve Fund is required for payment of an
obligation for which such Reserve Fund was created, and (iv) no Event of Default
shall have occurred and be continuing. Borrowers shall be responsible for
payment of any federal, state or local income or other tax applicable to the
interest or income earned on the Reserve Funds (with the exception of the Tax
and Insurance Escrow Fund). No other investments of the sums on deposit in the
Reserve Funds shall be permitted except as set forth in this Section 7.8.
Borrowers shall bear all reasonable costs associated with the investment of the
sums in the account in Permitted Investments. Such costs shall be deducted from
the income or earnings on such investment, if any, and to the extent such income
or earnings shall not be sufficient to pay such costs, such costs shall be paid
by Borrowers promptly on demand by Lender. Lender shall have no liability for
the rate of return earned or losses incurred on the investment of the sums in
Permitted Investments.
(d) Borrowers, jointly and severally, shall indemnify Lender and hold Lender
harmless from and against any and all actions, suits, third party claims,
demands, liabilities, actual losses, actual damages (excluding lost profits,
diminution in value and other consequential damages), obligations and reasonable
costs and expenses (including litigation costs and reasonable attorneys’ fees
and expenses) arising from or in any way connected with the Reserve Funds held
by Lender or the performance of the obligations for which the Reserve Funds were
established, excluding matters arising from Lender’s or its agents’ fraud,
willful misconduct, illegal acts or gross negligence. Borrowers shall assign to
Lender all rights and claims any Borrower may have against all Persons supplying
labor, materials or other services which are to be paid from or secured by the
Reserve Funds; provided, however, that Lender may not pursue any such right or
claim unless an Event of Default has occurred and remains uncured.
ARTICLE VIII.
DEFAULTS
Section 8.1. Event of Default. (a) Each of the following events shall constitute
an event of default hereunder (an “Event of Default”):
(i) if (A) the Debt is not paid in full on the Maturity Date, (B) any Reduced
Acquisition Loan Monthly Interest Payment or Construction Loan Monthly Interest
Payment or any required monthly deposit to any Reserve Fund is not paid in full
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before the related Payment Date, or (C) any other portion of the Debt is not
paid within three (3) Business Days following notice to Borrowers that the same
is due and payable;
(ii) if any of the Taxes or Other Charges are not paid prior to the date upon
which any interest or late charges shall begin to accrue thereon, subject to
Section 7.2 hereof;
(iii) if the Policies are not kept in full force and effect;
(iv) if any Borrower Transfers or otherwise encumbers any portion of any
Property or any interest therein or the IP or any portion thereof, or any direct
or indirect interest in any Transfer Restricted Party is Transferred, in each
instance, in violation of the provisions of this Agreement and not otherwise
consented to by Lender;
(v) if any representation or warranty made by any Borrower herein or in any
other Loan Document, or in any report, certificate, financial statement or other
instrument, agreement or document furnished to Lender by or on behalf of any
Borrower or any Restricted Party shall have been false or misleading in any
material respect as of the date the representation or warranty was made,
provided, however, if such representation or warranty is susceptible of being
cured, and Lender has not theretofore materially adversely relied thereon,
Borrowers shall have the right to cure such representation or warranty within
ten (10) Business Days of notice thereof;
(vi) if any Borrower, HRHI or any Guarantor shall make an assignment for the
benefit of any creditor (other than Lender);
(vii) if a receiver, liquidator or trustee shall be appointed for any Borrower,
HRHI or any Guarantor, or if any Borrower, HRHI or any Guarantor shall be
adjudicated a bankrupt or insolvent, or if any petition for bankruptcy,
reorganization or arrangement pursuant to federal bankruptcy law, or any similar
federal or state law, shall be filed by or against, consented to, or acquiesced
in by, any Borrower, HRHI or any Guarantor, or if any proceeding for the
dissolution or liquidation of any Borrower, HRHI or any Guarantor shall be
instituted; provided, however, if such appointment, adjudication, petition or
proceeding was involuntary and not consented to by any Borrower, HRHI or any
Guarantor, upon the same not being discharged, stayed or dismissed within ninety
(90) days, and provided that such appointment was not initiated by Lender;
(viii) if any Borrower attempts to assign its rights under this Agreement or any
of the other Loan Documents or any interest herein or therein in contravention
of the Loan Documents;
(ix) if any Borrower breaches any of its respective negative covenants contained
in Section 5.2 hereof or any covenant contained in Section 4.1.30 or Section
5.1.11 hereof, provided, however, that, unless otherwise addressed in any other
clause of this Section 8.1(a), a breach of any covenant contained in Section
4.1.30, Section 5.1.11 or Section 5.2 hereof shall not constitute an Event of
Default if (A) such breach is inadvertent and non-recurring, (B) if such breach
is curable, Borrowers shall promptly cure such breach within thirty (30) days
after notice thereof from Lender, and (C) with respect to a material breach of
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material covenant contained in Section 4.1.30 hereof, within fifteen
(15) Business Days of the request of Lender, Borrowers deliver to Lender an
Additional Insolvency Opinion, or a modification of the Insolvency Opinion, to
the effect that such breach shall not in any way impair, negate or amend the
opinions rendered in the Insolvency Opinion, which opinion or modification and
the counsel delivering such opinion or modification shall be acceptable to
Lender in its reasonable discretion;
(x) with respect to any term, covenant or provision set forth herein which
specifically contains a notice requirement or grace period, if any Borrower
shall be in default under such term, covenant or condition after the giving of
such notice or the expiration of such grace period;
(xi) if any of the assumptions contained in the Insolvency Opinion delivered to
Lender in connection with the Loan, or in any Additional Insolvency Opinion
delivered subsequent to the closing of the Loan, is or shall become untrue in
any material respect;
(xii) if a material default by any Borrower has occurred and continues beyond
any applicable cure period under any Management Agreement (or any Replacement
Management Agreement) and as a result of such default the Manager thereunder
terminates or cancels such Management Agreement (or any Replacement Management
Agreement);
(xiii) if (A) a material default by Gaming Borrower or any other Gaming Operator
has occurred and continues beyond any applicable cure period under the Casino
Component Lease (or any similar replacement Lease for purposes of operating the
Casino Component) and as a result of such default the Gaming Borrower or any
other Gaming Operator thereunder terminates or cancels such Casino Component
Lease (or any similar replacement Lease for purposes of operating the Casino
Component) or (B) without Lender’s prior written consent, Hotel/Casino Borrower
or Gaming Borrower shall terminate (or consent to or approve any such
termination), change, modify or amend the Casino Component Lease (or any similar
replacement Lease, consented to by Lender, for purposes of operating the Casino
Component), other than ministerial non-monetary amendments or modifications;
(xiv) if any Borrower fails to comply in any material respect with the covenants
as to Prescribed Laws set forth in Section 5.1.1 hereof and such failure to
comply continues after ten (10) Business Days notice thereof;
(xv) except as otherwise contemplated by the Loan Documents, if Hotel/Casino
Borrower ceases to do business as a hotel and casino at a standard at least
equal to Comparable Hotel/Casinos, including, without limitation, comparable
food and beverage outlets and other amenities, (other than temporary cessation
in connection with any diligent Restoration of the Hotel/Casino Property
following a Casualty or Condemnation) and such failure continues after thirty
(30) days notice from Lender thereof; provided, however, that if any such
failure is susceptible of cure but cannot reasonably be cured within such thirty
(30) day period, and provided, further, that Borrowers shall have commenced to
cure such failure within such thirty (30) day period and shall thereafter
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same, such thirty (30) day period shall be extended for such time as is
reasonably necessary for Borrowers in the exercise of due diligence to cure such
Default, such additional period not to exceed sixty (60) days, subject to
Excusable Delay;
(xvi) if a material default by Hotel Casino Borrower has occurred and continues
beyond any applicable cure period under the Liquor Management Agreement (or any
Replacement Liquor Management Agreement) and as a result of such default the
Liquor Manager thereunder terminates or cancels such Liquor Management Agreement
(or any Replacement Liquor Management Agreement);
(xvii) if (A) any revenues generated from gaming activities at the Property are
applied other than in accordance with the provisions of Section 2.6.1(c) hereof
and/or in the event any funds on deposit in the Cage Reserve or Casino Account
are applied to any items other than Permitted Gaming Expenses and Gaming
Borrower fails to cure any such misapplication within five (5) Business Days of
the earlier of (1) the date on which Lender notifies Gaming Borrower of the same
or (2) Borrower’s actual knowledge of such misapplication or (B) Gaming Borrower
fails to notify Lender of any such misapplication as required under and in
accordance with the provisions of Section 12.3.2 hereof;
(xviii) if at any time during the term of the Loan, for any reason (including,
without limitation, the revocation, suspension or surrender of any required
Governmental Approval), (A) the Gaming Operating Condition is not satisfied; or
(B) any Gaming License or finding of suitability held by the Gaming Operator
shall be materially adversely modified, denied, suspended, revoked or canceled
or allowed to lapse or if a notice of a material violation is issued under any
Gaming License by the issuing agency or other Governmental Authority having
jurisdiction, or any proceeding is commenced by any Governmental Authority for
the purpose of modifying in any materially adverse respect, suspending, revoking
or canceling any Gaming License in any materially adverse respect, in each case,
which is not stayed within sixty (60) days after commencement thereof and the
result of which is reasonably likely to be Borrowers’ inability to continue to
conduct gaming operations at the Hotel/Casino Property; provided, however, that
during the course of any of the foregoing, substantially the same gaming
operations are permitted to continue to operate at the Hotel/Casino Property, or
any Governmental Authority shall have appointed a conservator, supervisor or
trustee with respect to the Casino Component or the Hotel/Casino Property;
(xix) if at any time during the term of the Loan, for any reason (including,
without limitation, the revocation, suspension or surrender of any required
Governmental Approval), the alcoholic beverage services at the Hotel/Casino
Property are not being managed by a Qualified Liquor Manager pursuant to the
Liquor Management Agreement or a Replacement Liquor Management Agreement;
(xx) if HRHI shall fail to provide liquor management services following an Event
of Default or a foreclosure of the Mortgage as and to the extent required
pursuant to Sections 5(a) or 5(b) of the Assignment of Liquor Management
Agreement;

 

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(xxi) if Gaming Borrower shall fail to provide gaming operation services for the
Hotel/Casino Property following an Event of Default or a foreclosure of the
Mortgage as and to the extent required pursuant to Section 12.1(e) hereof;
(xxii) in the event that Gaming Borrower, any other Borrower or any Affiliate
thereof shall ever become the Liquor Manager, if Gaming Borrower, such other
Borrower or such Affiliate thereof thereafter shall fail to provide liquor
management services following an Event of Default or following the transfer of
the Hotel/Casino Property to a Lender Successor Owner as and to the extent
required pursuant to Section 5.1.23(c) hereof;
(xxiii) if any Borrower shall continue to be in Default under any of the other
terms, covenants or conditions of this Agreement or any other Loan Document, in
each instance, not specified in subsections (i) to (xxii) above, for ten
(10) Business Days after notice to Borrowers from Lender, in the case of any
Default which can be cured by the payment of a sum of money, or for thirty
(30) days after notice from Lender in the case of any other Default; provided,
however, that if any such non-monetary Default is susceptible of cure but cannot
reasonably be cured within such thirty (30) day period, and provided further
that Borrowers shall have commenced to cure such Default within such thirty
(30) day period and thereafter diligently and expeditiously proceed to cure the
same, such thirty (30) day period shall be extended for such time as is
reasonably necessary for Borrowers in the exercise of due diligence to cure such
Default, such additional period not to exceed ninety (90) days, subject to
Excusable Delay;
(xxiv) the occurrence of any event that is expressly specified to be an Event of
Default in this Agreement or any other Loan Document;
(xxv) if any other event shall occur or condition shall exist, if the effect of
such event or condition is to accelerate the maturity of any portion of the Debt
or to permit Lender to accelerate the maturity of all or any portion of the
Debt; or
(xxvi) if Borrower fails to comply with the provisions of Section 2.7.2(b)(xii)
hereof.
(b) Upon the occurrence and during the continuance of an Event of Default (other
than an Event of Default described in clauses (vi) or (vii) above) and at any
time thereafter, in addition to any other rights or remedies available to it
pursuant to this Agreement and the other Loan Documents or at law or in equity,
to the extent permitted by applicable law, Lender may take such action, without
notice or demand, that Lender deems advisable to protect and enforce its rights
against Borrowers and in and to any Property and/or the IP, including, without
limitation, declaring the Debt to be immediately due and payable, and Lender may
enforce or avail itself of any or all rights or remedies provided in the Loan
Documents against Borrowers, any Property and/or the IP, including, without
limitation, all rights or remedies available at law or in equity; and upon any
Event of Default described in clauses (vi) or (vii) above, the Debt and all
Other Obligations of Borrowers hereunder and under the other Loan Documents
shall, to the extent permitted by applicable law, immediately and automatically
become due and payable, without notice or demand, and each Borrower hereby
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any such notice or demand, anything contained herein or in any other Loan
Document to the contrary notwithstanding.
Section 8.2. Remedies.
(a) Upon the occurrence and during the continuance of an Event of Default,
subject to applicable Gaming Laws, all or any one or more of the rights, powers,
privileges and other remedies available to Lender against Borrowers under this
Agreement or any of the other Loan Documents executed and delivered by, or
applicable to, Borrowers or at law or in equity may be exercised by Lender at
any time and from time to time, whether or not all or any of the Debt shall be
declared due and payable, and whether or not Lender shall have commenced any
foreclosure proceeding or other action for the enforcement of its rights and
remedies under any of the Loan Documents, in each case to the extent permitted
by applicable law. Any such actions taken by Lender shall be cumulative and
concurrent and may be pursued independently, singularly, successively, together
or otherwise, at such time and in such order as Lender may determine in its sole
discretion, to the fullest extent permitted by law, without impairing or
otherwise affecting the other rights and remedies of Lender permitted by law,
equity or contract or as set forth herein or in the other Loan Documents.
Without limiting the generality of the foregoing, each Borrower agrees, to the
extent permitted by applicable law, that if an Event of Default is continuing
(i) Lender shall not be subject to any “one action” or “election of remedies”
law or rule, and (ii) all liens and other rights, remedies or privileges
provided to Lender shall remain in full force and effect until Lender has
exhausted all of its remedies against the Properties, the IP and any other
collateral and the Mortgage has been foreclosed, sold and/or otherwise realized
upon in satisfaction of the Debt or the Debt has been paid in full.
(b) During the continuance of an Event of Default, with respect to each Borrower
and the Properties and the IP, nothing contained herein or in any other Loan
Document shall be construed as requiring Lender to resort to any particular
Property or to the IP for the satisfaction of any of the obligations in
preference or priority to any other Property or the IP, and Lender may seek
satisfaction out of all of the Properties, any Property, the IP or any part of
any thereof, in its absolute discretion in respect of the Obligations. In
addition, to the extent permitted by applicable law, Lender shall have the right
from time to time to partially foreclose the Mortgage in any manner and for any
amounts secured by the Mortgage then due and payable as determined by Lender in
its sole discretion, including, without limitation, the following circumstances:
(i) in the event Borrowers default beyond any applicable grace period in the
payment of one or more scheduled payments of interest, Lender may foreclose the
Mortgage to recover such delinquent payments, and/or (ii) in the event Lender
elects to accelerate less than the entire Outstanding Principal Balance, Lender
may foreclose the Mortgage to recover so much of the Outstanding Principal
Balance as Lender may accelerate and such other sums secured by the Mortgage as
Lender may elect in its sole discretion. Notwithstanding one or more partial
foreclosures, the Properties, the IP and any other collateral shall remain
subject to the Mortgage to secure payment of sums secured by the Mortgage and
not previously recovered.
(c) Subject to applicable Gaming Laws, Lender shall have the right, at Lender’s
sole cost and expense except during the continuance of an Event of Default, in
which event the same shall be at Borrowers’ sole cost and expense, from time to
time to sever either or both of the Notes and the other Loan Documents into one
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other security documents (the “Severed Loan Documents”) in such denominations as
Lender shall determine in its sole discretion for purposes of evidencing and
enforcing its rights and remedies provided hereunder, provided that Borrowers’
liability or obligation shall not be increased by such severance. Borrowers
shall execute and deliver to Lender from time to time, promptly after the
request of Lender, a severance agreement and such other documents as Lender
shall reasonably request in order to effect the severance described in the
preceding sentence, all in form and substance reasonably satisfactory to Lender.
Subject to applicable Gaming Laws, each Borrower hereby absolutely and
irrevocably appoints Lender as its true and lawful attorney, coupled with an
interest, in its name and stead to make and execute all documents necessary or
desirable to effect the aforesaid severance, each Borrower ratifying all that
its said attorney shall do by virtue thereof; provided, however, Lender shall
not make or execute any such documents under such power until five (5) Business
Days after notice has been given to Borrowers by Lender of Lender’s intent to
exercise its rights under such power. Except as may be required in connection
with a Securitization and expressly provided pursuant to Section 9.1 hereof,
(i) Borrowers shall not be obligated to pay any costs or expenses incurred in
connection with the preparation, execution, recording or filing of the Severed
Loan Documents, and (ii) the Severed Loan Documents shall not contain any
representations, warranties or covenants not contained in the Loan Documents
(modified to reflect the current status of such representations and warranties)
and any such representations and warranties contained in the Severed Loan
Documents will be given by Borrowers only as of the Closing Date.
(d) The rights, powers and remedies of Lender under this Agreement shall be
cumulative and not exclusive of any other right, power or remedy which Lender
may have against Borrowers pursuant to this Agreement or the other Loan
Documents, or existing at law or in equity or otherwise. Lender’s rights, powers
and remedies may be pursued singularly, concurrently or otherwise, at such time
and in such order as Lender may determine in Lender’s sole discretion. No delay
or omission to exercise any remedy, right or power accruing upon an Event of
Default shall impair any such remedy, right or power or shall be construed as a
waiver thereof, but any such remedy, right or power may be exercised from time
to time and as often as may be deemed expedient. A waiver of one Default or
Event of Default with respect to any Borrower shall not be construed to be a
waiver of any subsequent Default or Event of Default by any Borrower or to
impair any remedy, right or power consequent thereon.
(e) To the extent permitted by applicable law, any amounts recovered from any
Property, the IP or any other collateral for the Loan after an Event of Default
may be applied by Lender toward the payment of any interest and/or principal of
the Loan, and/or to any other amounts due under the Loan Documents in such
order, priority and proportions as Lender in its sole discretion shall
determine.
(f) Upon the occurrence and during the continuance of an Event of Default,
Lender may declare Lender’s obligations to make Construction Loan Advances
hereunder to be terminated, whereupon the same shall terminate, and/or declare
all unpaid principal of and accrued interest on one or both of the Notes,
together with all other sums payable under the Loan Documents, to be immediately
due and payable, whereupon the same shall become and be immediately due and
payable, anything in the Loan Documents to the contrary notwithstanding, and
without presentation, protest or further demand or notice of any kind, all of
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applicable law; provided, however, that Lender may make Construction Loan
Advances or parts of Construction Loan Advances thereafter without thereby
waiving the right to demand payment of the Notes, without becoming liable to
make any other or further Construction Loan Advances, and without affecting the
validity of or enforceability of the Loan Documents. Notwithstanding and without
limiting the generality of the foregoing or anything else to the contrary
contained in this Agreement, upon the occurrence and during the continuance of
an Event of Default, Lender’s obligations to make Construction Loan Advances
hereunder shall automatically terminate.
(g) Upon the occurrence and during the continuance of an Event of Default,
Lender may cause the construction of the Project to be completed and may enter
upon the Property and construct, equip and complete the Project in accordance
with the Plans and Specifications, with such changes therein as Lender may, from
time to time, and in its sole and absolute discretion, deem appropriate. In
connection with any construction of the Project undertaken by Lender pursuant to
the provisions of this subsection, Lender may:
(i) use any funds of Borrowers, including any balance which may be held by
Lender as security or in escrow, including, without limitation, any Shortfall
Funds and/or any funds on deposit in the Construction Loan Reserve Account, the
Working Capital Reserve Account, the Initial Renovations Reserve Account, the
Interest Reserve Account, the General Reserve Account, the Casino Account and
any and all other Reserves;
(ii) draw down on any Letter of Credit then held by Lender and use the proceeds
thereof;
(iii) employ existing contractors, subcontractors, agents, architects, engineers
and the like, or terminate the same and employ others;
(iv) employ security watchmen to protect the Properties;
(v) make such additions, changes and corrections in the Plans and Specifications
as shall, in the judgment of Lender, be necessary or desirable;
(vi) take over and use any and all Personal Property contracted for or purchased
by Borrowers, if appropriate, or dispose of the same as Lender sees fit in
accordance with applicable law;
(vii) to the extent permitted by applicable law, execute all applications and
certificates on behalf of Borrowers which may be required by any Governmental
Authority or Legal Requirement or contract documents or agreements;
(viii) pay, settle or compromise all existing or future bills and claims which
are or may be Liens against any of the Properties, or may be necessary for the
completion of construction of the Project or the clearance of title to any of
the Properties, including, without limitation, all taxes and assessments;
(ix) complete the marketing and leasing of leasable space in the Project, enter
into new leases and occupancy agreements at any of the Properties, and modify or

