Exhibit 10.5

EXECUTION COPY

 

 

 

LOAN AGREEMENT

dated as of May 1, 2013

by and between

STOCKBRIDGE/SBE HOLDINGS, LLC,

as Borrower,

and

SLS LENDER, LLC,

as Lender

 

 

 

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TABLE OF CONTENTS

 

         Page     ARTICLE I      DEFINITIONS   

SECTION 1.01

  Defined Terms      1  

SECTION 1.02

  Terms Generally      35  

SECTION 1.03

  Accounting Terms; GAAP      35     ARTICLE II      THE CREDITS   

SECTION 2.01

  Commitments      35  

SECTION 2.02

  Loan      36  

SECTION 2.03

  Promissory Note      36  

SECTION 2.04

  Termination of Commitments      37  

SECTION 2.05

  Interest on Loan      37  

SECTION 2.06

  Optional and Mandatory Prepayments of the Loan      38  

SECTION 2.07

  [Intentionally Omitted]      39  

SECTION 2.08

  Payments      39  

SECTION 2.09

  Taxes      40  

SECTION 2.10

  Mitigation Obligations; Replacement of Lenders      42  

SECTION 2.11

  Net Cash Proceeds from Casualty Events      43     ARTICLE III     
REPRESENTATIONS AND WARRANTIES   

SECTION 3.01

  Organization; Powers      46  

SECTION 3.02

  Authorization; Enforceability      46  

SECTION 3.03

  No Consents; No Conflicts; No Defaults      46  

SECTION 3.04

  Financial Statements; Projections      47  

SECTION 3.05

  Properties      47  

SECTION 3.06

  Intellectual Property      50  

SECTION 3.07

  Equity Interests and Subsidiaries      51  

SECTION 3.08

  Litigation; Compliance with Laws      51  

SECTION 3.09

  Agreements      51  

SECTION 3.10

  Federal Reserve Regulations      51  

SECTION 3.11

  Investment Company Act; Other Regulations      51  

SECTION 3.12

  Use of Proceeds      52  

SECTION 3.13

  Taxes      52  

SECTION 3.14

  No Material Misstatements      52  

SECTION 3.15

  Labor Matters      52  

SECTION 3.16

  Solvency      53  

SECTION 3.17

  Employee Benefit Plans      53  

SECTION 3.18

  Environmental Matters      53  

SECTION 3.19

  Mortgages      54  

 

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         Page  

SECTION 3.20

  Permits      54  

SECTION 3.21

  Anti-Terrorism Law      54  

SECTION 3.22

  Flood Insurance Laws      55  

SECTION 3.23

  Insurance      55  

SECTION 3.24

  Compliance with Gaming Laws      55  

SECTION 3.25

  First Lien Financing Documents      55     ARTICLE IV      CONDITIONS TO
CREDIT EXTENSIONS   

SECTION 4.01

  Conditions to Initial Credit Extension      55  

SECTION 4.02

  Conditions to Each Borrowing      58     ARTICLE V      AFFIRMATIVE COVENANTS
  

SECTION 5.01

  Financial Statements, Reports, Etc.      58  

SECTION 5.02

  Litigation and Other Notices      60  

SECTION 5.03

  Existence; Businesses and Properties      61  

SECTION 5.04

  Insurance      61  

SECTION 5.05

  Obligations      62  

SECTION 5.06

  Employee Benefits      62  

SECTION 5.07

  Maintaining Records; Access to Properties and Inspections; Annual Meetings   
  63  

SECTION 5.08

  Use of Proceeds      63  

SECTION 5.09

  Compliance with Environmental Laws; Permits      63  

SECTION 5.10

  [Reserved]      65  

SECTION 5.11

  Security Interests; Further Assurances      65  

SECTION 5.12

  Information Regarding Collateral      66  

SECTION 5.13

  Compliance with Laws, Project Documents, etc.; Permits      66  

SECTION 5.14

  EB-5 Immigrant Investor Program Compliance      66  

SECTION 5.15

  [Intentionally Omitted]      67  

SECTION 5.16

  In Balance Test      67     ARTICLE VI      NEGATIVE COVENANTS   

SECTION 6.01

  Indebtedness      67  

SECTION 6.02

  Liens      69  

SECTION 6.03

  Sale and Leaseback Transactions      72  

SECTION 6.04

  Investments, Loans and Advances      72  

SECTION 6.05

  Mergers and Consolidations      73  

SECTION 6.06

  Asset Sales      74  

SECTION 6.07

  Dividends      76  

SECTION 6.08

  Transactions with Affiliates      78  

SECTION 6.09

  [Intentionally Omitted]      79  

SECTION 6.10

  Prepayments of Other Indebtedness; Modifications of Organizational Documents
and Other Documents, Etc.      79  

SECTION 6.11

  [Intentionally Omitted]      80  

SECTION 6.12

  Limitation on Issuance of Capital Stock      80  

 

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         Page  

SECTION 6.13

  Business; Holding Company Status      80  

SECTION 6.14

  Fiscal Year      81  

SECTION 6.15

  No Further Negative Pledge      81  

SECTION 6.16

  Anti-Terrorism Law; Anti-Money Laundering      81  

SECTION 6.17

  Limitation on Hedge Agreements      81  

SECTION 6.18

  Limitation on Zoning and Contract Changes and Compliance      81  

SECTION 6.19

  No Joint Assessment; Separate Lots      82     ARTICLE VII      ACCOUNTS   

SECTION 7.01

  Deposit Account      82     ARTICLE VIII      EVENTS OF DEFAULT   

SECTION 8.01

  Events of Default      82  

SECTION 8.02

  Rescission      85  

SECTION 8.03

  Application of Proceeds      85     ARTICLE IX      COLLATERAL   

SECTION 9.01

  Collateral Matters      86     ARTICLE X      MISCELLANEOUS   

SECTION 10.01

  Notices      87  

SECTION 10.02

  Waivers; Amendment      89  

SECTION 10.03

  Expenses; Indemnity; Damage Waiver      90  

SECTION 10.04

  Successors and Assigns      91  

SECTION 10.05

  Survival of Agreement      93  

SECTION 10.06

  Counterparts; Integration; Effectiveness      93  

SECTION 10.07

  Severability      94  

SECTION 10.08

  Right of Setoff      94  

SECTION 10.09

  Governing Law; Jurisdiction; Consent to Service of Process      94  

SECTION 10.10

  Waiver of Jury Trial      95  

SECTION 10.11

  Headings      95  

SECTION 10.12

  Treatment of Certain Information; Confidentiality      95  

SECTION 10.13

  USA PATRIOT Act Notice      96  

SECTION 10.14

  Interest Rate Limitation      96  

SECTION 10.15

  Obligations Absolute      96  

SECTION 10.16

  Waiver of Immunity      96  

SECTION 10.17

  [Intentionally Omitted]      97  

SECTION 10.18

  Certain Matters Affecting Lender      97  

SECTION 10.19

  Gaming Authorities and Liquor Laws      97   

 

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SCHEDULES

 

Schedule 1.01(b)

   —      Environmental Reports

Schedule 1.01(d)

   —      Mortgaged Property

Schedule 3.03

   —      Consents; Authorizations; Filings; Notices

Schedule 3.04(b)

   —      Material Liabilities

Schedule 3.05(b)(i)

   —      Real Property

Schedule 3.05(b)(iv)

   —      Assessments

Schedule 3.05(b)(vii)

   —      Options to Purchase; Rights of First Refusal; Restrictions on Transfer

Schedule 3.05(e)

   —      Project Property

Schedule 3.06(b)

   —      Trademarks

Schedule 3.06(c)

   —      Patents

Schedule 3.06(d)

   —      Copyrights

Schedule 3.06(e)

   —      Licenses

Schedule 3.07(a)

   —      Subsidiaries; Equity Interests

Schedule 3.07(c)

   —      Organizational Chart

Schedule 3.08

   —      Litigation

Schedule 3.09

   —      Material Agreements

Schedule 3.18

   —      Environmental Matters

Schedule 3.19(a)

   —      UCC Filing Offices

Schedule 3.19(c)

   —      Mortgage Filing Offices

Schedule 3.19(d)

   —      Intellectual Property Filing Offices

Schedule 3.25

   —      First Lien Financing Documents

Schedule 5.04(a)

   —      Insurance Policies and Programs

Schedule 6.01(c)

   —      Existing Indebtedness

Schedule 6.02(f)

   —      Existing Liens

Schedule 6.08(i)

   —      Affiliate Agreements

EXHIBITS

       

Exhibit A

   —      Form of SLS Las Vegas Mortgage

Exhibit B

   —      Form of Borrowing Request

Exhibit C

   —      Form of Compliance Certificate

Exhibit D-1

   —      Form of Joinder to Disbursement Agreement

Exhibit D-2

   —      Form of Side Letter to Joinder to Disbursement Agreement

Exhibit E

   —      Form of In-Balance Test Certificate

Exhibit F

   —      Form of Secured Promissory Note

Exhibit G

   —      Form of Solvency Certificate

Exhibit H

   —      Form of Subordination, Non-Disturbance and Attornment Agreement

Exhibit I

   —      Form of Subordination Agreement

Exhibit J

   —      Form of Tax Compliance Certificate

 

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LOAN AGREEMENT

This LOAN AGREEMENT (this “Agreement”) dated as of May 1, 2013 is by and between
STOCKBRIDGE/SBE HOLDINGS, LLC, a Delaware limited liability company
(“Borrower”), and SLS LENDER, LLC, a Delaware limited liability company
(“Lender”).

W I T N E S E T H:

WHEREAS, Borrower is renovating and proposes to own and operate the Project;

WHEREAS, Borrower has requested that Lender extend credit in the form of the
Loan in an aggregate principal amount not in excess of the Maximum Loan Amount;

WHEREAS, the proceeds of the Loan are to be used in accordance with
Section 3.12;

NOW, THEREFORE, Lender is willing to extend such credit to Borrower on the terms
and subject to the conditions set forth herein. Accordingly, the parties hereto
agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01 Defined Terms. As used in this Agreement, the following terms shall
have the meanings specified below:

“ADA Laws” shall mean the Americans with Disabilities Act of 1990, as amended
and supplemented from time to time, and any state or local laws covering similar
issues.

“ADF” shall mean American Dream Fund, LLC, a California limited liability
company.

“Affiliate” shall mean, when used with respect to a specified person, another
person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the person specified;
provided, however, that, for purposes of Section 6.08, the term “Affiliate”
shall also include any person that directly or indirectly owns more than 15% of
any class of Equity Interests having ordinary voting power for the election of
directors (or persons performing similar functions) of the person specified.

“Affiliate Documents” shall mean (i) the Hotel Management Agreement, (ii) the
DMA, and (iii) the Brand License Agreement.

“Agreement” shall have the meaning assigned to such term in the preamble hereto.

“Anti-Terrorism Laws” shall have the meaning assigned to such term in Section
3.21(a).

“Approved Fund” shall mean any Fund that is administered or managed by (a) a
Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an
entity that administers or manages a Lender.

“Architectural Services Agreement” shall have the meaning assigned to such term
in the Disbursement Agreement.

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“Asset Sale” shall mean (a) any conveyance, sale, lease, sublease, assignment,
transfer or other disposition (including by way of merger or consolidation and
including any Sale and Leaseback Transaction) of any property excluding (i) any
of the foregoing for an aggregate consideration of less than $200,000 with
respect to any transaction or series of related transactions, (ii) sales or
dispositions of inventory, in the ordinary course of business, (iii) assignments
and dispositions of cash and cash equivalents, and (iv) issuances or sales of
Equity Interests described in the following clause (b) and (b) any issuance or
sale of any Equity Interests of any Subsidiary of Borrower, to any person other
than (i) Borrower, (ii) any Subsidiary Guarantor or (iii) other than for
purposes of Section 6.06, any other Subsidiary.

“Attributable Indebtedness” shall mean, when used with respect to any Sale and
Leaseback Transaction, as at the time of determination, (i) to the extent
accounted for as a capitalized lease, the amount of the associated Capital Lease
Obligations and (ii) to the extent not accounted for as a capitalized lease, the
present value (discounted at a rate equivalent to Borrower’s then-current
weighted average cost of funds for borrowed money as at the time of
determination, compounded on a semi-annual basis) of the total obligations of
the lessee for rental payments during the remaining term of the lease included
in any such Sale and Leaseback Transaction.

“Available Funds” shall have the meaning assigned to such term in the
Disbursement Agreement.

“Board” shall mean the Board of Governors of the Federal Reserve System of the
United States (or any successor).

“Board of Directors” shall mean, with respect to any person, (i) in the case of
any corporation, the board of directors of such person, (ii) in the case of any
limited liability company, the sole member, the sole manager or the board of
managers of such person, (iii) in the case of any partnership, the Board of
Directors of the general partner of such person and (iv) in any other case, the
functional equivalent of the foregoing.

“Borrower” shall have the meaning assigned to such term in the preamble hereto.

“Borrowing” shall mean each advance of the Loan provided by Lender to Borrower
pursuant to Section 2.02.

“Borrowing Request” shall mean a request by Borrower in accordance with the
terms of Section 2.02 and substantially in the form of Exhibit B, or such other
form as shall be approved by Lender.

“Brand License Agreement” shall mean that certain Non-Exclusive SLS Brand
License Agreement dated as of April 1, 2011 between the Borrower and SBE Hotel
Licensing, LLC, together with all riders, addenda and other instruments referred
to therein, as amended, modified or supplemented from time to time.

“Business Day” shall mean any day other than a Saturday, Sunday or other day on
which banks in New York City are authorized or required by law to close.

“Capital Expenditure” shall mean with respect to any Person for any period,
without duplication, the aggregate amounts that would be reflected as additions
to property, plant or equipment on a consolidated balance sheet of such Person
and its Restricted Subsidiaries in accordance with GAAP, but excluding
(i) amounts for replacements, substitutions, restorations, acquisitions or
repairs of fixed assets, capital assets or equipment in each case to the extent
made with insurance or condemnation proceeds

 

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resulting from a Casualty Event or with proceeds of an Asset Sale, (ii) the
purchase price of property acquired in ordinary course trade-ins to the extent
that the gross amount of such purchase price is reduced by the credit granted by
the seller of such equipment for the equipment being traded in at such time,
(iii) expenditures that constitute any part of consolidated lease expense or
arise out of a sale leaseback transaction permitted hereunder, (iv) expenditures
that are accounted for as capital expenditures by the Borrower or any Restricted
Subsidiary and that actually are paid for, or reimbursed to the Borrower or any
Restricted Subsidiary in cash or cash equivalents, by a Person other than the
Borrower or any Restricted Subsidiary and for which neither the Borrower nor any
Restricted Subsidiary has liability, (v) the book value of any asset owned by
the Borrower or any Restricted Subsidiary prior to or during such period as a
result of such Person reusing or beginning to reuse such asset during such
period without a corresponding expenditure actually having been made in such
period, (vi) expenditures that constitute (x) acquisitions permitted under
Section 6.04 of the Existing First Lien Financing Agreement (or the
substantively similar and corresponding section of any other First Lien
Financing Agreement), including additions to plant, property or equipment
acquired as part of a purchase of an ongoing business pursuant to such
acquisition or transaction expenses constituting transition capital expenditures
in connection with such acquisition or (y) other Investments permitted under
Section 6.04 of the Existing First Lien Financing Agreement (or the
substantively similar and corresponding section of any other First Lien
Financing Agreement) constituting an acquisition of a Person, business unit or
division or substantially all of a Person’s assets, (vii) expenditures financed
with the Net Cash Proceeds of Indebtedness permitted to be incurred under
Section 6.01(e) of the Existing First Lien Financing Agreement (or the
substantively similar and corresponding section of any other First Lien
Financing Agreement), (viii) expenditures financed with Net Cash Proceeds
received by Borrower from a contribution to its common equity capital or the
issuance of its Equity Interests (other than Disqualified Capital Stock) (and
identified at the time of such contribution or issuance as being for the purpose
of expenditures referred to above) and (ix) interest or labor costs capitalized
in accordance with GAAP during such period or reflected as additions to
property, plant or equipment in the consolidated balance sheet of the Borrower
and its Subsidiaries. For purposes of this definition, the purchase price of
equipment or other fixed assets that are purchased simultaneously with the
trade-in of existing assets or with insurance proceeds shall be included in
Capital Expenditures only to the extent of the gross amount by which such
purchase price exceeds the credit granted by the seller of such assets for the
assets being traded in at such time or the amount of such insurance proceeds, as
the case may be.

“Capital Lease Obligations” of any person shall mean the obligations of such
person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.

“cash” means money, currency or a credit balance in any demand or Cash Account.

“Cash Account” means a demand, time, savings, passbook or like account with a
bank, savings and loan association, credit union or like organization, other
than an account evidenced by a negotiable certificate of deposit.

“Cash Equivalents” shall mean, as to any person, (a) securities issued, or
directly, unconditionally and fully guaranteed or insured, by the United States
or any agency or instrumentality thereof (provided that the full faith and
credit of the United States is pledged in support thereof) having maturities of
not more than 18 months from the date of acquisition by such person;
(b) securities issued by corporations chartered by the United States government
that have borrowing capacity at the United States Treasury or have United States
Treasury funds to support payment having maturities of not more than one year
from the date of acquisition by such person; (c) time deposits and certificates
of deposit of any First Lien Lender (determined at the time of acquisition or
deposit) or any commercial bank having,

 

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or which is the principal banking subsidiary of a bank holding company organized
under the laws of the United States, any state thereof or the District of
Columbia having, capital and surplus aggregating in excess of $500.0 million and
a rating of “A” (or such other similar equivalent rating) or higher (determined
at the time of acquisition or deposit) by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the Securities
Act) with maturities of not more than one year from the date of acquisition by
such person; (d) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clauses (a) and (b) above
entered into with any bank meeting the qualifications specified in clause
(c) above (determined at the time of acquisition), which repurchase obligations
are secured by a valid perfected security interest in the underlying securities;
(e) commercial paper and variable or fixed rate notes issued by an Approved Fund
(as defined in the Existing First Lien Financing Agreement) (or by the parent
company thereof) (determined at the time of acquisition) or any person
incorporated in the United States, in each case rated at least A-1 or the
equivalent thereof by Standard & Poor’s Ratings Group or at least P-1 or the
equivalent thereof by Moody’s Investors Service Inc. (determined at the time of
acquisition), and in each case maturing not more than one year after the date of
acquisition by such person; (f) marketable direct obligations issued by, or
unconditionally guaranteed by, any state, commonwealth or territory of the
United States or any political subdivision or taxing authority thereof having
one of the two highest rating categories obtainable from either Standard &
Poor’s Ratings Group or Moody’s Investors Service Inc. (determined at the time
of acquisition) and maturities not more than 18 months from the date of
acquisition by such person; (g) investments in investment funds, money market
funds or mutual funds substantially all of whose assets are comprised of
securities of the types described in clauses (a) through (f) above;
(h) investments in money market funds governed by Rule 2(a)(7) of the Investment
Company Act of 1940, as amended, rated AAA- (or the equivalent thereof) or
better by Standard & Poor’s Rating Group or Aaa3 (or the equivalent thereof) or
better by Moody’s Investors Service Inc. at the time of issuance and (i) demand
deposit accounts maintained in the ordinary course of business.

“Casino License” shall mean any and all licenses, approvals, consents, permits,
findings of suitability, registrations, waivers and authorizations under the
Gaming Laws required by any Gaming Authority and necessary for the ownership
(directly or indirectly) of the Project or Borrower or any First Lien Loan Party
or for the operation of gaming at the Project.

“Casualty Event” shall mean any involuntary loss of title, damage to or any
destruction of, or any condemnation or other Taking (including by any
Governmental Authority) of, any property of Borrower or any of its Subsidiaries.
“Casualty Event” shall include but not be limited to Events of Eminent Domain.

“CERCLA” shall mean the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, 42 U.S.C. § 9601 et seq., and all
implementing regulations.

“Change in Control” shall mean the occurrence of any of the following:

(1) the direct or indirect sale, lease, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or a series
of related transactions, of all or substantially all of the properties or assets
of the Borrower and its Subsidiaries taken as a whole to any person (including
any “person,” as that term is used in Section 13(d)(3) of the Exchange Act);

(2) the adoption of a plan relating to the liquidation or dissolution of
Borrower;

 

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(3) the consummation of any transaction (including, without limitation, any
merger or consolidation), the result of which is that (i) any “person” or
“group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act)
other than a Permitted Investor becomes the beneficial owner (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act) of more than 30% of the Voting
Stock of the Borrower or any parent company of the Borrower, measured by voting
power rather than number of shares or (ii) any “person” or “group” (as such
terms are used in Sections 13(d) and 14(d) of the Exchange Act) other than a
Permitted Investor becomes a beneficial owner (as defined in Rules 13d-3 and
13d-5 under the Exchange Act) of the non-voting interests of Borrower or any
parent company of the Borrower and as a result thereof the Stockbridge Fund
Entities and the SBE Entities (and Permitted Investors), collectively, cease to
be the beneficial owners (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act) of at least 50.1% of the non-voting interests of Borrower or any parent
company of the Borrower; or

(4) after an initial public offering of the Borrower or any parent company of
the Borrower (in either case, the “public company”), the first day on which a
majority of the members of the public company Board of Directors are not
Continuing Directors.

For purposes of this definition, a person shall not be deemed to have beneficial
ownership of Equity Interests subject to a stock purchase agreement, merger
agreement or similar agreement until the consummation of the transactions
contemplated by such agreement.

“Charges” shall have the meaning assigned to such term in Section 10.14.

“Closing Date” shall mean the date of the initial Credit Extension hereunder.

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

“Collateral” shall mean the “Trust Property” referred to in the SLS Las Vegas
Mortgage, now existing or hereafter acquired, that may at any time be or become
subject to Liens in favor of Lender pursuant to the SLS Las Vegas Mortgage in
order to secure the Secured Obligations.

“Commitment” shall mean the commitment of Lender to make the Borrowings from
time to time hereunder.

“Communications” shall have the meaning assigned to such term in
Section 10.01(d).

“Competitor” shall mean a person or Affiliate of any person (other than, subject
to the other limitations set forth in this definition, an Affiliate of any First
Lien Loan Party) that owns or controls, directly or indirectly, any Equity
Interests in, or operates, or has entered into any agreement to own or control,
directly or indirectly, any Equity Interests in, or to operate, a casino or
other gaming establishment or hotel within a fifty (50) mile radius of the
Project; provided, that the foregoing shall not cause (x) a person that holds a
passive investment constituting, directly or indirectly, less than 15% of the
Equity Interests of any entity owning or operating such casino, gaming
establishment or hotel to be a Competitor or (y) any person to be deemed a
Competitor unless the Borrower has provided notice to Lender that such gaming
establishment or hotel is a Competitor.

“Completion Guarantee” shall mean the Completion Guarantee (as defined in the
Existing First Lien Financing Agreement) or any similar guarantee delivered by
the Borrower in connection with the First Lien Financing Agreement.

“Compliance Certificate” shall mean a certificate of a Financial Officer
substantially in the form of Exhibit C.

 

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“Consolidated Adjusted EBITDA” shall mean, for any period, Consolidated Net
Income of Borrower and its Restricted Subsidiaries for such period plus, without
duplication and to the extent deducted in determining such Consolidated Net
Income for such period, the sum of (a) income tax expense (and other taxes based
on profits or capital) paid or payable or distributed or distributable by such
Person with respect to such period (whether or not paid during such period),
(b) Consolidated Interest Expense, amortization or write-off of debt discount
and debt issuance costs and commissions and discounts, premiums and other fees,
expenses and charges associated with Indebtedness, including underwriting,
arrangement and commitment fees and letter of credit fees and prepayment or
redemption premiums, (c) depreciation and amortization expense, (d) amortization
of intangibles (including, but not limited to, goodwill), (e) any extraordinary,
non-recurring or unusual charges, expenses or losses (including any unusual or
non-recurring operating expenses attributable to the implementation of cost
savings initiatives), severance, relocation costs, integration and facilities’
opening costs, restructuring charges, accruals and reserves, signing costs,
retention or completion bonuses, transition costs and costs related to
curtailments or modifications to pension and post-retirement employee benefit
plans (including any settlement of pension liabilities), (f) whether or not
otherwise includable as separate items in the statement of such Consolidated Net
Income for such period, losses on sales of assets outside of the ordinary course
of business, (g) whether or not otherwise includable as separate items in the
statement of such Consolidated Net Income, pre-opening expenses in an amount not
to exceed $20,000,000 related to the initial opening of the Project to the
extent incurred during such period, (h) Non-Cash Charges, (i) expenses relating
to actual or contemplated asset sales, acquisitions, investments, incurrences of
debt and issuances of equity and (j) expenses relating to the accrual of
obligations for casino reward programs, net of any cash payments made in respect
thereof, minus, to the extent included in the calculation of such Consolidated
Net Income for such period, the sum of (i) interest income (except to the extent
deducted in determining Consolidated Interest Expense), (ii) any extraordinary,
non-recurring or unusual income or gains (and, whether or not otherwise
includable as a separate item in the statement of such Consolidated Net Income
for such period, gains on the sales of assets outside of the ordinary course of
business (but in any event excluding proceeds of business interruption
insurance, which shall not be deducted in calculating Consolidated Adjusted
EBITDA)) and (iii) other non-cash items increasing such Consolidated Net Income
for such period (excluding any such non cash item to the extent it represents
the reversal of an accrual or reserve for potential cash item in any prior
period), all as determined on a consolidated basis, plus, to the extent not
included in determining such Consolidated Net Income for such period, any
distributions, dividends or other payments whether constituting fees or
otherwise received from any Unrestricted Subsidiary or any joint venture solely
to the extent not constituting a return of investment; provided that, for
purposes of calculating Consolidated Adjusted EBITDA for any period, (x) the
Consolidated Adjusted EBITDA of any Person or line of business sold or otherwise
disposed of by the First Lien Loan Parties during such period shall be excluded
for such period (as if the consummation of such sale or other disposition and
the repayment or assumption by the buyer of any Indebtedness in connection
therewith occurred as of the first day of such period) and (y) the Consolidated
Adjusted EBITDA of any Person (other than any Unrestricted Subsidiary) or
attributable to any line of business acquired by the First Lien Loan Parties
during such period shall be included for such period (as if the consummation of
such acquisition had occurred as of the first day of such period).

“Consolidated Current Assets” shall mean, as at any date of determination, the
total assets of Borrower and its Restricted Subsidiaries which may properly be
classified as current assets on a consolidated balance sheet of Borrower and its
Restricted Subsidiaries in accordance with GAAP, excluding cash and Cash
Equivalents.

“Consolidated Current Liabilities” shall mean, as at any date of determination,
the total liabilities of Borrower and its Restricted Subsidiaries which may
properly be classified as current liabilities (other than the current portion of
any Borrowing) on a consolidated balance sheet of Borrower and its Restricted
Subsidiaries in accordance with GAAP.

 

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“Consolidated Interest Expense” shall mean, for any period, total interest
expense (including that attributable to Capital Lease Obligations in accordance
with GAAP) of Borrower and its Restricted Subsidiaries for such period, with
respect to all outstanding Indebtedness of Borrower and its Restricted
Subsidiaries (including, without limitation, all commissions, discounts and
other fees and charges owed by Borrower and its Restricted Subsidiaries with
respect to letters of credit and bankers’ acceptance financing and net of
amounts payable to the Borrower and its Restricted Subsidiaries under Hedging
Agreements in respect of interest rates, to the extent such net costs or net
amounts received are allocable to such period in accordance with GAAP).

“Consolidated Net Income” shall mean for any period, the consolidated net income
(or loss) of Borrower and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP; provided, that in
calculating Consolidated Net Income of Borrower and its Restricted Subsidiaries
for any period, there shall be excluded (a) the income (or deficit) of any
Person accrued prior to the date it becomes a Subsidiary of the Borrower or is
merged into or consolidated with the Borrower or any of its Subsidiaries (except
to the extent such Person was a Subsidiary prior to such merger or
consolidation), (b) the income (or deficit) of any Person (other than a
Subsidiary of the Borrower that is not an Unrestricted Subsidiary) in which the
Borrower or any of its Subsidiaries has an ownership interest, except to the
extent that any such income is actually received by the Borrower or such
Subsidiary in the form of dividends or similar distributions, (c) the
undistributed earnings of any Subsidiary of the Borrower (other than a First
Lien Loan Party) to the extent that the declaration or payment of dividends or
similar distributions by such Subsidiary is not at the time permitted by the
terms of any Contractual Obligation (other than under any Financing Agreement)
or Requirement of Law applicable to such Subsidiary, and (d) the cumulative
effect of a change in accounting principles.

“Construction Consultant” shall mean Fulcrum LLC or such other construction
consultant of recognized national standing appointed by the lender (or agent for
lenders) possessing a first priority Lien on the SLS Las Vegas that is senior to
the SLS Las Vegas Mortgage, and, unless such lender or agent is an Institutional
Lender, that is reasonably acceptable to Lender.

“Contingent Obligation” shall mean, as to any person, any obligation, agreement,
understanding or arrangement of such person guaranteeing or intended to
guarantee any Indebtedness (“primary obligations”) of any other person (the
“primary obligor”) in any manner, whether directly or indirectly, including any
obligation of such person, whether or not contingent, (a) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor; (b) to advance or supply funds (i) for the purchase or payment of any
such primary obligation or (ii) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor; (c) to purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation; or
(d) otherwise to assure or hold harmless the holder of such primary obligation
against loss in respect thereof; provided, however, that the term “Contingent
Obligation” shall not include endorsements of instruments for deposit or
collection in the ordinary course of business or any product warranties. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made (or, if less, the maximum amount of such primary
obligation for which such person may be liable, whether singly or jointly,
pursuant to the terms of the instrument evidencing such Contingent Obligation)
or, if not stated or determinable, the maximum reasonably anticipated liability
in respect thereof (assuming such person is required to perform thereunder) as
determined by such person in good faith.

“Continuing Directors” shall mean the directors (or equivalent Persons) of
Borrower on the date of an initial public offering of the Borrower or any parent
company of the Borrower and each other director (or equivalent Person), if, in
each case, such other director’s (or equivalent Person’s) nomination

 

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for election to the board of directors (or equivalent governing body) of
Borrower is recommended by a majority of the then Continuing Directors or such
other director (or equivalent Person) receives the vote, directly or indirectly,
of the Permitted Investors in his or her election by the equity holders of
Borrower.

“Contractual Obligation” shall mean, as to any person, any provision of any
security issued by such person or of any agreement, instrument or other contract
to which such person is a party or by which it or any of its property is bound.

“Control” shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a person, whether
through the ownership of voting securities, by contract or otherwise, and the
term “Controlled” shall have meaning correlative thereto, provided in the case
of the Deposit Account, “Control” shall mean “control,” as such term is defined
in Section 9 104 of the UCC.

“Control Agreement” shall mean an agreement in a form that is reasonably
satisfactory to the Lender establishing the Lender’s Control with respect to the
Deposit Account (which initially shall be in the form of control agreement
delivered in connection with the Existing First Lien Financing Agreement).

“Credit Extension” shall mean the making of the Borrowings from time to time by
Lender.

“Debt Issuance” shall mean the incurrence by Borrower or any of its Restricted
Subsidiaries of any Indebtedness after the Closing Date (other than as permitted
by Section 6.01).

“Default” shall mean any event, occurrence or condition which is, or upon
notice, lapse of time or both would constitute, an Event of Default.

“Default Rate” shall have the meaning assigned to such term in Section 2.05(b).

“Deposit Account” shall have the meaning assigned to such term in Section 7.01.

“Disbursement Agent” shall mean KeyCorp Real Estate Capital Markets, Inc., in
its capacity as Disbursement Agent under the Disbursement Agreement, and any
successor Disbursement Agent appointed pursuant to the terms of the Disbursement
Agreement and that is either (x) an Institutional Lender, or (y) reasonably
acceptable to Lender.

“Disbursement Agent Accounts” shall have the meaning assigned to such term in
the Disbursement Agreement.

“Disbursement Agreement” shall mean that certain Master Disbursement Agreement,
dated as of May 2, 2012, as amended by Amendment No. 1 dated as of January 31,
2013, among the Borrower, the Administrative Agent (as defined in the Existing
First Lien Financing Agreement), the Collateral Agent (as defined in the
Existing First Lien Financing Agreement) and the Disbursement Agent. On the
Closing Date, Lender shall become party to the Disbursement Agreement by means
of the execution of a joinder thereto, substantially in the form of Exhibit D-1
hereto, in accordance with the terms of the Disbursement Agreement, and shall
execute and deliver a side letter relating thereto, substantially in the form of
Exhibit D-2 hereto.

 

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“Disbursement Agreement Event of Default” shall mean an “Event of Default” as
defined in the Disbursement Agreement.

“Disqualified Capital Stock” shall mean any Equity Interest which, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, (a) matures (excluding any
maturity as the result of an optional redemption by the issuer thereof) or is
mandatorily redeemable (other than solely for Equity Interests which are not
otherwise Disqualified Capital Stock), pursuant to a sinking fund obligation or
otherwise, or is redeemable at the option of the holder thereof, in whole or in
part, on or prior to the 91st day following the Maturity Date, as may be
extended hereunder, (b) is convertible into or exchangeable (unless at the sole
option of the issuer thereof) for (i) debt securities or (ii) any Equity
Interests referred to in clause (a) above, in each case at any time on or prior
to the date that is 91 days after the Maturity Date, as may be extended
hereunder, or (c) contains any repurchase obligation which may come into effect
prior to payment in full of all Obligations; provided, however, that any Equity
Interests that would not constitute Disqualified Capital Stock but for
provisions thereof giving holders thereof (or the holders of any security into
or for which such Equity Interests is convertible, exchangeable or exercisable)
the right to require the issuer thereof to redeem such Equity Interests upon the
occurrence of a change in control or an asset sale occurring prior to the date
that is 91 days after the Maturity Date, as may be extended hereunder, shall not
constitute Disqualified Capital Stock if such Equity Interests provide that the
issuer thereof will not redeem any such Equity Interests pursuant to such
provisions prior to the repayment in full of the Obligations or to the extent
such redemption is permitted under this Agreement.

“Disqualified Lender” shall mean any Lender who has been found by a Gaming
Authority pursuant to applicable Gaming Laws to be “unsuitable” or disqualified
as a lender to Borrower.

“Dividend” with respect to any person shall mean that such person has declared
or paid a dividend (other than a dividend of Qualified Capital Stock of such
Person) or returned any equity capital to the holders of its Equity Interests or
authorized or made any other distribution, payment or delivery of property
(other than Qualified Capital Stock of such person) or cash to the holders of
its Equity Interests as such, or redeemed, retired, purchased or otherwise
acquired, directly or indirectly, for consideration (other than consideration
consisting of Qualified Capital Stock of such person) any of its Equity
Interests outstanding (or any options or warrants issued by such person with
respect to its Equity Interests), or set aside any funds for any of the
foregoing purposes, or shall have permitted any of its Restricted Subsidiaries
to purchase or otherwise acquire for consideration any of the Equity Interests
of such person outstanding (or any options or warrants issued by such person
with respect to its Equity Interests). Without limiting the foregoing,
“Dividends” with respect to any person shall also include all payments (other
than payments in Qualified Capital Stock) made by such person with respect to
any stock appreciation rights, plans, equity incentive or achievement plans or
any similar plans or setting aside of any funds for the foregoing purposes.

“DMA” shall mean that certain Amended and Restated Development Management
Agreement dated as of April 1, 2011 between Borrower and SBE Las Vegas
Redevelopment I, LLC, together with all riders, addenda and other instruments
referred to therein, as amended, modified or supplemented from time to time.

“dollars” or “$” shall mean lawful money of the United States.

“EB-5 Immigrant Investor Program” shall mean the Immigrant Investor Program
created by Section 610 of Public Law 102-395 and administered by the United
States Citizen and Immigration Services.

 

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“EB-5 Taxes” shall mean any Taxes imposed solely as a result of the Loans having
been made from funds obtained through and in connection with, the EB-5 Immigrant
Investor Program.

“Effective Date” shall mean the date that is six months after the Closing Date.

“Eligible Assignee” shall mean (i) a commercial bank organized under the laws of
the United States or any state thereof; (ii) a savings and loan association or
savings bank organized under the laws of the United States or any state thereof;
(iii) a commercial bank organized under the laws of any other country or a
political subdivision thereof; provided, that (x) such bank is acting through a
branch or agency located in the United States or (y) such bank is organized
under the laws of a country that is a member of the Organization for Economic
Cooperation and Development or a political subdivision of such country; (iv) any
other entity which is an “accredited investor” (as defined in Regulation D under
the Securities Act) which extends credit or buys loans in the ordinary course,
including insurance companies, mutual funds and lease financing companies; and
(v) any Lender or Approved Fund; provided, that “Eligible Assignee” shall not
include (x) the Borrower or any Affiliate of the Borrower (other than a Person
who is an Affiliate solely because such Person owns Voting Stock or other Equity
Interests of Borrower or any of its Subsidiaries), (y) any Person that is a
Disqualified Lender or (z) any Competitor; provided, however, that after the
occurrence of and during the continuance of an Event of Default, “Eligible
Assignee” shall include any Competitor other than the Hotel Management
Competitors.

