Exhibit 10.2





Exhibit 10.2




EXECUTION VERSION




 





FIRST AMENDED AND RESTATED FIRST MEZZANINE LOAN AGREEMENT




Dated as of December 24, 2009




among




HRHH GAMING SENIOR MEZZ, LLC,

as Gaming Mezz Borrower,




HRHH JV SENIOR MEZZ, LLC,

as JV Borrower,




and




BROOKFIELD FINANCIAL, LLC — SERIES B,

as Lender




 






 


 









 







TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	ARTICLE I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
	 	 	3	 
	 
	 	 	 	 
	Section 1.1 Definitions
	 	 	3	 
	Section 1.2 Principles of Construction
	 	 	48	 
	 
	 	 	 	 
	ARTICLE II. GENERAL TERMS
	 	 	49	 
	 
	 	 	 	 
	Section 2.1 Loan Commitment; Disbursement to Borrowers
	 	 	49	 
	Section 2.2 Interest Rate
	 	 	49	 
	Section 2.3 Loan Payment
	 	 	57	 
	Section 2.4 Prepayments
	 	 	58	 
	Section 2.5 Release of Property
	 	 	63	 
	Section 2.6 Cash Management
	 	 	66	 
	Section 2.7 Extensions of the Initial Maturity Date
	 	 	68	 
	Section 2.8 Exit Fee
	 	 	75	 
	 
	 	 	 	 
	ARTICLE III. CONDITIONS PRECEDENT
	 	 	76	 
	 
	 	 	 	 
	Section 3.1 Intentionally Deleted
	 	 	76	 
	Section 3.2 Submission of Construction Loan Advance Documents to Lender
	 	 	76	 
	 
	 	 	 	 
	ARTICLE IV. REPRESENTATIONS AND WARRANTIES
	 	 	76	 
	 
	 	 	 	 
	Section 4.1 Representations of Borrowers
	 	 	76	 
	Section 4.2 Survival of Representations
	 	 	92	 
	Section 4.3 Definition of Borrowers’ Knowledge
	 	 	92	 
	 
	 	 	 	 
	ARTICLE V. COVENANTS OF BORROWERS
	 	 	93	 
	 
	 	 	 	 
	Section 5.1 Affirmative Covenants
	 	 	93	 
	Section 5.2 Negative Covenants
	 	 	110	 
	 
	 	 	 	 
	ARTICLE VI. INSURANCE; CASUALTY; CONDEMNATION; RESTORATION
	 	 	122	 
	 
	 	 	 	 
	Section 6.1 Insurance
	 	 	122	 
	Section 6.2 Casualty
	 	 	123	 
	Section 6.3 Condemnation
	 	 	124	 
	Section 6.4 Restoration
	 	 	125	 
	Section 6.5 Rights of Lender
	 	 	125	 
	 
	 	 	 	 
	ARTICLE VII. RESERVE FUNDS
	 	 	125	 
	 
	 	 	 	 
	Section 7.1 Intentionally Deleted
	 	 	 	 
	Section 7.2 Tax and Insurance Escrow Fund
	 	 	126	 
	Section 7.3 Replacement Reserve Fund
	 	 	126	 
	Section 7.4 Interest Reserve Fund
	 	 	126	 
	Section 7.5 Initial Renovation Reserve Fund
	 	 	127	 






 


 









 





	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	Section 7.6 General Reserve Fund
	 	 	127	 
	Section 7.7 Construction Loan Reserve Fund
	 	 	128	 
	Section 7.8 Working Capital Reserve Fund
	 	 	125	 
	Section 7.9 Reserve Funds, Generally
	 	 	128	 
	Section 7.10 Transfer of Mortgage Reserve Funds
	 	 	130	 
	 
	 	 	 	 
	ARTICLE VIII. DEFAULTS
	 	 	130	 
	 
	 	 	 	 
	Section 8.1 Event of Default
	 	 	130	 
	Section 8.2 Remedies
	 	 	135	 
	Section 8.3 Right to Cure Defaults
	 	 	137	 
	 
	 	 	 	 
	ARTICLE IX. SPECIAL PROVISIONS
	 	 	137	 
	 
	 	 	 	 
	Section 9.1 Sale of Note and Securitization
	 	 	137	 
	Section 9.2 Re-Dating
	 	 	139	 
	Section 9.3 Securitization Indemnification
	 	 	140	 
	Section 9.4 Exculpation
	 	 	143	 
	Section 9.5 Matters Concerning Managers and Liquor Manager
	 	 	147	 
	Section 9.6 Matters Concerning Gaming Operator
	 	 	148	 
	Section 9.7 Servicer
	 	 	148	 
	 
	 	 	 	 
	ARTICLE X. MISCELLANEOUS
	 	 	149	 
	 
	 	 	 	 
	Section 10.1 Survival
	 	 	149	 
	Section 10.2 Lender’s Discretion
	 	 	149	 
	Section 10.3 Governing Law
	 	 	149	 
	Section 10.4 Modification, Waiver in Writing
	 	 	151	 
	Section 10.5 Delay Not a Waiver
	 	 	151	 
	Section 10.6 Notices
	 	 	151	 
	Section 10.7 Trial by Jury
	 	 	153	 
	Section 10.8 Headings
	 	 	154	 
	Section 10.9 Severability
	 	 	154	 
	Section 10.10 Preferences
	 	 	154	 
	Section 10.11 Waiver of Notice
	 	 	154	 
	Section 10.12 Remedies of Borrowers
	 	 	154	 
	Section 10.13 Expenses; Indemnity
	 	 	154	 
	Section 10.14 Schedules Incorporated
	 	 	156	 
	Section 10.15 Offsets, Counterclaims and Defenses
	 	 	156	 
	Section 10.16 No Joint Venture or Partnership; No Third Party Beneficiaries
	 	 	156	 
	Section 10.17 Publicity
	 	 	157	 
	Section 10.18 Waiver of Marshalling of Assets
	 	 	157	 
	Section 10.19 Waiver of Counterclaim
	 	 	157	 
	Section 10.20 Conflict; Construction of Documents; Reliance
	 	 	158	 
	Section 10.21 Brokers and Financial Advisors
	 	 	158	 
	Section 10.22 Prior Agreements
	 	 	159	 
	Section 10.23 Joint and Several Liability
	 	 	159	 
	Section 10.24 Certain Additional Rights of Lender (VCOC)
	 	 	159	 
	Section 10.25 Note Register
	 	 	159	 






 


 









 





	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	ARTICLE XI. MORTGAGE LOAN AND MEZZANINE LOANS
	 	 	160	 
	 
	 	 	 	 
	Section 11.1 Mortgage Loan and Mezzanine Loan Deliveries
	 	 	160	 
	Section 11.2 Mortgage Loan and Mezzanine Loan Estoppels
	 	 	160	 
	Section 11.3 Mortgage Loan Defaults
	 	 	162	 
	Section 11.4 Discussions with Mortgage Lender
	 	 	163	 
	Section 11.5 Independent Approval Rights
	 	 	163	 
	Section 11.6 Intercreditor Agreement
	 	 	164	 
	 
	 	 	 	 
	ARTICLE XII. GAMING PROVISIONS
	 	 	164	 
	 
	 	 	 	 
	Section 12.1 Operation of Casino Component
	 	 	164	 
	Section 12.2 Gaming Liquidity Requirements
	 	 	166	 
	Section 12.3 Cage Reserve, Casino Account, Increases to Minimum Balance
	 	 	167	 
	 
	 	 	 	 
	ARTICLE XIII. INTENTIONALLY DELETED
	 	 	167	 
	 
	 	 	 	 
	ARTICLE XIV.
	 	 	167	 
	 
	 	 	 	 
	Section 14.1 Amendment and Restatement
	 	 	167	 
	 
	 	 	 	 
	ARTICLE XV. CONTRIBUTION AGREEMENT
	 	 	167	 
	 
	 	 	 	 
	Section 15.1 Contribution Generally
	 	 	167	 
	Section 15.2 Reimbursement Contribution
	 	 	168	 
	Section 15.3 Defaulting Borrower
	 	 	168	 
	Section 15.3 Maximum Liability
	 	 	169	 
	Section 15.5 Applicable Contributions
	 	 	169	 
	Section 15.5 Reimbursement Contribution as Asset
	 	 	169	 
	Section 15.7 Subordination of Reimbursement Contribution
	 	 	169	 
	Section 15.8 Waivers
	 	 	169	 
	 
	 	 	 	 
	ARTICLE XVI. CERTAIN BANKRUPTCY WAIVERS
	 	 	171	 
	 
	 	 	 	 
	Section 16.1 Consideration
	 	 	171	 
	Section 16.2 Waiver of Automatic Stay
	 	 	172	 
	Section 16.2 Consolidation
	 	 	172	 
	Section 16.3 Cooperation and Noninterference
	 	 	172	 






	 	 	 	 	 
	SCHEDULES
	 	 	 	 
	 
	 	 	 	 
	Schedule I-A

	 	—
	 	Legal Description of Hotel/Casino Property
	Schedule I-B

	 	—
	 	Legal Description of Café Property
	Schedule I-C

	 	—
	 	Legal Description of Adjacent Property
	Schedule II

	 	—
	 	Description of Project
	Schedule III

	 	—
	 	Description of Pledged Interests
	Schedule IV

	 	—
	 	Allocated Loan Amounts
	Schedule V

	 	—
	 	Net Worth Requirements
	Schedule VI

	 	—
	 	Organizational Structure
	Schedule VII

	 	—
	 	IP






 


 









 





	 	 	 	 	 
	Schedule VIII

	 	—
	 	Litigation
	Schedule IX

	 	—
	 	Operating Permits
	Schedule X

	 	—
	 	Rent Roll
	Schedule XI

	 	—
	 	List of Mortgage Loan Documents
	Schedule XII

	 	—
	 	Morton Indemnification Claims







 


 









 







AMENDED AND RESTATED FIRST MEZZANINE LOAN AGREEMENT




THIS AMENDED AND RESTATED FIRST MEZZANINE LOAN AGREEMENT, dated as of December 24, 2009 (as
amended, restated, replaced, supplemented or otherwise modified from time to time, this
“Agreement”), among BROOKFIELD FINANCIAL, LLC — SERIES B, a Delaware limited liability company,
having an address at c/o Brookfield Real Estate Financial Partners LLC, Three World Financial
Center, 200 Vesey Street, 11th Floor, New York, New York 10281 (together with its
successors and assigns, “Lender”), as successor in interest to Column Financial, Inc. (“Original
Lender”), HRHH GAMING SENIOR MEZZ, LLC, a Delaware limited liability company, having its principal
place of business c/o Morgans Hotel Group Co., 475 Tenth Avenue, New York, New York 10018,
Attention: Marc Gordon, Chief Investment Officer (“Gaming Mezz Borrower”) and HRHH JV SENIOR MEZZ,
LLC, a Delaware limited liability company, having its principal place of business c/o Morgans Hotel
Group Co., 475 Tenth Avenue, New York, New York 10018, Attention: Marc Gordon, Chief Investment
Officer (“JV Borrower”; and each of Gaming Mezz Borrower and JV Borrower, individually, a
“Borrower”, and collectively, “Borrowers”), jointly and severally.