 

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amend existing leases and occupancy agreements, all as Lender shall deem to be
necessary or desirable;
(x) to the extent permitted by applicable law, prosecute and defend all actions
and proceedings in connection with the completion of the construction of the
Project or in any other way affecting any of the Properties and take such action
and require such performance as Lender deems necessary under any Payment and
Performance Bonds; and
(xi) to the extent permitted by applicable law, take such other action
hereunder, or refrain from acting hereunder, as Lender may, in its sole and
absolute discretion, from time to time determine, and without any limitation
whatsoever, to carry out the intent of this Section 8.2.
Subject to Section 9.4 hereof, Borrowers shall be liable to Lender for all costs
paid or incurred for the construction, completion and equipping of the Project,
whether the same shall be paid or incurred pursuant to the provisions of this
Section 8.2 or otherwise, and all payments made or liabilities incurred by
Lender hereunder of any kind whatsoever shall be deemed advances made to
Borrowers under this Agreement and shall be secured by the Mortgage and the
other applicable Loan Documents. In the event Lender takes possession of any
Property and assumes control of such construction as aforesaid, Lender shall not
be obligated to continue such construction longer than Lender shall see fit and
may thereafter, at any time, change any course of action undertaken by it or
abandon such construction and decline to make further payments for the account
of Borrowers, whether or not the construction of the Project shall have been
completed. For the purpose of this Section 8.2 the construction, equipping and
completion of the Project shall be deemed to include any action necessary to
cure any existing Event of Default by Borrowers under any of the terms and
provisions of any of the Loan Documents.
ARTICLE IX.
SPECIAL PROVISIONS
Section 9.1. Sale of Notes and Securitization. (a) Borrowers acknowledge and
agree that Lender may sell all or any portion of the Loan and the Loan
Documents, including all or any portion of any of the Components, or require
Borrowers to restructure the Loan or any of the Components, into additional
multiple notes (which may include component notes and/or senior and junior
notes) and/or issue one or more participations therein and/or syndicate the Loan
and/or any of the Components, which restructuring may include reallocation of
principal amounts of the Loan and/or any of the Components, the First Mezzanine
Loan, the Second Mezzanine Loan and/or the Third Mezzanine Loan amongst each
other and/or the restructuring of a portion of the Loan and/or any of the
Components, the First Mezzanine Loan, the Second Mezzanine Loan and/or the Third
Mezzanine Loan to one or more of the foregoing or into one or more additional
mezzanine loans to the direct and/or indirect owners of the equity interests in
Borrowers as reasonably, mutually determined by Lender and Borrowers and that
are direct or indirect subsidiaries of HR Holdings, secured by a pledge of such
interests, or consummate one or more private or public securitizations of rated
single- or multi-class securities (the “Securities”) secured by or evidencing
ownership interests in all or any portion of the Loan and/or any of the
Components and the Loan Documents or a pool of assets that include the Loan
and/or any of the Components and the Loan Documents (such sales, participations
and/or

 

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securitizations, collectively, a “Securitization”). At the request of Lender,
and to the extent not already required to be provided by Borrowers under this
Agreement, Borrowers shall use commercially reasonable good faith efforts to
provide information not in the possession of Lender or which may be reasonably
required by Lender in order to satisfy the market standards to which Lender
customarily adheres or which may be reasonably required by prospective investors
(including, without limitation, any purchaser of all or any portion of the Loan,
the First Mezzanine Loan, the Second Mezzanine Loan and/or the Third Mezzanine
Loan and/or any purchaser of any participation interest in any such loan) and/or
the Rating Agencies in connection with any such Securitization including,
without limitation, to:
(i) provide additional and/or updated Provided Information or other information
with respect to the Properties and/or the IP reasonably requested or reasonably
required by Lender, prospective investors or the Rating Agencies, together with,
if customary or if otherwise requested by any Rating Agency, appropriate
verification and/or consents related to the Provided Information through letters
of auditors or opinions of counsel of independent attorneys reasonably
acceptable to Lender and the Rating Agencies;
(ii) review descriptive materials for presentations to any or all of the Rating
Agencies, and work with third-party service providers engaged to obtain,
collect, and deliver information reasonably requested or reasonably required by
Lender, prospective investors or the Rating Agencies;
(iii) if required by any Rating Agency or reasonably required by any above
referenced investor in the applicable loan, (i) deliver updated opinions of
counsel as to non-consolidation, due execution and enforceability with respect
to the Properties, the IP, any Borrower, HRHI, any Guarantor, any of their
respective Affiliates and the Loan Documents, and (ii) amend the Special Purpose
Entity provisions of the organizational documents for each Borrower, which
counsel opinions and amendments to the organizational documents shall be
reasonably satisfactory to Lender and the Rating Agencies;
(iv) if required by any Rating Agency, use commercially reasonable efforts to
deliver such additional tenant estoppel letters, subordination agreements and/or
other agreements from parties to agreements that affect any of the Properties or
the IP, which estoppel letters, subordination agreements and other agreements
shall be reasonably satisfactory to Lender and the Rating Agencies;
(v) provide, as of the closing date of the Securitization, updated
representations and warranties made in the Loan Documents as may be reasonably
requested by Lender or the Rating Agencies and consistent with the facts covered
by such representations and warranties made in the Loan Documents to the extent
they are true as of the closing of the Securitization;
(vi) execute such amendments to the Loan Documents as may be reasonably
requested by Lender or the Rating Agencies to effect the Securitization and/or
deliver one or more new component notes to replace any original note or modify
any original note to reflect multiple components of the Loan or any Component
(and such new notes or modified note shall have the same initial weighted
average coupon of the original note, but such

 

