Exhibit 10.3
EXECUTION VERSION
 
FIRST AMENDED AND RESTATED SECOND MEZZANINE LOAN AGREEMENT
Dated as of December 24, 2009
among
HRHH GAMING JUNIOR MEZZ, LLC,
as Gaming Mezz Borrower,
HRHH JV JUNIOR MEZZ, LLC,
as JV Borrower,
and
NRFC WA HOLDINGS, LLC,
as Lender
 

 

 

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TABLE OF CONTENTS

              Page  
 
       
ARTICLE I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
    3  
 
       
Section 1.1 Definitions
    3  
Section 1.2 Principles of Construction
    49  
 
       
ARTICLE II. GENERAL TERMS
    49  
 
       
Section 2.1 Loan Commitment; Disbursement to Borrowers
    49  
Section 2.2 Interest Rate
    50  
Section 2.3 Loan Payment
    57  
Section 2.4 Prepayments
    59  
Section 2.5 Release of Property
    63  
Section 2.6 Cash Management
    66  
Section 2.7 Extensions of the Initial Maturity Date
    68  
Section 2.8 Exit Fee
    76  
 
       
ARTICLE III. CONDITIONS PRECEDENT
    76  
 
       
Section 3.1 Intentionally Deleted
    76  
Section 3.2 Submission of Construction Loan Advance Documents to Lender
    76  
 
       
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
    77  
 
       
Section 4.1 Representations of Borrowers
    77  
Section 4.2 Survival of Representations
    93  
Section 4.3 Definition of Borrowers’ Knowledge
    93  
 
       
ARTICLE V. COVENANTS OF BORROWERS
    94  
 
       
Section 5.1 Affirmative Covenants
    94  
Section 5.2 Negative Covenants
    112  
 
       
ARTICLE VI. INSURANCE; CASUALTY; CONDEMNATION; RESTORATION
    124  
 
       
Section 6.1 Insurance
    124  
Section 6.2 Casualty
    125  
Section 6.3 Condemnation
    126  
Section 6.4 Restoration
    127  
Section 6.5 Rights of Lender
    127  
 
       
ARTICLE VII. RESERVE FUNDS
    127  
 
       
Section 7.1 Intentionally Deleted
       
Section 7.2 Tax and Insurance Escrow Fund
    128  
Section 7.3 Replacement Reserve Fund
    128  
Section 7.4 Interest Reserve Fund
    129  
Section 7.5 Initial Renovation Reserve Fund
    129  

 

 

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              Page  
 
       
Section 7.6 General Reserve Fund
    129  
Section 7.7 Construction Loan Reserve Fund
    130  
Section 7.8 Working Capital Reserve Fund
    127  
Section 7.9 Reserve Funds, Generally
    131  
Section 7.10 Transfer of Mortgage Reserve Funds
    132  
 
       
ARTICLE VIII. DEFAULTS
    132  
 
       
Section 8.1 Event of Default
    132  
Section 8.2 Remedies
    137  
Section 8.3 Right to Cure Defaults
    139  
 
       
ARTICLE IX. SPECIAL PROVISIONS
    140  
 
       
Section 9.1 Sale of Note and Securitization
    140  
Section 9.2 Re-Dating
    142  
Section 9.3 Securitization Indemnification
    142  
Section 9.4 Exculpation
    145  
Section 9.5 Matters Concerning Managers and Liquor Manager
    150  
Section 9.6 Matters Concerning Gaming Operator
    150  
Section 9.7 Servicer
    151  
 
       
ARTICLE X. MISCELLANEOUS
    151  
 
       
Section 10.1 Survival
    151  
Section 10.2 Lender’s Discretion
    151  
Section 10.3 Governing Law
    152  
Section 10.4 Modification, Waiver in Writing
    153  
Section 10.5 Delay Not a Waiver
    154  
Section 10.6 Notices
    154  
Section 10.7 Trial by Jury
    156  
Section 10.8 Headings
    156  
Section 10.9 Severability
    156  
Section 10.10 Preferences
    156  
Section 10.11 Waiver of Notice
    156  
Section 10.12 Remedies of Borrowers
    156  
Section 10.13 Expenses; Indemnity
    157  
Section 10.14 Schedules Incorporated
    158  
Section 10.15 Offsets, Counterclaims and Defenses
    158  
Section 10.16 No Joint Venture or Partnership; No Third Party Beneficiaries
    158  
Section 10.17 Publicity
    160  
Section 10.18 Waiver of Marshalling of Assets
    160  
Section 10.19 Waiver of Counterclaim
    160  
Section 10.20 Conflict; Construction of Documents; Reliance
    160  
Section 10.21 Brokers and Financial Advisors
    161  
Section 10.22 Prior Agreements
    161  
Section 10.23 Joint and Several Liability
    161  
Section 10.24 Certain Additional Rights of Lender (VCOC)
    161  
Section 10.25 Note Register
    162  

 

 

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              Page  
 
       
ARTICLE XI. MORTGAGE LOAN AND MEZZANINE LOANS
    163  
 
       
Section 11.1 Mortgage Loan and Mezzanine Loan Deliveries
    163  
Section 11.2 Mortgage Loan and Mezzanine Loan Estoppels
    163  
Section 11.3 Mortgage Loan and First Mezzanine Loan Defaults
    165  
Section 11.4 Discussions with Mortgage Lender
    166  
Section 11.5 Independent Approval Rights
    166  
Section 11.6 Intercreditor Agreement
    167  
 
       
ARTICLE XII. GAMING PROVISIONS
    167  
 
       
Section 12.1 Operation of Casino Component
    167  
Section 12.2 Gaming Liquidity Requirements
    169  
Section 12.3 Cage Reserve, Casino Account, Increases to Minimum Balance
    170  
 
       
ARTICLE XIII. INTENTIONALLY DELETED
    170  
 
       
ARTICLE XIV.
    170  
 
       
Section 14.1 Amendment and Restatement
    170  
 
       
ARTICLE XV. CONTRIBUTION AGREEMENT
    170  
 
       
Section 15.1 Contribution Generally
    170  
Section 15.2 Reimbursement Contribution
    171  
Section 15.3 Defaulting Borrower
    171  
Section 15.3 Maximum Liability
    172  
Section 15.5 Applicable Contributions
    172  
Section 15.5 Reimbursement Contribution as Asset
    172  
Section 15.7 Subordination of Reimbursement Contribution
    172  
Section 15.8 Waivers
    172  
 
       
ARTICLE XVI. CERTAIN BANKRUPTCY WAIVERS
    174  
 
       
Section 16.1 Consideration
    174  
Section 16.2 Waiver of Automatic Stay
    175  
Section 16.2 Consolidation
    175  
Section 16.3 Cooperation and Noninterference
    175  

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
  —   Description of Pledged Interests
Schedule IV
  —   Allocated Loan Amounts
Schedule V
  —   Net Worth Requirements
Schedule VI
  —   Organizational Structure
Schedule VII
  —   IP

 

 

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Schedule VIII
  —   Litigation
Schedule IX
  —   Operating Permits
Schedule X
  —   Rent Roll
Schedule XI
  —   List of Mortgage Loan Documents
Schedule XII
  —   List of First Mezzanine Loan Documents
Schedule XIII
  —   Morton Indemnification Claims

 

 

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AMENDED AND RESTATED SECOND MEZZANINE LOAN AGREEMENT
THIS AMENDED AND RESTATED SECOND MEZZANINE LOAN AGREEMENT, dated as of
December 24, 2009 (as amended, restated, replaced, supplemented or otherwise
modified from time to time, this “Agreement”), among NRFC WA HOLDINGS, LLC, a
Delaware limited liability company, having an address at c/o NorthStar Realty
Finance Corp., 399 Park Avenue, 18th Floor, New York, New York 10022 (together
with its successors and assigns, “Lender”), as successor in interest to Column
Financial, Inc. (“Original Lender”), HRHH GAMING JUNIOR MEZZ, 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 (“Gaming Mezz Borrower”) and HRHH JV JUNIOR
MEZZ, 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 (“JV Borrower”; and each
of Gaming Mezz Borrower and JV Borrower, individually, a “Borrower”, and
collectively, “Borrowers”), jointly and severally.
W I T N E S S E T H:
WHEREAS, pursuant to that certain Loan Agreement, dated as of February 2, 2007
by and between Mortgage Borrowers and Mortgage Lender (as such terms are
hereinafter defined) (the “Original Mortgage Loan Agreement”), Mortgage Lender
made a loan to Mortgage Borrowers in the original principal amount of up to
$1,360,000,000.00 (the “Mortgage Loan”), subject to and in accordance with the
terms and conditions of the Original Mortgage Loan Agreement;
WHEREAS, Mortgage Borrowers and Mortgage Lender entered into that certain
Amended and Restated Loan Agreement dated as of November 6, 2007 (the “First
Amended and Restated Mortgage Loan Agreement”), which amended and restated the
Original Mortgage Loan Agreement in its entirety to, among other things,
evidence (i) the prepayment by Mortgage Borrowers of $350,000,000.00 of the
Mortgage Loan from the proceeds of the Loan and the Mezzanine Loans (as each
term is hereinafter defined) (each a “Mezzanine Prepayment”), and (ii) the
increase by Mortgage Lender of the maximum amount of the Mortgage Loan that may
be funded under the Construction Loan following the Closing Date by
$20,000,000.00;
WHEREAS, in connection with the Mezzanine Prepayment: (i) First Mezzanine Lender
made the First Mezzanine Loan to First Mezzanine Borrowers (as such terms are
hereinafter defined), subject to and in accordance with the terms and conditions
of the First Mezzanine Loan Agreement, dated as of November 6, 2007 (the
“Original First Mezzanine Loan Agreement”) and the other First Mezzanine Loan
Documents (as defined in the Original First Mezzanine Loan Agreement);
(ii) Lender made the Loan to Borrowers, subject to and in accordance with the
terms and conditions of the Second Mezzanine Loan Agreement, dated as of
November 6, 2007 (the “Original Loan Agreement”) and the other Loan Documents
(as defined in the Original Loan Agreement); and (iii) Third Mezzanine Lender
made the Third Mezzanine Loan to Third Mezzanine Borrowers (as such terms are
hereinafter defined), subject to and in accordance with the terms and conditions
of the Third Mezzanine Loan Agreement, dated as of November 6,

 

 

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2007 (the “Original Third Mezzanine Loan Agreement”) and the other Third
Mezzanine Loan Documents (as defined in the Original Third Mezzanine Loan
Agreement);
WHEREAS, Mortgage Borrowers and Mortgage Lender entered into that certain Second
Amended and Restated Loan Agreement, dated as of April 25, 2008 (the “Second
Amended and Restated Mortgage Loan Agreement”) in connection with Mortgage
Borrowers’ qualification for the Initial Construction Loan Advance (as
hereinafter defined), which Second Amended and Restated Mortgage Loan Agreement
amended and restated the First Amended and Restated Mortgage Loan Agreement in
its entirety;
WHEREAS, on August 1, 2008, Borrower prepaid a portion of the Loan with the
Release Parcel Release Price (as hereinafter defined), resulting in an
Outstanding Principal Balance (as hereinafter defined) of $88,978,170.66;
WHEREAS, as of the date hereof, Mortgage Borrowers and Mortgage Lender are
entering into that certain Third Amended and Restated Loan Agreement (as the
same may be amended, restated, replaced, supplemented or otherwise modified from
time to time, the “Mortgage Loan Agreement”), which Mortgage Loan Agreement
amends and restates the Second Amended and Restated Mortgage Loan Agreement in
its entirety to, among other things, grant Mortgage Borrowers additional
extension terms under the Mortgage Loan (the “Mortgage Loan Modification”);
WHEREAS, in connection with the Mortgage Loan Modification: (i) First Mezzanine
Lender is willing to modify the First Mezzanine Loan, subject to and in
accordance with the terms and conditions of the First Mezzanine Loan Agreement
and the other First Mezzanine Loan Documents (as such terms are hereinafter
defined); (ii) Lender is willing to modify the Loan, subject to and in
accordance with the terms and conditions of this Agreement and the other Loan
Documents (as hereinafter defined) and (iii) Third Mezzanine Lender is willing
to modify the Third Mezzanine Loan, subject to and in accordance with the terms
and conditions of the Third Mezzanine Loan Agreement and the other Third
Mezzanine Loan Documents (as such terms are hereinafter defined); and
WHEREAS, in connection with this Agreement and the modification of the Loan,
Borrowers, HRHI, Guarantor and Lender (as applicable) are herewith executing and
delivering, among other things, (i) the Ratification of Pledge and Security
Agreement (as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time, the “Ratification of Pledge Agreement”),
(ii) that certain Omnibus Amendment of Second Mezzanine Loan Documents (as the
same may be amended, restated, replaced, supplemented or otherwise modified from
time to time, the “First Loan Document Modification Agreement”), (iii) that
certain First Modification and Ratification of Guaranties (as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time, the “First Guaranty Modification Agreement”), (iv) that certain First
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 “First HRHI Modification Agreement”), and (v) that certain
Amended and Restated Second Mezzanine Promissory Note, dated the date hereof, in
the original principal amount of One Hundred Million and No/100 Dollars
($100,000,000), made by Borrowers in favor of Lender (as the same may be
amended, restated, replaced, severed,

 

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assigned, supplemented or otherwise modified from time to time, the “Note”),
which Note replaces, amends and restates the Original Note (as hereinafter
defined) in its entirety. The Note does not create any new or additional
indebtedness, but evidences the same indebtedness evidenced by the Original
Note.
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 Original 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.
“Accrued Interest” shall mean, collectively, the sum of (i) all of the Interest
Differential Amounts and (ii) interest on all of the Interest Differential
Amounts accruing and compounding in accordance with the provisions of
Section 2.2.1(b).
“Additional Insolvency Opinion” shall have the meaning set forth in
Section 4.1.30(d) hereof.
“Adjacent Borrower” shall mean HRHH Development, LLC, a Delaware limited
liability company, together with its successors and assigns.
“Adjacent Property” shall have the meaning assigned to such term in the Mortgage
Loan Agreement.
“Adjacent Property IP License” shall have the meaning set forth in
Section 5.1.26(b) hereof.
“Administrative Agent” shall have the meaning assigned to such term in the
Mortgage Loan Agreement.
“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.
“Affiliate IP License” shall have the meaning set forth in Section 5.1.26(d)
hereof.

 

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“Affiliate Release Parcel Purchaser” shall have the meaning set forth in Section
2.5.1(a) hereof.
“Affiliated IP Party” shall mean any subsidiary of any Loan Party hereafter
formed with Lender’s consent to hold the IP.
“Affiliated Manager” shall mean any Manager in which any Loan Party or any
Guarantor has, directly or indirectly, any legal, beneficial or economic
interest.
“Aggregate Outstanding Principal Balance” shall mean, as of any date, the sum of
the Outstanding Principal Balance, the Mortgage Loan Outstanding Principal
Balance, the First Mezzanine Loan Outstanding Principal Balance and the Third
Mezzanine Loan Outstanding Principal Balance.
“Allocable Principal Balance” shall have the meaning set forth in Section 15.2
hereof.
“Alteration Threshold Amount” shall have the meaning assigned to such term in
the Mortgage Loan Agreement.
“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 Mortgage
Borrowers or the applicable Manager(s) for the applicable Fiscal Year or other
period.
“Applicable Contribution” shall have the meaning set forth in Section 15.5
hereof.
“Applicable Interest Rate” shall mean interest calculated on the Outstanding
Principal Balance of the Loan at a rate equal to (a) LIBOR plus 2.25% or, as
applicable, the Prime Rate plus the Prime Rate Spread, with respect to all
payments due through and including the Payment Date occurring in February, 2011
and (b) the Monthly Interest Rate, with respect to all payments due from and
after the Payment Date occurring in March, 2011 through the Maturity Date;
provided, however, with respect to each interest payment on each Payment Date
occurring on or after March, 2011, interest on the Outstanding Principal Balance
of the Loan shall be payable at a rate equal to LIBOR plus 2.25% (and not the
Monthly Interest Rate), 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
Current Pay Interest Payment shall be equal to the Monthly Interest Payment.
“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

 

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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.
“Assigned Employees” shall have the meaning set forth in the Employee Lease.
“Assignment Agreement” shall have the meaning set forth in Section 10.25 hereof.
“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 Mortgage
Lender, as assignee, assigning to Mortgage Lender all of each such Mortgage
Borrower’s right, title and interest in and to the Leases and Rents of its
Property as security for the Mortgage Loan, as modified by the First Mortgage
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 Second
Mezzanine Assignment of Liquor Management and Employee Services Agreement and
Subordination of Management Fees, dated as of the Closing Date, by Borrowers, as
assignors, and Hotel/Casino Borrower, to Lender, and consented and agreed to by
HRHI, in its capacity as the Liquor Manager, as modified by the First 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 (All Properties)” shall mean that certain
Second Mezzanine Assignment of Management Agreement and Subordination of
Management Fees (All Properties), dated as of the Closing Date, by Borrowers, as
assignors, Café Borrower, Hotel/Casino Borrower and Adjacent Borrower, to
Lender, and consented and agreed to by the Affiliated Manager of such
Properties, as modified by the First Loan Document Modification Agreement, and
as the 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

 

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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.
“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) hereof.
“Borrower” and “Borrowers” shall have the meanings set forth in the introductory
paragraph hereto, together with its or their successors and permitted assigns.
“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 mean HRHH Cafe, LLC, a Delaware limited liability company,
together with its successors and assigns.
“Café Property” shall have the meaning assigned to such term in the Mortgage
Loan Agreement.
“Cage Reserve” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.
“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 2.6.3(a)
hereof.
“Cash Management Agreement” shall mean that certain Cash Management Agreement
(Second Mezzanine Loan), dated as of the Closing Date, by and among Borrowers,
Mortgage Borrowers and Lender, as modified by the First Loan Document
Modification Agreement, and as the same hereafter may be amended, restated,
replaced, supplemented or otherwise modified from time to time.
“Cash Profit and Loss Statement” shall have the meaning assigned to such term in
the Mortgage Loan Agreement.

 

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“Casino Account” shall have the meaning assigned to such term in the Mortgage
Loan Agreement or such comparable account as shall be established under this
Agreement in accordance with Section 12.3 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 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 have the meaning assigned to such term in the
Mortgage Loan Agreement.
“Casualty” shall have the meaning set forth in Section 6.2 hereof.
“Certificate of Occupancy” shall have the meaning assigned to such term in the
Mortgage Loan Agreement.
“Change Order” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.
“Closing Completion Guaranty” shall mean that certain Second Mezzanine Closing
Guaranty of Completion, dated as of the Closing Date, from Guarantors to Lender,
as modified by the First Guaranty Modification Agreement and the First 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 November 6, 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” shall mean (i) the Pledged Collateral and (ii) all other collateral
for the Loan granted in the Loan Documents.
“Collateral Assignment of Interest Rate Cap Agreement” shall mean that certain
Collateral Assignment of Interest Rate Cap Agreement (Second Mezzanine Loan),
dated as of the Closing Date, executed by Borrowers in connection with the Loan
for the benefit of Lender and acknowledged by the Counterparty, as modified by
the First Loan Document Modification Agreement, and as the same hereafter may be
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

 

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the Hotel/Casino Property as of February 2, 2007, 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 have the meaning assigned to such term in the Mortgage Loan
Agreement.
“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.
“Constituent Member” shall mean any direct member or partner in any Loan Party,
any Mezzanine 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 Loan
Party, any Mezzanine Borrower or any Guarantor.
“Construction Completion Guaranty” shall mean that certain Second Mezzanine
Construction Guaranty of Completion, dated as of May 30, 2008, from Guarantors
in favor of Lender, as modified and ratified by the First Loan Document
Modification Agreement and the First Guaranty Modification Agreement, and as the
same hereafter may be amended, restated, replaced, supplemented or otherwise
modified from time to time.
“Construction Loan” shall have the meaning assigned to such term in the Mortgage
Loan Agreement.
“Construction Loan Advance” shall have the meaning assigned to such term in the
Mortgage Loan Agreement.
“Construction Loan Debt” shall have the meaning assigned to such term in the
Mortgage Loan Agreement.
“Construction Loan Note” shall mean that certain Amended and Restated
Replacement Construction Loan Promissory Note, dated the date hereof, in the
principal amount of Six Hundred Twenty Million and No/100 Dollars
($620,000,000), made by Mortgage Borrowers in favor of Mortgage Lender, and as
the same hereafter may be amended, restated, replaced, supplemented or otherwise
modified from time to time.
“Construction Loan Outstanding Principal Balance” shall have the meaning
assigned to such term in the Mortgage Loan Agreement.
“Construction Loan Reserve Account” shall have the meaning assigned to such term
in the Mortgage Loan Agreement or such comparable account as shall be
established under this Agreement in accordance with Section 7.7 hereof.
“Construction Qualification Date” shall mean May 30, 2008.

 

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“Construction Schedule” shall have the meaning assigned to such term in the
Mortgage Loan Agreement.
“Contingency Line Item” shall have the meaning assigned to such term in the
Mortgage Loan Agreement.
“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.
“Corporate Persons” shall have the meaning set forth in Section 10.26 hereof.
“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 Interest Payment” shall mean (a) for the interest payment due on
January 1, 2010, $312,441.88 and (b) for the interest payments due on the
Payment Dates commencing in February, 2010 (and for each following interest
payment due hereunder), the amount of interest to be paid on each such Payment
Date based on interest calculated for the preceding Interest Period at the
Applicable Interest Rate.
“Debt” shall mean the outstanding principal amount set forth in, and evidenced
by, this Agreement and the Note, together with all interest accrued and unpaid
thereon (including, without limitation, the Accrued Interest, as provided in
this Agreement) and all other sums (including the Exit Fee, if applicable) due
to Lender in respect of the Loan under the Note, this Agreement, the Pledge
Agreement and the other Loan Documents.
“Debt Service” shall mean, with respect to any particular period of time,
interest payments due under this Agreement and the 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 interest that was due and payable
on (a) the interest that was due and payable or would have been due and payable,
as applicable, on the Outstanding Principal Balance as determined based on the
Monthly Interest Rate (without giving effect to any accrual of interest on the
Loan), (b) the Mortgage Loan Outstanding Principal Balance, (c) the interest
that would have been due

 

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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), and (d) the
interest that would have been due and 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 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 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 have the meaning assigned to such term in the Mortgage Loan
Agreement.
“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 Monthly Interest Rate.
For purposes of this definition, the term “Monthly Interest Rate” shall mean
interest on all amounts due under this Agreement (including, without limitation,
Debt Service, Accrued Interest and the Exit Fee) at a rate equal to (a) LIBOR
plus 7.20%.
“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.
“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.
“DLJ Guarantor” shall mean DLJ MB IV HRH, LLC, a Delaware limited liability
company, together with its successors and permitted assigns.
“DLJMB Commitment Letter” shall mean that certain Commitment Letter of the DLJMB
Parties, dated as of February 2, 2007, addressed to the DLJ Guarantor, as
modified by that certain Modification and Ratification of DLJMB Commitment
Letter and Consent, dated as of the Closing Date, by the DLJMB Parties in favor
of Lender, Mortgage Lender, First Mezzanine Lender and Third Mezzanine Lender,
and as ratified by that certain Consent of DLJMB Parties and Reaffirmation
Agreement, dated as of the date hereof, by the DLJMB Parties

 

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in favor of Lender, Mortgage Lender, First Mezzanine Lender and Third Mezzanine
Lender, and as the same hereafter may be amended, restated, replaced,
supplemented or otherwise modified from time to time.
“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 the Mortgage Loan
Agreement to be furnished to Mortgage 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.