W I T N E S S E T H:




WHEREAS, pursuant to that certain Loan Agreement, dated as of February 2, 2007 by and between
Mortgage Borrowers and Mortgage Lender (as such terms are hereinafter defined) (the “Original
Mortgage Loan Agreement”), Mortgage Lender made a loan to Mortgage Borrowers in the original
principal amount of up to $1,360,000,000.00 (the “Mortgage Loan”), subject to and in accordance
with the terms and conditions of the Original Mortgage Loan Agreement;



WHEREAS, Mortgage Borrowers and Mortgage Lender entered into that certain Amended and Restated
Loan Agreement dated as of November 6, 2007 (the “First Amended and Restated Mortgage Loan
Agreement”), which amended and restated the Original Mortgage Loan Agreement in its entirety to,
among other things, evidence (i) the prepayment by Mortgage Borrowers of $350,000,000.00 of the
Mortgage Loan from the proceeds of the Loan and the Mezzanine Loans (as each term is hereinafter
defined) (each a “Mezzanine Prepayment”), and (ii) the increase by Mortgage Lender of the maximum
amount of the Mortgage Loan that may be funded under the Construction Loan following the Closing
Date by $20,000,000.00;



WHEREAS, in connection with the Mezzanine Prepayment: (i) Lender made the Loan to Borrowers,
subject to and in accordance with the terms and conditions of the First Mezzanine Loan Agreement,
dated as of November 6, 2007 (the “Original Loan Agreement”) and the other Loan Documents (as
defined in the Original Loan Agreement); (ii) Second Mezzanine Lender made the Second Mezzanine
Loan to Second Mezzanine Borrowers (as such terms are hereinafter defined), subject to and in
accordance with the terms and conditions of the Second Mezzanine Loan Agreement, dated as of
November 6, 2007 (the “Original Second Mezzanine Loan Agreement”) and the other Second Mezzanine
Loan Documents (as defined in the Original Second Mezzanine Loan Agreement); and (iii) Third
Mezzanine Lender made the Third Mezzanine Loan to Third Mezzanine Borrowers (as such terms are
hereinafter defined), subject to and in accordance with the terms and conditions of the Third
Mezzanine Loan Agreement,



 


 









 






dated as of November 6, 2007 (the “Original Third Mezzanine Loan Agreement”) and the other
Third Mezzanine Loan Documents (as defined in the Original Third Mezzanine Loan Agreement);



WHEREAS, Mortgage Borrowers and Mortgage Lender entered into that certain Second Amended and
Restated Loan Agreement, dated as of April 25, 2008 (the “Second Amended and Restated Mortgage Loan
Agreement”) in connection with Mortgage Borrowers’ qualification for the Initial Construction Loan
Advance (as hereinafter defined), which Second Amended and Restated Mortgage Loan Agreement amended
and restated the First Amended and Restated Mortgage Loan Agreement in its entirety;



WHEREAS, on August 1, 2008, Borrower prepaid a portion of the Loan with the Release Parcel
Release Price (as hereinafter defined), resulting in an Outstanding Principal Balance (as
hereinafter defined) of $177,956,341.32;



WHEREAS, as of the date hereof, Mortgage Borrowers and Mortgage Lender are entering into that
certain Third Amended and Restated Loan Agreement (as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time, the “Mortgage Loan Agreement”), which
Mortgage Loan Agreement amends and restates the Second Amended and Restated Mortgage Loan Agreement
in its entirety to, among other things, grant Mortgage Borrowers additional extension terms under
the Mortgage Loan (the “Mortgage Loan Modification”);



WHEREAS, in connection with the Mortgage Loan Modification: (i) Lender is willing to modify
the Loan, subject to and in accordance with the terms and conditions of this Agreement and the
other Loan Documents (as hereinafter defined); (ii) Second Mezzanine Lender is willing to modify
the Second Mezzanine Loan, subject to and in accordance with the terms and conditions of the Second
Mezzanine Loan Agreement and the other Second Mezzanine Loan Documents (as such terms are
hereinafter defined); and (iii) Third Mezzanine Lender is willing to modify the Third Mezzanine
Loan, subject to and in accordance with the terms and conditions of the Third Mezzanine Loan
Agreement and the other Third Mezzanine Loan Documents (as such terms are hereinafter defined); and



WHEREAS, in connection with this Agreement and the modification of the Loan, Borrowers, HRHI,
Guarantor and Lender (as applicable) are herewith executing and delivering, among other things, (i)
the Ratification of Pledge and Security Agreement (as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time, the “Ratification of Pledge Agreement”), (ii)
that certain Omnibus Amendment of First Mezzanine Loan Documents (as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time, the “First Mezzanine Loan
Document Modification Agreement”), (iii) that certain First Modification and Ratification of
Guaranties (as the same may be amended, restated, replaced, supplemented or otherwise modified from
time to time, the “First Guaranty Modification Agreement”), (iv) that certain First Modification of
HRHI Loan Documents and Ratification of HRHI Guaranty (as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time, the “First HRHI Modification
Agreement”), and (v) that certain Amended and Restated First Mezzanine Promissory Note, dated the
date hereof, in the original principal amount of Two Hundred Million and No/100



 


2









 






Dollars ($200,000,000), made by Borrowers in favor of Lender (as the same may be amended,
restated, replaced, severed, assigned, supplemented or otherwise modified from time to time, the
“Note”), which Note replaces, amends and restates the Original Note (as hereinafter defined) in its
entirety. The Note does not create any new or additional indebtedness, but evidences the same
indebtedness evidenced by the Original Note.



NOW, THEREFORE, in consideration of the foregoing and the covenants, agreements,
representations and warranties set forth in this Agreement, and for Ten Dollars ($10.00) and other
good and valuable consideration, the receipt and legal sufficiency of which are hereby
acknowledged, the parties hereto hereby covenant, agree, represent and warrant that the Original
Loan Agreement is hereby amended and restated in its entirety to read as follows:



ARTICLE I.

DEFINITIONS; PRINCIPLES OF CONSTRUCTION




Section 1.1 Definitions. For all purposes of this Agreement, except as otherwise
expressly required or unless the context clearly indicates a contrary intent:



“Acceptable Counterparty” shall mean any counterparty to the Interest Rate Cap Agreement that
has and shall maintain, until the expiration of the applicable Interest Rate Cap Agreement, a
long-term unsecured debt rating of at least “A+” by S&P and “A1” from Moody’s, which rating shall
not include a “t” or otherwise reflect a termination risk.



“Accrued Interest” shall mean, collectively, the sum of (i) all of the Initial Interest
Differential Amounts, (ii) all of the Subsequent Interest Differential Amounts and (iii) interest
on all of the Initial Interest Differential Amounts and all of the Subsequent Interest Differential
Amounts accruing and compounding in accordance with the provisions of Section 2.2.1(b).



“Additional Insolvency Opinion” shall have the meaning set forth in Section 4.1.30(d)
hereof.



“Adjacent Borrower” shall mean HRHH Development, LLC, a Delaware limited liability company,
together with its successors and assigns.



“Adjacent Property” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.



“Adjacent Property IP License” shall have the meaning set forth in Section 5.1.26(b)
hereof.



“Administrative Agent” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.



“Affiliate” shall mean, as to any Person, any other Person that, directly or indirectly, is in
Control of, is Controlled by or is under common Control with such Person or is a director or
officer of such Person or of an Affiliate of such Person.



“Affiliate IP License” shall have the meaning set forth in Section 5.1.26(d) hereof.


 


3









 





“Affiliate Release Parcel Purchaser” shall have the meaning set forth in Section
2.5.1(a) hereof.



“Affiliated IP Party” shall mean any subsidiary of any Loan Party hereafter formed with
Lender’s consent to hold the IP.



“Affiliated Manager” shall mean any Manager in which any Loan Party or any Guarantor has,
directly or indirectly, any legal, beneficial or economic interest.



“Aggregate Outstanding Principal Balance” shall mean, as of any date, the sum of the
Outstanding Principal Balance, the Mortgage Loan Outstanding Principal Balance, the Second
Mezzanine Loan Outstanding Principal Balance and the Third Mezzanine Loan Outstanding Principal
Balance.




“Allocable Principal Balance” shall have the meaning set forth in Section 15.2 hereof.



“Alteration Threshold Amount” shall have the meaning assigned to such term in the Mortgage
Loan Agreement.



“Alternative Minimum Rating Requirement” shall mean a long term unsecured debt rating at least
equal to the greater of (a) A1 by Moody’s, AA- by Fitch and A+ by S&P or (b) the long term
unsecured debt rating of the second bank or financial institution listed below assuming such banks
are at the time of determination listed in descending order of their respective long term unsecured
debt ratings by S&P: Deutsche Bank AG, Credit Suisse International, Barclays Bank PLC, JP Morgan
Chase Bank, N.A., and Wells Fargo Bank, N.A.



“Annual Budget” shall mean the operating budget, including all planned Capital Expenditures,
for all of the Properties, collectively, prepared by Mortgage Borrowers or the applicable
Manager(s) for the applicable Fiscal Year or other period.




“Applicable Contribution” shall have the meaning set forth in Section 15.5 hereof.



“Applicable Interest Rate” shall mean interest calculated on the Outstanding Principal Balance
of the Loan at a rate equal to (a) LIBOR plus 4.00% or, as applicable, the Prime Rate plus the
Prime Rate Spread, with respect to all payments due through and including the Payment Date
occurring in June, 2010 and (b) LIBOR plus 5.20% or, as applicable, the Prime Rate plus the Prime
Rate Spread, with respect to all payments due from and after the Payment Date occurring in July,
2010 through the Maturity Date.



“Approved Bank” shall mean a bank or other financial institution which has a minimum long term
unsecured debt rating of at least “AA” by S&P and Fitch and “Aa2” by Moody’s, provided that in the
event (a) the issuer of any existing Letter of Credit no longer satisfies such minimum long term
unsecured debt rating or (b) Borrower is unable to locate a bank or financial institution that
satisfies such minimum long term unsecured debt rating in connection with the issuance of any new
or replacement Letter of Credit required to be issued hereunder, an Approved Bank shall mean a bank
or other financial institution which has a minimum long term unsecured debt rating at least equal
to the Alternative Minimum Rating Requirement.


 


4









 






“Assigned Employees” shall have the meaning set forth in the Employee Lease.




“Assignment Agreement” shall have the meaning set forth in Section 10.25 hereof.



“Assignment of Leases” shall mean that certain first priority Assignment of Leases and Rents,
dated as of February 2, 2007, from Hotel/Casino Borrower, Café Borrower, Adjacent Borrower and
Gaming Borrower, as assignors, to Mortgage Lender, as assignee, assigning to Mortgage Lender all of
each such Mortgage Borrower’s right, title and interest in and to the Leases and Rents of its
Property as security for the Mortgage Loan, as modified by the First Mortgage Loan Document
Modification Agreement and the Second Mortgage Modification Agreement, and as the same hereafter
may be amended, restated, replaced, supplemented or otherwise modified from time to time.



“Assignment of Liquor Management Agreement” shall mean that certain First Mezzanine Assignment
of Liquor Management and Employee Services Agreement and Subordination of Management Fees, dated as
of the Closing Date, by Borrowers, as assignors, and Hotel/Casino Borrower, to Lender, and
consented and agreed to by HRHI, in its capacity as the Liquor Manager, as modified by the First
Mezzanine Loan Document Modification Agreement, and as the same hereafter may be amended, restated,
replaced, supplemented or otherwise modified from time to time.



“Assignment of Management Agreement (All Properties)” shall mean that certain First Mezzanine
Assignment of Management Agreement and Subordination of Management Fees (All Properties), dated as
of the Closing Date, by Borrowers, as assignors, Café Borrower, Hotel/Casino Borrower and Adjacent
Borrower, to Lender, and consented and agreed to by the Affiliated Manager of such Properties, as
modified by the First Mezzanine Loan Document Modification Agreement, and as the same hereafter may
be amended, restated, replaced, supplemented or otherwise modified from time to time.



“Award” shall mean any compensation paid by any Governmental Authority in connection with a
Condemnation of all or any part of any Property.



“Bankruptcy Action” shall mean with respect to any Person (a) such Person filing a voluntary
petition under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (b)
the filing of an involuntary petition against such Person under the Bankruptcy Code or any other
Federal or state bankruptcy or insolvency law; (c) such Person filing an answer consenting to or
otherwise acquiescing in or joining in any involuntary petition filed against it, by any other
Person under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law, or
soliciting or causing to be solicited petitioning creditors for any involuntary petition from any
Person; (d) such Person consenting to or acquiescing in or joining in an application for the
appointment of a custodian, receiver, trustee, or examiner for such Person or any portion of any
Property; or (e) such Person making an assignment for the benefit of creditors, or admitting, in
writing or in any legal proceeding, its insolvency or inability to pay its debts as they become
due.



“Bankruptcy Code” shall mean 11 U.S.C. § 101 et seq., as the same may be amended from time to
time.


 


5









 






“Benefit Amount” shall have the meaning set forth in Section 15.4 hereof.



“Bonafide Release Parcel Purchaser” shall have the meaning set forth in Section
2.5.1(a) hereof.



“Borrower” and “Borrowers” shall have the meanings set forth in the introductory paragraph
hereto, together with its or their successors and permitted assigns.




“Breakage Costs” shall have the meaning set forth in Section 2.2.3(h) hereof.



“Business Day” shall mean any day other than a Saturday, Sunday or any other day on which
national banks in New York, New York are not open for business.



“Café Borrower” shall mean HRHH Cafe, LLC, a Delaware limited liability company, together with
its successors and assigns.




“Café Property” shall have the meaning assigned to such term in the Mortgage Loan Agreement.




“Cage Reserve” shall have the meaning assigned to such term in the Mortgage Loan Agreement.



“Capital Expenditures” shall mean, for any period, the amount expended for items capitalized
under GAAP and the Uniform System of Accounts (including expenditures for building improvements or
major repairs, leasing commissions and tenant improvements, but excluding capitalized interest),
but specifically excluding any Pre-Opening Expenses and/or Extraordinary Expenses.




“Cash Management Account” shall have the meaning set forth in Section 2.6.3(a) hereof.



“Cash Management Agreement” shall mean that certain Cash Management Agreement (First Mezzanine
Loan), dated as of the Closing Date, by and among Borrowers, Mortgage Borrowers and Lender, as
modified by the First Mezzanine Loan Document Modification Agreement, and as the same hereafter may
be amended, restated, replaced, supplemented or otherwise modified from time to time.



“Cash Profit and Loss Statement” shall have the meaning assigned to such term in the Mortgage
Loan Agreement.



“Casino Account” shall have the meaning assigned to such term in the Mortgage Loan Agreement
or such comparable account as shall be established under this Agreement in accordance with
Section 12.3 hereof.