“Eminent Domain Proceeds” shall mean all cash and cash equivalents received by a
Borrower in respect of any Event of Eminent Domain, net of (a) all direct costs
of recovery of such Eminent Domain Proceeds (including legal, accounting,
appraisal and insurance adjuster fees and expenses), (b) amounts required to be
applied to the repayment of Indebtedness secured by a Permitted Lien (including
any penalty, premium or make-whole amounts related thereto) on any asset which
is the subject of the Event of Eminent Domain to which such Eminent Domain
Proceeds relate and (c) all Taxes paid or reasonably estimated to be payable as
a result thereof by a First Lien Loan Party or any direct or indirect owner of
Borrower (after taking into account any Tax credits or deductions and any Tax
sharing arrangements attributable to the First Lien Loan Parties, in each case
reducing the amount of Taxes so paid or estimated to be payable).

“Employee Benefit Plan” shall mean any “employee benefit plan” as defined in
Section 3(3) of ERISA which is sponsored, maintained or contributed to by, or
required to be contributed by Borrower or any of its ERISA Affiliates.

“Entertainment Venue Easements” shall have the meaning assigned to such term in
Section 6.06(n).

“Entertainment Venue Documents” shall have the meaning assigned to such term in
Section 6.06(n).

“Environment” shall mean ambient air, indoor air, surface water and groundwater
(including potable water, navigable water and wetlands), the land surface or
subsurface strata and natural resources.

“Environmental Claim” shall mean any claim, notice, governmental enforcement
lien, demand, order, action, suit or proceeding alleging liability or obligation
for any investigation, remediation, removal, cleanup, response, corrective
action, damages to natural resources, personal injury, property damage, punitive
damages, fines, penalties or costs, in each case resulting from or arising out
of (i) the presence, Release or threatened Release of Hazardous Material at any
Real Property or (ii) any violation or alleged violation of any Environmental
Law by Borrower related to the Mortgaged Property, and shall

 

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include any claim seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from or arising out of the presence,
Release or threatened Release of Hazardous Material at, under or about the Real
Property, or alleged injury or threat of injury to public health or safety (as
they relate to environmental matters at, under or about the Real Property) or
the Environment.

“Environmental Law” shall mean any Laws regulating protection of public health
and safety (as each relates to environmental matters) or the Environment, the
Release or threatened Release of Hazardous Materials or Hazardous Materials
Activity.

“Environmental Permit” shall mean any permit, license, registration, or written
exemption, consent, notification, approval or other authorization, required by
or from a Governmental Authority under Environmental Law.

“Environmental Report(s)” shall mean those certain environmental summaries
(including reports referenced therein) as more particularly identified on
Schedule 1.01(b).

“Equity Interest” shall mean, with respect to any person, any and all shares,
interests, participations or other equivalents, including membership interests
(however designated, whether voting or nonvoting), of equity of such person,
including, if such person is a partnership, partnership interests (whether
general or limited) and any other interest or participation that confers on a
person the right to receive a share of the profits and losses of, or
distributions of property of, such partnership, whether outstanding on the date
hereof or issued after the Closing Date, but excluding debt convertible or
exchangeable into such equity.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as the
same may be amended from time to time.

“ERISA Affiliate” shall mean, with respect to any person, any trade or business
(whether or not incorporated) that, together with such person, is treated as a
single employer under Section 414 of the Code.

“ERISA Event” shall mean (a) any “reportable event,” as defined in Section 4043
of ERISA or the regulations issued thereunder, with respect to a Plan (other
than an event for which the 30-day notice period is waived by regulation);
(b) with respect to a Plan, the failure to satisfy the minimum funding standard
of Section 412 of the Code and Section 302 of ERISA, whether or not waived;
(c) the failure to make by its due date a required installment under
Section 430(j) of the Code with respect to any Plan or the failure to make any
required contribution to a Multiemployer Plan; (d) the filing pursuant to
Section 412(c) of the Code and Section 302(c) of ERISA of an application for a
waiver of the minimum funding standard with respect to any Plan; (e) the
incurrence by Borrower or any of its ERISA Affiliates of any liability under
Title IV of ERISA with respect to the termination of any Plan; (f) the receipt
by Borrower or any of its ERISA Affiliates from the PBGC or a plan administrator
of any notice relating to the intention to terminate any Plan or Plans or to
appoint a trustee to administer any Plan, or the occurrence of any event or
condition which would reasonably be expected to constitute grounds under ERISA
for the termination of, or the appointment of a trustee to administer, any Plan;
(g) the incurrence by Borrower or any of its ERISA Affiliates of any liability
with respect to the withdrawal from any Plan or Multiemployer Plan; (h) the
receipt by Borrower or its ERISA Affiliates of any notice, concerning the
imposition of Withdrawal Liability or a determination that a Multiemployer Plan
is, or is expected to be, insolvent or in reorganization, within the meaning of
Title IV of ERISA; (i) a determination that any Plan is in “at risk” status
within the meaning of Section 430 of the Code; (j) the “substantial cessation of
operations” within the meaning of Section 4062(e) of ERISA with respect to a
Plan; (k) the making of any amendment to any Plan which would result in the
imposition of a lien or the posting of a bond or other security; and (l) the
occurrence of a nonexempt prohibited transaction (within the meaning of
Section 4975 of the Code or Section 406 of ERISA) which would reasonably be
expected to result in liability to Borrower.

 

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“Escrow Agreement” shall mean the Amended and Restated Subscription and
Administrative Fee Escrow Agreement, effective as of July 26, 2012, by and among
Lender, ADF, NES Financial Corp., a California corporation, and SunTrust Bank, a
Georgia banking corporation.

“Event of Default” shall have the meaning assigned to such term in Section 8.01.

“Event of Eminent Domain” shall mean, with respect to any property, (a) any
compulsory transfer or taking by condemnation, seizure, eminent domain or
exercise of a similar power, or transfer under threat of such compulsory
transfer or taking or confiscation of such property or the requisition of the
use of such property, by any agency, department, authority, commission, board,
instrumentality or political subdivision of any state, the United States or
another Governmental Authority having jurisdiction or (b) any settlement in lieu
of any of the actions described in clause (a) above.

“Excess Cash Flow” shall mean, for any Excess Cash Flow Period, Consolidated
Adjusted EBITDA for such Excess Cash Flow Period, minus, without duplication:

(a) Consolidated Interest Expense, to the extent paid in cash, and scheduled
principal amortization of First Lien Loans pursuant to Section 2.09 of the
Existing First Lien Financing Agreement (or the substantively similar and
corresponding section of any other First Lien Financing Agreement) and of any
other loans consisting of the Loan or constituting Senior Qualified Additional
Financing and any Permitted Refinancing thereof, to the extent actually made,
for such Excess Cash Flow Period;

(b) Capital Expenditures during such Excess Cash Flow Period that are paid in
cash (other than Capital Expenditures to the extent financed with the proceeds
of the incurrence of Indebtedness or the issuance of Equity Interests);

(c) Capital Expenditures that the Borrower or any of its Subsidiaries shall,
during such Excess Cash Flow Period, become obligated to make but that are not
made during such Excess Cash Flow Period; provided that Borrower shall deliver a
certificate to Lender not later than 90 days after the end of such Excess Cash
Flow Period, signed by a Responsible Officer of Borrower and certifying that
such Capital Expenditures are reasonably expected to be made in the following
Excess Cash Flow Period;

(d) taxes of Borrower and its Subsidiaries (including any related interest and
penalties) that were paid in cash during such Excess Cash Flow Period or that
will be paid within six months after the last day of such Excess Cash Flow
Period and for which reserves have been established;

(e) the absolute value of the difference, if negative, of the amount of Net
Working Capital at the end of the prior Excess Cash Flow Period (or the
beginning of the Excess Cash Flow Period in the case of the first Excess Cash
Flow Period) over the amount of Net Working Capital at the end of such Excess
Cash Flow Period; provided that for the purposes of this clause (e), Net Working
Capital in any Excess Cash Flow Period shall be no less than the Gaming Reserves
plus $1,500,000;

 

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(f) Non-Cash Charges to the extent added to clause (h) of the definition of
“Consolidated Adjusted EBITDA”;

(g) extraordinary, non-recurring or unusual expenses, charges or losses and
other items to the extent added to clause (e) of the definition of “Consolidated
Adjusted EBITDA”;

(h) preopening expenses related to the initial opening for the Project;

(i) amount added to Consolidated Adjusted EBITDA pursuant to clause (i) of the
definition of “Consolidated Adjusted EBITDA”;

(j) to the extent added in determining Consolidated Adjusted EBITDA, all items
constituting cash payment by Borrower or any of its Restricted Subsidiaries;

(k) Investments made under Section 6.04(k) of this Agreement or Section 6.04(k)
of the Existing First Lien Financing Agreement (or the substantively similar and
corresponding section of any other First Lien Financing Agreement);

(l) the aggregate amount of all repayments or redemptions of Indebtedness of
Borrower and the Restricted Subsidiaries (including (i) the principal component
of payments in respect of Capitalized Leases, (ii) the amount of any scheduled
or mandatory repayment of any First Lien Loans (to the extent actually made) but
excluding prepayments of First Lien Loans pursuant to Section 2.10(a) of the
Existing First Lien Financing Agreement (or the substantively similar and
corresponding section of any other First Lien Financing Agreement), except to
the extent financed with the proceeds of other Indebtedness of Borrower or its
Restricted Subsidiaries or the issuance of Equity Interests of Borrower (or with
contributions made to Borrower), and (iii) the amount of any scheduled or
mandatory repayment of the Loan and any other Qualified Additional Financing
loan (to the extent actually made) but excluding prepayments of the Loan
pursuant to Section 2.06(a) (or the substantively similar and corresponding
section of any Permitted Refinancing thereof) and, with respect to any other
Senior Qualified Additional Financing, any optional prepayments of such loans,
except to the extent financed with the proceeds of other Indebtedness of
Borrower or the issuance of Equity Interests of Borrower (or with contributions
made to Borrower); and

(m) the amounts distributed or reasonably expected to be distributed pursuant to
Section 6.07(l) with respect to such Excess Cash Flow Period;

provided that any amount deducted pursuant of any of the foregoing clauses that
will be paid after the close of such Excess Cash Flow Period shall not be
deducted again in a subsequent Excess Cash Flow Period; plus, without
duplication, (i) the difference, if positive, of the amount of Net Working
Capital at the end of the prior Excess Cash Flow Period (or the beginning of the
Excess Cash Flow Period in the case of the first Excess Cash Flow Period) over
the amount of Net Working Capital at the end of such Excess Cash Flow Period and
(ii) any amount deducted in calculating Excess Cash Flow in any prior Excess
Cash Flow Period pursuant to clause (c) above that was not ultimately applied to
make Capital Expenditures in the succeeding Excess Cash Flow Period.

“Excess Cash Flow Period” shall mean the period beginning with the first full
fiscal year commencing after the Opening Date to December 31 of such year and
each fiscal year of Borrower thereafter.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

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“Excluded Property” shall have the meaning assigned to such term in the Security
Agreement (as defined in the Existing First Lien Financing Agreement) and the
Pledge Agreement (as defined in the Existing First Lien Financing Agreement).

“Excluded Real Property” shall mean (a) any real property constituting a
leasehold interest and (b) any fee interest in real property having a fair
market value of less than $2,500,000 and which, in each case, is not material to
the Project.

“Excluded Taxes” shall mean, with respect to any Recipient, (a) Taxes imposed on
or measured by such Recipient’s net income or profits (however denominated and
including, for the avoidance of doubt, any U.S. federal backup withholding in
respect of such Taxes pursuant to Section 3406 of the Code), and franchise Taxes
imposed on it (in lieu of net income or profits Taxes), in each case by a
jurisdiction as a result of the Recipient being organized or having its
principal office or, its applicable lending office in such jurisdiction or
having any other present or former connection with such jurisdiction (other than
a connection deemed to arise solely from such Recipient having executed,
delivered, become a party to, or performed its obligations or received a payment
under, received or perfected a security interest under, enforced, and/or engaged
in any other transaction pursuant to this Agreement or any other Loan Document),
(b) any Tax in the nature of the branch profits Tax under Section 884(a) of the
Code that is imposed by any jurisdiction described in clause (a), (c) with
respect to such Recipient (other than an assignee pursuant to a request by
Borrower under Section 2.10), any U.S. federal withholding Tax imposed on
amounts payable to such Recipient pursuant to a Law in effect at the time such
Recipient becomes a party hereto (or designates a new lending office), except to
the extent that such Recipient (or its assignor, if any) was entitled,
immediately prior to the designation of a new lending office (or assignment), to
receive additional amounts from Borrower with respect to such U.S. federal
withholding Tax pursuant to Section 2.09, (d) any withholding Tax resulting from
Recipient’s failure to comply with Section 2.09(e), (e) any U.S. federal
withholding Tax imposed pursuant to FATCA, (f) any Tax imposed in respect of any
beneficiary, owner, partner or member of such Recipient that is treated as a
pass-through entity for Tax purposes, except to the extent such beneficiary,
owner, partner or member both (i) complied with the requirements under
Section 2.09(e) to the same extent as if it were a lender under this agreement
(except that the documentation required under Section 2.09(e) was delivered to
the applicable Recipient) and (ii) would have been entitled to receive
additional amounts with respect to such Tax pursuant to Section 2.09 if such
beneficiary, owner, partner or member had itself been a lender under this
agreement, and (g) any EB-5 Taxes.

“Executive Order” shall have the meaning assigned to such term in
Section 3.21(a).

“Existing First Lien Financing Agreement” shall mean the Credit Agreement, dated
as of May 2, 2012, as amended by Amendment No. 1, dated as of January 31, 2013,
by and among Borrower, Holdings, the other guarantors party thereto from time to
time, the Lenders (as defined therein), J.P. Morgan Securities LLC, as lead
arranger, syndication agent and sole bookrunning manager, the Administrative
Agent named therein and Collateral Agent named therein, and the other parties
thereto.

“Extension Option” shall mean each of the two extensions of the Maturity Date
(including as extended hereunder) of one year each, exercisable at Borrower’s
option by delivery to Lender of an Officer’s Certificate stating Borrower’s
exercise of an Extension Option, in the event the Loan has not been repaid in
full on the Maturity Date (including as extended hereunder).

“FATCA” shall mean Sections 1471 through 1474 of the Code as of the date hereof
(and any amended or successor version thereof that is substantively comparable
and not materially more onerous to comply with), and any current or future
Treasury regulations or official interpretations thereof and any agreements
entered into pursuant to Section 1471(b) of the Code.

 

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“Federal Funds Effective Rate” shall mean, for any day, the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System of the United States arranged by federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day that is a Business Day,
the average of the quotations for the day for such transactions received by
Lender from three federal funds brokers of recognized standing selected by it.

“Fees” shall mean the fees due to ADF during the term of this Agreement as an
Affiliate of Lender, pursuant to the terms of the Letter of Intent.

“Final Completion Date” shall have the meaning assigned to such term in the
Disbursement Agreement.

“Financial Officer” of any person shall mean the chief financial officer,
principal accounting officer, treasurer or controller of such person.

“Financing Agreements” shall mean, collectively, this Agreement and the other
Loan Documents, the First Lien Financing Documents, the other Qualified
Additional Financing Documents, if any, and any other loan, security or similar
agreement entered into on or after the Closing Date in connection with the
foregoing, including with respect to Permitted Refinancings of the Loan, the
First Lien Financing, or the Qualified Additional Financing, if any.

“First Lien Administrative Agent” shall mean the administrative agent, if any,
described in the First Lien Financing Agreement.

“First Lien Collateral Agent” shall mean the collateral agent, if any, described
in the First Lien Financing Agreement.

“First Lien Escrow Agent” means KeyCorp Real Estate Capital Markets, Inc., as
escrow agent under the First Lien Escrow and Security Agreement.

“First Lien Escrow and Security Agreement” shall mean the Escrow and Security
Agreement among Borrower, the Administrative Agent party thereto and the First
Lien Escrow Agent, dated as of May 2, 2012.

“First Lien Escrow Release Date” shall have the meaning assigned to the term
“Escrow Release Date” in the Existing First Lien Financing Agreement, or in the
event that the First Lien Escrow Release Date does not occur under the Existing
First Lien Financing Agreement, then such date designated by Borrower which
designated date shall be no later than ten (10) Business Days following the date
on which the closing occurs on the financing documents with one or more lenders
to replace the financing described in the Existing First Lien Financing
Agreement.

“First Lien Financing” shall mean the financing provided pursuant to the First
Lien Financing Agreement.

“First Lien Financing Agreement” shall mean the Existing First Lien Financing
Agreement, or, to the extent such agreement is no longer in effect, any other
loan agreement secured by a first mortgage lien on the SLS Las Vegas, including
as a result of any Permitted Refinancing thereof.

“First Lien Financing Documents” shall have the meaning assigned to the term
“Loan Documents” in the First Lien Financing Agreement.

 

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“First Lien Intercreditor Agreement” means the intercreditor agreement dated the
Closing Date, substantially in the form of Exhibit K to the Existing First Lien
Financing Agreement, by and between the First Lien Collateral Agent and Lender,
and, to the extent the Existing First Lien Financing Agreement is no longer in
effect, an intercreditor agreement required by the First Lien Lender, the
material terms of which are no more adverse to Lender than those included in the
form of intercreditor that is attached to the Existing First Lien Financing
Agreement.

“First Lien Lender” shall mean the lender or lenders described in the First Lien
Financing Agreement.

“First Lien Loan Party” shall mean the Borrower and any other loan party
described in the First Lien Financing Agreement.

“First Lien Loans” shall mean the loans and other extensions of credit described
in the First Lien Financing Agreement.

“First Lien Obligations” shall mean the loans and other obligations evidenced by
and described in the First Lien Financing Agreement.

“First Lien Pledge Agreement” shall mean the First Lien Pledge Agreement, dated
as of May 2, 2012, as amended by Amendment No. 1 dated as of January 31, 2013,
among the First Lien Loan Parties and First Lien Collateral Agent for the
benefit of the First Lien Secured Parties, or, to the extent the Existing First
Lien Financing Agreement is no longer in effect, the pledge agreement, if any,
contemplated by another loan agreement secured by a first mortgage lien on the
SLS Las Vegas, including as a result of any Permitted Refinancing thereof.

“First Lien Security Agreement” shall mean the Security Agreement (as defined in
the First Lien Financing Agreement) among the First Lien Loan Parties and the
First Lien Collateral Agent for the benefit of the First Lien Secured Parties,
or, to the extent the Existing First Lien Financing Agreement is no longer in
effect, the security agreement, if any, contemplated by another loan agreement
secured by a first mortgage lien on the SLS Las Vegas, including as a result of
any Permitted Refinancing thereof.

“First Lien Security Documents” shall have the meaning assigned to the term
“Security Documents” in the Existing First Lien Financing Agreement, or, to the
extent such agreement is no longer in effect, any security documents
contemplated by another loan agreement secured by a first mortgage lien on the
SLS Las Vegas, including as a result of any Permitted Refinancing thereof.

“First Lien Secured Parties” shall mean the secured parties as contemplated by
the First Lien Security Documents.

“Flood Insurance Laws” shall mean, collectively, (i) the National Flood
Insurance Act of 1968 as now or hereafter in effect or any successor statute
thereto, (ii) the Flood Disaster Protection Act of 1973 as now or hereafter in
effect or any successor statute thereto, (iii) the National Flood Insurance
Reform Act of 1994 as now or hereafter in effect or any successor statute
thereto and (iv) the Flood Insurance Reform Act of 2004 as now or hereafter in
effect or any successor statute thereto.

“Foreign Lender” shall mean any Recipient that is not a “United States person”
as defined in Section 7701(a)(30) of the Code.

“Funding Account” shall mean an account maintained with a Funding Escrow Agent.

 

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“Funding Escrow Agent” shall mean a third party institutional lender that is
selected by Lender and reasonably satisfactory to the Borrower.

“GAAP” shall mean generally accepted accounting principles in the United States.

“Gaming Approvals” shall mean, with respect to any action by a particular
person, any consents, approvals, waivers, exemptions, findings of suitability,
licenses, permits, registrations or other authorizations required for such
action by such person from a Gaming Authority or under Gaming Laws.

“Gaming Authority” shall mean, any Governmental Authorities that hold
regulatory, licensing or permitting authority over gambling, gaming or related
casino activities conducted by any First Lien Loan Party within its
jurisdiction, or before which an application for licensing to conduct such
activities is pending, and, in the case of the Project, the Nevada State Gaming
Control Board, the Nevada Gaming Commission and the Clark County Liquor and
Gaming Licensing Board.

“Gaming Facility” shall mean any building or other structure used or expected to
be used to enclose space in which a gaming operation is conducted (including any
outdoor space where gaming is allowed) and (a) which is wholly owned by a First
Lien Loan Party or (b) any portion or aspect of which is managed or used, or
expected to be managed or used, by a First Lien Loan Party.

“Gaming Laws” shall mean all Laws pursuant to which any Gaming Authority
possesses regulatory, licensing or permit authority over gambling, gaming or
related casino activities conducted or to be conducted by any First Lien Loan
Party, and all rules and regulations promulgated under such Laws, including, but
not limited to, those applicable to any First Lien Loan Party during the
construction of the Project and the application process in connection therewith.

“Gaming Reserves” shall mean any mandatory gaming security reserves, minimum
casino bankroll or other reserves required under applicable Gaming Laws or by
directive of the Gaming Authorities to be maintained by any First Lien Loan
Party.

“General Construction Agreement” shall mean that certain agreement between the
Borrower and the General Contractor dated as of December 21, 2011, together with
all riders, addenda and other instruments referred to therein, as amended,
modified or supplemented from time to time.

“General Contractor” shall mean PENTA Building Group, LLC, a Nevada limited
liability company.

“Governmental Authority” shall mean any national, state or local government
(whether domestic or foreign), any political subdivision thereof or any other
governmental, quasi-governmental, judicial, public or statutory instrumentality,
authority, body, agency, bureau or entity (including the Gaming Authorities,
Liquor Authorities, any zoning authority, the FDIC, the Comptroller of the
Currency, the Federal Reserve Board, any redevelopment authority, any central
bank and any comparable authority), any self-regulatory agency (e.g., FINRA),
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government or any arbitrator with
authority to bind a party at law.

“Hazardous Materials” shall mean the following: polychlorinated biphenyls
(“PCBs”) or PCB-containing equipment; asbestos or asbestos-containing materials;
radon gas, radiation, petroleum, crude oil or any fraction thereof; and any
other pollutants, contaminants, chemicals, wastes, materials, or substances,
regulated under any Environmental Laws.

 

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“Hazardous Materials Activity” shall mean any manufacture, storage, use,
generation, transportation, processing, treatment, disposal, disposition,
abatement, corrective action, response action, removal or remediation of any
Hazardous Materials.

“Hedging Agreement” shall mean any swap, cap, collar, forward purchase or
similar agreements or arrangements dealing with interest rates either generally
or under specific contingencies.

“Hedging Obligations” shall mean obligations under or with respect to Hedging
Agreements.

“Holdings” shall mean Stockbridge/SBE Investment Company, LLC, a Delaware
limited liability company.

“Hotel Management Agreement” shall mean that certain Amended and Restated
Management Agreement entered into as of April l, 2011 by and between the
Borrower and the Hotel Manager, together with all riders, addenda and other
instruments referred to therein, as amended, modified or supplemented from time
to time.

“Hotel Manager” shall mean SBEHG Las Vegas I, LLC, a Nevada limited liability
company.

“I-829 Petition” shall mean the application filed with United States Citizenship
and Immigration Services by an Investing Member, to remove the conditions from
their Resident Visas.

“Immaterial Subsidiary” shall mean each Subsidiary of Borrower which is
hereafter designated as such from time to time by written notice to the First
Lien Administrative Agent in a manner consistent with the terms and conditions
of the First Lien Financing Agreement.

“Improvements” shall mean the improvements, alterations or appurtenances now, or
at any time hereafter, located upon, in, under or above the Land or any part
thereof.

“In-Balance Projections” shall mean with respect to the In-Balance Test, good
faith projections of the Available Funds and the aggregate Remaining Costs for
the Project from the first day of the calendar month in which the In-Balance
Test is being made through the Scheduled Completion Date.

“In-Balance Test” shall mean the covenant set forth in Section 5.16.

“In-Balance Test Certificate” shall mean, with respect to the Project, an
Officers’ Certificate in substantially the form of Exhibit E, setting forth the
calculation of the Available Funds and the aggregate Remaining Costs for the
Project as of the date of such certificate.

“Indebtedness” of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money; (b) all obligations of such
person evidenced by bonds, debentures, notes or similar instruments; (c) all
obligations of such person under conditional sale or other title retention
agreements relating to property purchased by such person; (d) all obligations of
such person issued or assumed as the deferred purchase price of property or
services (excluding (i) trade accounts payable and accrued obligations incurred
in the ordinary course of business and not overdue by more than 90 days and
(ii) earn out obligations which do not constitute a liability on the balance
sheet of such Person in accordance with GAAP); (e) all Indebtedness of others
secured by any Lien on property owned or acquired by such person, whether or not
the obligations secured thereby have been assumed, but limited to the lesser of
(x) the aggregate principal amount of such Indebtedness and (y) the fair market
value of such property;

 

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(f) all Capital Lease Obligations of such person; (g) for purposes of
Section 8.01(f) only, all Hedging Obligations to the extent required to be
reflected on a balance sheet of such person; (h) all Attributable Indebtedness
of such person; (i) all obligations of such person for the reimbursement of any
obligor in respect of letters of credit, letters of guaranty, bankers’
acceptances and similar credit transactions; and (j) all Contingent Obligations
of such person in respect of Indebtedness of others of the kinds referred to in
clauses (a) through (i) above; provided that the term “Indebtedness” shall not
include (x) deferred or prepaid revenue and (y) purchase price holdbacks in
respect of a portion of the purchase price of an asset to satisfy warranty or
other unperformed obligations of the seller. The Indebtedness of any person
shall include the Indebtedness of any partnership or joint venture (other than a
joint venture that is itself a corporation, limited liability company or limited
partnership in which such Person is a limited partner and other loans made by
any member of Borrower to another member of Borrower pursuant to the terms and
provisions of Borrower’s Organizational Documents) in which such Person is a
general partner or a joint venture member, unless such Indebtedness is
non-recourse to such Person. Notwithstanding anything to the contrary contained
herein or in any other Loan Document, in no event shall casino “chips” or gaming
winnings of customers constitute Indebtedness.

“Indemnified Taxes” shall mean all Taxes imposed on or with respect to any
payment made by or on account of any obligation of Borrower under any Loan
Document, other than Excluded Taxes.

“Indemnitee” shall have the meaning assigned to such term in Section 10.03(b).

“Information” shall have the meaning assigned to such term in Section 10.12.

“Institutional Lender” shall mean any person or entity which extends credit or
buys or services loans in the ordinary course, including commercial banks,
savings and loan associations, savings banks, hedge funds, insurance companies,
mutual funds and lease financing companies (such terms to have the meanings, if
any, given to such terms in the applicable provisions of the Securities Act)
(but for the avoidance of doubt would not include a special purpose vehicle
formed for the purpose of extending loans with capital raised through the EB-5
Immigrant Investor Program).

“Insurance Conditions” shall mean Lender shall have received copy of, or a
certificate as to coverage under, and a declaration page relating to, the
insurance policies required by Section 5.04 (including, without limitation,
flood insurance policies to the extent required by Section 5.04) and the
applicable provisions of the SLS Las Vegas Mortgage, each of which (i) shall be
endorsed or otherwise amended to include a “standard” or “New York” lender’s
loss payable or mortgagee endorsement (as applicable) and as Lender’s interest
may appear, subject to the Intercreditor Agreements, (ii) shall name Lender as
additional insured, (iii) in the case of flood insurance, if applicable, shall
(a) identify the addresses of each property located in a special flood hazard
area, (b) indicate the applicable flood zone designation, the flood insurance
coverage and the deductible relating thereto and (c) provide that the insurer
will give Lender 45 days written notice of cancellation or non-renewal and
(iv) shall be otherwise in form and substance satisfactory to Lender.

“Insurance Policies” shall mean the insurance policies and coverages required to
be maintained by each First Lien Loan Party which is an owner, lessee or
operator of Mortgaged Property or any part of the Project pursuant to
Section 5.04 and all renewals and extensions thereof.

“Insurance Proceeds” shall mean all cash and cash equivalents paid under any
casualty insurance policy maintained by a First Lien Loan Party (other than
payments in respect of business interruption as reasonably determined by
Borrower), net of (a) all costs of recovery of such Insurance Proceeds
(including legal, accounting, appraisal and insurance adjuster fees and
expenses), (b) all amounts

 

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required to be applied to the repayment of Indebtedness secured by a Permitted
Lien (including any penalty, premium or make-whole amounts related thereto) on
any asset which is the subject of the event to which such Insurance Proceeds
relate and (c) all Taxes paid or reasonably estimated to be payable as a result
thereof, whether by a First Lien Loan Party or any direct or indirect owner
thereof (after taking into account any Tax credits or deductions and any Tax
sharing arrangements, in each case reducing the amount of Taxes so paid or
estimated to be payable).

“Insurance Requirements” shall mean, collectively, all material provisions of
the Insurance Policies, all material requirements of the issuer of any of the
Insurance Policies and all orders, rules, regulations and any other requirements
of the National Board of Fire Underwriters (or any other body exercising similar
functions) binding upon each First Lien Loan Party which is an owner, lessee or
operator of Mortgaged Property and applicable to the Mortgaged Property or any
use or condition thereof.

“Intellectual Property” shall mean the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising
under United States, state, multinational or foreign Laws or otherwise,
including, without limitation, copyrights, patents, trademarks, service-marks,
trade names, technology, know-how and processes, recipes, formulas, trade
secrets, or licenses (under which the applicable Person is licensor or licensee)
relating to any of the foregoing and all rights to sue at law or in equity for
any infringement or other impairment thereof, including the right to receive all
proceeds and damages therefrom.

“Intercreditor Agreements” means, collectively, the First Lien Intercreditor
Agreement and any Qualified Additional Financing Intercreditor Agreements.

“Interest Payment Date” shall mean (a) the last Business Day of each March,
June, September and December to occur during any period in which the Loan is
outstanding, and (b) the Maturity Date, as may be extended by one or two
Extension Options.

“Intermediate” shall mean Stockbridge/SBE Intermediate Company, LLC, a Delaware
limited liability company.

“Investing Member” means a member of Lender, as further defined and set forth in
the Operating Agreement.

“Investment” shall have the meaning assigned to such term in Section 6.04.

“Land” shall mean the real property specifically described in the SLS Las Vegas
Mortgage, including all of Borrower’s right, title and interest in and to all
oil, gas and mineral rights, oil, gas and minerals, easements, appurtenances,
water rights, water stock, rights in and to streets, roads and highways (whether
before or after vacation thereof), hereditaments and privileges relating, in any
manner whatsoever, to such real property.

“Laws” shall mean, collectively, all international, foreign, Federal, state and
local statutes, treaties, rules, regulations, orders, ordinances, codes and
administrative or judicial precedents or authorities and executive orders,
including the interpretation or administration thereof by any Governmental
Authority charged with the enforcement, interpretation or administration
thereof, and all applicable administrative orders, requests, licenses,
authorizations and permits of, and agreements with, any Governmental Authority.

 

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“Leases” shall mean any and all leases, subleases, tenancies, options,
concession agreements, rental agreements, occupancy agreements, franchise
agreements, access agreements and any other agreements (including all
amendments, extensions, replacements, renewals, modifications and/or guarantees
thereof), whether or not of record and whether now in existence or hereafter
entered into, affecting the use or occupancy of all or any portion of any Real
Property.

“Lender” shall have the meaning assigned to such term in the Preamble.

“Letter of Intent” shall mean that certain letter agreement, including the
exhibits and schedules attached thereto, by and between ADF and Borrower, dated
as of June 14, 2012, related to the financing contemplated by this Agreement, as
amended and restated by Amended and Restated Letter of Intent among ADF, Lender
Manager and Borrower dated as of May 1, 2013, and as the same may be
subsequently amended or modified.

“License Revocation” shall mean the revocation, failure to renew, denial or
suspension of any Gaming Approval, Casino License or Liquor License of any First
Lien Loan Party necessary for the ownership, use or operation of any Gaming
Facility or the Project, or the appointment of a receiver, conservator,
supervisor or similar official with respect to any portion of any Gaming
Facility or the Project.

“Lien” shall mean, with respect to any property, (a) any mortgage, deed of
trust, lien, pledge, encumbrance for security, claim, charge, assignment,
hypothecation, or security interest of any kind as security, in each of the
foregoing cases whether voluntary or imposed by law; and (b) the interest of a
vendor or a lessor under any conditional sale agreement, capital lease or title
retention agreement (or any financing lease having substantially the same
economic effect as any of the foregoing) relating to such property; provided in
no event shall an operating lease be deemed to constitute a Lien.

“Liquor Authorities” shall mean, in any jurisdiction in which Borrower or any of
its Restricted Subsidiaries sells and/or distributes beer, wine or liquor, or
proposes to sell and/or distribute beer, wine or liquor, the applicable
alcoholic beverage commission or other Governmental Authority responsible for
interpreting, administering or enforcing the Liquor Laws, and, in the case of
the Project, the Clark County Liquor and Gaming Licensing Board.

“Liquor Laws” shall mean, the Laws applicable to or involving the sale and/or
distribution of beer, wine or liquor by Borrower or any of its Restricted
Subsidiaries in any jurisdiction, as in effect from time to time, including the
policies, interpretations or administration thereof by the applicable Liquor
Authorities.

“Liquor License” shall mean, in any jurisdiction in which Borrower or any of its
Restricted Subsidiaries sells and/or distributes beer, wine or liquor, or
proposes to sell and/or distribute beer, wine or liquor, any license, permit or
other authorization to sell and distribute beer, wine or liquor that is granted
or issued by the Liquor Authorities.

“Loan” shall mean any loan or the loans collectively made by Lender to Borrower
pursuant to Section 2.02.

“LoanCore Note” means the Loan Agreement dated as of August 1, 2007 between the
Borrower and Greenwich Capital Financial Products, Inc., as Lender
(“Greenwich”), as amended by that certain First Amendment to Loan Agreement
dated as of October 31, 2007, as assigned by RBS Financial Products Inc.
(successor to Greenwich) to The Royal Bank of Scotland plc (“RBS”) pursuant to
the Assignment dated May 14, 2008, as assigned by RBS to Sahara Loan Purchaser,
LLC (“Loan Seller”) pursuant to Assignment dated April 22, 2011, as assigned by
Loan Seller to Jefferies Loancore LLC, a Connecticut limited partnership
(“Loancore”) pursuant to that certain Loan Purchase Agreement dated April 22,
2011

 

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between Loan Seller and Loancore, as amended by that certain Second Amendment to
Loan Agreement dated as of June 20, 2011 between the Borrower and Loancore, as
amended by that certain letter dated April 20, 2012, as amended by that certain
Third Amendment to Loan Agreement dated as of May 1, 2012, as amended by that
certain Fourth Amendment to Loan Agreement dated as of February 14, 2013,
together with any other instruments, certificates, documents or agreements
executed and delivered by the Borrower and any other loan party thereunder with
or for the benefit of Loancore (or its predecessors in interest) (in each case
as the same may be amended, amended and restated, supplemented or otherwise
modified from time to time).

“Loan Documents” shall mean this Agreement, the Disbursement Agreement, the
Note, the SLS Las Vegas Mortgage, the Subordination Agreement and any other
instruments, certificates, documents or agreements executed and delivered by
Borrower with or for the benefit of Lender in its capacity as such pursuant
hereto or thereto or in connection herewith or therewith (in each case as the
same may be amended, amended and restated, supplemented or otherwise modified
from time to time).

“Manager” shall mean Stockbridge/SBE Voteco Company, LLC, a Delaware limited
liability company, manager of Borrower.

“Margin Stock” shall have the meaning assigned to such term in Regulation U.

“Master Lease Easements” shall have the meaning assigned to such term in Section
6.06(m).

“Master Lease Documents” shall have the meaning assigned to such term in Section
6.06(m).

“Material Adverse Effect” shall mean any event or circumstance which: (a) has a
material adverse effect on the business, assets, operations or condition
(financial or otherwise) of the Borrower and its Restricted Subsidiaries, taken
as a whole, (b) materially and adversely affects the ability of Borrower to pay
the Obligations, or (c) materially and adversely affects the rights of Lender
under the Loan Documents, including the validity, enforceability or priority of
the Liens purported to be created by the SLS Las Vegas Mortgage (it being
understood that any delay in construction will not be deemed a Material Adverse
Effect, provided the Borrower reasonably expects the Opening Date to occur on or
prior to September 30, 2014). Solely with respect to Sections 5.02, 5.03, 5.09,
5.13 and 8.01, any event or circumstance relating to the revocation of or a
change to the EB-5 Immigrant Investor Program shall not be deemed a Material
Adverse Effect.

“Material Agreement” shall mean (a) the General Construction Agreement, (b) the
Architectural Services Agreement and (c) the Affiliate Documents.

