Exhibit 10.5


 


EXCHANGE AGREEMENT


 


This Exchange Agreement (as it may be amended, modified or supplemented
from time to time in accordance with the terms hereof, this “Agreement”), dated as of May 30, 2003, is
entered into by and among Hard Rock Hotel, Inc., a Nevada corporation (the “Company”), and Peter A. Morton, an
individual, and Desert Rock, Inc., a Nevada corporation (individually, a “Holder” and, collectively, the “Holders”).


 


R  E  C  I
T  A  L  S


 


WHEREAS, the Company has issued $140,000,000 aggregate principal amount
of 87/8% Second Lien Notes due 2013 (the “Offering”);


 


WHEREAS, concurrently, with the Offering, the Company entered into a
Credit Agreement with Bank of America, N.A., as administrative agent, and the
lenders party thereto (the “New Credit Facility”);


 


WHEREAS, in connection with the Offering, the Company entered into a
First Supplemental Indenture with U.S. Bank National Association (formerly
known as First Trust National Association), as trustee (the “Trustee”), amending that certain Indenture,
dated as of March 23, 1998, between the Company and the Trustee, as amended by
that certain First Amendment to the Indenture dated May 30, 2000, which
Indenture governs the Company’s 91⁄4% Senior Subordinated Notes due 2005 (the “Indenture Amendment”);


 


WHEREAS, the Indenture Amendment is effective and operative as of date
of the execution of this Agreement;


 


WHEREAS, the Company has terminated and repaid in full all amounts
owing under that certain Loan Agreement, dated as of March 23, 1998, among the Company,
Bank of America, N.A., as agent, Bear, Stearns & Co., Inc., as co-agent,
and the lenders party thereto (as amended, the “Old Credit Facility” and, together with the Offering, the New
Credit Facility and Indenture Amendment, the “Related
Transactions”);


 


WHEREAS, the Holders are the owners of all of the Company’s issued and
outstanding preferred stock, no par value per share (the “Preferred Stock”), consisting of 28,000
shares of 91⁄4% Series A Cumulative Preferred Stock, no par value per share (the
“Series A Preferred Stock”), and 1
share of 91⁄4% Series B Cumulative Preferred Stock, no par value per share (the “Series B Preferred Stock”), as set forth on
Schedule I attached hereto; and


 


WHEREAS, each Holder desires to exchange such Holder’s Preferred Stock
for Junior Subordinated Notes, the form and terms of which shall be
substantially as set forth in Exhibit A hereto (the “Notes”), of the Company, with an aggregate principal amount
equal to the aggregate liquidation preference of such Holder’s Preferred Stock,
plus a portion of accrued dividends thereon.


 

















 


A  G  R  E
E  M  E  N  T


 


NOW, THEREFORE, in consideration of the foregoing recitals and the
terms and conditions set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Company and the Holders (individually, a “Party”
and, collectively, the “Parties”),
intending to be legally bound, hereby agree as follows:


 


1.                                       Definitions


 


“Act” means the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder.


 


“Closing” has the meaning
set forth in Section 2(b) hereof.


 


“Company” has the meaning
set forth in the introductory paragraph of this Agreement.


 


“Governmental Authority”
means any agency, instrumentality, department, commission, court, tribunal or
board having jurisdiction, whether national, federal, state, provincial or
local.


 


“Holder” and “Holders” has the meaning set forth in the
introductory paragraph of this Agreement.


 


“Indenture Amendment” has
the meaning set forth in the recitals to this Agreement.


 


“Law” means laws,
statutes, rules, regulations, codes, orders, ordinances, judgments,
injunctions, decrees and policies of any Governmental Authority.


 


“Lien” means, with respect
to any Person, any security interest, mortgage, pledge, lien, charge,
encumbrance, title retention agreement or analogous instrument or device in, of
or on any assets or properties of such Person, now owned or hereafter acquired,
whether arising by agreement or by operation of law.


 


“Material Adverse Effect”
has the meaning set forth in Section 3(c) hereof.


 


“New Credit Facility” has
the meaning set forth in the recitals to this Agreement.


