Exhibit 4.5


 


THIS NOTE HAS NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
‘‘SECURITIES ACT’’), OR ANY STATE OR FOREIGN SECURITIES LAWS AND ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR AN EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.  THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF HARD ROCK HOTEL, INC. (THE “COMPANY”) THAT (I) SUCH
SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1)(A) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, OR
(B) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF
THE RESALE RESTRICTIONS SET FORTH HEREIN.


 


THIS NOTE IS SUBORDINATED IN
RIGHT OF PAYMENT TO THE PAYMENT IN FULL OF THE COMPANY’S OBLIGATIONS UNDER
SENIOR INDEBTEDNESS (AS DEFINED ON THE REVERSE HEREOF).


 


HARD ROCK HOTEL, INC.


JUNIOR SUBORDINATED NOTES


 


No. 1


 


HARD ROCK
HOTEL, INC., a Nevada corporation (the “Company”, which term shall include any
successor), promises to pay to Peter Morton Lifetime Trust, or its registered
assigns, the principal amount of Twenty Eight Million Dollars ($28,000,000.00)
on January 15, 2014 (the “Stated Maturity”), and to pay interest in cash or in
kind thereon from May 30, 2003 or from the most recent date to which interest
has been paid or duly provided for, semi-annually in arrears on January 15 and
July 15 of each year (each, an “Interest Payment Date”), commencing on January
15, 2004, at the rate of 97/8% per annum with respect to
interest paid in cash and, to the extent interest shall be paid in kind as
provided on the reverse hereof, at the rate of 101⁄2% per annum with respect to
such portion of interest paid in kind, in either case, on any Interest Payment
Date, until the principal is paid in full or made available for payment.  Anything herein to the contrary
notwithstanding, if any Interest Payment Date, Stated Maturity, redemption or
repurchase date, Change in Control Purchase Date, Asset Sale Offer purchase
date or other date on which a payment hereon is due falls on a day that is not
a Business Day, the required payment of interest, if any, and principal will be
made on the next succeeding Business Day and no interest or other amount will
accrue on that payment for the period from and after that Interest Payment
Date, Stated Maturity, redemption or repurchase date, Change in Control
Purchase Date, Asset Sale Offer purchase date or other date, as the case may
be, to the date of payment on such next succeeding Business Day.  The accrued and unpaid interest, if any, so
payable, and


 


1

















 


punctually paid or duly
provided for, on any Interest Payment Date will be paid to the Holder at the close
of business on the regular record date for such interest, which will be the
January 1 or July 1 (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date (a “Regular Record Date”).  Any interest with respect to any Note which
shall be payable, but shall not be punctually paid or duly provided for, on any
Interest Payment Date for such Note (herein called “Defaulted Interest”) shall
forthwith cease to be payable to the holder thereof on the relevant Regular
Record Date by virtue of having been such holder; and such Defaulted Interest
may be paid by the Company, at its election, to the holder of such Note at the
close of business on a special record date (a “Special Record Date”) for the
payment of such Defaulted Interest.  The
Company shall fix a Special Record Date for the payment of such Defaulted
Interest not more than 15 days and no less than 10 days prior to the date of
the proposed payment.  The Company shall
promptly cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be mailed to the holders of such Notes at
their respective addresses in the register of Notes maintained by the Company
not less than 10 days prior to such Special Record Date.  Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been mailed as
aforesaid, such Defaulted Interest shall be paid on such payment date to the
holder of such Note at the close of business on such Special Record Date


 


Reference is
hereby made to the further provisions of this Security set forth on the reverse
side of this Security, which further provisions shall for all purposes have the
same effect as if set forth at this place.


 


[SIGNATURE PAGE FOLLOWS]


 


2

















 


IN WITNESS
WHEREOF, the Company has caused this Note to be issued on the date first above
written.


 


	
   

  	
  HARD ROCK
  HOTEL, INC.,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Brian D.
  Ogaz

  
	
   

  	
  Title:

  	
  Senior Vice
  President

  



 


3

















 


[REVERSE OF NOTE]


 


Junior Subordinated Notes


 


This Note is
one of a duly authorized issue of Junior Subordinated Notes (the “Notes”),
limited in aggregate principal amount to $50,100,000 (subject to the exceptions
provided below) of HARD ROCK HOTEL, INC., a Nevada corporation (the “Company”,
which term shall include any successor).


 


1.                                       INTEREST


 


Interest on
the Notes may be paid in cash or in kind at the option of the Company; provided
that on each Interest Payment Date, the Company shall pay interest in cash in
an amount equal to the lesser of (a) 50% of the amount of interest accrued on
the Notes since the most recent Interest Payment Date and (y) the amount of
interest that the Company is permitted to pay in cash without causing a default
under the Senior Indebtedness.  Interest
on the Notes will accrue at the rate of 97/8% per annum
for the amounts paid in cash and at the rate of 101⁄2% per annum for amounts paid
in kind, in either case, on any Interest Payment Date.* To the extent that
interest is not required to be paid in cash on any Interest Payment Date and
the Company does not otherwise elect to pay such interest in cash, such
interest shall be deemed to have been paid in kind.  Interest on the Notes shall be paid in kind at any time that
payment of such interest in cash would cause a default under the Senior
Indebtedness.  The principal amount of
the Notes shall be increased to reflect any payment in kind of accrued interest
hereon.  Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance.  Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.


 


2.                                       SUBORDINATION


 


(a)                                  The
Company agrees for itself and its successors, and each holder by accepting a
Note agrees, that the payment of principal of, premium, interest on and any
other amounts payable by the Company with respect to the Notes is subordinated
in right of payment to the prior payment in full of all Obligations of the
Company under the Senior Indebtedness, whether outstanding on the Issue Date or
thereafter incurred.


 


(b)                                 Upon
any distribution to creditors of the Company in a liquidation or dissolution of
the Company or in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to the Company or its property, an assignment for
the benefit of creditors or any marshalling of the Company’s assets and
liabilities, the holders of the Senior Indebtedness will be entitled to receive
payment in full in cash of all Obligations due under such Senior Indebtedness
before the holders of Notes will be entitled to receive any payment with


 












* For example, assuming that (i) the principal amount
of the Notes is $50,100,000, and (ii) the portion of accrued interest on the
Notes to be paid in cash for the applicable semi-annual period, is 20% (which
is an amount equal to the lesser of 50% of the amount of accrued interest on
the Notes since most recent Interest Payment Date and the amount of interest
that is permitted to be paid by the Senior Indebtedness), the amount of
interest paid in cash would be equal to $494,737.50 [50,100,000 x (0.09875/2) x
0.20], and the amount of interest paid in kind would be equal to $2,104,200.00
[50,100,000 x (0.105/2) x 0.80], which amount would be added to the principal
of the Notes.


 


4

















 


respect to the Notes, and until
all Obligations with respect to the Senior Indebtedness are paid in full in
cash.


 


(c)                                  The
Company may not make any payment in cash upon or in respect of the Notes
(including any payment of interest or premium in cash, but excluding any
payment of interest in kind) and may not offer to repurchase the Notes (except
in Capital Stock or debt securities with subordination provisions substantially
consistent with those contained herein or from the trust pursuant to Legal
Defeasance), if (i) a default in the payment of the principal of or interest on
the Senior Indebtedness, or any other Obligation incurred under the Senior
Indebtedness occurs and has not been cured or waived in writing (a “payment
default”) or (ii) any other default occurs and is continuing with respect to
the Senior Indebtedness that permits the holders of such Senior Indebtedness to
accelerate its maturity (a “non-payment default”) and the holders of the Notes
receive a notice of such default (a “Payment Blockage Notice”) from a
representative of the holders of such Senior Indebtedness (each, a
“Representative”) (with a copy of such notice to the Company and the other
Representatives, if applicable).  The
Company may and shall, to the extent required pursuant to the terms of the
Notes, resume payments on the Notes (a) in the case of a payment default, upon
the date on which such default is cured or waived by the applicable
Representative in writing and (b) in the case of a non-payment default, the
earlier of the date on which such non-payment default is cured or waived by the
applicable Representative in writing and 360 days after the date on which the
applicable Payment Blockage Notice is received, unless the maturity of the
Senior Indebtedness has been accelerated. 
Any number of Payment Blockage Notices may be given; provided, however,
that: (1) not more than one Payment Blockage Notice shall be given within a
period of any 720 consecutive days, and (2) no non-payment default that existed
or was continuing on the date of delivery of any Payment Blockage Notice to the
holders of the Notes by a Representative, and which is known to the holder(s)
of the Senior Indebtedness, shall be, or be made, the basis for a subsequent
Payment Blockage Notice by any Representative (unless such non-payment default
shall have been cured or waived for a period of not less than 360 days).


 


(d)                                 A
failure by the Company to make any payment on the Notes when due or within any
applicable grace period, whether or not on account of the payment blockage
provision described above, shall not prevent the occurrence of any Event of
Default under the Notes and such failure would constitute an Event of Default
and would enable the holders of the Notes to accelerate the maturity thereof.


 


(e)                                  The
holders of the Notes agree not to take any action to accelerate the principal
amount of the Notes, or pursue any remedy with respect thereto, as a result of
any Event of Default described in clause (iii), (iv) or (v) of Section 11(a)
hereof or take any action to pursue any remedies with respect hereto if, within
15 days of receipt of the Proposed Acceleration Notice (as defined hereafter),
one or more Representatives delivers a notice to the holders of the Notes
requiring the holders to refrain from the declaration of such acceleration or
pursuit of remedies (the “Standstill Notice”), provided that in no event shall
the holders be required to standstill from taking such actions for any period
longer than 360 days following the date of such Standstill Notice or such
shorter period of time as shall be agreed by the Representative(s) that
delivered such Standstill Notice (the “Standstill Period”).


 


5

















 


(f)                                    Following
any Event of Default under the Notes, until Obligations under the Designated
Senior Indebtedness have been paid in full and the commitments under the
Designated Senior Indebtedness have been terminated, and for a period of 360
days following the date upon which either or both of the Representatives gives
written notice to the holders of the Notes and, thereafter, during any
bankruptcy proceeding or following acceleration under the Designated Senior
Indebtedness, the holders will not have the right to exercise any right of
set-off.