“Material Indebtedness” shall mean any Indebtedness (other than the Loan) or
Hedging Obligations of Borrower in an aggregate outstanding principal amount
exceeding $10,000,000. For purposes of determining Material Indebtedness, the
“principal amount” in respect of any Hedging Obligations of Borrower at any time
shall be the maximum aggregate amount (giving effect to any netting agreements)
that Borrower would be required to pay if the related Hedging Agreement were
terminated at such time.

“Maturity Date” shall mean the Original Maturity Date; provided, however, that
the Original Maturity Date may be extended by up to two Extension Options, the
first of which, if exercised, shall make the Maturity Date August 1, 2019, and
the second of which, if exercised, shall make the Maturity Date August 1, 2020.

 

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“Maximum Loan Amount” shall mean the Total EB-5 Offering Amount Raised;
provided, however, that after giving effect to any concurrent repayment of all
or a portion of First Lien Financing or Qualified Additional Financing, the
Maximum Loan Amount shall not exceed an amount, when taken together with any
other Qualified Additional Financing, that exceeds the aggregate principal
amount of Qualified Additional Financing permitted under the First Lien
Financing Agreement.

“Maximum Rate” shall have the meaning assigned to such term in Section 10.14.

“Mortgage” shall mean an agreement, including, but not limited to, a mortgage,
deed of trust or any other document, creating and evidencing a Lien on the
Mortgaged Property in form substantially similar to the mortgage securing the
First Lien Financing and reasonably satisfactory to Lender, in each case, with
such schedules and including such provisions as shall be necessary to conform
such document to applicable local or foreign law or as shall be customary under
applicable local or foreign law, and includes, without limitation, the SLS Las
Vegas Mortgage.

“Mortgaged Property” shall mean the real property described on Schedule 1.01(d)
or otherwise as to which Lender shall be granted Liens pursuant to the SLS Las
Vegas Mortgage (but only for such period that each such real property is subject
to a Mortgage).

“Multiemployer Plan” shall mean a multiemployer plan within the meaning of
Section 4001(a)(3) or Section 3(37) of ERISA (a) to which Borrower or any ERISA
Affiliate is then making or accruing an obligation to make contributions; (b) to
which Borrower or any ERISA Affiliate has within the preceding five plan years
made contributions; or (c) with respect to which Borrower could incur liability.

“Net Cash Proceeds” shall mean,

(a) with respect to any Asset Sale (other than any issuance or sale of Equity
Interests), the cash proceeds received by Borrower (including cash proceeds
subsequently received (as and when received by Borrower) in respect of non-cash
consideration initially received) net of (i) selling expenses (including
reasonable brokers’ or bankers’ fees or commissions, reasonable incentive
bonuses paid to officers and employees, legal, accounting and other professional
and transactional fees, transfer and similar taxes and Borrower’s good faith
estimate of income taxes actually paid or payable in connection with such sale,
including any taxes payable by a direct or indirect owner of the Borrower and
any taxes payable upon the repatriation of any such proceeds); (ii) amounts
provided as a reserve, in accordance with GAAP, against (x) any liabilities
under any indemnification obligations associated with such Asset Sale or (y) any
other liabilities retained by Borrower associated with the properties sold in
such Asset Sale (provided that, to the extent and at the time any such amounts
are released from such reserve, such amounts shall constitute Net Cash
Proceeds); (iii) Borrower’s good faith estimate of payments required to be made
within 180 days of such Asset Sale with respect to unassumed liabilities
relating to the properties sold (provided that, to the extent such cash proceeds
are not used to make payments in respect of such unassumed liabilities within
180 days of such Asset Sale, such cash proceeds shall constitute Net Cash
Proceeds); and (iv) the principal amount, premium or penalty, if any, interest
and other amounts on any Indebtedness which is secured by a Lien on the
properties sold in such Asset Sale (so long as such Lien was permitted to
encumber such properties under the Loan Documents at the time of such sale) and
which is repaid with such proceeds (other than any such Indebtedness assumed by
the purchaser of such properties);

 

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(b) with respect to any Debt Issuance by the Borrower, the cash proceeds
thereof, net of customary fees, commissions, costs and other expenses (including
legal, accounting and investment banking fees and expenses) incurred in
connection therewith; and

(c) with respect to any Casualty Event, the cash insurance proceeds,
condemnation awards and other compensation received in respect thereof,
including but not limited to Insurance Proceeds and Eminent Domain Proceeds, net
of all costs and expenses incurred in connection with the collection of such
proceeds, awards or other compensation in respect of such Casualty Event
(including (i) any costs incurred in connection with the adjustment or
settlement of any claims in respect thereof and (ii) costs incurred in
connection with any sale of such assets, including income taxes payable as a
result of any gain recognized in connection therewith).

“Net Working Capital” shall mean, at any time, Consolidated Current Assets at
such time minus Consolidated Current Liabilities at such time.

“Non-Cash Charges” shall mean (a) any impairment charge or asset write-off or
write-down related to intangible assets (including goodwill), long-lived assets,
and Investments in debt and equity securities pursuant to GAAP, (b) all losses
from Investments recorded using the equity method, (c) Non-Cash Compensation
Expenses, (d) the non-cash impact of acquisition method accounting, (e) any
non-cash loss attributable to the mark to market movement in the valuation of
hedging obligations or other derivative instruments pursuant to Financial
Accounting Codification No. 815—Derivatives and Hedging and (f) other non-cash
charges (provided, in each case, that if any non-cash charges represent an
accrual or reserve for potential cash items in any future period, the cash
payment in respect thereof in such future period shall be subtracted from
Consolidated Adjusted EBITDA to such extent, and excluding amortization of a
prepaid cash item that was paid in a prior period).

“Non-Cash Compensation Expense” shall mean any non-cash expenses and costs that
result from the issuance of stock or equity based awards, partnership
interest-based awards and similar incentive based compensation awards or
arrangements.

“Note” shall mean a secured promissory note, substantially in the form attached
hereto as Exhibit F, to be issued on the Closing Date and updated by the Lender
with notations of Borrowings upon the occurrence of each Borrowing hereunder.

“Obligations” shall mean obligations of Borrower from time to time arising under
or in respect of the due and punctual payment of (i) the principal of and
premium, if any, and interest (including interest accruing during the pendency
of any bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding) on the Loan, when
and as due, whether at maturity, by acceleration, upon one or more dates set for
prepayment or otherwise and (ii) all other monetary obligations, including fees,
costs, expenses and indemnities, whether primary, secondary, direct, contingent,
fixed or otherwise (including monetary obligations incurred during the pendency
of any bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding), of Borrower
under this Agreement and the other Loan Documents.

“OFAC” shall have the meaning assigned to such term in Section 3.21(b)(v).

“Officers’ Certificate” shall mean a certificate executed on behalf of Borrower
or the sole member or manager of Borrower by the chairman of the Board of
Directors (if an officer), the chief executive officer, the president or any
Financial Officer, Vice President or Secretary each in his or her official (and
not individual) capacity.

 

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“Opening Date” shall have the meaning assigned to such term in the Disbursement
Agreement.

“Operating Agreement” means that certain Operating Agreement of SLS Lender, LLC,
dated as of July 1, 2012, by and among Lender, Lender Manager and the Investing
Members.

“Organizational Documents” shall mean, with respect to any person, (i) in the
case of any corporation, the certificate of incorporation and by-laws (or
similar documents) of such person, (ii) in the case of any limited liability
company, the certificate of formation and operating agreement (or similar
documents) of such person, (iii) in the case of any limited partnership, the
certificate of formation and limited partnership agreement (or similar
documents) of such person, (iv) in the case of any general partnership, the
partnership agreement (or similar document) of such person and (v) in any other
case, the functional equivalent of the foregoing.

“Original Maturity Date” shall mean August 1, 2018.

“Other Taxes” shall mean any and all present or future stamp, court or
documentary, intangible, recording, filing or similar Taxes, other than the EB-5
Taxes, which arise from any payment made hereunder or under any other Loan
Document or from the execution, delivery, performance, enforcement or
registration of, from the receipt or perfection of a security interest under, or
otherwise with respect to, this Agreement or any other Loan Document.

“Participant” shall have the meaning assigned to such term in Section 10.04(e).

“Participant Register” shall have the meaning assigned to such term in
Section 10.04(e).

“Patriot Act” shall have the meaning assigned to such term in Section 4.01(s).

“PBGC” shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.

“Pension Plan” shall mean any Employee Benefit Plan, other than a Multiemployer
Plan, that is subject to Section 412 of the Code or Section 302 of ERISA.

“Permits” shall mean the collective reference to any and all consents, orders,
licenses, permits, approvals, notifications, certifications, registrations,
regulatory filings or notices and authorizations required under any Requirement
of Law (including Gaming Laws), including, without limitation, any Casino
License, Liquor License or other Gaming Approvals.

“Permitted Businesses” shall mean (a) the gaming business, (b) the development,
construction, ownership and operation of a Gaming Facility, (c) any development,
construction, ownership or operation of lodging, retail, restaurant or
convention facilities, sports or entertainment facilities, food and beverage
(including liquor) distribution operations, transportation services, parking
services, recreation, spa, pool, exercise and gym facilities or sales and
marketing services, (d) any development, construction, ownership or operation of
a full service destination resort, including, without limitation, residential or
vacation housing facilities (including, without limitation, timeshares, interval
ownership and condominiums and similar developments), parking services or sales
and marketing services, (e) any business or other activity, whether or not
licensed by Gaming Authorities (including any related internet business) that is
ancillary to, necessary for, incidental to, useful to, arising out of,
supportive of, related to, connected to or a reasonable extension, development
or expansion of any of the foregoing and/or (f) the ownership by a person of
Equity Interests in its Subsidiaries and other Investments permitted hereunder;
provided, however,

 

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that with respect to Borrower and its Subsidiaries, the foregoing shall only be
Permitted Businesses to the extent related to (or ancillary to, necessary for,
incidental to, useful to, arising out of, supportive of, or connected to) the
Project or in furtherance of the Project’s development, construction, ownership
or operation.

“Permitted Encumbrances” shall mean those exceptions specified in Schedule B of
the title policies delivered to Lender with respect to the Mortgaged Property.

“Permitted Investors” shall mean (i) the Stockbridge Fund Entities, any
investment fund Controlled by or under common Control with the Stockbridge Fund
Entities and any officer, director or person performing an equivalent function
of the foregoing persons, or any entity Controlled by any of the foregoing
persons, (ii) the SBE Entities, any entity or person Controlled by or under
common Control with the SBE Entities, and any officer, director or person
performing an equivalent function of the foregoing persons, or any entity
Controlled by any of the foregoing persons, (iii) any members of management of
Borrower on the Closing Date and family members thereof, including, without
limitation, the family members of Sam Nazarian and Terrence Fancher, (iv) any
trust, corporation, partnership or other entity the beneficiaries, stockholders,
partners, members, managers, owners or persons beneficially holding a
controlling interest of which (or persons which are the principal beneficiaries
of which) consist of any one or more of the persons referred to in the
immediately preceding clauses (i), (ii) and (iii), (v) any group (as defined in
the rules promulgated under Section 13(d) of the Exchange Act) which is
controlled by any of the persons referred to in the immediately preceding clause
(i), (ii), (iii) or (iv), and (vi) any Affiliates of any of the persons
referenced in clause (i), (ii), (iii), (iv) or (v), provided that for this
purpose, the proviso in the definition of “Affiliate” shall not apply.

“Permitted Liens” shall have the meaning assigned to such term in Section 6.02.

“Permitted Refinancing” shall mean, with respect to any person, any
modification, refinancing, refunding, renewal or extension of any Indebtedness
of such person; provided that (a) the principal amount (or accreted value, if
applicable) thereof does not exceed the principal amount (or accreted value, if
applicable) of the Indebtedness so modified, refinanced, refunded, renewed or
extended except by (i) an amount equal to unpaid accrued interest, make-whole
amounts, penalties and premium thereon plus other amounts paid, and fees
(including, without limitation, upfront fees and original issue discount) and
expenses reasonably incurred, in connection with such modification, refinancing,
refunding, renewal or extension and (ii) an amount equal to any existing
commitments unutilized thereunder, (b) the Indebtedness resulting from such
modification, refinancing, refunding, renewal or extension has a final maturity
date equal to or later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being modified, refinanced, refunded, renewed or
extended, (c) at the time thereof, no Default shall have occurred and be
continuing, (d) to the extent such Indebtedness being modified, refinanced,
refunded, renewed or extended is subordinated in right of payment to the
Obligations, the Indebtedness resulting from such modification, refinancing,
refunding, renewal or extension is subordinated in right of payment to the
Obligations on terms, taken as a whole, that are determined in good faith by a
Responsible Officer of the Borrower to be at least as favorable to Lender as
those contained in the documentation governing the Indebtedness being modified,
refinanced, refunded, renewed or extended, (e) Indebtedness of a Subsidiary that
is not a Guarantor (as defined in the First Lien Financing Agreement) or the
Borrower shall not refinance Indebtedness of Borrower or a Guarantor (as defined
in the First Lien Financing Agreement), (f) no person is an obligor under such
modified, refinanced, refunded, renewed or extended Indebtedness that was not an
obligor (or required to become an obligor) under such Indebtedness prior to such
modification, refinancing, refunding, renewal or extension and (g) to the extent
the Indebtedness being modified, refinanced, refunded, renewed or extended was
initially incurred pursuant to a Qualified Additional Financing, the
Indebtedness resulting from such modification, refinancing, refunding, renewal
or extension shall also qualify as a

 

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Qualified Additional Financing; provided that if any First Lien Loan Party is an
obligor under such modified, refinanced, refunded, renewed or extended
Indebtedness, other First Lien Loan Parties may be guarantors of such
Indebtedness; provided, further, that in the case of a Permitted Refinancing of
the First Lien Financing or any Senior Qualified Additional Financing, the
limitations in clauses (a) and (b) of this definition shall not apply.

“person” shall mean any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.

“Plan” shall mean any employee pension benefit plan (other than a Multiemployer
Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code
or Section 302 of ERISA which is maintained or contributed to by Borrower or its
ERISA Affiliate or with respect to which Borrower could incur liability
(including under Section 4069 of ERISA).

“Plans and Specifications” shall have the meaning assigned to such term in the
Disbursement Agreement.

“Proceedings” shall have the meaning assigned to such term in Section 5.02(a).

“Project” shall have the meaning assigned to such term in the Disbursement
Agreement.

“Project Budget” shall have the meaning assigned to such term in the
Disbursement Agreement.

“Project Costs” shall have the meaning assigned to such term in the Disbursement
Agreement.

“Project Documents” shall have the meaning assigned to such term in the
Disbursement Agreement.

“Project Site” shall mean that portion of the Mortgaged Property described on
Schedule 1.01(d), on which the Project is or will be located.

“property” shall mean any right, title or interest in or to property or assets
of any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible and including Equity Interests or other ownership interests of any
person and whether now in existence or owned or hereafter entered into or
acquired, including all Real Property.

“Purchase Money Obligation” shall mean, for any person, the obligations of such
person in respect of Indebtedness (including Capital Lease Obligations) incurred
for the purpose of financing all or any part of the purchase price of any
property (including Equity Interests of any person) or the cost of acquisition,
repair, installation, construction or improvement of any property and any
refinancing thereof; provided, however, that (i) such Indebtedness is incurred
or committed within 180 days after such acquisition, repair, installation,
construction or improvement of such property by such person and (ii) the amount
of such Indebtedness does not exceed 100% of the cost of such acquisition,
repair, installation, construction or improvement, as the case may be (including
financing costs).

“Qualified Additional Financing” shall mean one or more (which may be in
combination) of the following: U.S. EB-5 visa immigrant investor program
financings (including the financing to be provided under this Agreement), other
junior priority, unsecured and/or mezzanine financing and/or preferred or common
equity financing, with a combined blended cash interest rate not in excess of
6.0%

 

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per annum, and any Permitted Refinancing thereof. For the avoidance of doubt,
the Loan constitutes Qualified Additional Financing and any refinancing of a
Qualified Additional Financing with another source of funds that would qualify
as a Qualified Additional Financing shall be considered a Qualified Additional
Financing hereunder.

“Qualified Additional Financing Agent” means, with respect to any Qualified
Additional Financing, the person that serves in the capacity as agent or lender,
as applicable, for the financing source under the relevant Qualified Additional
Financing Agreement.

“Qualified Additional Financing Agreement” means, with respect to any Qualified
Additional Financing, the debt, equity, mezzanine and/or other financing
agreement(s) entered into by the Borrower pursuant to which such Qualified
Additional Financing is provided (including the financing to be provided under
this Agreement).

“Qualified Additional Financing Documents” means the Qualified Additional
Financing Agreement(s), the Disbursement Agreement, any Qualified Additional
Financing Security Documents, any Qualified Additional Financing Intercreditor
Agreement, any other intercreditor agreement, and any other instruments,
certificates, documents or agreements executed and delivered by any First Lien
Loan Party with or for the benefit of the Qualified Additional Financing Agent
or any Qualified Additional Financing Secured Parties in their capacities as
such pursuant hereto or thereto or in connection herewith or therewith (in each
case as the same may be amended, amended and restated, supplemented or otherwise
modified from time to time or refinanced or replaced pursuant to a Permitted
Refinancing).

“Qualified Additional Financing Intercreditor Agreement” means, with respect to
any Qualified Additional Financing, an intercreditor agreement, by and between
the Qualified Additional Financing Agent for such Qualified Additional Financing
and Lender, dated as of the later of the Closing Date or the closing date for
such Qualified Additional Financing, the material terms of which are no more
adverse to Lender as the terms set forth in the form of intercreditor agreement
attached to the Existing First Lien Financing Agreement.

“Qualified Additional Financing Secured Parties” shall mean, in the event that
the Qualified Additional Financing is secured by a Lien, the Qualified
Additional Financing Agent and holders of any Indebtedness constituting
Qualified Additional Financing.

“Qualified Additional Financing Security Documents” shall mean the collective
reference to any security agreement, pledge agreement, intellectual property
security agreement, account control agreements, mortgages, collateral
assignments and all other similar documents now or hereafter delivered to the
applicable Qualified Additional Financing Agent granting a Lien on any property
(or associated with such a grant) of any person to secure the obligations and
liabilities under any Qualified Additional Financing Document.

“Real Property” shall mean, collectively, all right, title and interest
(including any leasehold, mineral or other estate) in and to any and all parcels
of or interests in real property which the Borrower owns in fee or in which it
holds a leasehold interest as a tenant or in which it holds an easement right as
an easement holder or otherwise occupies, or in which it holds an option,
together with any buildings or other improvements located on such real property
(but not including Excluded Real Property), provided any leasehold interest or
easement or option shall be subject to the document creating such interest.

 

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“Real Property Conditions” shall mean Lender shall have received each of the
following:

(i) Mortgages; Fixture Filings. The SLS Las Vegas Mortgage encumbering the
Mortgaged Property in favor of Lender, duly executed and acknowledged by
Borrower as the owner of or holder of any interest in the Mortgaged Property,
and otherwise in form for recording in the recording office of each applicable
political subdivision where the Mortgaged Property is situated, together with
such certificates, affidavits, questionnaires or returns as shall be required in
connection with the recording or filing thereof to create a lien under
applicable Requirements of Law, and such financing statements and any other
instruments necessary to grant a mortgage lien under the laws of any applicable
jurisdiction, all of which shall be in form and substance reasonably
satisfactory to Lender;

(ii) Title Policy. With respect to the SLS Las Vegas Mortgage, a policy of title
insurance (or marked up title insurance commitment having the effect of a policy
of title insurance) insuring the Lien of the SLS Las Vegas Mortgage as a valid
junior mortgage Lien on the Mortgaged Property and fixtures described therein in
an amount not less than the aggregate amount of the Borrowings then outstanding
under this Agreement, which policy (or such marked-up commitment) (the “Title
Policy”) shall (A) be issued by the Title Company, (B) include such reinsurance
arrangements within the First American affiliated title companies (with
provisions for direct access) as shall be reasonably requested by Lender, (C) if
relevant, contain a “tie-in” or “cluster” endorsement, if available under
applicable law (i.e., policies which insure multiple mortgages against losses
regardless of location or allocated value of the insured property up to a stated
aggregated maximum coverage amount), (D) have been supplemented by such
endorsements (or where such endorsements are not available, opinions of special
counsel, architects or other professionals reasonably acceptable to Lender) as
shall be available in Nevada and as reasonably requested by Lender (including
endorsements on matters relating to usury, first loss, last dollar, zoning,
contiguity, revolving credit, doing business, non-imputation, public road
access, survey, variable rate, environmental lien, subdivision, mortgage
recording tax, separate tax lot, future advances, and so-called comprehensive
coverage over covenants and restrictions and (E) contain no exceptions to title
other than Permitted Encumbrances and other exceptions reasonably acceptable to
Lender (provided notwithstanding anything herein or in the Disbursement
Agreement to the contrary, because construction commenced prior to the Closing
Date, the Title Policy (and any update thereof or endorsement thereto) may
include a general exception for mechanics’ or materialmen’s liens and such
exception will be a Permitted Encumbrance);

(iii) Survey. An ALTA Survey with respect to the Mortgaged Property (the
“Survey”); provided, however, that an update to the Survey last updated July 31,
2007 of Carter Burgess (Job # 241711) shall not be required to the extent that
(x) an existing survey together with an “affidavit of no change” satisfactory to
the Title Company is delivered to Lender and the Title Company and (y) the Title
Company removes the standard survey exception and provides reasonable and
customary survey related endorsements and other coverages in the applicable
Title Policy (provided the Title Company may take an exception relating to the
removal of the roller coaster shown on the existing survey);

(iv) [Reserved];

(v) Management and Leasing Contracts. Copies of the Hotel Management Agreement
and any other material agreements providing for or relating to the management,
maintenance, operation or leasing of the Land or Improvements that have a term
in excess of 60 days;

 

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(vi) Chattel Searches. UCC searches against Borrower in its jurisdiction of
formation and in Clark County, NV;

(vii) Plans, Etc. A complete set of the Plans and Specifications and copies of a
site plan (showing all necessary approvals, utility connections and site
improvements) and all inspection and test records and reports made by or for
Borrower or its architect, in each case, in the same form and substance as
previously delivered to the First Lien Collateral Agent (or the Construction
Consultant);

(viii) Consultant’s Report. A copy of the report from the Construction
Consultant delivered to the First Lien Collateral Agent, to the effect that
(i) it has received and reviewed the construction related items required by the
Disbursement Agreement as of the date of such report in respect of the Project
and certifications from the professionals of record asserting that (a) the
available Plans and Specifications have been approved to the extent required at
such time by all applicable Governmental Authorities and (b) the improvements as
shown by the Plans and Specifications will comply with applicable zoning and
other Laws in all material respects and (ii) construction of the improvements,
along with all necessary roads and utilities, are expected to be finished on or
before the Scheduled Completion Date (provided this condition shall be deemed
satisfied if the Borrower uses commercially reasonable efforts to cause the
Construction Consultant to consent to the Lender’s reliance on said report,
subject to receipt of any necessary consent from the First Lien Administrative
Agent);

(ix) [Reserved];

(x) Progress and Construction Schedules. A copy of the projected construction
schedule showing the anticipated timeline for development of the Project;

(xi) [Reserved];

(xii) Budget. A copy of the Project Budget, in the same form and substance as
previously delivered to the First Lien Collateral Agent;

(xiii) Environmental Report. A copy of the Environmental Report;

(xiv) Easements. Copies of any easements pertaining to the Project;

(xv) [Reserved];

(xvi) [Reserved];

(xvii) [Reserved];

(xviii) [Reserved];

(xix) Flood Hazard Determinations. A completed “Life-of-Loan” Federal Emergency
Management Agency standard flood hazard determination with respect to the
Mortgaged Property (together with a notice about special flood hazard area
status and flood disaster assistance) duly executed by the Borrower; and

 

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(xx) Opinions. Opinions, addressed to Lender, of local counsel in each
jurisdiction (i) where the Mortgaged Property is located and (ii) where
Borrower, which is granting the SLS Las Vegas Mortgage on the Mortgaged Property
is organized, regarding the due execution and delivery and enforceability of the
SLS Las Vegas Mortgage, the limited liability company formation of Borrower,
existence and good standing of Borrower, and such other matters as may be
reasonably requested by Lender, each in form and substance reasonably
satisfactory to Lender.

“Recipient” shall mean Lender or any permitted assignee of Lender.

“Register” shall have the meaning assigned to such term in Section 10.04(d).

“Regulation D” shall mean Regulation D of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

“Regulation T” shall mean Regulation T of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

“Regulation U” shall mean Regulation U of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

“Regulation X” shall mean Regulation X of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

“Related Parties” shall mean, with respect to any person, such person’s
Affiliates and the directors, officers, employees, agents and advisors of such
person and of such person’s Affiliates (it being understood that the Related
Parties of Lender include ADF, CommerceCenters, LLC, and Rod Oshita, but do not
include any firms specializing in raising capital in accordance with the EB-5
Immigrant Investor Program).

“Release” shall mean releasing, spilling, leaking, seepage, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping,
disposing, depositing, dispersing, emanating or migrating of any Hazardous
Material in, into, onto or through the Environment, or within, from, or into any
building, structure or facility.

“Remaining Costs” shall have the meaning assigned to such term in the
Disbursement Agreement.

“Repair Plan” shall have the meaning assigned to such term in
Section 2.11(a)(iv).

“Requirements of Law” shall mean, as to any person, the Organizational Documents
of such person, and any Law or determination of an arbitrator or a court,
including, without limitation, zoning and subdivision ordinances, building
codes, Permits, Environmental Laws, ADA Laws and Gaming Laws, in each case
applicable to or binding upon such person or any of its property or to which
such person or any of its property is subject.

“Responsible Officer” of any person shall mean any executive officer or
Financial Officer of such person and any other officer or similar official
thereof with responsibility for the administration of the obligations of such
person in respect of this Agreement.

“Restricted Subsidiary” shall have the meaning assigned to such term in the
First Lien Financing Agreement.

 

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“Sale and Leaseback Transaction” has the meaning assigned to such term in
Section 6.03.

“SBE Entities” shall mean, individually and collectively, SBEEG Holdings, LLC,
SBE Las Vegas Holdings I, LLC and SBE Entertainment Group LLC.

“Scheduled Completion Date” shall have the meaning assigned to such term in the
Disbursement Agreement.

“Secured Obligations” shall mean the Obligations.

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Senior Qualified Additional Financing” shall mean any Qualified Additional
Financing that is subject to a Qualified Additional Financing Intercreditor
Agreement, which Indebtedness thereunder is secured by a Lien on the Mortgaged
Property that is senior to the Lien of the Lender on the Mortgaged Property
securing Indebtedness under this Agreement.

“SLS Las Vegas” shall mean the SLS Hotel & Casino Las Vegas.

“SLS Las Vegas Mortgage” shall mean the Junior Priority Deed of Trust,
Assignment of Rents and Leases, Security Agreement and Fixture Filing
substantially in the form of Exhibit A hereto, dated as of the Closing Date,
made by Borrower in favor of Nevada Title Company, as trustee, for Lender, as
the same may be subsequently amended, modified or subordinated to the interests
of other lenders with Liens on the Mortgaged Property permitted to be senior to
the Lien of Lender on the Mortgaged Property.

“Solvent” shall mean with respect to any person, as of any date of
determination:

(a) the amount of the “present fair saleable value” of the assets of such person
will, as of such date, exceed the amount of all “liabilities of such person,
contingent or otherwise,” as of such date, as such quoted terms are determined
in accordance with applicable federal and state laws governing determinations of
the insolvency of debtors,

(b) the present fair saleable value of the assets of such person will, as of
such date, be greater than the amount that will be required to pay the liability
of such person on its then existing debts as such debts become absolute and
matured considering potential financing alternatives and asset sales that may be
available to such person,

(c) such person will not have, as of such date, an unreasonably small amount of
capital with which to conduct its business, and

(d) such person will be able to pay its debts as they mature.

For purposes of this definition, (i) “debt” means liability on a “claim” and
(ii) “claim” means any (x) right to payment, whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured or
(y) right to an equitable remedy for breach of performance if such breach gives
rise to a right to payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured or unmatured, disputed,
undisputed, secured or unsecured.

 

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“Stockbridge Fund Entities” shall mean, individually and collectively,
Stockbridge Real Estate Fund II Co-Investors LV, LP; Stockbridge Real Estate
Fund II-A, LP; Stockbridge Real Estate Fund II-B, LP; Stockbridge Real Estate
Fund II-C, LP; Stockbridge Real Estate Fund II-D, LP; Stockbridge Real Estate
Fund II-E, LP; Stockbridge Real Estate Fund II-T, LP; Stockbridge Real Estate
Fund III-A, LP and Stockbridge Real Estate Fund III-C, LP.

“Subcontractor” shall mean any subcontractor or supplier engaged by the General
Contractor and any contractor or supplier engaged by Borrower, under one or more
contracts or work orders with respect to the construction of the Project.

“Subordinated Indebtedness” shall mean Indebtedness of Borrower that is by its
terms subordinated in right of payment to the Obligations of Borrower.

“Subordination Agreement” shall mean that certain Hotel Management Fee
Subordination Agreement substantially in the form of Exhibit I among the Hotel
Manager, Borrower and Lender.

“Subsidiary” shall mean, with respect to any person (the “parent”) at any date,
(i) any person the accounts of which would be consolidated with those of the
parent in the parent’s consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, (ii) any other
corporation, limited liability company, association or other business entity of
which securities or other ownership interests representing more than 50% of the
voting power of all Equity Interests entitled (without regard to the occurrence
of any contingency) to vote in the election of the Board of Directors thereof
are, as of such date, owned, controlled or held by the parent and/or one or more
subsidiaries of the parent, (iii) any partnership (a) the sole general partner
or the managing general partner of which is the parent and/or one or more
subsidiaries of the parent or (b) the only general partners of which are the
parent and/or one or more subsidiaries of the parent and (iv) any other person
that is otherwise Controlled by the parent and/or one or more subsidiaries of
the parent. Unless the context requires otherwise, “Subsidiary” refers to a
Subsidiary of Borrower.

“Substantial Completion Date” shall have the meaning assigned to such term in
the Disbursement Agreement.

“Taking” shall mean a taking or voluntary conveyance during the term of this
Agreement of all or part of the Real Estate, or any interest therein or right
accruing thereto or use thereof, as the result of, or in settlement of, or in
contemplation of, any condemnation or other Event of Eminent Domain affecting
any Real Property or any portion thereof, whether or not the same shall have
actually been commenced.

“Tax Indemnitee” shall have the meaning assigned to such term in
Section 2.09(c).

“Tax Return” shall mean all original and amended returns, declarations, claims
for refund reports, estimates, information returns and statements required to be
filed in respect of any Taxes, including any schedules, forms or other required
attachments thereto.

“Taxes” shall mean all present or future taxes, levies, imposts, duties,
deductions, withholdings, assessments, fees or other charges, imposed by any
Governmental Authority, including any interest, additions to tax or penalties
applicable thereto.

“Title Company” shall mean Nevada Title Company, as agent of First American
Title Company, or another nationally recognized title insurance company
reasonably acceptable to Lender; provided that for the purposes hereof, a title
insurance company that is acceptable to the First Lien Collateral Agent shall be
deemed acceptable to Lender.

 

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“Total EB-5 Offering Amount Raised” shall mean the aggregate amount of EB-5
capital (i) raised (and in respect of which subscription agreements have been
executed and delivered) on or prior to May 1, 2013 by an affiliate of the
manager of Lender, excluding any amounts raised by Henry Global or its
affiliates (provided I-526 Petitions with respect to such subscription
agreements executed on or prior to May 1, 2013 have been filed with the U.S.
Citizenship and Immigration Services no later than May 31, 2013), the aggregate
amount raised under this clause (i) to be no greater than $115,000,000, and
(ii) raised by another party in an offering in which American Dream Fund serves
as the regional center such that the aggregate amount raised under clause
(i) and (ii) is $150,000,000 or less.

“Total Indebtedness Secured by All SLS Las Vegas Mortgages” shall mean, as at
any date of determination and as determined in accordance with GAAP, the
aggregate outstanding principal amount of all Indebtedness of Borrower
constituting obligations for borrowed money that is secured by a mortgage lien
on the Mortgaged Property.

“UCC” shall mean the Uniform Commercial Code as in effect from time to time
(except as otherwise specified) in any applicable state or jurisdiction.

“United States” shall mean the United States of America.

“United States Tax Compliance Certificate” shall have the meaning assigned to
such term in Section 2.09(e)(ii).

“Unrestricted Subsidiary” shall have the meaning assigned to the term
“Unrestricted Subsidiary” in the First Lien Financing Agreement.

“Voting Stock” shall mean, with respect to any person, any class or classes of
Equity Interests pursuant to which the holders thereof have the general voting
power under ordinary circumstances to elect at least a majority of the Board of
Directors of such person.

“Weighted Average Life to Maturity” means, when applied to any Indebtedness at
any date, the number of years obtained by dividing: (i) the sum of the products
obtained by multiplying (a) the amount of each then remaining installment,
sinking fund, serial maturity or other required payments of principal, including
payment at final maturity, in respect thereof, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and
the making of such payment; by (ii) the then outstanding principal amount of
such Indebtedness.

“Wholly Owned Subsidiary” shall mean, as to any person, (a) any corporation 100%
of whose capital stock (other than directors’ qualifying shares) is at the time
owned by such person and/or one or more Wholly Owned Subsidiaries of such person
and (b) any partnership, association, joint venture, limited liability company
or other entity in which such person and/or one or more Wholly Owned
Subsidiaries of such person have a 100% equity interest at such time.

“Withdrawal Liability” shall mean liability to a Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.

 

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SECTION 1.02 Terms Generally. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words “include,” “includes” and “including” shall
be deemed to be followed by the phrase “without limitation.” The word “will”
shall be construed to have the same meaning and effect as the word “shall.”
Unless the context requires otherwise (a) any definition of or reference to any
Loan Document, agreement, instrument or other document herein shall be construed
as referring to such agreement, instrument or other document as from time to
time amended, restated, amended and restated, supplemented or otherwise modified
(subject to any restrictions on such amendments, restatements, amendments and
restatements, supplements or modifications set forth herein), (b) any reference
herein to any person shall be construed to include such person’s successors and
assigns, (c) the words “herein,” “hereof” and “hereunder,” and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement, (e) any reference to
any law or regulation herein shall refer to such law or regulation as amended,
modified or supplemented from time to time, (f) the words “asset” and “property”
shall be construed to have the same meaning and effect and to refer to any and
all tangible and intangible assets and properties, including cash, securities,
accounts and contract rights, (g) “on,” when used with respect to the Mortgaged
Property or any property adjacent to the Mortgaged Property, means “on, in,
under, above or about”, and (h) “permitted by the First Lien Financing
Agreement” or “as defined in the First Lien Financing Agreement” or words of
similar import mean, at any time after which the Existing First Lien Financing
Agreement is no longer in effect, then the substantively similar and
corresponding section of any other First Lien Financing Agreement, or if no such
First Lien Financing Agreement is then in effect, then the terms of any loan
agreement in connection with any Senior Qualified Additional Financing, provided
if no First Lien Financing Agreement or Senior Qualified Additional Financing
Agreement is then in effect or if such agreement(s) are in effect but do not
cover the subject matter in question, then the terms of the First Lien Financing
Agreement in effect as of the date of this Agreement as subsequently amended
from time to time.

SECTION 1.03 Accounting Terms; GAAP. Except as otherwise expressly provided
herein, all financial statements to be delivered pursuant to this Agreement
shall be prepared in accordance with GAAP as in effect from time to time and all
terms of an accounting or financial nature shall be construed and interpreted in
accordance with GAAP, as in effect on the date hereof unless otherwise agreed to
by Borrower and Lender. Notwithstanding any other provision contained in the
Loan Documents, all terms of an accounting or financial nature used in the Loan
Documents shall be construed, and all computations of amounts and ratios
referred to herein shall be made, without giving effect to any election under
Statement of Financial Accounting Standards 159 (or any other Financial
Accounting Standard having a similar result or effect) to value any Indebtedness
or other liabilities of Borrower or any of its Subsidiaries at “fair value,” as
defined therein. All other determinations with respect to whether leases
constitute Indebtedness or Capital Lease Obligations shall be made based on GAAP
as in effect on the date hereof.

ARTICLE II

THE CREDITS

SECTION 2.01 Commitments. Subject to the terms and conditions and relying upon
the representations and warranties herein set forth, Lender agrees to make the
Borrowings to Borrower in the aggregate principal amount not to exceed the
Maximum Loan Amount. Amounts paid or prepaid in respect of any Borrowing may not
be reborrowed.

 

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SECTION 2.02 Loan.

(a) Subject to the terms and conditions hereof, Lender hereby agrees to make the
Loan comprised of Borrowings in an aggregate amount up to the Maximum Loan
Amount to Borrower, which Borrowings shall be disbursed to Borrower or at the
direction of Borrower, to another person (including the Disbursement Agent), by
check or wire transfer, in immediately available funds in one or more Borrowings
of $500,000 or increments thereof, from time to time after Lender has received
funds from escrow pursuant to the Escrow Agreement and upon receipt of a
Borrowing Request from Borrower; provided, however, that in no event shall the
first Borrowing hereunder be in an amount less than $11,500,000. The aggregate
principal amount of the Loan (based on initial principal amount) shall not
exceed the Maximum Loan Amount.