 


“Notes” has the meaning
set forth in the recitals to this Agreement.


 


“Offering” has the meaning
set forth in the recitals to this Agreement.


 


“Old Credit Facility” has
the meaning set forth in the recitals to this Agreement.


 


“Order” means any
judgment, writ, decree, injunction, order, decision, directive, regulation or
ruling of any Governmental Authority that is binding on any Person under Law.


 


2

















 


“Person” means any
individual, corporation (including any non-profit corporation), general or
limited partnership, limited liability company, joint venture, estate, trust,
association, organization, labor union, or other entity or Governmental
Authority.


 


“Preferred Stock” has the
meaning set forth in the recitals to this Agreement.


 


“Preferred Stock Dividend”
has the meaning set forth in Section 2(b) hereof.


 


“Related Transactions” has
the meaning set forth in the recitals to this Agreement.


 


“Series A Preferred Stock”
has the meaning set forth in the recitals to this Agreement.


 


“Series B Preferred Stock”
has the meaning set forth in the recitals to this Agreement.


 


“Subsidiary” means, with
respect to any Person (the “Owner”),
any corporation or other Person of which securities or other interests having
the power to elect 50% or more of that corporation’s or other Person’s board of
directors or similar governing body, or otherwise having the power to direct
the business and policies of that corporation or other Person (other than
securities or other interests having such power only upon the happening of a
contingency that has not occurred) are held by the Owner or one or more of its
Subsidiaries; when used without reference to a particular Person, “Subsidiary”
means a Subsidiary of the Company.


 


2.                                       Exchange


 


(a)                                  Exchange.  Subject to the terms and conditions set
forth herein, in exchange for a Holder’s surrender of Preferred Stock
(including a portion of the accrued and unpaid dividends thereon), the Company
shall issue to such Holder a Note in the aggregate principal amount set forth
opposite such Holder’s name on Schedule I attached hereto.


 


(b)                                 Closing.  The closing of the transactions contemplated
hereby (the “Closing”) shall take
place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 300 South
Grand Avenue, Los Angeles, California 
90071, on the date hereof and immediately after the consummation of the
Related Transactions.  At the Closing,
each Holder shall deliver, or cause to be delivered, the stock certificates
evidencing the Preferred Stock owned by such Holder and in exchange therefor,
the Company shall deliver, or cause to be delivered, (i) certificates
evidencing the Notes registered in the name of such Holder and (ii) the accrued
dividends on such Holder’s Preferred Stock, as set forth on Schedule I attached
hereto (the “Preferred Stock Dividend”),
by wire transfer of immediately available funds to the account(s) designated by
such Holder.


 


3.                                       Representations
and Warranties of the Company.  The
Company hereby represents and warrants, as of the date hereof, to each Holder
that each of the representations and warranties set forth below is true and
correct:


 


(a)                                  Organization,
Standing, Etc.  The Company is a
corporation duly incorporated and validly existing and in good standing under
the laws of the State of Nevada and


 


3

















 


has all requisite corporate
power and authority to carry on its business as now conducted, to enter into
this Agreement and to perform its obligations hereunder and thereunder.


 


(b)                                 Authorization
and Validity.  The execution,
delivery and performance by the Company of this Agreement, including the
issuance of the Notes, have been duly authorized by all necessary corporate
action by the Company, and this Agreement constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, fraudulent transfer and other similar laws relating to
or affecting creditors’ rights generally and to general equitable principles
(regardless of whether considered in a proceeding in equity or at law).


 


(c)                                  No
Conflict; No Default.  The
execution, delivery and performance by the Company of this Agreement will not
(a) violate any provision of any Law or Order having applicability to the
Company, (b) violate or contravene any provision of the certificate of
incorporation or bylaws of the Company, or (c) after giving effect to the
Related Transactions, result in a breach of or constitute a default under any
indenture, loan or credit agreement or any other agreement, lease or instrument
to which the Company is a party or by which it or any of its properties may be
bound or result in the creation of any Lien thereunder, except, in respect of
the matters set forth in clauses (a) and (c), for such violation, breach,
default or Lien as would not have a material adverse effect on the business
operations, financial condition or results of operations of the Company and its
Subsidiaries, taken as a whole (“Material
Adverse Effect”).  The
Company is not in default under or in violation of any such Law or Order or any
such indenture, loan or credit agreement or other agreement, lease or
instrument, except for such default or violation as would not have a Material
Adverse Effect.