“Casino Component” shall mean that portion of the Hotel/Casino Property devoted to the
operation of a casino gaming operation and leased to Gaming Borrower pursuant to the Casino
Component Lease, including, without limitation, those areas devoted to the conduct of games of
chance, facilities associated directly with gaming operations, including, without



 


6









 






limitation, casino support areas such as surveillance and security areas, cash cages, counting
and accounting areas and gaming back-of-the-house areas, in each case, to the extent the operation
thereof requires a Gaming License under applicable Gaming Laws, as more particularly described and
set forth in the Casino Component Lease as the “Premises”.



“Casino Component Lease” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.




“Casualty” shall have the meaning set forth in Section 6.2 hereof.



“Certificate of Occupancy” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.




“Change Order” shall have the meaning assigned to such term in the Mortgage Loan Agreement.



“Closing Completion Guaranty” shall mean that certain First Mezzanine Closing Guaranty of
Completion, dated as of the Closing Date, from Guarantors to Lender, as modified by the First
Guaranty Modification Agreement and the First Mezzanine Loan Document Modification Agreement, and
as the same hereafter may be amended, restated, replaced, supplemented or otherwise modified from
time to time.




“Closing Date” shall mean November 6, 2007.



“Code” shall mean the Internal Revenue Code of 1986, as amended, as it may be further amended
from time to time, and any successor statutes thereto, and applicable U.S. Department of Treasury
regulations issued pursuant thereto in temporary or final form.



“Collateral” shall mean (i) the Pledged Collateral and (ii) all other collateral for the Loan
granted in the Loan Documents.



“Collateral Assignment of Interest Rate Cap Agreement” shall mean that certain Collateral
Assignment of Interest Rate Cap Agreement (First Mezzanine Loan), dated as of the Closing Date,
executed by Borrowers in connection with the Loan for the benefit of Lender and acknowledged by the
Counterparty, as modified by the First Mezzanine Loan Document Modification Agreement, and as the
same hereafter may be amended, restated, replaced, supplemented or otherwise modified from time to
time.



“Comparable Hotel/Casinos” shall mean hotel and casino resorts in Las Vegas, Nevada which are
of a similar nature, quality and scope as the hotel and casino resort being operated on the
Hotel/Casino Property as of February 2, 2007, including, without limitation, Mandalay Bay Resort
and Casino, MGM Grand Hotel and Casino, The Palms Casino Resort and Caesars Palace, in each of the
foregoing instances, as existing and being operated on the Closing Date.



“Component” shall have the meaning assigned to such term in the Mortgage Loan Agreement.


 


7









 





“Condemnation” shall mean a temporary or permanent taking by any Governmental Authority as the
result or in lieu or in anticipation of the exercise of the right of condemnation or eminent
domain, of all or any part of any Property, or any interest therein or right accruing thereto,
including any right of access thereto or any change of grade affecting such Property or any part
thereof.



“Constituent Member” shall mean any direct member or partner in any Loan Party, any Mezzanine
Borrower or any Guarantor and any Person that, directly or indirectly through one or more other
partnerships, limited liability companies, corporations or other entities is a stockholder, member
or partner in any Loan Party, any Mezzanine Borrower or any Guarantor.



“Construction Completion Guaranty” shall mean that certain First Mezzanine Construction
Guaranty of Completion, dated as of May 30, 2008, from Guarantors in favor of Lender, as modified
and ratified by the First Mezzanine Loan Document Modification Agreement and the First Guaranty
Modification Agreement, and as the same hereafter may be amended, restated, replaced, supplemented
or otherwise modified from time to time.



“Construction Loan” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.



“Construction Loan Advance” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.



“Construction Loan Debt” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.



“Construction Loan Note” shall mean that certain Amended and Restated Replacement Construction
Loan Promissory Note, dated the date hereof, in the principal amount of Six Hundred Twenty Million
and No/100 Dollars ($620,000,000), made by Mortgage Borrowers in favor of Mortgage Lender, and as
the same hereafter may be amended, restated, replaced, supplemented or otherwise modified from time
to time.



“Construction Loan Outstanding Principal Balance” shall have the meaning assigned to such term
in the Mortgage Loan Agreement.



“Construction Loan Reserve Account” shall have the meaning assigned to such term in the
Mortgage Loan Agreement or such comparable account as shall be established under this Agreement in
accordance with Section 7.7 hereof.




“Construction Qualification Date” shall mean May 30, 2008.



“Construction Schedule” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.




“Contribution” shall have the meaning set forth in Section 15.2 hereof.



“Control” shall mean the possession, directly or indirectly, of the power to direct or cause
the direction of management, policies or activities of a Person, whether through ownership



 


8









 






of voting securities, by contract or otherwise. “Controlled” and “Controlling” shall have
correlative meanings.



“Counterparty” shall mean, with respect to the Interest Rate Cap Agreement, SMBC Derivative
Products Limited, and with respect to any Replacement Interest Rate Cap Agreement, any substitute
Acceptable Counterparty.




“Credit Suisse” shall mean Credit Suisse Securities (USA) LLC and its successors in interest.



“Current Pay Interest Payment” shall mean (a) for the interest payment due on January 1, 2010,
$564,329.17 and (b) for the interest payments due on the Payment Dates commencing in February, 2010
(and for each following interest payment due hereunder), the amount of interest to be paid on each
such Payment Date based on interest calculated for the preceding Interest Period at the Applicable
Interest Rate.



“Debt” shall mean the outstanding principal amount set forth in, and evidenced by, this
Agreement and the Note, together with all interest accrued and unpaid thereon (including, without
limitation, the Accrued Interest, as provided in this Agreement) and all other sums (including the
Exit Fee, if applicable,) due to Lender in respect of the Loan under the Note, this Agreement, the
Pledge Agreement and the other Loan Documents.



“Debt Service” shall mean, with respect to any particular period of time, interest payments
due under this Agreement and the Note.




“Debt Service Coverage Ratio” shall mean, as of any date of determination, a ratio in which:




(a) the numerator is the Net Cash Flow with respect to the immediately preceding six
(6) calendar months as of such date of determination; and




(b) the denominator is the aggregate amount of interest that was due and payable on (a)
the interest that was due and payable or would have been due and payable, as applicable, on
the Outstanding Principal Balance as determined based on the Monthly Interest Rate (without
giving effect to any accrual of interest on the Loan), (b) the Mortgage Loan Outstanding
Principal Balance, (c) the interest that would have been due and payable under the Second
Mezzanine Loan as determined based on the contract rate of interest set forth in the Second
Mezzanine Loan Agreement (without giving effect to any accrual of interest on the Second
Mezzanine Loan), and (d) the interest that would have been due and payable under the Third
Mezzanine Loan as determined based on the contract rate of interest set forth in the Third
Mezzanine Loan Agreement (without giving effect to any accrual of interest on the Third
Mezzanine Loan), in all instances as determined based on such interest that was due and
payable, or as applicable, would have been payable for the immediately preceding six (6)
calendar months (provided that for purposes of determining the amount of such denominator
all computations of interest shall be made assuming the LIBOR component of each applicable
interest rate is equal to the greater of actual LIBOR in effect for the applicable time
period and a rate equal to one percent (1.0%)).


 


9









 





“Default” shall mean the occurrence of any event hereunder or under any other Loan Document
which, but for the giving of notice or passage of time, or both, would be an Event of Default.



“Default Rate” shall mean a rate per annum equal to the lesser of (a) the Maximum Legal Rate
and (b) four percent (4%) above the Monthly Interest Rate. For purposes of this definition, the
term “Monthly Interest Rate” shall mean interest on all amounts due under this Agreement
(including, without limitation, Debt Service, Accrued Interest and the Exit Fee) at a rate equal to
(a) LIBOR plus 5.20% with respect to all payments or other amounts due under this Agreement from
the date hereof through and including the Payment Date occurring on February 1, 2011 and (b) LIBOR
plus 6.50% with respect to all payments or other amounts due under this Agreement after February 1,
2011.




“Defaulting Borrower” shall have the meaning set forth in Section 15.3 hereof.



“Determination Date” shall mean, with respect to any Interest Period, the date that is two (2)
London Business Days prior to the fifteenth (15th) day of the calendar month in which such Interest
Period commences.



“Disclosure Document” shall mean a prospectus, prospectus supplement, private placement
memorandum, offering memorandum, offering circular or other offering documents, in each case in
preliminary or final form, used to offer Securities in connection with a Securitization.




“DLJ Entities” shall have the meaning set forth in Section 10.16(c) hereof.



“DLJ Guarantor” shall mean DLJ MB IV HRH, LLC, a Delaware limited liability company, together
with its successors and permitted assigns.



“DLJMB Commitment Letter” shall mean that certain Commitment Letter of the DLJMB Parties,
dated as of February 2, 2007, addressed to the DLJ Guarantor, as modified by that certain
Modification and Ratification of DLJMB Commitment Letter and Consent, dated as of the Closing Date,
by the DLJMB Parties in favor of Lender, Mortgage Lender, Second Mezzanine Lender and Third
Mezzanine Lender, and as ratified by that certain Consent of DLJMB Parties and Reaffirmation
Agreement, dated as of the date hereof, by the DLJMB Parties in favor of Lender, Mortgage Lender,
Second Mezzanine Lender and Third Mezzanine Lender, and as the same hereafter may be amended,
restated, replaced, supplemented or otherwise modified from time to time.




“DLJMB Parties” shall have the meaning set forth in Section 9.4 hereof.



“Draw Request” shall mean, with respect to each Construction Loan Advance, an Advance Request
together with all other documents required by the Mortgage Loan Agreement to be furnished to
Mortgage Lender as a condition to such Construction Loan Advance.



“Eligible Account” shall mean a separate and identifiable “deposit account”, as such term is
defined in any applicable Uniform Commercial Code, from all other funds held by the holding
institution that is either (a) an account or accounts maintained with a federal or state-



 


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chartered depository institution or trust company which complies with the definition of
Eligible Institution or (b) a segregated trust account or accounts maintained with a federal or
state chartered depository institution or trust company acting in its fiduciary capacity which, in
the case of a state chartered depository institution or trust company, is subject to regulations
substantially similar to 12 C.F.R. §9.10(b), having in either case a combined capital and surplus
of at least $50,000,000 and subject to supervision or examination by federal and state authority.
An Eligible Account will not be evidenced by a certificate of deposit, passbook or other
instrument.



“Eligible Institution” shall mean a depository institution or trust company, the short term
unsecured debt obligations or commercial paper of which are rated at least “A-1” by S&P, “P-1” by
Moody’s and “F-1+” by Fitch in the case of accounts in which funds are held for thirty (30) days or
less (or, in the case of accounts in which funds are held for more than thirty (30) days, the long
term unsecured debt obligations of which are rated at least “AA” by Fitch and S&P and “Aa2” by
Moody’s), provided that in the event (a) any depository institution or trust company in which the
Lockbox Account, Cash Management Account, Casino Account or any Reserve Fund is held is required to
be an Eligible Institution in order to cause any such account to be maintained as an Eligible
Account and such depository institution or trust company does not qualify as an Eligible
Institution because it no longer satisfies the above-stated minimum long term unsecured debt rating
or (b) Borrower is unable to locate a depository institution or trust company that satisfies the
minimum long term unsecured debt rating in connection with the transfer of any Reserve Funds to a
replacement depository institution or trust company or the replacement of the then existing Casino
Account, Lockbox Account or Cash Management Account, an Eligible Institution shall mean a
depository institution or trust company, the short term unsecured debt obligations or commercial
paper of which are rated at least “A-1” by S&P, “P-1” by Moody’s and “F-1+” by Fitch in the case of
accounts in funds which are held for thirty (30) days or less or in the case of accounts in which
funds are held for more than thirty (30) days, and the long term unsecured debt obligations of
which are at least equal to the Alternative Minimum Rating Requirement.




“Embargoed Person” shall have the meaning set forth in Section 4.1.35 hereof.



“Employee Lease” shall mean that certain Employee Lease Agreement, dated as of February 29,
2008, by and between HRHI and Gaming Borrower, as the same hereafter may be amended, restated,
replaced, supplemented or otherwise modified from time to time.



“Environmental Indemnity” shall mean that certain First Mezzanine Environmental Indemnity
Agreement, dated as of the Closing Date, executed by Borrowers in connection with the Loan for the
benefit of Lender, as modified and ratified by the First Mezzanine Loan Document Modification
Agreement, and as the same hereafter may be amended, restated, replaced, supplemented or otherwise
modified from time to time.




“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.



“Event of Default” shall have the meaning set forth in Section 8.1(a) hereof.


 


11









 





“Excess Cash Flow” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.



“Excess Cash Termination Condition” shall mean (i) Substantial Completion (including physical
completion of the pool but excluding, however, opening of the pool to hotel customers and/or the
public) and (ii) no Event of Default, Mortgage Event of Default or any Mezzanine Event of Default
shall have occurred and be continuing.