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new notes or modified note may change the interest rate of the Loan or any
Component), and modify the Cash Management Agreement with respect to the newly
created components such that the pricing and marketability of the Securities and
the size of each class of Securities and the rating assigned to each such class
by the Rating Agencies shall provide the most favorable rating levels and
achieve the optimum rating levels for the Loan, provided, however, that (i) such
new notes or modified note will not change the interest rate, the stated
maturity or the amortization of principal set forth in either of the Notes
unless the varying interest rates shall have the same initial weighted average
coupon of the original Notes, (ii) such amendments to the Loan Documents or the
new notes or modified note will not modify or amend any other economic or
material term of the Loan in a manner materially adverse to Borrowers, HRHI or
Guarantors or any of their respective Constituent Members, or (iii) such
amendments to the Loan Documents will not materially increase Borrowers’ or
Guarantors’ obligations and liabilities under the Loan Documents or materially
decrease the rights of Borrowers under the Loan Documents;
(vii) if requested by Lender, review any information regarding any Property, the
IP, any Borrower, any First Mezzanine Borrower, any Second Mezzanine Borrower,
any Third Mezzanine Borrower, HRHI, the Gaming Operator, any Manager, the Liquor
Manager and/or the Loan (including each of the Components) which is contained in
any preliminary or final private placement memorandum, prospectus, prospectus
supplement (including any amendment or supplement to either thereof), or other
disclosure document to be used by Lender or any affiliate thereof; and
(viii) supply to Lender such documentation, financial statements and reports
concerning any Borrower, any First Mezzanine Borrower, any Second Mezzanine
Borrower, any Third Mezzanine Borrower, HRHI, any Guarantor, the Loan (including
each of the Components), any Property and/or the IP in form and substance
required in order to comply with any applicable securities laws.
(b) Lender shall pay all reasonable third party costs and expenses (excluding
fees and expenses of Borrowers’ legal counsel) in excess of Twenty Thousand
Dollars ($20,000) incurred by Borrowers in connection with Borrowers’ complying
with requests made under this Section 9.1 and/or under Section 9.2 hereof,
provided, however, the fees and expenses of Borrowers’ legal counsel and
Borrowers’ administrative costs shall not be included in such amount and
Borrowers shall remain at all times responsible for the fees and expenses of its
legal counsel and its own administrative costs. In addition to the foregoing,
Lender expressly acknowledges and agrees that Borrowers shall not be required to
pay any Rating Agency surveillance charges.
(c) Notwithstanding anything to the contrary contained in this Agreement, in the
event of a Securitization that involves a participation or restructuring into
one or more New Mezzanine Loans, Borrowers shall not be required to deliver
Rating Agency confirmations in accordance with the terms and conditions of this
Agreement at any time that rated Securities are not outstanding.
Section 9.2. Re-Dating. In connection with a Securitization or other sale of all
or a portion of the Loan, Lender shall have the right to modify all operative
dates (including, but not limited to, payment dates, interest period start dates
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Documents, by up to ten (10) days (such action and all related action is a
“Re-Dating”) so long as such modification shall not have a materially adverse
effect on Borrowers. Borrowers shall cooperate with Lender to implement any
Re-Dating. If any Borrower fails to cooperate with Lender within ten
(10) Business Days of written request by Lender, Lender is hereby appointed as
each Borrower’s attorney-in-fact to execute any and all documents necessary to
accomplish the Re-Dating, the foregoing power of attorney being coupled with an
interest.
Section 9.3. Securitization Indemnification. (a) Each Borrower understands that
information provided to Lender by Borrowers and their agents, counsel and
representatives may be included in Disclosure Documents in connection with the
Securitization and may also be included in filings with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended (the
“Securities Act”), or the Securities and Exchange Act of 1934, as amended (the
“Exchange Act”), and may be made available to investors or prospective investors
in the Securities, the Rating Agencies, and service providers relating to the
Securitization. In the event that the Disclosure Document is required to be
revised prior to the sale of all Securities, Borrower will cooperate with the
holder(s) of the Notes in updating the Disclosure Document by providing all
current information necessary to keep the Disclosure Document accurate and
complete in all material respects.
(b) Upon Lender’s reasonable request, Borrowers shall provide in connection with
each of (i) a preliminary and a final private placement memorandum or (ii) a
preliminary and final prospectus or prospectus supplement, as applicable, an
agreement (A) certifying that Borrowers have examined such Disclosure Documents
specified by Lender and that to each Borrower’s actual knowledge, each such
Disclosure Document, as it relates to Borrowers, Borrowers’ Affiliates,
Guarantors, HRHI, the Properties, the IP, the Manager, the Liquor Manager, the
Gaming Operator and/or the Loan (including each of the Components), does not
contain any untrue statement of a material fact or omit to state a material fact
in each Borrower’s actual knowledge necessary in order to make the statements
made, in the light of the circumstances under which they were made, not
materially misleading, (B) jointly and severally indemnifying Lender, Credit
Suisse (whether or not it is Lender), any Affiliate of Lender or Credit Suisse
that has filed any registration statement relating to the Securitization or has
acted as the sponsor or depositor in connection with the Securitization, any
Affiliate of Lender or Credit Suisse that acts as an underwriter, placement
agent or initial purchaser of Securities issued in the Securitization, any other
co-underwriters, co-placement agents or co-initial purchasers of Securities
issued in the Securitization, and each of their respective officers, directors,
partners, employees, representatives, agents and Affiliates and each Person or
entity who controls any such Person within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (collectively, the “Indemnified
Persons”), for any out-of-pocket losses, third party claims, actual damages (but
not lost revenues, diminution in value and other consequential damages) or
liabilities (collectively, the “Liabilities”) to which any such Indemnified
Person may become subject insofar as the Liabilities arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any such Disclosure Document specified by Lender for Borrowers’
review, as it relates to Borrowers, Borrowers’ Affiliates, Guarantors, HRHI, the
Properties, the IP, the Manager, the Liquor Manager, the Gaming Operator and/or
the Loan (including each of the Components), known by any Borrower to be untrue
or arise out of or are based upon the omission or alleged omission to state
therein a material fact in any Borrower’s actual knowledge, required to be
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order to make the statements therein, in light of the circumstances under which
they were made, not misleading, and (C) agreeing to reimburse each Indemnified
Person for any reasonable legal or other reasonable expenses reasonably incurred
by such Indemnified Person in connection with investigating or defending the
Liabilities; provided, however, that Borrowers will be liable in any such case
under clauses (B) or (C) above only to the extent that any such Liabilities
arise out of or are based upon any such untrue statement or omission made
therein in reliance upon and in conformity with information furnished to Lender
by Borrowers in connection with the preparation of any Disclosure Document(s) or
in connection with the underwriting or closing of the Loan or in the ordinary
course of the Loan, including, without limitation, financial statements of any
Borrower, operating statements and rent rolls with respect to any of the
Properties. This indemnity agreement will be in addition to any liability which
any Borrower may otherwise have. Moreover, the indemnification provided for in
clauses (B) and (C) above shall be effective whether or not a separate
indemnification agreement is provided.
(c) In connection with Exchange Act Filings, Borrowers, jointly and severally,
shall (i) indemnify the Indemnified Persons for Liabilities to which any such
Indemnified Persons may become subject insofar as the Liabilities arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact in any Disclosure Documents specified by Lender for Borrowers’
review, as it relates to Borrowers, Borrowers’ Affiliates, Guarantors, HRHI, the
Properties, the IP, the Manager, the Liquor Manager, the Gaming Operator and/or
the Loan (including any of the Components), or the omission or alleged omission
to state in any such Disclosure Document a material fact in any Borrower’s
actual knowledge, required to be stated in such Disclosure Document in order to
make the statements in such Disclosure Document, in light of the circumstances
under which they were made, not misleading, and (ii) reimburse each Indemnified
Person for any reasonable legal or other expenses reasonably incurred by such
Indemnified Person in connection with defending or investigating the
Liabilities; provided, however, that Borrowers will be liable in any such case
under clauses (i) or (ii) above only to the extent that any such Liabilities
arise out of or are based upon any such untrue statement or omission made
therein in reliance upon and in conformity with information furnished to Lender
by Borrowers in connection with the preparation of any Disclosure Document(s) or
in connection with the underwriting or closing of the Loan or in the ordinary
course of the Loan, including, without limitation, financial statements of any
Borrower, operating statements and rent rolls with respect to any of the
Properties.
(d) Promptly after receipt by an Indemnified Person under this Section 9.3 of
notice of the commencement of any action, such Indemnified Person will, if a
claim in respect thereof is to be made against Borrowers under this Section 9.3,
notify Borrowers in writing of the commencement thereof, but the omission to so
notify Borrowers will not relieve any Borrower from any liability which any
Borrower may have to any Indemnified Person hereunder except to the extent that
such failure to notify causes material prejudice to any Borrower. In the event
that any action is brought against any Indemnified Person, and it notifies
Borrowers of the commencement thereof, Borrowers will be entitled to participate
therein and, to the extent that they may elect by written notice delivered to
such Indemnified Person promptly after receiving the aforesaid notice from such
Indemnified Person, to assume the defense thereof with counsel reasonably
satisfactory to such Indemnified Person. After notice from Borrowers to such
Indemnified Person under this Section 9.3, such Indemnified Person shall pay for
any legal or other expenses subsequently incurred by such Indemnified Person in
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defense thereof other than reasonable costs of investigation; provided, however,
if the defendants in any such action include both the Indemnified Person and any
Borrower and the Indemnified Person shall have reasonably concluded that there
are any legal defenses available to it and/or other Indemnified Persons that are
different from or additional to those available to Borrowers, the Indemnified
Person(s) shall have the right to select separate counsel to assert such legal
defenses and to otherwise participate in the defense of such action on behalf of
such Indemnified Person(s) at the cost of Borrowers. Borrowers shall not be
liable for the expenses of more than one separate counsel unless any Indemnified
Person shall have reasonably concluded that there may be legal defenses
available to it that are different from or additional to those available to
another Indemnified Person.
(e) Without the prior consent of Credit Suisse or Lender, as applicable (which
consent shall not be unreasonably withheld), no Borrower shall settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which indemnification may be
sought hereunder (whether or not any Indemnified Person is an actual or
potential party to such claim, action, suit or proceeding) unless Borrowers
shall have given Credit Suisse or Lender, as applicable, reasonable prior notice
thereof and shall have obtained an unconditional release of each Indemnified
Person hereunder from all liability arising out of such claim, action, suit or
proceeding. As long as Borrowers have complied with their obligations to defend
and indemnify hereunder, Borrowers shall not be liable for any settlement made
by any Indemnified Person without the consent of Borrowers (which consent shall
not be unreasonably withheld).
(f) Borrowers agree that if any indemnification or reimbursement sought pursuant
to this Section 9.3 is finally judicially determined to be unavailable for any
reason or is insufficient to hold any Indemnified Person harmless (with respect
only to the Liabilities that are the subject of this Section 9.3), then
Borrowers, on the one hand, and such Indemnified Person, on the other hand,
shall contribute to the Liabilities for which such indemnification or
reimbursement is held unavailable or is insufficient: (i) in such proportion as
is appropriate to reflect the relative benefits to Borrowers, on the one hand,
and such Indemnified Person, on the other hand, from the transactions to which
such indemnification or reimbursement relates; or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) but also the relative faults of Borrowers, on the one hand, and
all Indemnified Persons, on the other hand, as well as any other equitable
considerations. In determining the amount of contribution to which the
respective parties are entitled, the following factors shall be considered:
(A) Lender’s and Borrowers’ relative knowledge and access to information
concerning the matter with respect to which the claim was asserted; and (B) the
opportunity to correct and prevent any statement or omission. Notwithstanding
the provisions of this Section 9.3, no Person found liable for a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any other Person who is not also found
liable for such fraudulent misrepresentation.
(g) Borrowers agree that the indemnification, contribution and reimbursement
obligations set forth in this Section 9.3 shall apply whether or not any
Indemnified Person is a formal party to any lawsuits, claims or other
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further agree that the Indemnified Persons are intended third party
beneficiaries under this Section 9.3.
(h) Subject to the provisions of Section 9.4 hereof, the liabilities and
obligations of Borrowers and Lender under this Section 9.3 shall survive the
termination of this Agreement and the satisfaction and discharge of the Debt.
Section 9.4. Exculpation. Subject to the qualifications below, Lender shall not
enforce the liability and obligation of Borrowers to perform and observe the
obligations contained in the Notes, this Agreement, the Mortgage or the other
Loan Documents by any action or proceeding wherein a money judgment shall be
sought against any Borrower, except that Lender may bring a foreclosure action,
an action for specific performance or any other appropriate action or proceeding
to enable Lender to enforce and realize upon its interest under the Notes, this
Agreement, the Mortgage and the other Loan Documents, or in any Property, the
Rents, the IP or any other collateral given to Lender pursuant to the Loan
Documents; provided, however, that, except as specifically provided herein, any
judgment in any such action or proceeding shall be enforceable against any
Borrower only to the extent of such Borrower’s interest in its Property, in its
Rents, in the IP and in any other collateral given by it to Lender, and Lender,
by accepting the Notes, this Agreement, the Mortgage and the other Loan
Documents, agrees that it shall not sue for, seek or demand any deficiency
judgment against any Borrower in any such action or proceeding under, or by
reason of, or in connection with, the Notes, this Agreement, the Mortgage or the
other Loan Documents. The provisions of this Section 9.4 shall not, however,
(a) constitute a waiver, release or impairment of any obligation evidenced or
secured by any of the Loan Documents; (b) impair the right of Lender to name any
Borrower as a party defendant in any action or suit for foreclosure and sale
under the Mortgage; (c) affect the validity or enforceability of or any guaranty
made in connection with the Loan, including, without limitation, the
Non-Recourse Guaranty, the Closing Completion Guaranty, the Construction
Completion Guaranty and the HRHI Guaranty, or any of the rights and remedies of
Lender thereunder; (d) impair the right of Lender to obtain the appointment of a
receiver; (e) impair the enforcement of the Assignment of Leases; (f) constitute
a prohibition against Lender seeking a deficiency judgment against any Borrower
in order to fully realize the security granted by the Mortgage or commencing any
other appropriate action or proceeding in order for Lender to exercise its
remedies against any Property or the IP; or (g) constitute a waiver of the right
of Lender to enforce the liability and obligation of any Borrower, by money
judgment or otherwise, to the extent of any actual loss, damage (excluding any
lost revenue, diminution of value and other consequential damages), reasonable
cost, reasonable expense, liability, claim or other obligation incurred by
Lender (including attorneys’ fees and costs reasonably incurred) arising out of
or in connection with the following:
(i) fraud or intentional misrepresentation by any Borrower, HRHI, any Guarantor
or any of their respective principals, officers, agents or employees in
connection with the Loan;
(ii) physical waste to any Property arising from the intentional misconduct or
gross negligence of any Borrower, HRHI, any Guarantor or any of their respective
principals, officers, agents or employees and/or any removal of any asset
forming a part of any Property in violation of this Agreement or the other Loan
Documents;

 

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(iii) Intentionally Deleted;
(iv) the misappropriation or conversion by any Borrower, by any Person
Controlled by any Borrower, including, without limitation, any Affiliated
Manager, a Liquor Manager who is an Affiliate of any Borrower or a Gaming
Operator who is an Affiliate of any Borrower, by any agent of any Borrower, or
by any other Person with whom any Borrower shall collude or cooperate, of
(A) any Insurance Proceeds paid by reason of any Casualty, to the extent so
misappropriated or converted; (B) any Awards received in connection with a
Condemnation, to the extent so misappropriated or converted; (C) any Rents or
other Gross Income from Operations not delivered to Lender following and during
the continuance of an Event of Default and not otherwise used to pay actual,
customary Operating Expenses, including, without limitation, (I) any income,
proceeds or other amounts received by any Borrower under the Casino Component
Lease, and/or (II) without duplication of the foregoing clause (I), any income,
proceeds or revenue generated from gaming activities at any Property, in each of
the foregoing instances, to the extent so misappropriated or converted; (D) any
Rents paid more than one (1) month in advance in violation of this Agreement or
the other Loan Documents, to the extent so misappropriated or converted; and/or
(E) any security deposits, to the extent so misappropriated or converted;
(v) the failure to pay (or to deposit into the Reserve Funds amounts sufficient
to pay) all Taxes and all other costs giving rise to any Lien on any portion of
any Property or the IP with priority over or equal to the Lien of the Loan
Documents in violation of this Agreement or the other Loan Documents, to the
extent that there is sufficient Gross Income from Operations to make such
payments (or deposits, as applicable);
(vi) if any Borrower fails to maintain its status as a Special Purpose Entity as
required pursuant to the terms hereof;
(vii) if Borrowers fail to obtain Lender’s consent to any subordinate financing,
mortgage or other voluntary Lien encumbering any Property or the IP other than
Permitted Encumbrances and Permitted IP Encumbrances;
(viii) the failure to maintain insurance coverage under blanket insurance
policies to the extent permitted under this Agreement;
(ix) if any of the events set forth in clauses (a), (b) or (c) of Section 5.2.11
hereof shall occur without the prior approval of Lender;
(x) if any of the restrictions to Transfer set forth in Section 5.2.10 hereof or
in any of the other Loan Documents are violated (provided that a Transfer to
Lender or any Mezzanine Lender in connection with a foreclosure, deed in lieu of
foreclosure, or other consensual Transfer to Lender or any Mezzanine Lender
shall in no event give rise to any liability under this clause 9.4(x) and
provided further, that any such Transfer to Lender or any Mezzanine Lender shall
not limit or waive any other liability of the Borrowers or any Guarantor under
the other provisions of this Section 9.4 or the Non-Recourse Guaranty, as
applicable);
(xi) Intentionally Deleted;

 

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(xii) Intentionally Deleted;
(xiii) if HRHI shall fail to provide Assigned Employees for the operation of
gaming activities at the Hotel/Casino Property as and to the extent required
pursuant to Paragraph 5 of the Second HRHI Modification Agreement;
(xiv) if Gaming Borrower shall fail to provide gaming operation services for the
Hotel/Casino Property following an Event of Default, a foreclosure of the
Mortgage or a deed in lieu of foreclosure, as and to the extent required
pursuant to Section 12.1(e) hereof;
(xv) in the event that HRHI, Gaming Borrower, any other Borrower or any
Affiliate thereof shall be the Liquor Manager, if HRHI, Gaming Borrower, such
other Borrower or such Affiliate thereof shall fail to provide liquor management
services for the Hotel/Casino Property following an Event of Default, a
foreclosure of the Mortgage or a deed in lieu of foreclosure, as and to the
extent required (A) as to HRHI, pursuant to Sections 5(a) or 5(b) of the
Assignment of Liquor Management Agreement, as applicable, and (B) as to Gaming
Borrower, any other Borrower or any Affiliate thereof, pursuant to
Section 5.1.23(c) hereof;
(xvi) in connection with the $250,000.00 lease termination fee pursuant to
Section 3.2(B) of that certain Lease by and between PM Realty, LLC and HRHI, as
landlord, and Mr. Chow of Las Vegas, LLC, as tenant, dated December 24, 2004;
(xvii) as a result of the imposition of any tax provided in NRS §§375.020 and
375.023 with respect to the merger transaction contemplated under the Merger
Agreement and/or the subsequent conveyance of the Hotel/Casino Property (i) to
HRHH Gaming Junior Mezz, LLC, and then (ii) to HRHH Gaming Senior Mezz, LLC, and
then (iii) to Hotel/Casino Borrower, provided, however, that any liability under
this clause (xvii) shall terminate upon the payment in full of the Debt;
(xviii) as a result of Adjacent Borrower selling or attempting to sell any
Partial Release Parcel (including, without limitation, the sale of approximately
11.1 acres that occurred on August 1, 2008, regardless of whether such property
meets the definition of a “Partial Release Parcel” under this Agreement) in
accordance with the procedures set forth in Section 2.5.1(f) hereof, as
applicable, rather than pursuant to a customary direct deed transfer, including,
without limitation, (A) the imposition of any tax (including interest and
penalties) provided in NRS §§375.020 and 375.023, (B) in connection with any
Bankruptcy Action filed by or against any Subsidiary Transferee prior to or
following the consummation of such sale, and/or (C) in connection with any delay
in accomplishing any of the steps identified in said Section 2.5.1(f) hereof, as
applicable;
(xix) the occurrence of an Event of Default under Section 8.1(a)(xvii)(A)
hereof.
Notwithstanding anything to the contrary in this Agreement, the Notes or any of
the other Loan Documents, (A) Lender shall not be deemed to have waived any
right which Lender may have under Section 506(a), 506(b), 1111(b) or any other
provisions of the Bankruptcy Code to file a claim for the full amount of the
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collateral shall continue to secure all of the Debt owing to Lender in
accordance with the Loan Documents, and (B) the Debt shall be fully recourse to
Borrowers in the event of: (i) any Borrower, HRHI or both Guarantors filing a
voluntary petition under the Bankruptcy Code or any other Federal or state
bankruptcy or insolvency law; (ii) the filing of an involuntary petition against
any Borrower, HRHI or both Guarantors under the Bankruptcy Code or any other
Federal or state bankruptcy or insolvency law by or on behalf of any Person
other than Lender and/or the Administrative Agent, and such petition is not
dismissed within ninety (90) days after filing, or any Borrower, or any
Affiliate of any of them who Controls any Borrower, or HRHI or both Guarantors,
solicit or cause to be solicited petitioning creditors for any involuntary
petition against any Borrower, HRHI or both Guarantors from any Person (other
than if requested to do so by or on behalf of Lender and/or the Administrative
Agent); (iii) any Borrower, HRHI or both Guarantors filing an answer consenting
to, or any Borrower, HRHI or both Guarantors, or any Affiliate of any of them
who Controls any Borrower, otherwise consenting to or acquiescing or joining in,
any involuntary petition filed against any Borrower, HRHI or both Guarantors, by
any other Person (other than if filed by or on behalf of Lender and/or the
Administrative Agent) under the Bankruptcy Code or any other Federal or state
bankruptcy or insolvency law; (iv) any Borrower, HRHI or both Guarantors, or any
Affiliate of any of them who Controls any Borrower, consenting to or acquiescing
or joining in an application for the appointment of a custodian, receiver,
trustee or examiner for any Borrower or any portion of any Property or any
portion of the IP (other than any such appointment at the request or petition of
Lender and/or the Administrative Agent); or (v) any Borrower, HRHI or both
Guarantors voluntarily making an assignment for the benefit of creditors (other
than Lender and/or the Administrative Agent), or admitting, in writing or in any
legal proceeding, its insolvency or inability to pay its debts as they become
due; unless, in the case of any of the foregoing clauses (i), (ii), (iii), (iv)
or (v) as it relates to or affects both Guarantors, one or more guarantors
acceptable to Lender in its sole discretion remains or becomes a guarantor of
the Loan.
Notwithstanding anything to the contrary in this Agreement or any other Loan
Document, and except for (1) Guarantors’ obligations under the Non-Recourse
Guaranty, the Closing Completion Guaranty and the Construction Completion
Guaranty, (2) HRHI’s obligations under the HRHI Guaranty, and (3) with respect
to the DLJ Guarantor, DLJ Merchant Banking Partners IV, L.P., MBP IV Plan
Investors, L.P., DLJMB HRH Co-Investments, L.P., DLJ Offshore Partners IV, L.P.,
and DLJ Merchant Banking Partners IV (Pacific), L.P. (such limited partnerships,
collectively, the “DLJMB Parties”) as provided in that certain commitment letter
of the DLJMB Parties dated as of November 6, 2007 addressed to the DLJ
Guarantor, no present or future Constituent Member in any Borrower, nor any
present or future shareholder, officer, director, employee, trustee,
beneficiary, advisor, member, partner, principal, participant or agent of or in
any Borrower or of or in any Person that is or becomes a Constituent Member in
any Borrower, shall have any personal liability, directly or indirectly, under
or in connection with this Agreement or any of the Loan Documents, or any
amendment or amendments to any of the foregoing made at any time or times,
heretofore or hereafter, and Lender on behalf of itself and its successors and
assigns, hereby waives any and all such personal liability. In addition, Lender,
for itself and its successors and assigns, acknowledges and agrees that neither
Borrowers, nor any Constituent Member, nor any other party, is assuming any
personal liability, directly or indirectly, under or in connection with any
agreement, lease, instrument, claim or right constituting a part of any Property
or the IP or to which any Property or the IP is now or hereafter subject, except
as may be expressly set forth therein.