 


(d)                                 Government
Consent.  No order, consent,
approval, license, authorization or validation of, or filing, recording or
registration with, or exemption by, any governmental or public body or
authority is required on the part of the Company to authorize, or is required
in connection with the execution, delivery and performance of, or the legality,
validity, binding effect or enforceability of, this Agreement.


 


(e)                                  Validity
of Notes.  The Notes have been duly
authorized and, when issued in accordance with the terms hereof, will
constitute valid and binding obligations of the Company, enforceable against
the Company in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, fraudulent transfer and
other similar laws relating to or affecting creditors’ rights generally and to
general equitable principles (regardless of whether considered in a proceeding
in equity or at law).  The Company has
been advised by its independent financial advisors that the Notes represent
marketable debt securities with terms and conditions that are customary for an
investment similar to the Notes.


 


4.                                       Representations
and Warranties of Holders.  Each of
the Holders, severally and not jointly, hereby represent and warrant, as of the
date hereof, to the Company that each of the representations and warranties set
forth below is true and correct in all material respects:


 


4

















 


(a)                                  Authorization
and Validity.  Such Holder has all
requisite power and authority to execute and deliver this Agreement, to perform
such Holder’s obligations hereunder and to consummate the transactions
contemplated hereunder.  The execution,
delivery and performance of this Agreement have been duly authorized by all
necessary action on the part of such Holder, and this Agreement constitutes the
legal, valid and binding obligation of such Holder, enforceable against such
Holder in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, fraudulent transfer and
other similar laws relating to or affecting creditors’ rights generally and to
general equitable principles (regardless of whether considered in a proceeding
in equity or at law).


 


(b)                                 No
Conflict; No Default.  The
execution, delivery and performance of this Agreement by such Holder will not
(a) violate any provision of any material Law or any material Order having
applicability to such Holder, (b) if applicable, violate or contravene any
provision of the organizational documents of such Holder, or (c) result in a
material breach of or constitute a material default under any material
indenture, loan or credit agreement or any other material agreement, lease or
instrument of such Holder or by which such Holder or any of such Holder’s
material properties may be bound or result in the creation of any Lien
thereunder.


 


(c)                                  Ownership
of Preferred Stock.  Such Holder
owns the right, title and interest to the Preferred Stock owned by such
Holder.  Other than this Agreement,
there are no outstanding agreements, arrangements or understandings under which
such Holder may be obligated to assign its right, title and interest to the
Preferred Stock owned by such Holder.


 


(d)                                 Consents.  Such Holder has obtained all necessary
consents, approvals and authorizations of third parties in order to consummate
the transactions contemplated in this Agreement.


 


(e)                                  Investment
Representations.


 


(i)                                     Such
Holder is acquiring the Notes for such Holder’s own account, and not as a
nominee or agent for any other Person, and not with a view to the sale or
distribution of all or any part thereof in any transaction that would be in
violation of the securities laws of the United States, and such Holder has no
present intention of selling, granting participations in, or otherwise distributing
any of the Notes in violation of securities laws.  Such Holder does not have any contract, undertaking, agreement or
arrangement with any Person (other than the other Holders) to sell, transfer or
grant participations to such Person with respect to any such Notes.


 


(ii)                                  Such
Holder acknowledges that the Notes acquired hereunder will not be registered
under the Act, in part based upon an exemption from registration predicated on
the accuracy and completeness of its representations and warranties appearing
herein.  Such Holder acknowledges that,
as a result, it will not be permitted to sell, transfer or assign any of the
Notes acquired hereunder until such shares are registered or an exemption from
the registration requirements of the Act is available.  Such Holder acknowledges that there is no
assurance that such an exemption from registration will ever be available or
that any Notes will ever be able to be sold.