 


(g)                                 As
a result of the subordination and other provisions described above, in the
event of a liquidation or insolvency of the Company, the holders of the Notes
may recover less ratably than lenders under the Senior Indebtedness.


 


3.                                       OPTIONAL
REDEMPTION


 


The Notes will
not be redeemable at the Company’s option prior to January 15, 2009.  Thereafter, the Notes will be subject to
redemption at any time at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days’ notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest hereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on January 15 of the years indicated below:


 


	
  Year

  	
   

  	
  Percentage

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2009

  	
   

  	
  104.938

  	
  %

  
	
  2010

  	
   

  	
  103.292

  	
  %

  
	
  2011

  	
   

  	
  101.646

  	
  %

  
	
  2012 and thereafter

  	
   

  	
  100.000

  	
  %

  



 


4.                                       REGULATORY
REDEMPTION


 


If any Gaming
Authority requires that a holder or beneficial owner of Notes must be licensed,
qualified or found suitable under any applicable gaming law and such holder or
beneficial owner fails to apply for a license, qualification or a finding of
suitability within 30 days after being requested to do so by the Gaming
Authority (or such lesser period that may be required by such Gaming
Authority), or if such holder or such beneficial owner is not so licensed,
qualified or found suitable, the Company shall have the right to require such
holder or beneficial owner to dispose of such holder’s or beneficial owner’s
Notes within 10 days of receipt of such notice of such finding by such Gaming
Authority or such other date as may be ordered by such Gaming Authority.  The holder of Notes or beneficial owner
applying for a license, qualification or a finding of suitability must pay all
costs of the licensure and investigation for such qualification or finding of
suitability.  The Company is not
required to pay or reimburse any holder of the Notes or beneficial owner who is
required to apply for such license, qualification or finding of suitability for
the costs of the licensure or investigation for such qualification or finding
of suitability.  Such expense will,
therefore, be the obligation of such holder or beneficial owner.


 


6

















 


5.                                       SELECTION
AND NOTICE


 


If the Notes
are to be redeemed or repurchased in part in an offer to purchase at any time,
selection of Notes for redemption or repurchase will be made on a pro rata basis; provided that no Notes of $1,000 or less shall be redeemed
or repurchased in part.  Notices of
redemption or repurchase shall be mailed by first class mail at least 30 but
not more than 60 days before the redemption date or repurchase date to each
holder of Notes to be redeemed or repurchased at its registered address.  If the Notes are to be redeemed or
repurchased in part only, the notice of redemption or repurchase shall state
the portion of the principal amount to be redeemed or repurchased.  A new Note in principal amount equal to the
unredeemed or unrepurchased portion thereof will be issued in the name of the
holder thereof upon cancellation of the original Note.  If, on or before the redemption or repurchase
date, the Company shall duly provide for the payment of the redemption or
repurchase price on all Notes called for redemption or repurchase, then, on and
after the redemption or repurchase date, interest shall cease to accrue on the
Notes (or portions thereof) called for redemption or repurchase.


 


6.                                       MANDATORY
REDEMPTION


 


The Company is
not required to make mandatory redemption or sinking fund payments with respect
to the Notes.


 


7.                                       REPURCHASE
AT THE OPTION OF HOLDER UPON CHANGE OF CONTROL


 


(a)                                  Upon
the occurrence of a Change of Control, the Company will, following the payment
in full of all Obligations under the New Credit Facility, the consummation of a
Change of Control offer with respect to the Second Lien Notes (and the purchase
of all Second Lien Notes tendered in such offer) and the payment of any other
Senior Indebtedness the terms of which require repayment upon consummation of a
Change of Control, pursuant to the offer described below (the “Change of
Control Offer”) at an offer price in cash equal to 101% of the aggregate
principal amount plus accrued and unpaid interest hereon to the date of
repurchase (the “Change of Control Payment”). Within 30 days following any
Change of Control, the Company will mail a notice to the holders describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase the Notes on the date specified in such notice, which date shall
be no earlier than 30 days and no later than 60 days from the date such notice
is mailed (the “Change of Control Payment Date”), pursuant to the procedures
required herein and described in such notice. 
In the event that the Change of Control Offer constitutes an “issuer
tender offer,” the Company will comply with all federal securities laws and
regulations to the extent such laws and regulations are then applicable.


 


(b)                                 On
the Change of Control Payment Date, the Company will, to the extent lawful, (1)
accept for payment the Notes or portions thereof properly tendered pursuant to
the Change of Control Offer and (2) mail to the holders the Change of Control
Payment.  The Company will promptly
issue and mail to the holders a new Note equal in principal amount to the
unrepurchased portion of the Notes, if any; provided that such new Note will be
in a principal amount of $1,000 or an integral multiple thereof.  The Company will publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date.


 


7

















 


(c)                                  If
the payment date in connection with a Change of Control Offer hereunder is on
or after an interest payment record date and on or before the associated
interest payment date, any accrued and unpaid interest will be paid to the
Person in whose name a Note is registered at the close of business on such
record date, and such interest will not be payable to the holders who tendered
Notes pursuant to such Change of Control Offer.


 


(d)                                 Except
as described above with respect to a Change of Control, the holders of the
Notes shall not be entitled to require the Company to repurchase or redeem the
Notes in the event of a takeover, recapitalization or similar transaction.


 


(e)                                  The
Company will not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at
the times and otherwise in compliance with the requirements set forth in the
Notes applicable to a Change of Control Offer made by the Company and purchases
the Notes validly tendered and not withdrawn under such Change of Control
Offer.


 


8.                                       ASSET
SALES


 


(a)                                  The
Company will not, and will not permit any of its Restricted Subsidiaries to,
consummate an Asset Sale unless (i) the Company (or the Restricted Subsidiary,
as the case may be) receives consideration at the time of such Asset Sale at
least equal to the fair market value (as determined in good faith by the Board
of Directors) of the assets or Equity Interests issued or sold or otherwise
disposed of and (ii) at least 75% of the consideration therefor received by the
Company or such Restricted Subsidiary is in the form of cash or Cash
Equivalents; provided that the amount of (x) any liabilities (as shown on the
Company’s or such Restricted Subsidiary’s most recent balance sheet) of the
Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any guarantee
thereof) that are assumed by the transferee of any such assets pursuant to an
agreement that releases the Company or such Restricted Subsidiary from further
liability and (y) any securities, notes or other obligations received by the
Company or any such Restricted Subsidiary from such transferee that are
promptly, but in no event more than 30 days after receipt, converted by the
Company or such Restricted Subsidiary into cash (to the extent of the cash
received), shall be deemed to be cash for purposes of this provision.


 


(b)                                 Within
365 days after the receipt of any Net Proceeds from an Asset Sale, the Company
or such Restricted Subsidiary shall apply such Net Proceeds first to
permanently reduce in full all Indebtedness outstanding under the New Credit
Facility (and to correspondingly permanently reduce commitments with respect
thereto in the case of revolving borrowings) and second, to the extent that Net
Proceeds remain following such application, to make an asset sale offer
pursuant to the terms of the Second Lien Notes and purchase the Second Lien
Notes tendered in such offer and to permanently reduce any other Senior
Indebtedness if required by the terms thereof (and permanently reduce
commitments with respect thereto). 
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce Indebtedness under the Senior Indebtedness or invest such
Net Proceeds in any manner that is not prohibited by the terms of the
Notes.  Any Net Proceeds existing
subsequent to the reduction in full of all Indebtedness under the New Credit
Facility, the consummation of the asset sale offer pursuant to the terms of the
Second Lien Notes and the reduction of other Senior Indebtedness, as provided


 


8

















 


in the first sentence of this
paragraph will be deemed to constitute “Excess Proceeds.”  When the aggregate amount of Excess Proceeds
exceeds $25.0 million, the Company will be required to make an offer to the
holders of the Notes (an “Asset Sale Offer”) to purchase the maximum principal
amount of the Notes that it would be permitted to repurchase pursuant to the
terms of the then outstanding Senior Indebtedness and that may be purchased out
of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of
the principal amount plus accrued and unpaid interest to, but not including,
the date of purchase.  To the extent
that the aggregate amount of the Notes tendered pursuant to an Asset Sale Offer
is less than the Excess Proceeds, the Company may use any remaining Excess
Proceeds for general corporate purposes. 
If the aggregate principal amount of Notes surrendered by holders
thereof exceeds the amount of Excess Proceeds, the Notes shall be purchased on
a pro rata basis.  Upon the commencement of an Asset Sale
Offer, the Company will mail a notice to the holders of the Notes offering to
repurchase the Notes on the date specified in such notice, which date shall be
no earlier than 30 days and no later than 60 days from the date such notice is
mailed, pursuant to the procedures required herein and described in such
notice.  Upon completion of such offer
to purchase, the amount of Excess Proceeds shall be reset at zero.  In the event that an Asset Sale Offer
constitutes an “issuer tender offer,” the Company will comply with all federal
securities laws and regulations to the extent such laws and regulations are
then applicable.


 


(c)                                  If
the payment date in connection with an Asset Sale Offer hereunder is on or
after an interest payment record date and on or before the associated interest
payment date, any accrued and unpaid interest will be paid to the person in
whose name a Note is registered at the close of business on such record date,
and such interest will not be payable to holders who tender Notes pursuant to
such Asset Sale Offer.