 

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“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.
“Environmental Indemnity” shall mean that certain Second Mezzanine Environmental
Indemnity Agreement, dated as of the Closing Date, 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 as the same hereafter may be
amended, restated, replaced, supplemented or otherwise modified from time to
time.
“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 assigned to such term in the Mortgage
Loan Agreement.
“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,
Mortgage Event of Default or any Mezzanine Event of Default shall have occurred
and be continuing.
“Excess IP Release Price Proceeds” shall have the meaning set forth in Section
2.4.4(g) hereof.
“Exchange Act” shall have the meaning set forth in Section 9.3(a) hereof.
“Exchange Act Filing” shall have the meaning set forth in Section 5.1.11(e)
hereof.
“Excluded Taxes” shall mean, with respect to 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 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 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.

 

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“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 Loan Party and not arising out
of (a) the negligence, willful misconduct or illegal act of any Loan Party or
any Affiliate of any Loan Party, or (b) any cause or circumstance resulting from
the insolvency, bankruptcy or lack of funds of any Loan Party, any Guarantor or
any Affiliate of any Loan Party or any Guarantor.
“Existing FF&E Leases” shall have the meaning assigned to such term in the
Mortgage Loan Agreement.
“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 2.4.6
hereof.
“Extraordinary Expenses” shall have the meaning assigned to such term in the
Mortgage Loan Agreement.
“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
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 Mortgage 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 have the meaning assigned to such term in the Mortgage
Loan Agreement.
“First Amended and Restated Mortgage Loan Agreement” shall have the meaning set
forth in the recitals hereof.

 

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“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 hereof.
“First HRHI Modification Agreement” shall have the meaning set forth in the
recitals hereof.
“First Loan Document Modification Agreement” shall have the meaning set forth in
the recitals hereof.
“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 Collateral” shall mean the “Collateral” as defined in the First
Mezzanine Loan Agreement.
“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 Lender” shall mean Brookfield Financial, LLC – Series B (as
successor in interest to Column Financial, Inc.), in its capacity as holder of
the First Mezzanine Loan, together with its successors and assigns.
“First Mezzanine Loan” shall mean the loan in the original principal amount of
Two Hundred Million and No/100 Dollars ($200,000,000), made by First Mezzanine
Lender to First Mezzanine Borrowers pursuant to the First Mezzanine Loan
Agreement.
“First Mezzanine Loan Agreement” shall mean that certain First Amended and
Restated First Mezzanine Loan Agreement, dated as of the date hereof, among
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 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.

 

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“First Mezzanine Loan Outstanding Principal Balance” shall mean the “Outstanding
Principal Balance” as defined in the First Mezzanine Loan Agreement.
“First Mezzanine Obligations” shall mean the “Obligations” as defined in the
First Mezzanine Loan Agreement.
“First Mortgage Loan Document Modification Agreement” shall mean 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 the Closing Date, by and among Mortgage Borrowers and
Mortgage Lender.
“First Qualified Extended Maturity Date” shall mean February 9, 2011.
“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 15.2 hereof.
“GAAP” shall mean generally accepted accounting principles in the United States
of America as of the date of the applicable financial report.
“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 mean HRHH Gaming, LLC, a Nevada limited liability
company, together with its successors and assigns.
“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.
“General Reserve Account” shall have the meaning assigned to such term in the
Mortgage Loan Agreement or such comparable account as shall be established under
this Agreement in accordance with Section 7.6 hereof.
“General Reserve Fund” shall have the meaning assigned to such term in the
Mortgage Loan Agreement or such comparable fund as shall be established under
this Agreement in accordance with Section 7.6 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 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 Mortgage
Borrower or by any Manager (on behalf of any Mortgage Borrower) for the use,
occupancy or enjoyment of any of the Properties, or any part thereof, or
received by any Mortgage 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

 

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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 Mortgage 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 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 (i) any Mortgage Borrower from any of the Mortgage
Reserve Funds, (ii) any First Mezzanine Borrower from any of the First Mezzanine
Reserve Funds or (iii) to any Borrower from any of the Reserve Funds, as
applicable, and any interest earned thereon.
“Guaranties” shall mean, collectively, the Non-Recourse Guaranty, the Closing
Completion Guaranty, the Construction Completion Guaranty, and the HRHI
Guaranty, as the same hereafter may be amended, restated, replaced, supplemented
or otherwise modified from time to time.
“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(d)(D)
hereof.
“HCRI” shall have the meaning set forth in Section 4.1.37(b) hereof.
“Hotel/Casino Borrower” shall mean HRHH Hotel/Casino, LLC, a Delaware limited
liability company, together with its successors and assigns.
“Hotel/Casino Property” shall have the meaning assigned to such term in the
Mortgage Loan Agreement.
“HRHI” shall mean Hard Rock Hotel, Inc., a Nevada corporation, together with its
successors and permitted assigns.
“HRHI Guaranty” shall mean that certain Second Mezzanine HRHI Guaranty
Agreement, dated as of the Closing Date, from HRHI to Lender, as modified and
ratified by the

 

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First HRHI Modification Agreement and the First 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 Second Mezzanine Release of HRHI
Documents, dated as of the date hereof, by and between HRHI and Lender, and as
the same hereafter may be amended, restated, replaced, supplemented or otherwise
modified from time to time.
“HRHI Security Agreement” shall mean that certain Second Mezzanine HRHI Security
Agreement, dated as of the Closing Date, from HRHI in favor of Lender, securing
the HRHI Guaranty and covering certain assets of HRHI described therein, as
modified by the First HRHI Modification Agreement and the First Loan Document
Modification Agreement, and as the same hereafter may be amended, restated,
replaced, supplemented or otherwise modified from time to time.
“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),
officer, employee, partner, member (other than a “special member” or “springing
member”), manager, attorney or counsel of any Loan Party, any Mezzanine
Borrower, Gaming Member, HRHI or any Affiliate of any of them; (ii) a customer,
supplier or other person who

 

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derives any of its purchases or revenues from its activities with any Loan
Party, any Mezzanine 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 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 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 (provided such affiliate does not or did not own a
direct or indirect equity interest in any Borrower) 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 have the meaning assigned to such term
in the Mortgage Loan Agreement.
“Initial Debt Service Payment” shall mean $312,441.88 on January 1, 2010.
“Initial Maturity Date” shall mean February 9, 2010.
“Initial Renovation Reserve Account” shall have the meaning assigned to such
term in the Mortgage Loan Agreement or such comparable account as shall be
established under this Agreement in accordance with Section 7.5 hereof.
“Initial Renovation Reserve Fund” shall have the meaning assigned to such term
in the Mortgage Loan Agreement or such comparable fund as shall be established
under this Agreement in accordance with Section 7.5 hereof.
“Insolvency Opinion” shall mean that certain non-consolidation opinion letter
dated as of the Closing Date delivered by Latham & Watkins LLP in connection
with the Loan.
“Insurance Premiums” shall have the meaning set forth in Section 6.1(a) hereof.

 

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“Insurance Proceeds” shall have the meaning assigned to such term in the
Mortgage Loan Agreement.
“Intercreditor Agreement” shall mean that certain Intercreditor Agreement, dated
as of the Closing Date, by and among Lender, Mortgage Lender, First 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 Differential Amount” shall mean the aggregate sum of (i) the positive
difference, if any, between (a) interest payable on the Outstanding Principal
Balance for the period from December 9, 2009 to and excluding January 1, 2010 at
a rate of LIBOR plus 7.20% and (b) the Initial Debt Service Payment and (ii) the
positive difference, if any, between (a) the Current Pay Interest Payment with
respect to any Payment Date and (b) the Monthly Interest Payment payable on each
such date.
“Interest Period” shall mean, with respect to any Payment Date, the period
commencing on the first (1st) 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 assigned to such term in the
Mortgage Loan Agreement or such comparable account as shall be established under
this Agreement in accordance with Section 7.4 hereof.
“Interest Reserve Fund” shall have the meaning assigned to such term in the
Mortgage Loan Agreement or such comparable fund as shall be established under
this Agreement in accordance with Section 7.4 hereof.
“IP” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.
“IP Agreements” shall have the meaning set forth in Section 4.1.37(a) hereof.
“IP Borrower” shall mean HRHH IP, LLC, a Delaware limited liability company,
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 set forth in
Section 4.1.37(d) hereof.

 

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“IP Release Price” shall have the meaning assigned to such term in the Mortgage
Loan Agreement.
“IP Sale” shall have the meaning set forth in Section 2.5.3(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 and the
Collateral, 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 the
Collateral or any part of either of the foregoing, 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 Loan Party, at any time in force affecting such Property or the
Collateral or any part of either of the foregoing, 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.
“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.
“Liabilities” shall have the meaning set forth in Section 9.3(b) hereof.
“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.

 

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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 any mortgage, deed of trust, lien, pledge, negative pledge,
hypothecation, assignment, security interest, put, call, option, warrant, proxy,
voting agreement or any other encumbrance, charge or transfer of, on or
affecting any Loan Party, any of the Properties, the First Mezzanine Collateral,
the Collateral or any portion of either of the foregoing 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.
“Liquidation Event” shall have the meaning set forth in Section 2.4.3(a) 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 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.

 

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“Loan” shall mean the loan made by Lender to Borrowers pursuant to the Original
Loan Agreement in a maximum principal amount of One Hundred Million and No/100
Dollars ($100,000,000), which is evidenced by the Note.
“Loan Budget” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.
“Loan Documents” shall mean, collectively, this Agreement, the Note, the Pledge
Agreement, the Environmental Indemnity, the Assignment of Management Agreement
(All Properties), the Assignment of Liquor Management Agreement, 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 Assignment of Interest Rate Cap Agreement,
the Post-Closing Obligations Agreement, the Side Letter Agreement and all other
documents executed and/or delivered in connection with the Loan, as any of the
foregoing are modified by the First Loan Document Modification Agreement, the
First Guaranty Modification Agreement and the First HRHI Modification Agreement
(as applicable) and as the same hereafter may be amended, restated, replaced,
supplemented or otherwise modified from time to time.
“Loan Party” shall mean any of Borrowers, any of Mortgage Borrowers and/or any
of First Mezzanine Borrowers, and “Loan Parties” shall refer collectively to all
of them.
“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.
“Major Lease” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.
“Management Agreement” shall mean, with respect to each Property, the property
management agreement entered into by and between the applicable Mortgage
Borrower or Mortgage 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 services with
respect to the Property owned by such Mortgage 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

 

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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.
“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 Note 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 the 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 Borrower” or “Mezzanine Borrowers” shall mean, individually or
collectively, as the context may require, First Mezzanine Borrowers and Third
Mezzanine Borrowers.
“Mezzanine Default” shall mean any First Mezzanine Default and/or Third
Mezzanine Default, as applicable.
“Mezzanine Event of Default” shall mean any First Mezzanine Event of Default
and/or Third Mezzanine Event of Default, as applicable.
“Mezzanine Lender” or “Mezzanine Lenders” shall mean, individually or
collectively, as the context may require, First Mezzanine Lender and Third
Mezzanine Lender, and each of First Mezzanine Lender and/or Third Mezzanine
Lender.
“Mezzanine Loan” or “Mezzanine Loans” shall mean, individually or collectively,
as the context may require, the First Mezzanine Loan and the Third Mezzanine
Loan, and each of the First Mezzanine Loan and/or the Third Mezzanine Loan.
“Mezzanine Loan Documents” shall mean all documents evidencing and/or securing
the Mezzanine Loans and all documents executed and/or delivered in connection
therewith, and as the same hereafter may be amended, restated, replaced,
supplemented or otherwise modified from time to time subject to the terms of the
Intercreditor Agreement.

 

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“Mezzanine Prepayment” shall have the meaning set forth in the recitals hereof.
“Moody’s” shall mean Moody’s Investors Service, Inc.
“Monthly Gaming Requirement Certificate” shall have the meaning set forth in
Section 12.2 hereof.
“Monthly Interest Payment” shall mean the amount of interest paid on a Payment
Date for the preceding Interest Period based on interest calculated for such
preceding Interest Period at the Monthly Interest Rate.
“Monthly Interest Rate” shall mean interest calculated on the Outstanding
Principal Balance of the Loan at a rate equal to LIBOR plus 7.20% or, as
applicable, the Prime Rate plus the Prime Rate Spread.
“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 as of February 2, 2007, from Mortgage Borrowers to
Mortgage Lender, as amended by the First Mortgage 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 have the
meaning assigned to such term in the Mortgage Loan Agreement.
“Mortgage Borrower” shall mean any of Hotel/Casino Borrower, Café Borrower,
Adjacent Borrower, IP Borrower and Gaming Borrower, and “Mortgage Borrowers”
shall refer collectively to all of them.
“Mortgage Cash Management Account” shall have the meaning set forth in Section
2.6.2(a) hereof.
“Mortgage Cash Management Agreement” shall mean the “Cash Management Agreement”
as defined in the Mortgage Loan Agreement.
“Mortgage Debt” shall mean the “Debt” as defined in the Mortgage Loan Agreement.
“Mortgage Default” shall mean a “Default” under and as defined in the Mortgage
Loan Agreement.
“Mortgage Distributions” shall have the meaning set forth in Section 5.2.14(a)
hereof.

 

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“Mortgage Event of Default” shall mean an “Event of Default” under and as
defined in the Mortgage Loan Agreement.
“Mortgage Lender” shall mean Vegas HR Private Limited, as successor in interest
to Column Financial, Inc., in its capacity as holder of the Mortgage Loan,
together with its successors and assigns.
“Mortgage Lender Successor Owner” shall have the meaning set forth in
Section 5.1.23 hereof.
“Mortgage Loan” shall mean the loan made by Mortgage Lender to Mortgage
Borrowers pursuant to the Original Mortgage 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 Mortgage
Note, which was prepaid with the Mezzanine Loans on the Closing Date, and the
maximum amount of which that may be funded in the future under the Construction
Loan was increased by $20,000,000.00 on the Closing Date, both of the foregoing
resulting in a maximum principal amount of the Mortgage Loan from and after the
Closing Date 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 Mortgage Loan is
otherwise on the terms and conditions set forth in the Mortgage Loan Agreement
and the other Mortgage Loan Documents.
“Mortgage Loan Agreement” shall have the meaning set forth in the recitals
hereof.
“Mortgage Loan Documents” shall mean, collectively, the Mortgage Loan Agreement,
the Mortgage Note, the Mortgage, and any and all other documents defined as
“Loan Documents” in the Mortgage Loan Agreement, and as the same hereafter may
be amended, restated, replaced, supplemented or otherwise modified from time to
time.
“Mortgage Loan Guaranty Modification Agreements” shall mean, collectively,
(i) that certain Modification and Ratification of Guaranties, dated as of the
Closing Date, by and among Guarantors and Mortgage Lender and (ii) that certain
Second Modification and Ratification of Guaranties, dated as of the date hereof,
by and among Guarantors and Mortgage Lender.
“Mortgage Loan HRHI Modification Agreements” shall mean, collectively, (i) that
certain Modification of HRHI Loan Documents and Ratification of HRHI Guaranty,
dated as of the Closing Date, by and between HRHI and Mortgage Lender and
(ii) that certain Second Modification of HRHI Loan Documents and Ratification of
HRHI Guaranty, dated as of the date hereof, by and between HRHI and Mortgage
Lender.
“Mortgage Loan Outstanding Principal Balance” shall mean the “Outstanding
Principal Balance” as defined in the Mortgage Loan Agreement.
“Mortgage Note” and “Mortgage Notes” shall mean, individually or collectively,
as applicable, (i) the Reduced Acquisition Loan Note, and (ii) the Construction
Loan Note.

 

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“Mortgage 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 Mortgage
Loan Documents.
“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 Mortgage Borrowers, and Morton, and as the same hereafter may be
amended, restated, replaced, supplemented or otherwise modified from time to
time.
“Named Knowledge Parties” shall have the meaning set forth in Section 4.3
hereof.
“Net Cash Flow” shall have the meaning assigned to such term in the Mortgage
Loan Agreement.
“Net Liquidation Proceeds After Debt Service” shall mean, with respect to any
Liquidation Event, all amounts paid to or received by or on behalf of any Loan
Party in connection with such Liquidation Event after payment of all amounts
then due to Mortgage Lender, and then, First Mezzanine Lender, and then Lender,
including, without limitation, proceeds resulting from any Casualty to or
Condemnation of any Property and proceeds of any sale, refinancing or other
disposition or liquidation, less (without duplication of amounts already paid to
or retained by Mortgage Lender, First Mezzanine Lender or Lender) (a) in the
event of a Liquidation Event consisting of a Casualty or Condemnation, Lender’s,
First Mezzanine Lender’s and/or Mortgage Lender’s reasonable costs incurred in
connection with the recovery thereof; (b) in the event of a Liquidation Event
consisting of a Casualty or Condemnation, the costs incurred by any Mortgage
Borrower in connection with a Restoration of all or any portion of any Property
made in accordance with the Mortgage Loan Documents; (c) in the event of a
Liquidation Event consisting of a Casualty or Condemnation or a Transfer,
amounts required or permitted to be deducted therefrom and amounts paid pursuant
to the Mortgage Loan Documents to Mortgage Lender; (d) in the event of a
Liquidation Event consisting of a Casualty or Condemnation, those proceeds paid
to any Mortgage Borrower pursuant to Section 6.4(c)(vii) of the Mortgage Loan
Agreement; (e) in the case of a foreclosure sale, disposition or transfer of any
Property in connection with realization thereon following a Mortgage Event of
Default, such reasonable and customary costs and expenses of sale or other
disposition (including attorneys’ fees and brokerage commissions); (f) in the
case of a foreclosure sale, disposition or transfer of the First Mezzanine
Collateral in connection with realization thereon following a First Mezzanine
Event of Default, such reasonable and customary costs and expenses of sale or
other disposition (including attorneys’ fees and brokerage commissions); (g) in
the case of a foreclosure sale, disposition or transfer of the Collateral in
connection with realization thereon following an Event of Default, such
reasonable and customary costs and expenses of sale or other disposition
(including attorneys’ fees and brokerage commissions); (h) in the case of a
foreclosure sale, such costs and expenses incurred by (i) Mortgage Lender under
the Mortgage

 

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Loan Documents as Mortgage Lender shall be entitled to receive reimbursement for
under the terms of the Mortgage Loan Documents, (ii) First Mezzanine Lender
under the First Mezzanine Loan Documents as First Mezzanine Lender shall be
entitled to receive reimbursement for under the terms of the First Mezzanine
Loan Documents and/or (iii) Lender under the Loan Documents as Lender shall be
entitled to receive reimbursement for under the terms of the Loan Documents;
(i) in the case of a refinancing of the Mortgage Loan, the First Mezzanine Loan
or the Loan, such costs and expenses (including attorneys’ fees) of such
refinancing; and (j) the amount of any prepayments required pursuant to the
Mortgage Loan Documents, the First Mezzanine Loan Documents and/or the Loan
Documents in connection with any such Liquidation Event.
“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 assigned to such term in the Mortgage Loan
Agreement.
“Net Worth Requirements” shall mean those requirements set forth on Schedule V
attached hereto and made a part hereof.
“Non-Recourse Guaranty” shall mean that certain Second Mezzanine Guaranty
Agreement, dated as of the Closing Date, from Guarantors to Lender, as modified
by the First Guaranty Modification Agreement and the First 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” shall have the meaning set forth in the Recitals hereof.
“Notice” shall have the meaning set forth in Section 10.6 hereof.
“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 Mortgage Borrower and Mortgage Lender given in
connection with the Mortgage Loan, as modified by the First Mortgage Loan
Document Modification Agreement and the Second Mortgage Loan Document
Modification Agreement and as the same hereafter may be amended, restated,
replaced, supplemented or otherwise modified from time to time. On February 2,
2007, O&M Agreements were entered into by each of Hotel/Casino Borrower and
Mortgage Lender and Adjacent Borrower and Mortgage Lender.
“Obligations” shall mean, collectively, Borrowers’ obligations for the payment
of the Debt and the performance of the Other Obligations.

 

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“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 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 Mortgage Loan, debt service
under each of the Mezzanine Loans, 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 any of the
Mortgage Reserve Funds, the First Mezzanine Reserve Funds or the Reserve Funds,
as applicable. 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 under any Management Agreement.
Notwithstanding the foregoing, references herein to Operating Expenses that are
to be funded from amounts on deposit in the Mortgage Cash Management Account or
from any reserve established hereunder shall refer to actual Operating Expenses
incurred by Mortgage 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 have the meaning assigned to such term in the
Mortgage Loan Agreement.
“Original First Mezzanine Loan Agreement” shall have the meaning set forth in
the recitals hereof.
“Original Lender” shall have the meaning set forth in the recitals hereof.
“Original Loan Agreement” shall have the meaning set forth in the recitals
hereof.
“Original Mortgage Loan Agreement” shall have the meaning set forth in the
recitals hereof.

 

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“Original Mortgage Note” shall mean that certain Promissory Note dated as of
February 2, 2007 in the principal amount of up to $1,360,000,000.00 made by
Mortgage Borrowers in favor of Mortgage Lender.
“Original Note” shall mean that certain Second Mezzanine Promissory Note, dated
as of the Closing Date, in the principal amount of One Hundred Million and
No/100 Dollars ($100,000,000), made by Borrowers in favor of Lender.
“Original Third Mezzanine Loan Agreement” shall have the meaning set forth in
the recitals hereof.
“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, the Note 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.
“Outstanding Principal Balance” shall mean, as of any date, the outstanding
principal balance of the Loan.
“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 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 November 9, 2007 for all
purposes of this Agreement other than the payment of the monthly interest
payment pursuant to the Original Loan Agreement (because Borrowers and Lender
acknowledge that stub interest through November 9, 2007 was paid on the Closing
Date), and the first Payment Date for purposes of the monthly interest payment
pursuant to the Original Loan Agreement was December 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 Mortgage Loan Documents, the
Loan Documents and

 

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the Mezzanine 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 Mortgage Lender has approved or may approve in writing in Mortgage 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 Loan Party, 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 Loan Party, 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.
“Permitted Future FF&E Leases” shall have the meaning assigned to such term in
the Mortgage Loan Agreement.
“Permitted Gaming Expenses” shall have the meaning assigned to such term in the
Mortgage Loan Agreement.
“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 Mortgage Loan Documents, the
Loan Documents and the Mezzanine 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 VII 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 Mortgage Lender regarding the
physical condition of such Property, reasonably satisfactory in form and
substance to Mortgage Lender.
“Pink Taco IP” shall have the meaning set forth in Section 4.1.37(b) hereof.

 

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“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 Mortgage Lender in
accordance with the terms of the Mortgage Loan Agreement, as the same may be
amended and supplemented from time to time in accordance with the terms of the
Mortgage Loan Agreement (including by Change Orders).
“Pledge Agreement” shall mean that certain Second Mezzanine Pledge and Security
Agreement, dated as of the Closing Date, executed and delivered by Borrowers to
Lender as security for the Loan, as ratified by the Ratification of Pledge
Agreement, and as the same hereafter may be amended, restated, replaced,
supplemented or otherwise modified from time to time.
“Pledged Collateral” shall mean the “Collateral” as defined in the Pledge
Agreement.
“Pledged Interests” shall mean all membership and manager interests in each of
First Mezzanine Borrowers, as described on Schedule III attached hereto.
“Post-Closing Obligations Agreement” shall mean that certain Post Closing
Obligations Agreement, dated as of the date hereof, by and between Borrowers and
Lender.
“Policies” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.
“Pre-Opening Expenses” shall have the meaning assigned to such term in the
Mortgage Loan Agreement.
“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.