 

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For purposes of this Agreement and each of the other Loan Documents, neither the
negative capital account of any Constituent Member in any Borrower nor any
obligation of any Constituent Member in any Borrower to restore a negative
capital account or to contribute or loan capital to any Borrower or to any other
Constituent Member in any Borrower shall at any time be deemed to be the
property or an asset of such Borrower (or any such other Constituent Member) and
neither Lender nor any of its successors or assigns shall have any right to
collect, enforce or proceed against any Constituent Member with respect to any
such negative capital account or obligation to restore, contribute or loan.
Section 9.5. Matters Concerning Manager and Liquor Manager.
9.5.1. If (a) an Event of Default occurs and is continuing, (b) without the
consent of Lender, Morgans Parent ceases to Control any Manager, unless
following such change of Control, each affected Manager still constitutes a
Qualified Manager, (c) any Manager shall become bankrupt or insolvent, or
(d) any Manager commits fraud, gross negligence, willful misconduct or
misappropriation of funds with respect to any Borrower and/or any Property
and/or the IP or any material default otherwise occurs under any Management
Agreement beyond any applicable grace and cure periods, the applicable Borrower
shall, at the request of Lender, terminate the applicable Management Agreement
and replace the Manager thereunder with a Qualified Manager pursuant to a
Replacement Management Agreement, it being understood and agreed that the
management fee for such Qualified Manager shall not exceed then prevailing
market rates.
9.5.2. If (a) an Event of Default occurs and is continuing, (b) without the
consent of Lender, HR Holdings ceases to Control the Liquor Manager, unless
following such change of Control, the Liquor Manager still constitutes a
Qualified Liquor Manager, (c) the Liquor Manager shall become bankrupt or
insolvent, or (d) the Liquor Manager commits fraud, gross negligence, willful
misconduct or misappropriation of funds with respect to Hotel/Casino Borrower
and/or the Hotel/Casino Property or any material default otherwise occurs under
the Liquor Management Agreement beyond any applicable grace and cure periods,
Hotel/Casino Borrower shall, at the request of Lender, terminate the Liquor
Management Agreement and replace the Liquor Manager thereunder with a Qualified
Liquor Manager pursuant to a Replacement Liquor Management Agreement, it being
understood and agreed that the management fee for such Qualified Liquor Manager
shall not exceed then prevailing market rates; provided, however, that in no
event shall Hotel/Casino Borrower be required to terminate such Liquor Manager
if such immediate termination would require cessation of liquor-related
activities at any of the Properties and, in such event, (i) such termination
shall occur immediately upon the ability of Hotel/Casino Borrower to transfer
such liquor operations to a Qualified Liquor Manager as required herein, and
(ii) Hotel/Casino Borrower shall, at its sole cost and expense, diligently
pursue the engagement and licensing of a replacement Qualified Liquor Manager.
Section 9.6. Matters Concerning Gaming Operator. If (a) the Gaming Operator
commits fraud, gross negligence or willful misconduct with respect to the
Hotel/Casino Property or any material default otherwise occurs under the Casino
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applicable grace and cure periods, or (b) the Gaming Operator (i) has its gaming
license suspended or revoked, (ii) allows its gaming license to lapse, or
(iii) may not lawfully operate gaming at the Hotel/Casino Property pursuant to
any Legal Requirements or the order of any Governmental Authority, Hotel/Casino
Borrower shall, at the request of Lender and to the extent permitted by
applicable Legal Requirements and the requirements of any Gaming Authorities,
terminate the Casino Component Lease and replace the Gaming Operator with a
Qualified Gaming Operator pursuant to a new gaming lease or similar agreement
and a new recognition agreement, in each instance reasonably acceptable to
Lender; provided, however, that in no event shall Hotel/Casino Borrower be
required to terminate such Gaming Operator if such immediate termination would
require cessation of gaming-related activities at the Hotel/Casino Property and,
in such event, (A) such termination shall occur immediately upon the ability of
Hotel/Casino Borrower to transfer such gaming operations to a Qualified Gaming
Operator as required herein, and (B) Hotel/Casino Borrower shall, at its sole
cost and expense, diligently pursue the engagement and licensing of a
replacement Qualified Gaming Operator.
Section 9.7. Servicer. (a) At the option of Lender, the Loan may be serviced by
a servicer/trustee (the “Servicer”) selected by Lender and Lender may delegate
all or any portion of its responsibilities under this Agreement and the other
Loan Documents to the Servicer pursuant to a servicing agreement (the “Servicing
Agreement”) between Lender and Servicer. Borrowers shall not be responsible for
any set up fees or any other initial costs relating to or arising under the
Servicing Agreement nor shall Borrowers be responsible for payment of the
monthly servicing fee due to the Servicer under the Servicing Agreement.
(b) Lender shall endeavor in good faith (without liability for failure to do so)
to provide Borrowers with notification of any change in the Person servicing the
Loan; provided that it is expressly acknowledged and agreed by Lender that it
shall not constitute a Default or Event of Default hereunder if due to such
failure to provide notification Borrowers send any payments required to be made
hereunder to Lender or any predecessor Person servicing the Loan.
Section 9.8. Restructuring of Loan. Lender, without in any way limiting Lender’s
other rights hereunder, in its sole and absolute discretion, shall have the
right at any time, at Lender’s sole cost and expense, to require Borrowers to
restructure the Loan or any of the Components into additional multiple notes
(which may include component notes and/or senior and junior notes) and/or to
create participation interests in the Loan or any of the Components, which
restructuring may include reallocation of principal amounts of the Loan and/or
any of the Components, the First Mezzanine Loan, the Second Mezzanine Loan
and/or the Third Mezzanine Loan and/or the restructuring of a portion of the
Loan and/or any of the Components, the First Mezzanine Loan, the Second
Mezzanine Loan and/or the Third Mezzanine Loan to one or more of the foregoing
or to one or more additional mezzanine loans (each, a “New Mezzanine Loan”) to
the direct and/or indirect owners of the equity interests in Borrowers as
reasonably, mutually determined by Lender and Borrowers and that are direct or
indirect subsidiaries of HR Holdings, secured by a pledge of such interests, the
establishment of different interest rates for the Loan and/or any of the
Components, the First Mezzanine Loan, the Second Mezzanine Loan, the Third
Mezzanine Loan and any New Mezzanine Loan(s) and the payment of the Loan and/or
any of the Components, the First Mezzanine Loan, the Second Mezzanine Loan, the
Third Mezzanine Loan and any New Mezzanine Loan(s) in such order of priority as
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by Lender; provided, that (i) the total amounts of the Reduced Acquisition Loan,
the Construction Loan, the First Mezzanine Loan, the Second Mezzanine Loan, the
Third Mezzanine Loan and any New Mezzanine Loan(s) immediately following such
restructuring shall equal the amount of the Reduced Acquisition Loan, the
Construction Loan, the First Mezzanine Loan, the Second Mezzanine Loan, the
Third Mezzanine Loan and any previously existing New Mezzanine Loan(s), if any,
immediately prior to the restructuring, (ii) the weighted average spread above
LIBOR of the Reduced Acquisition Loan, the Construction Loan, the First
Mezzanine Loan, the Second Mezzanine Loan, the Third Mezzanine Loan and any New
Mezzanine Loan(s), if any, immediately following such restructuring, shall, in
the aggregate, equal the weighted average spread for all of the Reduced
Acquisition Loan, the Construction Loan, the First Mezzanine Loan, the Second
Mezzanine Loan, the Third Mezzanine Loan and any previously existing New
Mezzanine Loan(s), if any, immediately prior to the restructuring, and (iii) the
debt service payments on the Reduced Acquisition Loan, the Construction Loan,
the First Mezzanine Loan, the Second Mezzanine Loan, the Third Mezzanine Loan
and any New Mezzanine Loan(s), if any, as calculated immediately following such
restructuring, shall equal the aggregate debt service payments which would have
been payable under the Reduced Acquisition Loan, the Construction Loan, the
First Mezzanine Loan, the Second Mezzanine Loan, the Third Mezzanine Loan and
any previously existing New Mezzanine Loan(s), if any, had the restructuring not
occurred. Borrowers shall cooperate with all reasonable requests of Lender in
order to restructure the Loan and/or any of the Components, the First Mezzanine
Loan, the Second Mezzanine Loan and/or the Third Mezzanine Loan and/or to create
and/or restructure one or more New Mezzanine Loan(s), if applicable, and shall,
upon fifteen (15) Business Days written notice from Lender, which notice shall
include the forms of documents for which Lender is requesting execution and
delivery, (A) execute and deliver such documents, including, without limitation,
in the case of any New Mezzanine Loan, a mezzanine note, a mezzanine loan
agreement, a pledge and security agreement and a mezzanine cash management
agreement, (B) cause Borrowers’ counsel to deliver such legal opinions, and
(C) create such a bankruptcy remote borrower under each New Mezzanine Loan as,
in each of the case of clauses (A), (B) and (C) above, shall be reasonably
required by Lender and required by any Rating Agency in connection therewith,
all in form and substance reasonably satisfactory to Lender, including, without
limitation, the severance of this Agreement, the Mortgage and the other Loan
Documents if requested by Lender. Except as may be required in connection with a
Securitization pursuant to Section 9.1 hereof, Borrowers shall not be obligated
to pay any costs or expenses incurred in connection with any such restructuring
as set forth in this Section 9.8. In the event any Borrower fails to execute and
deliver such documents to Lender within five (5) Business Days following such
written notice by Lender, and Lender sends a second notice to Borrowers with
respect to the delivery of such documents containing a legend clearly marked in
not less than fourteen (14) point bold face type, underlined, in all capital
letters “POWER OF ATTORNEY IN FAVOR OF LENDER DEEMED EFFECTIVE FOR EXECUTION AND
DELIVERY OF DOCUMENTS IF NO RESPONSE WITHIN 5 BUSINESS DAYS”, each Borrower
hereby absolutely and irrevocably appoints Lender as its true and lawful
attorney, coupled with an interest, in its name and stead to make and execute
all documents necessary or desirable to effect such transactions, each Borrower
ratifying all that such attorney shall do by virtue thereof, if any Borrower
fails to execute and deliver such documents within five (5) Business Days of
receipt of such second notice. It shall be an Event of Default if any Borrower

 

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fails to comply with any of the terms, covenants or conditions of this
Section 9.8 after the expiration of five (5) Business Days after the second
notice thereof.
ARTICLE X.
MISCELLANEOUS
Section 10.1. Survival. This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto shall survive the making by Lender of the Loan and the execution
and delivery to Lender of the Notes, and shall continue in full force and effect
so long as all or any of the Debt is outstanding and unpaid unless a longer
period is expressly set forth herein or in the other Loan Documents. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the legal representatives, successors and assigns of such
party. All covenants, promises and agreements in this Agreement, by or on behalf
of any Borrower, shall inure to the benefit of the legal representatives,
successors and assigns of Lender.
Section 10.2. Lender’s Discretion. Whenever pursuant to this Agreement, Lender
exercises any right given to it to approve or disapprove, or any arrangement or
term is to be satisfactory to Lender, the decision of Lender to approve or
disapprove or to decide whether arrangements or terms are satisfactory or not
satisfactory shall (except as is otherwise specifically herein provided) be in
the sole discretion of Lender and shall be final and conclusive. Whenever this
Agreement expressly provides that Lender may not unreasonably withhold its
consent or its approval of an arrangement or term, such provisions shall also be
deemed to prohibit Lender from unreasonably delaying or conditioning such
consent or approval. Prior to a Securitization, whenever pursuant to this
Agreement the Rating Agencies are given any right to approve or disapprove, or
any arrangement or term is to be satisfactory to the Rating Agencies, the
decision of Lender to approve or disapprove or to decide whether arrangements or
terms are satisfactory or not satisfactory, based upon Lender’s determination of
Rating Agency criteria, shall be substituted therefor.
Section 10.3. Governing Law.
(a) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, THE LOAN WAS MADE BY
LENDER AND ACCEPTED BY BORROWERS IN THE STATE OF NEW YORK, AND THE PROCEEDS OF
THE LOAN DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE OF NEW YORK,
WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND
TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS
AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS) AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA,
EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, PRIORITY
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ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS IN ANY REAL PROPERTY INTEREST
CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL BE
GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE
APPLICABLE REAL PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST
EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK
SHALL GOVERN THE CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL LOAN DOCUMENTS
AND ALL OF THE OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO THE FULLEST
EXTENT PERMITTED BY LAW, EACH BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY
WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS
AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS, AND THIS AGREEMENT, THE NOTES
AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW
YORK GENERAL OBLIGATIONS LAW.
(b) NOTWITHSTANDING THE FOREGOING, THIS AGREEMENT IS SUBJECT TO THE GAMING LAWS.
LENDER EXPRESSLY ACKNOWLEDGES AND AGREES THAT ALL RIGHTS, REMEDIES, POWERS AND
OBLIGATIONS OF EACH PARTY UNDER THIS AGREEMENT MAY BE EXERCISED ONLY TO THE
EXTENT THAT THE EXERCISE THEREOF DOES NOT VIOLATE ANY APPLICABLE PROVISIONS OF
THE GAMING LAWS AND ONLY TO THE EXTENT THAT ANY APPLICABLE REQUIRED APPROVAL OF
ANY GAMING AUTHORITY (INCLUDING PRIOR APPROVALS) IS OBTAINED. NOTWITHSTANDING
THE FOREGOING, BORROWERS EXPRESSLY ACKNOWLEDGE AND AGREE THAT THE FACT THAT ANY
GAMING LAW OR THE LACK OF APPROVAL FROM ANY GAMING AUTHORITY MAY PREVENT ANY
BORROWER OR ANY OTHER PERSON FROM TAKING ANY ACTION OR FULFILLING ANY OBLIGATION
HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT WHICH RESULTS IN THE OCCURRENCE OF AN
EVENT OF DEFAULT AND/OR A CIRCUMSTANCE GIVING RISE TO RECOURSE LIABILITY UNDER
SECTION 9.4 HEREOF, SHALL NOT, IN ANY MANNER, LIMIT OR VITIATE OR BE DEEMED TO
LIMIT OR VITIATE SUCH EVENT OF DEFAULT OR SUCH CIRCUMSTANCE GIVING RISE TO
RECOURSE LIABILITY IN ANY MANNER WHATSOEVER.
(c) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR ANY BORROWER ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL, AT
LENDER’S OPTION, BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW
YORK, COUNTY OF NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL
OBLIGATIONS LAW AND, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH
BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE
AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND EACH
BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY

 

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SUIT, ACTION OR PROCEEDING. EACH BORROWER DOES HEREBY DESIGNATE AND APPOINT:
CT CORPORATION SYSTEM
111 EIGHTH AVENUE
NEW YORK, NEW YORK 10011
AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY
AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN
ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF
PROCESS UPON SAID AGENT AT SAID ADDRESS AND NOTICE OF SAID SERVICE MAILED OR
DELIVERED TO SUCH BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN
EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON SUCH BORROWER IN ANY SUCH SUIT,
ACTION OR PROCEEDING IN THE STATE OF NEW YORK. EACH BORROWER (I) SHALL GIVE
PROMPT NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT
HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE
AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE AGENT
AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF
PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED
AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT
LEAVING A SUCCESSOR.
Section 10.4. Modification, Waiver in Writing. No modification, amendment,
extension, discharge, termination or waiver of any provision of this Agreement,
or of either of the Notes, or of any other Loan Document, nor consent to any
departure by any Borrower therefrom, shall in any event be effective unless the
same shall be in a writing signed by the party against whom enforcement is
sought, and then such waiver or consent shall be effective only in the specific
instance, and for the purpose, for which given. Except as otherwise expressly
provided herein, no notice to, or demand on any Borrower, shall entitle such
Borrower or any other Borrower to any other or future notice or demand in the
same, similar or other circumstances.
Section 10.5. Delay Not a Waiver. Neither any failure nor any delay on the part
of Lender in insisting upon strict performance of any term, condition, covenant
or agreement, or exercising any right, power, remedy or privilege hereunder, or
under either of the Notes or under any other Loan Document, or under any other
instrument given as security therefor, shall operate as or constitute a waiver
thereof, nor shall a single or partial exercise thereof preclude any other
future exercise, or the exercise of any other right, power, remedy or privilege.
In particular, and not by way of limitation, by accepting payment after the due
date of any amount payable under this Agreement, either of the Notes or any
other Loan Document, Lender shall not be deemed to have waived any right either
to require prompt payment when due of all other amounts due under this
Agreement, either of the Notes or the other Loan Documents, or to declare a
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Section 10.6. Notices. Except as otherwise required by applicable law, all
notices, consents, approvals and requests required or permitted hereunder or
under any other Loan Document (each, a “Notice”) shall be given in writing and
shall be effective for all purposes if (a) hand delivered, (b) sent by reputable
overnight courier, (c) sent by (i) certified or registered United States mail,
postage prepaid, return receipt requested or (ii) expedited prepaid delivery
service, either commercial or United States Postal Service, with proof of
attempted delivery, or (d) sent by telecopier (with answer back acknowledged and
followed by a hard copy via one of the other methods described above), addressed
as follows (or to such other address and Person as shall be designated from time
to time by any party hereto, as the case may be, in a Notice to the other
parties hereto in the manner provided for in this Section 10.6):

         
 
  If to Lender:   Vegas HR Private Limited
 
      c/o GIC Real Estate, Inc.
 
      156 W. 56th Street
 
      Suite 1900
 
      New York, New York 10019
 
      Attention: Jesse Hom or Hard Rock Portfolio Manager
 
      Facsimile No.: (212) 468-1940
 
       
 
  with a copy to:   Dechert LLP
 
      90 State House Square
 
      12th Floor
 
      Hartford, CT 06103
 
      Attention: Laura Ciabarra, Esq.
 
      Facsimile No.: (860) 524-3930
 
            with a copy to Administrative Agent:
 
       
 
      TriMont Real Estate Advisors
 
      3424 Peachtree Rd, Suite 2200
 
      Atlanta, GA 30326
 
      Attention: Sean Donahue
 
      Facsimile No.: (404) 581-7798
 
       
 
      and at such time as Lender has notified Borrowers of a replacement
Administrative Agent, such replacement Administrative Agent’s address(es) for
Notice
 
       
 
  If to Borrowers:   Morgans Hotel Group Co.
 
      475 Tenth Avenue
 
      New York, New York 10018
 
      Re: Hard Rock
 
      Attention: Marc Gordon, Chief Investment Officer
 
      Facsimile No.: (212) 277-4201
 
       
 
  With a copy to:   Wachtell, Lipton, Rosen & Katz
 
      51 West 52nd Street

 

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      29th Floor
 
      New York, New York 10019
 
      Attention: Stephen Gellman, Esq.
 
      Facsimile No.: (212) 403-2000
 
       
 
  With a copy to:   DLJ Merchant Banking Partners
 
      11 Madison Avenue
 
      New York, New York 10010
 
      Attention: Ryan Sprott
 
      Facsimile No.: (212) 743-1667
 
       
 
  With a copy to:   Latham & Watkins LLP
 
      885 Third Avenue
 
      Suite 1000
 
      New York, New York 10022
 
      Attention: Michelle Kelban, Esq.
 
      Facsimile No.: (212) 751-4864
 
       
 
  With a copy to:   Latham & Watkins LLP
 
      633 West Fifth Street
 
      Suite 4000
 
      Los Angeles, California 90071
 
      Attention: Tom Sadler, Esq.
 