 


9.                                       CERTAIN
COVENANTS


 


(a)                                  Restricted Payments.  Except as otherwise provided below, the
Company will not directly or indirectly: 
(i) declare or pay any dividend or make any other payment or
distribution on account of the Company’s Equity Interests including, without
limitation, any dividend or distribution in connection with any merger or
consolidation involving the Company, or to the direct or indirect holders of
the Company’s Equity Interests in their capacity as such (other than dividends
or distributions payable in Equity Interests (other than Disqualified Stock) of
the Company); (ii) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or consolidated
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company, (iii) make any principal payment on or with
respect to, or purchase, redeem, defease or otherwise acquire or retire for
value any Subordinated Indebtedness, except a scheduled repayment of principal
or a payment of principal at Stated Maturity, or (iv) make any Restricted
Investment (all such payments and other actions set forth in clauses (i)
through (iv) above being collectively referred to as “Restricted Payments”),
unless, at the time of and after giving effect to such Restricted Payment:


 


(1)                                  no
Default or Event of Default shall have occurred and be continuing or would
occur as a consequence thereof; and


 


9

















 


(2)                                  the
Company would, at the time of such Restricted Payment and after giving pro forma
effect thereto as if such Restricted Payment had been made at the beginning of
the applicable four-quarter period, have been permitted to incur at least $1.00
of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in Section 9(b) hereof; and


 


(3)                                  such
Restricted Payment, together with the aggregate amount of all other Restricted
Payments made by the Company and its Restricted Subsidiaries after the Issue
Date (excluding Restricted Payments permitted by clauses (ii), (iii), (iv),
(v), (vi), (vii) and (viii) of the following paragraph), is less than the sum
(without duplication) of (i) 75% of the Consolidated Net Income of the Company
for the period (taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the Issue Date to the end of the Company’s most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (the “Reference Period”) (or,
if such Consolidated Net Income for such period is a deficit, less 100% of such
deficit), plus (ii) 100% of the aggregate net cash proceeds received by the
Company from the issue or sale since the Issue Date of Equity Interests of the
Company (other than Disqualified Stock) or of Disqualified Stock or debt
securities of the Company that have been converted into such Equity Interests
(other than Equity Interests (or Disqualified Stock or convertible debt
securities) sold to a Restricted Subsidiary of the Company), plus (iii) 100% of
the aggregate net cash proceeds received by the Company as an equity
contribution from a holder or holders of Equity Interests of the Company (other
than Disqualified Stock), plus (iv) to the extent that any Restricted
Investment that was made after the Issue Date is sold or otherwise liquidated
or repaid, the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment, plus (v) the amount resulting from
redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries, such
amount not to exceed the amount of Investments made by the Company or any
Restricted Subsidiary in such Unrestricted Subsidiary since the Issue Date that
was treated as a Restricted Payment under the Notes, plus (vi) to the extent
not otherwise included in Consolidated Net Income, the amount of the net
reduction in Investments in Unrestricted Subsidiaries resulting from the
payment of cash dividends received by the Company or any Restricted Subsidiary
of the Company from such Unrestricted Subsidiaries.


 


The foregoing
provisions will not prohibit:


 


(i)                                     the
payment of any dividend within 60 days after the date of declaration thereof,
if at said date of declaration such payment would have complied with the
provisions of the Notes;


 


(ii)                                  the
redemption, repurchase, retirement, defeasance or other acquisition of any
Equity Interests of the Company in exchange for, or out of the net cash
proceeds of the substantially concurrent sale (other than to a Restricted
Subsidiary of the Company) of, other Equity Interests of the Company (other
than any Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such


 


10

















 


 redemption, repurchase, retirement,
defeasance or other acquisition shall be excluded from clause (a)(ii) and (iii)
of the preceding paragraph;


 


(iii)                               the
defeasance, redemption, repurchase or other acquisition of Subordinated
Indebtedness in exchange for or with the net cash proceeds from an incurrence
of Permitted Refinancing Indebtedness or of the substantially concurrent sale
(other than to a Restricted Subsidiary of the Company) of Equity Interests in
the Company (other than any Disqualified Stock); provided that the amount of
any such net cash proceeds that are utilized for any such defeasance,
redemption, repurchase or other acquisition shall be excluded from clause
(a)(ii) and (iii) of the preceding paragraph;


 


(iv)                              the
redemption or repurchase of any Capital Stock or Indebtedness of the Company or
any of its Subsidiaries (other than any Capital Stock or Indebtedness that is
held or beneficially owned by any Permitted Holder) required by the Regulatory
Redemption provisions of the Notes (or any substantially comparable provision
governing other Indebtedness), or by any Governmental Authority or by the Board
of Directors if, in any such case, the ownership of such Capital Stock or
Indebtedness by the holder thereof will preclude, interfere with, threaten or
delay the issuance, maintenance, existence or reinstatement of any gaming or
liquor license, permit or approval, or result in the imposition or burdensome
terms or conditions on such license, permit or approval;


 


(v)                                 so
long as no Default or Event of Default shall have occurred and be continuing,
the declaration and payment of dividends to holders of any such class or series
of Disqualified Stock of the Company issued following the Issue Date in
accordance with Section 9(b) hereof;


 


(vi)                              repurchases
of Equity Interests deemed to occur upon exercise of stock options if such
Equity Interests represent a portion of the exercise price of such options;


 


(vii)                           the
one-time payment on or about the Issue Date of $15 million of accrued and unpaid
dividends to holders of shares of the Company’s outstanding preferred stock;
and


 


(viii)                        so
long as no Default or Event of Default has occurred and is continuing, the
making of Restricted Payments that, when aggregated with all other Restricted
Payments made following the Issue Date pursuant to this clause (viii), does not
exceed $15.0 million.


 


The Board of
Directors may designate any Restricted Subsidiary to be an Unrestricted
Subsidiary if such designation is permitted by this covenant and otherwise would
not cause a Default.  For purposes of
making such determination, all outstanding Investments by the Company and its
Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary
so designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this covenant. 
All such outstanding Investments will be deemed to constitute
Investments in an amount equal to the greatest of (x) the net book value of
such Investments at


 


11

















 


the time of such designation,
(y) the fair market value of such Investments at the time of such designation
and (z) the original fair market value of such Investments at the time they
were made. Such designation will only be permitted if such Restricted Payment
would be permitted at such time and if such Restricted Subsidiary otherwise
meets the definition of an Unrestricted Subsidiary.


 


The amount of
all Restricted Payments (other than cash) shall be the fair market value on the
date of the Restricted Payment of the asset(s) or securities proposed to be
transferred or issued by the Company or such Subsidiary, as the case may be,
pursuant to the Restricted Payment.  The
fair market value of any non-cash Restricted Payment shall be based on the good
faith determination of the Board of Directors.


 


(b)                                 Incurrence of Indebtedness and Issuance of
Disqualified Stock.  The
Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect
to (collectively, “incur”) any Indebtedness (including Acquired Indebtedness)
and that the Company will not, and will not permit any of its Restricted
Subsidiaries to issue any shares of Disqualified Stock and will not permit any
of its Restricted Subsidiaries to issue preferred stock; provided, however, that the Company and
any Restricted Subsidiary may incur Indebtedness (including Acquired
Indebtedness) or issue shares of Disqualified Stock, and any Restricted
Subsidiary may incur Acquired Indebtedness, if the Fixed Charge Coverage Ratio
for the Company’s most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred or such Disqualified Stock is
issued would have been at least 1.5 to 1, determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred, or the Disqualified Stock had been
issued, as the case may be, at the beginning of such four-quarter period.


 


The provisions
of the first paragraph of this covenant will not apply to the incurrence of any
of the following items of Indebtedness (collectively, “Permitted Debt”):


 


(i)                                     Indebtedness
of the Company under the Designated Senior Indebtedness with respect thereto in
an aggregate principal amount outstanding at any time not to exceed the sum of
(1) $40.0 million, (2) the difference between (A) $25.0 million less (B) the
amount of then outstanding FF&E Financing incurred pursuant to clause (iv)
below, less the aggregate amount of all proceeds from all Asset Sales that have
been applied since the Issue Date to permanently reduce the outstanding amount
of such Indebtedness pursuant to Section, (3) interest, fees, expenses,
obligations owed pursuant to any Hedging Obligations incurred with respect to
the New Credit Facility and related costs, and (4) $200.0 million with respect
to the Second Lien Notes;


 


(ii)                                  the
incurrence by the Company of Existing Indebtedness;


 


(iii)                               the
incurrence by the Company of Indebtedness represented by the Notes, including
any Notes issued to pay interest accrued on the Notes;


 


12

















 


(iv)                              the
incurrence by the Company or its Restricted Subsidiaries of FF&E Financing
in an aggregate principal amount not to exceed $25.0 million at any time
outstanding;


 


(v)                                 the
incurrence by the Company or its Restricted Subsidiaries of Permitted
Refinancing Indebtedness in exchange for, or the net proceeds of which are used
to refund, refinance or replace Indebtedness (other than intercompany
Indebtedness) that was permitted to be incurred pursuant to the first paragraph
of this Section 9(b) and subsections (i) and (iii) above;


 


(vi)                              the
incurrence by the Company or its Restricted Subsidiaries of intercompany
Indebtedness between or among the Company and its Restricted Subsidiaries, provided, however, that (i) if the Company
is the obligor on such Indebtedness, such Indebtedness is expressly
subordinated to the prior payment in full in cash of all Obligations with
respect to the Notes and (ii) (A) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by a Person other
than the Company or its Restricted Subsidiaries and (B) any sale or other
transfer of any such Indebtedness to a Person that is not the Company or a
Restricted Subsidiary shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by the Company or such Restricted Subsidiary;


 


(vii)                           the
incurrence by the Company or its Restricted Subsidiaries of Hedging Obligations
that are incurred for the purpose of fixing, managing or hedging interest rate
risk with respect to any fixed, floating or variable rate Indebtedness or for
the purpose of protecting against fluctuation in interest rates or the value of
foreign currencies purchased or received, in each case in respect of
Indebtedness that is permitted by the terms of the Notes to be outstanding; provided, however, that in the case of
Hedging Obligations that are incurred for the purpose of fixing, managing or
hedging interest rate risks with respect to Indebtedness, the notional
principal amount of any such Hedging Obligation does not exceed the principal
amount of the Indebtedness to which such Hedging Obligation relates and in the
case of Hedging Obligations incurred for the purpose of protecting against
fluctuations in interest rates or the value of foreign currencies purchased or
received, such Hedging Obligations do not increase the Indebtedness of the
Company and its Restricted Subsidiaries outstanding other than as a result of
fluctuations in foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder;


 


(viii)                        Indebtedness
incurred solely in respect of performance, surety and similar bonds or
completion guarantees, to the extent that such incurrence does not result in
the incurrence of any obligation for the payment of borrowed money to others;


 


(ix)                                Indebtedness
arising in the ordinary course of business out of workers compensation claims,
self insurance obligations and standby letters of credit covering workers
compensation, performance or similar obligations, all in the ordinary course of
business in accordance with customary industry practices, in amounts and for
the purposes customary in the Company’s industry;


 


13

















 


(x)                                   any
guarantee of the Company of Indebtedness or other obligations of any of its
Restricted Subsidiaries so long as the incurrence of such Indebtedness incurred
by such Restricted Subsidiary is permitted under the terms of the Notes;


 


(xi)                                the
incurrence by the Company of Indebtedness represented by the Notes and the
accrued and unpaid interest thereon; and


 


(xii)                             the
incurrence by the Company of additional Indebtedness in an aggregate principal
amount (or accreted value, as applicable) at any time outstanding not to exceed
$10.0 million.