(b) Monthly on the 15th of each month, Lender shall notify Borrower of the
amount of such funds received from escrow that is available at such time to be
loaned to Borrower.

(c) To request a Borrowing, Borrower shall deliver, by hand delivery or
facsimile, a duly completed and executed Borrowing Request to Lender not later
than 12:00 p.m., Los Angeles, CA time, three Business Days before the date of
the proposed Borrowing (provided that the first Borrowing Request may be
delivered on the Closing Date and shall include a request for amounts sufficient
to pay off the LoanCore Note). Each Borrowing Request shall be irrevocable and
shall specify the following information:

 

  (i) the aggregate amount of such Borrowing;

 

  (ii) the date of such Borrowing, which shall be a Business Day; and

 

  (iii) the location and number of Borrower’s account to which funds are to be
disbursed, which, so long as the Disbursement Agreement is in effect, shall be
the Qualified Additional Financing Proceeds Account (SLS Lender), as defined in
the Disbursement Agreement.

(d) Lender acknowledges that the proceeds of Borrowings will be used by the
Borrower for the purposes described in Section 3.12. Lender also acknowledges
that the provider of Senior Qualified Additional Financing may require (i) the
Borrower to collaterally assign to it all of the Borrower’s right, title and
interest in and to the Loan, this Agreement and the right to request Borrowings
and (ii) a lien on any amounts funded from escrow to the Lender pursuant to the
Escrow Agreement (other than holdback amounts or amounts representing fees) and
on the account to which such amounts are funded, and hereby consents to such
security interests. The Lender agrees that it will deliver to the Senior
Qualified Additional Financing lender or agent from time to time upon the
request of such party a certificate setting forth the amount of Commitment then
available for Borrowings, subject to adjustment as appropriate. The Lender
hereby agrees that for so long as such Senior Qualified Additional Financing
facility is in effect, Lender shall, under the terms and subject to the
limitations and conditions set forth in this Agreement, honor any Borrowing
Request with respect to the Borrower delivered to us in the name of such lender
or agent, without setoff, counterclaim or defense by funding the applicable
portion of the Commitment into the above-referenced account, provided such
Borrowing Request is delivered for purposes of paying due and payable
obligations of the Borrower to the lender or lenders under such Senior Qualified
Additional Financing facility. In furtherance of the foregoing, the Lender
agrees that it will, from time to time, execute and deliver, or cause to be
executed and delivered, such reasonably requested additional instruments,
certificates or documents, and take all such reasonable actions, as such Senior
Qualified Additional Financing lender or agent may deem necessary for the
validity, perfection and priority of the lien of such party on the rights and
interests described in this clause (d).

SECTION 2.03 Promissory Note. The Loan shall be evidenced by a Note, duly
executed by Borrower, dated as of the Closing Date, and made payable to Lender
or its registered assigns, and notated by the Lender or such registered assigns
as of the date of each Borrowing to reflect the amount of such Borrowing
hereunder. Principal and interest on the Note shall be calculated and due and
payable in the amount, manner and at the times set forth in this Agreement.

 

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SECTION 2.04 Termination of Commitments. The Commitments shall terminate on the
earliest of (a) the date that the aggregate principal amount of the Loan equals
the Maximum Loan Amount, (b) the date that the Total EB-5 Offering Amount Raised
is raised and loaned to Borrower, and (c) the Maturity Date, as may be extended
by one or two Extension Options.

SECTION 2.05 Interest on Loan.

(a) Interest. Subject to the provisions of Section 2.05(b) and commencing on and
continuing after the Effective Date, each Borrowing shall bear interest at a
rate per annum equal to 0.5%, on a non-compounded, accrual basis; provided,
however, (1) if Borrower elects an Extension Option on or before the Original
Maturity Date, such Borrowing shall bear interest at a per annum rate equal to
1.5%, on a non-compounded, accrual basis, from and after the Original Maturity
Date until the first anniversary of the Original Maturity Date, and (2) if
Borrower elects an Extension Option after the Original Maturity Date but before
the first anniversary of the Original Maturity Date, any Borrowing shall bear
interest at a per annum rate equal to 2.5%, on a non-compounded, accrual basis,
from and after the first anniversary of the Original Maturity Date until such
Borrowing is repaid in full.

(b) Default Rate. Notwithstanding the foregoing, if any of the Events of Default
set forth in clause (a), (b), (g) or (h) of Section 8.01 has occurred and is
continuing, then the past due amounts hereunder (and on all amounts hereunder
upon the occurrence and during the continuance of an Event of Default under
Section 8.01(g) or (h)) shall, to the extent permitted by applicable law, bear
interest, after as well as before judgment, at a rate per annum equal to 2.00%
plus the rate otherwise applicable (the “Default Rate”).

(c) Interest Payment Dates. Accrued interest on any Borrowing shall be payable
in arrears on each Interest Payment Date for the Loan; provided that
(i) interest accrued pursuant to Section 2.05(b) shall be payable on demand, and
(ii) in the event of any repayment or prepayment of such Borrowing, accrued
interest on the principal amount repaid or prepaid shall be payable on the date
of such repayment or prepayment; provided, further, that the first Interest
Payment Date shall be no earlier than the last day of the first full quarter
following the one year anniversary of the earlier of the Opening Date and the
Outside Opening Deadline (as defined in the Disbursement Agreement) of the SLS
Las Vegas.

(d) Interest Calculation. All interest hereunder shall be computed on the basis
of a year of 360 days and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).

 

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SECTION 2.06 Optional and Mandatory Prepayments of the Loan. Optional
Prepayments. (a) Borrower shall have the right at any time and from time to
time, at Borrower’s election, to prepay the Loan, in whole or in part, subject
to the requirements of this Section 2.06, (i) on the Maturity Date, as may be
extended, (ii) prior to the Maturity Date, as may be extended, to the extent
permitted by the regulations promulgated under the EB-5 Immigrant Investor
Program or other clear guidance from the United States Citizenship and
Immigration Services reasonably acceptable to Lender that prepayment of the Loan
to Lender prior to the approval of an individual investor’s I-829 petition is
acceptable and does not violate the “at risk” requirement; provided that each
partial prepayment shall be in an amount that is an integral multiple of
$500,000 and not less than $500,000 or, if less, the outstanding principal
amount of the Loan.

(b) Excess Cash Flow. With respect to the fiscal year in which the Original
Maturity Date occurs and each Excess Cash Flow Period thereafter, no later than
five Business Days after the date on which the financial statements with respect
to each fiscal year in which such period occurs are required to be delivered
pursuant to Section 5.01(a) (without giving effect to any grace period
applicable thereto), but subject to the Intercreditor Agreements and subject to
Section 2.06(g), Borrower shall make or cause to be made prepayments in
accordance with Section 2.06(e), in an aggregate amount equal to (A) (1) 25% of
Excess Cash Flow for the Excess Cash Flow Period then last ended in the event
the Loan has not been repaid in full by the Original Maturity Date (prorated to
include the period from the Original Maturity Date to and including the last day
of the applicable Excess Cash Flow Period), or (2) 50% of Excess Cash Flow for
the Excess Cash Flow Period then last ended in the event the Loan has not been
repaid in full by the first anniversary of the Original Maturity Date, minus
(B) any voluntary prepayments of the Loan pursuant to Section 2.06(a) (x) made
during such Excess Cash Flow Period (which, in any event shall not include any
designated prepayment pursuant to clause (y) below) and (y) at Borrower’s
option, at any time on or prior to the date of payment with respect to such
Excess Cash Flow Period during the Fiscal Year immediately following the Fiscal
Year that such Excess Cash Flow calculation relates to, in each case to the
extent such prepayments are not funded with the proceeds of Indebtedness or
equity.

(c) Investing Member I-526 Petition Denial. Immediately, upon demand by Lender,
Borrower shall make or cause to be made prepayments in accordance with this
Section 2.06(c), in an aggregate amount equal to the amount necessary to provide
a refund of an Investing Member’s capital contribution to Lender upon a final
denial (without appeal or after denial of any appeal) of such Investing Member’s
I-526 petition, so long as Lender has not, within 90 days of such final denial
(without appeal or after denial of any appeal), (i) made such required refund or
(ii) replaced such denied Investing Member with a substitute Investing Member.
After such time as (x) Borrower has made or caused to be made a prepayment in
accordance with Section 2.06(e), and (y) the corresponding refund by wire
transfer is made by Lender to the relevant Investing Member, Lender shall
deliver to Borrower the confirmation from the applicable wiring institution of
such wire transfer having been made.

(d) Casualty Events. So long as neither the First Lien Financing nor any Senior
Qualified Additional Financing is then outstanding, at the option of Lender, not
later than (i) in the case of Net Cash Proceeds from a Casualty Event subject to
Section 2.11(a), 18 months after the receipt of such Net Cash Proceeds and
(ii) in the case of Net Cash Proceeds from a Casualty Event subject to
Section 2.11(c) or (d), thirty (30) Business Days following the completion date
set forth in the associated Repair Plan, subject to Section 2.06(g), Borrower
shall apply any such Net Cash Proceeds that have not been used to repair or
restore the Project as permitted under the Loan Documents toward the prepayment
of the Obligations in accordance with Section 2.06(e).

 

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(e) Application of Prepayments. Unless otherwise mutually agreed by the Borrower
and the Lender, all prepayments shall reduce the then outstanding principal
amount of the Loan in order of Borrowings made. Any prepayment pursuant to
Section 2.06(c) shall be remitted to the relevant Investing Member or Investing
Members, as applicable, whose I-526 petition or I-526 petitions have been
denied.

(f) Notice of Prepayment. Borrower shall notify Lender by written notice of any
prepayment hereunder not later than 11:00 a.m., Los Angeles, CA time, one
Business Day before the date of prepayment. Each such notice shall be
irrevocable; provided that a notice of prepayment delivered by Borrower may
state that such notice is conditioned upon the effectiveness of another credit
facility or the closing of a securities offering or acquisition or sale, in
which case such notice may be revoked by Borrower (by notice to Lender on or
prior to the specified prepayment date) if such condition is not satisfied. Each
such notice shall specify the prepayment date, the principal amount of the Loan
or portion thereof to be prepaid and, in the case of a mandatory prepayment, a
reasonably detailed calculation of the amount of such prepayment. Prepayments
shall be accompanied by accrued interest.

(g) Notwithstanding anything in this Agreement to the contrary, with respect to
any prepayment pursuant to Section 2.06(b) or Section 2.06(d), no portion of any
Investing Member’s capital contribution may be repaid to such Investing Member
(if any portion is repaid at all) and any prepayments to such Investing Member
pursuant to Section 2.06(b) or Section 2.06(d) hereof shall be held in escrow by
the Lender with a third-party escrowee selected by the Lender but reasonably
acceptable to the Borrower (and at Borrower’s expense) until after any one (at
Lender’s option) of the following events has occurred (i) the Original Maturity
Date, (ii) such Investing Member’s I-829 Petition has been adjudicated or
(iii) the parties shall reasonably agree that such Investing Member prepayment
is permitted by the regulations promulgated under the EB-5 Immigrant Investor
Program or other clear guidance from United States Citizenship and Immigration
Services.

(h) Borrower agrees to cause any Qualified Additional Financing lender funding
loans with proceeds from an EB-5 Immigrant Investor Program to include a
provision in the loan documents restricting prepayment unless one of the
following events has occurred: (i) the stated maturity date for such loan,
(ii) the I-829 Petition of the investment member whose contributions are
attributable to the loan being prepaid has been adjudicated or (iii) the parties
to such financing shall reasonably agree that the prepayment of the loan
attributable to such investing member is permitted by the regulations
promulgated under the EB-5 Immigrant Investor Program or other clear guidance
from United States Citizenship and Immigration Services.

SECTION 2.07 [Intentionally Omitted].

SECTION 2.08 Payments. Borrower shall make each payment required to be made by
it hereunder or under any other Loan Document (whether of principal, interest,
fees or of amounts payable under Sections 2.09 or 10.03, or otherwise) on or
before the time expressly required hereunder or under such other Loan Document
for such payment (or, if no such time is expressly required, prior to 2:00 p.m.,
Los Angeles, CA time), on the date when due, in immediately available funds,
without setoff, deduction or counterclaim. Any amounts received after such time
on any date may, in the discretion of Lender, be deemed to have been received on
the next succeeding Business Day for purposes of calculating interest thereon.
All such payments shall be made to Lender by check to Lender’s office at c/o
American Dream Fund, LLC, 880 Apollo Street, Suite 218, El Segundo, CA 90245, or
by wire transfer in immediately available funds. If any payment under any Loan
Document shall be due on a day that is not a Business Day, unless specified
otherwise, the date for payment shall be extended to the next succeeding
Business Day, and, in the case of any payment accruing interest, interest
thereon shall be payable for the period of such extension. All payments under
each Loan Document shall be made in dollars, except as expressly specified
otherwise. To the extent not previously paid, the Loan, including the unpaid
principal balance and all accrued and unpaid interest, shall be due and payable
on the Maturity Date, as may be extended.

 

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SECTION 2.09 Taxes.

(a) Payments Free of Taxes. Unless required by applicable Law (as determined in
good faith by the applicable withholding agent), any and all payments by or on
account of any obligation of Borrower hereunder or under any other Loan Document
to any Recipient shall be made free and clear of and without reduction or
withholding for any Taxes; provided that if Borrower or other applicable
withholding agent shall be required by Law to deduct any Taxes from or in
respect of any sum paid or payable by Borrower to any Recipient under any of the
Loan Documents, then (i) if the Tax in question is an Indemnified Tax or Other
Tax, the sum payable by Borrower shall be increased as necessary so that after
all such required deductions or withholdings (including such deductions or
withholdings applicable to additional sums payable under this Section 2.09) have
been made, such Recipient receives an amount equal to the sum it would have
received had no such deductions or withholdings been made, (ii) Borrower or
other applicable withholding agent shall make such deductions or withholdings
and (iii) Borrower or other applicable withholding agent shall timely pay the
full amount deducted to the relevant Governmental Authority in accordance with
applicable Law.

(b) Payment of Other Taxes by Borrower. Without limiting the provisions of
paragraph (a) above, Borrower shall timely pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable Law.

(c) Indemnification by Borrower. Borrower shall, without duplication of
additional amounts paid pursuant to Section 2.09(a), indemnify each Recipient
(each, a “Tax Indemnitee”), within 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 2.09) imposed on such Tax Indemnitee by any Governmental
Authority in connection with this Agreement or any other Loan Document and
reasonable expenses arising therefrom or with respect thereto, regardless of
whether such Indemnified Taxes or Other Taxes were correctly or legally imposed,
asserted or otherwise determined to be payable by the relevant Governmental
Authority. A certificate, prepared in good faith, as to the amount of such
payment or liability and setting forth in reasonable detail the calculation of
such payment or liability delivered to Borrower by the Tax Indemnitee, shall be
conclusive absent manifest error.

(d) Evidence of Payments. As soon as practicable after any payment of any Taxes
by Borrower that Borrower is required to pay pursuant to this Section 2.09,
Borrower shall deliver to the applicable Recipient the original or a certified
copy of a receipt issued by such Governmental Authority evidencing such payment,
a copy of the return reporting such payment or other evidence of such payment
reasonably satisfactory to such Recipient.

(e) Status of Lenders. Each Recipient shall, at the time or times prescribed by
applicable Law and at such time or times reasonably requested by Borrower,
provide Borrower with any documentation prescribed by Law, or reasonably
requested by Borrower, certifying as to any entitlement of such Recipient to an
exemption from, or reduction in, any applicable withholding Tax with respect to
any payments to be made to such Recipient under the Loan Documents. Each such
Recipient shall, whenever a lapse in time or change in circumstances renders any
such documentation (including any specific documentation referenced below in
this Section 2.09(e)) expired, obsolete or inaccurate in any material respect,
or upon the reasonable request of the Borrower, deliver promptly to Borrower
updated or other appropriate documentation (including any new documentation
reasonably requested by Borrower) or promptly notify Borrower in writing if such
Recipient is not legally eligible to deliver such documentation under applicable
Law.

 

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Without limiting the generality of the foregoing:

 

  (i) Each Recipient that is a “United States person” (as defined in
Section 7701(a)(30) of the Code) shall deliver to Borrower on or before the date
on which it becomes a party to this Agreement two properly completed and duly
signed original copies of Internal Revenue Service Form W-9 (or any successor
form) certifying that such Recipient is exempt from U.S. federal backup
withholding.

 

  (ii) Each Foreign Lender shall deliver to Borrower on or before the date on
which it becomes a party to this Agreement whichever of the following is
applicable:

(I) two duly completed copies of Internal Revenue Service Form W-8BEN (or any
successor forms) claiming eligibility for benefits of an income tax treaty to
which the United States is a party,

(II) two duly completed copies of Internal Revenue Service Form W-8ECI (or any
successor forms),

(III) in the case of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under Section 871(h) or 881(c) of the Code, (x) a
certificate, in substantially the form of Exhibit J (any such certificate a
“United States Tax Compliance Certificate”), or any other form approved by
Borrower, to the effect that such Foreign Lender is not (A) a “bank” within the
meaning of Section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of
Borrower within the meaning of Section 881(c)(3)(B) of the Code, or (C) a
“controlled foreign corporation” described in Section 881(c)(3)(C) of the Code,
and that no payments in connection with the Loan Documents are effectively
connected with such Foreign Lender’s conduct of a U.S. trade or business and
(y) two duly completed copies of Internal Revenue Service Form W-8BEN (or any
successor forms),

(IV) to the extent a Foreign Lender is not the beneficial owner (for example,
where the Foreign Lender is a partnership, or is a Foreign Lender that has
transferred its beneficial ownership to a participant), Internal Revenue Service
Form W-8IMY (or any successor forms) of the Foreign Lender, accompanied by an
Internal Revenue Service Form W-8ECI, Internal Revenue Service W-8BEN, United
States Tax Compliance Certificate, Internal Revenue Service Form W-9, Internal
Revenue Service Form W-8IMY (or other successor forms) or any other required
information from each beneficial owner, as applicable (provided that, if the
Foreign Lender is a partnership (and not a participating Lender) and one or more
beneficial owners are claiming the portfolio interest exemption, the United
States Tax Compliance Certificate may be provided by such Foreign Lender on
behalf of such beneficial owner(s)), or

(V) two copies of any other form prescribed by applicable requirements of U.S.
federal income tax Law as a basis for claiming exemption from or a reduction in
U.S. federal withholding tax on any payments to such Foreign

 

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Lender under the Loan Documents, duly completed together with such supplementary
documentation as may be prescribed by applicable Requirements of Law to permit
Borrower to determine the withholding or deduction required to be made.

 

  (iii) If a payment made to any Recipient under any Loan Document would be
subject to United States federal withholding Tax imposed by FATCA if such
Recipient were to fail to comply with the applicable reporting requirements of
FATCA (including those contained in Section 1471(b) and 1472(b) of the Code, as
applicable) and such Recipient is entitled to an exemption from such
withholding, such Recipient shall deliver to Borrower, at the time or times
reasonably requested by Borrower, such documentation prescribed by applicable
Law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such
additional documentation reasonably requested by Borrower as may be necessary
for Borrower to comply with its obligations under FATCA, to determine whether
such Recipient has complied with its obligations under FATCA and to determine
the amount, if any, to deduct and withhold from such payment.

Notwithstanding any other provision of this clause (e), a Recipient shall not be
required to deliver any form that such Recipient is not legally eligible to
deliver.

(f) Treatment of Certain Refunds. If and to the extent that a Tax Indemnitee
determines, in good faith and in its sole discretion, that it has received a
refund of any Indemnified Taxes or Other Taxes as to which it has been
indemnified by Borrower or with respect to which Borrower has paid additional
amounts pursuant to this Section 2.09, then such Tax Indemnitee shall pay to
Borrower an amount equal to such refund (but only to the extent of indemnity
payments made, or additional amounts paid, by Borrower under this Section 2.09
with respect to the Indemnified Taxes or Other Taxes giving rise to such
refund), net of all reasonable out-of-pocket expenses (including Taxes) of such
Tax Indemnitee and without interest (other than any interest paid by the
relevant Governmental Authority with respect to such refund net of any Taxes
payable by any Tax Indemnitee); provided that Borrower, upon the request of the
Tax Indemnitee, agrees to repay the amount paid over to Borrower (plus any
penalties, interest or other charges imposed by the relevant Governmental
Authority) to such Tax Indemnitee in the event such Tax Indemnitee is required
to repay such refund to such Governmental Authority. This paragraph shall not be
construed to require any Tax Indemnitee to make available its Tax Returns (or
any other information relating to its Taxes that it deems confidential) to
Borrower or any other person.

(g) Defined term. For purposes of this Section 2.09, the term “applicable Law”
includes FATCA.

SECTION 2.10 Mitigation Obligations; Replacement of Lenders.

(a) Designation of a Different Lending Office. If any Recipient requires
Borrower to pay any additional amount to such Recipient or any Governmental
Authority for the account of such Recipient pursuant to Section 2.09, then such
Recipient shall use reasonable efforts to designate a different lending office
for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the judgment of such Recipient, such designation or assignment (i) would
eliminate or reduce amounts payable pursuant to Section 2.09, as the case may
be, in the future and (ii) would not subject such Recipient to any unreimbursed
cost or expense and would not otherwise be disadvantageous to such Recipient.
Borrower hereby agrees to pay all reasonable costs and expenses incurred by any
Recipient in connection with any such designation or assignment. A certificate
setting forth such costs and expenses submitted by such Recipient to Borrower
shall be conclusive absent manifest error.

 

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(b) Replacement of Lenders. If Borrower is required to pay any additional amount
to any Recipient or any Governmental Authority for the account of any Recipient
pursuant to Section 2.09 or if any Recipient is a Disqualified Lender, then
Borrower may, at its sole expense and effort, upon notice to such Recipient,
require such Recipient to assign and delegate, without recourse (in accordance
with and subject to the restrictions contained in, and consents required by,
Section 10.04), all of its interests, rights and obligations under this
Agreement and the other Loan Documents to an Eligible Assignee that shall assume
such obligations; provided that:

(i) such Recipient shall have received payment of an amount equal to the
outstanding principal of its Loans, accrued interest thereon, accrued fees and
all other amounts payable to it hereunder and under the other Loan Documents;

(ii) in the case of any such assignment resulting from payments required to be
made pursuant to Section 2.09, such assignment will result in a reduction in
such compensation or payments thereafter; and

(iii) such assignment does not conflict with applicable Requirements of Law,
including any Gaming Laws.

A Recipient shall not be required to make any such assignment or delegation if,
prior thereto, as a result of a waiver by such Recipient or otherwise, the
circumstances entitling Borrower to require such assignment and delegation cease
to apply.

SECTION 2.11 Net Cash Proceeds from Casualty Events.

(a) This Section 2.11, which shall apply only at such time as neither the First
Lien Financing nor any Senior Qualified Additional Financing is then
outstanding, shall apply to all Net Cash Proceeds from Casualty Events received
by Borrower in excess of $5,000,000 arising from and after the Opening Date from
any particular Casualty Event related to the Project. Any such Net Cash Proceeds
(other than those described in subsection (b) below) shall be applied to the
prepayment of the Obligations in accordance with Sections 2.06 and 2.08, unless
each of the following conditions are satisfied or waived by Lender as required
pursuant to Section 2.11(c) or 2.11(d), as the case may be, within 90 Business
Days (or, in the case of such Net Cash Proceeds described in Section 2.11(d),
120 Business Days) after Borrower’s receipt of such Net Cash Proceeds, in which
event such amounts shall be applied to the repair or restoration of the Project
in accordance with the terms of such Sections:

(i) the Borrower certifies (and the Construction Consultant, in the exercise of
its reasonable business judgment, acknowledges that such certification is
reasonable), that the damage or destruction or Event of Eminent Domain giving
rise to such Net Cash Proceeds does not constitute the destruction of all or
substantially all of the Project;

(ii) no Event of Default has occurred and is continuing (other than a Default or
an Event of Default arising under Section 8.01(c), 8.01(d) or 8.01(e), in each
case resulting solely from such Casualty Event or Event of Eminent Domain) at
the time of such damage or destruction or Event of Eminent Domain and after
giving effect to any proposed repair and restoration, no Event of Default would
reasonably be expected to result from such damage or destruction or proposed
repair and restoration or Event of Eminent Domain;

 

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(iii) the Borrower certifies (and the Construction Consultant, in the exercise
of its reasonable business judgment, acknowledges that such certification is
reasonable), that repair or restoration of the Project to a condition
substantially similar to the condition of the Project immediately prior to the
event or events to which the relevant Insurance Proceeds or Eminent Domain
Proceeds, as the case may be, relate, is technically and economically feasible
within an 18-month period after receipt of any such Insurance Proceeds or
Eminent Domain Proceeds, and that a sufficient amount of funds is or will be
available to the Borrower to make such repairs and restorations;

(iv) the Borrower delivers to Lender and the Construction Consultant a plan
describing in reasonable detail the nature of the repairs or restoration to be
effected and the anticipated costs and schedule associated therewith (the
“Repair Plan”), and the Construction Consultant, in the exercise of its
reasonable judgment, acknowledges that the Repair Plan is achievable;

(v) the Borrower certifies that a sufficient amount of funds is or will be
available to the Borrower to make all payments on Indebtedness which will become
due during and following the repair period and prior to the completion of such
repairs or restoration;

(vi) the Borrower reasonably expects it to obtain any Permit necessary to
proceed with the repair and restoration of the Project; and

(vii) the proposed repair or restoration is not prohibited by any of the other
Financing Agreements.

(b) (i) Borrower shall have the right to use up to an amount of $25,000,000 of
Insurance Proceeds and/or Eminent Domain Proceeds received by Borrower for each
single loss or series of related losses (excluding amounts received on account
thereof and applied (or to be applied) as payments to the Loan or other
Indebtedness), to repair, restore and/or replace the Property with respect to
which such Insurance Proceeds and/or Eminent Domain Proceeds relate and Sections
2.06 and 2.11 (other than this Section 2.11(b)(i)) shall not apply to such
proceeds.

(ii) If, subject to Section 2.11(b)(i), there shall occur any damage,
destruction or Event of Eminent Domain of or with respect to the Project with
respect to which Insurance Proceeds and/or Eminent Domain Proceeds received by
Borrower for any single loss or series of related losses not in excess of
$25,000,000 are payable (excluding amounts received on account thereof and
applied (or to be applied) as payments to the Loans or other Indebtedness), such
Insurance Proceeds and/or Eminent Domain Proceeds shall be held by Lender in the
Funding Account and released by Lender to Borrower in amounts from time to time
necessary to make payments for work undertaken towards repair, restoration or
reconstruction necessitated by such event(s), upon presentation of documentation
reasonably satisfactory to Lender supporting such requested payments.

(c) Provided that the conditions set forth in Section 2.11(a) have been waived
by Lender, or have been satisfied, if there shall occur any Casualty Event or
Event of Eminent Domain of or with respect to the Project with respect to which
Insurance Proceeds and/or Eminent Domain Proceeds received by Borrower for any
single loss or series of related losses in excess of $25,000,000 (excluding
amounts received on account thereof and applied (or to be applied) as payments
to the Loans or other Indebtedness) but not in excess of $50,000,000 (excluding
amounts received on account thereof and applied (or to be applied) as payments
to the Loans or other Indebtedness), are payable, such Insurance Proceeds and/or
Eminent Domain Proceeds received by Borrower shall be held by Lender in the
Funding Account and released by Lender to Borrower in accordance with subsection
(e) below.

 

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(d) Provided that the conditions set forth in Section 2.11(a) above have been
waived by Lender, or have been satisfied, if there shall occur any damage,
destruction or Event of Eminent Domain of or with respect to the Project with
respect to which Insurance Proceeds and/or Eminent Domain Proceeds received by
Borrower for any single loss or series of related losses in excess of
$50,000,000 are payable (excluding amounts received on account thereof and
applied (or to be applied) as payments to the Loans or other Indebtedness), such
Insurance Proceeds and/or Eminent Domain Proceeds shall be held by Lender in the
Funding Account and released by Lender to Borrower in accordance with subsection
(e) below.

(e) Except as provided in Section 2.11(b), amounts which are to be applied to
repair or restoration of the Project pursuant to this Section 2.11 or to fund
actual or contemplated debt service costs with respect to Indebtedness under the
Financing Agreements shall be disbursed by Lender from the Funding Account in
accordance with the procedures set forth in this Section 2.11(e). Lender shall
release Insurance Proceeds and/or Eminent Domain Proceeds for application toward
such repairs or restoration or debt service, conditioned upon the Borrower’s
delivery to Lender of a certificate from the Borrower (I) describing in
reasonable detail (x) the nature of the repairs or restoration to be effected
with such release and certifying that such repairs or restoration are materially
consistent with, and shall be undertaken in accordance with, the Repair Plan or
(y) the debt service costs to be funded with such release (including by deposit
into reserve accounts established under the Disbursement Agreement), (II)
stating the cost of such repairs or restoration, which shall be no less than the
amount of Insurance Proceeds and/or Eminent Domain Proceeds requested in such
release, and that such requested release amount will be applied to the cost
thereof, (III) stating that the aggregate amount requested in respect of such
repairs or restoration and the debt service costs to be funded (including by
deposit to reserve accounts) (when added to any other Insurance Proceeds and/or
Eminent Domain Proceeds received by Borrower) or funds otherwise made available
to Borrower) does not exceed the cost of such repairs or restoration (including
debt service costs) and that a sufficient amount of funds is or will be
available to Borrower) to complete such repair or restoration and (IV) stating
that neither a Default nor an Event of Default has occurred and is continuing
(other than a Default or an Event of Default arising under Section 8.01(c)
8.01(d) or 8.01(e), in each case resulting solely from such damage or
destruction or Event of Eminent Domain (provided that in any event no Default or
Event of Default under Section 8.01(a) shall have occurred and be continuing).

(f) The Borrower agrees to use commercially reasonably efforts to obtain such
additional title insurance, title insurance endorsements, mechanic’s lien
waivers, certificates, opinions or other matters as may reasonably be requested
by Lender as necessary or appropriate in connection with such repairs or
restoration of the Project or to preserve or protect Lender’s interests
hereunder and in the applicable Collateral.

(g) For the avoidance of doubt, so long as either the First Lien Financing or
any Senior Qualified Additional Financing is then outstanding, Borrower will be
obligated solely to comply with the provisions of such agreement pertaining to
the application of Net Cash Proceeds from Casualty Events; provided, however,
that once the First Lien Financing and any Senior Qualified Additional Financing
are no longer outstanding, Borrower must comply with the provisions of this
Agreement pertaining to the application of Net Cash Proceeds from Casualty
Events.

 

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ARTICLE III

REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants to Lender on the Closing Date that:

SECTION 3.01 Organization; Powers. Borrower (a) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (b) has the limited liability company power and authority, and the
legal right, to own and operate its property, to lease the property it operates
as lessee and to conduct the business in which it is currently engaged, (c) is
duly qualified as a foreign limited liability company and in good standing under
the laws of each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such qualification, except to
the extent the failure to be so qualified or in good standing would not
reasonably be expected to result in a Material Adverse Effect and (d) is in
compliance with all Requirements of Law, except to the extent that the failure
to comply therewith would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.

SECTION 3.02 Authorization; Enforceability.

(a) Borrower has the limited liability company power and authority, and the
legal right, to execute, deliver and perform the Loan Documents to which it is a
party and to carry out the transactions contemplated thereby and to borrow and
issue Indebtedness hereunder and under the Financing Agreements. Borrower has
taken all necessary limited liability company action to authorize the execution,
delivery and performance of the Loan Documents and the other Financing
Agreements to which it is a party and to authorize the borrowings and issuances
of Indebtedness on the terms and conditions of this Agreement and the other
Financing Agreements.

(b) Each Loan Document and each other Financing Agreement has been duly executed
and delivered on behalf of Borrower. This Agreement constitutes, and each other
Loan Document and Financing Agreement upon execution by all parties thereto will
constitute, a legal, valid and binding obligation of Borrower, enforceable
against Borrower in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors’ rights generally or by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law).

SECTION 3.03 No Consents; No Conflicts; No Defaults.

(a) No material consent or material authorization of, material filing with,
material notice to or other act by or in respect of, any Governmental Authority
or any person is required to be obtained, made or taken by Borrower in
connection with the borrowings hereunder or with the execution, delivery,
performance, validity or enforceability of this Agreement, any of the other Loan
Documents or any of the other Financing Agreements, except (i) consents,
authorizations, filings, notices and other acts, including Gaming Approvals,
Casino Licenses and Liquor Licenses, described in Schedule 3.03, which consents,
authorizations, filings, notices and other acts have, unless otherwise indicated
on Schedule 3.03, been obtained, made or taken (or waived) and are in full force
and effect, (ii) the filings and actions referred to in Section 3.19 and
(iii) ministerial filings and filings with respect to notices given or issued to
Governmental Authorities, including notices as to the status of construction of
the Project.

(b) The execution, delivery and performance of this Agreement, the other Loan
Documents and the other Financing Agreements, the borrowings hereunder and the
use of the proceeds thereof will not violate (i) any Requirement of Law,
including any Gaming Law, (ii) any Contractual Obligation of Borrower or
(iii) the Organizational Documents of Borrower, except in the cases of clauses
(i) and (ii), to the extent that any such violations, individually or in the
aggregate, would not reasonably be expected to result in a Material Adverse
Effect, and will not result in, or require, the creation or imposition of any
Lien on any of Borrower’s properties or revenues pursuant to any material
Requirement of Law or any such Contractual Obligation (other than the Liens
created, or permitted to be incurred, by the First Lien Financing Agreement,
this Agreement and the SLS Las Vegas Mortgage).

 

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(c) Borrower is not in default in any material respect under or with respect to
any Material Agreement.

SECTION 3.04 Financial Statements; Projections.

(a) Historical Financial Statements. The audited consolidated balance sheets of
Holdings and its consolidated Subsidiaries (including Borrower) as at
December 31, 2012, and the related consolidated statements of income and of cash
flows for the fiscal year ended on such date, reported on by
PricewaterhouseCoopers LLP, present fairly in all material respects the
consolidated financial condition of Holdings and its consolidated Subsidiaries
(including the Borrower) as at such date, and the consolidated results of
Holdings and its consolidated Subsidiaries’ (including the Borrower’s)
operations and consolidated cash flows for such fiscal year. All such financial
statements, including the related schedules and notes thereto, have been
prepared in accordance with GAAP applied consistently throughout the periods
involved, except as noted therein.

(b) No Liabilities. Other than as disclosed on Schedule 3.04(b), as of the
Closing Date, the Borrower does not have any material Contingent Obligations,
material contingent liabilities or liabilities for Taxes, or any long term
leases or unusual forward or long term commitments, including, without
limitation, any interest rate or foreign currency swap or exchange transactions
or other obligations in respect of derivatives, that are not reflected in the
most recent financial statements referred to in this Section 3.04, except for
the Obligations.

(c) No Material Adverse Effect. Since December 31, 2012, there have been no
developments or events that, individually or in the aggregate, have resulted in
or would reasonably be expected to result in a Material Adverse Effect.

(d) Projections. The projections, forward-looking statements, estimates and pro
forma financial information contained in this Agreement, any other Loan
Document, or any other document, certificate or statement furnished to Lender
(including, without limitation, the Projections) are based upon good faith
estimates and assumptions believed by Borrower to be reasonable at the time
made, it being recognized by Lender that such projections, forward-looking
statements, estimates and pro forma financial information are not to be viewed
as facts and are subject to material contingencies and assumptions, many of
which are beyond the control of Borrower, and that actual results during the
period or periods covered by any such projections, forward-looking statements,
estimates and pro forma financial information may differ materially from the
projected results.

SECTION 3.05 Properties.

(a) Generally. Borrower is the sole owner of, and has legal title to, or a valid
right to use, all of Borrower’s property necessary to the operation of
Borrower’s business, and none of such property is subject to any claims,
liabilities, obligations, charges or restrictions of any kind, nature or
description (other than claims, liabilities, obligations, charges or
restrictions that individually or in the aggregate would not reasonably be
expected to have a Material Adverse Effect) or to any Lien, other than Permitted
Liens.

 

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(b) Real Property.

(i) As of the Closing Date, Schedule 3.05(b)(i) sets forth a true, complete and
correct list of all Real Property, including a brief description thereof.
Borrower has delivered to Lender true, complete and correct copies of all such
leases as in effect on the Closing Date.

(ii) Assuming completion of the work contemplated in the Plans and
Specifications, all Real Property and the current use thereof comply with all
applicable Requirements of Law (including applicable building and zoning
ordinances and codes) and with all Insurance Requirements, and Borrower is not a
non-conforming user of such Real Property, except, in each case, where
noncompliance or such non-conforming use would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.

(iii) No Taking has been commenced with respect to all or any portion of any
Real Property or for the relocation of roadways providing access to such Real
Property, except, in each case, as would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.