      Facsimile No.: (213) 891-8763

A Notice shall be deemed to have been given: in the case of hand delivery or
delivery by a reputable overnight courier, at the time of delivery; in the case
of registered or certified mail, when delivered or the first attempted delivery
on a Business Day; in the case of expedited prepaid delivery and telecopy, upon
the first attempted delivery on a Business Day; or in the case of telecopy, upon
sender’s receipt of a machine-generated confirmation of successful transmission
on a Business Day after advice by telephone to recipient that a telecopy Notice
is forthcoming; provided, that within three (3) Business Days thereafter, a hard
copy of such Notice shall have been delivered pursuant to the provisions of
clause (a), (b)or (c) of this Section 10.6. Any failure to deliver a Notice by
reason of a change of address not given in accordance with this Section 10.6, or
any refusal to accept a Notice, shall be deemed to have been given when delivery
was attempted. Any Notice required or permitted to be given by any party
hereunder or under any other Loan Document may be given by its respective
counsel. Additionally, any Notice required or permitted to be given by Lender
hereunder or under any other Loan Document may also be given by the Servicer.
Any Notice sent to one Borrower shall constitute and shall be deemed to
constitute such Notice to all Borrowers. Any notice given hereunder may also be
given via electronic mail; provided that no such notice shall be deemed to have
been given in accordance with the requirements of this Section 10.6 unless a
hard copy of such Notice shall have been delivered pursuant to the provisions of
clause (a), (b), or (c) of this Section 10.6.
Section 10.7. Trial by Jury. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
EACH BORROWER AND LENDER EACH HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY
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WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL
NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM,
COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY EACH BORROWER AND
LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE
AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. EACH PARTY IS
HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER BY THE OTHER.
Section 10.8. Headings. The Article and/or Section headings and the Table of
Contents in this Agreement are included herein for convenience of reference only
and shall not constitute a part of this Agreement for any other purpose.
Section 10.9. Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
Section 10.10. Preferences. Lender shall have the continuing and exclusive right
to apply or reverse and reapply any and all payments by Borrowers to any portion
of the Obligations of Borrowers hereunder. To the extent Borrowers make a
payment or payments to Lender, which payment or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds received, the Obligations hereunder or
part thereof intended to be satisfied shall be revived and continue in full
force and effect, as if such payment or proceeds had not been received by
Lender.
Section 10.11. Waiver of Notice. Each Borrower hereby expressly waives, and
shall not be entitled to, any notices of any nature whatsoever from Lender
except with respect to matters for which this Agreement or the other Loan
Documents specifically and expressly provide for the giving of notice by Lender
to Borrowers and except with respect to matters for which Borrowers are not,
pursuant to applicable Legal Requirements, permitted to waive the giving of
notice.
Section 10.12. Remedies of Borrowers. In the event that a claim or adjudication
is made that Lender or its agents have acted unreasonably or unreasonably
delayed acting in any case where by law or under this Agreement or the other
Loan Documents, Lender or such agent, as the case may be, has an obligation to
act reasonably or promptly, each Borrower agrees that neither Lender nor its
agents shall be liable for any monetary damages, and Borrowers’ sole remedies
shall be limited to commencing an action seeking injunctive relief or
declaratory judgment. The parties hereto agree that any action or proceeding to
determine whether Lender has acted reasonably shall be determined by an action
seeking declaratory judgment.
Section 10.13. Expenses; Indemnity. (a) Borrowers jointly and severally covenant
and agree to pay or, if Borrowers fail to pay, to reimburse, Lender, within ten
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notice from Lender, for all reasonable costs and expenses (including reasonable
attorneys’ fees and disbursements) incurred by Lender in connection with
(i) Borrowers’ ongoing performance of and compliance with Borrowers’ respective
agreements and covenants contained in this Agreement and the other Loan
Documents on their part to be performed or complied with after the Closing Date,
including, without limitation, confirming compliance with environmental, gaming
and insurance requirements; (ii) the negotiation, preparation, execution,
delivery and administration of any consents, amendments, waivers or other
modifications to this Agreement and the other Loan Documents and any other
documents or matters requested by or benefiting any Borrower; (iii) securing
Borrowers’ compliance with their obligations pursuant to the provisions of this
Agreement and the other Loan Documents; (iv) the filing and recording fees and
expenses, title insurance and reasonable fees and expenses of counsel for
providing to Lender all required legal opinions, and other similar expenses
incurred in creating and perfecting the Liens in favor of Lender pursuant to
this Agreement and the other Loan Documents; (v) all fees payable hereunder,
including, without limitation, the Administrative Agent Fee, the Unused Advance
Fee, the Exit Fee and the fees of the Construction Consultant; (vi) reviewing
and processing any requested Construction Loan Advance or Change Order;
(vii) dealing with any Letter of Credit delivered to Lender hereunder; (viii)
enforcing or preserving any of Lender’s rights, either in response to third
party claims or in prosecuting or defending any action or proceeding or other
litigation, in each case against, under or affecting any Borrower, this
Agreement, the other Loan Documents, any Property, the IP or any other security
given for the Loan; and (ix) enforcing any obligations of or collecting any
payments due from any Borrower under this Agreement or the other Loan Documents
or with respect to any Property or the IP or in connection with any refinancing
or restructuring of the credit arrangements provided under this Agreement in the
nature of a “work-out” or of any insolvency or bankruptcy proceedings; provided,
however, that Borrowers shall not be liable for the payment of any such costs
and expenses to the extent the same arise by reason of the gross negligence,
illegal acts, fraud or willful misconduct of Lender. Notwithstanding the
provisions set forth in this Section 10.13(a) or in any other provision of this
Agreement or the other Loan Documents, in the event that (A) Lender employs
counsel to collect the Debt, protect or foreclose the Mortgage or as otherwise
permitted in this Agreement and the other Loan Documents and (B) Lender has sold
or transferred any interests in either of the Notes, then Borrowers shall only
be responsible for the attorneys’ fees and expenses of the counsel of one
Lender.
(b) Borrowers shall, jointly and severally, indemnify, defend and hold harmless
Lender from and against any and all other liabilities, obligations,
out-of-pocket losses, actual damages (but not lost revenues, diminution in value
and other consequential damages), penalties, actions, judgments, third party
suits, third party claims, reasonable costs, reasonable expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
the reasonable fees and disbursements of counsel for Lender in connection with
any investigative, administrative or judicial proceeding commenced or
threatened, whether or not Lender shall be designated a party thereto), that may
be imposed on, incurred by, or asserted against Lender in any manner relating to
or arising out of (i) any breach by any Borrower of its obligations under, or
any material misrepresentation by any Borrower contained in, this Agreement or
the other Loan Documents, or (ii) the use or intended use of the proceeds of the
Loan (collectively, the “Indemnified Liabilities”); provided, however, that
Borrowers shall not have any obligation to Lender hereunder to the extent that
such Indemnified Liabilities arise from the gross negligence, illegal acts,
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indemnify, defend and hold harmless set forth in the preceding sentence may be
unenforceable because it violates any law or public policy, Borrowers shall pay
the maximum portion that they are permitted to pay and satisfy under applicable
law to the payment and satisfaction of all Indemnified Liabilities incurred by
Lender.
(c) Borrowers, jointly and severally, covenant and agree to pay for or, if
Borrowers fail to pay, to reimburse Lender for, any fees and expenses incurred
by any Rating Agency in connection with any consent, approval, waiver or
confirmation obtained from such Rating Agency and required pursuant to the terms
and conditions of this Agreement or any other Loan Document in connection with
any request or approval sought by Borrowers, and Lender shall be entitled to
require payment of such fees and expenses as a condition precedent to the
obtaining of any such consent, approval, waiver or confirmation; provided,
however, that Lender expressly acknowledges and agrees that Borrowers shall not
be required to pay any Rating Agency surveillance charges.
Section 10.14. Schedules and Exhibits Incorporated. The Schedules and Exhibits
annexed hereto are hereby incorporated herein as a part of this Agreement with
the same effect as if set forth in the body hereof.
Section 10.15. Offsets, Counterclaims and Defenses. Any assignee of Lender’s
interest in and to this Agreement, either of the Notes and the other Loan
Documents shall take the same free and clear of all offsets, counterclaims or
defenses which are unrelated to such documents which Borrowers may otherwise
have against any assignor of such documents, and no such unrelated counterclaim
or defense shall be interposed or asserted by any Borrower in any action or
proceeding brought by any such assignee upon such documents and any such right
to interpose or assert any such unrelated offset, counterclaim or defense in any
such action or proceeding is hereby expressly waived by each Borrower to the
extent permitted by applicable law.
Section 10.16. No Joint Venture or Partnership; No Third Party Beneficiaries.
(a) Borrowers and Lender intend that the relationships created hereunder and
under the other Loan Documents be solely that of borrower and lender. Nothing
herein or therein is intended to create a joint venture, partnership,
tenancy-in-common, or joint tenancy relationship between any Borrower and Lender
nor to grant Lender any interest in any Property or the IP other than that of
mortgagee, beneficiary or lender.
(b) This Agreement and the other Loan Documents are solely for the benefit of
Lender and Borrowers and nothing contained in this Agreement or the other Loan
Documents shall be deemed to confer upon anyone other than Lender and Borrowers
any right to insist upon or to enforce the performance or observance of any of
the obligations contained herein or therein. All conditions to the obligations
of Lender to make the Loan hereunder and/or to disbursements from the Reserve
Funds are imposed solely and exclusively for the benefit of Lender and no other
Person shall have standing to require satisfaction of such conditions in
accordance with their terms or be entitled to assume that Lender will refuse to
make the Loan and/or will refuse to make any disbursement from any Reserve Fund
in the absence of strict compliance with any or all thereof and no other Person
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to be a beneficiary of such conditions, any or all of which may be freely waived
in whole or in part by Lender if, in Lender’s sole discretion, Lender deems it
advisable or desirable to do so.
(c) Without limiting the generality of Section 10.16(a) hereof, Borrowers
expressly acknowledge and agree that: (i) DLJ Merchant Banking, Inc. is an
affiliate of Original Lender and various of its indirect subsidiaries and/or
affiliates own indirect ownership interests in each Borrower (the “DLJ
Entities”), and (ii) neither the Lender named herein nor any successor or assign
thereof shall have any liability to any Borrower as a result of such
relationship between Original Lender and the DLJ Entities, including, without
limitation, under any theory of lender liability.
(d) The benefits of this Agreement shall not inure to any third party, nor shall
this Agreement be construed to make or render Lender liable to any Trade
Contractors including any Major Contractors or others for goods and materials
supplied or work and labor furnished in connection with the construction or
rehabilitation of the Project or for debts or claims accruing to any such
Persons against Borrowers. Lender shall not be liable for the manner in which
any Construction Loan Advances under this Agreement may be applied by Borrowers,
any Major Contractor or any of Borrower’s other Trade Contractors.
Notwithstanding anything contained in the Loan Documents, or any conduct or
course of conduct by the parties hereto, before or after signing the Loan
Documents, this Agreement shall not be construed as creating any rights, claims
or causes of action against Lender, or any of its officers, directors, agents or
employees, in favor of any Major Contractor or other Trade Contractor, or any of
their respective creditors, or any other Person. Without limiting the generality
of the foregoing, Construction Loan Advances made directly to any Major
Contractor or other Trade Contractor pursuant to any requests for Construction
Loan Advances, whether or not such request is required to be approved by
Borrowers, shall not be deemed a recognition by Lender of a third-party
beneficiary status of any such Person.
(e) Observation, inspection and approvals by Lender of the Plans and
Specifications, the construction of the Project and/or the workmanship and
materials used therein shall impose no responsibility or liability of any nature
whatsoever on Lender or Lender’s Construction Consultant and no Borrower, Trade
Contractor or other interested Person, under any circumstances, shall be
entitled to rely upon such inspections and approvals by Lender or Lender’s
Construction Consultant for any reason. Approvals granted by Lender for any
matters covered under this Agreement shall be narrowly construed to cover only
the parties and facts identified in any such approval.
(f) All terms, provisions, covenants and other conditions of the obligations of
Lender to make Construction Loan Advances hereunder are imposed, and all funds
held by Lender pursuant to this Agreement are held, solely and exclusively for
the benefit of Lender. No Person, other than Borrowers, shall have standing to
require satisfaction of such terms, provisions, covenants and other conditions
in accordance with their terms; neither Borrowers nor any other Person shall be
entitled to assume that Lender will refuse to make Construction Loan Advances in
the absence of strict compliance with any or all of such terms, covenants and
other conditions; and no Person, other than Borrowers, shall be entitled to
require any particular application of such funds (but Borrowers shall be
entitled to require the application of such funds as provided in this
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circumstances, shall be deemed to be beneficiary of such terms, provisions,
covenants and other conditions, any or all of which may be freely waived, in
whole or in part, by Lender at any time if, in Lender’s discretion, Lender deems
it advisable or desirable to do so.
Section 10.17. Publicity. All news releases, publicity or advertising by any
Borrower or their Affiliates through any media intended to reach the general
public which refers to the Loan Documents or the financing evidenced by the Loan
Documents or to Lender, Credit Suisse or any of their Affiliates shall be
subject to the prior approval of Lender not to be unreasonably withheld,
conditioned or delayed. Notwithstanding the foregoing, disclosure required by
applicable state or federal securities laws, rules or regulations or other
applicable Legal Requirements, or as customarily and reasonably requested by any
Gaming Authorities, shall not be subject to Lender’s prior written approval.
Section 10.18. Waiver of Marshalling of Assets. To the fullest extent permitted
by law, each Borrower, for itself and its successors and assigns, waives all
rights to a marshalling of the assets of any Borrower, any Borrower’s partners
and others with interests in any Borrower, and of any Property or the IP, or to
a sale in inverse order of alienation in the event of foreclosure of the
Mortgage, and agrees not to assert any right under any laws pertaining to the
marshalling of assets, the sale in inverse order of alienation, homestead
exemption, the administration of estates of decedents, or any other matters
whatsoever to defeat, reduce or affect the right of Lender under the Loan
Documents to a sale of any Property and/or the IP for the collection of the Debt
without any prior or different resort for collection or of the right of Lender
to the payment of the Debt out of the net proceeds of the Properties and/or the
IP in preference to every other claimant whatsoever. In addition, to the fullest
extent permitted by law, each Borrower, for itself and its successors and
assigns, waives in the event of foreclosure of the Mortgage, any equitable right
otherwise available to such Borrower which would require the separate sale of
any Property and/or the IP or require Lender to exhaust its remedies against any
Property and/or the IP before proceeding against any other Property and/or the
IP; and further in the event of such foreclosure, each Borrower does hereby
expressly consent to and authorize, at the option of Lender, the foreclosure and
sale either separately or together of any combination of the Properties and the
IP.
Section 10.19. Waiver of Counterclaim. To the fullest extent permitted by law,
each Borrower hereby waives the right to assert a counterclaim, other than a
compulsory counterclaim, in any action or proceeding brought against it by
Lender or its agents or otherwise to offset any Obligations under the Loan
Documents. No failure by Lender to perform any of its obligations hereunder
shall be a valid defense to, or result in any offset against, any payments which
any Borrower is obligated to make under any of the Loan Documents.
Section 10.20. Conflict; Construction of Documents; Reliance. In the event of
any conflict between the provisions of this Agreement and any of the other Loan
Documents, the provisions of this Agreement shall control. The parties hereto
acknowledge that they were represented by competent counsel in connection with
the negotiation, drafting and execution of the Loan Documents and that such Loan
Documents shall not be subject to the principle of construing their meaning
against the party which drafted same. Each Borrower acknowledges that, with
respect to the Loan, such Borrower shall rely solely on its own judgment and
advisors in entering into the Loan without relying in any manner on any
statements, representations or recommendations of Lender or any parent,
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subject to any limitation whatsoever in the exercise of any rights or remedies
available to it under any of the Loan Documents or any other agreements or
instruments which govern the Loan by virtue of the ownership by it or any
parent, subsidiary or Affiliate of Lender of any equity interest any of them may
acquire in any Borrower, and each Borrower hereby irrevocably waives the right
to raise any defense or take any action on the basis of the foregoing with
respect to Lender’s exercise of any such rights or remedies. Each Borrower
acknowledges that Lender engages in the business of real estate financings and
other real estate transactions and investments which may be viewed as adverse to
or competitive with the businesses of Borrowers or their Affiliates.
Section 10.21. Brokers and Financial Advisors.
(a) Each Borrower hereby represents that neither it nor any of its Affiliates
has dealt with any financial advisors, brokers, underwriters, placement agents,
agents or finders in connection with the transactions contemplated by this
Agreement. Each Borrower hereby agrees to indemnify, defend and hold Lender
harmless from and against any and all third-party claims, liabilities,
out-of-pocket costs and reasonable expenses of any kind (including Lender’s
reasonable attorneys’ fees and expenses (but only for one (1) set of attorneys))
in any way relating to or arising from a claim by any Person that such Person
acted on behalf of any Borrower or an Affiliate of any Borrower in connection
with the transactions contemplated herein. The provisions of this
Section 10.21(a) shall survive the expiration and termination of this Agreement
and the payment of the Debt.
(b) Lender hereby represents that neither it nor any of its Affiliates has dealt
with any financial advisors, brokers, underwriters, placement agents, agents or
finders in connection with the transactions contemplated by this Agreement.
Lender hereby agrees to indemnify, defend and hold Borrowers harmless from and
against any and all third-party claims, liabilities, out-of-pocket costs and
reasonable expenses of any kind (including Borrowers’ reasonable attorneys’ fees
and expenses (but only for one (1) set of attorneys)) in any way relating to or
arising from a claim by any Person that such Person acted on behalf of Lender or
an Affiliate of Lender in connection with the transactions contemplated herein.
The provisions of this Section 10.21(b) shall survive the expiration and
termination of this Agreement and the payment of the Debt.
Section 10.22. Prior Agreements. This Agreement and the other Loan Documents
contain the entire agreement of the parties hereto and thereto in respect of the
transactions contemplated hereby and thereby, and all prior agreements among or
between such parties, whether oral or written, including, without limitation,
(i) the Commitment Letter dated May 11, 2006 between Morgans Hotel Group Co.,
MHG HR Acquisition Corp and Lender, and (ii) the Commitment Letter dated
December 22, 2006 between Morgans Hotel Group Co., MHG HR Acquisition Corp, DLJ
Merchant Banking, Inc. and Lender, are superseded by the terms of this Agreement
and the other Loan Documents.
Section 10.23. Joint and Several Liability. The representations, covenants,
warranties and obligations of Borrowers hereunder are joint and several.

 