 

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“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) the Monthly Interest Rate (calculated in accordance with
LIBOR) 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 assigned to such term in the
Mortgage Loan Agreement.
“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
the Mortgage Loan Agreement and the other Mortgage 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.
“Project Costs” shall have the meaning assigned to such term in the Mortgage
Loan Agreement.
“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 the
Mortgage Loan Agreement, the Mortgage and the other Mortgage Loan Documents.
“Provided Information” shall mean any and all financial and other information
prepared and provided by any Loan Party, any Manager, HRHI or any Guarantor or
under the supervision or control of any Loan Party, any Manager, HRHI or any
Guarantor (but excluding third party independent reports) with respect to one or
more of the Properties, the IP, the Collateral, any Loan Party, any 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.
“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 Mortgage Borrowers, Morgans Group LLC and Chicago Title Agency
of Nevada, Inc., and as the same hereafter may be amended, restated, replaced,
supplemented or otherwise modified from time to time.
“Qualified Extended Maturity Date” shall have the meaning set forth in
Section 2.7.2 hereof.

 

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“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 Mortgage
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 Mortgage Lender 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 Mortgage
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, Loan Parties 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 Loan Party, (A) if such Affiliate was covered in
the Insolvency Opinion or in any subsequent Additional Insolvency Opinion, Loan
Parties 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 Loan Parties, or (B) if such Affiliate
was not covered in the Insolvency Opinion or in any subsequent Additional
Insolvency Opinion, Loan Parties shall have obtained and delivered to Lender an
Additional Insolvency Opinion with respect to such Affiliate and Loan Parties.
“Qualified Guarantor Transferee” shall mean any one or more of the following:
(i) 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;
(ii) 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;
(iii) an institution substantially similar to any of the entities described in
the foregoing clause (i) or (ii);
(iv) any entity Controlling or Controlled by or under common Control with any of
the entities described in the foregoing clause (i) or (ii);
(v) 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

 

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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
(vi) 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 Mortgage 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) 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, Loan Parties 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 Loan Party, (1) if such Affiliate was covered in the Insolvency Opinion or
in any subsequent Additional Insolvency Opinion, Loan Parties 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 Loan Parties, or (2) if such Affiliate
was not covered in the Insolvency Opinion or in any subsequent Additional
Insolvency Opinion, Loan Parties shall have obtained and delivered to Lender an
Additional Insolvency Opinion with respect to such Affiliate and Loan Parties.
“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 Mortgage 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, Loan Parties 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 Loan Party, (A) if such
Affiliate was covered in the Insolvency Opinion or in any subsequent Additional
Insolvency Opinion, Loan Parties 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 Loan
Parties, or (B) if such Affiliate was not covered in the Insolvency Opinion or
in any subsequent Additional Insolvency Opinion, Loan Parties shall have
obtained and delivered to Lender an Additional Insolvency Opinion with respect
to such Affiliate and Loan Parties.
“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

 

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(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.
“Ratification of Pledge Agreement” shall have the meaning set forth in the
recitals 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 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 assigned to such term in the
Mortgage Loan Agreement.
“Reduced Acquisition Loan Debt” shall have the meaning assigned to such term in
the Mortgage Loan Agreement.
“Reduced Acquisition Loan Outstanding Principal Balance” shall have the meaning
assigned to such term in the Mortgage Loan Agreement.
“Reduced Acquisition Loan Note” shall mean that certain Amended and Restated
Replacement Reduced Acquisition Loan Promissory Note, dated the date hereof, in
the principal amount of Four Hundred Ten Million and No/100 Dollars
($410,000,000), made by Mortgage Borrowers in favor of Mortgage Lender, and as
the same hereafter may be amended, restated, replaced, supplemented or otherwise
modified from time to time.
“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 10.25 hereof.
“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.

 

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“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.
“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 assigned to such term in
the Mortgage Loan Agreement.
“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.
“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 Mortgage 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 Mortgage 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 Borrowers’ 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 Loan Parties 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 Loan Parties 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 assigned to such term in
the Mortgage Loan Agreement or such comparable account as shall be established
under this Agreement in accordance with Section 7.3 hereof.
“Replacement Reserve Fund” shall have the meaning assigned to such term in the
Mortgage Loan Agreement or such comparable fund as shall be established under
this Agreement in accordance with Section 7.3 hereof.

 

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“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 have the meaning assigned to such term in the Mortgage Loan
Agreement.
“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 Loan Party, each Mezzanine
Borrower, HRHI, HR Holdings and each Guarantor.
“S&P” shall mean Standard & Poor’s Ratings Group, a division of the McGraw-Hill
Companies.
“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 assigned to such term in the Mortgage Loan
Agreement.
“Second Amended and Restated Mortgage Loan Agreement” shall have the meaning set
forth in the recitals hereof.
“Second Mortgage Loan Document Modification Agreement” shall mean that certain
Omnibus Amendment, dated as of the date hereof, by and among Mortgage Borrowers,
Guarantors, HRHI, Manager and Mortgage Lender.
“Second Mortgage Modification Agreement” shall mean 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, dated as of the date hereof, by
and among Mortgage Borrowers and Mortgage Lender.
“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.

 

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“Second Qualified Extension Term” shall have the meaning set forth in
Section 2.7.2(b) 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(a) hereof.
“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 have the meaning assigned to such term in the Mortgage Loan
Agreement.
“Shortfall Funds” shall have the meaning assigned to such term in the Mortgage
Loan Agreement.
“Side Letter Agreement” shall mean that certain Side Letter Agreement, dated as
of the date hereof, among the Borrowers, Mortgage Borrowers, First Mezzanine
Borrowers, Third Mezzanine Borrowers, Lender, Mortgage Lender, First 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.
“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,
owning, holding, selling, transferring, managing and operating the Collateral,
(B) entering into the Loan Documents (as and when executed), including any
predecessor loan agreement and documents related thereto, (C) refinancing the
Collateral in connection with repayment of the Loan, and/or (D) 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 the Collateral or managing member of the limited liability company
that owns the Collateral;
(b) has not been and is not engaged in, and will not engage in, any business
unrelated to (i) the acquisition, ownership, management, sale, transfer or
operation of the Collateral, (ii) acting as general partner of the limited
partnership that owns the Collateral, or (iii) acting as managing member of the
limited liability company that owns the Collateral;
(c) has not had, does not have, and will not have, any assets other than those
related to the Collateral, or, if such entity is a general partner in a limited
partnership, its general

 

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partnership interest in the limited partnership that owns the Collateral, or, if
such entity is a managing member of a limited liability company, its membership
interest in the limited liability company that owns the Collateral;
(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;
(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

 

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extent permitted by law, take any actions described in clause (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 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 the 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 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 the other Borrower)
records, books, resolutions (if any) and agreements;
(m) other than as provided in the Cash 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 or any Mortgage Borrower,

 

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except for services rendered under a business management services agreement with
an Affiliate that complies with the terms contained in clause (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 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 partnership or limited liability
company formalities, as applicable;
(s) has not incurred and will not incur any Indebtedness other than (i) the
Debt, and (ii) unsecured trade payables and operational debt not evidenced by a
note and in an aggregate amount not exceeding $50,000; 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;
(t) except as contemplated under Article XV with respect to the 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;

 

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(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 a Funding Borrower makes any Contribution to the other
Borrower by paying any such overhead expenses of the 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 Mortgage Loan Documents, the Loan Documents, the
First Mezzanine Loan Documents or the 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 the
other Borrower or any Mortgage 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
clause (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, 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;
(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

 

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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 agreed 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 Loan and the other Mezzanine Loans),
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 other
entity, except for the Loan Parties; 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.
“Strike Price” shall mean, as applicable, with respect to:
(i) the period commencing on the Closing Date through and including the Initial
Maturity Date, five and one-half percent (5.5%) per annum; and
(ii) 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 Required Equity Amount” shall have the meaning assigned to such term
in the Mortgage Loan Agreement.
“Subsidiary Transferee” shall have the meaning assigned to such term in the
Mortgage Loan Agreement.
“Substantial Completion” shall have the meaning assigned to such term in the
Mortgage Loan Agreement.

 

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“Survey” shall mean a current survey of each of the Properties, certified to the
Title Company and Mortgage Lender and their successors and assigns, in form and
content reasonably satisfactory to Mortgage Lender.
“Tax and Insurance Escrow Fund” shall have the meaning assigned to such term in
the Mortgage Loan Agreement or such comparable fund as shall be established
under this Agreement in accordance with 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.
“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 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 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, together with its successors and assigns.
“Third Mezzanine Loan” shall mean the loan in the original principal amount of
up to Sixty Five Million and No/100 Dollars ($65,000,000), 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 the “Outstanding
Principal Balance” as defined in the Third Mezzanine Loan Agreement.

 

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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 Mortgage Lender and licensed to
issue title insurance in the State of Nevada.
“Title Insurance Policy” shall have the meaning assigned to such term in the
Mortgage Loan Agreement.
“Transfer” shall have the meaning set forth in Section 5.2.10(b) hereof.
“Transfer Restricted Party” shall mean, collectively, each Loan Party, each
Mezzanine Borrower, each Constituent Member of each Loan Party, HRHI, HR
Holdings and each Guarantor.
“Trust” shall have the meaning set forth in Section 10.25(a) hereof.
“UCC” or “Uniform Commercial Code” shall mean the Uniform Commercial Code as in
effect in the State of Nevada, the State of New York or the State of Delaware,
as applicable.
“UCC Financing Statements” shall mean the UCC Financing Statement delivered in
connection with the Pledge Agreement and the other Loan Documents and filed in
the applicable filing offices.
“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.
“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 assigned to such term in
the Mortgage Loan Agreement or such comparable fund as shall be established
under this Agreement in accordance with Section 7.1 hereof.

 

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“Working Capital Reserve Account” shall have the meaning assigned to such term
in the Mortgage Loan Agreement or such comparable account as shall be
established under this Agreement in accordance with 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) With respect to terms defined by cross-reference to the Mortgage Loan
Documents, the First Mezzanine Loan Documents and/or the Third Mezzanine Loan
Documents, as applicable, such defined terms shall have the definitions set
forth in the Mortgage Loan Documents, the First Mezzanine Loan Documents and/or
the Third Mezzanine Loan Documents as of the date hereof, and no modifications
to the Mortgage Loan Documents, the First Mezzanine Loan Documents and/or the
Third Mezzanine Loan Documents, as the case may be, shall have the effect of
changing such definitions for the purpose of this Agreement unless Lender
expressly agrees that such definitions as used in this Agreement have been
revised or Lender consents to the modification documents. With respect to any
provisions incorporated by reference herein from the Mortgage Loan Agreement
and/or the First Mezzanine Loan Agreement, as applicable, such provisions shall
be deemed a part of this Agreement notwithstanding the fact that the Mortgage
Loan and/or the First Mezzanine Loan, as the case may be, shall no longer be
effective for any reason. The words “Borrowers shall cause First Mezzanine
Borrowers to” or “Borrowers shall cause First Mezzanine Borrowers not to” (or
words of similar meaning) shall mean Borrowers, as the direct or indirect sole
members of First Mezzanine Borrowers, shall cause First Mezzanine Borrowers to
so act or not to so act, as applicable. The words “Borrowers shall cause
Mortgage Borrowers to” or “Borrowers shall cause Mortgage Borrowers not to” (or
words of similar meaning) shall mean Borrowers, as the sole members of First
Mezzanine Borrowers, shall cause First Mezzanine Borrower, as the direct or
indirect sole members of Mortgage Borrowers, to cause Mortgage Borrowers to so
act or not to so act, as applicable.
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 on the Closing Date.
2.1.2 Loan.
(a) Borrowers hereby acknowledge and agree that, on the Closing Date, Lender
made the Loan to Borrowers in the principal amount of $100,000,000.00, which
represented a full disbursement of all proceeds of the Loan. On August 1, 2008,
Borrower prepaid a portion of the Loan with the Release Parcel Release Price
received in connection with the sale of certain property by Adjacent Borrower,
resulting in an Outstanding Principal Balance of $88,978,170.66. The Loan is
evidenced by the Note and this Agreement, is secured by the Pledge Agreement and
the other Loan Documents and shall be repaid with interest, costs and charges as
more particularly set forth in the Note, this Agreement, the Pledge Agreement
and the other Loan Documents. Principal amounts of the Loan which are repaid for
any reason may not be reborrowed. Lender shall not fund any portion of the 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 Loan will not constitute a non-exempt
prohibited transaction under ERISA.
(b) Borrowers used the proceeds of the Loan to make a contribution to Mortgage
Borrowers for use by Mortgage Borrowers to make the Mezzanine Prepayment.
Section 2.2 Interest Rate.
2.2.1 Interest Generally.
(a) Interest on the Outstanding Principal Balance shall accrue from the date
hereof to and excluding the Maturity Date at the Monthly Interest Rate.
(b) Interest on the Interest Differential Amounts shall accrue from the date
hereof at the Monthly Interest Rate. All interest accruing on the Interest
Differential Amounts shall compound monthly and be determined by Lender (which
determination shall be conclusive and binding upon Borrowers absent manifest
error).
2.2.2 Interest Calculation. Interest on the 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 2.2.1 above and Section 2.2.3 below and based on a three
hundred sixty (360) day year by (c) the Outstanding Principal Balance or the
Accrued Interest amounts, as applicable (it being understood that the portion of
Accrued Interest amounts that represents interest on the Interest Differential
Amounts shall compound monthly). If, at any time, Lender or Borrowers determine
that Lender has miscalculated the Applicable Interest Rate, the Monthly Interest
Rate or Accrued Interest (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, the Monthly Interest Rate or Accrued Interest represents an
increase in the applicable monthly (or other) 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, Monthly Interest Rate or

 

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Accrued Interest (if such Accrued Interest shall have been paid) 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 $312,441.88.
2.2.3 Determination of Interest Rate.
(a) If the Loan is converted to a Prime Rate Loan pursuant to the provisions of
Section 2.2.3(c) or (f) hereof, the Loan shall bear interest at the Prime Rate
plus the Prime Rate Spread.
(b) Subject to the terms and conditions of this Section 2.2.3 and Section 2.3.1,
the Loan shall be a LIBOR Loan and Borrowers shall pay interest on the Loan at
the Applicable Interest Rate for the applicable Interest Period and shall pay
the Accrued Interest as set forth in Section 2.2.1 hereof. Any change in the
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, the 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, the 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) Lender 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

 

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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, Borrowers 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 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 asserted on or
attributable to amounts payable under this Section 2.2.3) paid by Lender, 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, Lender 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 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 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, 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 (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
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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).
(v) If 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 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 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 Lender in the event 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
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 the
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

 

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compliance (taking into consideration Lender’s policies with respect to capital
adequacy) by any material amount; or
(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 a
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 a LIBOR Loan hereunder, (ii) any prepayment (whether voluntary or
mandatory) of the 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 the LIBOR Loan
hereunder, and (iii) the conversion (for any reason whatsoever, whether
voluntary or involuntary) of the Applicable Interest Rate to the Prime Rate plus
the Prime Rate Spread with respect to any portion of the Outstanding Principal
Balance then bearing interest at the Applicable Interest Rate 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 a 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

 

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detail the basis for calculating the additional amounts owed to Lender under
this Section 2.2.3, 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 the LIBOR
Loan 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 the LIBOR Loan 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, the 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 (including,
without limitation, Accrued Interest), shall accrue interest at the Default
Rate, calculated from the date such payment or amount was due without regard to
any grace or cure periods or any other provision contained herein.
2.2.6 Usury Savings. This Agreement, the Note 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 the Outstanding Principal Balance or on or in
connection with Accrued Interest 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 the Outstanding
Principal Balance or on or in connection with Accrued Interest at a rate in
excess of the Maximum Legal Rate, the Applicable Interest Rate, the rate
applicable to Accrued Interest 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 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 Cash Management Account any amounts due Borrowers under such
Interest Rate Cap Agreement so long as any portion of the Debt exists, provided
that

 

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the Debt shall be deemed to exist even if one or more of the Properties, the IP
or the Collateral 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 Outstanding Principal Balance
as of the date hereof. Borrowers shall collaterally assign to Lender, pursuant
to the Collateral Assignment of Interest Rate Cap Agreement, 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
Cash Management 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 Cash Management 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;
(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

 

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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.
(a) Borrowers shall pay to Lender on the Payment Date occurring in January, 2010
the Initial Debt Service Payment.
(b) Borrowers shall pay to Lender on each Payment Date commencing with the
Payment Date occurring in February, 2010 the Current Pay Interest Payment.
(c) Borrowers shall pay (and cause Mortgage Borrower to pay) to Lender the
Accrued Interest in accordance with, to the extent provided, and at the times
provided in Sections 7.6.2 and 7.6.3 of the Mortgage Loan Agreement. For the
avoidance of doubt, Borrowers confirm and agree that Accrued Interest shall for
all purposes of this Agreement be defined to include (and be determined taking
into account) interest accruing on the sum of all of the Interest Differential
Amounts at the rates and for the periods set forth in Section 2.2.1(b), and
compounded monthly. Any and all Accrued Interest that is not paid to Lender
pursuant to Sections 7.6.2 and 7.6.3 of the Mortgage Loan Agreement shall be due
and payable on the Maturity Date.

 

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(d) If applicable, Borrowers may cause Mortgage Borrower to pay to Lender or
have be applied from the applicable Mortgage Reserve Fund all amounts payable to
Lender on account of Debt Service in accordance with Sections 7.1.2 and 7.6.2 of
the Mortgage Loan Agreement or any other Loan Document.
(e) For purposes of making payments hereunder, but not for purposes of
calculating Interest Periods, if the day on which any 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. Interest shall be payable at the rates set forth in this Agreement
through and including the day immediately preceding the Maturity Date (unless
interest at the Default Rate shall apply, in which case interest shall be
determined as and for the periods described in Section 2.2.5). 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 if there
shall be an offset on account of any Extra Non-Accrued Interest as described in
Section 2.4.6, or if there shall be a credit as described in the last sentence
of Section 2.2.2, which shall be the only offset or credit permitted under this
Agreement).
(f) 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
(including, without limitation, all Accrued Interest including interest accrued
thereon as provided in this Agreement), and all other amounts due hereunder and
under the Note, the Pledge Agreement and the other Loan Documents (including,
without limitation, the Exit Fee).
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 Pledge Agreement and
the other Loan Documents to the extent permitted by applicable law.
2.3.3 Method and Place of Payment. Except as otherwise specifically provided
herein, all payments and prepayments under this Agreement and the Note 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 NRFC WA Holdings, LLC, c/o
NorthStar Realty Finance Corp., 399 Park Avenue, 18th Floor, New York, New York
10022, Attention: [                    ], 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.

 

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Section 2.4 Prepayments.
2.4.1 Voluntary Prepayments. 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 (a) if such prepayment occurs on a date
other than a Payment Date, all interest (including, without limitation, all
Accrued Interest and any interest due in connection therewith) which would have
accrued on the amount of the Loan to be paid through, but not including, the
next succeeding first (1st) day of a 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; (b) the
Exit Fee; and (c) all other sums due and payable under this Agreement, the Note,
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 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.
2.4.2 Intentionally Deleted.
2.4.3 Prepayment Upon Occurrence of Liquidation Events.
(a) In the event of (i) any Casualty to all or any portion of the Property,
(ii) any Condemnation of all or any portion of any Property, (iii) a Transfer of
any Property in connection with realization thereon by Mortgage Lender following
a Mortgage Event of Default, including, without limitation, a foreclosure sale,
or (iv) any refinancing of any Property or the Mortgage Loan (each, a
“Liquidation Event”), Borrowers shall cause the related Net Liquidation Proceeds
After Debt Service to be deposited with Lender or directly into the Cash
Management Account. On each date on which Lender actually receives a
distribution of Net Liquidation Proceeds After Debt Service, if such date is a
Payment Date, such Net Liquidation Proceeds After Debt Service shall be applied
first to Accrued Interest and then to the Outstanding Principal Balance in an
amount equal to one hundred percent (100%) of such Net Liquidation Proceeds
After Debt Service and all other sums then due to prepay the Loan. In the event
Lender receives a distribution of Net Liquidation Proceeds After Debt Service on
a date other than a Payment Date, such amounts shall be held by Lender as
collateral security for the Loan in an interest bearing account, with such
interest accruing to the benefit of Borrowers, and shall be applied by Lender on
the next Payment Date. Any such prepayment shall be applied to all accrued and
unpaid interest amounts and other amounts then due to Lender under this
Agreement or any of the other Loan Documents (including, without limitation, any
Accrued Interest and the Exit Fee and then to the Outstanding Principal Balance.