(iv) Except for those disclosed in the Title Policies or as set forth on
Schedule 3.05(b)(iv), as of the Closing Date (x) there are no current or pending
special or other assessments (other than for ad valorem taxes) for public
improvements or otherwise affecting any Real Property, nor (y) are there any
contemplated improvements to such Real Property that may reasonably be expected
to result in such special or other assessments, in any case that would
reasonably be expected to result in a Material Adverse Effect.

(v) Borrower has not suffered, permitted or initiated the joint assessment of
any Real Property with any other real property constituting a separate tax lot
that is not owned by Borrower or is not subject to a Mortgage. As of the Closing
Date, the Mortgaged Property has been properly subdivided or entitled to
exception therefrom, and for all purposes the Mortgaged Property may be
mortgaged, conveyed and otherwise dealt with as separate legal lots or parcels.

(vi) Other than exceptions to any of the following that could not, individually
or in the aggregate, reasonably be expected to result in a Material Adverse
Effect, (A) all approvals from Governmental Authorities having jurisdiction over
the Land and Improvements, including, but not limited to, building permits,
street openings or closings, zoning or use permits, variances or special
exceptions, zoning reclassifications, setback requirements however established,
and approvals of fire underwriters, have been obtained for the portion of the
Improvements that have been constructed, to the extent required under applicable
Law, and to the extent so obtained, have not been withdrawn, (B) the
construction of the Improvements shall be performed in conformity with all
applicable Laws, and the Plans and Specifications, (C) the Plans and
Specifications to the extent required by applicable law, have been approved by
all applicable Governmental Authorities and (D) all construction heretofore
performed on the Improvements has been performed within the perimeter of the
Land in accordance with the Plans and Specifications and all applicable
Governmental Authorities, and in accordance with any restrictive covenants
applicable thereto. Assuming completion of the work contemplated in the Plans
and Specifications, there are no existing material structural defects in the
Improvements and no material violation of any governmental requirements exists
with respect thereto. The anticipated use thereof complies with applicable
zoning ordinances and all regulations affecting the Project and all governmental
requirements for such use have been satisfied, to the extent required to be
satisfied at such time, except to the extent such noncompliance or failure to
satisfy government requirements would not reasonably be expected to result in a
Material Adverse Effect.

 

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(vii) As of the Closing Date, except as set forth on Schedule 3.05(b)(vii),
there are no outstanding options to purchase or rights of first refusal or
restrictions on transferability affecting any Real Property (other than those
restrictions on transfer set forth in, or otherwise permitted under, the Loan
Documents, including, without limitation, Permitted Liens).

(viii) (A) Other than exceptions to any of the following that would not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect, as of the Closing Date, (i) all utility services necessary for
the current state of construction of the Project are available, including,
without limitation, public sanitary sewer service and storm sewers, public
water, electricity, gas and telephone service, and (ii) all permits and
approvals have been obtained or are available so that the Improvements may be
hooked up to the public sanitary sewer service, which public sanitary sewer
service shall be available to the full extent required for the full operation of
the Project and shall permit the discharge of sewage for the types and amounts
anticipated to be produced from the Project. Other than exceptions to any of the
following that would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect, after the Closing Date, the
Borrower reasonably expects to have all utilities available, as and when
necessary, to complete the construction of the Improvements.

(B) Other than exceptions to any of the following that would not, individually
or in the aggregate, reasonably be expected to result in a Material Adverse
Effect, the Borrower reasonably expects that as of the Opening Date, all public
sanitary sewer service and storm sewers necessary for the full operation of the
Project will be available at the title lines of the Land (or, if they pass
through adjoining private land, in accordance with valid public or unencumbered
private easements which inure to the benefit of Borrower and any applicable
First Lien Loan Parties and run with the Land, copies of which have been
delivered to Lender).

(C) As of the Opening Date, the Project shall have all hot and chilled water for
purposes of heating and air conditioning, electricity, and gas services
necessary for the operation of the Project at the title lines of the Land (or,
if they pass through adjoining private or public land, in accordance with valid
public or unencumbered private easements or licenses which inure to the benefit
of Borrower and any applicable First Lien Loan Parties and run with the Land,
copies of which have been delivered to Lender).

(ix) All roads necessary for the utilization of the Real Property related to the
Project Site for its current and intended purposes are indicated on the Survey
and provide adequate public access to the Project Site for its current and
intended purposes.

(x) Except as would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect, no building or structure
constituting Real Property or any appurtenance thereto or equipment thereon, or
the use, operation or maintenance thereof, violates any restrictive covenant
affecting such Real Property or encroaches on any easement or on any property
owned by others.

(c) Landmark Status. The Real Property and the site conditions thereof are not
preserved as landmarks or historic sites in such way that would reasonably be
expected to have a Material Adverse Effect on the Real Property.

(d) Budget. The In-Balance Test Certificate delivered on the First Lien Escrow
Release Date is a true, correct and complete statement in all material respects
of the proposed sources and uses for the development and completion of the
Project as of the First Lien Escrow Release Date. As of the Closing Date the
Project Budget and all of the amounts set forth therein, present a true, full

 

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and complete statement in all material respects of all Project Costs reasonably
anticipated by the Borrower to be incurred in connection with the development
and completion of the Project in accordance with this Agreement. As of the
Closing Date no material capital expenditures with respect to the Real Property
are being incurred or are to the Borrower’s knowledge reasonably necessary,
except as specified in the Project Budget.

(e) Project Property. The Real Property set forth on Schedule 3.05(e)
constitutes all of the real property currently owned or leased by Borrower and
used in the development of the Project, and no other Real Property is necessary
to complete the development of the Project and begin operations.

SECTION 3.06 Intellectual Property.

(a) Ownership No Claims. Borrower (or one or more of the First Lien Loan
Parties) owns, or is licensed or otherwise has the right to use, all
Intellectual Property that is material to the conduct of its business as
currently conducted except as would not reasonably be expected to result in a
Material Adverse Effect. As of the Closing Date, no claim has been asserted or
is pending by any person challenging the use of any such Intellectual Property
or the validity or effectiveness of any such Intellectual Property within the
past three (3) years, nor as of the Closing Date does Borrower know of any valid
basis for any such claim, except as would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect. To the knowledge
of Borrower, the use by Borrower (or one or more of the First Lien Loan Parties)
of the Intellectual Property that is material to the conduct of its business as
currently conducted, does not infringe on the rights of any person, which
infringement, individually or in the aggregate, would reasonably be expected to
result in a Material Adverse Effect.

(b) Trademarks. As of the Closing Date, Schedule 3.06(b) (i) identifies each of
the registrations and pending applications for material trademarks,
service-marks and trade names currently registered by, made by or otherwise held
by Borrower (or one or more of the First Lien Loan Parties) (other than Excluded
Property) and identifies which such person registered, made or otherwise holds,
or filed an application with respect to, such Intellectual Property and
(ii) specifies as to each, the jurisdiction in which such Intellectual Property
has been issued or registered (or, if applicable, in which an application for
such issuance or registration has been filed), including the respective
registration or application numbers and applicable dates of registration or
application and expiration.

(c) Patents. As of the Closing Date, Schedule 3.06(c) (i) identifies each of the
material patents and patent applications currently owned or made by Borrower (or
one or more of the First Lien Loan Parties) and identifies which such person
applied for or owns such Intellectual Property and (ii) specifies as to each,
the jurisdiction in which such Intellectual Property has been issued or
registered (or, if applicable, in which an application for such issuance or
registration has been filed), including the respective patent or application
numbers and applicable dates of issuance or application and expiration.

(d) Copyrights. As of the Closing Date, Schedule 3.06(d) (i) identifies each of
the material copyrights applications and registrations currently registered or
applied for by Borrower (or one or more of the First Lien Loan Parties) and
identifies which such person applied for or registered such Intellectual
Property and (ii) specifies as to each, the jurisdiction in which such
Intellectual Property has been issued or registered (or, if applicable, in which
an application for such issuance or registration has been filed), including the
respective registration or application numbers and applicable dates of
registration or application and expiration.

 

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(e) Licenses. As of the Closing Date, Schedule 3.06(e) identifies all licenses,
sub-licenses and other agreements relating to Intellectual Property (excluding
Intellectual Property available on a commercial basis in the ordinary course) to
which Borrower (or one or more of the First Lien Loan Parties) is a party that
are material to the conduct of Borrower’s business and pursuant to which
(i) Borrower (or one or more of the First Lien Loan Parties) is a licensor,
sub-licensor, licensee or sub-licensee or the equivalent or (ii) any other
person is authorized to use any Intellectual Property of Borrower (or one or
more of the First Lien Loan Parties) as a licensee, sub-licensee or the
equivalent.

SECTION 3.07 Equity Interests and Subsidiaries.

(a) The persons listed on Schedule 3.07(a) constitute all the Subsidiaries of
Borrower as of the Closing Date. Schedule 3.07(a) sets forth, as of the Closing
Date, (i) the name and jurisdiction of formation of Borrower and each of its
Subsidiaries and (ii) the persons that own its Equity Interests and the
percentage and number of each class of Equity Interests owned by any such
person. Such Equity Interests have been validly issued and are owned free and
clear of any Liens or restrictions on transfer (other than restrictions on
transfer that may be imposed by Gaming Laws once such entity has been licensed
or registered thereunder). As of the Closing Date, each such Subsidiary is a
Wholly Owned Subsidiary of Borrower.

(b) As of the Closing Date, there are no outstanding subscriptions, options,
warrants, calls, rights or other agreements or commitments (other than stock
options granted to employees, officers or directors and directors’ qualifying
shares) of any nature relating to any Equity Interests of the Borrower.

(c) An accurate organizational chart, showing the ownership structure of
Borrower and each of its Subsidiaries, if any, on the Closing Date is set forth
on Schedule 3.07(c).

SECTION 3.08 Litigation; Compliance with Laws. Except as set forth on Schedule
3.08, no litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the knowledge of Borrower, threatened
in writing by or against Borrower, or against any of their respective properties
or revenues (a) as of the Closing Date, with respect to any of the Financing
Agreements or any of the transactions contemplated hereby or thereby or
(b) that, individually or in the aggregate, would reasonably be expected to
result in a Material Adverse Effect.

SECTION 3.09 Agreements. As of the Closing Date, no Requirement of Law or
Contractual Obligation applicable to Borrower would, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.
Schedule 3.09 accurately and completely lists all Material Agreements to which
Borrower is a party which are in effect on the Closing Date and Borrower has
delivered to Lender complete and correct copies of all such Material Agreements
as of the Closing Date, including any amendments, supplements or modifications
with respect thereto entered into on or prior to the Closing Date, and all such
Material Agreements are in full force and effect as of the Closing Date.

SECTION 3.10 Federal Reserve Regulations. Borrower is not engaged principally,
or as one of its principal activities, in the business of extending credit for
the purpose of buying or carrying Margin Stock. No part of the proceeds of the
Loan will be used, whether directly or indirectly, and whether immediately,
incidentally or ultimately, for any purpose that entails a violation of, or that
is inconsistent with, the provisions of the regulations of the Board, including
Regulation T, U or X.

SECTION 3.11 Investment Company Act; Other Regulations. Borrower is not an
“investment company” or a company “controlled” by an “investment company,”
subject to regulation under, the Investment Company Act of 1940, as amended.
Borrower is not subject to regulation under the

 

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Federal Power Act or the Interstate Commerce Act or registration under the
Investment Company Act of 1940 or under any other federal or state statute or
regulation which may limit its ability to incur Indebtedness (other than the
Gaming Laws and laws of general applicability) or which may otherwise render all
or any portion of the Obligations unenforceable.

SECTION 3.12 Use of Proceeds. Borrower will use the proceeds of the Loan (a) to
repay outstanding Indebtedness related to the Mortgaged Property (including the
LoanCore Note, which repayment shall be made using the first Borrowing of the
Loan hereunder) and for the payment of transaction costs, fees and expenses
incurred in connection with this Agreement, the other Financing Agreements and
the other transactions contemplated hereby, (b) to repay (in part) outstanding
Indebtedness owed in connection with the First Lien Financing Documents, (c) to
repay (in whole or in part) outstanding Indebtedness owed in connection with any
Senior Qualified Additional Financing, (d) to fund the costs and expenses of the
renovation, remodel, construction and development of the SLS Las Vegas
(including, without limitation, Project Costs), (e) to fund the costs and
expenses in connection with the opening and initial operations of the SLS Las
Vegas, (f) intentionally omitted, (g) to fund the costs and expenses associated
with the operations of the Project, and (h) to fund fees and expenses incurred
in connection with the foregoing, including, without limitation, working
capital, transaction costs and expenses.

SECTION 3.13 Taxes.

(a) Borrower has timely filed, or caused to be timely filed, all material Tax
returns that are required to have been filed by it in any jurisdiction. Borrower
has paid all Taxes shown to be due and payable on such returns and all other
material Taxes payable by it (including in its capacity as withholding agent),
to the extent the same have become due and payable (other than those Taxes it is
contesting in good faith and by appropriate proceedings in accordance with
applicable Law (or which have been subject to such a contest) and with respect
to which Borrower has established adequate reserves in accordance with GAAP).
There is no current, and Borrower is aware of no proposed or pending, Tax
assessments, deficiencies, audits or other claims against Borrower that would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.

(b) There are no Liens for Taxes on any of the properties of Borrower other than
Liens permitted pursuant to Section 6.02.

SECTION 3.14 No Material Misstatements. No statement or information (excluding
projections, forward-looking statements, estimates, pro forma financial
information (as such pro forma financial information relates to future events or
forward-looking circumstances) and information of a general, economic or
industry nature) contained in the Confidential Private Placement Memorandum of
Lender dated as of July 3, 2012, or in this Agreement, any other Loan Document,
or any other document, certificate or written statement furnished to Lender by
or on behalf of Borrower for use in connection with the transactions
contemplated by this Agreement or the other Loan Documents, when taken as a
whole and as updated from time to time (but without any obligation on behalf of
Borrower to provide such update, except expressly as set forth herein),
contained any untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements contained herein or therein not
materially misleading in light of the circumstances in which the same were made.
Labor Matters. There are no strikes, stoppages, lockouts, slowdowns or other
labor disputes pending against Borrower, or to the knowledge of Borrower,
threatened against Borrower, in each case that would reasonably be expected to,
individually or in the aggregate, result in a Material Adverse Effect. The hours
worked by, and payments made to, employees of Borrower have not been in
violation of the Fair Labor Standards Act of 1938, as amended, or any other
applicable Requirement of Law dealing with such matters, in any manner which
would reasonably be expected to, individually or in the aggregate, result in a
Material Adverse Effect. All payments due from Borrower on account of employee
health and welfare insurance that would reasonably be expected to, individually
or in the aggregate, result in a Material Adverse Effect if not paid have been
paid or accrued as a liability on the books of any First Lien Loan Party,
including Borrower.

 

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SECTION 3.16 Solvency. As of the Closing Date, both prior to and after giving
effect to the transactions contemplated hereby and under the other Financing
Agreements (including, without limitation, any Debt Issuance contemplated
thereby, and after giving effect to the application of the proceeds thereof),
Borrower is Solvent.

SECTION 3.17 Employee Benefit Plans. Except in each case, as would not
reasonably be expected to result in a Material Adverse Effect, (a) no ERISA
Event has occurred or would reasonably be expected to occur, (b) no liability to
the PBGC (other than required premium payments) or the Internal Revenue Service
in respect of any Employee Benefit Plan, or to any Employee Benefit Plan or any
trust established under Title IV of ERISA has been or would reasonably be
expected to be incurred by Borrower or any of their respective ERISA Affiliates,
and (c) the actuarial present value of all benefit liabilities under each
Pension Plan (based on those assumptions that would be used to determine whether
each such Pension Plan could be terminated in a standard termination under
Section 4041(b) of ERISA) did not, as of the last annual valuation date prior to
the date on which this representation is made or deemed made, exceed the value
of the assets of such Pension Plan allocable to such accrued benefits. Except to
the extent required under Section 4980B of the Code or similar state laws, no
Employee Benefit Plan provides health or welfare benefits (through the purchase
of insurance or otherwise) for any retired or former employee of Borrower or any
of its respective ERISA Affiliates. As of the most recent valuation date for
each Multiemployer Plan for which an actuarial report is available, the
potential liability of Borrower and its ERISA Affiliates for a complete
withdrawal from such Multiemployer Plan (within the meaning of Section 4203 of
ERISA), when aggregated with such potential liability for a complete withdrawal
from all Multiemployer Plans, based on information available pursuant to
Section 4221(e) of ERISA, would not reasonably be expected to result in a
Material Adverse Effect.

SECTION 3.18 Environmental Matters. Except as set forth on Schedule 3.18:

(a) Borrower is, and, during the past three years has been, in compliance with
all applicable Environmental Laws and Environmental Permits applicable to the
Real Property, except as would not reasonably be expected to result in a
Material Adverse Effect.

(b) There has not been a Release of Hazardous Materials at, on, under or from
the Real Property, or at any other location to which Borrower has sent Hazardous
Material for treatment, storage, or disposal for which Borrower would reasonably
be expected to incur liability, in each case which would reasonably be expected
to result in a Material Adverse Effect.

(c) Except as would not reasonably be expected to result in a Material Adverse
Effect, there is no Environmental Claim to which Borrower is named as a party
that is pending or, to the knowledge of Borrower, threatened in writing.

(d) Except as would not reasonably be expected to result in a Material Adverse
Effect, Borrower has not received any written request for information, or been
notified that it is a potentially responsible party, under CERCLA or otherwise
liable for a Release of Hazardous Materials at the Real Property under any other
Environmental Law.

(e) Except as would not reasonably be expected to result in a Material Adverse
Effect, Borrower has not (i) entered into any written consent decree, order, or
settlement or other agreement that remains outstanding, or is subject to any
judgment, decree, or order, in any judicial, administrative, arbitral, or other
forum for dispute resolution, pertaining to compliance with or liability under
any Environmental Law or as a result of any Environmental Claim or (ii) assumed
by contract or, to the knowledge of the Borrower, by operation of law any
specific liabilities under any Environmental Law or for any Hazardous Materials.

 

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SECTION 3.19 Mortgages. On the Closing Date, with respect to the Mortgaged
Property, the SLS Las Vegas Mortgage will be effective to create in favor of
Lender, a legal, valid, binding and enforceable Lien on, and security interest
in, the property described therein, any improvements thereon and any fixtures
related thereto and the proceeds and products thereof, and when the SLS Las
Vegas Mortgage is recorded in the offices specified on Schedule 3.19, the SLS
Las Vegas Mortgage shall constitute a perfected Lien on, and security interest
in, the property described therein, all improvements thereon and all fixtures
related thereto, and the proceeds and products thereof, as security for the
Secured Obligations, in each case subject only to Permitted Liens and prior and
superior in right to any other Lien (except Permitted Liens).

SECTION 3.20 Permits. Other than exceptions to any of the following that would
not, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect: (a) Borrower has obtained and holds all Permits
required as of the date this representation is deemed made in respect of all
Real Property and any other property currently owned, leased or otherwise
operated by or on behalf of, or for the benefit of, such Person, for the
operation of its business at such date, (b) Borrower has performed and observed
all requirements of such Permits (to the extent required to be performed by the
date this representation is deemed made) and (c) as of the Closing Date no other
Permits are required for the commencement of renovation.

SECTION 3.21 Anti-Terrorism Law.

(a) Borrower is not and, to the knowledge of Borrower, none of its Affiliates is
in violation of any Requirement of Law relating to terrorism or money laundering
(“Anti-Terrorism Laws”), including Executive Order No. 13224 on Terrorist
Financing, effective September 24, 2001 (the “Executive Order”), and the Uniting
and Strengthening America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorism Act of 2001, Public Law 107-56.

(b) Borrower is not and to the knowledge of Borrower, no Affiliate or broker or
other agent of Borrower acting or benefiting in any capacity in connection with
the Loan is any of the following:

(i) a person that is listed in the annex to, or is otherwise subject to the
provisions of, the Executive Order;

(ii) a person owned or controlled by, or acting for or on behalf of, any person
that is listed in the annex to, or is otherwise subject to the provisions of,
the Executive Order;

(iii) a person with which Lender is prohibited from dealing or otherwise
engaging in any transaction by any Anti-Terrorism Law;

(iv) a person that commits, threatens or conspires to commit or supports
“terrorism” as defined in the Executive Order; or

(v) a person that is named as a “specially designated national and blocked
person” on the most current list published by the U.S. Treasury Department
Office of Foreign Assets Control (“OFAC”) at its official website or any
replacement website or other replacement official publication of such list.

 

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(c) Borrower does not (i) conduct any business or engage in making or receiving
any contribution of funds, goods or services to or for the benefit of any person
described in paragraph (b) above, (ii) deal in, or otherwise engage in any
transaction relating to, any property or interests in property blocked pursuant
to the Executive Order, or (iii) engage in or conspire to engage in any
transaction that evades or avoids, or has the purpose of evading or avoiding, or
attempt to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

SECTION 3.22 Flood Insurance Laws. The SLS Las Vegas Mortgage does not encumber
improved real property which is located in an area that has been identified by
the Director of the Federal Emergency Management Agency (“FEMA”) as an area
having special flood hazards and in which flood insurance has been made
available under Flood Insurance Laws (except the Mortgaged Property to the
extent such flood insurance as required by Flood Insurance Laws has been
obtained and is in full force and effect as required by this Agreement or the
other Loan Documents).

SECTION 3.23 Insurance. Borrower is insured by insurers of recognized financial
responsibility (as of the date such insurance was purchased) against such losses
and risks and in such amounts as are customary in the businesses in which it is
engaged, for companies located in a similar geographic area, taking into account
the activities and relative size (as compared to other similarly situated
companies) of Borrower and in any event in accordance with Section 5.04.

SECTION 3.24 Compliance with Gaming Laws. Incurrence of the Obligations by
Borrower under the Loan Documents complies with all applicable provisions of the
Gaming Laws, subject to any informational filings or reports required by the
Gaming Authorities and except for all Casino Licenses and Liquor Licenses to be
obtained by Borrower relating to the Project, which approvals and licenses shall
be sought, diligently and in good faith by Borrower prior to the Opening Date.

SECTION 3.25 First Lien Financing Documents. Set forth on Schedule 3.25 is a
list of all First Lien Financing Documents as of the Closing Date, true and
correct copies of which have been provided by the Borrower to the Lender. As of
the Closing Date, no Event of Default (as defined in the First Lien Financing
Agreement) exists and Borrower and the First Lien Loan Parties are in full
compliance with the terms of the First Lien Financing Documents. The First Lien
Financing Documents comply in all material respects with all applicable laws,
are in full force and effect as of the Closing Date and have not been
terminated, rescinded or withdrawn as of such date. The execution, delivery and
performance of the First Lien Financing Documents by Borrower and the other
First Lien Loan Parties did not and will not require any registration with,
consent, or approval of, or notice to, or other action with or by, any
Governmental Authority, other than (x) consents or approvals that have been
obtained and that are still in full force and effect, and (y) consents or
approvals the failure of which to obtain could not reasonably be expected to be
(A) materially adverse to the business, operations, or financial condition of
Borrower or (B) materially adverse to the interests of Lender.

ARTICLE IV

CONDITIONS TO CREDIT EXTENSIONS

SECTION 4.01 Conditions to Initial Credit Extension. The obligation of Lender to
fund the initial Credit Extension shall be subject to the prior or concurrent
satisfaction of each of the conditions precedent set forth in this Section 4.01
(provided the conditions in clauses (k), (n) and (p) shall be satisfied on or
prior to the First Lien Escrow Release Date).

(a) Loan Documents. There shall have been delivered to Lender an executed
counterpart of each of the Loan Documents.

 

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(b) Corporate Documents. Lender shall have received:

(i) a certificate of an authorized officer of Manager, dated the Closing Date,
certifying (A) that attached thereto is a true and complete copy of each
Organizational Document of Borrower certified (to the extent applicable) as of a
recent date by the Secretary of State of the state of its organization, (B) that
attached thereto is a true and complete copy of resolutions duly adopted by the
Board of Directors of Borrower authorizing the execution, delivery and
performance of the Loan Documents to which such person is a party and the
borrowings hereunder, and that such resolutions have not been modified,
rescinded or amended and are in full force and effect and (C) as to the
incumbency and specimen signature of each officer executing any Loan Document or
any other document delivered in connection herewith on behalf of Borrower
(together with a certificate of another officer as to the incumbency and
specimen signature of the secretary or assistant secretary executing the
certificate in this clause (i));

(ii) a certificate as to the good standing of Borrower as of a recent date, from
the Secretary of State of the state of its organization (or other applicable
Governmental Authority); and

(iii) a certificate or certificates as to the qualification of Borrower to do
business in all other states (or applicable jurisdictions) where Borrower’s
ownership or lease of property or the conduct of its business requires such
qualification to the extent material to the business of Borrower.

(c) Searches. Lender shall have received UCC, tax lien, litigation, and
intellectual property searches performed by the First Lien Administrative Agent
or First Lien Collateral Agent, as applicable, the results of which are
satisfactory to Lender.

(d) Officers’ Certificate. Lender shall have received a certificate, dated the
Closing Date and signed by a Financial Officer of Manager, confirming that there
has been no event or circumstance since December 31, 2012 which has resulted in,
or which would reasonably be expected to result in, either individually or in
the aggregate, a Material Adverse Effect.

(e) Financial Statements; Pro Forma Financials; Projections. Lender shall have
received the financial statements and forecasts described in Section 3.04.

(f) Indebtedness. After giving effect to the transactions contemplated hereby,
Borrower shall not have outstanding any Indebtedness other than (i) the Loan and
Credit Extensions hereunder and (ii) Indebtedness permitted in Section 6.01 of
this Agreement.

(g) Opinions of Counsel. Lender shall have received a favorable written opinion
of (i) Davis Polk & Wardwell LLP, special counsel for Borrower, (ii) Richards,
Layton & Finger P.A., counsel to the Borrower in Delaware and (iii) Lewis and
Roca LLP, counsel to Borrower in Nevada, in each case (A) dated the Closing
Date, (B) addressed to Lender and (C) in a form reasonably satisfactory to
Lender.

(h) Solvency Certificate. Lender shall have received a solvency certificate in
the form of Exhibit G, dated the Closing Date and signed by a Financial Officer
of Manager.

(i) [Reserved].

 

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(j) Fees. Lender and ADF shall have received on or prior to the Closing Date all
fees and other amounts due and payable to Lender and ADF, respectively, on or
prior to the Closing Date, as more fully described in the Letter of Intent,
including, but not limited to the reasonable fees and expenses of Homeier & Law,
P.C., counsel to Lender Manager and ADF.

(k) Intercreditor Agreements. Lender shall have received (i) from First Lien
Collateral Agent an executed counterpart of the First Lien Intercreditor
Agreement, and (ii) from the Qualified Additional Financing Agent of any Senior
Qualified Additional Financing, an executed counterpart of a Qualified
Additional Financing Intercreditor Agreement.

(l) Subordination Agreement. Lender shall have received an executed counterpart
of the Subordination Agreement.

(m) Borrowing Request. Lender shall have received a fully executed Borrowing
Request from Borrower reflecting a request for a Borrowing in an amount not less
than $11,500,000, as required by Section 2.02.

(n) Construction Documents. Lender shall have received the following:

(i) copies of (A) General Construction Agreement; (B) Architectural Services
Agreement; (C) DMA; and (D) Hotel Management Agreement; and

(ii) a plan and cost review report from the Construction Consultant.

(o) First Lien Proceeds. Lender shall have received evidence that the First Lien
Escrow Agent has received the net loan proceeds of the First Lien Loan pursuant
to the First Lien Escrow and Security Agreement.

(p) Insurance Conditions. The Insurance Conditions shall have been satisfied.

(q) Real Property Conditions. The Real Property Conditions shall have been
satisfied.

(r) Representations and Warranties. Each of the representations and warranties
made by Borrower in or pursuant to the Loan Documents shall be true and correct
in all material respects (except where already qualified as to materiality) on
and as of such date as if made on and as of such date, except for
representations and warranties expressly stated to relate to a specific earlier
date, in which case such representations and warranties shall be true and
correct in all material respects only as of such earlier date.

(s) USA Patriot Act. Lender shall have received, sufficiently in advance of the
Closing Date, all documentation and other information that may be required by
Lender in order to enable compliance with applicable “know your customer” and
anti-money laundering rules and regulations, including the United States PATRIOT
Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the
“Patriot Act”) including the information described in Section 10.13.

(t) Absence of Material Disruption. There shall be an absence of any material
disruption or general adverse developments in the financial or capital markets
that reasonably could be expected to materially impair the ability of Lender to
raise the capital necessary to make the Loan, as reasonably determined by Lender
in its sole discretion.

 

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(u) No Default. No Default or Event of Default shall have occurred and be
continuing on such date or immediately after giving effect to the extensions of
credit requested to be made on such date.

(v) No Legal Bar. No order, judgment or decree of any Governmental Authority
shall purport to restrain Lender from making the Loan to be made by it.

SECTION 4.02 Conditions to Each Borrowing. The obligation of Lender to fund each
Borrowing shall be subject to following conditions precedent:

(a) With respect to each Borrowing, each of the representations and warranties
made by Borrower in or pursuant to the Loan Documents shall be true and correct
in all material respects (except where already qualified as to materiality) on
and as of the date of the making of such Borrowing as if made on and as of the
date of such Borrowing, except for representations and warranties expressly
stated to relate to a specific earlier date, in which case such representations
and warranties shall be true and correct in all material respects only as of
such earlier date;

(b) no Default or Event of Default shall have occurred and be continuing on the
date of on such Borrowing or immediately after giving effect to such Borrowing;
and

(c) Lender shall have received a fully executed Borrowing Request.

ARTICLE V

AFFIRMATIVE COVENANTS

Borrower covenants and agrees with Lender that from and after the Closing Date
and until the Commitments have been terminated and the principal of and interest
on the Loan, all Fees and all other expenses or amounts payable under any Loan
Document shall have been paid in full, unless Lender shall otherwise consent in
writing, Borrower will:

SECTION 5.01 Financial Statements, Reports, Etc. Furnish to Lender:

(a) Annual Reports. As soon as available, but in any event not later than 90
days after the end of each fiscal year (120 days in the case of the first fiscal
year after the Closing Date), a copy of the audited consolidated balance sheets
of Holdings and its consolidated Subsidiaries (including Borrower) as at the end
of such fiscal year and the related audited consolidated statements of income
and of cash flows for such fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal year, reported on without a
“going concern” or like qualification or exception (other than any qualification
for periods ending prior to the Opening Date that advises of the development
stage nature of Holdings and its consolidated Subsidiaries (including Borrower))
or qualification arising out of the scope of the audit, by
PricewaterhouseCoopers LLP or another independent certified public accountants
of nationally recognized standing;

(b) Quarterly Reports. As soon as available, but in any event not later than 45
days after the end of each of the first three quarterly periods of each fiscal
year, the unaudited consolidated balance sheets of Holdings and its consolidated
Subsidiaries (including Borrower) as at the end of such quarter and the related
unaudited consolidated statements of income and of cash flows for such quarter
and the portion of the fiscal year through the end of such quarter, setting
forth in each case in comparative form the figures for the previous year,
certified by a Responsible Officer as being fairly stated in all material
respects (subject to normal year end audit adjustments and the absence of
footnotes);

 

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all such financial statements delivered pursuant to this Section 5.01 shall be
complete and correct in all material respects (in the case of financial
statements delivered pursuant to subsection (b) of this Section 5.01, subject to
normal year-end audit adjustments and the absence of footnotes) and shall be
prepared in reasonable detail and in accordance with GAAP applied consistently
throughout the periods reflected therein and with prior periods (except as
approved by the accountants or Responsible Officer referred to above, as the
case may be, and disclosed therein). The requirements of Sections 5.01(a) and
(b) may be satisfied through the delivery of a Form 10-K or Form 10-Q containing
the consolidated financial statements of Holdings and its consolidated
Subsidiaries (including Borrower) required under Sections 5.01(a) and (b),
respectively (subject to, in the case of Section 5.01(a), delivery of the report
required thereunder and, in the case of Section 5.01(b), delivery of the
Responsible Officer certificate required thereunder); provided that any such
reports that are provided to the First Lien Administrative Agent and not
determined by the First Lien Administrative Agent to be unacceptable for the
foregoing purposes shall be deemed to satisfy the requirements hereof; provided,
further that to the extent the First Lien Administrative Agent requires
additional materials or documents to satisfy the requirements hereof, Borrower
shall deliver such additional materials or documents to Lender;

(c) Financial Officer’s Certificate. Concurrently with the delivery of any
financial statements pursuant to Section 5.01(a) or (b), (i) a certificate of a
Financial Officer of Manager stating that such Financial Officer has obtained no
knowledge of the existence of any Default or Event of Default that is continuing
except as specified in such certificate, and (ii) a Compliance Certificate;

(d) Narrative Discussion. Within 45 days after the end of each fiscal quarter of
Borrower after the Opening Date (other than the fourth fiscal quarter of a
Fiscal Year) and within 90 days after the end of the fourth fiscal quarter of
each fiscal year after the Opening Date, a narrative discussion and analysis of
the financial condition and results of operations of Borrower for such fiscal
quarter and for the period from the beginning of the then current fiscal year
(or if the then current fiscal year is the fiscal year in which the Opening Date
has occurred, from the Opening Date) to the end of such fiscal quarter (provided
that such discussion and analysis may be provided through delivery of a Form
10-K or Form 10-Q for Holdings covering such applicable period); provided that
any such reports that are provided to the First Lien Administrative Agent and
not determined by the First Lien Administrative Agent to be unacceptable for the
foregoing purposes shall be deemed to satisfy the requirements hereof; provided,
further that to the extent the First Lien Administrative Agent requires
additional materials or documents to satisfy the requirements hereof, Borrower
shall deliver such additional materials or documents to Lender;

(e) Budgets. Commencing with the Opening Date, no later than the Opening Date,
and no later than 90 days after the beginning of each fiscal year thereafter, a
detailed consolidated budget of the Borrower for such fiscal year (or portion
thereof from the Opening Date through the end of such fiscal year), including a
projected consolidated balance sheet of the Borrower as of the end of such
fiscal year, and the related consolidated statements of income and of projected
cash flow (collectively, the “Projections”), which Projections shall in each
case be accompanied by a certificate of a Responsible Officer stating that, at
the time made, such Projections are based on estimates and assumptions believed
by the Responsible Officer to be reasonable at the time made; provided that any
such reports that are provided to the First Lien Administrative Agent and not
determined by the First Lien Administrative Agent to be unacceptable for the
foregoing purposes shall be deemed to satisfy the requirements hereof; provided,
further that to the extent the First Lien Administrative Agent requires
additional materials or documents to satisfy the requirements hereof, Borrower
shall deliver such additional materials or documents to Lender;

 

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(f) Proceedings. Within 45 days after the end of the first three fiscal quarters
of each fiscal year and within 90 days after the fourth fiscal quarter of each
fiscal year (120 days in the case of the first fiscal year after the Closing
Date), a schedule of all Proceedings involving an alleged liability of, or
claims against, Borrower, equal to or greater than $5,000,000, and promptly
after request by Lender, such other information as may be reasonably requested
by Lender to enable Lender and its counsel to evaluate any of such Proceedings
(to the extent delivery of such information will not violate any confidentiality
obligations binding upon Borrower or constitute a waiver of attorney client
privilege and in any event excluding any information concerning Proceedings
relating to workers’ compensation claims);

(g) Insurance. Within 90 days after the end of each fiscal year commencing after
the Opening Date, a certificate certifying that the insurance requirements of
Section 5.04 have been implemented and are being complied with in all material
respects (or if such requirements are not being met, an explanation as to why
such requirements are not being met);

(h) Governmental Filings and Notices. Promptly upon request by Lender, copies of
any other material reports or documents that were filed by Borrower with any
Governmental Authority and copies of any and all material notices and other
material communications from any Governmental Authority with respect to
Borrower; and

(i) Other Information. Promptly, from time to time, such other information
regarding the operations, business affairs and financial condition of Borrower,
as Lender may reasonably request (to the extent delivery of such information
will not violate any confidentiality obligations binding upon Borrower or
constitute a waiver of attorney client privilege).