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Section 10.24. Certain Additional Rights of Lender (VCOC). Notwithstanding
anything to the contrary contained in this Agreement, Lender shall have:
(a) subject to applicable Gaming Laws, the right to routinely consult with and
advise each Borrower’s management regarding the significant business activities
and business and financial developments of each Borrower; provided, however,
that such consultations shall not include discussions of environmental
compliance programs or disposal of hazardous substances. Consultation meetings
should occur on a regular basis (no less frequently than quarterly) with Lender
having the right to call special meetings at any reasonable times and upon
reasonable advance notice;
(b) the right, in accordance with the terms of this Agreement, to examine the
books and records of each Borrower at any reasonable times upon reasonable
notice;
(c) the right, in accordance with the terms of this Agreement, including,
without limitation, Section 5.1.11 hereof, to receive monthly, quarterly and
year-end financial reports, including balance sheets, statements of income,
shareholder’s equity and cash flow, a management report and schedules of
outstanding indebtedness; and
(d) the right, without restricting any other rights of Lender under this
Agreement (including any similar right), to approve any acquisition by any
Borrower of any other significant property (other than personal property
required for the day to day operation of any Property).
The rights described above in this Section 10.24 may be exercised by any entity
which owns and Controls, directly or indirectly, substantially all of the
interests in Lender.
Section 10.25. Future Funding, Participations and Assignment.
(a) Borrowers hereby acknowledge that Lender intends, at Lender’s sole cost and
expense, to transfer one or both of the Notes and the other Loan Documents to
one or more special purpose entities in one or more transactions (collectively,
with their respective successors, assigns and beneficiaries, the “Trust”) in
connection with the issuance of Securities. Whether or not any such transfer
occurs, it is intended that a participation agreement (the “Participation
Agreement”) will be executed and delivered pursuant to which (i) one or more
senior participation interests will be created representing a portion of the
principal amount of one or both of the Notes previously advanced, and (ii) one
or more junior participation interests (each, a “Junior Participation”) will be
created which may or may not represent funded portions of one or both of the
Notes and shall represent all future funding obligations under the Construction
Loan Note. Each Junior Participation will be transferred to one or more third
parties (in such capacity, each, a “Junior Holder”). The documentation
associated with the Construction Loan Note obligates Lender to make future
advances of funds to Borrowers with respect to the Properties (such obligation,
the “Future Funding Obligations”), it being understood and agreed that Future
Funding Obligations do not include obligations to fund Construction Loan
Advances from the Construction Loan Account in accordance with the terms and
conditions of Sections 3.3 and 3.4 hereof. From and after the date on which the
Remaining Construction Loan Advance has been made, there shall be no further
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and all references to the same or restrictions relating to the same shall cease
to have any further force or effect without the need for any amendment of any
Loan Document, including this Agreement. Lender will not transfer the Future
Funding Obligations to the Trust, but instead to one or more Junior Holders. By
its execution and delivery of this Agreement and its acceptance of the Loan on
the date hereof in accordance with the terms hereof, Borrowers hereby
acknowledge, confirm, reaffirm and agree that: (i) one or both of the Notes may
be transferred to the Trust; (ii) whether or not either of the Notes has been or
ever is transferred to the Trust, any and all Junior Participations will be
transferred to one or more Junior Holders; (iii) from and after the date of
transfer to the Junior Holders, the Future Funding Obligations will be solely
the obligation of the applicable Junior Holder(s), on the same terms and
conditions specified in the Construction Loan Note and the related Loan
Documents; and (iv) Borrowers will not have any right of offset or other claim
against any Trust (or its assigns or beneficiaries) as holder of any Note or any
interest therein in connection with the Future Funding Obligations or against
any Junior Holder, other than with respect to the Future Funding Obligations
associated with its Junior Participation.
(b) Lender and/or any Junior Holder may assign, transfer or sell all or any
portion of its Future Funding Obligation and shall thereafter be relieved of
such Future Funding Obligation, provided that such assignee at the time of
assignment assumes such Future Funding Obligation in writing in a manner
directly enforceable by, and reasonably acceptable to, Borrowers and such
assumption is delivered to Borrowers. At such time as Lender has so transferred
all of the Future Funding Obligations pursuant to this Section 10.25, the named
Lender hereunder shall have no Future Funding Obligations hereunder or under the
other Loan Documents. Notwithstanding the foregoing, Lender expressly agrees
that no matter how many participations Lender may create, assign, transfer or
sell with respect to the Future Funding Obligations, Borrowers shall only have
to deal with the Administrative Agent in connection with obtaining any Advance
under the Future Funding Obligations.
Section 10.26. Note Register. Administrative Agent shall maintain on behalf of
Borrowers pursuant to the last sentence of this Section 10.26, or cause to be
maintained, (i) a copy of each assignment of all or any portion of either of the
Notes (an “Assignment Agreement”) delivered to it and (ii) a register within the
meaning of US Treasury Regulation Section 5(f).103-1(c) (the “Register”), in
which it will register the name and address of Lender and the name and address
of each assignee of Lender under this Agreement, and the principal amount of the
Loan owing to each such Lender pursuant to the terms hereof and of each
Assignment Agreement. Borrowers, Lenders and the Administrative Agent may not
treat any Person whose name is not recorded in the Register pursuant to the
terms hereof as a Lender for the purposes of this Agreement, notwithstanding
notice to the contrary or any notation of ownership or other writing on any
Note. The Register shall be available for inspection by any Lender at
Administrative Agent’s principal place of business, at any reasonable time and
from time to time, upon reasonable prior notice. Borrowers hereby appoint
Administrative Agent as their agent for purposes of compliance with US Treasury
Regulation Section 5(f).103-1(c) and Administrative Agent hereby accepts such
appointment.
Section 10.27. Corporate Rate Policy. Borrowers shall provide lodging at the
Hotel/Casino Property for Lender’s employees, officers and directors (together
the “Corporate Persons”) visiting the Property in all instances for a rate of
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prevailing rate), provided that absent Borrowers reasonable consent thereto the
aggregate number of rooms to be provided per night in accordance with the terms
of this Section 10.27 shall not exceed (a) five (5) rooms on any Sunday night,
Monday night, Tuesday night, Wednesday night or Thursday night and (b) two
(2) rooms on any Friday night or Saturday night. Additionally, Borrower shall
upgrade each Corporate Person’s lodging accommodations to suite product, on a
space-available basis (with availability to be determined on the date of stay),
at no extra charge. Furthermore, Corporate Persons will be granted admission to
all events (excluding ticketed concerts) in any of the Property’s facilities, in
all instances without any charge (it being acknowledged and agreed that
Corporate Persons will be obligated to pay other generally applicable charges,
fees or expenses payable following admission).
ARTICLE XI.
MEZZANINE LOANS
Section 11.1. Mezzanine Loan Deliveries.
(a) Promptly after receipt, Borrowers shall deliver (or cause First Mezzanine
Borrowers, Second Mezzanine Borrowers or Third Mezzanine Borrowers, as
applicable, to deliver) to Lender a true, correct and complete copy of all
material notices, demands, requests or material correspondence (including
electronically transmitted items) received from (i) First Mezzanine Lender by
any First Mezzanine Borrower or any guarantor under the First Mezzanine Loan
Documents, (ii) Second Mezzanine Lender by any Second Mezzanine Borrower or any
guarantor under the Second Mezzanine Loan Documents, or (iii) Third Mezzanine
Lender by any Third Mezzanine Borrower or any guarantor under the Third
Mezzanine Loan Documents.
(b) Unless otherwise delivered to Lender pursuant to the provisions of
Section 5.1.11 hereof, Borrowers shall deliver (or cause First Mezzanine
Borrowers, Second Mezzanine Borrowers or Third Mezzanine Borrowers, as
applicable, to deliver) to Lender all of the financial statements, reports,
material certificates and related items delivered or required to be delivered by
(i) First Mezzanine Borrowers to First Mezzanine Lender under the First
Mezzanine Loan Documents as and when due under the First Mezzanine Loan
Documents, (ii) Second Mezzanine Borrowers to Second Mezzanine Lender under the
Second Mezzanine Loan Documents as and when due under the Second Mezzanine Loan
Documents, and (iii) Third Mezzanine Borrowers to Third Mezzanine Lender under
the Third Mezzanine Loan Documents as and when due under the Third Mezzanine
Loan Documents.
Section 11.2. Mezzanine Loan Estoppels.
(a) After written request by Lender but in no event more than two (2) times in
any twelve (12) month period, Borrowers shall (or shall cause First Mezzanine
Borrowers to) from time to time, use reasonable efforts to obtain from First
Mezzanine Lender such estoppel certificates with respect to the status of the
First Mezzanine Loan and compliance by First Mezzanine Borrowers with the terms
of the First Mezzanine Loan Documents as may reasonably be requested by Lender.
In the event or to the extent that First Mezzanine Lender is not legally
obligated to deliver such estoppel certificates and is unwilling to deliver the
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Borrowers shall not be in breach of this provision so long as Borrowers furnish
to Lender estoppels executed by Borrowers and First Mezzanine Borrowers
expressly representing to Lender the information requested by Lender regarding
the status of the First Mezzanine Loan and the compliance by First Mezzanine
Borrowers with the terms of the First Mezzanine Loan Documents. Borrowers hereby
jointly and severally indemnify Lender from and against all liabilities,
obligations, losses, damages, penalties, assessments, actions, or causes of
action, judgments, suits, claims, demands, costs, expenses (including reasonable
attorneys’ and other professional fees, whether or not suit is brought and
settlement costs) and reasonable disbursements of any kind or nature whatsoever
which may be imposed on, actually incurred by, or asserted against Lender based
in whole or in part upon any fact, event, condition or circumstance relating to
the First Mezzanine Loan which was misrepresented in any material respect by
Borrowers in, or which warrants disclosure and was omitted from, such estoppel
executed by Borrowers and First Mezzanine Borrowers.
(b) After written request by Lender but in no event more than two (2) times in
any twelve (12) month period, Borrowers shall (or shall cause Second Mezzanine
Borrowers to) from time to time, use reasonable efforts to obtain from Second
Mezzanine Lender such estoppel certificates with respect to the status of the
Second Mezzanine Loan and compliance by Second Mezzanine Borrowers with the
terms of the Second Mezzanine Loan Documents as may reasonably be requested by
Lender. In the event or to the extent that Second Mezzanine Lender is not
legally obligated to deliver such estoppel certificates and is unwilling to
deliver the same, or is legally obligated to deliver such estoppel certificates
but breaches such obligation, then Borrowers shall not be in breach of this
provision so long as Borrowers furnish to Lender estoppels executed by Borrowers
and Second Mezzanine Borrowers expressly representing to Lender the information
requested by Lender regarding the status of the Second Mezzanine Loan and the
compliance by Second Mezzanine Borrowers with the terms of the Second Mezzanine
Loan Documents. Borrowers hereby jointly and severally indemnify Lender from and
against all liabilities, obligations, losses, damages, penalties, assessments,
actions, or causes of action, judgments, suits, claims, demands, costs, expenses
(including reasonable attorneys’ and other professional fees, whether or not
suit is brought and settlement costs) and reasonable disbursements of any kind
or nature whatsoever which may be imposed on, actually incurred by, or asserted
against Lender based in whole or in part upon any fact, event, condition or
circumstance relating to the Second Mezzanine Loan which was misrepresented in
any material respect by Borrowers in, or which warrants disclosure and was
omitted from, such estoppel executed by Borrowers and Second Mezzanine
Borrowers.
(c) After written request by Lender but in no event more than two (2) times in
any twelve (12) month period, Borrowers shall (or shall cause Third Mezzanine
Borrowers to) from time to time, use reasonable efforts to obtain from Third
Mezzanine Lender such estoppel certificates with respect to the status of the
Third Mezzanine Loan and compliance by Third Mezzanine Borrowers with the terms
of the Third Mezzanine Loan Documents as may reasonably be requested by Lender.
In the event or to the extent that Third Mezzanine Lender is not legally
obligated to deliver such estoppel certificates and is unwilling to deliver the
same, or is legally obligated to deliver such estoppel certificates but breaches
such obligation, then Borrowers shall not be in breach of this provision so long
as Borrowers furnish to Lender estoppels executed by Borrowers and Third
Mezzanine Borrowers expressly representing to Lender the information requested
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and the compliance by Third Mezzanine Borrowers with the terms of the Third
Mezzanine Loan Documents. Borrowers hereby jointly and severally indemnify
Lender from and against all liabilities, obligations, losses, damages,
penalties, assessments, actions, or causes of action, judgments, suits, claims,
demands, costs, expenses (including reasonable attorneys’ and other professional
fees, whether or not suit is brought and settlement costs) and reasonable
disbursements of any kind or nature whatsoever which may be imposed on, actually
incurred by, or asserted against Lender based in whole or in part upon any fact,
event, condition or circumstance relating to the Third Mezzanine Loan which was
misrepresented in any material respect by Borrowers in, or which warrants
disclosure and was omitted from, such estoppel executed by Borrowers and Third
Mezzanine Borrowers.
Section 11.3. Intercreditor Agreement. Borrowers hereby acknowledge and agree
that (a) the Intercreditor Agreement entered into by and among Lender, First
Mezzanine Lender, Second Mezzanine Lender and Third Mezzanine Lender will be
solely for the benefit of Lender, First Mezzanine Lender, Second Mezzanine
Lender and Third Mezzanine Lender, (b) none of (i) any of the Borrowers,
(ii) any First Mezzanine Borrower, (iii) any Second Mezzanine Borrower, or
(iv) any Third Mezzanine Borrower shall be intended third-party beneficiaries of
any of the provisions therein, and (c) none of (i) any of the Borrowers,
(ii) any First Mezzanine Borrower, (iii) any Second Mezzanine Borrower, or
(iv) any Third Mezzanine Borrower shall have any rights thereunder or shall be
entitled to rely on any of the provisions contained therein. None of Lender,
First Mezzanine Lender, Second Mezzanine Lender or Third Mezzanine Lender shall
have any obligation to disclose to Borrowers the contents of the Intercreditor
Agreement. Borrowers’ obligations hereunder are and will be independent of the
Intercreditor Agreement and shall remain unmodified by the terms and provisions
thereof.
ARTICLE XII.
GAMING PROVISIONS
Section 12.1. Operation of Casino Component.
(a) Borrowers shall (i) observe, perform and enforce the obligations imposed
under the Casino Component Lease or any similar replacement Lease for purposes
of operating the Casino Component in a commercially reasonable manner and in a
manner not to impair the value of the Casino Component or the Hotel/Casino
Property, (ii) not amend, terminate or modify the Casino Component Lease or any
similar replacement Lease for purposes of operating the Casino Component without
Lender consent other than modifications of a ministerial or non-monetary nature;
(iii) not permit Hotel/Casino Borrower to collect any of the rents or other
payments due under the Casino Component Lease more than one (1) month in advance
and (iv) not assign its interests under the Casino Component Lease or any
similar replacement Lease for purposes of operating the Casino Component except
to the extent otherwise permitted by Section 5.2.10 hereof.
(b) Gaming Borrower shall operate the Casino Component pursuant to the Casino
Component Lease and in accordance with all Gaming Laws and all other applicable
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(c) Borrowers shall maintain all Gaming Licenses (in the name of Gaming
Borrower), Operating Permits and Governmental Approvals necessary for the lawful
operation of the Casino Component as a casino consistent with Comparable
Hotel/Casinos and use its commercially reasonable efforts to operate the Casino
Component in a manner designed to maximize revenues from the Properties in the
aggregate. No Borrowers shall take, permit or omit any action that would
adversely affect the status or good standing of Gaming Borrower under such
Operating Permits, Gaming Licenses or Governmental Approvals.
(d) Borrowers hereby acknowledge and agree that the Casino Component Lease and
any and all rights and interests (whether choate or inchoate and including,
without limitation, all mechanic’s and materialmen’s liens under applicable law)
owned, claimed or held, by Gaming Borrower thereunder or otherwise in and to the
Casino Component, shall be in all respects subordinate and inferior to the liens
and security interests created, or to be created, for the benefit of Lender
under the Loan Documents, and securing the repayment of the Notes and the
performance of the Obligations, and all renewals, extensions, increases,
supplements, amendments, modifications or replacements thereof.
(e) Borrowers hereby agree that (i) upon the occurrence and during the
continuance of an Event of Default and at the request of Lender, Gaming Borrower
shall continue to perform all of its obligations under the terms of the Casino
Component Lease with respect to the Casino Component, (ii) upon and after
foreclosure, deed in lieu of foreclosure or other similar transfer of the Casino
Component to a Lender Successor Owner, Gaming Borrower shall (A) recognize such
Lender Successor Owner as the lessor under the Casino Component Lease, (B) not
exercise any right to terminate the Casino Component Lease, and (C) at the
request of such Lender Successor Owner, continue to operate and manage the
Casino Component and maintain all applicable Gaming Licenses with respect to the
Casino Component for a period not to exceed fifteen (15) months after the
effective date of such transfer to such Lender Successor Owner (which period
shall in all events terminate upon Lender Successor Owner’s appointment of a new
gaming operator possessing all Gaming Licenses and other Governmental Approvals
necessary to conduct all gaming operations at the Hotel/Casino Property, subject
to Gaming Borrower’s obligation to transfer its responsibilities under the
Casino Component Lease to such new gaming operator and to reasonably cooperate
with the transition of the gaming operations from Gaming Borrower to such new
gaming operator), in accordance with the terms of the Casino Component Lease;
provided that such Lender Successor Owner shall be obligated to pay a then
market rate casino management fee which is reasonable and customary for similar
casinos in Las Vegas, Nevada, and (iii) at any time after foreclosure, deed in
lieu of foreclosure or other similar transfer of the Casino Component to a
Lender Successor Owner, at the option of such Lender Successor Owner exercised
by written notice to Gaming Borrower, such Lender Successor Owner shall have the
right to terminate the Casino Component Lease without penalty or termination
fee.
(f) Upon the occurrence and during the continuance of an Event of Default,
Lender may elect, upon written notice, to require Gaming Borrower or any other
Borrower to surrender or relinquish one or more or all of the Gaming Licenses
held by such Person(s). If Gaming Borrower or such other Borrower fails or
refuses to so relinquish such Gaming License(s) within five (5) Business Days
after receipt of such written notice, then Lender is hereby appointed (which
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attorney in fact with full authority to surrender or relinquish each such Gaming
License on each such Borrower’s behalf, the foregoing power being irrevocable
and coupled with an interest.
(g) Gaming Borrower agrees to (i) execute such affidavits and certificates as
Lender shall reasonably require to further evidence the agreements herein
contained, (ii) on request from Lender, furnish Lender with copies of such
information as Hotel/Casino Borrower is entitled to receive under the Casino
Component Lease, and (iii) cooperate with Lender’s representative in any
inspection of all or any portion of the Casino Component from time to time at
reasonable times during business hours.
(h) Lender agrees to cooperate with all Gaming Authorities in connection with
the administration of its regulatory jurisdiction over the Gaming Operator,
Gaming Borrower and any other Person licensed by or registered with the Gaming
Authorities, including the provision of such documents or other information as
may be requested by the Gaming Authorities relating to the Casino Component
Lease or the Loan Documents. Additionally, Lender acknowledges and understands
that (a) it is subject to being called forward by the Gaming Authorities, in
their discretion, for licensing or a finding of suitability, (b) all rights,
remedies and powers provided in this Agreement may be exercised only to the
extent the exercise thereof does not violate any applicable Gaming Laws, and
(c) to the extent prior approval of the Gaming Authorities is required pursuant
to applicable Gaming Laws for the exercise, operation and effectiveness of any
remedy hereunder or under any other Loan Document, or the taking of any action
that may be taken by Lender hereunder or under any other Loan Document, such
remedy or action shall be subject to such prior approval of the Gaming
Authorities, but the foregoing acknowledgements shall not be read or construed,
in any manner or at any time, to qualify or limit any representation, warranty,
covenant, agreement or obligation of any Borrower herein, including, without
limitation, any of the same relating to the due authorization, execution,
delivery, performance and/or enforceability of any Loan Document, or any
assignment, issuance, granting or remedy evidenced, created or effected thereby.
Notwithstanding the foregoing, Borrowers expressly acknowledge and agree that
Lender shall not be liable to any Borrower or any other Person for any loss,
cost, damage, fine or other expense suffered by any Borrower or any other Person
resulting from Lender’s cooperation with, appearance before, or provision of
information or documents to, any Gaming Authority as contemplated in this
Section 12.1(h), except for Lender’s gross negligence, willful misconduct or
fraud.
Section 12.2. Gaming Liquidity Requirements. Borrowers shall furnish to Lender,
within five (5) Business Days following the end of each calendar month, an
Officer’s Certificate certifying as to the actual amount of the Gaming Liquidity
Requirement (including a calculation of the determination thereof) and the
Gaming Operating Reserve with respect to such month, including any changes to
the foregoing during such month, the foregoing to be in form and substance
reasonably acceptable to Lender (the “Monthly Gaming Requirement Certificate”).
Section 12.3. Cage Reserve, Casino Account, Increases to Minimum Balances.
12.3.1. Borrowers shall maintain the Casino Account as an Eligible Account and
the amounts on deposit therein (or in any replacement account thereto) may only
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days prior written notice to Lender, replace the Casino Account with another
Eligible Account, provided that no Event of Default has occurred and is then
continuing and, as a condition precedent thereto, Gaming Borrower shall deliver
to Lender a fully executed replacement Casino Account Control Agreement in form
and substance acceptable to Lender in its reasonable discretion.
12.3.2. Borrowers shall not use any funds comprising the Gaming Account for
purposes other than payment of Permitted Gaming Expenses and Borrowers shall not
transfer or withdraw (or cause or permit any party to transfer or withdraw) any
funds on deposit in the Gaming Account other than (a) transfers to the Lockbox
Account in accordance with the provisions of Section 2.6.1(c) of this Agreement
or (b) transfers or withdrawals pursuant to which the amounts so transferred or
deposited will be applied to Permitted Gaming Expenses (it being agreed that
such transfers or withdrawals described in this clause (b), shall only occur in
the event the funds then comprising the Gaming Account, together with any Prior
Day’s Cash Receipts to be deposited into the Gaming Account, are not in the
Gaming Borrower’s reasonable business judgment, after taking into consideration
the cash needs of the Casino Component, sufficient to satisfy such Permitted
Gaming Expenses). As used herein, “Permitted Gaming Expense” shall mean all
costs and expenses incurred, or payments or refunds to be made, in connection
with the operation of the Casino Component in the ordinary course of business,
but not expenses which are contemplated to be paid or reimbursed via
disbursements made pursuant to Section 2.6.2 hereof or funds on deposit in any
of the Reserve Accounts. In the event that any funds comprising the Gaming
Account are used for purposes other than Permitted Gaming Expenses or any cash
receipts attributable to gaming activities at the Property are transferred to
any account other than the Lockbox Account, Borrowers shall provide notice to
Lender on the same Business Day on which any Borrower shall obtain actual
knowledge of the same.
12.3.3. Gaming Borrower may from time to time request in writing that the
Minimum Gaming Account Balance be increased and Lender shall have the right to
accept or reject such request in its sole discretion, provided that if no Event
of Default shall have occurred and then be continuing, Lender shall not
unreasonably reject such request in the event Borrowers shall establish that
absent any such increase, Borrowers will not be in compliance with the Gaming
Liquidity Requirement or other applicable Gaming Laws.
ARTICLE XIII.
INTENTIONALLY DELETED
ARTICLE XIV.
AMENDMENT AND RESTATEMENT
Section 14.1. Amendment and Restatement. Borrowers and Lender hereby agree that
the Second Amended and Restated Loan Agreement is hereby amended and restated in
its entirety, and that from and after the date hereof, all of the terms and
conditions contained in this Agreement shall replace the terms and conditions of
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Agreement, it being understood and agreed that the execution of this Agreement
shall not impair the liens of any of the Loan Documents.
ARTICLE XV.
CONTRIBUTION AGREEMENT
Section 15.1. Contribution Generally. As a result of the transactions
contemplated by this Agreement, each individual Borrower may benefit, directly
and indirectly, from the payment of the Debt and the performance of the
Obligations by other Borrowers (or the application of the collateral owned by
such other Borrowers to the payment of the Debt or the performance of the
Obligations) and, in consideration therefor, each Borrower (i) desires to enter
into an allocation and contribution agreement with the other Borrowers as set
forth in this Article XV to provide a fair and equitable agreement to make
contributions among each of the applicable Borrowers in the event any obligation
of any Borrower is performed by any other Borrower and (ii) agrees to
subordinate and subrogate any rights or claims it may have against other
Borrowers as and to the extent set forth in this Article XV.
Section 15.2. Reimbursement Contribution. In the event any one or more Borrowers
(any such Borrower, a “Funding Borrower”) pays or is deemed to have paid an
amount in excess of the principal amount set forth for such Borrower in
Schedule XXII (such principal amount, the “Allocable Principal Balance”) (any
such payment or deemed payment in excess of the applicable Allocable Principal
Balance, a “Contribution”) as a result of (a) such Funding Borrower’s payment of
the Debt and/or performance of any of the other Obligations and/or (b) Lender’s
realization on the Property, IP or other assets owned by such Funding Borrower
(whether by foreclosure, deed in lieu of foreclosure, private sale or other
means), then after (i) payment in full of the Loan and the satisfaction of all
of all Borrowers’ other obligations to Lender and (ii) payment in full of the
Mezzanine Loans, such Funding Borrower shall be entitled to contribution from
each benefited Borrower for the amount of the Contribution so paid, advanced or
benefited (any such contribution, a “Reimbursement Contribution”), up to such
benefited Borrower’s then current Allocable Principal Balance. The parties
acknowledge that the Allocable Principal Balances shown on Schedule XXII were
computed assuming the Loan is or has been fully advanced, and that each amount
shown in Schedule XXII shall be re-computed (or reduced) proportionally if
Reimbursement Contributions are required to be determined for purposes of this
Article XV at a time when the Loan has not been fully advanced. Any
Reimbursement Contributions required to be made hereunder shall, subject to the
balance of the provisions in this Article XV regarding payment, subordination
and subrogation, be made within ten (10) days after demand therefor.
Section 15.3. Defaulting Borrower. If a Borrower (a “Defaulting Borrower”) shall
have failed to make a Reimbursement Contribution as hereinabove provided, after
the later to occur of (a) payment of the Loan in full and the satisfaction of
all of all Borrowers’ other obligations to Lender and payment in full by the
Mezzanine Borrowers of the Mezzanine Loans or (b) the date which is 366 days
after the payment in full of the Loan, the Funding Borrower to whom such
Reimbursement Contribution is owed shall be subrogated to the rights of Lender
against such Defaulting Borrower, including the right to receive a portion of
such Defaulting Borrower’s Property, IP or assets in an amount equal to the
Reimbursement Contribution payment required hereunder that such Defaulting
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Lender returns any payments in connection with a bankruptcy of a Borrower, all
other Borrowers shall jointly and severally pay to Lender all such amounts
returned, together with interest at the Default Rate accruing from and after the
date on which such amounts were returned. For avoidance of doubt, until such
time as the Loan and the Mezzanine Loans are indefeasibly paid in full and
satisfied, each of the Borrowers hereby subjects and subordinates to payment of
the Loan to the Lender and to payment of distributions to its Member (in
accordance with the Cash Management Agreement) any and all rights of such
Borrower under this Article XV, including its right to Reimbursement
Contribution, and waives any right of subrogation such Funding Borrower may have
with respect thereto.
Section 15.4. Maximum Liability. Each Borrower shall be liable under this
Article XV with respect to the Obligations only for such total maximum amount
(if any) that would not render its Obligations hereunder or under any of the
Loan Documents subject to avoidance under Chapter 5 of the Bankruptcy Code or
any comparable provisions of any State law.
Section 15.5. Applicable Contributions. In the event that at any time there
exists more than one Funding Borrower with respect to any Contribution (in any
such case, the “Applicable Contribution”), then Reimbursement Contributions from
Defaulting Borrowers pursuant hereto shall be allocated among such Funding
Borrowers in proportion to the total amount of the Contributions made for or on
account of the other Borrowers by each such Funding Borrower pursuant to the
Applicable Contribution. In the event that at any time any Borrower pays an
amount hereunder in excess of the amount calculated pursuant to this
Section 15.5, that Borrower shall be deemed to be a Funding Borrower to the
extent of such excess and shall be entitled to a Reimbursement Contribution from
the other Borrowers in accordance with the provisions of this Section.
Section 15.6. Reimbursement Contribution as Asset. Each Borrower acknowledges
that the right to receive any Reimbursement Contributions in accordance with the
terms hereof shall constitute an asset of the Borrower to which any such
Reimbursement Contribution is owing.
Section 15.7. Subordination. No Reimbursement Contribution payments payable by a
Borrower pursuant to the terms of this Article XV shall be paid until all
amounts then due and payable by all of Borrowers to Lender, pursuant to the
terms of the Loan Documents, and all amounts then due and payable by any of the
Mezzanine Borrowers to any of the Mezzanine Lenders pursuant to the terms of any
of the Mezzanine Loan Documents, are paid in full in cash. Nothing contained in
this Article XV shall limit or affect in any way the Obligations of any Borrower
to Lender under this Agreement or any other Loan Documents.
Section 15.8. Waivers. With respect to the agreements set forth in this
Article XV only, each Borrower waives, to the extent permitted by applicable
law:
15.8.1. any right to require Lender to proceed against any other Borrower or any
other Person or to proceed against or exhaust any security held by Lender at any
time or to pursue any other remedy in Lender’s power before proceeding against
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15.8.2. the defense of the statute of limitations in any action against any
other Borrower or for the collection of any indebtedness or the performance of
any obligation under the Loan or the repayment of any Contribution and/or
collection of any Reimbursement Contribution;
15.8.3. any defense based upon any legal disability or other defense of any
other Borrower, any guarantor of any other person or by reason of the cessation
or limitation of the liability of any other Borrower or any guarantor from any
cause other than full payment of all sums payable under the Note, this Agreement
and any of the other Loan Documents;
15.8.4. any defense based upon any lack of authority of the officers, directors,
partners or agents acting or purporting to act on behalf of any other Borrower
or any principal of any other Borrower or any defect in the formation of any
other Borrower or any principal of any other Borrower;
15.8.5. any defense based upon any statute or rule of law which provides that
the obligation of a surety must be neither larger in amount nor in any other
respects more burdensome than that of a principal;
15.8.6. any defense based upon any failure by Lender to obtain collateral for
the indebtedness or failure by Lender to perfect a lien on any collateral;
15.8.7. presentment, demand, protest and notice of any kind;
15.8.8. any defense based upon any failure of Lender to give notice of sale or
other disposition of any collateral to any other Borrower or to any other person
or entity or any defect in any notice that may be given in connection with any
sale or disposition of any collateral;
15.8.9. any defense based upon any failure of Lender to comply with Applicable
Laws in connection with the sale or other disposition of any collateral,
including, without limitation, any failure of Lender to conduct a commercially
reasonable sale or other disposition of any collateral;
15.8.10. any defense based upon any election by Lender, in any bankruptcy
proceeding, of the application or non-application of Section 1111(6)(2) of the
Bankruptcy Code or any successor statute;
15.8.11. any defense based upon any use of cash collateral under Section 363 of
the Bankruptcy Code;
15.8.12. any defense based upon any agreement or stipulation entered into by
Lender with respect to the provision of adequate protection in any bankruptcy
proceeding;
15.8.13. any defense based upon any borrowing or any grant of a security
interest under Section 364 of the Bankruptcy Code;