 

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(b) Borrowers shall immediately notify Lender of any Liquidation Event once any
Borrower has knowledge of such event. Borrowers shall be deemed to have
knowledge of (i) a sale (other than a foreclosure sale) of any Property on the
date on which a contract of sale for such sale is entered into, and a
foreclosure sale, on the date notice of such foreclosure sale is given, and
(ii) a refinancing of the Property, on the date on which a binding commitment
for such refinancing is entered into and a closing date for the funding of such
refinancing has been scheduled. The provisions of this Section 2.4.3 shall not
be construed to contravene in any manner either (i) the restrictions and other
provisions regarding refinancing of the Mortgage Loan or Transfer of any
Property set forth in this Agreement, any other Loan Document or any Mortgage
Loan Document, whether or not notice is given pursuant to this Section 2.4.3 or
(ii) Borrowers’ right to prepay set forth in this Agreement and the other Loan
Documents or the Mortgage Loan Documents.
(c) Upon payment in full of the Debt and all other Obligations, Lender shall
disburse any Net Liquidation Proceeds After Debt Service to:
(i) in the event the Third Mezzanine Loan is outstanding, to Third Mezzanine
Lender; and
(ii) in the event the Third Mezzanine Loan has been paid in full, to Borrowers.
2.4.4 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 Mortgage Loan and the Mezzanine Loans as follows:
(a) so long as no Mortgage 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) of the Mortgage Loan
Agreement, 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 Mortgage
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 Lender to be applied to the
Debt, until the Debt is paid in full, (v) then, any remaining amounts shall be
disbursed by 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 a Mortgage Event
of Default, any voluntary prepayment shall be applied (i) first, by Mortgage
Lender, to payment of the Mortgage Debt (including, without limitation, the Exit
Fee payable pursuant to the Mortgage Loan Agreement), in any order, priority and
proportion as Mortgage Lender shall elect in its sole discretion from time to
time, until the Mortgage Debt (including, without limitation, the Exit Fee
payable pursuant to the Mortgage Loan Agreement) is paid in full, and (ii) then,
Mortgage Lender shall 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

 

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then outstanding, until the First Mezzanine Debt is paid in full, and
(iii) then, First Mezzanine Lender shall disburse any remainder to Lender for
application in accordance with the terms of the Loan Documents if the Debt (or
any portion thereof) is then outstanding, until the Debt is paid in full, and
(iv) then, Lender shall disburse 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 (v) then, Third Mezzanine Lender shall
disburse the balance, if any, to Mortgage Borrowers;
(b) Intentionally Deleted;
(c) all Net Proceeds not required to be made available for Restoration, and as
to which Mortgage Lender has not otherwise elected in its sole discretion to
make available for Restoration, shall be applied (i) first, to the Mortgage Debt
(including, without limitation, the Exit Fee and any related Breakage Costs
payable pursuant to the Mortgage Loan Agreement), in any order, priority and
proportion as Mortgage Lender shall elect in its sole discretion from time to
time, until the Mortgage Debt (including, without limitation, the Exit Fee
payable pursuant to the Mortgage Loan Agreement) is paid in full, (ii) then,
Mortgage 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, (iii) then, First Mezzanine Lender shall disburse any remaining
amounts to Lender to be applied to the Debt, until the Debt is paid in full,
(iv) then, Lender shall disburse any remaining amounts to Third Mezzanine Lender
to be applied to the Third Mezzanine Debt, until the Third Mezzanine Debt is
paid in full, and (v) then, Third Mezzanine Lender shall disburse any remaining
amounts to Mortgage Borrowers;
(d) any Mortgage Reserve Funds or other cash collateral held by or on behalf of
Mortgage Lender, whether in the Mortgage Cash Management Account or any of the
Mortgage Reserve Funds, or otherwise, including, without limitation, any Net
Proceeds and/or any Excess Cash Flow then being held by Mortgage Lender, shall,
upon the occurrence and during the continuance of a Mortgage Event of Default,
be applied by Mortgage Lender as follows or may continue to be held by Mortgage
Lender as additional collateral for the Mortgage Loan, all in Mortgage Lender’s
sole discretion: (i) first, to the Mortgage Debt (including, without limitation,
the Exit Fee payable pursuant to the Mortgage Loan Agreement), in any order,
priority and proportions as Mortgage Lender shall elect in its sole discretion
from time to time, until the Mortgage Debt (including, without limitation, the
Exit Fee payable pursuant to the Mortgage Loan Agreement) is paid in full,
(ii) then, disbursed by Mortgage 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, (iii) then, disbursed by First
Mezzanine Lender to Lender for application in accordance with the terms of the
Loan Documents if the Debt (or any portion thereof) is then outstanding, until
the Debt is paid in full, (iv) then, disbursed by 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, (v) then, the
balance, if any, disbursed by Third Mezzanine Lender to Mortgage 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

 

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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 Mortgage 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 Lender to be applied to the Debt, until the Debt is paid in full,
(v) then, any remaining amounts shall be disbursed by 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 Mortgage Borrowers;
(f) Intentionally Deleted;
(g) the proceeds of any IP Release Price shall be allocated as follows: (A) the
first $60,000,000 of any such IP Release Price payable in connection with such
IP Sale 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 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 to Lender to be applied to the Debt, until the Debt is paid in full,
and (v) 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 (B) 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 in accordance
with Section 2.4.3(g) of the Mortgage Loan Agreement;
(h) all Rents received by Mortgage Lender upon the occurrence and during the
continuance of a Mortgage Event of Default pursuant to Section 3.1 of the
Assignment of Leases shall be applied by Mortgage Lender as follows or may
continue to be held by Mortgage Lender as additional collateral for the Mortgage
Loan, all in Mortgage 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 by Mortgage 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 to Lender for
application in accordance with the terms of the Loan Documents if the Debt (or
any portion thereof) is then outstanding, until the 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 Mortgage
Borrowers;
(i) Intentionally Deleted; and
(j) Intentionally Deleted.

 

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Upon payment in full of the Debt (including, without limitation, the Exit Fee),
Lender’s sole obligation under this Section 2.4.4 shall be to disburse any
remaining funds described herein and held by Lender to Third Mezzanine Lender
for application in accordance with the terms of the Third Mezzanine Loan
Documents.
2.4.5 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
Funds or any Net Liquidation Proceeds After Debt Service), (a) such tender or
recovery shall be deemed made on the next occurring Payment Date together with
the monthly Debt Service or Accrued Interest 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) Borrowers shall also pay
the Exit Fee (or the applicable portion thereof).
2.4.6 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 the Loan 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
Current Pay Interest Payment 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 Current Pay Interest Payment due to Borrowers under this Section 2.4.6,
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.
2.4.7 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 the Note shall cause, give rise
to a right to require, or otherwise result in, the release of the Lien of the
Pledge Agreement or any other Loan Document.

 

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2.5.1 Releases of Adjacent Property.
(a) Section 2.5.1 of the Mortgage Loan Agreement contains provisions permitting
Adjacent Borrower to (i) 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 Mortgage Borrower or any other Restricted
Party (an “Affiliate Release Parcel Purchaser”; and together with a Bonafide
Release Parcel Purchaser, 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”), and obtain a release of such Partial Release Parcel from the
Liens of the Mortgage upon satisfaction of certain conditions and requirements
set forth in Section 2.5.1 of the Mortgage Loan Agreement.
(b) Lender hereby consents to any Release Parcel Sale conducted in accordance
with the terms of Section 2.5.1 of the Mortgage Loan Agreement provided that:
(i) Borrowers deliver to Lender a copy of all requests and other notices
relating to such Release Parcel Sale (including the Sale Request) delivered to
Mortgage Lender concurrently with delivery of the same to Mortgage Lender;
(ii) all certifications made by Adjacent Borrower in connection with such
Release Parcel Sale also run for the benefit of Lender;
(iii) contemporaneously with such Release Parcel Sale, Borrowers shall cause
Adjacent Borrower to deposit directly into the Mortgage Cash Management Account
an amount equal to the sum of (A) the Release Parcel Release Price for the
applicable Parcel determined in accordance with the Mortgage Loan Agreement,
which funds shall be applied by Mortgage Lender as provided in Section 2.4.3(e)
of the Mortgage Loan Agreement and Section 2.4.4(e) hereof, plus (B) all accrued
and unpaid interest on said amount prepaid in accordance with the terms of this
Agreement and the Mortgage Loan Agreement, plus (C) if such prepayment occurs on
a day other than a Payment Date, interest on the Release Parcel Release Price
to, but not including, the next succeeding first (1st) day of a calendar month;
(iv) 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 Section 2.5.1(a) of the
Mortgage Loan Agreement, and (C) providing all release documents in connection
with any Release Parcel Sale as provided in Section 2.5.1(d) of the Mortgage
Loan Agreement; and
(v) No monetary Default, monetary Mortgage Default or any monetary Mezzanine
Default, and no Event of Default, Mortgage Event of Default or any

 

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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.
(c) Upon repayment in full of the Mortgage Loan and the First Mezzanine Loan, if
the Loan or any portion thereof is then outstanding, the provisions of
Section 2.5.1 of the Mortgage Loan Agreement and all related definitions shall
be incorporated into this Agreement in their entirety, but the terms used
therein shall mean and refer to the correlative terms defined herein.
2.5.2 Intentionally Deleted.
2.5.3 Release of IP.
(a) Section 2.5.3 of the Mortgage Loan Agreement contains provisions permitting
IP Borrower to sell the IP (in whole but not in part) (an “IP Sale”), to a
bonafide third party purchaser (an “IP Purchaser”), and obtain a release of the
IP from the Liens of the Mortgage upon satisfaction of certain conditions and
requirements set forth in Section 2.5.3 of the Mortgage Loan Agreement.
(b) Lender hereby consents to any IP Sale conducted in accordance with the terms
of Section 2.5.3 of the Mortgage Loan Agreement provided that:
(i) Borrowers deliver to Lender a copy of all requests and other notices
relating to such IP Sale delivered to Mortgage Lender concurrently with delivery
of the same to Mortgage Lender;
(ii) all certifications made by IP Borrower in connection with such IP Sale also
run for the benefit of Lender;
(iii) contemporaneously with such IP Sale, Borrowers shall cause IP Borrower to
deposit directly into the Mortgage Cash Management Account an amount equal to
the sum of (A) the IP Release Price determined in accordance with the Mortgage
Loan Agreement, which funds shall be applied by Mortgage Lender as provided in
Section 2.4.3(g) of the Mortgage Loan Agreement and Section 2.4.4(g) hereof,
plus (B) all accrued and unpaid interest on said amount prepaid in accordance
with the terms of this Agreement and the Mortgage Loan Agreement, plus (C) if
such prepayment occurs on a day other than a Payment Date, interest on the IP
Release Price to, but not including, the next succeeding first (1st) day of a
calendar month;
(iv) 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 Section 2.5.3(a) of the Mortgage Loan Agreement, and (C)

 

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providing all release documents in connection with any IP Sale as provided in
Section 2.5.3(d) of the Mortgage Loan Agreement; and
(v) No monetary Default, monetary Mortgage Default or any monetary Mezzanine
Default, and no Event of Default, Mortgage Event of Default or any 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
such IP Sale.
(c) Upon repayment in full of the Mortgage Loan and the First Mezzanine Loan, if
the Loan or any portion thereof is then outstanding, the provisions of
Section 2.5.3 of the Mortgage Loan Agreement and all related definitions shall
be incorporated into this Agreement in their entirety, but the terms used
therein shall mean and refer to the correlative terms defined herein.
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
cause any Mortgage Borrower 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.
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 Note
and this Agreement, Lender shall release the Lien of the Pledge Agreement and
the other Loan Documents.
Section 2.6 Cash Management.
2.6.1 Lockbox Account.
(a) During the term of the Loan, Borrowers shall cause Mortgage Borrowers to
establish and maintain a segregated Eligible Account (the “Lockbox Account”)
with Lockbox Bank in trust for the benefit of Mortgage Lender, which Lockbox
Account shall be under the sole dominion and control of Mortgage Lender pursuant
to and in accordance with the Mortgage Loan Documents and shall comply with all
of the terms and conditions set forth in Section 2.6.1 of the Mortgage Loan
Agreement.

 

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(b) Borrowers shall (i) cause each Mortgage Borrower, and its Manager and HRHI,
to (i) deposit all amounts received by such Mortgage Borrower, Manager and HRHI
constituting Rents, receipts, license or sublicense payments or payments
received under any sponsorship agreements (and any other amounts described in
Section 2.6.1(b) of the Mortgage Loan Agreement) into the Lockbox Account and
(ii) cause Gaming Borrower to comply with the provisions of Section 2.6.1(c) of
the Mortgage Loan Agreement with respect to the Prior Day’s Cash Receipts.
(c) In the event (i) Mortgage Lender waives the requirements of Mortgage
Borrowers to maintain the Lockbox Account pursuant to the terms of Section 2.6.1
of the Mortgage Loan Agreement, or (ii) the Mortgage Loan has been repaid in
full, Lender shall have the right to require Borrowers to establish and maintain
an account that would operate in the same manner as the Lockbox Account in
Section 2.6.1 of the Mortgage Loan Agreement and the provisions of Section 2.6.1
of the Mortgage Loan Agreement shall be incorporated herein by reference.
2.6.2 Mortgage Cash Management Account.
(a) During the term of the Loan, Borrowers shall cause Mortgage Borrowers to
establish and maintain a segregated Eligible Account (the “Mortgage Cash
Management Account”), which Mortgage Cash Management Account shall be under the
sole dominion and control of Mortgage Lender and shall comply with all of the
terms and conditions set forth in Section 2.6.2 of the Mortgage Loan Agreement.
(b) Borrowers shall direct or cause Mortgage Borrowers to direct that all cash
contributions from the Lockbox Account and the Mortgage Cash Management Account
to be paid to or for the benefit of Lender in accordance with the Mortgage Loan
Agreement and the Mortgage Cash Management Agreement shall be deposited into the
Cash Management Account maintained in accordance with this Agreement and the
Cash Management Agreement. Lender agrees that it shall deliver to Mortgage
Lender, not less than five (5) days prior to each Payment Date, a written notice
setting forth (i) the amount of the Current Pay Interest Payment that will be
due on the next Payment Date, and (ii) an itemized list of any other amounts
that will be due on such next Payment Date pursuant to the terms of this
Agreement and/or the other Loan Documents.
(c) In the event (i) Mortgage Lender waives the requirements of Mortgage
Borrowers to maintain the Mortgage Cash Management Account pursuant to the terms
of Section 2.6.2 of the Mortgage Loan Agreement, or (ii) the Mortgage Loan has
been repaid in full, Lender shall have the right to require Borrowers to
establish and maintain an account that would operate in the same manner as the
Mortgage Cash Management Account in Section 2.6.2 of the Mortgage Loan Agreement
and the provisions of Section 2.6.2 of the Mortgage Loan Agreement shall be
incorporated herein by reference; provided, however, that references to
“Lender,” “Cash Management Account,” and other applicable terms shall be deemed
to refer to the Lender, Cash Management Account and other applicable terms
hereunder.
2.6.3 Cash Management Account.

 

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(a) There shall be established and maintained a segregated Eligible Account (the
“Cash Management Account”) to be held by Servicer in trust for the benefit of
Lender, which Cash Management Account shall be under the sole dominion and
control of Lender. The Cash Management Account shall be entitled “TriMont Real
Estate Advisors, Inc. as Servicer for Vegas HR Limited Investor P & I Collection
Account” 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 and Servicer 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) All funds on deposit in the Cash Management Account following the occurrence
of an Event of Default may be applied by Lender in such order and priority as
Lender shall determine.
(c) Provided no Event of Default shall have occurred and be continuing, all
funds on deposit in the Cash Management Account shall be applied by Lender in
accordance with the terms of this Agreement (including, without limitation,
Section 2.4.3 and Section 2.4.4 hereof) and the Cash Management Agreement.
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 Mortgage Default, Mortgage
Event of Default, monetary Mezzanine Default or Mezzanine Event of Default shall
have occurred and be continuing at the time the First

 

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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;
(iii) if the 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 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 Cash Management 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 caused Mortgage
Borrowers to deposit with Mortgage Lender in immediately available funds, for
deposit by Mortgage Lender into the applicable Mortgage 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 determined by Mortgage
Lender in accordance with the applicable provisions of the Mortgage Loan
Agreement, and which amounts thereafter shall constitute a part of the
applicable Reserve Fund(s) and shall be held and disbursed by Mortgage Lender as
set forth in Article VII of the Mortgage Loan Agreement (or, if the Mortgage
Loan and the First Mezzanine Loan have been paid in full, Borrowers shall have
deposited such

 

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amount with Lender for deposit into the applicable Reserve Fund(s) to be held
and disbursed by Lender as set forth in Article VII hereof);
(vii) Intentionally Deleted;
(viii) the maturity date of the Mortgage Loan, if the Mortgage 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 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;
(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 Mortgage Default, Mortgage
Event of Default, monetary Mezzanine Default or 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;

 

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(iii) if the 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 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 Cash Management 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 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 caused Mortgage
Borrowers to deposit with Mortgage Lender in immediately available funds, for
deposit by Mortgage Lender into the applicable Mortgage 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 determined by
Mortgage Lender in accordance with the applicable provisions of the Mortgage
Loan Agreement, and which amounts thereafter shall constitute a part of the
applicable Reserve Fund(s) and shall be held and disbursed by Mortgage Lender as
set forth in Article VII of the Mortgage Loan Agreement (or, if the Mortgage
Loan and the First Mezzanine Loan have been paid in full, Borrowers shall have
deposited such amount with Lender for deposit into the applicable Reserve
Fund(s) to 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 day of the Second Qualified Extension Term; provided,

 

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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 Mortgage Loan, if the Mortgage 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 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;
(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 sum of the Outstanding Principal Balance and all
Accrued Interest then due not later than one (1) Business Day immediately
preceding the first day of the Second Qualified Extension Term; and
(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 Mortgage Default, Mortgage
Event of Default, monetary Mezzanine Default or 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

 

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not later than thirty (30) days, prior to the Second Qualified Extended Maturity
Date;
(iii) if the 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 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 Cash Management 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;
(v) the maturity date of the Mortgage Loan, if the Mortgage 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 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;
(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

 

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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 caused Mortgage
Borrowers to deposit with Mortgage Lender in immediately available funds, for
deposit by Mortgage Lender into the applicable Mortgage 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 determined by Mortgage
Lender in accordance with the applicable provisions of the Mortgage Loan
Agreement, and which amounts thereafter shall constitute a part of the
applicable Reserve Fund(s) and shall be held and disbursed by Mortgage Lender as
set forth in Article VII of the Mortgage Loan Agreement (or, if the Mortgage
Loan and the First Mezzanine Loan have been paid in full, Borrowers shall have
deposited such amount with Lender for deposit into the applicable Reserve
Fund(s) to 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 Mortgage Default, Mortgage
Event of Default, monetary Mezzanine Default or Mezzanine Event of Default shall
have occurred and be continuing at the time the Fourth Qualified 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

 

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maturity date not earlier than the Fourth Qualified Extended Maturity Date and
(iv) shall have a notional amount equal to the 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 Cash Management 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 caused Mortgage
Borrowers to deposit with Mortgage Lender in immediately available funds, for
deposit by Mortgage Lender into the applicable Mortgage 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 determined by
Mortgage Lender in accordance with the applicable provisions of the Mortgage
Loan Agreement, and which amounts thereafter shall constitute a part of the
applicable Reserve Fund(s) and shall be held and disbursed by Mortgage Lender as
set forth in Article VII of the Mortgage Loan Agreement (or, if the Mortgage
Loan and the First Mezzanine Loan have been paid in full, Borrowers shall have
deposited such amount with Lender for deposit into the applicable Reserve
Fund(s) to be held and disbursed by Lender as set forth in Article VII hereof);
(vi) the maturity date of the Mortgage Loan, if the Mortgage 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;
(vii) 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;
(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

 

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(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 Fees.
(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 clause (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,
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 addition to the
principal amount prepaid or repaid) in an amount equal to two percent (2.00%) 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,
Borrowers shall pay an Exit Fee in an amount (in addition to the Net Proceeds so
applied) equal to two percent (2.00%) of such Net Proceeds; 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 (in addition to the principal amount of the Debt repaid) equal to the
principal amount of the Debt so repaid multiplied by two percent (2.00%). 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.
(b) 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.
ARTICLE III.
CONDITIONS PRECEDENT.
Section 3.1 Intentionally Deleted.
Section 3.2 Submission of Construction Loan Advance Documents to Lender.
Borrowers shall submit, or shall cause Mortgage Borrowers to submit, to Lender,
contemporaneously with any submission thereof by Mortgage Borrowers to Mortgage
Lender, a copy of each Draw Request related to each Construction Loan Advance
and all documents required to be delivered by Mortgage Borrowers to Mortgage
Lender in connection therewith pursuant to Article III of the Mortgage Loan
Agreement; provided, however, that any breach of this provision shall not
constitute an Event of Default hereunder.

 

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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.
(a) Such Borrower has been duly organized and is validly existing and in good
standing with requisite power and authority to own its assets 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 assets, 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 and management of the relevant First Mezzanine
Borrower. The ownership interests of such Borrower are as set forth on the
organizational chart attached hereto as Schedule VI.
(b) Such Borrower has the power and authority and the requisite ownership
interests to control the actions of the relevant First Mezzanine Borrower and,
in turn, the relevant Mortgage Borrower and upon the realization of the Pledged
Collateral under the Pledge Agreement, Lender or any other party succeeding to
such Borrower’s interest in the Pledged Collateral described in the Pledge
Agreement would have such control. Without limiting the foregoing, such Borrower
has sufficient control over the relevant First Mezzanine Borrower and, in turn,
the relevant Mortgage Borrower to cause such Mortgage Borrower to (i) take any
action on Mortgage Borrower’s part required by the Mortgage Loan Documents and
(ii) refrain from taking any action prohibited by the Mortgage Loan Documents.
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

 

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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 been obtained and is in full
force and effect.
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
any Loan Party, HRHI or any Guarantor or, to such Borrower’s actual knowledge,
pending against any Property, the IP, the First Mezzanine Collateral or the
Collateral or, to such Borrower’s actual knowledge, threatened in writing
against any Loan Party, HRHI or any Guarantor, or any Property, the IP, the
First Mezzanine Collateral or the Collateral 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 Loan Party, HRHI, any Guarantor, any Property, the IP, the First Mezzanine
Collateral or the Collateral, (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 any Loan
Party, HRHI or any Guarantor to perform, in all material respects, its
respective obligations under each of the Mortgage Loan Documents, the First
Mezzanine Loan Documents or the Loan Documents, as applicable, or (iv) the value
of, or cash flow from, any Property, the IP, the First Mezzanine Collateral or
the Collateral.
(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 Borrower’s 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, the First Mezzanine Loan Documents or the Mortgage 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 Loan Party 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 such Borrower or any
Loan Party. 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 Loan Party
or any Affiliate of any Loan Party.
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 any Loan Party, any Property, the IP, the First Mezzanine
Collateral or the Collateral, or such Borrower’s business, properties or assets,
operations or condition, financial or

 

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otherwise. To the best of such Borrower’s actual knowledge, no Loan Party is 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 Loan Party or any
of the Properties, the IP, the First Mezzanine Collateral or the Collateral 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 properties or
assets is otherwise bound, other than (a) obligations incurred in the ordinary
course of business relating to such Borrower’s ownership and operation of the
Collateral permitted pursuant to clause (s) of the definition of “Special
Purpose Entity” set forth in Section 1.1 hereof, (b) obligations incurred in the
ordinary course of the business relating to Mortgage Borrowers’ ownership and
operation of the Properties as permitted pursuant to clause (s) of the
definition of “Special Purpose Entity” set forth in Section 1.1 of the Mortgage
Loan Agreement as in effect on the date hereof, (c) obligations incurred in the
ordinary course of the business relating to First Mezzanine Borrowers’ ownership
and operation of the First Mezzanine Collateral as permitted pursuant to clause
(s) of the definition of “Special Purpose Entity” set forth in Section 1.1 of
the First Mezzanine Loan Agreement as in effect on the date hereof, and
(d) obligations under the Loan Documents.
4.1.6 Title.
(a) Such Borrower is the record and beneficial owner of, and has good and valid
title to, its Pledged Interests, free and clear of all Liens, except those Liens
granted to Lender under the Loan Documents. The Pledge Agreement, together with
the UCC Financing Statements relating to the Pledged Collateral that have been
properly filed in the appropriate records, created and continue to create a
valid, perfected first priority security interest in and to the portion of the
Pledged Collateral covered thereby, all in accordance with the terms thereof for
which a Lien can be perfected by filing a UCC Financing Statement. For so long
as the Lien of the Pledge Agreement is outstanding, such Borrower shall forever
warrant, defend and preserve such title and the validity and priority of the
Lien of the Pledge Agreement and shall forever warrant and defend such title,
validity and priority to Lender against the claims of all persons whomsoever.
(b) Each Mortgage 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
Mortgage Loan Documents and the Liens created by the Mortgage Loan Documents.
(c) First Mezzanine Borrowers are the record and beneficial owners of, and have
good and marketable title to, the First Mezzanine Collateral, free and clear of
all Liens whatsoever, except for the Liens contemplated by and permitted under
the First Mezzanine Loan Documents.
(d) 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
the Properties (as currently used) or (i) such Borrower’s ability to repay the
Loan, (ii) Mortgage

 

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Borrowers’ ability to repay the Mortgage Loan or (iii) First Mezzanine
Borrowers’ ability to repay the First Mezzanine Loan.
(e) 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 Mortgage 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 Note, 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 their respective 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 its 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 Loan Party, HRHI or any Guarantor, and none of the Loan
Parties, 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 the Loan Parties, HRHI nor any Guarantor are contemplating either the
filing of a petition by it 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 any Loan Party, 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, the IP,
the First Mezzanine Collateral or the Collateral, (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 such Borrower, any other Loan Party, HRHI or any Guarantor to
perform, in all material respects, its respective obligations under each of the
Loan Documents, the First Mezzanine Loan Documents and the Mortgage Loan
Documents, as applicable.