“Excess IP Release Price Proceeds” shall have the meaning set forth in Section
2.4.4(g) hereof.




“Exchange Act” shall have the meaning set forth in Section 9.3(a) hereof.




“Exchange Act Filing” shall have the meaning set forth in Section 5.1.11(e) hereof.



“Excluded Taxes” shall mean, with respect to Lender or any other recipient of any payment to
be made by or on account of any obligation of Borrowers hereunder, (a) income or franchise taxes
imposed on (or measured by reference to) its net income by the United States of America, or by the
jurisdiction under the laws of which such recipient is organized or in which its principal office
is located or, in the case of any Lender, in which its applicable lending office is located, or any
other jurisdiction in which it is subject to tax solely as a result of any present or former
connection between Lender or other recipient, as applicable, and the jurisdiction imposing such tax
other than a present or former connection solely as a result of the activities and transactions
specifically contemplated by this Agreement, (b) any branch profits taxes imposed by the United
States of America or any similar tax imposed by any other jurisdiction described in clause
(a) of this definition, and (c) in the case of a Non-U.S. Lender, any withholding tax that is
imposed on amounts payable to such Non-U.S. Lender at the time such Non-U.S. Lender designates a
new lending office, unless the designation of such new lending office was at the request of
Borrowers, or is attributable to such Non-U.S. Lender’s failure to comply with Section
2.2.3(e)(iii) hereof, except to the extent that such Non-U.S. Lender was entitled, at the time
of designation of a new lending office, to receive additional amounts from Borrowers with respect
to such withholding tax pursuant to Section 2.2.3(e) hereof.



“Excusable Delay” shall mean a delay due to acts of god, governmental restrictions, stays,
judgments, orders, decrees, enemy actions, civil commotion, fire, casualty, strikes, work
stoppages, shortages of labor or materials or other causes beyond the reasonable control of any
Loan Party and not arising out of (a) the negligence, willful misconduct or illegal act of any Loan
Party or any Affiliate of any Loan Party, or (b) any cause or circumstance resulting from the
insolvency, bankruptcy or lack of funds of any Loan Party, any Guarantor or any Affiliate of any
Loan Party or any Guarantor.



“Existing FF&E Leases” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.




“Exit Fee” shall have the meaning set forth in Section 2.8 hereof.



“Extension Option” shall mean any Qualified Extension Option.


 


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“Extension Term” shall mean any Qualified Extension Term.




“Extra Non-Accrued Interest” shall have the meaning set forth in Section 2.4.6 hereof.



“Extraordinary Expenses” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.



“FF&E” shall mean all furniture, furnishings, fixtures and equipment required for the
operation of any of the Properties, including, without limitation, (i) lobby furniture, carpeting,
draperies, paintings, bedspreads, television sets, office furniture and equipment such as safes,
cash registers, and accounting, duplicating and communication equipment, telephone systems, back
and front of the house computerized systems, guest room furniture, specialized hotel equipment such
as equipment required for the operation of kitchens, laundries, the front desk, dry cleaning
facilities, bar and cocktail lounges, restaurants, recreational facilities as they may exist from
time to time, and decorative lighting, material handling equipment and cleaning and engineering
equipment and all other fixtures, equipment, apparatus and personal property needed for such
purposes, (ii) Gaming Equipment which any Mortgage Borrower is lawfully permitted to own or lease,
and (iii) rock and roll memorabilia unique to the Hotel/Casino Property and similar in character to
the other rock and roll memorabilia displayed at the Hotel/Casino Property.



“FF&E Expenditures” shall mean amounts expended for the purchase, replacement and/or
installation of FF&E at the Properties.



“FF&E Expenditures Work” shall mean any labor performed or materials installed in connection
with any FF&E Expenditures.



“Final Completion” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.



“First Amended and Restated Mortgage Loan Agreement” shall have the meaning set forth in the
recitals hereof.



“First Full Operating Month” shall mean the calendar month following the month in which
Substantial Completion occurs.



“First Guaranty Modification Agreement” shall have the meaning set forth in the recitals
hereof.




“First HRHI Modification Agreement” shall have the meaning set forth in the recitals hereof.



“First Mezzanine Loan Document Modification Agreement” shall have the meaning set forth in the
recitals hereof.



“First Mortgage Loan Document Modification Agreement” shall mean that certain Modification of
Construction Deed of Trust, Assignment of Leases and Rents, Security



 


13









 






Agreement and Financing Statement (Fixture Filing) and Other Loan Documents, dated as of the
Closing Date, by and among Mortgage Borrowers and Mortgage Lender.




“First Qualified Extended Maturity Date” shall mean February 9, 2011.



“First Qualified Extension Option” shall have the meaning set forth in Section
2.7.2(a) hereof.



“First Qualified Extension Term” shall have the meaning set forth in Section 2.7.2(a)
hereof.



“Fiscal Year” shall mean each twelve (12) month period commencing on January 1 and ending on
December 31 during each year of the term of the Loan.




“Fitch” shall mean Fitch, Inc.




“Fourth Qualified Extended Maturity Date” shall mean February 9, 2014.



“Fourth Qualified Extension Option” shall have the meaning set forth in Section
2.7.2(d) hereof.



“Fourth Qualified Extension Term” shall have the meaning set forth in Section 2.7.2(d)
hereof.




“Funding Borrower” shall have the meaning set forth in Section 15.2 hereof.



“GAAP” shall mean generally accepted accounting principles in the United States of America as
of the date of the applicable financial report.



“Gaming Authority” shall mean any of the Nevada Gaming Commission, the Nevada State Gaming
Control Board, the Clark County Liquor and Gaming Licensing Board and any other Governmental
Authority and/or regulatory authority or body or any agency which has, or may at any time after the
Closing Date have, jurisdiction over the gaming activities or the sale or distribution of liquor at
any of the Properties, or any successor to any such authority.



“Gaming Borrower” shall mean HRHH Gaming, LLC, a Nevada limited liability company, together
with its successors and assigns.



“Gaming Equipment” shall mean any and all gaming devices (as defined in NRS 463.0155), gaming
device parts, inventory and other related gaming equipment and supplies used in connection with the
operation of a casino, including, without limitation, slot machines, gaming tables, cards, dice,
chips, tokens (including slot machine tokens not currently in circulation, and “reserve” chips, if
any, not currently in circulation), player tracking systems, cashless wagering systems (as defined
in NRS 463.014) and associated equipment (as defined in NRS 463.0136), which are located at any
Property, are owned or leased by any Borrower and are used or useable exclusively in the present or
future operation of slot machines and live games at any Property, together with all improvements
and/or additions thereto, mobile gaming systems (as defined in Regulation 14.010(11) under NRS
Chapter 463), all contracts necessary to own or operate any of



 


14









 






the Gaming Equipment and/or to conduct gaming operations for the Casino Component, all
assignable manufacturers and other warranties applicable to the Gaming Equipment, all computer
hardware and software used to operate the Gaming Equipment and/or to conduct gaming operations for
the Casino Component.



“Gaming Laws” shall mean the provisions of the Nevada Gaming Control Act, codified as NRS
Chapter 463, as amended from time to time, all regulations of the Gaming Authorities promulgated
thereunder, as amended from time to time, the provisions of the Clark County Code, as amended from
time to time, and all other laws, statutes, rules, rulings, orders, ordinances, regulations and
other Legal Requirements of any Gaming Authority.



“Gaming License” shall mean any license, qualification, franchise, accreditation, approval,
registration, permit, finding of suitability or other authorization relating to gaming, the gaming
business or the operation of a casino under the Gaming Laws or required by any Gaming Authority or
otherwise necessary under any Gaming Laws for the operation of gaming, the gaming business or a
resort casino at the Hotel/Casino Property.



“Gaming Liquidity Requirement” shall mean the minimum bankroll requirements for cash and cash
equivalents required to be maintained by Gaming Borrower pursuant to the Gaming Laws in an amount
no greater than is mandated by Nevada Gaming Commission Regulation 6.150.




“Gaming Member” shall mean HRHH Gaming Member, LLC, a Delaware limited liability company.



“Gaming Operating Condition” shall mean that the gaming operations at the Hotel/Casino
Property are being operated by a Qualified Gaming Operator pursuant to the Casino Component Lease.



“Gaming Operating Reserve” shall mean such cash funds and reserves that are held and
maintained by Gaming Borrower, in its capacity as the duly licensed operator of the Casino
Component under applicable Gaming Laws, either in the Cage Reserve or in the Casino Account,
including, without limitation, casino chips, tokens, checks and markers; provided that all
such Gaming Operating Reserves (i) are established and maintained solely for use in the day-to-day
operation and management of the Casino Component in the ordinary course of business, and (ii) are
funded and maintained in accordance with the requirements of all applicable Gaming Laws and are in
the amounts that are reasonable and customary for casino operations at Comparable Hotel/Casinos (it
being agreed that 110% of statutory or regulatory minimums shall be deemed a reasonable and
customary minimum amount for these purposes).



“Gaming Operator” shall mean a Qualified Gaming Operator who is supervising, managing and
operating all gaming activities at the Hotel/Casino Property. Gaming Borrower is the Gaming
Operator as of the date hereof.



“General Reserve Account” shall have the meaning assigned to such term in the Mortgage Loan
Agreement or such comparable account as shall be established under this Agreement in accordance
with Section 7.6 hereof.


 


15









 





“General Reserve Fund” shall have the meaning assigned to such term in the Mortgage Loan
Agreement or such comparable fund as shall be established under this Agreement in accordance with
Section 7.6 hereof.



“Governmental Approvals” shall mean all approvals, consents, waivers, orders, acknowledgments,
authorizations, permits and licenses required under applicable Legal Requirements to be obtained
from any Governmental Authority for the construction of any and all of the Project and/or the use,
occupancy and operation following completion of construction, as the context requires.



“Governmental Authority” shall mean any court, board, agency, commission, office or other
authority of any nature whatsoever for any governmental unit (federal, state, county, district,
municipal, city or otherwise) whether now or hereafter in existence, including, without limitation,
any Gaming Authority.



“Gross Income from Operations” shall mean, for any period, all Rents and all other income and
proceeds (whether in cash or on credit, and computed in accordance with GAAP and, to the extent
applicable with respect to the Hotel/Casino Property, the Uniform System of Accounts), received by
any Mortgage Borrower or by any Manager (on behalf of any Mortgage Borrower) for the use, occupancy
or enjoyment of any of the Properties, or any part thereof, or received by any Mortgage Borrower or
any Manager for the sale of any goods, services or other items sold on or provided from any of the
Properties in the ordinary course of such Property’s operation, including, without limitation: (a)
all income and proceeds received under Leases; (b) all income and proceeds received from rental of
rooms and commercial, meeting, conference and/or banquet space within any of the Properties
including net parking revenue; (c) all income and proceeds received from food and beverage
operations and from catering services conducted from any of the Properties even though rendered
outside of any of the Properties; (d) Intentionally Deleted; (e) without duplication of the
foregoing clause (a), all income, proceeds and revenue generated from gaming activities at
the Property; (f) Intentionally Deleted; (g) all income and proceeds from business interruption,
rental interruption and use and occupancy insurance with respect to the operation of any of the
Properties (after deducting therefrom all necessary costs and expenses incurred in the adjustment
or collection thereof); (h) all Awards for temporary use (after deducting therefrom all costs
incurred in the adjustment or collection thereof and in Restoration of any of the Properties); (i)
all income and proceeds from judgments, settlements and other resolutions of disputes with respect
to matters which would be includable in this definition of “Gross Income from Operations” if
received in the ordinary course of any of the Properties’ operation (after deducting therefrom all
necessary costs and expenses incurred in the adjustment or collection thereof); (j) interest on
credit accounts, rent concessions or credits, and other required pass-throughs and interest on
Reserve Funds; and (k) deposits received for rental of rooms; and “Gross Income from Operations”
shall also include all licensing fees and other income and receipts generated by the IP; but “Gross
Income from Operations” shall exclude (1) gross receipts received by lessees, licensees or
concessionaires of any of the Properties (but not any percentage rents or similar payments derived
therefrom); (2) income and proceeds from the sale or other disposition of goods, FF&E, capital
assets and other items not in the ordinary course of the operation of the applicable Property
and/or any IP; (3) federal, state and municipal excise, sales and use taxes collected directly from
customers, patrons or guests of any of the Properties as a part of or based on the sales price of
any goods, services or other items,



 


16









 






such as gross receipts, room, admission, cabaret or equivalent taxes; (4) Awards (except to
the extent provided in clause (h) above); (5) refunds, rebates, discounts and other similar
credits of amounts not included in Operating Expenses at any time and uncollectible accounts; (6)
gratuities collected by the employees at any of the Properties; (7) the proceeds of any financing,
refinancing or sale of any of the Properties (or all of the membership interests in any Mortgage
Borrower) or the FF&E; (8) other non-recurring income or proceeds resulting other than from the use
or occupancy of any of the Properties, or any part thereof, or other than from the sale of goods,
services or other items sold on or provided from any of the Properties in the ordinary course of
business; (9) any credits or refunds made to customers, guests or patrons in the form of allowances
or adjustments to previously recorded revenues; (10) deposits received for rental of banquet space
or business or conference meeting rooms; (11) security deposits received under any Leases, unless
and until the same shall be applied in accordance with the terms of the applicable Lease(s); (12)
all proceeds from insurance to the extent not included in income pursuant to clause (g)
above; and (13) any disbursements to any Mortgage Borrower from any of the Mortgage Reserve Funds
or to any Borrower from any of the Reserve Funds, as applicable, and any interest earned thereon.