 


For purposes
of determining compliance with this covenant, in the event that an item of
Indebtedness meets the criteria of more than one of the categories of Permitted
Debt described in clauses (i) through (xii) above or is entitled to be incurred
pursuant to the first paragraph of this Section 9(b), the Company shall, in its
sole discretion, classify and reclassify such item of Indebtedness in any
manner that complies with this Section 9(b) and such item of Indebtedness will
be treated as having been incurred pursuant to only one of such clauses or
pursuant to the first paragraph of this Section 9(b).  Accrual of interest, the accretion of accreted value and the payment
of interest in the form of additional Indebtedness will not be deemed to be an
incurrence of Indebtedness for purposes of this covenant.


 


(c)                                  Liens. 
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien securing Indebtedness that is pari
passu or subordinate in right of payment to the Notes, on any asset
now owned or hereafter acquired, or any income or profits therefrom or assign
or convey any right to receive income therefrom, except Permitted Liens,
unless:


 


(i)                                     in
the case of any Lien securing Indebtedness that is pari passu in right of
payment with the Notes, the Notes are secured by a lien on such property, asset
or proceeds that is senior in priority to or pari passu with such Lien; and


 


(ii)                                  in
the case of any Lien securing Indebtedness that is subordinate in right of
payment to the Notes, the Notes are by a Lien on such property, assets or
proceeds that is senior in priority to such Lien.


 


(d)                                 Dividend and Other Payment Restrictions Affecting
Subsidiaries.  The Company
will not, and will not permit any of its Restricted Subsidiaries to, directly
or indirectly, create or otherwise cause or suffer to exist or become effective
any consensual encumbrance or consensual restriction on the ability of any
Restricted Subsidiary to:


 


(i)                                     (a)
pay dividends or make any other distributions to the Company or any of its
Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any
other interest or participation in, or measured by, its profits, or (b) pay any
indebtedness owed to the Company or any of its Restricted Subsidiaries,


 


(ii)                                  make
loans or advances to the Company or any of its Restricted Subsidiaries or


 


14

















 


(iii)                               transfer
any of its properties or assets to the Company or any of its Restricted
Subsidiaries.


 


The provisions
of the first paragraph of this covenant will not apply to encumbrances or
restrictions existing under or by reason of (a) Existing Indebtedness as in
effect on the Issue Date, (b) the Senior Indebtedness as in effect as on the
Issue Date, and any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive (as determined by the Board
of Directors in good faith) with respect to such dividend and other payment
restrictions than those contained in the Senior Indebtedness as in effect on
the Issue Date, (c) the Notes, (d) applicable law, rules or regulations, or any
order or ruling by a Governmental Authority or a Gaming Authority, (e) any
instrument of a Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (but not created in
connection with or in contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired, provided that, in the
case of Indebtedness, such Indebtedness was permitted by the terms of the Notes
to be incurred, (f) customary non-assignment provisions in leases, licenses,
encumbrances, contracts or similar agreements entered into or acquired in the
ordinary course of business, (g) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) on the property so acquired, (h) contracts for
the sale of assets, including, without limitation, customary restrictions with
respect to a Subsidiary pursuant to an agreement that has been entered into for
the sale or disposition of all or substantially all of the Capital Stock or
assets of such Subsidiary; and (i) Permitted Refinancing Indebtedness, provided that the restrictions contained
in the agreements governing such Permitted Refinancing Indebtedness are no more
restrictive (as determined by the Board of Directors in good faith) than those
contained in the agreements governing the Indebtedness being refinanced.


 


(e)                                  Merger, Consolidation or Sale of Assets.  The Company may not consolidate or merge
with or into (whether or not the Company is the surviving corporation), or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets in one or more related
transactions, to another corporation, Person or entity unless the Company is
the surviving corporation or the entity or the Person formed by or surviving
any such consolidation or merger (if other than the Company) or to which such
sale, assignment, transfer, lease, conveyance or other disposition shall have been
made is an entity organized or existing under the laws of the United States,
any state thereof or the District of Columbia, and the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made assumes all the
obligations of the Company under the Notes.


 


(f)                                    Transactions With Affiliates.  The Company will not, and will not permit
any of its Restricted Subsidiaries to, make any payment to or Investment in, or
sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding,


 


15

















 


loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an
“Affiliate Transaction”) unless such Affiliate Transaction is on terms that are
no less favorable (as determined by the Board of Directors in good faith) to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person, and such Affiliate Transaction has been
approved by a majority of the disinterested members of the Board of Directors.


 


The foregoing
provisions will not apply to the following:


 


(i)                                     any
employment agreement entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business of the Company or such
Restricted Subsidiary;


 


(ii)                                  transactions
between or among the Company and/or its Restricted Subsidiaries;


 


(iii)                               Restricted
Payments that are permitted by the provisions of the Notes;


 


(iv)                              (A)
if no Default or Event of Default shall have occurred and be continuing, the
payment of a fee to Peter A. Morton in connection with the rendering of
services to or on behalf of the Company pursuant to the Supervisory Agreement
and (B) the reimbursement of expenses (including, without limitation, allocated
salaries and overhead) incurred by entities controlled by Peter A. Morton in
providing support and travel services to the Company and its Restricted
Subsidiaries in the ordinary course of business, consistent with past practice;


 


(v)                                 the
payment of reasonable and customary fees paid to, and indemnity provided on
behalf of, officers, directors or employees of the Company or any Restricted
Subsidiary;


 


(vi)                              loans
to employees in the ordinary course of business of the Company; provided that any such loan in excess of
$200,000 must be approved by a majority of the disinterested members of the
Board of Directors;


 


(vii)                           any
agreement in effect as of the Issue Date or any amendment to such agreement (so
long as such amendment is no less favorable to the holders of the Notes in any
material respect than the original agreement as in effect on the Issue Date) or
any transaction contemplated thereby;


 


(viii)                        the
Subordination Agreements;


 


(ix)                                additional
investments in the Company by Peter A. Morton or his Affiliates, including,
without limitation, the exchange of the Company’s outstanding preferred stock
beneficially owned by Peter A. Morton for the Notes pursuant to the Exchange
Agreement;


 


16

















 


(x)                                   any
payments to holders of Notes in accordance with the terms hereof; and


 


(xi)                                any
agreement entered into following the Issue Date and relating to sublicense of
the right to use the “Hard Rock Hotel” trademark.


 


10.                                 PAYMENTS
FOR CONSENT


 


Neither the
Company nor any of its Subsidiaries will, directly or indirectly, pay or cause
to be paid any consideration, whether by way of interest, fee or otherwise, to
the holders of the Notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the Notes unless such
consideration is offered to be paid or is paid to all holders of the Notes that
consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.


 


11.                                 EVENTS
OF DEFAULT AND REMEDIES


 


(a)                                  Each
of the following shall constitute an Event of Default; (i) default for 60 days
in the payment when due of interest on the Notes; (ii) default in payment when
due of the principal of or premium, if any, on the Notes; (iii) failure by the
Company or any of its Restricted Subsidiaries for 75 days after notice by the
holder of at least 25% of Notes then outstanding to comply with any of its
agreements in the Notes; (iv) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the Company
or any of its Restricted Subsidiaries), other than Indebtedness owed to the
Company or a Restricted Subsidiary, whether such Indebtedness or guarantee now
exists, or is created after the dated hereof, which default (a) is caused by a
failure to pay at final maturity (giving effect to any applicable grace periods
and any extensions thereof) the principal amount of such Indebtedness (a
“Payment Default”) or (b) results in the acceleration of such Indebtedness,
prior to its express maturity and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $20.0 million or more; (v) failure by
the Company or any of its Subsidiaries to pay final judgments aggregating in
excess of $20.0 million, which judgments are not paid, discharged or stayed for
a period of 60 days (net of applicable insurance coverage which is acknowledged
in writing by the insurer); (vi) the loss of the legal right to operate any
Casino by the Company or any of its Restricted Subsidiaries resulting in a
cessation of operations for a period of more than 360 days; (vii) the Company
or any Significant Subsidiary, pursuant to or under or within the meaning of
any Bankruptcy Law (1) commences a voluntary case or proceeding, (2) consents
to the entry of any order for relief against it in an involuntary case or
proceeding or to the commencement of any case against it, (3) consents to the
appointment of a Custodian of it or for any substantial part of its property,
(4) makes a general assignment for the benefit of its creditors, (5) files a
petition in bankruptcy or answer or consent seeking reorganization or relief,
or (6) consents to the filing of such petition or the appointment of or taking
possession by a Custodian; and (viii) a court of competent jurisdiction enters
an order or decree under any Bankruptcy Law that (1) is for relief against the
Company or any Significant Subsidiary, in an involuntary case or proceeding, or
adjudicates the Company or any


 


17

















 


Significant Subsidiary
insolvent or bankrupt, (2) appoints a Custodian of the Company or any Significant
Subsidiary, or for any substantial part of its property, or (3) orders the
winding up or liquidation of the Company or any Significant Subsidiary, and the
order or decree remains unstayed and in effect for 60 days.


 


(b)                                 If
any Event of Default described in clause (i), (ii) or (vi) in the preceding
paragraph occurs and is continuing, the holder of at least 25% in principal
amount of the then outstanding Notes may declare the Notes to be due and
payable immediately.  If any Event of
Default described in clause (iii), (iv) or (v) occurs and is continuing, then
no later than 15 days prior to the proposed date of declaration of any
acceleration of the principal amount of the Notes (the “Acceleration Date”),
the holder of not less than 25% of the Notes shall deliver a notice (the
“Proposed Acceleration Notice”) of such Event of Default to the trustee with
respect to the Second Lien Notes and the administrative agent under the New
Credit Facility.  Upon the earliest of
(a) the Acceleration Date, if no Standstill Notice is received prior to the
Acceleration Date, (b) the expiration of the Standstill Period and (c) 60 days
following acceleration of the Designated Senior Indebtedness, the holder of at
least 25% in aggregate principal amount of the outstanding Notes may declare
the Notes to be due and payable immediately. 
Notwithstanding the foregoing, in the case of an Event of Default
specified in clauses (vii) and (viii) of the preceding paragraph, with respect
to the Company, the Notes will become due and payable without further action or
notice.  The holders of the Notes may
not enforce the Notes except as provided herein.