 


5

















 


(iii)                               Such
Holder (1) is an “accredited investor” within the meaning of Rule 501 of
Regulation D promulgated under the Act; (2) has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investment in the Notes; (3) has the ability to bear the economic
risks of its investment for an indefinite period of time; and (4) has been
furnished with and has had access to such information, and has had adequate
opportunity to ask questions of, and received answers from, the Company or its
representatives concerning the Company’s business, operations, financial
condition, assets, liabilities and all other matters relevant to its investment
in the Notes.


 


5.                                       Miscellaneous.


 


(a)                                  Notices.   All notices and other communications
hereunder shall be in writing and shall be deemed sufficiently given and served
for all purposes when personally delivered or given by telex or
machine-confirmed facsimile or one business day after a writing is delivered to
a national overnight courier service or three business days after a writing is
deposited in the United States mail, first class postage or other charges
prepaid and registered, return receipt requested, addressed as follows (or at
such other address for a Party as shall be specified by like notice):


 


If to the Company, to:


 


Hard Rock Hotel, Inc.


4455 Paradise Road


Las Vegas, Nevada  89109


Attention: 
Brian Ogaz


Facsimile: 
(310) 652-8747


 


With a copy (which shall not constitute notice) to:


 


Skadden, Arps, Slate, Meagher & Flom LLP


300 South Grand Avenue


Los Angeles, California  90071


Attention: 
Gregg A. Noel, Esq.


Facsimile: 
(213) 687-5600


 


If to Mr. Morton:


 


510 North Robertson Boulevard


Los Angeles, California  90048


Facsimile: 
(310) 652-8747


 


If to Desert Rock:


 


c/o Gordon & Silver, Ltd.


3960 Howard Hughes Parkway, Ninth Floor


Las Vegas, Nevada  89109


Attention: 
James A. Mace, Esq.


Facsimile: 
(702) 693-6766


 


6

















 


(b)                                 Further
Assurances.  Each of the Parties
hereby further covenants and agrees that it shall take all such further actions
as may be reasonably necessary to carry out the purposes and intent of this
Agreement and shall refrain from taking any action which would frustrate the
purposes and intent of this Agreement.


 


(c)                                  Effectiveness;
Counterparts.  This Agreement shall
not become effective and binding on the Parties unless and until counterpart
signature pages hereto shall have been executed and delivered by each of the
Company and the Holders.  This Agreement
may be executed by one of more of the Parties in any number of counterparts,
each of which shall be deemed to be an original, but all such counterparts when
taken together shall constitute one and the same instrument.


 


(d)                                 Entire
Agreement.  This Agreement
constitutes the entire agreement among the Parties with respect to the subject
matter hereof and supersedes all prior negotiations and all prior agreements
and understandings, both written and oral, among the Parties with respect to
the subject matter hereof.


 


(e)                                  Interpretation.  When a reference is made in this Agreement
to Sections, paragraphs, clauses or Annexes, such reference shall be to a
Section, paragraph or clause of or Annex to this Agreement unless otherwise
indicated.  The words “include”, “includes”, and “including”
when used therein shall be deemed in each case to be followed by the words “without limitation.”  The words “hereof,”
“herein,” “herewith,” “hereby” and “hereunder”
and words of similar import shall, unless otherwise stated, be construed to
refer to this Agreement as a whole and not to any particular provision of this
Agreement.  Unless the context otherwise
requires, defined terms shall include the singular and plural and the
conjunctive and disjunctive forms of the terms defined.  None of the Parties shall have any term or
provision construed against such Party solely by reason of such Party having
drafted the same.


 


(f)                                    Specific
Performance.  Each of the Parties
recognizes and agrees that if for any reason any of the provisions of this
Agreement are not performed by such Party in accordance with their specific
terms or are otherwise breached, immediate and irreparable harm or injury would
be caused to the other Parties for which money damages would not be an adequate
remedy.  Accordingly, each Party agrees
that, in addition to any other available remedies, the Parties shall be
entitled to an injunction restraining any violation or threatened violation of
the provisions of this Agreement without the necessity of any Party posting a
bond or other form of security.  In the
event that any action should be brought in equity to enforce the provisions of
this Agreement, each Party agrees that it will not allege, and each other Party
hereby waives the defense, that there is an adequate remedy at law.