“Guaranties” shall mean, collectively, the Non-Recourse Guaranty, the Closing Completion
Guaranty, the Construction Completion Guaranty, and the HRHI Guaranty, as the same hereafter may be
amended, restated, replaced, supplemented or otherwise modified from time to time.




“Guarantor” shall mean each of the Morgans Guarantor and the DLJ Guarantor.




“Guarantor Transfer” shall have the meaning set forth in Section 5.2.10(d)(D) hereof.




“HCRI” shall have the meaning set forth in Section 4.1.37(b) hereof.



“Hotel/Casino Borrower” shall mean HRHH Hotel/Casino, LLC, a Delaware limited liability
company, together with its successors and assigns.



“Hotel/Casino Property” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.



“HRHI” shall mean Hard Rock Hotel, Inc., a Nevada corporation, together with its successors
and permitted assigns.



“HRHI Guaranty” shall mean that certain First Mezzanine HRHI Guaranty Agreement, dated as of
the Closing Date, from HRHI to Lender, as modified and ratified by the First HRHI Modification
Agreement and the First Mezzanine Loan Document Modification Agreement, and as the same hereafter
may be amended, restated, replaced, supplemented or otherwise modified from time to time.



“HRHI Release” shall mean that certain First Mezzanine Release of HRHI Documents, dated as of
the date hereof, by and between HRHI and Lender, and as the same hereafter may be amended,
restated, replaced, supplemented or otherwise modified from time to time.


 


17









 





“HRHI Security Agreement” shall mean that certain First Mezzanine HRHI Security Agreement,
dated as of the Closing Date, from HRHI in favor of Lender, securing the HRHI Guaranty and covering
certain assets of HRHI described therein, as modified by the First HRHI Modification Agreement and
the First Mezzanine Loan Document Modification Agreement, and as the same hereafter may be amended,
restated, replaced, supplemented or otherwise modified from time to time.




“HR Holdings” shall mean Hard Rock Hotel Holdings, LLC, a Delaware limited liability company.



“Improvements” shall have the meaning set forth in the granting clause of the Mortgage with
respect to each Property.



“Indebtedness” of a Person, at a particular date, means the sum (without duplication) at such
date of (a) all indebtedness or liability of such Person (including, without limitation, amounts
for borrowed money and indebtedness in the form of mezzanine debt and preferred equity); (b)
obligations evidenced by bonds, debentures, notes, or other similar instruments; (c) obligations
for the deferred purchase price of property or services (including trade obligations for which such
Person or its assets are liable); (d) obligations under letters of credit (for which such Person is
liable if such amounts were advanced thereunder or for which such Person is liable to reimburse);
(e) obligations under acceptance facilities; (f) all guaranties, endorsements (other than for
collection or deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds, to invest in any Person or entity, or
otherwise to assure a creditor against loss for which funds are required to be paid; and (g)
obligations secured by any Liens, for which such Person or its assets are liable.




“Indemnified Liabilities” shall have the meaning set forth in Section 10.13(b) hereof.




“Indemnified Person” shall have the meaning set forth in Section 9.3(b) hereof.




“Indemnified Taxes” shall mean taxes other than Excluded Taxes.



“Independent Director” or “Independent Manager” shall mean a Person who (a) is not at the time
of initial appointment, or at any time while serving as a director or manager, as applicable, and
has not been at any time during the preceding five (5) years: (i) a stockholder, director (with the
exception of serving as the Independent Director or Independent Manager of a Borrower), officer,
employee, partner, member (other than a “special member” or “springing member”), manager, attorney
or counsel of any Loan Party, any Mezzanine Borrower, Gaming Member, HRHI or any Affiliate of any
of them; (ii) a customer, supplier or other person who derives any of its purchases or revenues
from its activities with any Loan Party, any Mezzanine Borrower, Gaming Member, HRHI or any
Affiliate of any of them; (iii) a Person Controlling or under common Control with any such
stockholder, director, officer, employee, partner, member, manager, customer, supplier or other
Person; or (iv) a member of the immediate family of any such stockholder, director, officer,
employee, partner, member, manager, customer, supplier or other Person and (b) has (i) prior
experience as an independent director or independent manager for a corporation or limited liability
company whose charter documents required the unanimous consent of all independent directors or
independent managers thereof before such corporation or



 


18









 






limited liability company could consent to the institution of bankruptcy or insolvency
proceedings against it or could file a petition seeking relief under any applicable federal or
state law relating to bankruptcy and (ii) at least three years of employment experience with one or
more nationally recognized companies that provides, inter alia, professional
independent directors or independent managers in the ordinary course of their respective business
to issuers of securitization or structured finance instruments, agreements or securities or lenders
originating commercial real estate loans for inclusion in securitization or structured finance
instruments, agreements or securities and is at all times during his or her service as an
Independent Director or Independent Manager hereunder an employee of such a company. A natural
Person who satisfies the foregoing definition other than subparagraph (a)(ii) due to such
Person’s actions as a hotel guest, casino patron or other customer of any services provided by a
Borrower shall not be disqualified from serving as an Independent Director or Independent Manager
of a Borrower provided that such natural Person satisfies all other criteria set forth above.
Furthermore, a natural Person who satisfies the foregoing definition except for being (or having
been) the independent director or independent manager of a “special purpose entity” affiliated with
any Borrower (provided such affiliate does not or did not own a direct or indirect equity interest
in any Borrower) shall not be disqualified from serving as an Independent Director or Independent
Manager, provided that such natural Person satisfies all other criteria set forth above.



“Initial Construction Loan Advance” shall have the meaning assigned to such term in the
Mortgage Loan Agreement.




“Initial Debt Service Payment” shall mean $564,329.17 on January 1, 2010.



“Initial Interest Differential Amount” shall mean the aggregate sum of (i) the positive
difference, if any, between (a) interest payable on the Outstanding Principal Balance for the
period from December 9, 2009 to and excluding January 1, 2010 at the rate of LIBOR plus 5.20% and
(b) the Initial Debt Service Payment and (ii) the positive difference, if any, between (a) the
Monthly Interest Payment for the period from January 1, 2010 through and including the Payment Date
occurring in June, 2010 and (b) the Current Pay Interest Payment payable on each such date.




“Initial Maturity Date” shall mean February 9, 2010.



“Initial Renovation Reserve Account” shall have the meaning assigned to such term in the
Mortgage Loan Agreement or such comparable account as shall be established under this Agreement in
accordance with Section 7.5 hereof.



“Initial Renovation Reserve Fund” shall have the meaning assigned to such term in the Mortgage
Loan Agreement or such comparable fund as shall be established under this Agreement in accordance
with Section 7.5 hereof.



“Insolvency Opinion” shall mean that certain non-consolidation opinion letter dated as of the
Closing Date delivered by Latham & Watkins LLP in connection with the Loan.



“Insurance Premiums” shall have the meaning set forth in Section 6.1(a) hereof.


 


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“Insurance Proceeds” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.



“Intercreditor Agreement” shall mean that certain Intercreditor Agreement, dated as of the
Closing Date, by and among Lender, Mortgage Lender, Second Mezzanine Lender and Third Mezzanine
Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from
time to time in accordance with the terms thereof.



“Interest Period” shall mean, with respect to any Payment Date, the period commencing on the
first (1st) day of the calendar month that precedes the month in which such Payment Date
occurs and terminating on and including the last day of the calendar month that precedes the month
in which such Payment Date occurs; provided, however, that (a) the Interest Period
in effect on the date of this Agreement shall be deemed to have commenced on December 9, 2009 and
end on December 31, 2009 and (b) no Interest Period shall end later than the Maturity Date (other
than for purposes of calculating interest at the Default Rate).



“Interest Rate Cap Agreement” shall mean, as applicable, an interest rate cap agreement
(together with the confirmation and schedules relating thereto) in form and substance reasonably
satisfactory to Lender by and among Borrowers and an Acceptable Counterparty or a Replacement
Interest Rate Cap Agreement.



“Interest Reserve Account” shall have the meaning assigned to such term in the Mortgage Loan
Agreement or such comparable account as shall be established under this Agreement in accordance
with Section 7.4 hereof.



“Interest Reserve Fund” shall have the meaning assigned to such term in the Mortgage Loan
Agreement or such comparable fund as shall be established under this Agreement in accordance with
Section 7.4 hereof.




“IP” shall have the meaning assigned to such term in the Mortgage Loan Agreement.




“IP Agreements” shall have the meaning set forth in Section 4.1.37(a) hereof.



“IP Borrower” shall mean HRHH IP, LLC, a Delaware limited liability company, together with its
successors and assigns.




“IP License” shall have the meaning set forth in Section 5.1.26(a) hereof.



“IP Material Adverse Effect” shall have the meaning set forth in Section 4.1.37(d)
hereof.



“IP Release Price” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.




“IP Sale” shall have the meaning set forth in Section 2.5.3(a) hereof.



“Lease” shall mean any lease, sublease or subsublease, letting, license, concession or other
agreement (whether written or oral and whether now or hereafter in effect) pursuant to



 


20









 






which any Person is granted a possessory interest in, or right to use or occupy all or any
portion of any space in any Property, and (a) every modification, amendment or other agreement
relating to such lease, sublease, subsublease, or other agreement entered into in connection with
such lease, sublease, subsublease, or other agreement, and (b) every guarantee of the performance
and observance of the covenants, conditions and agreements to be performed and observed by the
other party thereto. The foregoing definition expressly excludes ordinary course hotel room
rentals, but specifically includes the Casino Component Lease.



“Legal Requirements” shall mean, with respect to each Property and the Collateral, all
federal, state, county, municipal and other governmental statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities affecting
such Property or the Collateral or any part of either of the foregoing, or the construction, use,
alteration or operation thereof, or any part thereof, whether now or hereafter enacted and in
force, including, without limitation, the Gaming Laws and the Americans with Disabilities Act of
1990, as amended, and all permits, licenses and authorizations and regulations relating thereto,
including, without limitation, all Governmental Approvals, and all covenants, agreements,
restrictions and encumbrances contained in any instruments, either of record or known to any Loan
Party, at any time in force affecting such Property or the Collateral or any part of either of the
foregoing, including, without limitation, any which may (a) require repairs, modifications or
alterations in or to such Property or any part thereof, or (b) in any way limit the use and
enjoyment thereof.




“Lender” shall have the meaning set forth in the introductory paragraph hereto.



“Letter of Credit” shall mean an irrevocable, unconditional (other than ministerial
conditions), transferable, clean sight draft letter of credit, as the same may be replaced, split,
substituted, modified, amended, supplemented, assigned or otherwise restated from time to time,
(either an evergreen letter of credit or a letter of credit which does not expire until at least
two (2) Business Days after the Maturity Date or such earlier date as such Letter of Credit is no
longer required pursuant to the terms of this Agreement) in favor of Lender and entitling Lender to
draw thereon based solely on a statement purportedly executed by an officer of Lender stating that
it has the right to draw thereon, and issued by a domestic Approved Bank or the U.S. agency or
branch of a foreign Approved Bank.




“Liabilities” shall have the meaning set forth in Section 9.3(b) hereof.



“LIBOR” shall mean, with respect to each Interest Period, the rate (expressed as a percentage
per annum and rounded upward, if necessary, to the next nearest 1/100,000th of 1% (0.00001%)) for
deposits in U.S. dollars, for a one-month period, that appears on Telerate Page 3750 (or the
successor thereto) as of 11:00 a.m., London time, on the related Determination Date. If such rate
does not appear on Telerate Page 3750 as of 11:00 a.m., London time, on such Determination Date,
LIBOR shall be the arithmetic mean of the offered rates (expressed as a percentage per annum) for
deposits in U.S. dollars for a one-month period that appear on the Reuters Screen Libor Page as of
11:00 a.m., London time, on such Determination Date, if at least two such offered rates so appear.
If fewer than two such offered rates appear on the Reuters Screen Libor Page as of 11:00 a.m.,
London time, on such Determination Date, Lender shall request the principal London office of any
four major reference banks in the London interbank



 


21









 






market selected by Lender in its reasonable discretion to provide such bank’s offered
quotation (expressed as a percentage per annum) to prime banks in the London interbank market for
deposits in U.S. dollars for a one-month period as of 11:00 a.m., London time, on such
Determination Date for amounts of not less than U.S. $1,000,000. If at least two such offered
quotations are so provided, LIBOR shall be the arithmetic mean of such quotations. If fewer than
two such quotations are so provided, Lender shall request any three major banks in New York City
selected by Lender in its reasonable discretion to provide such bank’s rate (expressed as a
percentage per annum) for loans in U.S. dollars to leading European banks for a one-month period as
of approximately 11:00 a.m., New York City time on the applicable Determination Date for amounts of
not less than U.S. $1,000,000. If at least two such rates are so provided, LIBOR shall be the
arithmetic mean of such rates. LIBOR shall be determined conclusively by Lender or its agent,
absent manifest error.