 

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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, each
Loan Party 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
Loan Party is in default or violation of any order, writ, injunction, decree or
demand of any Governmental Authority. There has not been committed by any Loan
Party 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, the First
Mezzanine Collateral or the Collateral any act or omission affording the federal
government or any other Governmental Authority the right of forfeiture as
against any Property, the First Mezzanine Collateral, the Collateral or any part
of either of the foregoing or any monies paid in performance of (i) any Mortgage
Borrower’s obligations under any of the Mortgage Loan Documents, (ii) any First
Mezzanine Borrower’s obligations under any of the First Mezzanine Loan
Documents, or (iii) any Borrower’s 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) and the Collateral, as
applicable, as of the date of such reports, and (iii) to the extent prepared or
audited by an independent certified public accounting firm, have been prepared
in accordance with the Uniform System of 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 Loan
Party 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 the Collateral, the First Mezzanine Collateral or
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 Loan Party or, to each Borrower’s actual

 

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knowledge after due inquiry, to the Collateral and, 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.
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 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
the 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.

 

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4.1.19 No Prior Assignment. Other than the assignment in favor of Mortgage
Lender under the Mortgage Loan Documents, there are no prior assignments by
Mortgage Borrowers of the Leases or any portion of the Rents due and payable or
to become due and payable which are presently outstanding. There are no prior
assignments of the Collateral which are presently outstanding except in
accordance with the Loan Documents.
4.1.20 Insurance. Mortgage Borrowers have obtained and Borrowers 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 Loan Party, 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
and are in full force and effect. Each Borrower shall cause Mortgage Borrowers
to 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) of the Mortgage Loan Agreement 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 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,

 

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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 Loan Party 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 Mortgage 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 either party and there are no conditions that, with the
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
Mortgage 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 Affiliates. Such Borrower does not own any equity interests in any other
Person other than the related Pledged Interests.
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

 

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paragraph of this Agreement. Each Borrower is organized under the laws of the
State of Delaware.
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 Mortgage Borrowers and/or
the transfer of the First Mezzanine Collateral to First Mezzanine Borrowers
and/or the transfer of the Collateral 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
Mortgage Loan Documents, including, without limitation, the Mortgage, or of any
of the Loan Documents, including, without limitation, the Pledge Agreement and
the related UCC Financing Statements, have been paid as of the date hereof. The
Pledge Agreement 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 Mortgage
Loan Documents, the Loan Documents and the Mezzanine Loan Documents have been
paid in full, each Borrower hereby represents, warrants and covenants that
(i) such Borrower is, shall be and shall continue to be a Special Purpose
Entity, (ii) each Mortgage Borrower is, shall be and shall continue to be a
“Special Purpose Entity” (as such term is defined in Section 1.1 of the Mortgage
Loan Agreement as in effect on the date hereof) and (iii) each First Mezzanine
Borrower is, shall be and shall continue to be a “Special Purpose Entity” (as
such term is defined in Section 1.1 of the First Mezzanine Loan Agreement as in
effect on the date hereof).
(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

 

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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) Mortgage Borrowers and First Mezzanine Borrowers have complied, and each
Borrower will cause Mortgage Borrowers and First Mezzanine Borrowers, as
applicable, to comply, with all of the assumptions made with respect to Mortgage
Borrowers and First Mezzanine Borrowers, as applicable, in the Insolvency
Opinion and each Borrower will cause Mortgage Borrowers and First Mezzanine
Borrowers, as applicable, to comply with all of the assumptions made with
respect to Mortgage Borrowers and First Mezzanine Borrowers, as applicable, in
any Additional Insolvency Opinion.
4.1.31 Management Agreements; 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 the Management Agreement outstanding as of December 23, 2009,
which non-payment has not given rise to the exercise or enforcement of remedies
under such Management Agreement as of the date hereof). Following the date
hereof, there shall be no material default thereunder (other than the
non-payment of certain management fees and other payments under the Management
Agreement outstanding as of December 23, 2009, which non-payment has not given
rise to the exercise or enforcement of remedies under such Management Agreement
as of the date hereof).
(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, the IP or the Collateral
has been or will be purchased by any Loan Party 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 or Mortgage
Borrower to Lender and in all financial statements, rent rolls, reports,
certificates and other documents submitted in connection with the Loan or in
satisfaction of the terms thereof and all statements of fact made by any
Borrower in this Agreement or in any other Loan Document, and, to the knowledge
of each Borrower, all statements of fact made by Mortgage Borrowers in the
Mortgage Loan Agreement or in any other Mortgage 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, the IP or the Collateral or
the business operations or the

 

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financial condition of any Loan Party. 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
Loan Party, 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 Loan Party, 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 Loan Party, 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 Loan Party 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 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 conveyed the Cash Management Account;
(b) The Cash Management Account constitutes a “deposit account” within the
meaning of the Uniform Commercial Code of the State of New York; and
(c) The Cash Management Account is not in the name of any Person other than
Borrowers, as pledgors, or Lender, as pledgee.
4.1.37 Intellectual Property.
(a) Intentionally Deleted.
(b) Schedule VII attached hereto is a true, correct and complete list of all the
Registered IP used by any Loan Party in connection with the ownership, operation
and/or

 

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use of one or more of the Properties. Part I of said Schedule VII 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 IP
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 VII 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
Assignment and Assumption Agreement dated as of 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. (“HCRI”) (all such IP listed on
Part II of said Schedule VII, the “Rank IP”). Part III of said Schedule VII 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 VII, 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 VII, Mortgage 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 VII hereto sets forth:
(i) any written communications from any Loan Party or any Affiliate thereof to
one or more third parties, or from one or more third parties to any Loan Party
or any Affiliate thereof, alleging infringement by any third party or any Loan
Party 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 Loan Party and of whom any Loan Party has actual knowledge, which in the
opinion of any Loan Party infringes upon any IP listed in said Schedule VII
hereof or with respect to which the failure to resolve such alleged infringement
could reasonably be expected to have an IP Material Adverse Effect.

 

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(f) Except as disclosed in said Schedule VII:
(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 Loan Party 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;
(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 Loan Party 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 Loan Party
requires a license or right under or in respect of any intellectual property of
any other Person (except another Loan Party) to conduct such Loan Party’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 Loan Party 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
Loan Party or any Affiliated IP Party or any of the properties or products
currently sold by any Loan Party or any Affiliated IP Party, and none of the IP
or Licensed IP, infringes the patent, industrial property, trademark, trade
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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 Loan Party 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 Loan Party requires a license or right under or
in respect of any intellectual property of any other Person (except another Loan
Party) to conduct such Loan Party’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 Loan Party is a
party which significantly restricts the fields in which such business may be
carried on.
(m) To Borrowers’ actual knowledge, no disclosure has been made to any Person of
the know-how or financial or trade secrets of any Loan Party, 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
Borrower’s 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 Loan Parties or Managers 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 Mortgage 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 Mortgage Lender.
4.1.40 Morton Indemnification and PWR/RWB Escrow Agreement. Borrowers have
delivered, or caused Mortgage Borrowers to deliver, 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
Loan Party nor any Affiliate thereof has (a) made any claim under the Morton
Indemnification, except as set forth in Schedule XIII 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. No Loan Party nor

 

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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 XIII 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; the Loan Parties 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.
(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) None of the Loan Parties 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) None of the Loan Parties nor Gaming Borrower has 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.

 

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(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, none of the Loan
Parties 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 Loan Party in any of the Loan Documents, the Mortgage
Loan Documents or the First Mezzanine Loan Documents, as applicable, that
require the approval of the Gaming Authorities in order to become effective,
except as set forth in Section 17 of the Pledge Agreement and the Pledge
Agreement affecting the First Mezzanine Collateral.
(k) (i) Hotel/Casino Borrower meets the suitability standards for a landlord
contemplated or set forth in the Gaming Laws; and (ii) no Loan Party 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 Control of First Mezzanine Borrowers and Mortgage Borrowers. Borrowers
have the power and authority and the requisite ownership interests to Control
the actions of First Mezzanine Borrowers and, in turn, Mortgage Borrowers.
4.1.43 Separate and Distinct Loans. The Loan, the Mortgage Loan and the
Mezzanine Loans are entirely separate, distinct and independent obligations,
made to separate and distinct borrowers, on separate and distinct terms and
secured by separate and distinct collateral.
4.1.44 Mortgage Loan Documents and First Mezzanine Loan Documents. There are no
Mortgage Loan Documents and no First Mezzanine Loan Documents other than those
set forth on Schedule XI and Schedule XII, respectively, attached hereto. True
and correct copies of all the Mortgage Loan Documents and the First Mezzanine
Loan Documents have been provided to Lender and none of the Mortgage Loan
Documents nor the First Mezzanine Loan Documents have been modified or amended
since the delivery thereof, except as forth on such Schedule XI and
Schedule XII, respectively.
4.1.45 No Defaults. No Mortgage Default, Mortgage Event of Default, First
Mezzanine Default or First Mezzanine Event of Default existed as of the Closing
Date or as of the date hereof.
4.1.46 Loan Party Representations and Warranties.

 

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(a) Borrowers have reviewed the representations and warranties made by, and
covenants of, (i) Mortgage Borrowers to and for the benefit of Mortgage Lender
contained in the Mortgage Loan Documents, and (ii) First Mezzanine Borrowers to
and for the benefit of First Mezzanine Lender contained in the First Mezzanine
Loan Documents and all such representations and warranties are true, correct and
complete in all material respects.
(b) All of the representations and warranties contained in the Mortgage Loan
Documents are hereby incorporated into this Agreement and deemed made hereunder
as and when made thereunder and shall remain incorporated without regard to any
waiver, amendment or other modification thereof or to whether the related
Mortgage Loan Document has been repaid or otherwise terminated, unless otherwise
consented to in writing by Lender.
4.1.47 Distributions to Affiliates. Neither of the Borrowers has entered into,
and none of the Collateral is 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.

 

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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 Pledge Agreement encumbering the
Collateral (and all related obligations) 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, or cause each other Loan Party to
comply, in all material respects with all Legal Requirements applicable to such
Loan Party, the First Mezzanine Collateral, the Collateral, the Properties or
the IP, including, without limitation, Prescribed Laws. There shall never be
committed by any Borrower, and no Borrower shall, nor shall cause any other Loan
Party to, 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 the First Mezzanine Collateral, the Collateral and/or any
Property or any part thereof or any monies paid in performance of any Borrower’s
obligations under any of the Loan Documents or paid in performance of First
Mezzanine Borrowers’ obligations under any of the First Mezzanine Loan Documents
or paid in performance of Mortgage Borrowers’ obligations under any of the
Mortgage 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, and shall cause each other Loan Party to, 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 Mortgage
Borrowers’ right to demolish the Improvements on the Adjacent Property subject
to, and in accordance with, the provisions of Section 3.18 of the Mortgage Loan
Agreement, 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 cause Mortgage Borrowers to 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
the Mortgage Loan Agreement. Borrowers shall cause Mortgage Borrowers to 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, or may cause any other Loan Party to 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 any Loan Party, the First Mezzanine Collateral, the
Collateral or the Property or any alleged violation of any Legal Requirement,
provided that (a) no Event of Default, Mortgage Event of Default or any
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 Loan Party 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) none of any Property, the First
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Collateral, the Collateral nor any part thereof or interest therein will be in
imminent danger of being sold, forfeited, terminated, cancelled or lost;
(d) such Borrower shall, and shall cause each other Loan Party to, 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 shall suspend the enforcement of the contested Legal Requirement
against such Loan Party, the First Mezzanine Collateral, the Collateral or any
Property; and (f) such Borrower shall furnish, or shall cause each other Loan
Party to 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 the First
Mezzanine Collateral, the Collateral 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, or shall cause Mortgage
Borrowers to 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, Mortgage Borrowers’ obligation to directly pay Taxes shall be suspended
for so long as Mortgage Borrowers comply with the terms and provisions of
Section 7.2 of the Mortgage Loan Agreement or Borrowers comply with the terms
and provisions of Section 7.2 hereof, if applicable. Borrowers will deliver, or
will cause Mortgage Borrowers to 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, or shall cause
Mortgage Borrowers to 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, Mortgage Borrowers shall not
be required to furnish such receipts for payment of Taxes in the event that such
Taxes have been paid by Mortgage Lender pursuant to Section 7.2 of the Mortgage
Loan Agreement or by Lender pursuant to Section 7.2 hereof, if applicable.
Borrowers shall not suffer, and shall not permit any other Loan Party to suffer,
and shall promptly cause to be paid and discharged (or provide reasonable
security for) any Lien or charge against any of the Properties, the First
Mezzanine Collateral or the Collateral, and shall promptly pay, or shall cause
Mortgage Borrowers to 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, or may cause each other Loan Party to 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, Mortgage Event of
Default or 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 Borrower or such other Loan Party 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, the First Mezzanine Collateral, the Collateral nor any part of any of
the foregoing 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, or shall cause such other Loan Party to pay,

 

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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, the First Mezzanine Collateral and the Collateral; and
(f) such Borrower shall furnish, or shall cause such other Loan Party to
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 the First Mezzanine Collateral, the
Collateral or any Property (or any part of any of the foregoing or interest
therein) shall be in danger of being sold, forfeited, terminated, cancelled or
lost or there shall be any imminent danger of the Lien of the Pledge Agreement
being primed by any related Lien.
5.1.3 Litigation. Borrowers shall give prompt notice to Lender of any litigation
or governmental proceedings pending or threatened in writing against any Loan
Party, 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 Loan Party, HRHI, any Guarantor, any Property,
the IP, the First Mezzanine Collateral or the Collateral, (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 Loan Party, HRHI or any Guarantor to perform, in all
material respects, its respective obligations under each of the Mortgage Loan
Documents, the First Mezzanine Loan Documents or the Loan Documents, as
applicable, or (d) the value of, or cash flow from, any Property, the IP, the
First Mezzanine Collateral or the Collateral.
5.1.4 Access to the Properties. Borrowers shall cause Mortgage Borrowers to
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 Special Distributions. On each date on which amounts are required to be
disbursed to the Cash Management Account or otherwise to be paid to Borrowers or
Lender pursuant to the terms of the Mortgage Loan Documents (including the
Mortgage Loan Agreement and/or the Mortgage Cash Management Agreement), or are
required to be paid to Lender under any of the Loan Documents, Borrowers shall
exercise their rights to cause First Mezzanine Borrowers and, in turn, First
Mezzanine Borrowers shall exercise their rights to cause Mortgage Borrowers to
make to Borrowers distributions in an aggregate amount such that Lender shall
receive the amount required to be disbursed to Lender from the Cash Management
Account or otherwise paid to Lender on such date.
5.1.6 Cooperate in Legal Proceedings. Borrowers shall reasonably cooperate, and
shall cause each other Loan Party to 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.

 

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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, and shall cause Mortgage Borrowers to 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, and shall cause each other Loan Party
to, at Borrowers’ sole cost and expense (subject to the terms and conditions of
this Agreement):
(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 Personal Property 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 filing of the UCC Financing Statements.
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 respect of the Collateral. Borrowers shall cause each other Loan
Party to keep and maintain on a Fiscal Year basis, in accordance with the
Uniform System of Accounts and reconciled each year in accordance with GAAP (or
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accounting basis acceptable to Lender), 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 Statement) at the office of any Loan Party 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’ and each of the other Loan
Parties’ accounting records with respect to the Properties, the IP, the First
Mezzanine Collateral and the Collateral, 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, Mortgage 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 Collateral and the
Properties for such Fiscal Year and containing statements of profit and loss for
Borrowers, Mortgage Borrowers, HRHI, each Guarantor, the Collateral and each
Property and a balance sheet for Borrowers, Mortgage 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 investors or otherwise prepared in the
ordinary course of its business, accompanied by the Officer’s Certificate
required under Section 5.1.11(b)(B) of the Mortgage Loan Agreement. Borrowers
shall also deliver to Lender a Cash Profit and Loss Statement annualized for the
applicable prior Fiscal Year, which Cash Profit and Loss Statement shall be
prepared on a cash accounting basis. Notwithstanding anything to the contrary
set forth in this Agreement, the financial statements of Borrowers and Mortgage
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
Loan Parties and/or other assets related to one or more of the Loan Parties, 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 Loan Parties and/or other
assets related to one or more of the Loan Parties, 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 Loan Parties
and/or other assets related to HRHI, one or more of the Loan Parties, 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 Loan Parties and/or
other assets related to HRHI, one or more of the Loan Parties, one or more of
the Properties and/or the IP. Borrowers will furnish, or will cause each of the
other Loan Parties to furnish, to Lender a copy of the financial statements and
all other materials which such Loan Parties are required to provide to Mortgage
Lender under Section 5.1.11 of the Mortgage Loan Agreement or First Mezzanine
Lender under Section 5.1.11 of the First Mezzanine Loan Agreement, within the
time periods required under such Section.

 

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(c) For each Fiscal Year during the term of the Loan, Borrowers shall submit to
Lender (and Borrowers shall cause Mortgage Borrowers to submit to Mortgage
Lender) an Annual Budget not later than twenty (20) days prior to the
commencement of such Fiscal Year.
(d) In the event that any Mortgage Borrower must incur any Extraordinary
Expense, then Borrowers shall promptly deliver to Lender (and Borrowers shall
cause Mortgage Borrowers to promptly deliver to Mortgage Lender) a reasonably
detailed explanation of such proposed Extraordinary Expense for Lender’s
approval, provided that Mortgage Borrower shall be permitted to obtain a
disbursement of funds for payment of Extraordinary Expenses prior to obtaining
Lender approval thereof and to the extent provided under the provisions of
Section 2.6.2(b)(iii) and 2.6.2(c)(v) of the Mortgage Loan Agreement (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.
(e) 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 the
Collateral 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, or shall cause Mortgage Borrowers
to 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 mezzanine 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 mezzanine loans included or expected to be included, as applicable, in the
Securitization. Such financial data or financial statements shall be 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
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connection with or relating to the Securitization (an “Exchange Act Filing”) is
not required. If requested by Lender, Borrowers shall furnish, or shall cause
Mortgage Borrowers to 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 mezzanine 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.
(f) All financial data and financial statements provided by Borrowers pursuant
to Section 5.1.11(e) 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(e) hereof shall be audited by independent accountants of
Borrowers or Mortgage 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 or Mortgage Borrowers under
Section 5.1.11(e) 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(f).
(g) If requested by Lender, Borrowers shall provide, or shall cause each
Mortgage Borrowers to 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.
(h) 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(e) and (f) hereof, Lender may
request, and Borrowers shall promptly provide, or shall cause Mortgage Borrowers
to provide, such other financial data and financial statements as Lender
determines to be necessary or appropriate for such compliance.
(i) Borrowers hereby agree to provide Lender with at least five (5) Business
Days’ written notice prior to the effectiveness of any change (and each change)
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(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’ or Mortgage 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, the Collateral and any Loan Party
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, and will cause each
Loan Party to continue, to engage in the businesses presently conducted by it as
and to the extent the same are necessary for the ownership, maintenance,
management and operation of the First Mezzanine Collateral, the Collateral, the
Properties or the IP, as applicable. Each Borrower will qualify, and will cause
each other Loan Party to qualify, to do business and will remain, and will cause
each other Loan Party to 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 First Mezzanine Collateral, the
Collateral, the Properties or the IP, as applicable.
5.1.13 Title to the Collateral, the Properties and the IP. Borrowers will
warrant and defend (i) the title to the Collateral and every part thereof,
subject only to Liens permitted hereunder (including Permitted Encumbrances) or
under the Pledge Agreement, and (ii) the validity and priority of the Lien of
the Pledge Agreement, subject only to Liens permitted hereunder (including
Permitted Encumbrances), in each case against the claims of all Persons
whomsoever.
(a) Borrowers will cause Mortgage Borrowers to warrant and defend (i) 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 (ii) 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.
(b) 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 the Collateral, 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 Pledge Agreement is
foreclosed in whole or in part or that the Pledge Agreement is put into the
hands of an attorney for collection, suit, action or foreclosure, (b) of the
foreclosure of any pledge prior to or subsequent to the Pledge Agreement 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
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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
appellate proceeding or post-judgment action involved therein.
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, (ii) the Outstanding Principal Balance
and all Accrued Interest then due, (iii) the Applicable Interest Rate and the
Monthly Interest Rate of the Loan, (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 Note, this
Agreement, the Pledge Agreement 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
Outstanding Principal Balance and all Accrued Interest then due, (ii) the
Applicable Interest Rate and the Monthly Interest Rate, (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, or cause to
be delivered, 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 each Mortgage Borrower
and/or each Mezzanine Borrower, 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 Loan received by them
on the Closing Date only for the purposes set forth in Section 2.1.2 hereof.
5.1.17 Performance by Borrowers.
(a) 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

 

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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 prior consent of Lender.
(b) Except for changes to the Mortgage Loan Documents that Mortgage Borrowers
are obligated to enter into pursuant to the terms of the Mortgage Loan
Documents, Borrowers shall not from and after the date hereof cause or permit
Mortgage Borrowers to enter into or otherwise suffer or permit any amendment,
waiver, supplement, termination or other modification of any Mortgage Loan
Document executed and delivered by, or applicable to, Mortgage Borrowers without
the prior written consent of Lender which consent shall not be unreasonably
withheld, conditioned or delayed. Borrowers shall cause Mortgage Borrowers to
provide Lender with a copy of any amendment, waiver, supplement, termination or
other modification to the Mortgage Loan Documents within five (5) days after the
execution thereof.
(c) Borrowers shall not cause or permit First Mezzanine Borrowers to enter into
or otherwise suffer or permit any amendment, waiver, supplement, termination or
other modification of any First Mezzanine Loan Document executed and delivered
by, or applicable to, First Mezzanine Borrowers without the prior written
consent of Lender which consent shall not be unreasonably withheld, conditioned
or delayed. Borrowers shall cause First Mezzanine Borrowers to provide Lender
with a copy of any amendment, waiver, supplement, termination or other
modification to the First Mezzanine Loan Documents within five (5) days after
the execution thereof.
(d) Borrowers shall not, and shall not permit any other Loan Party to, (i) amend
or modify the organizational documents of such Loan Party in any respect without
Lender’s prior written consent, or (ii) take any action that would cause the
membership interests of any other Loan Party to cease to constitute
“certificated securities” (as defined in the Uniform Commercial Code of the
States of New York and Delaware) without Lender’s prior written consent.
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 and each Mortgage Borrower as of the
date of the Securitization.
5.1.19 No Joint Assessment. Borrowers shall not suffer, permit or initiate, and
shall cause Mortgage Borrowers not to 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
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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 Mortgage 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, or shall cause Mortgage Borrowers to furnish,
Lender with executed copies of all Leases. All proposed Major Leases shall be on
commercially reasonable terms and no Lease shall contain any terms which would
materially adversely affect Lender’s rights under the Loan Documents or Mortgage
Lender’s rights under the Mortgage 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 Mortgage Lender or any purchaser at a sale by
foreclosure or power of sale, provided that, with respect to Major Leases,
Mortgage Lender provides commercially reasonable non-disturbance language.
Borrowers shall cause Mortgage Borrowers to (i) observe and perform the
obligations imposed upon the lessor under the Leases in a commercially
reasonable manner; (ii) 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 Mortgage Borrower or
acceptance of surrender by a tenant of any Major Lease will be permitted without
the consent of Lender; (iii) not collect any of the rents more than one (1)
month in advance (other than security deposits); (iv) not execute any other
assignment of lessor’s interest in the Leases or the Rents (except as
contemplated by the Mortgage Loan Documents); and (v) 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 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 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