 


(c)                                  The
holder of a majority in aggregate principal amount of the Notes then
outstanding may on behalf of the holders of the Notes waive any existing
Default or Event of Default and its consequences under the Notes except a
continuing Default or Event of Default in the payment of interest, premium, if
any, on, or the principal of, the Notes.


 


12.                                 NO
PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS


 


No director,
officer, employee, incorporator or stockholder of the Company, as such, shall
have any liability for any obligations of the Company under the Notes, or for
any claim based on, in respect of, or by reason of, such obligations or its
creation.  Each holder by accepting a
Note waives and releases all such liability. 
The waiver and release are part of the consideration for issuance of the
Notes.  Such waiver may not be effective
to waive liabilities under the federal securities laws and it is the view of
the Commission that such a waiver is against public policy.


 


13.                                 LEGAL
DEFEASANCE AND COVENANT DEFEASANCE


 


(a)                                  The
Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the Notes (“Legal Defeasance”) except
for (i) the rights of holders of outstanding Notes to receive payments in
respect of the principal of, premium, if any, and interest on the Notes when
such payments are due from the trust referred to below, (ii) the Company’s
obligations with respect to the Notes concerning issuing a temporary Note,
registration of a Note, a mutilated, destroyed, lost or stolen Note and the
maintenance of an office or agency for payment and money for security payments
held in trust, (iii) the rights,


 


18

















 


powers, trusts, duties and
immunities of the Company’s obligations in connection herewith and (iv) the
Legal Defeasance provisions of the Notes. 
In addition, the Company may, at its option and at any time, elect to
have the obligations of the Company released with respect to certain covenants
that are described in the Notes (“Covenant Defeasance”) and, thereafter, any
omission to comply with such obligations shall not constitute a Default or
Event of Default with respect to the Notes. 
In the event Covenant Defeasance occurs, certain events (not including
non-payment, bankruptcy, receivership, rehabilitation and insolvency events)
described under “Events of Default” will no longer constitute an Event of
Default with respect to the Notes.


 


(b)                                 In
order to exercise either Legal Defeasance or Covenant Defeasance,


 


(i)                                     the
Company must irrevocably deposit, in trust, for the benefit of the holders of
the Notes, cash in United States dollars, non-callable Government Securities,
or a combination thereof, in such amounts as will be sufficient, in the opinion
of a nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the Notes on the Stated Maturity
or on the applicable redemption or repurchase date, as the case may be, and the
Company must specify whether the Notes are being defeased to maturity or to a
particular redemption or repurchase date;


 


(ii)                                  in
the case of Legal Defeasance, the Company shall have received an opinion of
counsel in the United States reasonably acceptable confirming that (A) the
Company has received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the Issue Date, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the holders of the Notes
will not recognize income, gain or loss for federal income tax purposes as a result
of such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Legal Defeasance had not occurred;


 


(iii)                               in
the case of Covenant Defeasance, the Company shall have received an opinion of
counsel in the United States confirming that the holders of the outstanding
Notes will not recognize income, gain or loss for federal income tax purposes
as a result of such Covenant Defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;


 


(iv)                              no
Default or Event of Default shall have occurred and be continuing on the date
of such deposit (other than a Default or Event of Default resulting from the
borrowing of funds to be applied to such deposit) or insofar as Events of
Default from bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of deposit;


 


(v)                                 such
Legal Defeasance or Covenant Defeasance will not result in a breach or
violation of, or constitute a default under any material agreement or
instrument (other than the Notes) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;


 


19

















 


(vi)                              the
Company must have received an opinion of counsel to the effect that after the
91st day following the deposit, assuming that no holder of Notes is an insider
of the Company (as “insider” is defined in Bankruptcy Code Section 101), the
cash or securities so deposited will not be subject to avoidance and recovery
under Bankruptcy Code Sections 547 and 550;


 


(vii)                           the
deposit was not made by the Company with the intent to defeat, hinder, delay or
defraud creditors of the Company; and


 


(viii)                        the
Company must have received an opinion of counsel, stating that all conditions
precedent provided for in the Notes relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.


 


14.                                 AMENDMENT,
SUPPLEMENT AND WAIVER


 


(a)                                  Except
as provided in the next two succeeding paragraphs, the Notes may be amended or
supplemented with the written consent of the holders of at least a majority in
principal amount of the Notes then outstanding (including, without limitation,
consents obtained in connection with a purchase of, or tender offer or exchange
offer for, Notes),  and any
existing default or compliance with any provision of the Notes may be waived
with the consent of the holder of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for Notes); provided that the Notes shall not be
amended in any way that adversely affects the holders of Senior Indebtedness.


 


(b)                                 Without
the consent of each holder, an amendment, supplement or waiver may not (with
respect to any Notes held by a non-consenting holder):  (i) reduce the principal amount of Notes
whose holders must consent to an amendment, supplement or waiver, (ii) reduce
the principal of or change the fixed maturity of any Note or alter the
provisions with respect to the redemption price of the Notes, (iii) reduce the
rate of or change the time for payment of interest on any Note, (iv) waive a
Default or Event of Default in the payment of principal of or premium, if any,
on the Notes (except a rescission of acceleration of the Notes by the holders
of at least a majority in aggregate principal amount of the Notes and a waiver
of the payment default that resulted from such acceleration), (v) make any Note
payable in money other than that stated in the Notes, (vi) make any change in
the provisions of the Notes relating to waivers of past Defaults or the rights
of holders of Notes to receive payments of principal of or premium, if any, on
the Notes (except as otherwise provided hereunder), or (vii) make any change in
the foregoing amendment and waiver provisions.


 


(c)                                  Notwithstanding
the foregoing, without the consent of the holders of the Notes, the Company may
amend or supplement the Notes to cure any ambiguity, defect or inconsistency,
to provide for the assumption of the Company’s obligations to the holders of
the Notes in the case of a merger or consolidation, or to make any change that
would provide any additional rights or benefits to the holders of the Notes or
that does not adversely affect the legal rights of the holders of the Notes.


 


20

















 


15.                                 TRANSFER
AND EXCHANGE


 


Upon request
by a holder of Notes and such holder’s compliance with the provisions under
this Section 15, the Company shall register the transfer or exchange of
Notes.  Prior to such registration of
transfer or exchange, the requesting holder shall present on surrender to the
Company the Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Company duly executed by the requesting
holder or by its attorney, duly authorized in writing.  In addition, the requesting holder shall
provide any additional certifications, documents and information, as
applicable, pursuant to the provisions of this Section 15.


 


The Notes may
be transferred to and registered in the name of Persons who take delivery
thereof if the Company receives a certificate in the form of Exhibit A hereto,
including the certifications required thereunder.


 


16.                                 CERTAIN
DEFINITIONS


 


Set forth
below are certain defined terms used in the Notes.


 


“Acquired Indebtedness” means, with respect
to any specified Person, Indebtedness of any other Person existing at the time
such other Person is merged with or into or became a Subsidiary of such
specified Person.


 


“Affiliate” of any specified Person means
any other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person. For purposes of
this definition, “control” (including, with correlative meanings, the terms
“controlling,” “controlled by” and “under common control with”), as used with
respect to any Person, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement
or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.


 


“Asset Sale” means (i) the voluntary sale,
lease, conveyance or other disposition of any assets or rights (including,
without limitation, by way of a sale and leaseback) other than in the ordinary
course of business (provided that the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company and its
Subsidiaries taken as a whole will be governed by the provisions of the Notes,
and (ii) the issue or sale by the Company or any of its Restricted Subsidiaries
of Equity Interests of any of the Company’s Restricted Subsidiaries, in the
case of either clause (i) or (ii), whether in a single transaction or a series
of related transactions that have a fair market value (as determined in good
faith by the Board of Directors) in excess of $1.0 million or for net cash
proceeds in excess of $1.0 million. 
Notwithstanding the foregoing: 
(i) a transfer of assets by the Company to a Restricted Subsidiary or by
a Restricted Subsidiary to the Company or to another Restricted Subsidiary;
(ii) an issuance of Equity Interests by a Restricted Subsidiary to the Company
or to another Restricted Subsidiary; (iii) a permitted Restricted Payment; (iv)
a disposition of cash or Cash Equivalents; (v) a disposition of either obsolete
equipment or equipment that is damaged, worn out or otherwise no longer useful
in the business; (vi) any sale of Equity Interests in, or Indebtedness or other
securities of, an Unrestricted Subsidiary; (vii) any sale and leaseback of an
asset within 90 days after the completion of construction or acquisition of
such asset;  and (viii) any
surrender or waiver of


 


21

















 


contract rights or a
settlement, release or surrender of contract, tort or other claims of any kind
or a grant of any Lien not prohibited by the Notes shall not be considered an
Asset Sale.


 


“Bankruptcy Law” means Title 11, United
States Code, or any similar Federal or State law for the relief of debtors.


 


“Board of Directors”
means the board of directors of the Company or any duly authorized committee
thereof.


 


“Board Resolution”
means a copy of a resolution certified by the secretary, an assistant secretary
or director of the Company to have been duly adopted by the Board of Directors
and to be in full force and effect on the date of such certification, and
delivered to the Trustee.


 


“Business Day” means each Monday, Tuesday,
Wednesday, Thursday and Friday that is not a day on which banking institutions
in New York, New York are authorized or obligated by law or executive order to
close.


 


“Capital Lease Obligation” means, at the
time any determination thereof is to be made, the amount of the liability in
respect of a capital lease that would at such time be required to be
capitalized on a balance sheet in accordance with GAAP.


 


“Capital Stock” means (i) in the case of a
corporation, corporate stock, (ii) in the case of an association or business
entity, any and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock, (iii) in the case of a
partnership or limited liability company, partnership or membership interests
(whether general or limited) and (iv) 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 assets of, the issuing Person.