“LIBOR Loan” shall mean the Loan at such time as interest thereon accrues at a rate of
interest based upon LIBOR.




“Licensed IP” shall have the meaning set forth in Section 4.1.37(b) hereof.



“Lien” shall mean any mortgage, deed of trust, lien, pledge, negative pledge, hypothecation,
assignment, security interest, put, call, option, warrant, proxy, voting agreement or any other
encumbrance, charge or transfer of, on or affecting any Loan Party, any of the Properties, the
Collateral or any portion of either of the foregoing or any interest therein, including, without
limitation, any conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, the filing of any financing
statement, and mechanic’s, materialmen’s and other similar liens and encumbrances. For the
avoidance of doubt, “Lien” shall not be deemed to include any Permitted IP Encumbrances.




“Liquidation Event” shall have the meaning set forth in Section 2.4.3(a) hereof.



“Liquor Management Agreement” shall mean, with respect to the Hotel/Casino Property and, if
applicable, the Adjacent Property, that certain Liquor Management and Employee Services Agreement,
dated as of February 2, 2007, between Hotel/Casino Borrower and HRHI, in its capacity as the Liquor
Manager, as the same may be amended, modified or supplemented from time to time, pursuant to which
the Liquor Manager shall manage all alcoholic beverage services at the Hotel/Casino Property and,
if applicable, the Adjacent Property, or, if the context requires, a Replacement Liquor Management
Agreement.



“Liquor Manager” shall mean, with respect to the Hotel/Casino Property, HRHI, or, if the
context requires, another Qualified Liquor Manager.



“Loan” shall mean the loan made by Lender to Borrowers pursuant to the Original Loan Agreement
in a maximum principal amount of Two Hundred Million and No/100 Dollars ($200,000,000), which is
evidenced by the Note.



“Loan Documents” shall mean, collectively, this Agreement, the Note, the Pledge Agreement, the
Environmental Indemnity, the Assignment of Management Agreement (All



 


22









 






Properties), the Assignment of Liquor Management Agreement, the Non-Recourse Guaranty, the
Closing Completion Guaranty, the Construction Completion Guaranty, the HRHI Guaranty, the HRHI
Security Agreement, the Cash Management Agreement, the Collateral Assignment of Interest Rate Cap
Agreement, the Post-Closing Obligations Agreement, the Side Letter Agreement and all other
documents executed and/or delivered in connection with the Loan, as any of the foregoing are
modified by the First Mezzanine Loan Document Modification Agreement, the First Guaranty
Modification Agreement and the First HRHI Modification Agreement (as applicable) and as the same
hereafter may be amended, restated, replaced, supplemented or otherwise modified from time to time.



“Loan Party” shall mean any of Borrowers and/or any of Mortgage Borrowers and “Loan Parties”
shall refer collectively to all of them.




“Lockbox Account” shall have the meaning set forth in Section 2.6.1(a) hereof.



“Lockbox Bank” shall mean Wells Fargo Bank, National Association, or any successor or
permitted assigns thereof.



“London Business Day” shall mean any day other than a Saturday, Sunday or any other day on
which commercial banks in London, England are not open for business.




“Major Lease” shall have the meaning assigned to such term in the Mortgage Loan Agreement.



“Management Agreement” shall mean, with respect to each Property, the property management
agreement entered into by and between the applicable Mortgage Borrower or Mortgage Borrowers and
the applicable Manager, as the same has been and may be amended, modified or supplemented from time
to time, pursuant to which such Manager is to provide property management and other services with
respect to the Property owned by such Mortgage Borrower, or, if the context requires, a Replacement
Management Agreement.



“Manager” shall mean Morgans Hotel Group Management LLC or, if the context requires, a
Qualified Manager who is managing any of the Properties.



“Material Action” shall mean any action to consolidate or merge the applicable Special Purpose
Entity with or into any Person, or sell all or substantially all of the assets of such Special
Purpose Entity, or to institute proceedings to have the Special Purpose Entity be adjudicated
bankrupt or insolvent, or consent to the institution of bankruptcy or insolvency proceedings
against the Special Purpose Entity or file a petition seeking, or consent to, reorganization or
relief with respect to the Special Purpose Entity under any applicable federal or state law
relating to bankruptcy, or consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Special Purpose Entity or a substantial part of its
property, or make any assignment for the benefit of creditors of the Special Purpose Entity, or
admit in writing the Special Purpose Entity’s inability to pay its debts generally as they become
due, or declare or effectuate a moratorium on the payment of any obligation, or take action in
furtherance of any such action, or, to the fullest extent permitted by law, dissolve or liquidate
the Special Purpose Entity.


 


23









 





“Maturity Date” shall mean the Initial Maturity Date or, if applicable, the Qualified Extended
Maturity Date, or such other date on which the final payment of principal of the Note becomes due
and payable as therein or herein provided, whether at such stated maturity date, by declaration of
acceleration, or otherwise.



“Maximum Legal Rate” shall mean the maximum non-usurious interest rate, if any, that at any
time or from time to time may be contracted for, taken, reserved, charged or received on the
indebtedness evidenced by the Note and as provided for herein or the other Loan Documents, under
the laws of such state or states whose laws are held by any court of competent jurisdiction to
govern the interest rate provisions of the Loan.



“Merger Agreement” shall mean that certain Agreement and Plan of Merger, dated as of May 11,
2006, by and among Morgans Hotel Group Co., MHG HR Acquisition Corp., Hard Rock Hotel, Inc. and
Peter A. Morton, as amended by that certain First Amendment to Agreement and Plan of Merger, dated
as of January 30, 2007.



“Mezzanine Borrower” or “Mezzanine Borrowers” shall mean, individually or collectively, as the
context may require, Second Mezzanine Borrowers and Third Mezzanine Borrowers.



“Mezzanine Default” shall mean any Second Mezzanine Default and/or Third Mezzanine Default, as
applicable.



“Mezzanine Event of Default” shall mean any Second Mezzanine Event of Default and/or Third
Mezzanine Event of Default, as applicable.



“Mezzanine Lender” or “Mezzanine Lenders” shall mean, individually or collectively, as the
context may require, Second Mezzanine Lender and Third Mezzanine Lender, and each of Second
Mezzanine Lender and/or Third Mezzanine Lender.



“Mezzanine Loan” or “Mezzanine Loans” shall mean, individually or collectively, as the context
may require, the Second Mezzanine Loan and the Third Mezzanine Loan, and each of the Second
Mezzanine Loan and/or the Third Mezzanine Loan.



“Mezzanine Loan Documents” shall mean all documents evidencing and/or securing the Mezzanine
Loans and all documents executed and/or delivered in connection therewith, and as the same
hereafter may be amended, restated, replaced, supplemented or otherwise modified from time to time
subject to the terms of the Intercreditor Agreement.




“Mezzanine Prepayment” shall have the meaning set forth in the recitals hereof.




“Moody’s” shall mean Moody’s Investors Service, Inc.



“Monthly Gaming Requirement Certificate” shall have the meaning set forth in Section
12.2 hereof.


 


24









 





“Monthly Interest Payment” shall mean the amount of interest paid on a Payment Date for the
preceding Interest Period based on interest calculated for such preceding Interest Period at the
Monthly Interest Rate.



“Monthly Interest Rate” shall mean interest calculated on the Outstanding Principal Balance of
the Loan at a rate equal to (a) LIBOR plus 5.20% or, as applicable, the Prime Rate plus the Prime
Rate Spread, with respect to all payments due for the period from the date hereof through and
including the Payment Date occurring in February, 2011 and (b) LIBOR plus 6.50% or, as applicable,
the Prime Rate plus the Prime Rate Spread, with respect to all payments due after the Payment Date
occurring in February, 2011.



“Morgans Guarantor” shall mean Morgans Group LLC, a Delaware limited liability company,
together with its successors and permitted assigns.



“Morgans Parent” shall mean Morgans Hotel Group Co., a Delaware corporation, together with its
successors and permitted assigns.



“Mortgage” shall mean that certain first priority Construction Deed of Trust, Assignment of
Leases and Rents, Security Agreement and Financing Statement (Fixture Filing), dated as of February
2, 2007, from Mortgage Borrowers to Mortgage Lender, as amended by the First Mortgage Loan Document
Modification Agreement and the Second Mortgage Modification Agreement, and as the same hereafter
may be amended, restated, replaced, supplemented or otherwise modified from time to time.



“Mortgage Borrower” shall mean any of Hotel/Casino Borrower, Café Borrower, Adjacent Borrower,
IP Borrower and Gaming Borrower, and “Mortgage Borrowers” shall refer collectively to all of them.



“Mortgage Cash Management Account” shall have the meaning set forth in Section
2.6.2(a) hereof.



“Mortgage Cash Management Agreement” shall mean the “Cash Management Agreement” as defined in
the Mortgage Loan Agreement.




“Mortgage Debt” shall mean the “Debt” as defined in the Mortgage Loan Agreement.




“Mortgage Default” shall mean a “Default” under and as defined in the Mortgage Loan Agreement.




“Mortgage Distributions” shall have the meaning set forth in Section 5.2.14(a) hereof.



“Mortgage Event of Default” shall mean an “Event of Default” under and as defined in the
Mortgage Loan Agreement.



“Mortgage Lender” shall mean Vegas HR Private Limited, as successor in interest to Column
Financial, Inc., in its capacity as holder of the Mortgage Loan, together with its successors and
assigns.


 


25









 





“Mortgage Lender Successor Owner” shall have the meaning set forth in Section 5.1.23
hereof.



“Mortgage Loan” shall mean the loan made by Mortgage Lender to Mortgage Borrowers pursuant to
the Original Mortgage Loan Agreement in a maximum principal amount of up to ONE BILLION THREE
HUNDRED SIXTY MILLION and No/100 Dollars ($1,360,000,000.00), which was comprised of the Original
Acquisition Loan and the Construction Loan, and which was evidenced by the Original Mortgage Note,
which was prepaid with the Mezzanine Loans on the Closing Date, and the maximum amount of which
that may be funded in the future under the Construction Loan was increased by $20,000,000.00 on the
Closing Date, both of the foregoing resulting in a maximum principal amount of the Mortgage Loan
from and after the Closing Date of up to ONE BILLION THIRTY MILLION and 00/100 Dollars
($1,030,000,000.00), comprised of (i) the Reduced Acquisition Loan, which is evidenced by the
Reduced Acquisition Loan Note, and (ii) the Construction Loan, which is evidenced by the
Construction Loan Note, and which Mortgage Loan is otherwise on the terms and conditions set forth
in the Mortgage Loan Agreement and the other Mortgage Loan Documents.




“Mortgage Loan Agreement” shall have the meaning set forth in the recitals hereof.



“Mortgage Loan Documents” shall mean, collectively, the Mortgage Loan Agreement, the Mortgage
Note, the Mortgage, and any and all other documents defined as “Loan Documents” in the Mortgage
Loan Agreement, and as the same hereafter may be amended, restated, replaced, supplemented or
otherwise modified from time to time.



“Mortgage Loan Guaranty Modification Agreements” shall mean, collectively, (i) that certain
Modification and Ratification of Guaranties, dated as of the Closing Date, by and among Guarantors
and Mortgage Lender and (ii) that certain Second Modification and Ratification of Guaranties, dated
as of the date hereof, by and among Guarantors and Mortgage Lender.



“Mortgage Loan HRHI Modification Agreements” shall mean, collectively, (i) that certain
Modification of HRHI Loan Documents and Ratification of HRHI Guaranty, dated as of the Closing
Date, by and between HRHI and Mortgage Lender and (ii) that certain Second Modification of HRHI
Loan Documents and Ratification of HRHI Guaranty, dated as of the date hereof, by and between HRHI
and Mortgage Lender.



“Mortgage Loan Outstanding Principal Balance” shall mean the “Outstanding Principal Balance”
as defined in the Mortgage Loan Agreement.



“Mortgage Note” and “Mortgage Notes” shall mean, individually or collectively, as applicable,
(i) the Reduced Acquisition Loan Note, and (ii) the Construction Loan Note.



“Mortgage Reserve Funds” shall mean, collectively, the Tax and Insurance Escrow Fund, the
Replacement Reserve Fund, the Working Capital Reserve Fund, the Initial Renovation Reserve Fund,
the Interest Reserve Fund, the General Reserve Fund, any funds on deposit in the Construction Loan
Reserve Account, any Shortfall Funds and any other escrow fund established pursuant to the Mortgage
Loan Documents.