 

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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 permit or cause Mortgage Borrowers to 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 of the Mortgage Loan Agreement,
Borrowers shall, or shall cause Mortgage Borrowers to, 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 or Mortgage Borrower’s
financial condition, the value of the Collateral, 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 the Mortgage Loan Agreement and 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 at any Property (other than such amounts to be
paid or reimbursed by 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; provided, however, that (i) in the
event (A) Mortgage Borrowers are required to and do deliver such security to
Mortgage Lender under the Mortgage Loan Agreement, or (B) if the Mortgage Loan
has been paid in full, First Mezzanine Borrowers are required to and do deliver
such security to First Mezzanine Lender under the First Mezzanine Loan
Agreement; and (ii) upon request, Lender receives evidence reasonably acceptable
to it of the delivery of such security by Mortgage Borrowers to Mortgage Lender,
or by First Mezzanine Borrowers to First Mezzanine Lender, as applicable, then
Borrowers shall not be required to deliver any such security to Lender. Such
security (if given as set forth above) shall be in an amount equal to the excess
of the total unpaid amounts with respect to alterations to the Improvements on
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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 Mortgage Borrowers to operate the Properties, 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
cause Mortgage Borrowers to promptly enter into a Replacement Management
Agreement with the applicable Manager or another Qualified Manager, as
applicable.
(b) Borrowers shall cause each Mortgage Borrower to: (i) promptly perform and/or
observe, in all material respects, all of the covenants and agreements required
to be performed and observed by such Mortgage Borrower under the Management
Agreement to which such Mortgage Borrower is a party and do all things necessary
to preserve and to keep unimpaired such Mortgage Borrower’s material rights
thereunder; (ii) promptly notify Lender of any material default under the
Management Agreement of which such Mortgage Borrower or Borrower is aware;
(iii) promptly deliver to Lender a copy of each financial statement, business
plan, capital expenditures plan, notice, report and estimate received by such
Mortgage Borrower under the 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 the Management
Agreement in a commercially reasonable manner.
(c) Borrowers shall cause Hotel/Casino Borrower to, 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. Borrowers shall cause Hotel/Casino Borrower to 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 Casualty or other events outside the
reasonable control of Borrowers and Mortgage Borrowers.
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, Borrowers shall cause Hotel/Casino
Borrower to 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, or shall cause Hotel/Casino Borrower to 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

 

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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), Borrowers shall cause Hotel/Casino Borrower to promptly enter into a
Replacement Liquor Management Agreement with the Liquor Manager or another
Qualified Liquor Manager, as applicable.
(b) Borrowers shall cause Hotel/Casino Borrower to: (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 Loan Parties or an Affiliate of any Loan Party, 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 Mortgage Lender, its designee
or nominee (a “Mortgage Lender Successor Owner”), cause Mortgage Borrowers to
comply with the provisions of Section 5.1.23 (c) of the Mortgage Loan Agreement.
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 cause
Mortgage Borrowers to 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) Borrowers shall cause Hotel/Casino Borrower to comply with the provisions of
Section 5.1.24(b) of the Mortgage Loan Agreement.
5.1.25 Intellectual Property.
(a) Each Borrower shall take, and shall cause Mortgage Borrowers to 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
Loan Party, (ii) maintaining and complying with the terms of all licenses
necessary for the use of any IP licensed to any Loan Party, (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 Loan Party’s attention, and
using commercially

 

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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 Loan Party’s attention and (iii) refraining
from any act or omission that might jeopardize any Loan Party’s ability to use
any of the IP.
(b) Borrowers shall cause Hotel/Casino Borrower to operate the Hotel/Casino
Property as a “Hard Rock” hotel unless otherwise consented to in writing by
Lender and shall cause Hotel/Casino Borrower to refrain from any act or
omission, including, without limitation, any act contemplated under
Section 5.1.26 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 permit or cause Mortgage Borrowers to 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 Loan
Party 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 an
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 Mortgage Borrower’s ownership and/or operation of, or any activities
conducted on, its Property, (2) does not and will not materially diminish any
Mortgage 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

 

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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 Borrowers shall cause IP Borrower to deposit the same 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
remain in full force and effect and, at Lender’s request in its sole discretion,
Borrowers shall cause IP Borrower to 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 Loan Party 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 an
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 Mortgage Default or
monetary Mezzanine Default, and no Event of Default, Mortgage Event of Default
or 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 Mortgage 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
Mortgage 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
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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 Loan Party 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)
hereof, any Mortgage Borrower shall receive any such consideration and/or
royalties, Borrowers shall cause such Mortgage Borrower to deposit the same
directly in the Lockbox Account within one (1) Business Day following receipt by
such Mortgage 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 affect 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, Borrowers
shall cause IP Borrower to 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 Mortgage Default or monetary Mezzanine
Default, and no Event of Default, Mortgage Event of Default or 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 Loan Party

 

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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.
5.1.27 Mortgage Reserve Funds. (1)  Borrowers shall cause Mortgage Borrowers to
deposit and maintain each of the Mortgage Reserve Funds as required pursuant to
the terms of the Mortgage Loan Agreement and to perform and comply with all the
terms and provisions relating thereto.
(a) Each Borrower grants to Lender a security interest in such Borrower’s
interest in each of the Mortgage Reserve Funds, if any, subject to the prior
rights of Mortgage Lender and First Mezzanine Lender, and any and all monies now
or hereafter deposited in each Mortgage Loan Reserve Fund as additional security
for payment of the Debt to the extent such Borrower has an interest in same.
Subject to the qualifications regarding Borrowers’ interest in the Mortgage
Reserve Funds, if any, until expended or applied in accordance with the Mortgage
Loan Documents, the First Mezzanine Loan Documents or the Loan Documents,
Borrowers’ interest in the Mortgage Reserve Funds shall constitute additional
security for the Debt and upon the occurrence of an Event of Default, Lender
may, in addition to any and all other remedies available to Lender, but subject
to the prior rights of Mortgage Lender and First Mezzanine Lender thereto, apply
any sums then present in any or all of the Mortgage Reserve Funds to the payment
of the Debt in any order in its sole discretion.
5.1.28 Mortgage Loan and First Mezzanine Loan Notices.
(a) Borrowers shall give notice, or cause notice to be given to Lender, promptly
upon the occurrence and during the continuance of a Mortgage Event of Default or
a First Mezzanine Event of Default.
(b) Borrowers shall cause each Loan Party to promptly notify Lender of all
notices received by such Loan Party under or in connection with the Mortgage
Loan or the First Mezzanine Loan, including, without limitation, any notice by
Mortgage Lender or First Mezzanine Lender to the applicable Loan Party of any
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performance or observance of any of the terms, covenants or conditions of the
Mortgage Loan Documents or the First Mezzanine Loan Documents on the part of
such Loan Party to be performed or observed, and deliver to Lender a true copy
of each such notice, together with any other consents, notices, requests or
other written correspondence between the applicable Loan Party and Mortgage
Lender or First Mezzanine Lender.
5.1.29 Compliance with Mortgage Loan Documents and First Mezzanine Loan
Documents.
(a) Borrowers shall cause Mortgage Borrowers to comply with all of the terms,
covenants and conditions set forth in the Mortgage Loan Documents. Borrowers
acknowledge that the obligation to comply with this covenant is separate from,
and may be enforced independently from, the obligations of Mortgage Borrowers
under the Mortgage Loan Documents.
(b) Borrowers shall cause First Mezzanine Borrowers to comply with all of the
terms, covenants and conditions set forth in the First Mezzanine Loan Documents.
Borrowers acknowledge that the obligation to comply with this covenant is
separate from, and may be enforced independently from, the obligations of First
Mezzanine Borrowers under the First Mezzanine Loan Documents.
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
the earlier release of the Lien of the Pledge Agreement 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, and shall cause Mortgage Borrowers not to, 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, or cause Mortgage Borrowers to 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, and shall cause Mortgage Borrowers not to, 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) Borrowers shall not cause or permit Hotel/Casino Borrower to, 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

 

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Management Agreement; provided, that Borrowers may replace, or may cause or
permit Hotel/Casino Borrower to replace, without Lender’s consent, 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,
Borrowers shall cause Hotel/Casino Borrower not to 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.
(a) Borrowers shall not create, incur, assume or suffer to exist any Lien on
(i) any portion of the Pledged Collateral except for the Lien created by the
Pledge Agreement or (ii) any portion of the other Collateral, except for
Permitted Encumbrances and Liens created by or permitted pursuant to the Loan
Documents.
(b) Borrowers shall not permit or cause any Loan Party to create, incur, assume
or suffer to exist any Lien on any portion of any Property, the IP or the First
Mezzanine Collateral 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 Mortgage Loan Documents and the First Mezzanine
Loan Documents, as applicable; and (iii) Liens for Taxes or Other Charges not
yet delinquent.
5.2.3 Dissolution.
(a) No Borrower shall (i) engage in any dissolution, liquidation or
consolidation or merger with or into any other business entity; (ii) engage in
any business activity not related to the ownership and operation of the
Collateral; (iii) transfer, lease or sell, in one transaction or any combination
of transactions, the assets or all or substantially all of the assets of such
Borrower except to the extent permitted by the Loan Documents; or (iv) modify,
amend, waive or terminate (A) its organizational documents in any material
respect or in any respect with regard to the provisions concerning such
Borrower’s status as a Special Purpose Entity, or (B) its qualification and good
standing in any jurisdiction, in each case, without obtaining the prior consent
of Lender.
(b) Borrowers shall cause each other Loan Party not to (i) engage in any
dissolution, liquidation or consolidation or merger with or into any other
business entity, (ii) engage in any business activity not related to the
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Mezzanine Collateral; (ii) transfer, lease or sell, in one transaction or any
combination of transactions, the assets or all or substantially all of the
properties or assets of such Loan Party except to the extent permitted by the
Mortgage Loan Documents, the First Mezzanine Loan Documents and the Loan
Documents; or (iii) modify, amend, waive or terminate (A) its organizational
documents in any material respect or in any respect with regard to the
provisions concerning such Mortgage Borrower’s or such First Mezzanine
Borrowers’ status as a “Special Purpose Entity” (as such term is defined in
Section 1.1 of the Mortgage Loan Agreement or the First Mezzanine Loan
Agreement, as applicable, in each case as in effect on the date hereof), or
(B) its qualification and good standing in any jurisdiction, in each case,
without obtaining the prior consent of Lender.
5.2.4 Change in Business.
(a) No Borrower shall enter into any line of business other than the ownership
and management of the Collateral, 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.
(b) No Borrower shall permit or cause any other Loan Party to enter into any
line of business other than the ownership and operation of its Property, the IP
or the First Mezzanine Collateral, 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.
(a) No Borrower shall cancel or otherwise forgive or release any material claim
or debt owed to such Borrower by any Person, except for adequate consideration
and in the ordinary course of such Borrower’s business.
(b) No Borrower shall permit or cause any other Loan Party to cancel or
otherwise forgive or release any material claim or debt (other than termination
of Leases by Mortgage Borrowers in accordance with the Mortgage Loan Agreement)
owed to such Loan Party by any Person, except for adequate consideration and in
the ordinary course of such Loan Party’s business.
5.2.6 Zoning. No Borrower shall cause or permit any Mortgage Borrower to
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 cause or permit any Mortgage Borrower to remove or transfer any material
article of FF&E or other personal property owned by any Mortgage 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

 

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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
action or matter or stating in reasonable detail its objections to 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 Collateral 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 Note,
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:

 

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(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).
5.2.10 Transfers.
(a) Borrowers acknowledge that Lender has examined and relied on the experience
of Borrowers and their direct and indirect members in owning and operating the
Collateral and Mortgage Borrowers in agreeing to make the Loan, and will
continue to rely on Borrowers’ ownership of the Collateral as a means of
maintaining the value of the Collateral as security for repayment of the Debt
and the performance of the obligations contained in the Loan Documents.
Additionally, Borrowers acknowledge that Lender has examined and relied on the
experience of Mortgage Borrowers and their general partners, members, principals
and (if any Mortgage 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 Mortgage Borrowers’ ownership of the Properties and the IP
as a means of maintaining the value of the Properties and the IP and, therefore,
indirectly the value of the Collateral, 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 Collateral 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 Collateral.
(b) 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 the Collateral 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 Mortgage Borrower as
collateral for the First Mezzanine Loan and, if applicable, the exercise of

 

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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 Mortgage 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 Loan and, if applicable, the exercise of remedies by 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 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 Lender shall pay to Mortgage 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 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
foreclosure, public or private sale or transfer in lieu of foreclosure under the
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
Mortgage 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 of the Mortgage Loan Agreement;
(F) Intentionally Deleted;
(G) any IP License or Adjacent Property IP License granted in accordance with
the provisions of Section 5.1.26 hereof;

 

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(H) the 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 Mortgage Borrower in
order to create one or more new mezzanine borrowers for any New Mezzanine Loan
as contemplated under the Mortgage Loan Agreement, 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 First
Mezzanine Borrowers in connection with the creation of 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) of the Mortgage Loan Agreement;
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.
(c) A Transfer shall include, but not be limited to, (i) an installment sales
agreement wherein any Borrower or Mortgage Borrower, as applicable, agrees to
sell a Property or any part thereof, the IP, the Collateral or any part thereof
for a price to be paid in installments; (ii) an agreement by any Mortgage
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 Mortgage 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
interests; (vii) the removal or the resignation of any Manager (including,
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limitation, an Affiliated Manager) other than in accordance with the Mortgage
Loan Agreement and Section 5.1.22 hereof; or (viii) any deed-in-lieu or
consensual foreclosure relating to any Property with or for the benefit of
Mortgage Lender or any Affiliate thereof.
(d) 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 or 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 Mortgage Borrower for so long as the
Loan, the Mortgage Loan or any Mezzanine Loan is outstanding, and/or (ii) any
direct interest in any Borrower for so long as the Loan or any 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, Mortgage Event of Default or any
Mezzanine Event of Default has occurred and is continuing, (2) (y) one or both
Guarantors continue to Control, directly or indirectly, each Loan Party and
HRHI, and (z) one or both Guarantors own, directly or indirectly, at least a
fifty-one percent (51%) economic interest in each Loan Party 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 Loan Party 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 Loan Party, 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,
or cause Mortgage Borrowers to 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, Mortgage Event of Default or any Mezzanine Event of Default
has occurred and is continuing, (2) (y) one or both Guarantors continue to
Control, directly or indirectly, each Loan Party and HRHI, and (z) one or both
Guarantors own, directly or indirectly, at least a fifty-one percent (51%)
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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, or cause Mortgage Borrowers to 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 Loan Party and HRHI, and
(z) one or both Guarantors own, directly or indirectly, at least a fifty-one
percent (51%) economic interest in each Loan Party 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
Loan Party and the other Transfer Restricted Parties, and the single purpose
nature and bankruptcy remoteness of each Loan Party and the other Transfer
Restricted Parties, after such Transfer shall satisfy the applicable provisions
of the Loan Documents, the Mortgage Loan Documents and/or the First Mezzanine
Loan Documents (including, without limitation, Section 4.1.30 hereof and/or
Section 4.1.30 of the Mortgage Loan Agreement or the First Mezzanine Loan
Agreement, as applicable), (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 Loan Party 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 Loan
Party, 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, or cause Mortgage
Borrowers to 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; and
(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
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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 Loan Party 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 Loan Party, 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, or cause Mortgage Borrowers to 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.
(e) With respect to any Transfer permitted under this Section 5.2.10 or
otherwise consented to by Lender, Borrowers shall pay, or shall cause Mortgage
Borrowers to 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.
(f) 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.
5.2.11 Morton Indemnification and PWR/RWB Escrow Agreement. Borrowers shall not
do, and Borrowers shall not permit any Mortgage Borrower or 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;
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any rights or remedies under the Morton Indemnification or the PWR/RWB Escrow
Agreement; or (c) other than the funds released on February 2, 2007 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.
Borrowers shall cause Mortgage Borrowers to comply with the provisions of
Section 5.2.11 of the Mortgage Loan Agreement.
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, and Borrower shall not cause or permit
Mortgage Borrower to, 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, Mortgage Event of Default and/or
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 of the Mortgage Loan Agreement.
5.2.13 Limitation on Securities Issuances.
(a) Borrowers shall not cause any ownership interests in any other Loan Party to
be issued other than those that have been issued as of the Closing Date nor
shall Borrowers cause or permit any other Loan Party to enter into or grant any
option, warrant or other agreement or right with respect to any ownership
interest in such Loan Party or with respect to any income or profits of such
Loan Party.
(b) No Borrower shall issue any ownership interests or other securities other
than those that have been issued as of the Closing Date nor shall any Borrower
enter into or grant any option, warrant or other agreement or right with respect
to any ownership interest in such Borrower.
5.2.14 Distributions.
(a) Any and all dividends, including capital dividends, stock or liquidating
dividends, distributions of property, redemptions or other distributions made by
any Mortgage Borrower on or in respect of any interests in such Mortgage
Borrower, and any and all cash and other property received in payment of the
principal of or in redemption of or in exchange for any such interests
(collectively, the “Mortgage Distributions”), shall become part of the
Collateral.
(b) If any Mortgage Distributions shall be received by any Borrower or any
Affiliate of any Borrower after the occurrence and during the continuance of an
Event of Default, each Borrower shall hold, or shall cause the same to be held,
in trust for the benefit of Lender. Any and all revenue derived from any
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occupants of such Property shall be held and applied in accordance with the
terms and provisions of the Mortgage Loan Agreement.
5.2.15 Refinancing or Prepayment of the Mortgage Loan or the First Mezzanine
Loan.
(a) Borrowers or Mortgage Borrowers shall not be required to obtain the consent
of Lender to refinance the Mortgage Loan, provided that the Loan shall have been
(or shall simultaneously be) paid in full in accordance with the terms of this
Agreement (including the Accrued Interest, the Exit Fee or any other amounts due
and payable to Lender under the Loan Documents). Borrowers shall cause Mortgage
Borrowers to obtain the prior written consent of Lender to enter into any other
refinancing of the Mortgage Loan which consent shall not be unreasonably
withheld, conditioned or delayed.
(b) Borrowers or First Mezzanine Borrowers shall not be required to obtain the
consent of Lender to refinance the First Mezzanine Loan, provided that the Loan
shall have been (or shall simultaneously be) paid in full in accordance with the
terms of this Agreement (including the Accrued Interest, the Exit Fee or any
other amounts due and payable to Lender under the Loan Documents). Borrowers
shall cause First Mezzanine Borrowers to obtain the prior written consent of
Lender to enter into any other refinancing of the First Mezzanine Loan which
consent shall not be unreasonably withheld, conditioned or delayed.
5.2.16 Acquisition of the Mortgage Loan.
(a) No Loan Party, Guarantor, or any Affiliate of any of them or any Person
acting at any such Person’s request or direction, shall acquire or agree to
acquire Mortgage Lender’s interest in the Mortgage Loan, or any portion thereof
or any interest therein, or any direct or indirect ownership interest in the
holder of the Mortgage Loan (other than any passive minority interest in the
holder of the Mortgage Loan obtained by any Person), via purchase, transfer,
exchange or otherwise, and any breach or attempted breach of this provision
shall constitute an Event of Default hereunder. If, solely by operation of
applicable subrogation law, Borrowers shall have failed to comply with the
foregoing, then Borrowers: (i) shall immediately notify Lender of such failure;
(ii) shall cause any and all such prohibited parties acquiring any interest in
the Mortgage Loan Documents: (A) not to enforce the Mortgage Loan Documents; and
(B) upon the request of Lender, to the extent any of such prohibited parties has
or have the power or authority to do so, to promptly: (1) cancel the promissory
note evidencing the Mortgage Loan, (2) reconvey and release the Lien securing
the Mortgage Loan and any other collateral under the Mortgage Loan Documents,
and (3) discontinue and terminate any enforcement proceeding(s) under the
Mortgage Loan Documents.
(b) Lender shall have the right at any time to acquire all or any portion of the
Mortgage Loan or any interest in any holder of, or participant in, the Mortgage
Loan without notice or consent of Borrowers or any other Loan Party, in which
event Lender shall have and may exercise all rights of Mortgage Lender
thereunder (to the extent of its interest), including the right (i) to declare
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Mortgage Loan indebtedness, in accordance with the terms thereof and (iii) to
pursue all remedies against any obligor under the Mortgage Loan Documents.
5.2.17 Other Limitations. Prior to the payment and performance in full of the
Obligations, no Borrower shall, nor shall permit or cause any other Loan Party
or any of its respective Affiliates to, without the prior written consent of
Lender, which consent shall not be unreasonably withheld, give its consent or
approval to any of the following actions or items:
(a) any Mortgage Borrower or any First Mezzanine Borrower creating, incurring,
assuming or suffering to exist any additional Liens on any portion of any
Property or the First Mezzanine Collateral, as applicable, except for Permitted
Encumbrances;
(b) any modification, amendment, consolidation, spreading, restatement, waiver
or termination of any of the Mortgage Loan Documents or the First Mezzanine Loan
Documents;
(c) Intentionally Deleted;
(d) any material change in the method of conduct of the business of any Borrower
or any other Loan Party; or
(e) the settlement of any claim against any Borrower or any other Loan Party,
other than a fully insured third party.
ARTICLE VI.
INSURANCE; CASUALTY; CONDEMNATION; RESTORATION
Section 6.1 Insurance.
(a) Borrowers shall cause Mortgage Borrowers to obtain and maintain, or cause to
be maintained, at all times during the term of the Loan the insurance required
under Section 6.1 of the Mortgage Loan Agreement, including, without limitation,
meeting all insurer requirements thereunder. In addition, Borrowers shall cause
Mortgage Borrower to cause Lender to be named as an additional named insured
under each of the insurance policies described in Section 6.1(a)(ii), (iii),
(v), (vii), and (xii) of the Mortgage Loan Agreement, and Borrowers shall cause
Mortgage Borrowers to cause Lender to be named as a named insured together with
Mortgage Lender, as their interest may appear, under the insurance policies
required under Section 6.1 (a)(i), (iv), (vi), (viii), (ix), (x) and (xi) of the
Mortgage Loan Agreement. Borrowers shall cause Mortgage Borrowers to cause all
insurance policies required under this Section 6.1 to provide for at least
thirty (30) days prior notice to Lender in the event of policy cancellation or
material changes. Not less than five (5) Business Days prior to the expiration
dates of the Policies theretofore furnished to Lender pursuant to the terms
hereof, 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; provided, however, that in the case
of renewal Policies, Borrowers may furnish Lender with binders therefor to be
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(b) 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 the Collateral, 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 Pledge Agreement and shall bear interest at the
Default Rate from the date of demand.
(c) Notwithstanding anything to the contrary set forth herein, proof of all
property coverages required under Section 6.1(a) of the Mortgage Loan Agreement
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.
(d) For purposes of this Agreement, Lender shall have the same approval rights
over the insurance referred to above (including, without limitation, the
insurers, deductibles and coverages thereunder, as well as the right to require
other reasonable insurance pursuant to Section 6.1(a)(xii) of the Mortgage Loan
Agreement) as are provided in favor of Mortgage Lender in the Mortgage Loan
Agreement. All liability insurance provided for in the Mortgage Loan Agreement
shall provide insurance with respect to the liabilities of each of the Loan
Parties. The Policies delivered pursuant to the Mortgage Loan Agreement shall
include endorsements of the type described in Section 6.1(e) of the Mortgage
Loan Agreement, but pursuant to which Lender shall have the same rights as
Mortgage Lender as referred to in such Section 6.1(e).
(e) Upon repayment in full of the Mortgage Loan and the First Mezzanine Loan,
the provisions of Section 6.1 of the Mortgage Loan Agreement and all related
definitions shall be incorporated into this Agreement in their entirety.
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 cause
Mortgage Borrowers to give prompt notice of such damage to Lender and shall
cause Mortgage Borrowers to 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 of the
Mortgage Loan Agreement, provided, that if (A) Mortgage Lender is obligated to
make Net Proceeds available to Mortgage Borrowers for purposes of Restoration in
accordance with Section 6.4 of the Mortgage Loan Agreement, (B) Mortgage Lender
has received such Net Proceeds, and (C) Mortgage Lender has not made such Net
Proceeds available to Mortgage Borrowers, then Borrowers shall not be required
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Borrowers to repair and restore such Property unless and until such Net Proceeds
are made available to Mortgage Borrowers. It is expressly understood, however,
that Mortgage 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,
or shall cause Mortgage Borrowers to 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 or any
Mortgage 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, or shall cause the applicable
Mortgage Borrower to, 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 cause Mortgage Borrowers to 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, or shall cause the applicable Mortgage Borrower to,
from time to time deliver to Lender all instruments reasonably requested by it
to permit such participation. Borrowers shall, or shall cause Mortgage Borrowers
to, 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 Note 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 Note. If any
Property or any portion thereof is taken by a condemning authority, Borrowers
shall, or shall cause Mortgage Borrowers to, promptly commence and diligently
prosecute the Restoration of the applicable Property and otherwise comply with
the provisions of Section 6.4 of the Mortgage Loan Agreement, provided, that if
(A) Mortgage Lender is obligated to make Net Proceeds available to Mortgage
Borrowers for purposes of Restoration in accordance with Section 6.4 of the
Mortgage Loan Agreement, (B) Mortgage Lender has received such Net Proceeds, and
(C) Mortgage Lender has not made such Net Proceeds available to Mortgage
Borrowers, then Mortgage Borrowers shall not be obligated to repair and restore
such Property unless and until such Net Proceeds are made available to Mortgage
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 the Note shall have been sought, recovered or denied,
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thereof sufficient to pay the Debt (and all components thereof, including,
without limitation, the Exit Fee).
Section 6.4 Restoration.
(a) Borrowers shall, or shall cause Mortgage Borrowers to, deliver to Lender
copies of all reports, plans, specifications, documents and other materials that
are delivered to Mortgage Lender under Section 6.4 of the Mortgage Loan
Agreement in connection with a Restoration of any Property after a Casualty or
Condemnation. If any insurance proceeds or condemnation awards are to be
disbursed by Mortgage Lender for Restoration, Borrowers shall deliver or cause
to be delivered to Lender copies of all written correspondence delivered to and
received from Mortgage Lender that relates to the restoration and release of the
insurance proceeds or condemnation awards.
(b) Notwithstanding any provision in this Agreement to the contrary, all
insurance proceeds and condemnation awards will be made available to Mortgage
Borrowers in accordance with the Mortgage Loan Agreement. In the event the
Mortgage Loan has been paid in full and Lender receives any insurance proceeds
or condemnation award, Lender shall either apply such proceeds to the Debt or
for the Restoration of any Property in accordance with the same terms and
conditions contained in Section 6.4 of the Mortgage Loan Agreement.
(c) Upon repayment in full of the Mortgage Loan and the First Mezzanine Loan, if
the Loan or any portion thereof is then outstanding, the provisions of
Section 6.4 of the Mortgage Loan Agreement and all related definitions shall be
incorporated into this Agreement in their entirety.
Section 6.5 Rights of Lender. For purposes of this Article VI, Borrowers shall
obtain the approval of Lender for each matter requiring the approval of Mortgage
Lender under the provisions of Sections 6.4 of the Mortgage Loan Agreement, with
each reference in any such provisions to the “Loan” to include the Mortgage Loan
and the Loan, and the reference in any such provisions to the “Maturity Date” to
mean the Maturity Date, as defined herein. If (a) Mortgage Lender does not
require the deposit by Mortgage Borrowers of the “Net Proceeds Deficiency”
pursuant to Section 6.4(c)(vi) of the Mortgage Loan Agreement or (b) First
Mezzanine Lender does not require the deposit by First Mezzanine Borrowers of
the “Net Proceeds Deficiency pursuant to Section 6.5 of the First Mezzanine Loan
Agreement, Lender shall have the right to demand that Borrowers make a deposit
of said “Net Proceeds Deficiency” in accordance with the terms of such Section
(as if each reference therein to “Borrowers” and “Lender” referred to Borrowers
and Lender, respectively).
ARTICLE VII.
RESERVE FUNDS
Section 7.1 Working Capital Reserve Fund.
(a) Borrowers shall cause Mortgage Borrowers to comply with all of the terms and
conditions set forth in Section 7.1 of the Mortgage Loan Agreement.