 


“Cash Equivalents” means, when used in
connection with any Person, that Person’s Investments in:


 


(a)                                  Government
Securities due within one year after the date of the making of the Investment;


 


(b)                                 readily
marketable direct obligations of any State of the United States of America or
any political subdivision of any such State or any public agency or
instrumentality thereof given on the date of such Investment a credit rating of
at least Aa by Moody’s Investors Service, Inc. (“Moody’s”) or AA by Standard
& Poor’s Ratings Group (“S&P”), in each case due within one year from
the making of the Investment;


 


(c)                                  certificates
of deposit issued by, bank deposits in, eurodollar deposits through, bankers’
acceptances of, and repurchase agreements covering Government Securities
executed by, any lender under the New Credit Facility or any bank incorporated
under the laws of the United States of America, any state thereof or the
District of Columbia and having on the date of such Investment combined
capital, surplus and undivided profits of at least $250,000,000, in each case
due within one year after the date of the making of the Investment;


 


22

















 


(d)                                 certificates
of deposit issued by, bank deposits in, eurodollar deposits through, bankers’
acceptances of, and repurchase agreements covering Government Securities
executed by, any branch or office located in the United States of America of a
bank incorporated under the laws of any jurisdiction outside the United States
of America having on the date of such Investment combined capital, surplus and
undivided profits of at least $500,000,000, in each case due within one year
after the date of the making of the Investment; and


 


(e)                                  readily
marketable commercial paper of corporations doing business in and incorporated
under the laws of the United States of America or any state thereof or of any
corporation that is the holding company for a bank described in clause (c) or
(d) above given on the date of such Investment a credit rating of at least P-1
by Moody’s or A-1 by S&P, in each case due within 90 days after the date of
the making of the Investment.


 


“Casino” means any gaming establishment and
other property or assets directly ancillary thereto or used in connection
therewith, including any building, restaurant, hotel theater, parking
facilities, retail shops, land, golf courses and other recreation and
entertainment facilities, vessel, barge, ship and equipment.


 


“Change of Control” means the occurrence of
any of the following: (i) the 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 assets of the
Company and its Restricted Subsidiaries taken as a whole to any “person” (as
such term is used in Section 13(d)(3) of the Exchange Act), other than to the
Permitted Holders, (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company, (iii) prior to the first Equity Offering, the
Permitted Holders cease to be the “beneficial owner” (as such term is defined
in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly,
of a majority of the Voting Stock of the Company (as measured by voting power
rather than number of shares), (iv) after the first Equity Offering, (A) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any “person” (as defined above),
other than the Permitted Holders, becomes the “beneficial owner” (as defined
above), directly or indirectly, of 35% or more of the Voting Stock of the
Company (measured by voting power rather than number of shares) and (B) the
Permitted Holders “beneficially own” (as defined in Rule 13d-3 and Rule 13d-5
under the Exchange Act), directly or indirectly, in the aggregate a lesser
percentage of the Voting Stock of the Company (measured by voting power rather
than number of shares) than such other person, (v) after the first Equity
Offering, Continuing Directors cease to constitute a majority of the members of
the board of directors of the Company, or (vi) the Company consolidates with,
or merges with or into, any Person, other than the Permitted Holders, or any
Person, other than the Permitted Holders, consolidates with, or merges with or
into, the Company, in any such event pursuant to a transaction in which the
outstanding Voting Stock of the Company is converted into or exchanged for
cash, securities or other property, other than any such transaction where the
Voting Stock of the Company outstanding immediately prior to such transaction
is converted into or exchanged for Voting Stock (other than Disqualified Stock)
of the surviving or transferee Person constituting a majority of the
outstanding shares of such Voting Stock of such surviving or transferee person
(immediately after giving effect to such issuance).


 


23

















 


“Consolidated Cash Flow” means, with
respect to any Person for any period, the sum of, without duplication, the
Consolidated Net Income of such Person for such period plus (i) provision for
taxes based on income or profits of such Person and its Subsidiaries for such
period, to the extent that such provision for taxes was included in computing
such Consolidated Net Income, plus (ii) consolidated interest expense of such
Person and its Subsidiaries for such period, whether paid or accrued and
whether or not capitalized (including, without limitation, amortization of
original issue discount, amortization of deferred financing fees, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers’ acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), to the extent that any such expense
was deducted in computing such Consolidated Net Income, plus (iii)  consolidated depreciation, amortization
and other non-cash charges of the Person and its Subsidiaries required to be
reflected as expenses on the books and records of the Person, minus (iv) cash
payments with respect to any non-cash charges previously added back pursuant to
clause (iii), plus (v) preopening costs that are required by GAAP to be charged
as an expense prior to or upon opening, to the extent that such preopening
costs were deducted in computing such Consolidated Net Income.  Notwithstanding the foregoing, the provision
for taxes on the income or profits of, and the depreciation and amortization
and other non-cash charges of, a Subsidiary of the referent Person shall be
added to Consolidated Net Income to compute Consolidated Cash Flow only to the
extent (and in same proportion) that the Net Income of such Subsidiary was
included in calculating the Consolidated Net Income of such Person.


 


“Consolidated Net Income” means, with
respect to any Person for any period, the aggregate of the Net Income of such
Person and its Subsidiaries for such period, on a consolidated basis,
determined in accordance with GAAP; provided
that (i) the Net Income (but not loss) of any Person that is not a Restricted
Subsidiary that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the referent Person or a Restricted Subsidiary thereof, (ii) the Net
Income of any Subsidiary shall be excluded to the extent that the declaration
or payment of dividends or similar distributions by that Subsidiary of that Net
Income is not at the date of determination permitted without any prior
government approval (that has not been obtained) or, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in
a pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles shall be excluded, and (v) all other extraordinary gains
and extraordinary losses shall be excluded.


 


“Continuing Directors” means, as of any
date of determination, any member of the board of directors of the Company who
(i) was a member of such board of directors on the Issue Date or (ii) was
nominated for election or elected to such board of directors with the approval
of a majority of the Continuing Directors who were members of such board of
directors at the time of such nomination or election.


 


“Custodian” means any receiver, trustee,
assignee, liquidator, custodian or similar official under any Bankruptcy Law.


 


24

















 


“Default” means any event that is or with
the passage of time or the giving of notice or both would be an Event of
Default.


 


“Designated Senior Indebtedness” means
Indebtedness incurred under the New Credit Facility and the Second Lien Notes.


 


“Disqualified Stock” means any Capital
Stock that, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable at the option of the holder
thereof), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the holders thereof, in whole or in part, on or prior to the
date that is 91 days after the date on which the Notes mature, provided, however, that any Capital Stock
that would constitute Disqualified Stock solely because the holders thereof (or
of any security into which it is convertible or for which it is exchangeable)
have the right to require the issuer to repurchase such Capital Stock (or such
security into which it is convertible or for which it is exchangeable) upon the
occurrence of any of the events constituting an Asset Sale or a Change of
Control shall not constitute Disqualified Stock if such Capital Stock (and all
such securities into which it is convertible or for which it is exchangeable)
provides that the issuer thereof will not repurchase or redeem any such Capital
Stock (or any such security into which it is convertible or for which it is
exchangeable) pursuant to such provisions prior to compliance by the Company
with the provisions of the Notes.


 


“Equity Interests” means Capital Stock and
all warrants, options or other rights to acquire Capital Stock (but excluding
any debt security that is convertible into, or exchangeable for, Capital
Stock).


 


“Equity Offering” means any bona fide
underwritten public offering of common stock by the Company other than (i)
issuances of Disqualified Stock, (ii) issuances in payment of or to finance the
purchase price of an acquisition or (iii) issuances of common stock pursuant to
employee benefit plans of the Company or otherwise as compensation to employees
of the Company.


 


“Exchange Agreement” means the Exchange
Agreement, dated the Issue Date, among the Company, Peter A. Morton and Desert
Rock, Inc., relating to the exchange of all of the Company’s outstanding
preferred stock for the Notes.


 


“Existing Indebtedness” means Indebtedness
of the Company and its Subsidiaries (other than Indebtedness under the New
Credit Facility and the Second Lien Notes) in existence on the Issue Date,
until such amounts are repaid.


 


“Existing Notes” means the Company’s 91⁄4%
Senior Subordinated Notes due 2005 outstanding immediately following the
issuance of the Notes and the application of the net proceeds therefrom.


 


“FF&E Financing”
means Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the purpose
of financing all or any part of the purchase price, lease or cost of
construction or


 


25

















 


improvement of property, plant
or equipment (including without limitation, slot machines and other gaming
equipment) used in a Permitted Business.


 


“Fixed Charge Coverage Ratio” means with
respect to any Person for any period, the ratio of the Consolidated Cash Flow
of such Person for such period to the Fixed Charges of such Person for such
period. In the event that the Company or any of its Subsidiaries incurs,
assumes, Guarantees, repays or redeems any Indebtedness (other than revolving
credit borrowings) or issues or redeems preferred stock subsequent to the commencement
of the period for which the Fixed Charge Coverage Ratio is being calculated but
prior to the date on which the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the “Calculation Date”), then the Fixed Charge
Coverage Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, Guarantee, repayment or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period and in the case of
revolving credit borrowings, the Fixed Charge Coverage Ratio shall be computed
based on the average daily balance of such Indebtedness during the applicable
reference period. In addition, for purposes of making the computation referred
to above, (i) acquisitions that have been made by the Company or any of its
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period and Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income, (ii) the Consolidated Cash Flow
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall
be excluded, (iii) the Fixed Charges attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, but only to the extent that
the obligations giving rise to such Fixed Charges will not be obligations of
the referent Person or any of its Subsidiaries following the Calculation Date,
and (iv) in the case of Indebtedness bearing interest at a floating rate which
is being given pro forma effect, the interest on such Indebtedness shall be
calculated as if the rate in effect on the Calculation Date had been the
applicable rate for the entire period (taking into account any Hedging
Obligation applicable to such Indebtedness).


 


“Fixed Charges” means, with respect to any
Person for any period, the sum, without duplication, of (i) the consolidated
interest expense of such Person and its Restricted Subsidiaries for such
period, whether paid or accrued (including, without limitation, amortization of
debt issuance costs (other than amortization of debt issuance costs related to
the Notes and the New Credit Facility) and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or banker’s acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), (ii) the consolidated interest
expense of such Person and its Restricted Subsidiaries that was capitalized
during such period and (iii) any interest expense on Indebtedness of another
Person that is Guaranteed by such person or one of its Restricted Subsidiaries
or secured by a Lien on assets of such Person or one of its Restricted
Subsidiaries (whether or not such Guarantee or Lien is called upon).