“Morton” shall mean Peter A. Morton.


 


26









 






“Morton Assigned IP” shall have the meaning set forth in Section 4.1.37(b) hereof.



“Morton Indemnification” shall mean that certain Indemnification Agreement, dated as of May
11, 2006, between Morgans Hotel Group Co., the indirect parent of each of Mortgage Borrowers, and
Morton, and as the same hereafter may be amended, restated, replaced, supplemented or otherwise
modified from time to time.




“Named Knowledge Parties” shall have the meaning set forth in Section 4.3 hereof.




“Net Cash Flow” shall have the meaning assigned to such term in the Mortgage Loan Agreement.



“Net Liquidation Proceeds After Debt Service” shall mean, with respect to any Liquidation
Event, all amounts paid to or received by or on behalf of any Borrower or any Mortgage Borrower in
connection with such Liquidation Event after payment of all amounts then due to Mortgage Lender,
and then, Lender, including, without limitation, proceeds resulting from any Casualty to or
Condemnation of any Property and proceeds of any sale, refinancing or other disposition or
liquidation, less (without duplication of amounts already paid to or retained by Mortgage
Lender or Lender) (a) in the event of a Liquidation Event consisting of a Casualty or Condemnation,
Lender’s and/or Mortgage Lender’s reasonable costs incurred in connection with the recovery
thereof; (b) in the event of a Liquidation Event consisting of a Casualty or Condemnation, the
costs incurred by any Mortgage Borrower in connection with a Restoration of all or any portion of
any Property made in accordance with the Mortgage Loan Documents; (c) in the event of a Liquidation
Event consisting of a Casualty or Condemnation or a Transfer, amounts required or permitted to be
deducted therefrom and amounts paid pursuant to the Mortgage Loan Documents to Mortgage Lender; (d)
in the event of a Liquidation Event consisting of a Casualty or Condemnation, those proceeds paid
to any Mortgage Borrower pursuant to Section 6.4(c)(vii) of the Mortgage Loan Agreement; (e) in the
case of a foreclosure sale, disposition or transfer of any Property in connection with realization
thereon following a Mortgage Event of Default, such reasonable and customary costs and expenses of
sale or other disposition (including attorneys’ fees and brokerage commissions); (f) in the case of
a foreclosure sale, disposition or transfer of the Collateral in connection with realization
thereon following an Event of Default, such reasonable and customary costs and expenses of sale or
other disposition (including attorneys’ fees and brokerage commissions); (g) in the case of a
foreclosure sale, such costs and expenses incurred by Mortgage Lender under the Mortgage Loan
Documents as Mortgage Lender shall be entitled to receive reimbursement for under the terms of the
Mortgage Loan Documents and/or incurred by Lender under the Loan Documents as Lender shall be
entitled to receive reimbursement for under the terms of the Loan Documents; (h) in the case of a
refinancing of the Mortgage Loan or the Loan, such costs and expenses (including attorneys’ fees)
of such refinancing; and (i) the amount of any prepayments required pursuant to the Mortgage Loan
Documents and/or the Loan Documents in connection with any such Liquidation Event.



“Net Operating Income” shall mean, for any period, the amount obtained by subtracting
Operating Expenses for the Properties for such period from Gross Income from Operations for such
period.


 


27









 






“Net Proceeds” shall have the meaning assigned to such term in the Mortgage Loan Agreement.



“Net Worth Requirements” shall mean those requirements set forth on Schedule V
attached hereto and made a part hereof.



“Non-Recourse Guaranty” shall mean that certain First Mezzanine Guaranty Agreement, dated as
of the Closing Date, from Guarantors to Lender, as modified by the First Guaranty Modification
Agreement and the First Mezzanine Loan Document Modification Agreement, and as the same hereafter
may be amended, restated, replaced, supplemented or otherwise modified from time to time.



“Non-U.S. Lender” shall mean any Lender that is organized under the laws of a jurisdiction
other than laws of the United States of America, any State thereof or the District of Columbia.




“Note” shall have the meaning set forth in the Recitals hereof.




“Notice” shall have the meaning set forth in Section 10.6 hereof.




“NRS” shall mean the Nevada Revised Statutes, as amended from time to time.



“O&M Agreement” shall mean an Operations and Maintenance Agreement, dated as of February 2,
2007, by and among a Mortgage Borrower and Mortgage Lender given in connection with the Mortgage
Loan, as modified by the First Mortgage Loan Document Modification Agreement and the Second
Mortgage Loan Document Modification Agreement and as the same hereafter may be amended, restated,
replaced, supplemented or otherwise modified from time to time. On February 2, 2007, O&M
Agreements were entered into by each of Hotel/Casino Borrower and Mortgage Lender and Adjacent
Borrower and Mortgage Lender.



“Obligations” shall mean, collectively, Borrowers’ obligations for the payment of the Debt and
the performance of the Other Obligations.



“Officer’s Certificate” shall mean a certificate delivered to Lender by a Borrower or a
Guarantor, as applicable, which is signed by an authorized officer or manager of such Borrower or
Guarantor or a Constituent Member thereof, as applicable, which shall in all events be subject to
Section 9.4 hereof.



“Operating Expenses” shall mean, for any period, the total of all expenditures, computed in
accordance with GAAP, of whatever kind during such period relating to the operation, maintenance
and/or management of any of the Properties that are incurred on a regular monthly or other periodic
basis, including without limitation, utilities, ordinary repairs, maintenance, environmental and
engineering (but excluding utilities) (which ordinary repairs, maintenance, environmental and
engineering (but excluding utilities) for the purposes of this definition shall be no less than an
assumed expense of $400,000.00 per month, and following the First Full Operating Month, such
assumed expense shall increase to $600,000.00 per month, insurance, license fees, property taxes
and assessments, sales tax, room occupancy tax, live entertainment tax, advertising expenses, base
and incentive management fees, payroll and related



 


28









 






taxes, computer processing charges, tenant improvements and leasing commissions, interest and
fees charged in connection with FF&E, capital and equipment leases, operational equipment or other
lease payments as approved by Lender, and other similar costs, but excluding depreciation and
amortization with respect to the Properties, Debt Service, debt service under the Mortgage Loan,
debt service under each of the Mezzanine Loans, Capital Expenditures, items that would otherwise
constitute Project Costs, Extraordinary Expenses, Pre-Opening Expenses, the cost of any items
incurred at any Manager’s expense pursuant to any Management Agreement, non-recurring expenses and
contributions to any of the Mortgage Reserve Funds or the Reserve Funds, as applicable. Operating
Expenses shall also include the cost (computed in accordance with GAAP) of any complimentary food,
beverages, hotel room and/or other amenities provided to any customers or guests of the
Hotel/Casino Property, including, without limitation, under the Casino Component Lease, under the
Liquor Management Agreement and/or under any Management Agreement. Notwithstanding the foregoing,
references herein to Operating Expenses that are to be funded from amounts on deposit in the
Mortgage Cash Management Account or from any reserve established hereunder shall refer to actual
Operating Expenses incurred by Mortgage Borrower in lieu of cash Operating Expenses computed in
accordance with GAAP.




“Operating Permits” shall have the meaning set forth in Section 4.1.22 hereof.



“Original Acquisition Loan” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.




“Original Lender” shall have the meaning set forth in the recitals hereof.




“Original Loan Agreement” shall have the meaning set forth in the recitals hereof.




“Original Mortgage Loan Agreement” shall have the meaning set forth in the recitals hereof.



“Original Mortgage Note” shall mean that certain Promissory Note dated as of February 2, 2007
in the principal amount of up to $1,360,000,000.00 made by Mortgage Borrowers in favor of Mortgage
Lender.



“Original Note” shall mean that certain First Mezzanine Promissory Note, dated as of the
Closing Date, in the principal amount of Two Hundred Million and No/100 Dollars ($200,000,000),
made by Borrowers in favor of Lender.



“Original Second Mezzanine Loan Agreement” shall have the meaning set forth in the recitals
hereof.



“Original Third Mezzanine Loan Agreement” shall have the meaning set forth in the recitals
hereof.



“Other Charges” shall mean all ground rents, maintenance charges, impositions other than
Taxes, and any other charges, including, without limitation, vault charges and license fees for the
use of vaults, chutes and similar areas adjoining any Property, now or hereafter levied or assessed
or imposed against such Property or any part thereof.


 


29









 





“Other Obligations” shall mean (a) the performance of all obligations of each Borrower
contained herein; (b) the performance of each obligation of each Borrower contained in any other
Loan Document; and (c) the performance of each obligation of each Borrower contained in any
renewal, extension, amendment, modification, consolidation, change of, or substitution or
replacement for, all or any part of this Agreement, the Note or any other Loan Documents.



“Other Taxes” means any and all stamp or documentary taxes or any other excise or property
taxes, or similar governmental charges or levies imposed, enacted or to become effective after the
date hereof, arising from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement. Other Taxes shall not include Excluded Taxes.



“Outstanding Principal Balance” shall mean, as of any date, the outstanding principal balance
of the Loan.




“Owned IP” shall have the meaning set forth in Section 4.1.37(b) hereof.




“Partial Release Parcel” shall have the meaning set forth in Section 2.5.1(a) hereof.



“Payment Date” shall mean the first (1st) day of each calendar month during the
term of the Loan or, if such day is not a Business Day, the immediately preceding Business Day.
The first Payment Date was November 9, 2007 for all purposes of this Agreement other than the
payment of the Monthly Interest Payment pursuant to the Original Loan Agreement (because Borrowers
and Lender acknowledge that stub interest through November 9, 2007 was paid on the Closing Date),
and the first Payment Date for purposes of the Monthly Interest Payment pursuant to the Original
Loan Agreement was December 9, 2007.



“Permitted Adjacent/Café Uses” shall have the meaning set forth in Section 4.1.11
hereof.



“Permitted Encumbrances” shall mean, with respect to a Property, collectively (a) the Liens
and security interests created by the Mortgage Loan Documents, the Loan Documents and the Mezzanine
Loan Documents, (b) all Liens, encumbrances and other matters disclosed in the Title Insurance
Policy relating to such Property, (c) Liens, if any, for Taxes imposed by any Governmental
Authority not yet delinquent, (d) such other title and survey exceptions, documents, agreements or
instruments as Mortgage Lender has approved or may approve in writing in Mortgage Lender’s
reasonable discretion, (e) easements, restrictions, covenants and/or reservations which are
necessary for the operation of such Property that do not and would not have a material adverse
effect on (i) the business operations, economic performance, assets, financial condition, equity,
contingent liabilities, material agreements or results of operations of any Loan Party, any
Guarantor or any Property or (ii) the value of, or cash flow from, any Property, (f) zoning
restrictions and/or laws affecting such Property that do not and would not have a material adverse
effect on (i) the business operations, economic performance, assets, financial condition, equity,
contingent liabilities, material agreements or results of operations of any Loan Party, any
Guarantor or any Property or (ii) the value of, or cash flow from, any Property, (g) the Liens
securing any Existing FF&E Leases and/or any Permitted Future FF&E Leases, and (h) any other Liens
which are being duly contested in accordance with the provisions



 


30









 






of Section 5.1.1 or 5.1.2 hereof or Section 3.6(b) of the Mortgage, but only
for so long as such contest shall be permitted pursuant to said Section 5.1.1 or
5.1.2 hereof or Section 3.6(b) of the Mortgage, as applicable.



“Permitted Future FF&E Leases” shall have the meaning assigned to such term in the Mortgage
Loan Agreement.



“Permitted Gaming Expenses” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.




“Permitted Investments” shall have the meaning set forth in the Cash Management Agreement.



“Permitted IP Encumbrances” shall mean, with respect to the IP, collectively (a) the Liens and
security interests created by the Mortgage Loan Documents, the Loan Documents and the Mezzanine
Loan Documents, (b) such other Liens or security interests as Lender may approve in writing in
Lender’s sole discretion, (c) the Liens on the IP set forth on Schedule VII hereto, which
were extinguished on or prior to the Closing Date, and (d) any other IP Agreements permitted under
this Agreement.



“Person” shall mean any individual, corporation, partnership, joint venture, limited liability
company, estate, trust, unincorporated association, any federal, state, county or municipal
government or any bureau, department or agency thereof and any fiduciary acting in such capacity on
behalf of any of the foregoing.



“Personal Property” shall have the meaning set forth in the granting clause of the Mortgage
with respect to each Property.



“Physical Conditions Report” shall mean, with respect to each Property, a report prepared by a
company reasonably satisfactory to Mortgage Lender regarding the physical condition of such
Property, reasonably satisfactory in form and substance to Mortgage Lender.




“Pink Taco IP” shall have the meaning set forth in Section 4.1.37(b) hereof.




“Pink Taco License” shall have the meaning set forth in Section 4.1.37(b) hereof.