SECTION 5.02 Litigation and Other Notices. Furnish to Lender written notice of
the following promptly (and, in any event, within three Business Days of the
occurrence or obtaining knowledge thereof):

(a) the institution of any action, suit, proceeding (whether administrative,
judicial or otherwise), governmental investigation or arbitration against or
affecting Borrower, or any property of Borrower (collectively, “Proceedings”)
not previously disclosed in writing by Borrower to Lender that would reasonably
be expected to result in a Material Adverse Effect, or any material development
in any such Proceeding, in each case together with such other information as may
be reasonably available to Borrower to enable Lender and its counsel to evaluate
such matters (to the extent delivery of such information will not violate any
confidentiality obligations binding upon Lender or constitute a waiver of
attorney client privilege and in any event excluding any information concerning
Proceedings relating to workers’ compensation claims);

(b) copies of all notices provided to Borrower pursuant to any documents
evidencing Material Indebtedness relating to material defaults and promptly upon
execution and delivery thereof, copies of all amendments to any of the documents
evidencing Material Indebtedness;

(c) the institution of any special or other assessments (other than ad valorem
taxes) for public improvements or otherwise affecting any Real Estate, or any
contemplated improvements to such Real Estate that would reasonably result in
such special or other assessments;

(d) the occurrence of any Default or Event of Default;

 

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(e) the occurrence, or any Responsible Officer of Borrower obtaining knowledge
of a forthcoming occurrence, of any ERISA Event and in any event within 10 days
after any Responsible Officer of Borrower knows of such ERISA Event, a written
notice specifying the nature thereof, what actions Borrower or ERISA Affiliate
has taken, is taking or proposes to take with respect thereto and, when known,
any action taken or threatened by the Internal Revenue Service, the Department
of Labor or the PBGC with respect thereto;

(f) at the request of Lender following the occurrence of any Event of Default, a
complete and accurate list of the names and addresses of each Subcontractor; and

(g) any other developments or events that, individually or in the aggregate,
have resulted in, or would reasonably be expected to result in, a Material
Adverse Effect.

Each notice pursuant to clauses (a) and (g) of this Section 5.02 shall be
accompanied by a statement of a Responsible Officer setting forth details of the
occurrence referred to therein and stating what action Borrower proposes to take
with respect thereto.

SECTION 5.03 Existence; Businesses and Properties.

(a) (i) Preserve, renew and keep in full force and effect its organizational
existence and with respect to each Subsidiary of the Borrower, in each case
remain a Wholly Owned Subsidiary of Borrower and (ii) take all reasonable action
to maintain all rights, privileges, franchises, Permits and licenses necessary
in the normal conduct of its business, except, in each case, as otherwise
permitted by Section 6.05 or Section 6.06 and except, in the case of subsection
(ii) above, to the extent that failure to do so would not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.

(b) Keep all property and systems material to the operation of the business of
Borrower in good working order and condition, ordinary wear and tear, accidents
and force majeure and, casualty and condemnation events, excepted.

(c) Maintain, as of a particular date, all rights of way, easements, grants,
privileges, licenses (including, without limitation, Casino Licenses and Liquor
Licenses), certificates, and Permits necessary for the intended use by Borrower
or any First Lien Loan Party of any Real Property at such date, except any such
item the loss of which, individually or in the aggregate, would not reasonably
be expected to materially and adversely affect or interfere with the Project or
Project Site.

(d) With respect to the Mortgaged Property, comply with the terms of each lease
or other grant of interests in real property, including easement grants, so as
to not permit any material uncured default on its part to exist thereunder,
except, in each case, where noncompliance therewith would not reasonably be
expected to materially and adversely affect or interfere with the Project or
Project Site.

SECTION 5.04 Insurance.

(a) Generally. At all times maintain in full force and effect the insurance
policies and programs listed on Schedule 5.04(a), which policies and programs
may be modified or cancelled from time to time if, (i) and only to the extent
that, such policies and programs are not then available on commercially
reasonable terms and (ii) the resulting coverage is, at the time of the
modification or cancellation, customary for companies engaged in the same or
similar business, which are similarly situated, and which have obtained or are
then obtaining insurance coverage under similar conditions as those then
currently applicable to Borrower. In the event that, in accordance with the
preceding sentence, Borrower is, at any time or from time to time, permitted to
deviate from the insurance policies and pro-grams described in Schedule 5.04(a)
and, thereafter, any such policy or program as set forth in Schedule 5.04(a)
becomes available on commercially reasonable terms, Borrower shall promptly
procure coverage satisfying the requirement for such policy or program.

 

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(b) Notice to Lender. Deliver to Lender, (i) promptly upon request of Lender
from time to time, information as to the insurance carried, (ii) promptly
following receipt thereof, from any insurer, a copy of any notice of
cancellation, non-renewal or material change in coverage from that existing on
the Closing Date, unless such coverage is replaced prior to the cancellation or
non-renewal thereof in accordance with Section 5.04(a), (iii) forthwith, notice
of any cancellation, non-renewal or material change in coverage received by
Borrower, unless such insurance is replaced prior to the cancellation or
non-renewal thereof in accordance with Schedule 5.04(a) and (iv) promptly after
such information is available to Borrower, information as to any claim for an
amount in excess of $5,000,000 with respect to any property or casualty
insurance policy maintained by Borrower.

(c) If any portion of the Mortgaged Property is at any time located in an area
identified by the Federal Emergency Management Agency (or any successor agency)
as a special flood hazard area with respect to which flood insurance has been
made available under the National Flood Insurance Act of 1968 (as now or
hereafter in effect or successor act thereto), then the Borrower shall
(i) maintain, or cause to be maintained, with a financially sound and reputable
insurer, flood insurance in an amount and otherwise sufficient to comply with
all applicable rules and regulations promulgated pursuant to the Flood Insurance
Laws and (ii) deliver to Lender evidence of such compliance in form and
substance reasonably acceptable to Lender.

SECTION 5.05 Obligations.

(a) Payment of Obligations. Pay, discharge or otherwise satisfy at or before
maturity or before they become delinquent, as the case may be, all Taxes imposed
upon it or its properties, and all lawful claims for labor, material and
supplies which, if unpaid might give rise to a Lien upon such properties, except
where (i) the amount or validity thereof is currently being contested in good
faith by appropriate proceedings in accordance with applicable Law and adequate
reserves in accordance with GAAP with respect thereto have been provided on the
books of the relevant First Lien Loan Party or (ii) the failure to do so would
not, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect.

(b) Filing of Returns. Borrower shall timely file, or cause to be filed, all
material Tax Returns that are required to be filed by it in any jurisdiction.

SECTION 5.06 Employee Benefits. Comply in all material respects with the
applicable provisions of ERISA and the Code and (b) furnish to Lender (x) as
soon as possible after, and in any event within 10 business days after any
Responsible Officer of Borrower knows or has reason to know that, any ERISA
Event has occurred that, alone or together with any other ERISA Event, would
reasonably be expected to result in liability of Borrower or any of their ERISA
Affiliates in an aggregate amount that would reasonably be expected to have a
Material Adverse Effect or the imposition of a Lien on any of the property of
Borrower, a statement of a Responsible Officer of Borrower setting forth details
as to such ERISA Event and the action, if any, that Borrower proposes to take
with respect thereto; (y) upon the reasonable request by Lender, copies of
(i) each Schedule SB (Actuarial Information) to the annual report (Form 5500
Series) filed by Borrower or any ERISA Affiliate with the Internal Revenue
Service with respect to each Plan; (ii) the most recent actuarial valuation
report for each Plan; (iii) all notices received by Borrower or any ERISA
Affiliate from a Multiemployer Plan sponsor or any governmental agency
concerning an ERISA Event; and (iv) such other documents or governmental reports
or filings relating to any Plan (or employee benefit plan (as such term is
defined in Section 3(3) of ERISA)

 

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sponsored or contributed to by Borrower) as Lender shall reasonably request and
(z) promptly following any request therefor, copies of (i) any documents
described in Section 101(k) of ERISA that Borrower or its ERISA Affiliate may
request with respect to any Multiemployer Plan and (ii) any notices described in
Section 101(1) of ERISA that Borrower or its ERISA Affiliate may request with
respect to any Multiemployer Plan; provided that if Borrower or its ERISA
Affiliate has not requested such documents or notices from the administrator or
sponsor of the applicable Multiemployer Plan, Borrower or ERISA Affiliate shall
promptly make a request for such documents or notices from such administrator or
sponsor and shall provide copies of such documents and notices promptly after
receipt thereof.

SECTION 5.07 Maintaining Records; Access to Properties and Inspections; Annual
Meetings.

(a) Keep in all material respects records and books of account in accordance
with GAAP. Subject to any Gaming Laws restricting or modifying such actions,
Borrower will permit representatives of Lender, at Lender’s expense (unless an
Event of Default is continuing, in which case at Borrower’s expense), to visit
and inspect any of its properties and examine any of its financial books and
records at any reasonable time and upon reasonable prior notice, and as often as
may reasonably be desired and during normal business hours, to discuss the
business, operations, properties and financial and other condition of Borrower
with officers of Borrower and with their respective independent certified public
accountants (provided that a Responsible Officer may be present for any such
discussions with independent certified public accountants if the Borrower so
chooses); provided that, notwithstanding the foregoing, (x) such inspection
rights shall be subject to confidentiality restrictions binding on Borrower and
its Subsidiaries, and shall not encompass materials subject to attorney client
privilege and (y) unless an Event of Default has occurred and is continuing,
Lender may visit and inspect Borrower’s and its Subsidiaries’ offices and books
and records not more than two times per fiscal year of Borrower.

(b) Within 45 days after the end of each fiscal quarter and 90 days after the
fourth fiscal quarter of each fiscal year (120 days in the case of the first
fiscal year after the Closing Date) commencing after the Closing Date, at the
request of Lender, hold a meeting or conference call (at a mutually agreeable
time and, to the extent applicable, location and venue, the costs of such venue
or call to be paid by Borrower), with Lender, at which meeting shall be reviewed
the financial results of the previous fiscal year and the financial condition of
Borrower and the budgets presented for the current fiscal year of Borrower.

SECTION 5.08 Use of Proceeds. Use the proceeds of the Loan only for the purposes
set forth in Section 3.12.

SECTION 5.09 Compliance with Environmental Laws; Permits.

(a) Except to the extent failure to do so would not reasonably be expected to
result in a Material Adverse Effect, comply with, and use commercially
reasonable efforts to require compliance by all tenants and subtenants, if any,
with, all Environmental Laws and obtain, maintain and comply with, and use
commercially reasonable efforts to require that all tenants and subtenants
obtain, maintain and comply with any and all Environmental Permits.

(b) Except to the extent failure to do so would not reasonably be expected to
result in a Material Adverse Effect, conduct and complete all investigations,
studies, sampling and testing, and all remedial, removal and other actions, in
each case to the extent required under Environmental Laws in connection with any
Real Property owned in fee by the Borrower (including, as necessary under
Environmental Law, asbestos surveys and abatement and/or groundwater
investigation and remediation), and comply as required with all Environmental
Laws governing any Real Property owned in fee by the Borrower or the
improvements thereon.

 

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(c) Lender may (but shall not be required to) at Borrower’s expense, at any time
that Lender has a reasonable basis to believe that (i) a Release of Hazardous
Materials has occurred at, on or under any Real Property owned in fee by the
Borrower or (ii) there has been a violation of Environmental Law in connection
with any Real Property owned in fee by the Borrower that, in each case, would
reasonably be expected to have a Material Adverse Effect, (A) retain an
independent professional consultant to review any environmental audits,
investigations, analyses and reports relating to Hazardous Materials prepared by
or for the First Lien Loan Parties or any of them, (B) conduct its own
investigation of such Real Property owned in fee by the Borrower in respect of
such Release (if any) or (C) conduct a further Phase I investigation, asbestos
survey, or other environmental assessment of such Real Property owned in fee by
the Borrower. For purposes of conducting such a review and/or investigation,
Lender and its agents, employees, consultants and contractors shall have the
right, upon reasonable prior notice, to enter into or onto such Real Property
and to perform such tests on such property (including taking samples of soil,
groundwater and suspected asbestos containing materials) as are reasonably
necessary to conduct such further Phase I investigation, asbestos survey or
other environmental assessment, or investigate such recommendations as may be
set forth in such subsequent Phase I, asbestos survey or other environmental
assessment report. Notwithstanding the foregoing, absent an Event of Default in
connection with or related to Environmental Law that is continuing, Lender shall
first afford the Borrower a reasonable opportunity to conduct its own review
and/or investigation instead, and in all cases shall give reasonable prior
notice and reasonably cooperate with the Borrower concerning such review and/or
investigation. Lender shall share the results of such investigation with
Borrower and shall provide copies of associated reports to Borrower and provide
Borrower with the reasonable opportunity to participate in any sampling
investigation, including the right to take split or other verification samples.
Any such investigation shall be conducted, unless otherwise agreed to in writing
by Borrower and Lender, during normal business hours and shall be conducted so
as not to unreasonably interfere with the ongoing operations at such Real
Property or the Project or cause any damage or loss to any property at such Real
Property or the Project. Any report of any investigation conducted at the
request of Lender pursuant to this Section 5.09 will be obtained and shall be
used by Lender solely for the purposes of Lender’s internal credit decisions, to
monitor and police the Loan and to protect Lender’s security interests, if any,
created by the Loan Documents, and except as may be required by applicable law
and subject to any independent legal obligations of the independent professional
consultant, Lender shall not confer with, make filings to or otherwise
correspond with any Governmental Authority with respect to or relating to such
sampling or investigation without the reasonable consent of, or participation
by, Borrower; provided, however, should any such investigation conducted at the
request of Lender confirm a Release of Hazardous Materials at, on, under or from
any Real Property owned in fee by the Borrower, Borrower shall, at Borrower’s
sole cost and expense without prejudice to Borrower’s right to assert any claims
against any Governmental Authority or other Person, if and to the extent
required under Environmental Law, undertake to remediate such Release and shall
otherwise comply with any Environmental Law with respect to such Release.
Notwithstanding the foregoing, Lender shall not be able to exercise any of its
rights in respect of this Section 5.09(c) for so long as any First Lien
Financing remains outstanding.

(d) Upon request, deliver or make available to Lender (i) as soon as reasonably
practicable following receipt thereof, copies in Borrower’s possession or
control of all non-privileged portions of environmental audits, investigations,
analyses and reports not previously made available to Lender, whether prepared
by personnel of Borrower or by independent consultants, Governmental Authorities
or any other Persons, with respect to the Real Property or with respect to any
Environmental Claims, (ii) reasonably promptly upon the occurrence thereof,
written notice describing in reasonable detail (A) any Release required to be
reported to any Governmental Authority under any Environmental

 

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Laws that would reasonably be expected to result in a Material Adverse Effect
and (B) any remedial action taken by any Person in response to (1) any Release
of Hazardous Materials which would reasonably be expected to result in a
Material Adverse Effect, or (2) any Environmental Claims against Borrower that
would reasonably be expected to result in a Material Adverse Effect, (iii) as
soon as practicable following the sending or receipt thereof by Borrower, a copy
of any and all material written communications with any third parties with
respect to (A) any Environmental Claims that would reasonably be expected to
result in a Material Adverse Effect, (B) any Release required to be reported to
any Governmental Authority that would reasonably be expected to result in a
Material Adverse Effect, and (C) any request for information from any
Governmental Authority stating that such Governmental Authority is investigating
whether Borrower may be potentially responsible under CERCLA or any analogous
Environmental Law or may otherwise have liability under any Environmental Law
that would reasonably be expected to result in a Material Adverse Effect and
(iv) with reasonable promptness, such other documents and information as from
time to time may be reasonably requested by Lender regarding any matters
disclosed pursuant to this Section 5.09(d) or otherwise affecting the Mortgaged
Property under any Environmental Law that would reasonably be expected to have a
Material Adverse Effect.

SECTION 5.10 [Reserved].

SECTION 5.11 Security Interests; Further Assurances. From time to time execute
and deliver, or cause to be executed and delivered, such additional instruments,
certificates or documents, and take all such actions, as Lender may deem
necessary or desirable for the continued validity, perfection and priority of
the Lien of Lender on the Collateral (or with respect to any additions thereto
or replacements or proceeds or products thereof which do not constitute Excluded
Real Property or other property with respect to which the Loan Documents do not
require Lender to have a security interest) pursuant hereto or thereto; provided
that, for the avoidance of doubt, Lender acknowledges that its priority with
respect to the Collateral may be subordinated with respect to Indebtedness
permitted under this Agreement that is secured by a Lien on the Mortgaged
Property that is senior to the Lien of Lender on the Mortgaged Property
(including Indebtedness under the First Lien Financing and any Senior Qualified
Additional Financing) (and Lender agrees to execute additional documents as
necessary to reflect this priority of Liens in accordance with this Agreement).
Upon the exercise by Lender of any power, right, privilege or remedy pursuant to
this Agreement or the other Loan Documents which requires any consent, approval,
recording, qualification or authorization of any Governmental Authority
following the occurrence and during the continuance of an Event of Default,
Borrower shall execute and deliver, or will cause the execution and delivery of,
all applications, certifications, instruments and other documents and papers
that Lender may be required to obtain from Borrower for such governmental
consent, approval, recording, qualification or authorization. In the event that
a Lien not otherwise permitted under this Agreement shall encumber the Mortgaged
Property, any other item of Collateral or any portion thereof (or a mechanic’s
or materialmen’s claim of lien shall be filed or otherwise asserted against the
Mortgaged Property, any other item of Collateral or any portion thereof),
Borrower shall promptly discharge or cause to be discharged by payment to the
lienor or lien claimant or promptly secure removal by bonding or deposit with
the county clerk or otherwise or, at Lender’s option, and if obtainable promptly
obtain title insurance against, any such Lien or mechanics’ or materialmen’s
claims of lien filed or otherwise asserted against the Mortgaged Property or
such other item of Collateral or any portion thereof within 30 days after the
date of notice thereof (which period Lender may extend in its sole discretion so
long as Borrower is diligently pursuing such actions); provided, that the
provisions of this Section 5.11 (and compliance therewith) shall not be deemed
to constitute a waiver of any of the provisions of Section 6.02. Borrower shall
fully preserve the Lien and the priority (subject to Permitted Liens) of the SLS
Las Vegas Mortgage without cost or expense to Lender. If Borrower fails to
promptly discharge, remove or bond off any Lien on the Collateral which is not a
Permitted Lien and which is not being contested by Borrower in good faith by
appropriate proceedings promptly instituted and diligently conducted, within 60
days after the

 

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receipt of notice thereof from Lender, then Lender may, but shall not be
required to, procure the release and discharge of such Lien, and in furtherance
thereof may, in its sole discretion, effect any settlement or compromise with
the lienor or lien claimant or post any bond or furnish any security or
indemnity as Lender, in its sole discretion, may elect. In settling,
compromising or arranging for the discharge of any Liens or claims of Liens
under this Section 5.11, Lender shall not be required to establish or confirm
the validity or amount of the Lien or the claim. Borrower agrees that all costs
and expenses reasonably expended or otherwise incurred pursuant to this
Section 5.11 (including reasonable attorneys’ fees and disbursements) by Lender
shall constitute Obligations and shall be paid by Borrower in accordance with
the terms hereof. For the avoidance of doubt, in the event of a conflict between
this Agreement and the Disbursement Agreement with respect to the terms of this
Section 5.11, the terms of the Disbursement Agreement shall control.

SECTION 5.12 Information Regarding Collateral. Not effect any change (i) in
Borrower’s legal name, (ii) in the location of any Borrower’s chief executive
office, (iii) in Borrower’s identity or organizational structure, (iv) in
Borrower’s Federal Taxpayer Identification Number or organizational
identification number, if any, or (v) in Borrower’s jurisdiction of organization
(in each case, including by merging with or into any other entity, reorganizing,
dissolving, liquidating, reorganizing or organizing in any other jurisdiction),
until (A) it shall have given Lender prior written notice of its intention so to
do, clearly describing such change and providing such other information in
connection therewith as Lender may reasonably request and (B) it shall have
taken all action reasonably satisfactory to Lender to maintain the perfection
and priority of the security interest of Lender in the Collateral, if
applicable. Borrower agrees to promptly provide Lender with certified
Organizational Documents reflecting any of the changes described in the
preceding sentence.

SECTION 5.13 Compliance with Laws, Project Documents, etc.; Permits.

(a) Comply with all Requirements of Law, noncompliance with which would,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect, and comply in all material respects with its Organizational
Documents.

(b) Comply, duly and promptly, in all respects with its respective obligations
and enforce all of its respective rights under all Project Documents, except
where the failure to so comply or enforce its rights would not, individually or
in the aggregate, reasonably be expected to result in a Material Adverse Effect.

(c) From time to time obtain, maintain, retain, observe, keep in full force and
effect and comply with the terms, conditions and provisions of all Permits as
shall now or hereafter be necessary under applicable Requirements of Law, except
to the extent the failure to do so would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.

SECTION 5.14 EB-5 Immigrant Investor Program Compliance.

(a) Adhere in all material respects to that certain Business Plan dated June 19,
2012; provided, however, that any adjustments to such Business Plan that would
have the effect of reducing the number of qualifying jobs under the EB-5
Immigrant Investor Program by more than 15% shall require the consent of Lender.

(b) As soon as available, but in any event not later than 60 days after the end
of each fiscal year, deliver reports regarding job creating information,
together with supporting documentation regarding such information, and any other
information Lender may require in its sole and reasonable discretion to
determine compliance with the EB-5 Immigrant Investor Program;

 

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(c) Within twenty-one months of the date any Investing Member has received
conditional resident status in respect of its $500,000 investment in Lender,
create a minimum of ten (10) qualifying jobs under the EB-5 Immigrant Investor
Program attributable to such Investing Members $500,000 investment in the
Project; and

(d) Comply with such other requirements as Lender may reasonably require in its
reasonable discretion after due inquiry to ensure compliance with the EB-5
Immigrant Investor Program.

SECTION 5.15 [Intentionally Omitted].

SECTION 5.16 In Balance Test.

(a) On the First Lien Escrow Release Date, and monthly thereafter through the
Substantial Completion Date, Borrower shall deliver to Lender:

(i) the In-Balance Projections prepared for the In-Balance Test for the Project,
which shall be accompanied by an Officers’ Certificate stating that such
In-Balance Projections are based on estimates, information and assumptions that
are reasonable at the time;

(ii) an In-Balance Test Certificate demonstrating its satisfaction of the
In-Balance Test, with such supporting detail for the calculations set forth in
such In-Balance Test Certificate as Lender, First Lien Administrative Agent, or
the Construction Consultant shall reasonably request; and

(iii) such other information as Lender, First Lien Administrative Agent or the
Construction Consultant shall reasonably request in connection with the
In-Balance Test.

(b) The Project shall be deemed to satisfy the In-Balance Test if, as of such
date, the Available Funds equal or exceed the aggregate Remaining Costs for the
Project.

ARTICLE VI

NEGATIVE COVENANTS

Borrower covenants and agrees with Lender that, from and after the Closing Date
and until the Commitments have been terminated and the principal of and interest
on the Loan, all Fees and all other expenses or amounts payable under any Loan
Document have been paid in full, unless Lender shall otherwise consent in
writing, Borrower will not:

SECTION 6.01 Indebtedness. Incur, create, assume or permit to exist, directly or
indirectly, any Indebtedness, except:

(a) Indebtedness incurred under this Agreement and the other Loan Documents;

(b) [Reserved];

(c) Indebtedness outstanding on the date hereof and listed on Schedule 6.01(c)
and Permitted Refinancings thereof;

(d) [Reserved];

 

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(e) Indebtedness in respect of Purchase Money Obligations and Capital Lease
Obligations and Attributable Indebtedness in respect of Sale and Leaseback
Transactions and Permitted Refinancings thereof in an aggregate principal amount
not to exceed $15,000,000 at any time outstanding;

(f) Indebtedness in respect of one or more revolving credit facilities in an
aggregate principal amount not to exceed $22,500,000; provided that such
Indebtedness shall not be incurred prior to the date that, at the time of
incurrence and based on the Project Schedule then in effect, is reasonably
expected to be six months or more prior to the Opening Date;

(g) Indebtedness of Borrower in respect of performance bonds, municipal bonds,
guaranties, commercial or standby letters of credit, bankers’ acceptances,
surety bonds or similar instruments issued by a Person other than Borrower for
the benefit of a trade creditor of Borrower or in respect of obligations (other
than obligations constituting Indebtedness for borrowed money) of Borrower
incurred in the ordinary course of business, in an aggregate amount not to
exceed $10,000,000 at any time outstanding; provided that in the event that
Borrower enters into the revolving credit facility permitted under
Section 6.01(f), such amount shall be reduced to $5,000,000;

(h) To the extent constituting Indebtedness of Borrower, agreements to pay
service fees to professionals (including architects, engineers and designers) in
furtherance of and in connection with the development of the Project, in each
case to the extent such agreements and related payment provisions are reasonably
consistent with commonly accepted industry practices (provided that no such
agreements shall give rise to Indebtedness for borrowed money);

(i) Contingent Obligations of Borrower with respect to Indebtedness of Borrower
permitted under this Section 6.01;

(j) Indebtedness consisting of endorsements of instruments for deposit in the
ordinary course of business;

(k) to the extent constituting Indebtedness, agreements for the deferred payment
of premiums or to finance the deferred payment of premiums owing by Borrower
under any insurance policies entered into in the ordinary course of business in
connection with a Permitted Business;

(l) Indebtedness under Hedging Agreements with respect to interest rates not
entered into for speculative purposes; provided that such Hedging Agreements
(i) relate to payment obligations on Indebtedness otherwise permitted to be
incurred by the Loan Documents and (ii) the notional principal amount of such
Hedging Agreements at the time incurred does not exceed the principal amount of
the Indebtedness to which such Hedging Agreements relate;

(m) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within five business days of its incurrence;

(n) Indebtedness arising from agreements of the Borrower providing for
indemnification, adjustments of purchase price or similar obligations, in each
case, incurred or assumed in connection with the acquisition or disposition of
any business, assets or a Subsidiary;

(o) the guarantee by the Borrower of Indebtedness of a Restricted Subsidiary
that was permitted to be incurred by a provision of Section 6.01 in the First
Lien Financing Agreement;

 

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(p) additional Indebtedness of Borrower in an aggregate principal amount not to
exceed $10,000,000 at any time outstanding; and

(q) subject to clause (y) in the proviso below, Indebtedness of Borrower
incurred pursuant to the First Lien Financing and other Qualified Additional
Financings and Permitted Refinancings thereof;

provided that notwithstanding anything to the contrary in clauses (a) through
(q) of this Section 6.01, (x) to the extent that any lender (or agent for
lenders) possessing a Lien on the SLS Las Vegas that is senior to the SLS Las
Vegas Mortgage, but only to the extent such lender or agent is an Institutional
Lender, waives any default, or consents to any actions of Borrower that would
cause a default, with respect to the substantively similar and corresponding
sections of such senior secured financing agreements to clauses (e), (f),
(g) and (p), Lender shall be deemed to have waived such default, or consented to
such actions of Borrower, and (y) Borrower shall not incur, create, or assume,
directly or indirectly, such Indebtedness if the incurrence of such Indebtedness
(including a Permitted Refinancing of such Indebtedness) would result in Total
Indebtedness Secured by All SLS Las Vegas Mortgages being in excess of the
greater of (1) the outstanding amount of Total Indebtedness Secured by All SLS
Las Vegas Mortgages immediately prior to the incurrence of such Indebtedness,
and (2) 75% of the greater of (I) the cost of the Project and (II) the appraised
fair market value of the Project.

SECTION 6.02 Liens. Create, incur, assume or permit to exist, directly or
indirectly, any Lien on any property now owned or hereafter acquired by it or on
any income or revenues or rights in respect of any thereof, except the following
(collectively, the “Permitted Liens”):

(a) Liens for Taxes not yet due and payable or due and payable but not yet
delinquent or which are being contested in good faith by appropriate
proceedings, provided that adequate reserves with respect to such Taxes being
contested are maintained on the books of the applicable First Lien Loan Party,
to the extent required by GAAP;

(b) carriers’, warehousemen’s, mechanics’, materialmen’s, suppliers’
repairmen’s, landlord’s or other similar Liens arising in the ordinary course of
business for amounts which are not overdue for a period of more than 60 days or
that are being contested in good faith by appropriate proceedings (in any event,
so long as no foreclosure proceedings have been commenced with respect thereto
or if commenced, such proceedings are stayed during the pendency of such
contest); provided, that (i) adequate reserves with respect to such obligations
contested in good faith are maintained on the books of the applicable First Lien
Loan Party, to the extent required by GAAP and (ii) at any time prior to the
Final Completion Date, the amount of Borrower’s likely liability under each such
Lien or claim (as determined by the applicable First Lien Loan Party in good
faith) is reserved through an allocation in the applicable Disbursement Agent
Accounts;

(c) Liens incurred in the ordinary course of business in connection with
workers’ compensation, unemployment insurance, old age pensions and social
security benefits or other similar benefits (or to secure letters of credit
issued for such purposes), so long as no foreclosure, sale or similar
proceedings have been commenced with respect thereto;

(d) Liens incurred on deposits made or cash collateral provided (including in
respect of deposits made in the form of letters of credit) to secure the
performance of bids, tenders, trade contracts (other than for borrowed money),
leases, statutory obligations, appeal bonds, indemnities, release bonds, fee and
expense arrangements with trustees and fiscal agents and other obligations of a
like or similar nature incurred in the ordinary course of business;

 

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(e) easements, covenants, rights-of-way, restrictions, subdivisions,
encroachments and other similar encumbrances and other minor defects and
irregularities in title that, in the aggregate, are not substantial in amount
and do not materially detract from the value of the Real Property taken as a
whole or materially interfere with the development, construction\ or operation
of the Project on the Project Site, including, without limitation, Permitted
Encumbrances;

(f) Liens in existence on the date hereof listed on Schedule 6.02(f) after
giving effect to the transactions contemplated hereby; provided, that no such
Lien is spread to cover any additional property (other than proceeds of the sale
or other disposition thereof and property appurtenant thereto or improvements
thereof) after the Closing Date and that the amount of Indebtedness secured
thereby is not increased; and provided further that no such Lien (i) shall
materially interfere with the development, construction or operation of the
Project on the Project Site, or (ii) result in a Material Adverse Effect or a
foreclosure on any part of the Mortgaged Property;

(g) Liens created pursuant to the SLS Las Vegas Mortgage or otherwise securing
the Obligations;

(h) leases and subleases, in each case permitted under Section 6.06, and any
leasehold mortgage granted by a lessee or sublessee in favor of any party
financing the lessee or sublessee under any such lease or sublease; provided,
that (i) Borrower is not liable for the payment of any principal of, or
interest, premiums or fees on, such financing and (ii) such leasehold mortgage
does not affect or encumber fee title to the property subject to the lease
(other than as a result of the encumbrance of such leasehold interest);

(i) licenses of patents, trademarks, copyrights and other Intellectual Property
rights granted by Borrower in the ordinary course of business and, in the
aggregate, not interfering in any material respect with the ability of Borrower
to operate the Project in the ordinary course and licenses permitted under
Section 6.06(h);

(j) Liens securing Indebtedness permitted under Section 6.01(q) and ranking
junior, equal, or senior, in priority, to the Liens securing the Loan (and
Lender agrees to execute and deliver for recordation such agreements or such
instruments as may be required to reflect the subordination of the Liens
securing the Loan to any such senior Liens, if any, securing indebtedness
including the First Lien Financing Agreement and any Senior Qualified Additional
Financing agreement); provided, however, that the Liens securing Indebtedness
pursuant to any Senior Qualified Additional Financing shall be subject to the
Qualified Additional Financing Intercreditor Agreement;

(k) Liens in respect of an agreement to effect an Asset Sale, to the extent such
Lien extends only to the property to be disposed of and such Asset Sale is
permitted by Section 6.05 or 6.06;

(l) Liens arising out of judgments, attachments or awards not resulting in a
Default or Event of Default under Section 8.01(i);

(m) Liens created pursuant to the First Lien Financing Documents or otherwise
securing the First Lien Obligations (including Liens created thereunder securing
Hedging Agreements entered into with any counterparty that is a First Lien
Secured Party);

(n) Liens arising from the filing of precautionary UCC financing statements
relating solely to operating leases permitted by this Agreement;

 

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(o) Liens in favor of customs and revenue authorities arising as a matter of law
to secure payment of customs duties in connection with the importation of goods;

(p) any zoning or similar law or right reserved to or vested in any Governmental
Authority to control or regulate the use of any Real Property;

(q) Liens securing Indebtedness permitted under Section 6.01(e); provided that
(i) such Liens either exist on the date hereof or are created in connection with
the acquisition, design, installation, construction, repair or improvement of
property financed by such Indebtedness or are created in connection with a
refinancing of Indebtedness incurred under Section 6.01(e) and (ii) such Liens
do not at any time encumber any property other than the property (and proceeds
of the sale or other disposition thereof and the proceeds (including insurance
proceeds), products, rents, profits, accessions and replacements thereof or
thereto) financed by such Indebtedness;

(r) Liens in respect of customary rights of set off, revocation, refund or
charge-back or similar rights under deposit, disbursement or concentration
account agreements or under the UCC or arising by operation of law, of banks or
other financial institutions where Borrower maintains deposit, disbursement or
concentration accounts in the ordinary course of a Permitted Business;

(s) Liens on cash or cash equivalents deposited with, or held for the account
of, Borrower securing reimbursement obligations under performance bonds,
municipal bonds, guaranties, commercial or standby letters of credit, bankers’
acceptances, surety bonds or similar instruments permitted under
Section 6.01(g), granted in favor of the issuers of such performance bonds,
guaranties, commercial letters of credit, bankers’ acceptances, surety bonds or
similar instruments, so long as (i) such cash or cash equivalents are segregated
from Borrower’s general cash accounts so that such Liens attach only to such
cash and cash equivalents and (ii) the amount of cash and/or cash equivalents
secured by such Liens does not exceed 110% of the amount of the obligations
secured thereby (ignoring any interest earned or paid on such cash and any
dividends or distributions or other amounts declared or paid in respect of such
cash equivalents);

(t) Liens of sellers of goods to Borrower arising under Section 2 of the UCC or
similar provisions of applicable law in the ordinary course of business,
covering only the goods sold and securing only the unpaid purchase price for
such goods and related expenses;

(u) Liens securing Indebtedness permitted under Section 6.01(k), so long as such
Liens attach only to the insurance policies with respect to which such
Indebtedness is incurred, the proceeds thereof, or deposits made as security for
the obligations thereunder;

(v) Liens securing Indebtedness permitted under Section 6.01(f), which may be
secured equally and ratably with the First Lien Obligations on a “first-out” or
“super-priority” basis pursuant to an intercreditor agreement on terms
prevailing on the date thereof for similar intercreditor agreements, as
reasonably determined by First Lien Administrative Agent;

(w) Asset Sales described in Sections 6.06(g) and 6.06(l);

(x) [Reserved];

(y) From and after the lease or sublease of any interest pursuant to
Section 6.06(f), (m) or (n), any reciprocal easement agreement entered into
between a First Lien Loan Party and the holder of such interest;

 

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(z) (i) the Master Lease Easements and the Entertainment Venue Easements in
connection with the transactions contemplated under Sections 6.06 (m) and
(n) and (ii) any other easements, covenants or rights of way which are not
material in nature and granted to tenants in connection with the leases
contemplated under Section 6.06(f); and

(aa) additional Liens incurred by a First Lien Loan Party so long as the
obligations secured by such Liens do not exceed $10,000,000 in the aggregate at
any time; provided, however, to the extent that any lender (or agent for
lenders) possessing a Lien on the SLS Las Vegas that is senior to the SLS Las
Vegas Mortgage, but only to the extent such lender or agent is an Institutional
Lender, waives any default, or consents to any actions of Borrower that would
cause a default, with respect to the substantively similar and corresponding
sections of such senior secured financing agreements to this clause (aa), Lender
shall be deemed to have waived such default, or consented to such actions of
Borrower.

SECTION 6.03 Sale and Leaseback Transactions. Enter into any arrangement,
directly or indirectly, with any person whereby it shall sell or transfer any
property, real or personal, used or useful in its business, whether now owned or
hereafter acquired, and thereafter rent or lease such property or other property
which it intends to use for substantially the same purpose or purposes as the
property being sold or transferred (a “Sale and Leaseback Transaction”) unless
(i) the sale of such property is permitted by Section 6.06, (ii) the
Attributable Indebtedness is permitted by Section 6.01 and (iii) any Liens
arising in connection with its use of such property are permitted by
Section 6.02.