 


26

















 


“GAAP” means
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accounts and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as have
been approved by a significant segment of the accounting profession, which are
in effect on the Issue Date.


 


“Gaming Authority” means any Governmental
Authority with the power to regulate gaming in any Gaming Jurisdiction, and the
corresponding Governmental Authorities with the responsibility to interpret and
enforce the laws and regulations applicable to gaming in any Gaming
Jurisdiction.


 


“Gaming Jurisdiction” means any Federal,
state or local jurisdiction in which any entity, in which the Company has a
direct or indirect beneficial, legal or voting interest, conducts casino
gaming, now or in the future.


 


“Gaming Law” means any law, rule,
regulation or ordinance governing gaming activities (including, without
limitation, The Riverboat Gambling Act of Illinois, The Louisiana Riverboat
Economic Development and Gaming Control Act, the Missouri Riverboat Gaming Act
(Mo. Rev. Stat. Section 313.800 et seq.) and the Nevada Gaming Control Act
(Nev. Rev. Stat. Section 463.010 et seq.), in each case including all amendments
or modifications thereof), any administrative rules or regulations promulgated
thereunder, and any of the corresponding statutes, rules and regulations in
each Gaming Jurisdiction.


 


“Government Securities” means readily
marketable (a) direct full faith and credit obligations of the United States of
America or obligations guaranteed by the full faith and credit of the United
States of America, or (b) obligations of an agency or instrumentality of, or
corporation owned, controlled or sponsored by, the United States of America
that are generally considered in the securities industry to be implicit
obligations of the United States of America.


 


“Governmental Authority” means any agency,
authority, board, bureau, commission, department, office or instrumentality of
any nature whatsoever of the United States or foreign government, any state,
any province or any city or other political subdivision or otherwise and
whether now or hereafter in existence, or any officer or official thereof, and
any maritime authority.


 


“Guarantee” means a guarantee (other than
by endorsement of negotiable instruments for collection in the ordinary course
of business), direct or indirect, in any manner (including, without limitation,
letters of credit and reimbursement agreements in respect thereof), of all or
any part of any Indebtedness.


 


“Hedging Obligations” means with respect to
any Person, the obligations of such Person under (i) interest rate swap
agreements, interest rate cap agreements and interest rate collar agreements
with respect to Indebtedness that is permitted by the terms of the Notes and
(ii) other agreements or arrangements designed to protect such Person against
fluctuation in interest rates or the value of foreign currencies purchased or
received by such Person in the ordinary course of business.


 


27

















 


“Indebtedness” means, with respect to any
Person, any indebtedness of such Person, whether or not contingent, (i) in
respect of borrowed money, or (ii) evidenced by bonds, notes, debentures or
similar instruments or letters of credit or reimbursement agreements in respect
thereof (other than letters of credit securing obligations not constituting
Indebtedness that are issued in the ordinary course of business by a Person to
the extent not drawn upon or, if and to the extent drawn upon, such drawing is
reimbursed no later than the tenth Business Day following receipt by such
Person of a demand for reimbursement following payment on the letter of credit)
or bankers’ acceptances, or (iii) representing Capital Lease Obligations or the
balance deferred and unpaid of the purchase price of any property, except any
such balance that constitutes an accrued expense or trade payable, or (iv)
representing any Hedging Obligations, in each case if and to the extent any of
the foregoing indebtedness (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the
Guarantee by such Person of any Indebtedness of any other Person; provided that
for purposes of clarity, trade accounts payable arising in the ordinary course
of business shall not constitute Indebtedness.


 


“Investments” means, with respect to any
Person, all investments by such Person in other Persons (including Affiliates)
in the forms of direct or indirect loans (including guarantees of Indebtedness
or such other obligations), advances (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business) or
capital contributions, purchases or other acquisitions for consideration of
Indebtedness, Equity Interests or other securities, together with all items
that are or would be classified as investments on a balance sheet prepared in
accordance with GAAP. If the Company or any Restricted Subsidiary of the
Company sells or otherwise disposes of any Equity Interests of any direct or
indirect Restricted Subsidiary of the Company such that, after giving effect to
any such sale or disposition, such Person is no longer a Restricted Subsidiary
of the Company, the Company shall be deemed to have made an Investment on the
date of any such sale or disposition equal to the fair market value of the
Equity Interests of such Restricted Subsidiary not sold or disposed of.


 


“Issue Date” means May 30, 2003.


 


“Laws” means, collectively, all federal,
state and local statutes, rules, regulations, ordinances, codes and
administrative or judicial precedents, or other matters having the force of law
and binding upon the parties hereto.


 


“Lien” means, with respect to any asset,
any mortgage, lien, pledge, charge, security interest or encumbrance of any
kind in respect of such asset, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any option or other
agreement to sell or give a security interest in and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction).


 


“Net Income” means, with respect to any
Person, the net income (loss) of such Person, determined in accordance with
GAAP and before any reduction in respect of preferred stock dividends,
excluding, however, (i) any gain or loss, together with any related provision
for


 


28

















 


taxes on such gain or loss,
realized in connection with (a) any Asset Sale (including, without limitation,
dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries
(including any losses or charges resulting from the redemption or repurchase of
the Existing Notes and the extinguishment of Indebtedness under that certain
credit agreement dated as of March 23, 1998 by and among the Company, Bank of
America, N.A. and the other lenders named therein) and (ii) any extraordinary
or nonrecurring gain or loss, together with any related provision for taxes on
such extraordinary or nonrecurring gain or loss.


 


“Net Proceeds” means the aggregate cash
proceeds received by the Company or any of its Restricted Subsidiaries in
respect of any Asset Sale (including, without limitation, any cash received
upon the sale or other disposition of any non-cash consideration received in
any Asset Sale), net of the direct costs relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees,
and sales commissions) and any relocation expenses incurred as a result
thereof, taxes paid or payable as a result thereof (after taking into account
any available tax credits or deductions and any tax sharing arrangements),
amounts required to be applied to the repayment of Indebtedness secured by a
Lien on the asset or assets that were the subject of such Asset Sale and any
reserve for adjustment in respect of the sale price of such asset or assets
established in accordance with GAAP.


 


“New Credit Facility” means that certain
credit agreement, dated as of May 30, 2003, by and among the Company and Bank
of America N.A., as administrative agent, and the lenders parties thereto,
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
modified, renewed, refunded, replaced, extended, restated or refinanced from
time to time, whether by the same or any other agent, lender or group of
lenders; provided that the total amount of Indebtedness is not thereby increased
beyond the amount that may then be incurred at such time pursuant to Section
9(b) hereof.


 


“Non-Recourse Debt” means Indebtedness (i)
as to which neither the Company nor any of its Restricted Subsidiaries (a)
provides credit support of any kind (including any undertaking, agreement or
instrument that would constitute Indebtedness), (b) is directly or indirectly
liable (as a guarantor or otherwise), as reflected in the express terms of the
instrument governing such Indebtedness, or (c) constitutes the lender; and (ii)
no default with respect to which (including any rights that the holders thereof
may have to take enforcement action against an Unrestricted Subsidiary) would
permit (upon notice, lapse of time or both) any holder of any Indebtedness
(other than the Notes being offered hereby) of the Company or any of its
Restricted Subsidiaries to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity.


 


“Obligations” means any principal,
interest, penalties, fees indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.


 


“Permitted Business”
means the gaming business and other businesses necessary for, incident to, connected
with or arising out of the gaming business (including developing and


 


29

















 


operating lodging, dining and
nightclub facilities, sports or entertainment facilities, transportation
services, retail operations and other related activities or enterprises and any
additions or improvements thereto) or any business that is reasonably similar
thereto or a reasonable extension, development or expansion thereof or
ancillary thereto, in each case without regard 
to the geographic location of such business.


 


“Permitted Holders” means Peter A. Morton
and any of his Related Parties.


 


“Permitted Liens” means (i) Liens on assets
of the Company and any Subsidiary of the Company created by the Senior
Indebtedness; (ii) Liens in favor of the Company; (iii) Liens on property of a
Person existing at the time such Person is merged into or consolidated with the
Company or any Subsidiary of the Company; provided
that such Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with the Company; (iv) Liens on property existing
at the time of acquisition thereof by the Company or any Subsidiary of the
Company, provided that such Liens
were in existence prior to the contemplation of such acquisition; (v) Liens to
secure the performance of statutory or regulatory obligations, leases, surety
or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (vi) Liens to secure FF&E
Financing permitted by clause (iv) of the second paragraph of Section 9(b)
covering only the assets acquired with such Indebtedness; (vii) Liens existing
on the Issue Date; (viii) Liens securing Hedging Obligations with respect to
Indebtedness incurred under the New Credit Facility, provided that the
counterparties with respect to such Hedging Obligations are the lenders under
the New Credit Facility; (ix) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
concluded; provided that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor; (x) Liens incurred in the ordinary course
of business of the Company or any Subsidiary of the Company with respect to
obligations that do not exceed $15.0 million at any one time outstanding and
that (A) are not incurred in connection with the borrowing of money or the
obtaining of advances or credit (other than trade credit in the ordinary course
of business) and (B) do not in the aggregate materially detract from the value
of the property or materially impair the use thereof in the operation of
business by the Company or such Subsidiary, each as determined by the Board of
Directors in good faith; (xi) Liens on assets of Unrestricted Subsidiaries that
secure Non-Recourse Debt of Unrestricted Subsidiaries; (xii) Liens of carriers,
warehousemen, mechanics, landlords, materialmen, repairmen and for crew wages
or salvage or other like Liens arising by operation of law in the ordinary
course of business and consistent with industry practices and Liens on deposits
made to obtain the release of such Liens if (A) the underlying obligations are
not overdue for a period of more than 60 days or (B) such Liens are being
contested in good faith and by appropriate proceedings by the Company or its
Subsidiary and adequate reserves with respect thereto are maintained on the
books of the Company or such Subsidiary, as the case may be, in accordance with
GAAP; (xiii) easements, rights-of-way, zoning and similar restrictions and
other similar encumbrances or title defects incurred or imposed, as applicable,
in the ordinary course of business and consistent with industry practices
which, in the aggregate, are not substantial in amount, and which do not in any
case materially detract from the value of the property subject thereto (as such
property is used by the Company or its Subsidiary) or interfere with the
ordinary conduct of the business of the Company or such Subsidiary; provided,
however, that any such Liens are not incurred in connection with any