 


(g)                                 Assignment;
Successors and Assigns.  Neither
this Agreement nor any of the rights, interests or obligations of the Holders
under this Agreement shall be assigned or delegated, in whole or in part, by
operation of law or otherwise by any of the Holders without the prior written
consent of the Company.  Neither this
Agreement nor any of the rights, interests or obligations of the Company under
this Agreement shall be assigned or delegated, in whole or in part, by
operation of law or otherwise by the Company without the prior written consent
of each


 


7

















 


of the Holders.  This Agreement has been and is made solely
for the benefit of and shall be binding upon each of the Parties and no other
person shall acquire or have any right under or by virtue of this Agreement.


 


(h)                                 No
Third Party Beneficiaries.  Unless
expressly stated herein, this Agreement shall be solely for the benefit of the
Parties and no other person or entity and is not intended to, and shall not,
confer upon any other person any rights or remedies hereunder.


 


(i)                                     Headings.  The headings of the sections, paragraphs and
subsections of this Agreement are inserted for convenience only and shall not
affect the meaning or interpretation of such section, paragraph or subsection
or of this Agreement.


 


(j)                                     Amendments
and Waivers.  This Agreement may not
be modified, amended or supplemented except in writing signed by the Company
and each of the Holders.


 


(k)                                  GOVERNING
LAW.  THIS AGREEMENT SHALL BE
CONSTRUED AND INTERPRETED, AND THE RIGHTS OF THE PARTIES SHALL BE DETERMINED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING WITHOUT
LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAWS
AND RULE 327(b) OF THE NEW YORK CIVIL PRACTICE LAWS AND RULES.  EACH OF THE PARTIES HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH
OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE
BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS.  EACH OF THE PARTIES IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND
ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM
THAT ANY SUCH SUIT, ACTION OR PROCEEDINGS BROUGHT IN SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.  EACH
OF PARTIES IRREVOCABLY CONSENTS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO
UNDER APPLICABLE LAW, TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, AT THE ADDRESS SET FORTH HEREIN,
SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING.  NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE
COMPANY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY OF THE HOLDERS IN ANY OTHER
JURISDICTION.


 


(l)                                     Severability.  If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein


 


8

















 


shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
Parties shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. 
It is hereby stipulated and declared to be the intention of the Parties
that they would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.


 


 


[SIGNATURE
PAGE FOLLOWS]


 


9

















 


IN WITNESS WHEREOF, each of the Parties has executed this Agreement as
of the date and year first above written.


 


 


	
   

  	
  PETER A. MORTON

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DESERT ROCK, INC.

  
	
   

  	
  a Nevada corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Peter A. Morton

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HARD ROCK HOTEL, INC.

  
	
   

  	
  a Nevada corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Brian D. Ogaz

  
	
   

  	
  Title:

  	
  Senior Vice President

  



 


 


[Signature
Page to Exchange Agreement]


 


10

















 


SCHEDULE I


 


 


	
  Holder

  	
   

  	
  Series A

  Preferred Stock

  	
   

  	
  Series B

  Preferred Stock

  	
   

  	
  Preferred

  Stock Dividend

  	
   

  	
  Aggregate

  Principal

  Amount of Notes

  	
   

  
	
  Peter A. Morton

  	
   

  	
  28,000

  	
   

  	
  0

  	
   

  	
  $

  	
  10,811,046.89

  	
   

  	
  $

  	
  28,000,000.00

  	
   

  
	
  Desert Rock, Inc.

  	
   

  	
  0

  	
   

  	
  1

  	
   

  	
  $

  	
  4,188,953.11

  	
   

  	
  $

  	
  22,037,380.50

  	
   

  
	
  Total

  	
   

  	
  28,000

  	
   

  	
  1

  	
   

  	
  $

  	
  15,000,000.00

  	
   

  	
  $

  	
  50,037,380.50

  	
   

  



 

















 


EXHIBIT A


 


 


[FORM OF JUNIOR SUBORDINATED NOTES]