SECTION 6.04 Investments, Loans and Advances. Directly or indirectly, lend money
or credit (by way of guarantee or otherwise) or make advances to any person, or
purchase or acquire any stock, bonds, notes, debentures or other securities of,
or any other equity interest in, or make any capital contribution to, any other
person, or purchase or own a futures contract or otherwise become liable for the
purchase or sale of currency or other commodities at a future date in the nature
of a futures contract (all of the foregoing, collectively, “Investments”),
except that the following shall be permitted:

(a) extensions of trade credit in the ordinary course of business (including,
without limitation, advances to patrons of the Project’s casino operation
consistent with ordinary course gaming operations and applicable Gaming Laws);

(b) Investments in Cash Equivalents;

(c) [Intentionally Omitted];

(d) loans and advances to employees of any First Lien Loan Party in the ordinary
course of business (including, without limitation, for travel, entertainment and
relocation expenses) in an aggregate amount not to exceed $250,000 at any one
time outstanding; provided, however, that to the extent any lender (or agent for
lenders) possessing a Lien on the SLS Las Vegas that is senior to the SLS Las
Vegas Mortgage, but only to the extent such lender or agent is an Institutional
Lender, waives any default, or consents to any actions of Borrower that would
cause a default, with respect to the substantively similar and corresponding
sections of such senior secured financing agreements to this clause (d), Lender
shall be deemed to have waived such default, or consented to such actions of
Borrower;

(e) Investments by Borrower in any First Lien Loan Party;

(f) Investments received in settlement of debt as liabilities owed to any First
Lien Loan Party or in satisfaction of judgments;

 

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(g) to the extent constituting Investments, (i) Borrower may consummate a
transaction permitted pursuant to Section 6.05, (ii) Borrower may engage in
Asset Sales permitted pursuant to Section 6.06 (including receipt of
consideration constituting Investments), (iii) Borrower may make Dividends
permitted pursuant to Section 6.07 and (iv) Borrower may take actions permitted
pursuant to Section 6.08;

(h) Investments consisting of pledges or deposits made in the ordinary course of
business, including the investment of such sums as provided in Sections 6.02(d),
(r) and (s);

(i) Investments consisting of debt securities and other non-cash consideration
received as consideration for an Asset Sale permitted by Section 6.06;

(j) prepaid expenses and similar items in the ordinary course of business
pursuant to transactions not otherwise prohibited hereunder;

(k) in addition to Investments otherwise expressly permitted by this
Section 6.04, so long as no Default or Event of Default shall have occurred and
be continuing at the time such Investments are made or would result therefrom,
Investments by Borrower in an aggregate amount not to exceed $5,000,000 at any
time outstanding; provided, however, that to the extent to the extent that any
lender (or agent for lenders) possessing a Lien on the SLS Las Vegas that is
senior to the SLS Las Vegas Mortgage, but only to the extent such lender or
agent is an Institutional Lender, waives any default, or consents to any actions
of Borrower that would cause a default, with respect to the substantively
similar and corresponding sections of such senior secured financing agreements
to this clause (k), Lender shall be deemed to have waived such default, or
consented to such actions of Borrower;

(l) Investments in Unrestricted Subsidiaries and joint ventures established to
develop or operate restaurants, night clubs, hotel space, entertainment venues,
retail space or other activities within the Project not to exceed $10,000,000 at
any time outstanding, which Investments may be made pursuant to (or in lieu of)
dispositions in the manner contemplated under Section 6.06(n) or received in
consideration for dispositions under Section 6.06(n); and

(m) Investments in an amount equal to any Net Cash Proceeds received by Borrower
after the Closing Date from capital contributions or issuances of Equity
Interests Qualified Capital Stock.

The amount of any Investment shall be the initial cost thereof (or, in the case
of Investments under clause (k) (in a form other than cash or Cash Equivalents),
based on the fair market value of the assets contributed on the date of such
contributions), minus all payments received from time to time with respect to
such Investment, whether constituting dividends, distributions, sale proceeds,
interest, principal or otherwise; and in the case of an Investment which is a
Contingent Obligation, the amount thereof shall be determined as provided in the
definition of Contingent Obligation and shall be reduced as the underlying
obligation is reduced.

SECTION 6.05 Mergers and Consolidations. Wind up, liquidate or dissolve its
affairs or enter into any transaction of merger or consolidation, except that
the following shall be permitted:

(a) any First Lien Loan Party (other than Holdings) may be merged or
consolidated with or into Borrower; provided, that Borrower shall be the
continuing or surviving entity; and

(b) Borrower may dispose of any of its property in accordance with Section 6.06.

 

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SECTION 6.06 Asset Sales. Effect any Asset Sale, except that the following shall
be permitted:

(a) the disposition for fair market value of obsolete, surplus or worn out
property or property no longer useful or necessary in the business of Borrower;

(b) the disposition of cash or Cash Equivalents (in each case in transactions
not prohibited hereunder), Investments permitted pursuant to Section 6.04,
inventory in the ordinary course of business, and receivables (in connection
with the collection thereof and otherwise as customary in businesses of the type
conducted by Borrower);

(c) dispositions permitted by Section 6.05 or Section 6.07;

(d) the sale or issuance of Borrower’s Equity Interests (other than Disqualified
Capital Stock) to its direct parent or to any First Lien Loan Party;

(e) dispositions of property having a fair market value not in excess of
$2,500,000 in the aggregate in any fiscal year; provided, that (i) the
consideration received for such property shall be in an amount at least equal to
the fair market value thereof (determined as of the time of execution of a
binding agreement with respect to such dispositions); and (ii) the consideration
received therefor shall be at least 75% in cash or Cash Equivalents; provided
that for purposes of this clause (ii), each of the following shall be deemed to
be cash: (A) any liabilities (as shown the most recent balance sheet of Borrower
and its consolidated Subsidiaries provided hereunder or in the footnotes
thereto) of the Borrower, other than liabilities that are by their terms
subordinated to the payment in cash of the Obligations, that are assumed by the
transferee with respect to the applicable disposition and for which Borrower
shall have been validly released and (B) any securities or instruments received
by the Borrower from such transferee that are converted by the Borrower into
cash (to the extent of the cash received) within 180 days following the closing
of the applicable disposition; provided, however, that to the extent to the
extent that any lender (or agent for lenders) possessing a Lien on the SLS Las
Vegas that is senior to the SLS Las Vegas Mortgage, but only to the extent such
lender or agent is an Institutional Lender, waives any default, or consents to
any actions of Borrower that would cause a default, with respect to the
substantively similar and corresponding sections of such senior secured
financing agreements to this clause (e), Lender shall be deemed to have waived
such default, or consented to such actions of Borrower;

(f) subject to the last paragraph of this Section 6.06, the Borrower may enter
into any leases or subleases with respect to any of its Real Property (including
in order to minimize unrelated business taxable income to indirect members in
Borrower);

(g) the dedication of space or other dispositions of property in connection with
and in furtherance of constructing structures or improvements reasonably related
to the development, construction and operation of the Project; provided, that in
each case such dedication or other dispositions are in furtherance of, and do
not materially impair or interfere with the use or operations (or intended use
or operations) of, the Project;

(h) Borrower may (i) license trademarks, trade names, copyrights, patents and
other Intellectual Property in the ordinary course of business, provided that
such licensing, individually or in the aggregate, does not interfere in any
material respect with the ordinary conduct of the business of Borrower and
(ii) abandon any trademarks, trade names, copyrights, patents or other
Intellectual Property no longer necessary in the business of Borrower;

 

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(i) the incurrence of Liens permitted under Section 6.02; provided, that any
leases (whether or not constituting Permitted Liens) shall be permitted only to
the extent provided in subsection (f) above and the last paragraph of this
Section 6.06;

(j) Asset Sales in connection with or as a result of any Casualty Event;
provided, that Borrower otherwise complies with Sections 2.10 and 2.17, as
applicable, of the First Lien Financing Agreement;

(k) [Reserved];

(l) the granting of easements, rights of way and rights of access to
Governmental Authorities, utility providers, cable or other communication
providers and other parties providing services or benefits to the Project, the
Real Property held by Borrower or the public at large that (i) do not in any
case materially detract from the value of the Real Property, taken as a whole,
and (ii) would not reasonably be expected to interfere in any material respect
with the construction, development or operation of the Project or the Real
Property;

(m) Borrower may (i) enter into a master lease with respect to any portion of
the Project with a person who shall from time to time directly or indirectly
lease or sublease such property to persons who, either directly or through
Affiliates of such persons, shall operate or manage all or some of the food and
beverage or retail venues within the Project, including without limitation
restaurants, night clubs and bars, or recreation venues within the Project, and
(ii) grant related declarations of covenants, conditions and restrictions and
reservation of easements and common area spaces benefiting the tenants of such
lease and subleases generally (collectively, “Master Lease Easements,” and
together with any such master lease, are referred to collectively as “Master
Lease Documents” and individually as a “Master Lease Document”); provided that
(A) no Event of Default shall exist and be continuing at the time any such
Master Lease Document is entered into or would occur as a result of entering
into such Master Lease Document or sublease permitted pursuant thereto,
(B) Borrower shall be required to maintain control (which may be through
required contractual standards) over the primary aesthetics and standards of
service and quality of the business being operated or conducted in connection
with any such leased or subleased space, and (C) no Master Lease Document or
operations conducted pursuant thereto would be reasonably expected to materially
interfere with, or materially impair or detract from, the operation of the
Project; provided, further that (x) Lender shall provide the master lessee
tenant under any Master Lease Document and any tenants under any sublease
entered into pursuant to such Master Lease Document with a subordination,
non-disturbance and attornment agreement substantially in the form of Exhibit H
hereto or in such other form as is reasonably satisfactory to Lender and
Borrower, and (y) unless Lender shall otherwise waive such requirement, with
respect to any such lease or sublease having a term of five years or more and
reasonably anticipated annual rents (whether due to base rent, fixed rents,
reasonably anticipated percentage rents or other reasonably anticipated rental
income from such lease or sublease) in excess of $5,000,000 (other than leases
solely between First Lien Loan Parties), Borrower shall enter into, and cause
the tenant under any such Master Lease Document to enter into, such
subordination, non-disturbance and attornment agreement;

(n) lease or sublease of, any portion of the Project to persons who, either
directly or through Affiliates of such persons, intend to operate or manage a
night club, bar, restaurant, recreation, spa, pool, exercise or gym facility, or
entertainment or retail venues within the Project and (ii) grant related
declarations of covenants, conditions and restrictions and reservation of
easements and common area spaces benefiting such tenants of such lease and
subleases generally (collectively, the “Entertainment Venue Easements,” and
together with any such lease or sublease, are referred to collectively as the
“Entertainment Venue Documents” and individually as an “Entertainment Venue
Document”); provided that (A) no Event of Default shall exist and be continuing
at the time any such

 

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Entertainment Venue Document is entered into or would occur as a result of
entering into such Entertainment Venue Document, (B) Borrower shall be required
to maintain control (which may be through required contractual standards to be
determined by Borrower in its sole but reasonable discretion) over the primary
aesthetics and standards of service and quality of the business being operated
or conducted in connection with any such leased or subleased space and (C) no
Entertainment Venue Document or operations conducted pursuant thereto would
reasonably be expected to materially interfere with, or materially impair or
detract from, the operation of the Project; provided further that (x) upon
request by Borrower, Lender shall provide the tenant under any Entertainment
Venue Document with a subordination, non-disturbance and attornment agreement
substantially in the form of Exhibit H hereto or in such other form as is
reasonably satisfactory to Lender and Borrower, and (y) unless Lender shall
otherwise waive such requirement, with respect to any such Entertainment Venue
Document having a term of five years or more and reasonably anticipated annual
rents (whether due to base rent, fixed rents, reasonably anticipated percentage
rents or other reasonably anticipated rental income from such lease or sublease)
in excess of $5,000,000 (other than leases solely between First Lien Loan
Parties), Borrower shall enter into, and cause the tenant under any such
Entertainment Venue Document to enter into, such subordination, non-disturbance
and attornment agreement; and

(o) Investments permitted under Section 6.04.

Notwithstanding the foregoing provisions of this Section 6.06, subsection
(f) above shall be subject to the additional provisos that: (a) no Event of
Default shall exist and be continuing at the time such transaction, lease or
sublease is entered into, (b) such transaction, lease or sublease would not
reasonably be expected to materially interfere with, or materially impair or
detract from, the operation of the Project, (c) no gaming, hotel or casino
operations (other than hotel operations approved in writing by Lender and the
operation of arcades and games for minors) may be conducted on any space that is
subject to such transaction, lease or sublease other than by and for the benefit
of Borrower and (d) no lease or sublease may provide that Borrower subordinate
its fee, condominium or leasehold interest to any lessee or any party financing
any lessee; provided, that (x) Lender shall provide the tenant under any such
lease or sublease (at the request of the Borrower) with a subordination,
non-disturbance and attornment agreement substantially in the form of Exhibit H
hereto with such changes as Lender may approve, which approval shall not be
unreasonably withheld, conditioned or delayed, or in such other form as is
reasonably satisfactory to Lender and (y) unless Lender shall otherwise waive
such requirement, with respect to any such lease or sublease having a term of
five years or more and reasonably anticipated annual rents (whether due to base
rent, fixed rents, reasonably anticipated percentage rents or other reasonably
anticipated rental income from such lease or sublease) in excess of $5,000,000
(other than leases solely between First Lien Loan Parties), Borrower shall enter
into, and cause the tenant under any such lease or sublease to enter into with
Lender, a subordination, non-disturbance and attornment agreement, substantially
in the form of Exhibit H hereto with such changes as Lender may approve, which
approval shall not be unreasonably withheld, conditioned or delayed.

SECTION 6.07 Dividends. Declare or pay, directly or indirectly, any Dividends
with respect to Borrower, except that the following shall be permitted:

(a) to the extent constituting Dividends, (i) Borrower may consummate a
transaction permitted pursuant to Section 6.05, (ii) Borrower may make
Investments permitted pursuant to Section 6.04 and (iii) Borrower may take
actions permitted pursuant to Section 6.08;

(b) [Reserved];

 

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(c) so long as no Default or Event of Default shall have occurred and be
continuing or would result therefrom, Borrower may pay dividends or
distributions to the other First Lien Loan Parties or Borrower to permit such
other persons to (i) repurchase Qualified Capital Stock of Borrower or any First
Lien Loan Party from present or former employees (or the estates, family members
or heirs) of such persons upon the death, disability or termination of
employment of such employees or (ii) make payments in respect of Indebtedness
issued by Borrower solely for the purposes de-scribed in clause (i); provided,
that the aggregate amount of payments under this subsection (c), will not exceed
$5,000,000 during any fiscal year; provided further that if any portion of such
permitted dividend or distribution is not made in any fiscal year, such portion
may be carried over for dividends or distributions to be made in accordance with
clause (i) or (ii) above in the next succeeding fiscal year (with amounts
expended in such next succeeding fiscal year to be applied first against the
amount carried over and second against the amount set forth above in respect of
such succeeding fiscal year) subject to the aggregate amount of payments under
this subsection (c) (including any amounts carried over) not exceeding
$10,000,000 during any fiscal year;

(d) on and after the Final Completion Date and so long as no Default or Event of
Default shall have occurred and be continuing or would result therefrom,
Borrower may pay Dividends not otherwise permitted under any other subsection of
this Section 6.07 in an amount not to exceed, in the aggregate, $500,000 per
fiscal year; provided, however, that to the extent to the extent that any lender
(or agent for lenders) possessing a Lien on the SLS Las Vegas that is senior to
the SLS Las Vegas Mortgage, but only to the extent such lender or agent is an
Institutional Lender, waives any default, or consents to any actions of Borrower
that would cause a default, with respect to the substantively similar and
corresponding sections of such senior secured financing agreements to this
clause (d), Lender shall be deemed to have waived such default, or consented to
such actions of Borrower;

(e) to the extent constituting Dividends, Borrower may pay Project Costs as
permitted pursuant to the Disbursement Agreement;

(f) the making of any Dividend in exchange for, or out of the net cash proceeds
of the substantially concurrent sale (other than to a Subsidiary of Borrower)
of, Equity Interests of Borrower (other than Disqualified Capital Stock), or of
any Person that is or becomes, substantially concurrently with such transaction,
a holding company of Borrower, or from the substantially concurrent contribution
of common equity capital to Borrower;

(g) the repurchase of Equity Interests deemed to occur upon the exercise of
stock options or warrants to the extent such Equity Interests represent a
portion of the exercise price of those stock options or warrants;

(h) any termination or cancellation of Equity Interests issued to, or reserved
for issuance to, any director, officer or employee of Borrower, including upon
the death, disability or termination of employment of such director, officer or
employee;

(i) Dividends constituting payment in respect of fractional shares relating to
the exercise of stock options or warrants;

(j) after the Final Completion Date, Dividends up to an amount contributed as
capital contributions or received through issuances of Qualified Capital Stock
and used to fund Project Costs at any time that the conditions to funding
disbursements for Project Costs under the Disbursement Agreement were not
satisfied;

(k) so long as no Default or Event of Default shall have occurred and be
continuing or would result therefrom, Borrower may pay dividends or
distributions or make other payments to the other First Lien Loan Parties (or
direct or indirect members in such other First Lien Loan Parties) in

 

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an aggregate amount not to exceed the amount of equity funded to such other
First Lien Loan Parties (or direct or indirect members in such First Lien Loan
Parties) by such Persons to the extent that at the time of funding or issuance
constituted Qualified Additional Financing and excluding equity funded pursuant
to the Completion Guarantee; provided that such dividends, distributions or
payments shall only be made out of the Net Cash Proceeds of an incurrence of
Indebtedness which also constitutes Qualified Additional Financing;

(l) (i) for each taxable period during which Intermediate is a partnership for
U.S. federal tax purposes, Dividends to Holdings in an amount necessary to
permit Intermediate to make a pro rata distribution on each
April 15, June 15, September 15, and January 15 (or next succeeding Business Day
if such date falls on other than a Business Day) of such taxable period to its
owners such that each direct or indirect owner of Intermediate receives an
amount from such pro rata distribution from Intermediate sufficient to enable
such owner to pay its U.S. federal, state and/or local income taxes (as
applicable) attributable to its share of the taxable income of Intermediate that
is attributable to Intermediate’s direct ownership of Holdings and its indirect
ownership of Borrower with respect to such taxable period (assuming that each
owner is subject to income tax at the highest combined marginal federal, state,
and/or local income tax rate applicable to any owner for such taxable period and
taking into account the deductibility of state and local income taxes for U.S.
federal income tax purposes (and any limitations thereon), the alternative
minimum tax, any cumulative net taxable loss of Intermediate for prior taxable
periods ending after the Closing Date to the extent such loss is of a character
that would allow such loss to be available to reduce taxes in the current
taxable period (taking into account any limitations on the utilization of such
loss to reduce such taxes and assuming such loss had not already been utilized)
and the character (e.g., long-term or short-term capital gain or ordinary or
exempt) of the applicable income) and (ii) Dividends to Holdings in an amount
equal to the Taxes of Holdings and Intermediate and the expenses of preparing
and filing the Tax returns of Holdings and Intermediate, in an amount not to
exceed $250,000 per annum; and

(m) Dividends or other distributions in respect of Excess Cash Flow for any
Excess Cash Flow Period that was not used to make a mandatory prepayment under
any First Lien Financing Agreement or any Senior Qualified Additional Financing
Agreement (including to Lender in accordance with Section 2.06(b)).

SECTION 6.08 Transactions with Affiliates. Enter into, directly or indirectly,
any transaction or series of related transactions, whether or not in the
ordinary course of business, with any Affiliate of Borrower, other than on terms
and conditions at least as favorable to Borrower as would reasonably be obtained
by Borrower at that time in a comparable arm’s-length transaction with a person
other than an Affiliate, except that the following shall be permitted:

(a) on terms that are not less favorable to Borrower than those that might be
obtained at the time in a comparable arm’s length transaction with Persons who
are not Affiliates of Borrower so long as, to the extent applicable, Borrower
has delivered to Lender prior to the consummation of any such transaction
(1) with respect to any transaction or series of related transactions involving
aggregate consideration in excess of $1,000,000, a resolution of the Board of
Directors of Borrower certifying that such transaction or series of related
transactions complies with this Section 6.08 and that such transaction or series
of related transactions has been approved by a majority of the disinterested
members of the Board of Directors of Borrower, to the extent there are any such
disinterested members of such Board of Directors and (2) with respect to any
such transaction or series of related transactions that involves aggregate
consideration in excess of $5,000,000, an opinion as to the fairness to Borrower
at the time such transaction or series of related transactions is entered into
from a financial point of view issued by an accounting, appraisal or investment
banking firm of national standing; provided, however, that to the extent that
any lender (or agent for lenders) possessing a Lien on the SLS Las Vegas that is

 

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senior to the SLS Las Vegas Mortgage, but only to the extent such lender or
agent is an Institutional Lender, waives any default, or consents to any actions
of Borrower that would cause a default, with respect to the substantively
similar and corresponding sections of such senior secured financing agreements
to this clause (a), Lender shall be deemed to have waived such default, or
consented to such actions of Borrower;

(b) a disposition permitted pursuant to Section 6.06 (provided, that the
requirements of subsection (a) above shall apply to leases of portions of the
Project permitted pursuant to Section 6.06(f) and dispositions permitted
pursuant to Section 6.06(b) and provided further that dispositions permitted
pursuant to Section 6.06(m) and (n) shall be on terms at least as favorable to
Borrower and the other First Lien Loan Parties, taken as a whole, and giving
effect to all related transactions and the benefits to the Project expected to
result therefrom, as in a comparable arm’s length transaction), an Investment
permitted pursuant to Section 6.04 or a Dividend permitted pursuant to
Section 6.07;

(c) the payment of Project Costs as permitted pursuant to the Disbursement
Agreement;

(d) customary employment, employee benefit, compensation, indemnification and
insurance arrangements with officers, managers and directors of Borrower or of
any First Lien Loan Party;

(e) the disposition or issuance by the Borrower of its Equity Interests (other
than Disqualified Capital Stock);

(f) (i) the reimbursement of Affiliates of Borrower permitted under Section 4.4
of the Disbursement Agreement and (ii) the reimbursement of amounts provided by
an Affiliate for application towards expenditures necessary as a result of a
casualty, Event of Eminent Domain or Taking prior to receipt of Insurance
Proceeds or Eminent Domain Proceeds as the case may be, by Borrower with respect
thereto;

(g) transactions contemplated by the Financing Agreements and transactions
entered into in connection with modifications to the Financing Agreements;

(h) transactions with Unrestricted Subsidiaries or joint ventures pursuant to
this Agreement in the manner contemplated under Section 6.06(n) or for the
purpose of developing the assets held by such Unrestricted Subsidiaries or joint
ventures; and

(i) transactions contemplated by agreements existing as of the Closing Date, as
set forth on Schedule 6.08(i), including the Affiliate Documents.

SECTION 6.09 [Intentionally Omitted].

SECTION 6.10 Prepayments of Other Indebtedness; Modifications of Organizational
Documents and Other Documents, Etc. Directly or indirectly:

(a) make any optional or voluntary payment, prepayment, repurchase or redemption
of principal on, or otherwise voluntarily or optionally defease, any
Subordinated Indebtedness, or segregate funds for any such payment, prepayment,
repurchase, redemption or defeasance, or enter into any derivative or other
transaction with any derivatives counterparty obligating Borrower to make
payments to such derivatives counterparty as a result of any change in market
value of such Indebtedness, except with respect to the prepayment, repurchase,
redemption or defeasance (and the segregation of funds related thereto) of
Indebtedness with the proceeds of Permitted Refinancings thereof or from the
proceeds of equity contributions or issuances of Qualified Capital Stock or in
connection with the conversion of Indebtedness to Qualified Capital Stock of
Borrower;

 

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(b) terminate, amend or modify, or permit the termination, modification of its
Organizational Documents other than (i) any such termination, amendments or
modifications effected in connection with any transfers permitted by this
Agreement and (ii) any such amendments or modifications or such new agreements
which are required by the Gaming Laws and otherwise not adverse in any material
respect to the interests of Lender or in connection with the transactions
permitted under Section 6.04, 6.05 or 6.06;

(c) agree to any amendments to, or assignments, terminations or waivers of, any
of its rights under, any Permits or Material Agreements without in each case
obtaining the prior written consent of Lender if any such amendments,
assignments, terminations or waivers would, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect (taking into
consideration any viable replacements or substitutions therefor at the time such
determination is made) or would, individually or in the aggregate, be materially
disadvantageous to the interests of Lender; or

(d) amend or otherwise change the terms of any Financing Agreements or make any
payment consistent with an amendment thereof or change thereto (other than
(i) the Loan Documents and (ii) the First Lien Financing Documents or the
documents governing any Senior Qualified Additional Financing to the extent that
such amendment or change would not (i) add any prohibition or restriction on the
payment of the Obligations in addition to those set forth in such agreements or
the Intercreditor Agreements or this Agreement or (ii) result in the Borrower
breaching clause (y) of the proviso appearing at the end of Section 6.01) if the
effect of such amendment or change (or payment) would result in the Borrower
breaching clause (y) of the proviso appearing at the end of Section 6.01, change
(to earlier dates) any dates upon which payments of principal or interest are
due thereon, change the redemption, prepayment or defeasance provisions thereof
(to require any additional or earlier prepayment) or change the subordination
provisions of any such Indebtedness (or of any guaranty thereof).

SECTION 6.11 [Intentionally Omitted].

SECTION 6.12 Limitation on Issuance of Capital Stock.

(a) Issue any Equity Interest that is not Qualified Capital Stock.

(b) With respect to any Subsidiary, issue any Equity Interest (including by way
of sales of treasury stock) or any options or warrants to purchase, or
securities convertible into, any Equity Interest, except (i) for stock splits,
stock dividends and additional issuances of Equity Interests which do not
decrease the percentage ownership of Borrower or any Subsidiary in any class of
the Equity Interest of such Subsidiary; (ii) Subsidiaries of Borrower formed
after the Closing Date may issue Equity Interests to Borrower or the Subsidiary
of Borrower which is to own such Equity Interests; and (iii) for issuance of
nominal directors’ qualifying shares pursuant to Requirements of Law.

SECTION 6.13 Business; Holding Company Status.

(a) Enter into any material line of business other than Permitted Businesses; or

(b) Permit any Affiliate of Borrower, including Holdings, to hold title to the
Project Site or the principal assets comprising the Project (except through its
Equity Interests in Borrower which holds title to such assets).

 

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SECTION 6.14 Fiscal Year. Change its fiscal year-end to a date other than
December 31.

SECTION 6.15 No Further Negative Pledge. Enter into or suffer to exist or become
effective any agreement that prohibits or limits the ability of Borrower to
create, incur, assume or suffer to exist any Lien upon any of its property or
revenues, whether now owned or hereafter acquired, to secure the Obligations
other than (i) agreements existing as of the Closing Date (including the First
Lien Financing Agreement and the documents governing any Senior Qualified
Additional Financing and Permitted Refinancing), and (ii) (a) this Agreement and
the other Financing Agreements and any Indebtedness permitted under
Section 6.01(f), (b) any agreements governing any Liens permitted hereunder (in
each such case, any prohibition or limitation shall only be effective against
the property financed thereby or subject to such Lien and proceeds thereof),
(c) customary nonassignment provisions contained in leases, licenses and similar
agreements, joint venture arrangements and other contracts (in each case other
than those with respect to Real Property) and so long as such restrictions are
limited to such leases, licenses and similar agreements, joint venture
arrangements or other contracts, or, in the case of leases, licenses and similar
agreements, the property subject thereto), (d) any agreements governing any
Excluded Property or other property with respect to which the Loan Documents do
not require Lender to have a security interest (in which case any prohibition or
limitation shall only be effective against such Excluded Property or other such
property applicable thereto and proceeds thereof), (e) as required by applicable
Law, including any Gaming Law, (f) restrictions on the transfer of any property
subject to a contract with respect to an Asset Sale or other transfer,
conveyance or disposition permitted under this Agreement, (g) restrictions on
deposits made in connection with license applications or to secure letters of
credit or surety or other bonds issued in connection therewith or deposits made
in the ordinary course of business with respect to insurance premiums, worker’s
compensation, statutory obligations, utility deposits, rental obligations,
unemployment insurance, performance of tenders, surety and appeal bonds and
other similar obligations (or to secure letters of credit or surety or other
bonds relating thereto), (h) the subordination provisions of any Indebtedness
owed to Borrower, and (i) any agreements, encumbrances or restrictions existing
on the Closing Date.

SECTION 6.16 Anti-Terrorism Law; Anti-Money Laundering.

(a) Directly or indirectly, (i) knowingly conduct any business or engage in
making or receiving any contribution of funds, goods or services to or for the
benefit of any person described in Section 3.21, (ii) knowingly deal in, or
otherwise engage in any transaction relating to, any property or interests in
property blocked pursuant to the Executive Order or any other Anti-Terrorism
Law, or (iii) knowingly engage in or conspire to engage in any transaction that
evades or avoids, or has the purpose of evading or avoiding, or attempts to
violate, any of the prohibitions set forth in any Anti-Terrorism Law (and
Borrower shall deliver to Lender any certification or other evidence requested
from time to time by Lender in its reasonable discretion, confirming Borrower’s
compliance with this Section 6.16).

(b) Cause or permit any of the funds of Borrower that are used to repay the Loan
to be derived from any unlawful activity with the result that the making of the
Loan would be in violation of any Requirement of Law.

SECTION 6.17 Limitation on Hedge Agreements. Enter into any Hedging Agreement
other than Hedging Agreements entered into in the ordinary course of business
(and not for speculative purposes) to protect against changes in interest rates
or foreign exchange rates.

SECTION 6.18 Limitation on Zoning and Contract Changes and Compliance. Without
the knowledge and written consent of Lender, initiate or consent to any zoning
change of the Project Site or seek any material variance under any existing
zoning ordinance, except, in each case, to the extent such variance or change in
zoning would not reasonably be expected to materially and adversely affect the
occupancy, use or operation of all or any material portion of the Project Site
as a hotel and casino.

 

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SECTION 6.19 No Joint Assessment; Separate Lots. Suffer, permit or initiate the
joint assessment of the Mortgaged Property owned by it with real property other
than the Mortgaged Property owned by it.

ARTICLE VII

ACCOUNTS

SECTION 7.01 Deposit Account. As of the date hereof, pursuant to the SLS
Mortgage, the Borrower has pledged to Lender the Qualified Additional Financing
Proceeds Account (as defined in the Disbursement Agreement) relating to the Loan
(the “Deposit Account”). The Lender has a first priority security interest in
the Deposit Account, which security interest is perfected by Control. The Lender
is party to the Control Agreement. The Lender agrees with the Borrower that the
Lender shall not give any instructions directing the disposition of funds from
time to time credited to the Deposit Account or withhold any withdrawal rights
from the Borrower with respect to funds from time to time credited to the
Deposit Account unless an Event of Default has occurred and is continuing. The
Borrower agrees that once the Lender sends an instruction or notice to a Bank
exercising its Control over the Deposit Account the Borrower shall not give any
instructions or orders with respect to the Deposit Account including, without
limitation, instructions for distribution or transfer of any funds in the
Deposit Account. The Borrower shall not grant Control of the Deposit Account to
any person other than the Lender.

EVENTS OF DEFAULT

SECTION 8.01 Events of Default. Upon the occurrence and during the continuance
of the following events (“Events of Default”), provided in no event shall any
such event that occurs prior to the Closing Date constitute an Event of Default:

(a) default shall be made in the payment of any principal of the Loan when and
as the same shall become due and payable, whether at the due date thereof or at
a date fixed for prepayment (whether voluntary or mandatory) thereof or by
acceleration thereof or otherwise; provided that the failure to pay any amount
due under the Disbursement Agreement (and not otherwise due hereunder) shall
constitute an Event of Default hereunder only to the extent such failure to pay
constitutes a Disbursement Agreement Event of Default;

(b) default shall be made in the payment of any interest on the Loan or any Fee
or any other amount (other than an amount referred to in paragraph (a) above)
due under any Loan Document, when and as the same shall become due and payable,
and such default shall continue unremedied for a period of three Business Days;
provided, that the failure to pay any amount due under the Disbursement
Agreement (and not otherwise due hereunder) shall constitute an Event of Default
hereunder only to the extent such failure to pay constitutes a Disbursement
Agreement Event of Default;

(c) any representation or warranty made or deemed made by Borrower in or in
connection with any Loan Document or Credit Extension hereunder, or any
representation, warranty, statement or information contained in any report,
certificate, or financial statement furnished in connection with or pursuant to
any Loan Document, shall prove to have been false or misleading in any material
respect when so made, deemed made or furnished; provided, that the inaccuracy of
any representation or warranty contained only in the Disbursement Agreement or
report, certificate, or financial statement delivered pursuant to the
Disbursement Agreement shall constitute an Event of Default hereunder only to
the extent such inaccuracy constitutes a Disbursement Agreement Event of
Default;

 

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(d) (i) default shall be made in the due observance or performance by Borrower
of any covenant, condition or agreement contained in Section 5.02(d), 5.03(a),
or 5.08 or in Article VI, or (ii) default shall be made in the due observance or
performance by Borrower of any covenant, condition or agreement contained in
Section 5.14(c) and such default shall continue unremedied or shall not be
waived for a period of 30 days after receipt by the Borrower of written notice
of such default from Lender to Borrower;

(e) default shall be made in the due observance or performance by Borrower of
any covenant, condition or agreement contained in any Loan Document (other than
those specified in paragraphs (a), (b) or (d) immediately above) and such
default shall continue unremedied or shall not be waived for a period of 30 days
after receipt by the Borrower of written notice of such default from Lender to
Borrower; provided, that the failure to perform or comply with any such
provision of the Disbursement Agreement shall constitute an Event of Default
hereunder only to the extent such failure to perform or to comply constitutes a
Disbursement Agreement Event of Default;

(f) the Indebtedness of the First Lien Financing or Senior Qualified Additional
Financing or other Qualified Additional Financing in an aggregate principal
amount in excess of $50,000,000 shall become due prior to its stated maturity or
become subject to a mandatory purchase offer by the obligor, as a result of
Borrower having failed to pay any principal or interest, regardless of amount,
due in respect of such Indebtedness when and as the same shall become due and
payable beyond any applicable grace period, or failed to observe or perform any
other term, covenant, condition or agreement contained in any agreement or
instrument evidencing or governing any such Indebtedness;

(g) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed in a court of competent jurisdiction seeking (i) relief in
respect of Borrower, or of a substantial part of the property of Borrower (other
than any Immaterial Subsidiary), under Title 11 of the U.S. Code, as now
constituted or hereafter amended, or any other federal, state or foreign
bankruptcy, insolvency, receivership or similar law; or (ii) the appointment of
a receiver, trustee, custodian, sequestrator, conservator or similar official
for Borrower or for a substantial part of the property of Borrower (other than
any Immaterial Subsidiary); and such proceeding or petition shall continue
undismissed for 60 days or an order or decree approving or ordering any of the
foregoing shall be entered;

(h) Borrower shall (i) voluntarily commence any proceeding or file any petition
seeking relief under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other federal, state or foreign bankruptcy,
insolvency, receivership or similar law; (ii) consent to the institution of, or
fail to contest in a timely and appropriate manner, any proceeding or the filing
of any petition described in paragraph (g) above; (iii) apply for or consent to
the appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for Borrower or for a substantial part of the property of
Borrower (other than any Immaterial Subsidiary); (iv) make a general assignment
for the benefit of creditors; (v) admit in writing its inability or fail
generally to pay its debts as they become due; or (vi) except as expressly
permitted by Section 6.05, wind up or liquidate;

(i) one or more judgments, orders or decrees for the payment of money in an
aggregate amount (to the extent not paid or covered by insurance) in excess of
$15,000,000 shall be rendered against Borrower and the same shall remain
undischarged, unvacated or unbonded for a period of 30 consecutive days during
which execution shall not be effectively stayed;

 

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(j) one or more ERISA Events shall have occurred that, when taken together with
all other such ERISA Events that have occurred, would reasonably be expected to
result in a Material Adverse Effect or in the imposition of a material Lien on
any properties of Borrower;

(k) any security interest and Lien purported to be created by the SLS Las Vegas
Mortgage shall cease to be in full force and effect, or shall cease to give
Lender, the Liens, rights, powers and privileges purported to be created and
granted under the SLS Las Vegas Mortgage (including a perfected second priority
(to the extent that Borrower does not incur any Senior Qualified Additional
Financing or other senior Indebtedness permitted by this Agreement that is
secured by a Lien on the Mortgaged Property that is permitted by this Agreement
to be senior to the Lien of Lender on the Mortgaged Property), and otherwise,
junior priority security interest in and Lien on all of the Collateral
thereunder (except as otherwise provided in this Agreement or in the SLS Las
Vegas Mortgage and subject to Permitted Liens)) in favor of Lender, or shall be
asserted by Borrower not to be a valid, perfected (except as otherwise provided
in any Loan Document) security interest in or Lien on the Collateral covered
thereby; provided, that no Event of Default shall occur under this clause (k) if
Borrower cooperates with Lender to replace or perfect such security interest and
Lien, such security interest and Lien is replaced and the rights, powers and
privileges of Lender is not materially adversely affected by such replacement;

(l) any Loan Document or any material provisions thereof shall at any time and
for any reason be declared by a court of competent jurisdiction to be null and
void, or a proceeding shall be commenced by Borrower, seeking to establish the
invalidity or unenforceability thereof (exclusive of questions of interpretation
of any provision thereof), or Borrower shall repudiate or deny any portion of
its liability or obligation for the Obligations;

(m) there shall have occurred a Change in Control;

(n) (i) the failure to obtain by the Opening Date any of the Gaming Approvals,
Casino Licenses or Liquor Licenses necessary for the ownership, use or operation
of any Gaming Facility or the Project, (ii) after the Opening Date, the filing
of a disciplinary complaint by any Gaming Authority seeking a License Revocation
with respect to any Gaming Approval, Casino License or Liquor License issued to
or held by Borrower, provided, that Borrower shall have 90 days from the date of
filing of such disciplinary complaint (or such longer period of time expressly
permitted by any Gaming Authority not to exceed 180 days from the date of filing
of the disciplinary complaint) to cure any issue or deficiency giving rise to
the filing of such disciplinary complaint such that the complaint is ultimately
dismissed or settled without a revocation, non-renewal, denial or suspension of
any such Permit, (iii) after the Opening Date, the occurrence of a License
Revocation that continues for 10 or more consecutive Business Days prohibiting
gaming operations accounting for 10% or more of the consolidated gross revenues
(calculated in accordance with GAAP) of Borrower related to gaming operations,
or (iv) after the Opening Date, Borrower or any of its operators, managers or
agents cease to conduct gaming activities or operate any portion of the casino
at any Gaming Facility for any reason whatsoever (other than temporary cessation
in connection with alterations permitted hereunder or restoration following a
Casualty Event) which cessation continues for five or more Business Days and
accounts for 10% or more of the consolidated gross revenues (calculated in
accordance with GAAP) of Borrower related to gaming operations;

(o) any Permit or any material provision thereof shall be suspended, revoked,
cancelled, terminated or materially and adversely modified or failed to be
renewed or to be in full force and effect, if any such failure, violation,
breach, suspension, revocation, cancellation, termination, modification or
non-renewal, individually or in the aggregate, would reasonably be expected to
result in a Material Adverse Effect; and

 

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(p) the Opening Date has not occurred on or prior to September 30, 2014 (or
solely in the event that (i) the Borrower has exercised its first Escrow
Extension Option (as defined in the First Lien Financing Agreement) pursuant to
Section 2.10(h) of the Existing First Lien Financing Agreement, December 31,
2014, (ii) the Borrower has exercised its second Escrow Extension Option (as
defined in the First Lien Financing Agreement) pursuant to Section 2.10(h) of
the Existing First Lien Financing Agreement, March 31, 2015 and (iii) the
Borrower has exercised its third Escrow Extension Option (as defined in the
Existing First Lien Financing Agreement) pursuant to Section 2.10(h) of the
Existing First Lien Financing Agreement, June 30, 2015, or such Existing First
Lien Financing Agreement is no longer in effect, such date, if any, specified as
a required opening date in the First Lien Financing Agreement);

then, and in every such event (other than an event with respect to Borrower
described in paragraph (g) or (h) above), and at any time thereafter during the
continuance of such event, Lender shall, by notice to Borrower, take either or
both of the following actions, at the same or different times: (i) terminate
forthwith the Commitments and (ii) declare the Loan then outstanding to be
forthwith due and payable in whole or in part, whereupon the principal of the
Loan so declared to be due and payable, together with accrued interest thereon
and any unpaid accrued Fees and all other Obligations of Borrower accrued
hereunder and under any other Loan Document, shall become forthwith due and
payable, subject to the Intercreditor Agreements, without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived by Borrower, anything contained herein or in any other Loan Document to
the contrary notwithstanding; and in any event, with respect to an event with
respect to Borrower described in paragraph (g) or (h) above, the Commitments
shall automatically terminate and the principal of the Loan then outstanding,
together with accrued interest thereon and any unpaid accrued Fees and all other
Obligations of Borrower accrued hereunder and under any other Loan Document,
shall automatically become due and payable, subject to the Intercreditor
Agreements, without presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived by Borrower, anything contained
herein or in any other Loan Document to the contrary notwithstanding.