 

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15.8.14. any defense based upon the avoidance of any security interest in favor
of Lender for any reason;
15.8.15. any defense based upon any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, liquidation or dissolution proceeding,
including any discharge of, or bar or stay against collecting, all or any of the
obligations evidenced by the Note or owing under any of the Loan Documents;
15.8.16. any defense or benefit based upon any Borrower’s, or any other party’s,
resignation of the portion of any obligation secured by the applicable Security
Instruments to be satisfied by any payment from any other Borrower or any such
party;
15.8.17. all rights and defenses arising out of an election of remedies by
Lender even though the election of remedies, such as non-judicial foreclosure
with respect to security for the Loan or any other amounts owing under the Loan
Documents, has destroyed any Borrower’s rights of subrogation and reimbursement
against any other Borrower;
15.8.18. any claim or other right which any Borrower might now have or hereafter
acquire against any other Borrower or any other person that arises from the
existence or performance of any obligations under the Note, this Agreement, the
Mortgage or the other Loan Documents, including, without limitation, any of the
following: (i) any right of subrogation, reimbursement, exoneration,
contribution, or indemnification; or (ii) any right to participate in any claim
or remedy of Lender against any other Borrower or any collateral security
therefor, whether or not such claim, remedy or right arises in equity or under
contract, statute or common law; and
15.8.19. any rights of Borrowers of subrogation, reimbursement, indemnification,
and/or contribution against any other Borrower or any other person or entity,
and any other rights and defenses that are or may become available to any
Borrower or any other person or entity by reasons of applicable law.
The statements and provisions set forth in this Article XV are intended to
effectuate, inter alia, a subordination agreement which shall be effective in
any bankruptcy or other similar proceeding involving any or all of the Borrowers
and/or the Property or any portion thereof.
ARTICLE XVI.
CERTAIN BANKRUPTCY WAIVERS
Section 16.1. Consideration. Each Borrower hereby acknowledges and agrees that
(i) it has received good and valuable consideration for its agreement to the
terms and provisions of this Agreement, including without limitation, this
Article XVI, (ii) its agreement to such terms and provisions is a material
condition and inducement to Lender’s willingness to enter into this Agreement
and the restructuring of the Loan contemplated herein, (iii) Lender has relied
upon the agreement of each such Borrower to such terms and provisions in
entering into this Agreement and the restructuring contemplated herein and
Lender would not have entered into this Agreement or the restructuring
contemplated herein without the agreement of each such Borrower to the terms and
provisions of this Agreement and this Article XVI in particular, (iv) it

 

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has been represented by competent counsel of its own choosing in the negotiation
of this Agreement and this Article XVI in particular, and it has discussed this
provisions with counsel and hereby knowingly and willingly waives its rights as
described in this Article XVI. This Agreement (and this Article XVI) may be
introduced as evidence in any judicial or other proceeding, without further
authentication or foundation, and shall constitute prima facie evidence of the
facts and agreements set forth herein.
Section 16.2. Waiver of Automatic Stay. To the maximum extent permitted by
applicable law, Lender is and shall be entitled to, and Borrowers and Guarantor
hereby consent to, Lender’s obtaining immediate relief from the stay imposed by
Section 362(a) of the Bankruptcy Code, as amended, in any proceeding under the
Bankruptcy Code involving Borrower or Guarantor or any similar stay in any other
similar proceeding involving Borrower or Guarantor. Each Borrower represents,
warrants and agrees that (i) it is a sophisticated commercial party experienced
in transactions similar to the transaction contemplated herein and is
represented by counsel of its own choosing, which counsel is experienced in
transactions similar to the transaction contemplated herein, as determined by
each such Borrower in its sole discretion, (ii) it has been given good and
valuable consideration for the waiver described in this Section 16.2, including
without limitation, Lender’s agreement to the restructuring described herein,
(iii) it has not entered into this Agreement with the intention, expectation or
belief that its performance in accordance with the terms of this Agreement will
adversely affect such Borrower’s secured or unsecured creditors other than
Lender, if any, and it is entering into this Agreement with a reasonable, good
faith expectation that it will be able to perform and satisfy its obligations to
its secured and unsecured creditors, if any, as and when such obligations become
due, and (iv) it has been advised of, and discussed with its counsel,
alternatives to entering into this Agreement, and it has determined that the
transactions described herein are more favorable to it than any such
alternatives and are in the best interests of its businesses and creditors.
Section 16.3. Consolidation. In furtherance of each Borrower’s intent to
maintain its separateness as set forth in Section 4.1.30 of this Agreement, in
the event of any bankruptcy or other similar proceeding, whether voluntary or
involuntary, no Borrower, Guarantor, Restricted Party or any Affiliate thereof
shall seek, consent to or acquiesce in any action or proceeding to substantively
consolidate the assets and/or liabilities of any Borrower (or any of the
collateral for the Loan) with the assets and/or liabilities of any other Person,
including, specifically, the First Mezzanine Borrower, the Second Mezzanine
Borrower, the Third Mezzanine Borrower or any Guarantor.
Section 16.4. Cooperation and Noninterference. Upon the occurrence and during
the continuance of any Event of Default, no Borrower shall take any action of
any kind or nature whatsoever, directly or indirectly, to delay, oppose, impede,
obstruct, hinder, enjoin, or otherwise interfere with, and Borrowers will
cooperate and comply with, the exercise by Lender of any and all of Lender’s
rights and remedies against Borrowers, Guarantor and/or the Property, the IP and
any other collateral for the Loan, this Agreement or the other Loan Documents,
including the rights and remedies of Lender set forth in this Article XVI.
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IN WITNESS WHEREOF, the parties hereto have caused this Third Amended and
Restated Loan Agreement to be duly executed by their duly authorized
representatives, all as of the day and year first above written.

            HRHH HOTEL/CASINO, LLC,
a Delaware limited liability company
      By:   /s/ Richard Szymanski         Name:   Richard Szymanski       
Title:   Vice President        HRHH CAFE, LLC,
a Delaware limited liability company
      By:   /s/ Richard Szymanski         Name:   Richard Szymanski       
Title:   Vice President        HRHH DEVELOPMENT, LLC,
a Delaware limited liability company
      By:   /s/ Richard Szymanski         Name:   Richard Szymanski       
Title:   Vice President        HRHH IP, LLC,
a Delaware limited liability company
      By:   /s/ Richard Szymanski         Name:   Richard Szymanski       
Title:   Vice President   

 

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            HRHH GAMING, LLC,
a Nevada limited liability company
      By:   /s/ Richard Szymanski         Name:   Richard Szymanski       
Title:   Vice President   

 

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            VEGAS HR PRIVATE LIMITED,
a Singapore corporation
      By:   /s/ Tia Miyamoto         Name:   Tia Miyamoto        Title:  
Authorized Signatory        By:   /s/ Jordan Bock         Name:   Jordan Bock   
    Title:   Authorized Signatory     

 

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Exhibits and Schedules Omitted