 

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(b) In the event (i)(A) Mortgage Lender waives the requirements of Mortgage
Borrowers to maintain the Working Capital Reserve Fund and the Working Capital
Reserve Account pursuant to the terms of Section 7.1 of the Mortgage Loan
Agreement and (B) First Mezzanine Lender waives the requirements of First
Mezzanine Borrowers to maintain the Working Capital Reserve Fund and the Working
Capital Account pursuant to the terms of Section 7.1 of the First Mezzanine Loan
Agreement; or (ii) the Mortgage Loan and the First Mezzanine Loan have been
repaid in full (without a prepayment of the Loan in full), Lender shall have the
right to require Borrowers to establish and maintain an escrow that would
operate in the same manner as the Working Capital Reserve Fund and the Working
Capital Reserve Account in Section 7.1 of the Mortgage Loan Agreement and the
provisions of Section 7.1 of the Mortgage Loan Agreement and all related
definitions shall be incorporated herein by reference; provided, however, that
all references to “Borrowers,” “Lender” and “Event of Default” therein shall be
deemed references to Borrowers, Lender and Event of Default as defined herein.
Section 7.2 Tax and Insurance Escrow Fund.
(a) Borrowers shall cause Mortgage Borrowers to comply with all of the terms and
conditions set forth in Section 7.2 of the Mortgage Loan Agreement.
(b) In the event (i)(A) Mortgage Lender waives the requirements of Mortgage
Borrowers to maintain the Tax and Insurance Escrow Fund pursuant to the terms of
Section 7.2 of the Mortgage Loan Agreement and (B) First Mezzanine Lender waives
the requirements of First Mezzanine Borrowers to maintain the Tax and Insurance
Escrow Fund pursuant to the terms of Section 7.2 of the First Mezzanine Loan
Agreement, or (ii) the Mortgage Loan and the First Mezzanine Loan have been
repaid in full (without a prepayment of the Loan in full), Lender shall have the
right to require Borrowers to establish and maintain an escrow that would
operate in the same manner as the Tax and Insurance Escrow Fund in Section 7.2
of the Mortgage Loan Agreement and the provisions of Section 7.2 of the Mortgage
Loan Agreement and all related definitions shall be incorporated herein by
reference; provided, however, that all references to “Borrowers,” “Lender” and
“Event of Default” therein shall be deemed references to Borrowers, Lender and
Event of Default as defined herein.
Section 7.3 Replacement Reserve Fund.
(a) Borrowers shall cause Mortgage Borrowers to comply with all of the terms and
conditions set forth in Section 7.3 of the Mortgage Loan Agreement.
(b) In the event (i)(A) Mortgage Lender waives the requirements of Mortgage
Borrowers to maintain the Replacement Reserve Fund and the Replacement Reserve
Account pursuant to the terms of Section 7.3 of the Mortgage Loan Agreement and
(B) First Mezzanine Lender waives the requirements of First Mezzanine Borrowers
to maintain the Replacement Reserve Fund and the Replacement Reserve Account
pursuant to the terms of Section 7.3 of the First Mezzanine Loan Agreement, or
(ii) the Mortgage Loan and the First Mezzanine Loan have been repaid in full
(without a prepayment of the Loan in full), Lender shall have the right to
require Borrowers to establish and maintain an escrow that would operate in the
same manner as the Replacement Reserve Fund and the Replacement Reserve Account
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Loan Agreement and the provisions of Section 7.3 of the Mortgage Loan Agreement
and all related definitions shall be incorporated herein by reference; provided,
however, that all references to “Borrowers,” “Lender” and “Event of Default”
therein shall be deemed references to Borrowers, Lender and Event of Default as
defined herein.
Section 7.4 Interest Reserve Fund.
(a) Borrowers shall cause Mortgage Borrowers to comply with all of the terms and
conditions set forth in Section 7.4 of the Mortgage Loan Agreement.
(b) In the event (i)(A) Mortgage Lender waives the requirements of Mortgage
Borrowers to maintain the Interest Reserve Fund pursuant to the terms of
Section 7.4 of the Mortgage Loan Agreement and (B) First Mezzanine Lender waives
the requirements of First Mezzanine Borrowers to maintain the Interest Reserve
Fund pursuant to the terms of Section 7.4 of the First Mezzanine Loan Agreement,
or (ii) the Mortgage Loan and the First Mezzanine Loan have been repaid in full
(without a prepayment of the Loan in full), Lender shall have the right to
require Borrowers to establish and maintain an escrow that would operate in the
same manner as the Interest Reserve Fund in Section 7.4 of the Mortgage Loan
Agreement and the provisions of Section 7.4 of the Mortgage Loan Agreement and
all related definitions shall be incorporated herein by reference; provided,
however, that all references to “Borrowers,” “Lender” and “Event of Default”
therein shall be deemed references to Borrowers, Lender and Event of Default as
defined herein.
Section 7.5 Initial Renovation Reserve Fund.
(a) Borrowers shall cause Mortgage Borrowers to comply with all of the terms and
conditions set forth in Section 7.5 of the Mortgage Loan Agreement.
(b) In the event (i)(A) Mortgage Lender waives the requirements of Mortgage
Borrowers to maintain the Initial Renovation Reserve Fund and the Initial
Renovation Reserve Account pursuant to the terms of Section 7.5 of the Mortgage
Loan Agreement and (B) First Mezzanine Lender waives the requirements of First
Mezzanine Borrowers to maintain the Initial Renovation Reserve Fund and the
Initial Renovation Reserve Account pursuant to the terms of Section 7.5 of the
First Mezzanine Loan Agreement, or (ii) the Mortgage Loan and the First
Mezzanine Loan have been repaid in full (without a prepayment of the Loan in
full), Lender shall have the right to require Borrowers to establish and
maintain an escrow that would operate in the same manner as the Initial
Renovation Reserve Fund and the Initial Renovation Reserve Account in
Section 7.5 of the Mortgage Loan Agreement and the provisions of Section 7.5 of
the Mortgage Loan Agreement and all related definitions shall be incorporated
herein by reference; provided, however, that all references to “Borrowers,”
“Lender” and “Event of Default” therein shall be deemed references to Borrowers,
Lender and Event of Default as defined herein.
Section 7.6 General Reserve Fund.
(a) Borrowers shall cause Mortgage Borrowers to comply with all of the terms and
conditions set forth in Section 7.6 of the Mortgage Loan Agreement.
(b) In the event (i)(A) Mortgage Lender waives the requirements of Mortgage
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pursuant to the terms of Section 7.6 of the Mortgage Loan Agreement and
(B) First Mezzanine Lender waives the requirements of First Mezzanine Borrowers
to maintain the General Reserve Fund and the General Reserve Account pursuant to
the terms of Section 7.6 of the First Mezzanine Loan Agreement, or (ii) the
Mortgage Loan and the First Mezzanine Loan have been repaid in full (without a
prepayment of the Loan in full), Lender shall have the right to require
Borrowers to establish and maintain an escrow that would operate in the same
manner as the General Reserve Fund and the General Reserve Account in Section
7.6 of the Mortgage Loan Agreement and the provisions of Section 7.6 of the
Mortgage Loan Agreement and all related definitions shall be incorporated herein
by reference; provided, however, that all references to “Borrowers,” “Lender”
and “Event of Default” therein shall be deemed references to Borrowers, Lender
and Event of Default as defined herein.
(c) In the event (i)(A) Mortgage Lender waives the requirements of Mortgage
Borrowers to maintain the IP Subaccount pursuant to the terms of Section 7.6 of
the Mortgage Loan Agreement and (B) First Mezzanine Lender waives the
requirements of First Mezzanine Borrowers to maintain the IP Subaccount pursuant
to the terms of Section 7.6 of the First Mezzanine Loan Agreement, or (ii) the
Mortgage Loan and the First Mezzanine Loan have been repaid in full (without a
prepayment of the Loan in full), Lender shall have the right to require
Borrowers to establish and maintain an subaccount of the General Reserve Account
that would operate in the same manner as the IP Subaccount in Section 7.6 of the
Mortgage Loan Agreement and the provisions of Section 7.6 of the Mortgage Loan
Agreement and all related definitions shall be incorporated herein by reference;
provided, however, that all references to “Borrowers,” “Lender” and “Event of
Default” therein shall be deemed references to Borrowers, Lender and Event of
Default as defined herein.
Section 7.7 Construction Loan Reserve Fund.
(a) Borrowers shall cause Mortgage Borrowers to comply with all of the terms and
conditions set forth in Section 7.7 of the Mortgage Loan Agreement.
(b) In the event (i)(A) Mortgage Lender waives the requirements of Mortgage
Borrowers to maintain the Construction Loan Reserve Fund and the Construction
Loan Reserve Account pursuant to the terms of Section 7.7 of the Mortgage Loan
Agreement and (B) First Mezzanine Lender waives the requirements of First
Mezzanine Borrowers to maintain the Construction Loan Reserve Fund and the
Construction Loan Reserve Account pursuant to the terms of Section 7.7 of the
First Mezzanine Loan Agreement, or (ii) the Mortgage Loan and the First
Mezzanine Loan have been repaid in full (without a prepayment of the Loan in
full), Lender shall have the right to require Borrowers to establish and
maintain an escrow that would operate in the same manner as the Construction
Loan Reserve Fund and the Construction Loan Reserve Account in Section 7.7 of
the Mortgage Loan Agreement and the provisions of Section 7.7 of the Mortgage
Loan Agreement and all related definitions shall be incorporated herein by
reference; provided, however, that all references to “Borrowers,” “Lender” and
“Event of Default” therein shall be deemed references to Borrowers, Lender and
Event of Default as defined herein.

 

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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.
(b) 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 as follows:
(i) first, to 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 (ii) then, any balance remaining to
Borrowers.
(c) 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 (1) all of the 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.
(d) Except to the extent provided in the 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 levy to be
made thereon, or any UCC-1 Financing Statements, except those naming Lender as
the secured party, to be filed with respect thereto.
(e) 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
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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 7.9. 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.
(f) 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.
Section 7.9 Transfer of Mortgage Reserve Funds. If Mortgage Lender waives any
reserves or escrow accounts required in accordance with the terms of the
Mortgage Loan Agreement, which reserves or escrow accounts are also required in
accordance with the terms of this Article VII, or if the Mortgage Loan is paid
off in full (without a prepayment of the Loan in full), then Borrowers shall
cause any amounts that had been, or would have been, deposited into any reserves
or escrow accounts in accordance with the terms of the Mortgage Loan Agreement
to be deposited or transferred to Lender in accordance with the terms of this
Article VII (and Borrowers shall enter into a cash management and lockbox
agreement for the benefit of Lender substantially similar to the arrangement
entered into between Mortgage Borrowers and Mortgage Lender at the time of the
closing of the Mortgage Loan).
ARTICLE VIII.
DEFAULTS
Section 8.1 Event of Default. 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 Current
Pay Interest Payment or any required monthly deposit to any Reserve Fund is not
paid in full on or before the related Payment Date, or (C) any other portion of
the Debt is not paid within three (3) Business Days following notice to
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(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 of the Mortgage Loan Agreement or Section 7.2 hereof, as applicable;
(iii) if the Policies are not kept in full force and effect;
(iv) if any Borrower Transfers or otherwise encumbers any portion of the
Collateral or any interest therein, or if any Mortgage 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 Loan Party, 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 Loan
Party, HRHI or any Guarantor, or if any Loan Party, 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 Loan Party, HRHI or any Guarantor, or if any proceeding for the
dissolution or liquidation of any Loan Party, HRHI or any Guarantor shall be
instituted; provided, however, if such appointment, adjudication, petition or
proceeding was involuntary and not consented to by any Loan Party, 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
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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
any 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 Mortgage 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 or any Mortgage 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
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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 caused
Mortgage Borrowers to commence to cure such failure within such thirty (30) day
period and shall 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 Mortgage 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) of the
Mortgage Loan Agreement 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 Mortgage 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 of the Mortgage Loan Agreement;
(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 Mortgage 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

 

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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;
(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 Mortgage Borrower or any
Affiliate thereof shall ever become the Liquor Manager, if Gaming Borrower, such
other Mortgage 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 Mortgage Lender Successor Owner
as and to the extent required pursuant to Section 5.1.23(c) of the Mortgage Loan
Agreement and 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 the Liens created pursuant to the Pledge Agreement or any other Loan
Document shall cease to be a fully perfected enforceable first priority security
interest effective under the Gaming Laws or if there shall be a default

 

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under the Pledge Agreement beyond any applicable notice and cure periods
contained in the Pledge Agreement;
(xxvi) 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;
(xxvii) if a Mortgage Event of Default shall occur and be continuing;
(xxviii) if a First Mezzanine Event of Default shall occur and be continuing; or
(xxix) if Borrowers fail 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 and/or the
Collateral, 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 and/or the Collateral, 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 expressly waives 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
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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 Collateral and
the Pledge Agreement 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 Collateral, nothing contained herein or in any other Loan Document shall
be construed as requiring Lender to resort to the Collateral or any particular
portion of the Collateral for the satisfaction of any of the obligations in
preference or priority to any other collateral, and Lender may seek satisfaction
out of the Collateral or any part 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 upon the
Collateral under the Pledge Agreement in any manner and for any amounts secured
by the Pledge Agreement 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 upon the
Collateral under the Pledge Agreement to recover such delinquent payments,
and/or (ii) in the event Lender elects to accelerate less than the sum of the
entire Outstanding Principal Balance and all Accrued Interest, Lender may
foreclose upon the Collateral under the Pledge Agreement to recover so much of
the Outstanding Principal Balance (or amounts owing) as Lender may accelerate
and such other sums secured by the Pledge Agreement as Lender may elect in its
sole discretion. Notwithstanding one or more partial foreclosures, the
Collateral and any other collateral shall remain subject to the Pledge Agreement
to secure payment of sums secured by the Pledge Agreement 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 the Note and the other Loan Documents into one or more separate
notes, pledges and 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
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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 the
Collateral 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 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 all unpaid principal of and accrued interest on the Note,
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
which are expressly hereby waived by Borrowers to the extent permitted by
applicable law.
Section 8.3 Right to Cure Defaults. Upon the occurrence and during the
continuance of any Event of Default, Lender may, but without any obligation to
do so and without notice to or demand on Borrowers and without releasing
Borrowers from any obligation hereunder, make any payment or do any act required
of Borrowers hereunder in such manner and to such extent as Lender may deem
necessary to protect the security hereof. Subject to the terms of the Mortgage
Loan Agreement, Lender is authorized to enter upon any Property for such
purposes, or appear in, defend, or bring any action or proceeding to protect its
interest in the Properties for such purposes, and the cost and expense thereof
(including reasonable attorneys’ fees to the extent permitted by law), with
interest as provided in this Section 8.3, shall constitute a portion of the Debt
and shall be due and payable to Lender upon demand. All such costs and expenses
incurred by Lender in remedying such Event of Default or such failed payment or
act or in appearing in, defending, or bringing any action or proceeding shall
bear interest at the Default Rate, for the period after notice from Lender that
such cost or expense was incurred to the date of payment to Lender. All such
costs and expenses incurred by Lender together with interest thereon calculated
at the Default Rate shall be deemed to constitute a portion of the Debt and
shall be secured by the Pledge Agreement and enforced as a lien against the
Collateral and shall be immediately due and payable upon demand by Lender
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ARTICLE IX.
SPECIAL PROVISIONS
Section 9.1 Sale of Note and Securitization. Borrowers acknowledge and agree
that, at any time from and after the Closing Date, Lender may sell all or any
portion of the Loan and the Loan Documents, or require Borrowers to restructure
the Loan into 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, which restructuring may include the restructuring of a
portion of the 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 the Loan Documents or a pool of assets that include the Loan and the Loan
Documents (such sales, participations and/or 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 Mortgage Loan and/or a
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, the IP, the First Mezzanine Collateral and/or
the Collateral 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, (A) deliver updated opinions
of counsel as to non-consolidation, due execution and enforceability with
respect to the Properties, the IP, the Collateral, any Loan Party, HRHI, any
Guarantor, any of their respective Affiliates and the Loan Documents, and
(B) amend the Special Purpose Entity provisions of the organizational documents
for each Loan Party, which counsel opinions and amendments to the organizational
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(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,
the IP, or the Collateral, 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 such Securitization and/or
deliver one or more new component notes to replace the original note or modify
the original note to reflect multiple components of the Loan (and such new notes
or modified note shall have the same initial weighted average coupon of the
original note, but such new notes or modified note may change the interest rate
of the Loan), 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 (A) such
new notes or modified note will not change the interest rate, the stated
maturity or the amortization of principal set forth in the Note unless the
varying interest rates shall have the same initial weighted average coupon of
the original Note, (B) 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 any Loan Party, HRHI or Guarantors or
any of their respective Constituent Members, or (C) such amendments to the Loan
Documents will not materially increase any Loan Party’s 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, the First Mezzanine Collateral, the Collateral, any Loan Party, any
Mezzanine Borrower, HRHI, the Gaming Operator, any Manager, the Liquor Manager
and/or the Loan 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 Loan Party, any Mezzanine Borrower, HRHI, any Guarantor, the
Loan, any Property, the IP, the First Mezzanine Collateral and/or the Collateral
in form and substance required in order to comply with any applicable securities
laws.