 


30

















 


borrowing of money or any
commitment to loan any money or to extend any credit; (xiv) customary Liens
(other than any Lien imposed by ERISA) incurred or deposits made in the
ordinary course of business in connection with worker’s compensation,
unemployment insurance and other types of social security legislation; (xv)
Liens arising by operation of law in connection with judgments, only to the
extent, for an amount and for a period not resulting in an Event of Default
with respect thereto; (xvi) leases or subleases granted to other Persons in the
ordinary course of business not materially interfering with the conduct of the
business of the Company or any of its Subsidiaries or materially detracting
from the value of the relative assets of the Company or any Subsidiary; (xvii)
Liens arising from precautionary Uniform Commercial Code financing statement
filings regarding operating leases entered into by the Company or any of its
Subsidiaries in the ordinary course of business; (xviii) a Lien on the funds or
securities deposited under the Notes for the purpose of defeasing or redeeming
the Notes on or prior to the maturity date to the extent permitted or required
by the Notes; and (xix) Liens arising solely by virtue of any statutory or
common law provision relating to banker’s liens, rights of setoff or similar
rights and remedies as to deposit accounts or other funds maintained with a
creditor depository institution.


 


“Permitted Refinancing Indebtedness” means
any Indebtedness of the Company or any of its Restricted Subsidiaries issued in
exchange for, or the net proceeds of which are used to extend, refinance,
renew, replace, defease or refund Indebtedness of the Company or any of its
Restricted Subsidiaries; provided
that:(i) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount of (or
accreted value, if applicable), plus accrued interest on, the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded (plus the amount
of reasonable expenses incurred in connection therewith including premiums
paid, if any, to the holders thereof); (ii) such Permitted Refinancing
Indebtedness has a final maturity date at 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 extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.


 


“Person” means any individual, corporation,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.


 


“Related Party” with respect to any Person,
means (a) any Affiliate, or spouse or immediate family member (in the case of
an individual) of such Person, or (b) any trust, corporation, partnership or
other entity, the beneficiaries, stockholders, partners, owners or Persons
beneficially holding a majority interest of which consist of such Person and/or
such other Person referred to in the immediately preceding clause (a), or (c)
any trustee, executor or


 


31

















 


receiver appointed to manage or
administer the assets of a Person who is an individual following the death of
such individual.


 


“Restricted Investment” means an Investment
other than a Permitted Investment.


 


“Restricted Subsidiary” of a Person means
any Subsidiary of the referent Person that is not an Unrestricted Subsidiary.


 


“Second Lien Notes”
means the Company’s 87/8% Second Lien Notes due 2013,
including any related guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
modified, renewed, refunded, replaced, extended, restated or refinanced from
time to time; provided that the total amount of Indebtedness is not thereby
increased beyond the amount that may then be incurred at such time pursuant to
Section 9(b) hereof.


 


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


 


“Senior Indebtedness”
means Indebtedness of the Company arising under the New Credit Facility or the
Second Lien Notes or that, by the terms of the instrument creating or
evidencing such Indebtedness, is expressly designated Senior Indebtedness and made
senior in right of payment to the Notes.


 


“Significant Subsidiary”
means any Subsidiary that would be a “significant subsidiary” as defined in
Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities
Act, as such Regulation is in effect on the date hereof.


 


“Stated Maturity” means, with respect to
any installment of interest or principal on any series of Indebtedness, the
date on which such payment of interest or principal was scheduled to be paid in
the original documentation governing such Indebtedness, and shall not include
any contingent obligations to repay, redeem or repurchase any such interest or
principal prior to the date originally scheduled for the payment thereof.


 


“Subordinated Indebtedness” means all
Indebtedness of the Company that is expressly subordinated in right of payment
to the Notes.


 


“Subordination Agreements” means the
Subordination Agreements, dated the Issue Date, between the Company and Peter
A. Morton, relating to the subordination of the fees payable under the
Supervisory Agreement.


 


“Subsidiary” means, with respect to any
Person, (i) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other Subsidiaries
of that Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or of one or more Subsidiaries of such Person (or any combination thereof).


 


32

















 


“Supervisory Agreement” means the Amended
and Restated Supervisory Agreement dated as of October 21, 1997 between the
Company and Peter A. Morton providing for the payment by the Company of a management
fee to Peter A. Morton in connection with the rendering of management services
to or on behalf of the Company, which obligation of the Company to pay such
management fee will be subordinated to the prior payment in full of all
obligations with respect to the Notes pursuant to the Subordination Agreement
and which obligation is otherwise in lieu of the payment of any other
compensation to Peter A. Morton in respect of services rendered to the Company.


 


“Unrestricted Subsidiary” means (i) any
Subsidiary that is designated by the Board of Directors as an Unrestricted
Subsidiary pursuant to a Board Resolution; but only to the extent that such
Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not
party to any agreement, contract, arrangement or understanding with the Company
or any Restricted Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Company or such Restricted Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of the Company; (c) is a Person with
respect to which neither the Company nor any of its Restricted Subsidiaries has
any direct or indirect obligation (x) to subscribe for additional Equity Interests
or (y) to maintain or preserve such Person’s financial condition or to cause
such Person to achieve any specified levels of operating results; and (d) has
not guaranteed or otherwise directly or indirectly provided credit support for
any Indebtedness of the Company or any of its Restricted Subsidiaries. Any such
designation by the Board of Directors shall be evidenced by filing a certified
copy of the Board Resolution giving effect to such designation and an Officers’
Certificate certifying that such designation complied with the foregoing
conditions and was permitted pursuant to Section 9(a) hereof.  If, at any time, any Unrestricted Subsidiary
would fail to meet the foregoing conditions as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of the
Notes and any Indebtedness of such Subsidiary shall be deemed to be incurred by
a Restricted Subsidiary of the Company as of such date (and, if such
Indebtedness is not permitted to be incurred as of such date pursuant to
Section 9(b) hereof, the Company shall be in default of such covenant). The
Board of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided
that such designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of the Company of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (i)
such Indebtedness is permitted pursuant to Section 9(b) hereof, calculated on a
pro forma basis as if such designation had occurred at the beginning of the
four-quarter reference period, and (ii) no Default or Event of Default would be
in existence following such designation.


 


“Voting Stock” of any Person as of any date
means the Capital Stock of such Person that is at the time entitled to vote in
the election 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


 


33

















 


and the making of such payment,
by (ii) the then outstanding principal amount of such Indebtedness.


 


17.                                 GOVERNING
LAW


 


This Note
shall be governed by and construed in accordance with the laws of the State of
New York.


 


18.                                 ABBREVIATIONS



 


Customary abbreviations may be used in the name of a holder or an
assignee, such as TEN COM (=tenants in common), TENANT (=tenants by the
entireties), JT TEN (=joint tenants with right of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).


 


34

















 


SCHEDULE OF EXCHANGES OF NOTES


 


The following exchanges have been made with respect to this Note:


 


 


	
  Date of

  Exchange

  	
   

  	
  Amount of decrease in

  Principal Amount of

  this Note

  	
   

  	
  Amount of increase in

  Principal Amount of

  this Note

  	
   

  	
  Principal Amount of this Note

  following such

  decrease (or increase)

  	
   

  	
  Signature of authorized

  signatory of the Company

  	
   

  



 


35

















 


ASSIGNMENT FORM


 


To assign this Note, fill in
the form below:


 


For value received, I or we
assign and transfer this Note to


 


 


(Insert assignee’s soc. sec. or tax ID no.)


 


 


 


 


(Print or type assignee’s name, address and zip code)


 


and irrevocably appoint
                               
attorney to transfer this Note on the books of the Company.  The attorney may substitute another to act
for him.


 


 


	
   

  	
  Your Signature:  

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
  (Sign
  exactly as your name appears on the 
  other side of this Note.  Your
  signature must correspond with the name as it appears on the face of this
  Note in every particular, without any change whatever.)

  
	
  Signature
  Guaranteed

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Participant
  in a Recognized Signature

  Guarantee Medallion Program

  	
   

  
	
   

  	
   

  
	
  By:  

  	
   

  	
   

  	
   

  
	
  Authorized Signatory

  	
   

  
							



 


36

















 


EXHIBIT A


 


TRANSFER CERTIFICATE


 


Hard Rock Hotel, Inc.

4455 Paradise Road

Las Vegas, Nevada  89109


 


Re:                               Junior
Subordinated Notes (the “Notes”)


 


This
certificate relates to
$                  
principal amount of Notes owned in certificated form by
                     
(the “Transferor”).


 


The Transferor
has requested the Company to exchange or register the transfer of such Notes.


 


In connection
with such request and in respect of each such Note, the Transferor does hereby
certify that the Transferor is familiar with transfer restrictions relating to
the Notes as provided in the legend set forth on the Notes, and further
certifies that the transfer of each such Note is being made pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the “Securities Act”) (check applicable box) or the transfer or exchange, as
the case may be, of such Security does not require registration under the
Securities Act because (check applicable box):


 




	
  o

  	
   

  	
  Such Note is
  being transferred to the Company;

  
	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  Such Note is
  being transferred pursuant to and in compliance with an exemption from the
  registration requirements under the Securities Act provided by, and in
  accordance with, Rule 144 (or any successor provision thereto) (“Rule 144”)
  under the Securities Act, if available; or

  
	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  Such Note is
  being transferred pursuant to an effective registration statement under the
  Securities Act.

  






 

















 


 


	
   

  	
   

  
	
  DATE:

  	
  Insert Name of Transferor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature(s) of Transferor 

  
	
   

  	
  Title:

  



 


(If the registered owner is a corporation, partnership, other entity or
fiduciary, the title of the person signing on behalf of such registered owner
must be stated.)


 


	
   

  	
  Signature Guaranteed

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Participant in a Recognized Signature

  Guarantee Medallion Program  

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized Signatory