SECTION 8.02 Rescission. If at any time after termination of the Commitments or
acceleration of the maturity of the Loan, Borrower shall pay all arrears of
interest and all payments on account of principal of the Loan owing by it that
shall have become due otherwise than by acceleration (with interest on principal
and, to the extent permitted by law, on overdue interest, at the rates specified
herein) and all Defaults (other than non-payment of principal of and accrued
interest on the Loan due and payable solely by virtue of acceleration) shall be
remedied or waived pursuant to Section 10.02, then upon written notice to
Borrower, the termination of the Commitments or the acceleration and their
consequences may be rescinded and annulled; but such action shall not affect any
subsequent Default or impair any right or remedy consequent thereon. The
provisions of the preceding sentence are not intended to benefit Borrower and do
not give Borrower the right to require Lender to rescind or annul any
acceleration hereunder, even if the conditions set forth herein are met.

SECTION 8.03 Application of Proceeds. Subject to the terms of any Intercreditor
Agreements contemplated under Section 6.02(j) and (v), the proceeds received by
Lender in respect of any sale of, collection from or other realization upon all
or any part of the Collateral pursuant to the exercise by Lender of its remedies
shall be applied, in full or in part, together with any other sums then held by
Lender pursuant to this Agreement, promptly by Lender as follows:

(a) First, to the payment of all reasonable costs and expenses, fees,
commissions and taxes of such sale, collection or other realization including
compensation to Lender and Lender’s agents and counsel, and all expenses,
liabilities and advances made or incurred by Lender in connection therewith and
all amounts for which Lender is entitled to indemnification pursuant to the
provisions of any Loan Document, together with interest on each such amount at
the highest rate then in effect under this Agreement from and after the date
such amount is due, owing or unpaid until paid in full;

 

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(b) Second, without duplication of amounts applied pursuant to clause (a) above,
to the indefeasible payment in full in cash, of interest and other amounts
constituting Obligations (other than principal);

(c) Third, to the indefeasible payment in full in cash, of the principal amount
of the Obligations; and

(d) Fourth, the balance, if any, to the person lawfully entitled thereto
(including Borrower or its successors or assigns) or as a court of competent
jurisdiction may direct.

In the event that any such proceeds are insufficient to pay in full the items
described in clauses (a) through (d) of this Section 8.03, the Borrower shall
remain liable for any deficiency.

ARTICLE IX

COLLATERAL

SECTION 9.01 Collateral Matters. Lender irrevocably agrees that any Lien on any
property granted to or held by Lender shall be automatically terminated and
released (i) upon payment in full of all Obligations (other than contingent
indemnification obligations not yet accrued and payable), or (ii) at the time
the property subject to such Lien is transferred or to be transferred as part of
or in connection with any transfer permitted hereunder or under any other Loan
Document (and Lender may rely conclusively on a certificate to that effect
provided to it by Borrower upon its reasonable request without further inquiry).

Lender shall, upon the request of the Borrower:

(i) release or subordinate any Lien on any property granted to or held by Lender
under any Loan Document to the holder of any Lien on such property that is
permitted by Section 6.02(q), to the extent required by the terms of the
obligations secured by such Liens;

(ii) consent to and enter into (and execute documents permitting the filing and
recording, where appropriate) (x) the grant of easements and covenants,
conditions, restrictions and declarations and (y) subordination, non-disturbance
and attornment agreements, in each case in favor of the ultimate purchasers, or
tenants under leases or subleases of any portion of the Project, as applicable,
in connection with the transactions contemplated by Sections 6.06(f), (l),
(m) and (n); and

(iii) subordinate the SLS Las Vegas Mortgage to any reciprocal easement
agreements, covenants, conditions and restrictions and other similar rights
reasonably acceptable to Lender which are requested by Borrower pursuant to the
transactions contemplated by Sections 6.06(l), (m) and (n).

In each case as specified in this Section 9.01, Lender will, at Borrower’s
expense, execute and deliver to Borrower such documents as Borrower may
reasonably request to evidence the release of such item of Collateral from the
security interest granted under the SLS Las Vegas Mortgage or any such consents
or subordination agreements to effectuate the matters referenced above, in each
case in accordance with the terms of the Loan Documents and this Section 9.01.

 

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ARTICLE X

MISCELLANEOUS

SECTION 10.01 Notices.

(a) Generally. Except in the case of notices and other communications expressly
permitted to be given by telephone (and except as provided in paragraph
(b) below), all notices and other communications provided for herein shall be in
writing and shall be delivered by hand or overnight courier service, mailed by
certified or registered mail or sent by facsimile as follows:

 

  (i) if to Borrower at:

Stockbridge/SBE Holdings, LLC

c/o Stockbridge Real Estate Partners II, LLC

4 Embarcadero Center, Suite 3300

San Francisco, CA 94111

Attention: Controller

Facsimile: (415) 658-3433

Email: controller@sbfund.com

with a copy to:

SBE Entertainment Group

8000 Beverly Blvd.

Los Angeles, CA 90048

Attention: General Counsel

Facsimile: (323) 655-8001

Email: randyw@sbe.com

with a copy to:

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, NY 10017

Attention: Thomas Patrick Dore, Jr., Esq.

Facsimile: (212) 701-5136

Email: dore@dpw.com

with a copy to:

Paul Hastings LLP

515 South Flower Street

Los Angeles, CA 90071

Attention: David Phelps, Esq.

Facsimile: (213) 693-6103

Email: davidphelps@paulhastings.com

 

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  (ii) if to Lender, to it at:

SLS Lender, LLC

c/o American Dream Fund, LLC

880 Apollo Street, Suite 218

El Segundo, CA 90245

Attn: George Ekins and Joseph McCarthy

Phone: (310) 736-2159

Fax: (310) 706-4388

Email: inquiry@adreamfund.com

with a copy to:

Homeier & Law, P.C.

15233 Ventura Blvd., Suite 605

Sherman Oaks, CA 91403

Attn: Jor Law

Phone: (818) 450-1552

Fax: (818) 907-7876

Email: jor@homeierlaw.com

Notices sent by hand or overnight courier service, or mailed by certified or
registered mail, shall be deemed to have been given when received; notices sent
by telecopier shall be deemed to have been given when sent (except that, if not
given during normal business hours for the recipient, shall be deemed to have
been given at the opening of business on the next business day for the
recipient). Notices delivered through electronic communications to the extent
provided in paragraph (b) below, shall be effective as provided in said
paragraph (b).

(b) Electronic Communications. Notices and other communications to Lender
hereunder may (subject to Section 10.01(d)) be delivered or furnished by
electronic communication (including e-mail and Internet or intranet websites)
pursuant to procedures approved by Lender. Lender or Borrower may, in their
discretion, agree to accept notices and other communications to it hereunder by
electronic communications pursuant to procedures approved by it (including as
set forth in Section 10.01(d)); provided that approval of such procedures may be
limited to particular notices or communications.

Unless Lender otherwise prescribes, notices and other communications sent to an
e-mail address shall be deemed received upon the sender’s receipt of an
acknowledgement from the intended recipient (such as by the “return receipt
requested” function, as available, return e-mail or other written
acknowledgement); provided that if such notice or other communication is not
sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on
the next business day for the recipient.

(c) Change of Address, Etc. Any party hereto may change its address or
telecopier number for notices and other communications hereunder by notice to
the other parties hereto.

(d) Emailing of Communications. Borrower hereby agrees that it will provide to
Lender all information, documents and other materials that it is obligated to
furnish to Lender pursuant to this Agreement and any other Loan Document,
including all notices, requests, financial statements, financial and other
reports, certificates and other information materials, but excluding any such
communication that (i) relates to the payment of any principal or other amount
due under this Agreement prior to the scheduled date therefor, (ii) provides
notice of any Default under this Agreement or (iii) is required to be delivered
to satisfy any condition precedent to the effectiveness of this Agreement and/or
any borrowing or other extension of credit hereunder (all such non-excluded
communications,

 

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collectively, the “Communications”), by transmitting the Communications in an
electronic/soft medium in a format reasonably acceptable to Lender at
inquiry@adreamfund.com or at such other e-mail address(es) provided to Borrower
from time to time or in such other form, including hard copy delivery thereof,
as Lender shall require. In addition, Borrower agrees to continue to provide the
Communications to Lender in the manner specified in this Agreement or any other
Loan Document or in such other form, including hard copy delivery thereof, as
Lender shall require. Nothing in this Section 10.01 shall prejudice the right of
Lender or Borrower to give any notice or other communication pursuant to this
Agreement or any other Loan Document in any other manner specified in this
Agreement or any other Loan Document or as Lender shall require.

To the extent consented to by Lender in writing from time to time, Lender agrees
that receipt of the Communications by Lender at its e-mail address(es) set forth
above shall constitute effective delivery of the Communications to Lender for
purposes of the Loan Documents.

SECTION 10.02 Waivers; Amendment.

(a) Generally. No failure or delay by Lender in exercising any right or power
hereunder or under any other Loan Document shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of Lender hereunder and under the other
Loan Documents are cumulative and are not exclusive of any rights or remedies
that they would otherwise have. No waiver of any provision of any Loan Document
or consent to any departure by Borrower therefrom shall in any event be
effective unless the same shall be permitted by this Section 10.02, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. Without limiting the generality of the foregoing,
the making of the Loan shall not be construed as a waiver of any Default,
regardless of whether Lender may have had notice or knowledge of such Default at
the time. No notice or demand on Borrower in any case shall entitle Borrower to
any other or further notice or demand in similar or other circumstances.

(b) Waivers, Amendments, Etc. Subject to Section 10.02(c), neither this
Agreement nor any other Loan Document nor the Intercreditor Agreements nor any
provision hereof or thereof may be waived, amended, supplemented or modified
except pursuant to an agreement or agreements in writing entered into by
Borrower and Lender, and, if applicable, the other parties that are party
thereto.

(c) Notwithstanding anything in this Section 10.02 to the contrary, in
connection with the incurrence by Borrower of additional Indebtedness permitted
by this Agreement, including pursuant to Section 6.01, Lender agrees to execute
and deliver any amendments, amendments and restatements, re-statements or
waivers of or supplements to or other modifications to, the SLS Las Vegas
Mortgage, and to make or consent to any filings or take any other actions in
connection therewith, including the entry into the intercreditor agreement
referred to in Section 6.01, as may be reasonably deemed by Borrower to be
necessary or reasonably desirable for any Lien on the assets of Borrower
permitted to secure such additional Indebtedness to become a valid, perfected
lien (with such priority as may be designated by Borrower, to the extent such
priority is permitted by the Loan Documents) pursuant to the SLS Las Vegas
Mortgage being so amended, amended and restated, restated, waived, supplemented
or otherwise modified.

 

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SECTION 10.03 Expenses; Indemnity; Damage Waiver.

(a) Costs and Expenses. Borrower shall pay (i) all reasonable and documented out
of pocket expenses incurred by Lender and its Affiliates (including the
reasonable fees, charges and disbursements of one counsel plus local counsel in
each relevant jurisdiction for Lender) in connection with the administration of
this Agreement and the other Loan Documents, and the preparation, negotiation,
execution, and delivery of any amendment, amendment and restatement,
modification or waiver of the provisions of this Agreement and the other Loan
Documents (whether or not the transactions contemplated hereby or thereby shall
be consummated), including in connection with post-closing searches to confirm
that security filings and recordations have been properly made and including any
costs and expenses of any service providers in connection therewith, and
(ii) all out-of-pocket expenses incurred by Lender (provided that any such legal
expenses shall be limited to the fees, disbursements and other charges of one
counsel to Lender plus local counsel in each relevant jurisdiction), in
connection with the enforcement or protection of its rights (A) in connection
with this Agreement and the other Loan Documents, including its rights under
this Section 10.03, or (B) in connection with the Loan made hereunder, including
all such out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of the Loan.

(b) Indemnification by Borrower. Borrower shall indemnify Lender and each
Related Party of Lender (each such person being called an “Indemnitee”) against,
and hold each Indemnitee harmless from, any and all reasonable and documented,
out of pocket losses, claims, damages, liabilities and related expenses
(including the fees, charges and disbursements of one counsel plus local counsel
in each relevant jurisdiction for any Indemnitee) incurred by any Indemnitee or
asserted against any Indemnitee by any party hereto or any third party arising
out of, in connection with, or as a result of (i) the execution or delivery of
this Agreement, any other Loan Document, or any amendment, amendment and
restatement, modification or waiver of the provisions hereof or thereof, or any
agreement or instrument contemplated hereby or thereby, the performance by the
parties hereto of their respective obligations hereunder or thereunder or the
consummation of the transactions contemplated hereby or thereby, (ii) the Loan
or the use or proposed use of the proceeds therefrom, (iii) any actual or
alleged presence or Release or threatened Release of Hazardous Materials on, at,
under or from, or any Environmental Claim related in any way to the Mortgaged
Property, or any liability under Environmental Law related in any way to
Borrower, (iv) any actual or prospective claim, litigation, investigation or
proceeding relating to any of the foregoing, whether based on contract, tort or
any other theory, whether brought by a third party or by Borrower, and
regardless of whether any Indemnitee is a party thereto; provided that such
indemnity shall not, as to any Indemnitee, be available (i) to the extent that
such losses, claims, damages, liabilities or related expenses that are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence, bad faith or willful
misconduct of such Indemnitee or any of its Related Parties, (ii) from a
material breach of such Indemnitee’s obligations hereunder or under any other
Loan Document, (iii) to the extent arising from any claim, litigation,
investigation or proceeding that is brought by an Indemnitee against any other
Indemnitee, (iv) as to any of the matters described in the second paragraph of
the “Indemnification” section of the Letter of Intent or (v) to the extent that
such losses, claims, damages, liabilities or related expenses directly result
from Lender’s participation in the EB-5 Immigrant Investor Program and do not
result from Borrower’s conduct. Each Indemnitee shall be a third-party
beneficiary of the indemnity provided by this Section 10.03(b). For the
avoidance of doubt, this Section 10.03(b) shall not apply with respect to any
Tax-related matter, except to the extent of any Taxes that represent losses,
damages, etc. resulting from a non-Tax claim.

 

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(c) Waiver of Consequential Damages, Etc. To the fullest extent permitted by
applicable Requirements of Law, Borrower shall not assert, and Borrower hereby
waives, any claim against any Indemnitee, on any theory of liability, for
special, indirect, consequential or punitive damages (as opposed to direct or
actual damages) arising out of, in connection with, or as a result of, this
Agreement, any other Loan Document or any agreement or instrument contemplated
hereby, the transactions contemplated hereby or thereby, the Loan or the use of
the proceeds thereof. No Indemnitee referred to in paragraph (b) above shall be
liable for any damages arising from the use by unintended recipients of any
information or other materials distributed by it through telecommunications,
electronic or other information transmission systems in connection with this
Agreement or the other Loan Documents or the transactions contemplated hereby or
thereby, except to the extent any such damages incurred by Borrower are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence, bad faith or willful
misconduct of such Indemnitee or material breach of any Loan Document by such
Indemnitee.

(d) Payments. All amounts due under this Section shall be payable not later than
3 Business Days after demand therefor.

SECTION 10.04 Successors and Assigns.

(a) Successors and Assigns Generally. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns permitted hereby, except that Borrower may not assign or
otherwise transfer any of its rights or obligations hereunder without the prior
written consent (not to be unreasonably withheld or delayed) of Lender (it being
understood that a merger or consolidation that is otherwise permitted by the
Loan Documents shall not constitute such an assignment or transfer). Nothing in
this Agreement, expressed or implied, shall be construed to confer upon any
person (other than the parties hereto, their respective successors and assigns
permitted hereby, Participants to the extent provided in paragraph (e) of this
Section 10.04 and, to the extent expressly contemplated hereby, the other
Indemnitees) any legal or equitable right, remedy or claim under or by reason of
this Agreement.

(i) Assignments by Lender. Without the prior written consent of Borrower (which
may be withheld in Borrower’s reasonable discretion), Lender may not assign all
or any portion of its rights and obligations under this Agreement (including all
or a portion of its Commitment and the Loan). For the avoidance of doubt, it
would be reasonable for Borrower to withhold consent to any assignment or
participation by Lender if such assignment or participation could reasonably be
expected to result in an adverse consequence on the Borrower (including any
diminution of rights of Borrower against ADF or Lender under the Letter of
Intent), resulting from, among other things, that such assignment or
participation (i) requires the consent of any member in the SLS Lender, LLC or
is not expressly permitted by the Operating Agreement, or (ii) requires consent
under or violates the EB-5 Immigrant Investor Program or result in any adverse
effect on Borrower. Any transfer of any interest held by ADF in Lender or SLS
Lender Manager, LLC, a Delaware limited liability company, shall be deemed an
assignment of the Loan that is subject to this Section 10.04(a)(i). Lender
acknowledges that ADF and Lender have affirmative obligations in favor of the
Borrower and other First Lien Loan Parties pursuant to the Letter of Intent.
Lender shall not take (or permit any affiliates to take) any action that could
reasonably be expected to result in any diminution of obligations on the part of
ADF under the Letter of Intent or result in a violation of the EB-5 Immigrant
Investor Program. Notwithstanding the foregoing, ADF may transfer its interests
in the Lender, to either (x) a regional center duly approved by United States
Citizenship and Immigration Services or (y) a party which becomes a successor in
interest to ADF pursuant to a merger or consolidation, provided, in each case,
the assignee or successor agrees to be bound by the terms and provisions of this
Agreement and the Letter of Intent and provided further, in each case, the
assignee or successor is reasonably acceptable to the Borrower with respect to
the assignee’s or successor’s ability to perform those duties, acts or
obligations required under this Agreement and the Letter of Intent, such
acceptance or withholding of acceptance by the Borrower to be determined in a
commercially reasonable and timely manner.

 

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(b) Agreement by Assignee. From and after the effective date specified in each
assignment, the assignee thereunder shall be a party to this Agreement and, to
the extent of the interest assigned by such assignment, have the rights and
obligations of a lender under this Agreement, and Lender shall, to the extent of
the interest assigned by such assignment to such lender, be released from its
obligations under this Agreement (and, in the case of an assignment covering all
of Lender’s rights and obligations under this Agreement, Lender shall cease to
be a party hereto) but shall continue to be entitled to the benefits of Sections
2.09 and 10.03 with respect to facts and circumstances occurring prior to the
effective date of such assignment. Any assignment or transfer by Lender of
rights or obligations under this Agreement that does not comply with this
paragraph shall be treated for purposes of this Agreement as a sale by Lender of
a participation in such rights and obligations in accordance with paragraph
(d) of this Section 10.04.

(c) Register. Borrower shall maintain at its office a copy of each assignment
delivered to it and a register for the recordation of the names and addresses of
the lenders, and the Commitments of, and principal amounts (and related interest
amounts) of the Loan owing to, each lender pursuant to the terms hereof from
time to time (the “Register”). The entries in the Register shall be conclusive
absent manifest error, and Borrower and the lenders shall treat each person
whose name is recorded in the Register pursuant to the terms hereof as a lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by any lender (with
respect to its own interest only), at any reasonable time and from time to time
upon reasonable prior notice.

(d) Participations. Without the prior written consent of Borrower, subject to
Section 10.04(b), Lender may not sell participations to any person (each, a
“Participant”) in all or any portion of Lender’s rights and/or obligations under
this Agreement (including all or a portion of its Commitment and/or the Loan).
In the event that any consent has been granted and the Lender participates any
portion of the Loan, (i) Lender’s obligations under this Agreement shall remain
unchanged, (ii) Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (iii) Borrower shall continue
to deal solely and directly with Lender in connection with Lender’s rights and
obligations under this Agreement.

Any agreement or instrument pursuant to which Lender sells such a participation
shall provide that Lender shall retain the sole right to enforce the Loan
Documents and to approve any amendment, modification or waiver of any provision
of the Loan Documents. Lender agrees, at the Borrower’s request and expense, to
use reasonable efforts to cooperate with Borrower to effectuate the replacement
of any Participant upon certain terms and conditions to be agreed to by the
parties. To the extent permitted by law, each Participant also shall be entitled
to the benefits of Section 10.08 as though it were a lender and had acquired its
interest by assignment pursuant to paragraph (b) of this Section, provided such
Participant agrees to be subject to certain terms and conditions regarding the
sharing of amounts received by exercising such Participant’s right to setoff
pursuant to Section 10.08 with the lenders as though it were a lender. In
addition, Lender, to the extent Lender sells a participation to one or more
Participants under this Section 10.4(e) shall, acting as a non-fiduciary agent
of Borrower, keep a register, specifying the name and address of each
Participant and each such Participant’s entitlement to payments of principal
(and related interest amounts) with respect to such participation (the
“Participant Register”). The entries in the Participant Register shall be
conclusive absent manifest error, and the Borrower and Lender shall treat each
person whose name is recorded in the Participant Register as the owner of such
participation for all purposes of this Agreement notwithstanding any notice to
the contrary; provided that Lender shall not have the obligation to disclose all
or a portion of the Participant Register (including the identity of the

 

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Participant or any information relating to a Participant’s interest in the Loan
or other obligations under any Loan Document) to any person except to the extent
that such disclosure is necessary in connection with a Tax audit or other Tax
proceeding to establish that any loans are in registered form for U.S. federal
income tax purposes.

(e) [Intentionally Omitted].

(f) Certain Pledges. Lender may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement to secure obligations
of Lender; provided that no such pledge or assignment shall release Lender from
any of its obligations hereunder or substitute any such pledgee or assignee for
Lender as a party hereto. Notwithstanding the foregoing, no such pledge shall be
made under this Section 10.04(g) if such pledge results or would result in a
violation of the EB- 5 Immigrant Investor Program or would result in any adverse
effect on Borrower.

(g) Electronic Execution of Assignments. The words “execution”, “signed”,
“signature”, and words of like import in any assignment and assumption shall be
deemed to include electronic signatures or the keeping of records in electronic
form, each of which shall be of the same legal effect, validity or
enforceability as a manually executed signature or the use of a paper-based
record-keeping system, as the case may be, to the extent and as provided for in
any applicable Requirement of Law, including the Federal Electronic Signatures
in Global and National Commerce Act, the New York State Electronic Signatures
and Records Act, or any other similar state laws based on the Uniform Electronic
Transactions Act.

SECTION 10.05 Survival of Agreement. All covenants, agreements, representations
and warranties made by Borrower in the Loan Documents and in the certificates or
other instruments delivered in connection with or pursuant to this Agreement or
any other Loan Document shall be considered to have been relied upon by the
other parties hereto and shall survive the execution and delivery of the Loan
Documents and the making of the Loan, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that Lender may have
had notice or knowledge of any Default or incorrect representation or warranty
at the time any credit is extended hereunder, and shall continue in full force
and effect as long as the principal of or any accrued interest on the Loan or
any fee or any other amount payable under this Agreement is outstanding and
unpaid and so long as the Commitments have not expired or terminated. The
provisions of Sections 2.09, 9.01, 10.09, 10.10, and 10.12 shall survive and
remain in full force and effect regardless of the consummation of the
transactions contemplated hereby, the repayment of the Loan or the termination
of this Agreement or any provision hereof.

SECTION 10.06 Counterparts; Integration; Effectiveness. This Agreement may be
executed in counterparts (and by different parties hereto in different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. Other than with respect to
the Fees pursuant to the terms set forth in the Letter of Intent, paragraph 12
of the Letter of Intent, and the obligations set forth in the paragraphs
enumerated in paragraph 12 of the Letter of Intent, this Agreement and the other
Loan Documents constitute the entire contract among the parties relating to the
subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except
as provided in Section 4.01, this Agreement shall become effective when it shall
have been executed by Lender and when Lender shall have received counterparts
hereof that, when taken together, bear the signatures of each of the other
parties hereto. Delivery of an executed counterpart of a signature page of this
Agreement by telecopier or other electronic transmission (i.e., a “pdf” or “tif”
document) shall be effective as delivery of a manually executed counterpart of
this Agreement.

 

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SECTION 10.07 Severability. Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.

SECTION 10.08 Right of Setoff. If an Event of Default shall have occurred and be
continuing, Lender is hereby authorized at any time and from time to time, to
the fullest extent permitted by applicable Requirements of Law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final, in whatever currency) at any time held and other obligations (in whatever
currency) at any time owing by Lender to or for the credit or the account of
Borrower against any and all of the obligations of Borrower now or hereafter
existing under this Agreement or any other Loan Document to Lender, irrespective
of whether or not Lender shall have made any demand under this Agreement or any
other Loan Document and although such obligations of Borrower may be contingent
or unmatured. The rights of Lender under this Section 10.08 are in addition to
other rights and remedies (including other rights of setoff) that Lender may
have. Lender agrees to notify Borrower promptly after any such setoff and
application; provided that the failure to give such notice shall not affect the
validity of such setoff and application. Notwithstanding the foregoing, Lender
shall not have any right of set off with respect to amounts held in the
Disbursement Agent Accounts.

SECTION 10.09 Governing Law; Jurisdiction; Consent to Service of Process.

(a) Governing Law. This Agreement shall be construed in accordance with and
governed by the law of the State of New York, without regard to conflicts of law
principles that would require the application of the laws of another
jurisdiction.

(b) Submission to Jurisdiction. Each party hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New
York, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to any Loan Document, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State court or, to the
fullest extent permitted by applicable law, in such Federal court. Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement or
any other Loan Document shall affect any right that Lender may otherwise have to
bring any action or proceeding relating to this Agreement or any other Loan
Document against Borrower or its properties in the courts of any jurisdiction.

(c) Waiver of Venue. Each party hereto hereby irrevocably and unconditionally
waives, to the fullest extent permitted by applicable Requirements of Law, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or any other
Loan Document in any court referred to in Section 10.09(b). Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by applicable
Requirements of Law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court.

(d) Service of Process. Each party hereto irrevocably consents to service of
process in any action or proceeding arising out of or relating to any Loan
Document, in the manner provided for notices (other than telecopier) in
Section 10.01. Nothing in this Agreement or any other Loan Document will affect
the right of any party hereto to serve process in any other manner permitted by
applicable Requirements of Law.

 

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SECTION 10.10 Waiver of Jury Trial. Each party hereto hereby waives, to the
fullest extent permitted by applicable Requirements of Law, any right it may
have to a trial by jury in any legal proceeding directly or indirectly arising
out of or relating to this Agreement, any other Loan Document or the
transactions contemplated hereby (whether based on contract, tort or any other
theory). Each party hereto (a) certifies that no representative, agent or
attorney of any other party has represented, expressly or otherwise, that such
other party would not, in the event of litigation, seek to enforce the foregoing
waiver and (b) acknowledges that it and the other parties hereto have been
induced to enter into this Agreement by, among other things, the mutual waivers
and certifications in this Section 10.10.

SECTION 10.11 Headings. Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.

SECTION 10.12 Treatment of Certain Information; Confidentiality. Lender agrees
to maintain the confidentiality of the Information (as defined below), except
that Information may be disclosed (a) to its Affiliates and to its and its
Affiliates’ respective partners, directors, officers, employees, agents,
advisors and other representatives (it being understood that the persons to whom
such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) pursuant
to the order of any court or to the extent requested by any Governmental
Authority or regulatory authority (including any self-regulatory authority, such
as the National Association of Insurance Commissioners), (c) to the extent
required by applicable Requirements of Law or by any subpoena or similar
compulsory legal process, (d) to the extent that such information is
independently developed by Lender without use of any Information or any
derivative thereof, (e) to the extent that such Information becomes publicly
available other than by reason of disclosure by Lender, any of their affiliates
or any of their representatives in breach of this agreement, (f) to any other
party hereto, (g) in connection with the exercise of any remedies hereunder or
under any other Loan Document or any action or proceeding relating to this
Agreement or any other Loan Document or the enforcement of rights hereunder or
thereunder, (h) subject to an agreement containing provisions substantially the
same as those of this Section 10.12, to any assignee of or Participant in, or
any prospective assignee of or Participant in, any of its rights or obligations
under this Agreement (other than any Competitor), (i) with the consent of
Borrower or (j) to the extent such Information (x) becomes publicly available
other than as a result of a breach of this Section 10.12 or (y) becomes
available to Lender or any of their respective Affiliates on a non-confidential
basis from a source other than Borrower that is not to the knowledge of Lender
subject to confidentiality obligations to Borrower or otherwise prohibited from
furnishing or making available such information to Lender by a contract, legal
or fiduciary obligation. For purposes of this Section 10.12, “Information” means
all information received from Borrower or any of its Subsidiaries relating to
Borrower or any of its Subsidiaries or any of their respective businesses, other
than any such information that is available to Lender on a non-confidential
basis prior to disclosure by Borrower or any of its Subsidiaries; provided that,
in the case of information received from Borrower or any of its Subsidiaries
after the date hereof, such information is clearly identified at the time of
delivery as confidential. Any person required to maintain the confidentiality of
Information as provided in this Section 10.12 shall be considered to have
complied with its obligation to do so if such person has exercised the same
degree of care to maintain the confidentiality of such Information as such
person would accord to its own confidential information.

 

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SECTION 10.13 USA PATRIOT Act Notice. Lender hereby notifies Borrower that
pursuant to the requirements of the Patriot Act it may be required to obtain,
verify and record information that identifies Borrower, which information
includes the name, address and tax identification number of Borrower and other
information regarding Borrower that will allow Lender to identify Borrower in
accordance with the Patriot Act. This notice is given in accordance with the
requirements of the Patriot Act and is effective as to Lender.

SECTION 10.14 Interest Rate Limitation. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to the Loan, together with
all fees, charges and other amounts which are treated as interest on the Loan
under applicable Requirements of Law (collectively, the “Charges”), shall exceed
the maximum lawful rate (the “Maximum Rate”) which may be contracted for,
charged, taken, received or reserved by Lender holding the Loan in accordance
with applicable Requirements of Law, the rate of interest payable in respect of
the Loan hereunder, together with all Charges payable in respect thereof, shall
be limited to the Maximum Rate and, to the extent lawful, the interest and
Charges that would have been payable in respect of the Loan but were not payable
as a result of the operation of this Section 10.14 shall be cumulated and the
interest and Charges payable to Lender in respect of the Loan or periods shall
be increased (but not above the Maximum Rate therefor) until such cumulated
amount, together with interest thereon at the Federal Funds Effective Rate to
the date of repayment, shall have been received by Lender.

SECTION 10.15 Obligations Absolute. To the fullest extent permitted by
applicable Requirements of Law, all obligations of Borrower hereunder shall be
absolute and unconditional irrespective of:

(a) any bankruptcy, insolvency, reorganization, arrangement, readjustment,
composition, liquidation or the like of Borrower;

(b) any lack of validity or enforceability of any Loan Document or any other
agreement or instrument relating thereto against Borrower;

(c) any change in the time, manner or place of payment of, or in any other term
of, all or any of the Obligations, or any other amendment or waiver of or any
consent to any departure from any Loan Document or any other agreement or
instrument relating thereto;

(d) any exchange, release or non-perfection of any Collateral for all or any of
the Obligations;

(e) any exercise or non-exercise, or any waiver of any right, remedy, power or
privilege under or in respect hereof or any Loan Document; or

(f) any other circumstances which might otherwise constitute a defense available
to, or a discharge of, Borrower.

SECTION 10.16 Waiver of Immunity. To the extent that Borrower has, or hereafter
may be entitled to claim or may acquire, for itself or any Collateral, any
immunity (whether sovereign or otherwise) from suit, jurisdiction of any court
or from any legal process (whether through service of notice, attachment prior
to judgment, attachment in aid of execution or otherwise) with respect to itself
or any Collateral, Borrower hereby waives such immunity in respect of its
obligations hereunder and under any promissory notes evidencing the Loan
hereunder and any other Loan Document to the fullest extent permitted by
applicable Requirements of Law and, without limiting the generality of the
foregoing, agrees that the waivers set forth in this Section 10.16 shall be
effective to the fullest extent now or hereafter permitted under the Foreign
Sovereign Immunities Act of 1976 (as amended, and together with any successor
legislation) and are, and are intended to be, irrevocable for purposes thereof.

 

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SECTION 10.17 [Intentionally Omitted].

SECTION 10.18 Certain Matters Affecting Lender.

(a) In the event that the Lender is determined to be a Disqualified Lender, such
lender shall cooperate with Borrower to cause such lender to not constitute a
Disqualified Lender. If such lender cannot be made to not constitute a
Disqualified Lender, such lender shall be subject to replacement pursuant to
Section 2.10(b).

(b) The interests, with respect to this Agreement, of any Disqualified Lender
shall be subject to the regulatory jurisdiction of all Gaming Authorities.

SECTION 10.19 Gaming Authorities and Liquor Laws. Each party to this Agreement
hereby acknowledges that the Loan Documents and consummation of the transactions
contemplated by the Loan Documents are subject to applicable Gaming Laws. Lender
agrees to cooperate with the Gaming Authorities and Liquor Authorities in
connection with the administration of their regulatory jurisdiction over
Borrower or any of its Subsidiaries, including, without limitation, the
provision of such documents or other information as may be requested by any such
Gaming Authorities or Liquor Authorities relating to Lender, Borrower, any
Subsidiary of Borrower or the Loan Documents. Notwithstanding any other
provision of this Agreement, Borrower hereby consents to any such cooperation
and disclosure by Lender to any such Gaming Authorities or Liquor Authorities
and releases Lender from any liability for any such cooperation or disclosure.
Once Borrower is licensed by or registered with the Gaming Authorities, the
rights, remedies and powers provided in this Agreement may be exercised only to
the extent that the exercise thereof does not violate any applicable provision
of the Gaming Laws and Liquor Laws and if prior approval of any Gaming
Authorities or Liquor Authorities is required therefor, such approval shall be
obtained.

[Signature Pages Follow]

 

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

 

STOCKBRIDGE/SBE HOLDINGS, LLC,

a Delaware limited liability company, as Borrower

BY: STOCKBRIDGE/SBE VOTECO COMPANY,

LLC, its manager

By:  

/s/ Darren Drake

  Name: Darren Drake   Title: Authorized Signatory

 

[SIGNATURE PAGE TO LOAN AGREEMENT]

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SLS LENDER, LLC,

a Delaware limited liability company, as Lender

BY:   SLS LENDER MANAGER, LLC, its manager By:   LOGO [g850024dsp1014.jpg]  

 

Name: George W. Ekins

  Title: Principal

 

[SIGNATURE PAGE TO LOAN AGREEMENT]

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Exhibits and Schedules Omitted