 

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(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
their legal counsel and their 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 additional 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
and end dates, etc.) under the Loan 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 a Securitization. In the event that the Disclosure
Document is required to be revised prior to the sale of all Securities,
Borrowers will cooperate with the holder of the Note 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 the Loan Parties, the Loan Parties’
Affiliates, Guarantors, HRHI, the Properties, the IP, the First Mezzanine
Collateral, the Collateral, the Managers, the Liquor Manager, the Gaming
Operator

 

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and/or the Loan, 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 or any Affiliate of Lender 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 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 any Loan
Party, any Loan Party’s Affiliates, Guarantors, HRHI, the Properties, the IP,
the First Mezzanine Collateral, the Collateral, the Managers, the Liquor
Manager, the Gaming Operator and/or the Loan, 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
stated therein or necessary in 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 Loan Party, 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 the Loan Parties, the Loan Parties’ Affiliates,
Guarantors, HRHI, the Properties, the IP, the First Mezzanine Collateral, the
Collateral, the Managers, the Liquor Manager, the Gaming Operator and/or the
Loan, or the omission or alleged omission to state in any such Disclosure
Document a material fact in any Loan Party’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
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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 Loan Party, 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
connection with the 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 Lender, (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 Lender 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
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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
proceedings. Borrowers 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 Note, this Agreement, the Pledge Agreement 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
Note, this Agreement, the Pledge Agreement and the other Loan Documents, or in
the 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 the Collateral, and Lender, by accepting
the Note, this Agreement, the Pledge Agreement 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 Note, this Agreement, the Pledge Agreement 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 Pledge Agreement; (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
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constitute a prohibition against Lender seeking a deficiency judgment against
any Borrower in order to fully realize the security granted by the Pledge
Agreement or commencing any other appropriate action or proceeding in order for
Lender to exercise its remedies against the Collateral; or (f) 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 Loan Party, 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 Loan Party, 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;
(iii) Intentionally Deleted;
(iv) the misappropriation or conversion by any Loan Party, by any Person
Controlled by any Loan Party, including, without limitation, any Affiliated
Manager, a Liquor Manager who is an Affiliate of any Loan Party or a Gaming
Operator who is an Affiliate of any Loan Party, by any agent of any Loan Party,
or by any other Person with whom any Loan Party 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 Loan Party 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 of any Loan Party to pay (or to deposit into the Mortgage
Reserve Funds or the Reserve Funds, if applicable, amounts sufficient to pay)
all Taxes and all other costs giving rise to any Lien on any portion of the
Collateral or 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);

 

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(vi) if any Loan Party fails to maintain its status as a Special Purpose Entity
as required pursuant to the terms hereof;
(vii) if any Loan Party fails to obtain Lender’s consent to any subordinate
financing, mortgage or other voluntary Lien encumbering the Collateral, 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, an assignment
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 Guarantor under the
other provisions of this Section 9.4 or the Non-Recourse Guaranty, as
applicable);
(xi) Intentionally Deleted;
(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 3 of the First 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 Loan Party or any
Affiliate thereof shall be the Liquor Manager, if HRHI, Gaming Borrower, such
other Loan Party or such Affiliate thereof shall fail to provide liquor
management services for the Hotel/Casino Property following an Event of Default
or 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 Mortgage Borrower or any Affiliate thereof, pursuant to
Section 5.1.23(c) hereof;

 

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(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 (A) to
HRHH Gaming Junior Mezz, LLC, and then (B) to Gaming Mezz Borrower, 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; and/or
(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) of the Mortgage
Loan Agreement, 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) of the Mortgage Loan Agreement.
(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 Note 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
Debt secured by the Pledge Agreement or to require that all 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 Loan Party, 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 Loan Party, 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 such petition is not dismissed within ninety (90) days after filing, or any
Loan Party, or any Affiliate of any of them who Controls any Loan Party, or HRHI
or both Guarantors, solicit or cause to be solicited petitioning creditors for
any involuntary petition against any Loan Party, HRHI or both Guarantors from
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behalf of Lender); (iii) any Loan Party, HRHI or both Guarantors filing an
answer consenting to, or any Loan Party, HRHI or both Guarantors, or any
Affiliate of any of them who Controls any Loan Party, otherwise consenting to or
acquiescing or joining in, any involuntary petition filed against any Loan
Party, HRHI or both Guarantors, by any other Person (other than if filed by or
on behalf of Lender) under the Bankruptcy Code or any other Federal or state
bankruptcy or insolvency law; (iv) any Loan Party, HRHI or both Guarantors, or
any Affiliate of any of them who Controls any Loan Party, consenting to or
acquiescing or joining in an application for the appointment of a custodian,
receiver, trustee or examiner for any Loan Party or any portion of any Property
or any portion of the IP or the Collateral (other than any such appointment at
the request or petition of Lender); (v) any Loan Party, HRHI or both Guarantors
voluntarily making an assignment for the benefit of creditors (other than
Lender), or admitting, in writing or in any legal proceeding, its insolvency or
inability to pay its debts as they become due; and/or (vi) Gaming Mezz Borrower
failing to comply, or cause compliance by the applicable Loan Party, with the
requirements of the Gaming Laws to obtain the approval of the Gaming Authorities
of the pledge of the Gaming Securities pursuant to Section 17(b) of the Pledge
Agreement (it being understood and agreed that Borrowers shall have no liability
under this clause (vi) to the extent arising from the failure of Lender to
reasonably cooperate with the Gaming Authorities in connection with such Gaming
Law requirements to the extent necessary); unless, in the case of any of the
foregoing clauses (i), (ii), (iii), (iv), (v) or (vi) 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 the DLJMB Commitment Letter,
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, the IP or the Collateral or to
which any Property, the IP or the Collateral is now or hereafter subject, except
as may be expressly set forth therein.
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
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Section 9.5 Matters Concerning Managers 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 Mortgage 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, Borrowers
shall cause the applicable Mortgage Borrower to, 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,
Borrowers shall cause Hotel/Casino Borrower to, 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) Borrowers shall cause Hotel/Casino Borrower
to, 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
Component Lease beyond any 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, Borrowers shall cause Hotel/Casino Borrower to, 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
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the ability of Hotel/Casino Borrower to transfer such gaming operations to a
Qualified Gaming Operator as required herein, and (B) Borrowers shall cause
Hotel/Casino Borrower to, 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.
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 Note, 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

 

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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 NOTE 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
AND 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 NOTE AND THE OTHER LOAN DOCUMENTS, AND THIS AGREEMENT, THE NOTE
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

 

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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
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 the Note, 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
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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 the Note 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, the Note 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, the Note or the other
Loan Documents, or to declare a default for failure to effect prompt payment of
any such other amount.
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:   NRFC WA Holdings, LLC
 
      c/o NorthStar Realty Finance, Corp.
 
      399 Park Avenue, 18th Floor
 
      New York, New York 10022
 
      Attention: Aaron Davis
 
      Facsimile No.: (212) 547-2718
 
       
 
  with a copy to:   Sidley Austin LLP
 
      787 Seventh Avenue
 
      New York, New York 10019
 
      Attention: Alan S. Weil, Esq.
 
      Facsimile No.: (212) 839-5599
 
       
 
  If to Borrowers:   HRHH Gaming Junior Mezz, LLC
 
      and
 
      HRHH JV Junior Mezz, LLC
 
      c/o Morgans Hotel Group Co.
 
      475 Tenth Avenue

 

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      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
 
      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
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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
ISSUE TRIABLE OF RIGHT BY JURY, AND 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
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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 (10) days of receipt of 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 Exit Fee; (vi) dealing with any Letter of
Credit delivered to Lender hereunder; (vii) 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, the Collateral or any other security given for the Loan; and
(viii) 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, the IP or the Collateral 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 Pledge Agreement or as
otherwise permitted in this Agreement and the other Loan Documents and
(B) Lender has sold or transferred any interests in the Note, 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,
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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, fraud or
willful misconduct of Lender. To the extent that the undertaking to 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 Incorporated. The Schedules 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, the Note 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 the Collateral other than that of secured
party, pledgee or lender.

 

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(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
shall under any circumstances be deemed 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 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 Mortgage Borrowers or Borrowers. 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.
(e) Observation, inspection and approvals, if applicable, 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 and no Borrower, Mortgage Borrower, Trade Contractor or
other interested Person, under any circumstances, shall be entitled to rely upon
such inspections and approvals by Lender 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) Notwithstanding anything to the contrary herein, in the Mortgage Loan
Agreement or the Intercreditor Agreement, Lender hereby waives any and all
rights to approve or otherwise consent to (i) any Change Order; (ii) any
reallocation of Contingency Line Items under the Loan Budget and/or (iii) any
FF&E leases, and in no event shall Borrower be required to see Lender’s approval
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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 the Collateral, or to a sale
in inverse order of alienation in the event of foreclosure of the Pledge
Agreement, 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 the Collateral 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 Collateral in preference to
every other claimant whatsoever.
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,
subsidiary or Affiliate of Lender. Lender shall not be 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.

 

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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.
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
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(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 Note Register. Administrative Agent shall maintain on behalf of
Borrowers pursuant to the last sentence of this Section 10.25, or cause to be
maintained, (i) a copy of each assignment of all or any portion of the Note (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, Lender 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 the 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 10.26 Corporate Rate Policy. Borrowers shall cause Mortgage Borrowers to
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 $100 per night (or if less, the then prevailing rate),
provided that absent Mortgage Borrowers’ reasonable consent thereto the
aggregate number of rooms to be provided per night in accordance with the terms
of this Section 10.26 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, Borrowers shall
cause Mortgage Borrowers to 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 charge
(it being acknowledged and agreed that Corporate Persons will be obligated to
pay other generally applicable charges, fees or expenses payable following
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ARTICLE XI.
MORTGAGE LOAN AND MEZZANINE LOANS
Section 11.1 Mortgage Loan and Mezzanine Loan Deliveries.
(a) Promptly after receipt, Borrowers shall deliver (or cause Mortgage
Borrowers, First 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) Mortgage Lender by any
Mortgage Borrower or any guarantor under the Mortgage Loan Documents, (ii) First
Mezzanine Lender by any First Mezzanine Borrower or any guarantor under the
First 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 Mortgage Borrowers,
First 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) Mortgage Borrowers to Mortgage Lender under the Mortgage Loan Documents as
and when due under the Mortgage Loan Documents, (ii) First Mezzanine Borrowers
to First Mezzanine Lender under the First Mezzanine Loan Documents as and when
due under the First 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 Mortgage Loan and 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 Mortgage Borrowers
to) from time to time, use reasonable efforts to obtain from Mortgage Lender
such estoppel certificates with respect to the status of the Mortgage Loan and
compliance by Mortgage Borrowers with the terms of the Mortgage Loan Documents
as may reasonably be requested by Lender. In the event or to the extent that
Mortgage 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 Mortgage Borrowers expressly representing to Lender
the information requested by Lender regarding the status of the Mortgage Loan
and the compliance by Mortgage Borrowers with the terms of the Mortgage 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 Mortgage 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 Mortgage Borrowers.

 

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(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 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
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 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.
(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
by Lender regarding the status of the Third Mezzanine Loan 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.

 

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Section 11.3 Mortgage Loan Defaults and First Mezzanine Loan Defaults.
(a) Without limiting the generality of the other provisions of this Agreement,
and without waiving or releasing Borrowers from any of their obligations
hereunder, if there shall occur any Mortgage Event of Default or any First
Mezzanine Event of Default, Borrowers hereby expressly agree that Lender shall
have the immediate right, without notice to or demand on any of the applicable
Loan Parties, but shall be under no obligation: (i) to pay all or any part of
the Mortgage Loan and/or the First Mezzanine Loan, as applicable, and any other
sums, that are then due and payable and to perform any act or take any action on
behalf of the applicable Loan Parties, as may be appropriate, to cause all of
the terms, covenants and conditions of the Mortgage Loan Documents or the First
Mezzanine Loan Documents on the part of such Loan Parties to be performed or
observed thereunder to be promptly performed or observed; and (ii) to pay any
other amounts and take any other action as Lender, in its sole and absolute
discretion, shall deem advisable to protect or preserve the rights and interests
of Lender in the Loan and/or the Collateral. Lender shall have no obligation to
complete any cure or attempted cure undertaken or commenced by Lender. All sums
so paid and the costs and expenses incurred by Lender in exercising rights under
this Section 11.3 (including, without limitation, reasonable attorneys’ and
other professional fees), with interest at the Default Rate, for the period from
the date of demand by Lender to Borrowers for such payments to the date of
payment to Lender, shall constitute a portion of the Debt, shall be secured by
the Pledge Agreement and shall be due and payable to Lender upon demand
therefor.
(b) Subject to the rights of tenants and the Mortgage Loan Agreement, Borrowers
hereby grant, and shall cause Mortgage Borrowers to grant, Lender and any Person
designated by Lender the right to enter upon any Property at any time for the
purpose of carrying out the rights granted to Lender under this Section 11.3.
(c) Borrowers shall not, and shall not cause or permit any of the Loan Parties
or any other Person to, impede, interfere with, hinder or delay, any effort or
action on the part of Lender to cure any default or asserted default under the
Mortgage Loan or the First Mezzanine Loan, as applicable, or to otherwise
protect or preserve Lender’s interests in the Loan and the Collateral (including
the Properties) following a default or asserted default under the Mortgage Loan
or the First Mezzanine Loan, as applicable, in accordance with the provisions of
this Agreement and the other Loan Documents.
(d) Borrowers hereby indemnify Lender from and against all liabilities,
obligations, losses, damages, penalties, assessments, actions, or causes of
action, judgments, suits, claims, demands, costs, expenses (including, without
limitation, reasonable attorneys’ and other professional fees, whether or not
suit is brought, and settlement costs), and disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against Lender as a
result of the foregoing actions described in Section 11.3(a). Lender shall have
no obligation to any Loan Party or any other party to make any such payment or
performance.
(e) If Lender shall receive a copy of any notice of default under the Mortgage
Loan Documents or the First Mezzanine Loan Documents, such notice shall
constitute full protection to Lender for any action taken or omitted to be taken
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reliance thereon. As a material inducement to Lender in making the Loan,
Borrowers hereby absolutely and unconditionally release and waive all claims
against Lender arising out of Lender’s exercise of its rights and remedies
provided in this Section 11.3 other than claims arising out of the fraud,
illegal acts, gross negligence or willful misconduct of Lender.
(f) In the event that Lender cures any Mortgage Event of Default or First
Mezzanine Event of Default, any such cure by Lender shall not waive or be deemed
to have cured such Mortgage Event of Default or such First Mezzanine Event of
Default and shall constitute an immediate Event of Default under this Agreement
without any notice, grace or cure period otherwise applicable under this
Agreement.
(g) In the event that Lender makes any payment in respect of the Mortgage Loan
and/or the First Mezzanine Loan, Lender shall be subrogated to (i) all of the
rights of Mortgage Lender under the Mortgage Loan Documents against the
Properties and Mortgage Borrowers and/or (ii) all of the rights of First
Mezzanine Lender under the First Mezzanine Loan Documents against the First
Mezzanine Collateral and First Mezzanine Borrowers, as applicable, in each case
in addition to all other rights which Lender may have under the Loan Documents
or applicable law (including, without limitation, reasonable attorneys’ and
other professional fees), and any such payments made by Lender together with
interest at the Default Rate, for the period from the date of demand by Lender
to Borrowers for such payments to the date of payment to Lender, (i) shall
constitute a portion of the Debt, (ii) shall be secured by the Pledge Agreement
and (iii) shall be due and payable to Lender upon demand therefor.
Section 11.4 Discussions with Mortgage Lender and First Mezzanine Lender. In
connection with the exercise of its rights set forth in the Loan Documents,
Lender shall have the right at any time to discuss the Properties, the Mortgage
Loan, the First Mezzanine Loan, the Loan or any other matter directly with
Mortgage Lender and/or First Mezzanine Lender or its respective consultants,
agents or representatives without notice to or permission from any Borrower or
any other Loan Party, nor shall Lender have any obligation to disclose such
discussions or the contents thereof with any Borrower or any other Loan Party.
Section 11.5 Independent Approval Rights.
(a) If any action, proposed action or other decision is consented to or approved
by Mortgage Lender or First Mezzanine Lender, such consent or approval shall not
be binding or controlling on Lender; provided, however, that, notwithstanding
anything to the contrary which may be contained in this Agreement, and as
between Lender and Borrowers only, Lender shall be deemed to have approved or
waived any document delivered or action taken, or required to be delivered or
taken, by Mortgage Borrowers to Mortgage Lender under the Mortgage Loan
Agreement related to the construction of the Project which is approved or waived
in writing by Mortgage Lender under the Mortgage Loan Documents.
(b) Borrowers hereby acknowledge and agree that (i) the risks of Mortgage Lender
in making the Mortgage Loan and the risks of First Mezzanine Lender in making
the First Mezzanine Loan are different from the risks of Lender in making the
Loan, (ii) in determining whether to grant, deny, withhold or condition any
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Mortgage Lender, First Mezzanine Lender and Lender may reasonably reach
different conclusions, and (iii) Lender has an absolute independent right to
grant, deny, withhold or condition any requested consent or approval based on
its own point of view. Further, the denial by Lender of a requested consent or
approval shall not create any liability or other obligation of Lender if the
denial of such consent or approval results directly or indirectly in a default
under the Mortgage Loan and/or the First Mezzanine Loan, and Borrowers hereby
waive any claim of liability against Lender arising from any such denial.
Section 11.6 Intercreditor Agreement.
(a) Borrowers hereby acknowledge and agree that (i) the Intercreditor Agreement
entered into by and among Lender, Mortgage Lender, First Mezzanine Lender and
Third Mezzanine Lender will be solely for the benefit of Lender, Mortgage
Lender, First Mezzanine Lender and Third Mezzanine Lender; (ii) none of
Borrowers, Mortgage Borrowers, First Mezzanine Borrowers or Third Mezzanine
Borrowers shall be intended third-party beneficiaries of any of the provisions
therein; and (iii) none Borrowers, Mortgage Borrowers, First Mezzanine Borrowers
or Third Mezzanine Borrowers shall have any rights thereunder or shall be
entitled to rely on any of the provisions contained therein. None of Lender,
Mortgage Lender, First 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.
(b) In the event that Lender, pursuant to the terms of the Intercreditor
Agreement, is required to pay over to Mortgage Lender or First Mezzanine Lender
any payment or distribution of assets, whether in cash, property or securities
which otherwise would have been applied to the Debt, including, without
limitation, any proceeds of any property previously received by Lender on
account of the Loan or any payments under the Guaranties, pursuant to voluntary
payment or judgment or otherwise, then Borrowers agree to indemnify Lender for
any amounts so paid, and any amount so paid shall continue to be owing pursuant
to the Loan Documents as part of the Debt notwithstanding the prior receipt of
such payment by Lender.
ARTICLE XII.
GAMING PROVISIONS
Section 12.1 Operation of Casino Component.
(a) Borrowers shall (i) cause Mortgage Borrower to 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 allow any amendment to
or termination or modification of 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; and
(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 permit any assignment by Mortgage Borrowers of their respective
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Lease or any similar replacement Lease for purposes of operating the Casino
Component except to the extent otherwise permitted by the Mortgage Loan
Documents or the Loan Documents.
(b) Borrowers shall cause Gaming Borrower to operate the Casino Component
pursuant to the Casino Component Lease and in accordance with all Gaming Laws
and all other applicable Legal Requirements.
(c) Borrowers shall cause Mortgage Borrowers to 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 Loan Party 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 Note 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 Mortgage Lender Successor Owner, Gaming Borrower shall
(A) recognize such Mortgage 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 Mortgage 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 Mortgage
Lender Successor Owner (which period shall in all events terminate upon Mortgage
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 Mortgage 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 Mortgage Lender Successor Owner,
at the option of such Mortgage Lender Successor Owner exercised by written
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Mortgage 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 Borrowers to cause Gaming
Borrower or any other Loan Party to surrender or relinquish one or more or all
of the Gaming Licenses held by such Person(s). If Gaming Borrower or such other
Loan Party 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 appointment is coupled with an interest) as each Loan Party’s
attorney in fact with full authority to surrender or relinquish each such Gaming
License on each such Loan Party’s behalf, the foregoing power being irrevocable
and coupled with an interest.
(g) Borrowers agree to cause Gaming Borrower 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 Loan Party 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 Loan Party or any other Person for any loss,
cost, damage, fine or other expense suffered by any Loan Party 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, or shall
cause Gaming Borrower to furnish, to Lender, within five (5) Business Days
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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 Balance.
12.3.1 Borrowers shall cause Mortgage Borrowers to comply with all of the terms
and conditions set forth in Sections 2.6.1 and 12.3 of the Mortgage Loan
Agreement.
12.3.2 In the event (i)(A) Mortgage Lender waives the requirements of Mortgage
Borrowers to maintain the Casino Account and/or Cage Reserve pursuant to the
terms of Sections 2.6.1 and 12.3 of the Mortgage Loan Agreement and (B) First
Mezzanine Lender waives the requirements of First Mezzanine Borrowers to
maintain the Casino Account and/or Cage Reserve pursuant to the terms of
Sections 2.6.1 and 12.3 of the First Mezzanine Loan Agreement, or (ii) the
Mortgage Loan and the First Mezzanine Loan have been repaid in full (without a
prepayment of the Loan in full), Lender shall have the right to require
Borrowers to establish and maintain accounts that would operate in the same
manner as the Casino Account and Cage Reserve in Sections 2.6.1 and 12.3 of the
Mortgage Loan Agreement and the provisions of Section 2.6.1 and 12.3 of the
Mortgage Loan Agreement and all related definitions shall be incorporated herein
by reference; provided, however, that all references to “Borrowers,” “Lender”
and “Event of Default” therein shall be deemed references to Borrowers, Lender
and Event of Default as defined herein.
ARTICLE XIII.
INTENTIONALLY DELETED
ARTICLE XIV.
Section 14.1 Amendment and Restatement. Borrowers and Lender hereby agree that
the Original 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 the Original Loan
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
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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 Collateral or other assets owned by such Funding Borrower
(whether by foreclosure, assignment 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 Mortgage Loan, the Loan and 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 after payment in full by
the Mortgage Borrower of the Mortgage Loan and payment in full by the Mezzanine
Borrowers of the Mezzanine Loans or (b) the date which is 366 days after 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 Collateral or assets in an amount equal to the Reimbursement
Contribution payment required hereunder that such Defaulting Borrower failed to
make; provided, however, if 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, the Mortgage 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
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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 15.3 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 15.5 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 (i) all
amounts then due and payable by the Borrowers to Lender, pursuant to the terms
of the Loan Documents, (ii) all amounts then due and payable by the Mortgage
Borrowers to the Mortgage Lender pursuant to the terms of any of the Mortgage
Loan Documents and (iii) 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 each 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:
(a) 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
any Borrower;
(b) 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
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(c) 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;
(d) 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;
(e) 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;
(f) 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;
(g) presentment, demand, protest and notice of any kind;
(h) 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;
(i) 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;
(j) 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;
(k) any defense based upon any use of cash collateral under Section 363 of the
Bankruptcy Code;
(l) any defense based upon any agreement or stipulation entered into by Lender
with respect to the provision of adequate protection in any bankruptcy
proceeding;
(m) any defense based upon any borrowing or any grant of a security interest
under Section 364 of the Bankruptcy Code;
(n) any defense based upon the avoidance of any security interest in favor of
Lender for any reason;
(o) any defense based upon any bankruptcy, insolvency, reorganization,
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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;
(p) any defense or benefit based upon any Borrower’s, or any other party’s,
resignation of the portion of any obligation secured by the Pledge Agreement or
other Loan Documents to be satisfied by any payment from any other Borrower or
any such party;
(q) 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;
(r) 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
Pledge Agreement 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
(s) 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 Collateral 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 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
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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 Mortgage Borrowers, the First 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 Collateral 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 Amended and Restated
Second Mezzanine Loan Agreement to be duly executed by their duly authorized
representatives, all as of the day and year first above written.

            HRHH GAMING JUNIOR MEZZ, LLC,
a Delaware limited liability company
      By:   /s/ Fred J. Kleisner         Name:   Fred J. Kleisner       
Title:   President        HRHH JV JUNIOR MEZZ, LLC,
a Delaware limited liability company
      By:   /s/ Fred J. Kleisner         Name:   Fred J. Kleisner       
Title:   President   

 

 

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            NRFC WA HOLDINGS, LLC,
a Delaware limited liability company
      By:   /s/ Daniel R. Gilbert         Name:   Daniel R. Gilbert       
Title:   Executive Vice President &
Chief Investment Officer     

 

 

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Schedules Omitted