“Plans and Specifications” shall mean the plans and specifications for the Project prepared by
the Architect and reasonably approved by Mortgage Lender in accordance with the terms of the
Mortgage Loan Agreement, as the same may be amended and supplemented from time to time in
accordance with the terms of the Mortgage Loan Agreement (including by Change Orders).



“Pledge Agreement” shall mean that certain First Mezzanine Pledge and Security Agreement,
dated as of the Closing Date, executed and delivered by Borrowers to Lender as security for the
Loan, as ratified by the Ratification of Pledge Agreement, and as the same hereafter may be
amended, restated, replaced, supplemented or otherwise modified from time to time.


 


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“Pledged Collateral” shall mean the “Collateral” as defined in the Pledge Agreement.



“Pledged Interests” shall mean all membership and manager interests in each of Mortgage
Borrowers, as described on Schedule III attached hereto.




“Policies” shall have the meaning assigned to such term in the Mortgage Loan Agreement.



“Post-Closing Obligations Agreement” shall mean that certain Post Closing Obligations
Agreement, dated as of the date hereof, by and between Borrowers and Lender.



“Pre-Opening Expenses” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.



“Prescribed Laws” shall mean, collectively, (a) the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law
107-56) (The USA PATRIOT Act), (b) Executive Order No. 13224 on Terrorist Financing, effective
September 24, 2001, and relating to Blocking Property and Prohibiting Transactions With Persons Who
Commit, Threaten to Commit, or Support Terrorism, (c) the International Emergency Economic Power
Act, 50 U.S.C. §1701 et. seq., and (d) all other Legal Requirements relating to money laundering or
terrorism.



“Prime Rate” shall mean the annual rate of interest publicly announced by Citibank, N.A. in
New York, New York, as its base rate, as such rate shall change from time to time. If Citibank,
N.A. ceases to announce a base rate, Prime Rate shall mean the rate of interest published in
The Wall Street Journal from time to time as the “Prime Rate”. If more than one “Prime
Rate” is published in The Wall Street Journal for a day, the average of such “Prime Rates”
shall be used, and such average shall be rounded up to the nearest one-hundredth (100th) of one
percent (1%). If The Wall Street Journal ceases to publish the “Prime Rate”, Lender shall
select an equivalent publication that publishes such “Prime Rate”, and if such “Prime Rates” are no
longer generally published or are limited, regulated or administered by a governmental or
quasigovernmental body, then Lender shall select a comparable interest rate index.



“Prime Rate Loan” shall mean the Loan at such time as interest thereon accrues at a rate of
interest based upon the Prime Rate.



“Prime Rate Spread” shall mean the difference (expressed as the number of basis points)
between (a) the Monthly Interest Rate (calculated in accordance with LIBOR) on the date LIBOR was
last applicable to the Loan and (b) the Prime Rate on the date that LIBOR was last applicable to
the Loan; provided, however, in no event shall such difference be a negative
number.



“Prior Day’s Cash Receipts” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.



“Project” shall mean those renovations and improvements (exclusive of the Initial Renovations)
expected to be constructed and performed on the Hotel/Casino Property and the Adjacent Property in
accordance with the terms of the Mortgage Loan Agreement and the other



 


32









 






Mortgage Loan Documents, including, without limitation, a parking facility, an expansion of
the hotel and casino on the Hotel/Casino Property and the construction of an approximately 440 room
hotel facility, as generally described on Schedule II attached hereto and as more
particularly described in the Plans and Specifications.




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



“Property” and “Properties” shall mean, individually and collectively, each and every one of
the Hotel/Casino Property, the Café Property and the Adjacent Property that, as of any particular
date, is subject to the terms of the Mortgage Loan Agreement, the Mortgage and the other Mortgage
Loan Documents.



“Provided Information” shall mean any and all financial and other information prepared and
provided by any Loan Party, any Manager, HRHI or any Guarantor or under the supervision or control
of any Loan Party, any Manager, HRHI or any Guarantor (but excluding third party independent
reports) with respect to one or more of the Properties, the IP, the Collateral, any Loan Party, any
Mezzanine Borrower, any Manager, HRHI and/or any Guarantor.



“Publicly Traded Company” shall mean any Person with a class of securities traded on a
national or international securities exchange and/or registered under Section 12(b) or 12(g) of the
Securities Exchange Act or 1934.



“PWR/RWB Escrow Agreement” shall mean that certain Escrow Agreement, dated as of May 11, 2006,
between PM Realty, LLC, Red, White and Blue Pictures, Inc., Morton, 510 Development Corporation,
Morgans Hotel Group Co., the indirect parent of each of Mortgage Borrowers, Morgans Group LLC and
Chicago Title Agency of Nevada, Inc., and as the same hereafter may be amended, restated, replaced,
supplemented or otherwise modified from time to time.



“Qualified Extended Maturity Date” shall have the meaning set forth in Section 2.7.2
hereof.




“Qualified Extension Option” shall have the meaning set forth in Section 2.7.2 hereof.




“Qualified Extension Term” shall have the meaning set forth in Section 2.7.2 hereof.



“Qualified Gaming Operator” shall mean (a) Gaming Borrower, or (b) a reputable and experienced
gaming operator (which may be an Affiliate of any Mortgage Borrower) possessing experience in
supervising, operating and managing gaming activities at properties similar in size, scope, use and
value as the Hotel/Casino Property; provided, that with respect to any Person under any of
the foregoing clauses (a) or (b), such Person shall have, at all times during its
engagement as Gaming Operator, all required approvals and licenses from all applicable Governmental
Authorities, including, without limitation, all Gaming Authorities, and provided,
further, that with respect to the foregoing clause (b): (i) such Person shall be
reasonably acceptable to Mortgage Lender and such Person shall agree to operate the gaming
operations at the Hotel/Casino Property pursuant to one or more written agreements previously
approved by Mortgage Lender in its reasonable discretion (including, by way of example but without



 


33









 






limitation, a new lease and/or sublease and related recognition agreement), (ii) after a
Securitization has occurred, Loan Parties shall have obtained prior written confirmation from the
applicable Rating Agencies that the supervision, operation and management of the gaming activities
at the Hotel/Casino Property by such Person will not cause a downgrade, withdrawal or qualification
of the then current ratings of the Securities or any class thereof, and (iii) if such Person is an
Affiliate of any Loan Party, (A) if such Affiliate was covered in the Insolvency Opinion or in any
subsequent Additional Insolvency Opinion, Loan Parties shall have obtained and delivered to Lender
an update of such Insolvency Opinion or Additional Insolvency Opinion, as applicable, which
addresses the new relationship between such Affiliate and Loan Parties, or (B) if such Affiliate
was not covered in the Insolvency Opinion or in any subsequent Additional Insolvency Opinion, Loan
Parties shall have obtained and delivered to Lender an Additional Insolvency Opinion with respect
to such Affiliate and Loan Parties.




“Qualified Guarantor Transferee” shall mean any one or more of the following:



(i) an investment trust, bank, saving and loan association, insurance company, trust company,
commercial credit corporation, pension plan, pension fund or pension advisory firm, mutual fund,
government entity or plan;



(ii) an investment company, money management firm or “qualified institutional buyer” within
the meaning of Rule 144A under the Securities Act, as amended, or an entity that is an “accredited
investor” within the meaning of Regulation D under the Securities Act, as amended;



(iii) an institution substantially similar to any of the entities described in the foregoing
clause (i) or (ii);



(iv) any entity Controlling or Controlled by or under common Control with any of the entities
described in the foregoing clause (i) or (ii);



(v) any Person (a) with a long-term unsecured debt rating from the Rating Agencies of at least
Investment Grade or (b) who, together with its Affiliates, (A) (x) owns in its entirety, or (y)
owns a general partnership interest, managing membership interest or other equivalent ownership and
management interest in, an entity that owns, or (z) operates, at least ten (10) full service hotels
exclusive of the Properties totaling in the aggregate no less than 3,500 rooms; or



(vi) any other Person (including opportunity funds) that has been approved as a Qualified
Guarantor Transferee by the Rating Agencies.



“Qualified Liquor Manager” shall mean either (a) HRHI, (b) Gaming Borrower, (c) Hotel Casino
Borrower, or (d) a reputable and experienced liquor management organization (which may be an
Affiliate of any Mortgage Borrower) possessing experience in managing all or substantially all
alcoholic beverage services at properties similar in size, scope, use and value as the Hotel/Casino
Property, provided, that (i) any Person referred to in the foregoing clause (a)
through (d) shall have, at all times during its engagement as the Liquor Manager, all
Governmental Approvals necessary to provide all alcoholic beverage services at the Hotel/Casino
Property, and (ii) with respect to clause (d) above, (A) after a Securitization has
occurred, Loan Parties shall have obtained prior written confirmation from the applicable Rating



 


34









 






Agencies that management of all alcoholic beverage services at the Hotel/Casino Property by
such Person will not cause a downgrade, withdrawal or qualification of the then current ratings of
the Securities or any class thereof, and (B) if such Person is an Affiliate of any Loan Party, (1)
if such Affiliate was covered in the Insolvency Opinion or in any subsequent Additional Insolvency
Opinion, Loan Parties shall have obtained and delivered to Lender an update of such Insolvency
Opinion or Additional Insolvency Opinion, as applicable, which addresses the new relationship
between such Affiliate and Loan Parties, or (2) if such Affiliate was not covered in the Insolvency
Opinion or in any subsequent Additional Insolvency Opinion, Loan Parties shall have obtained and
delivered to Lender an Additional Insolvency Opinion with respect to such Affiliate and Loan
Parties.



“Qualified Manager” shall mean either (a) any Manager with respect to the Property it is
managing on the date hereof, or (b) in the reasonable judgment of Lender, a reputable and
experienced property management organization (which may be an Affiliate of any Mortgage Borrower or
Guarantor) possessing experience in managing properties similar in size, scope, use and value as
the applicable Property, provided, that with respect to clause (b) above, (i) after
a Securitization has occurred, Loan Parties shall have obtained prior written confirmation from the
applicable Rating Agencies that management of the applicable Property by such Person will not cause
a downgrade, withdrawal or qualification of the then current ratings of the Securities or any class
thereof, and (ii) if such Person is an Affiliate of any Loan Party, (A) if such Affiliate was
covered in the Insolvency Opinion or in any subsequent Additional Insolvency Opinion, Loan Parties
shall have obtained and delivered to Lender an update of such Insolvency Opinion or Additional
Insolvency Opinion, as applicable, which addresses the new relationship between such Affiliate and
Loan Parties, or (B) if such Affiliate was not covered in the Insolvency Opinion or in any
subsequent Additional Insolvency Opinion, Loan Parties shall have obtained and delivered to Lender
an Additional Insolvency Opinion with respect to such Affiliate and Loan Parties.



“Qualified Real Estate Guarantor” shall mean (i) Morgans Group LLC or (ii) a Qualified
Guarantor Transferee that is regularly engaged in (x) the business of making or owning commercial
real estate loans (including mezzanine loans with respect to commercial real estate), (y) operating
hospitality properties, or (z) employing executive level employees with at least ten (10) years of
experience with regard to the same as part of a business segment or business sector of a Qualified
Guarantor Transferee.




“Rank” shall have the meaning set forth in Section 4.1.37(b) hereof.




“Rank IP” shall have the meaning set forth in Section 4.1.37(b) hereof.




“Rank License” shall have the meaning set forth in Section 4.1.37(b) hereof.




“Ratification of Pledge Agreement” shall have the meaning set forth in the recitals hereof.



“Rating Agencies” shall mean, prior to the final Securitization of the Loan, each of S&P,
Moody’s and Fitch, or any other nationally recognized statistical rating agency which has been



 


35









 






designated by Lender and, after the final Securitization of the Loan, shall mean any of the
foregoing that have rated any of the Securities.




“Re-Dating” shall have the meaning set forth in Section 9.2 hereof.



“Reduced Acquisition Loan” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.



“Reduced Acquisition Loan Debt” shall have the meaning assigned to such term in the Mortgage
Loan Agreement.



“Reduced Acquisition Loan Outstanding Principal Balance” shall have the meaning assigned to
such term in the Mortgage Loan Agreement.



“Reduced Acquisition Loan Note” shall mean that certain Amended and Restated Replacement
Reduced Acquisition Loan Promissory Note, dated the date hereof, in the principal amount of Four
Hundred Ten Million and No/100 Dollars ($410,000,000), made by Mortgage Borrowers in favor of
Mortgage Lender, and as the same hereafter may be amended, restated, replaced, supplemented or
otherwise modified from time to time.



“Refinancing Loan” shall mean a loan or loans (i) the proceeds of which is/are used in whole
or in part to refinance the Loan, and/or (ii) is/are secured by a lien on any of the Properties
and/or the IP and/or the direct or indirect ownership interests in one or more Borrowers.




“Register” shall have the meaning set forth in Section 10.25 hereof.



“Registered” with respect to any IP, means any IP issued by, registered with, renewed by or
the subject of a pending application before, any Governmental Authority or Internet domain name
registrar.



“Regulation AB” shall mean Regulation AB under the Securities Act and the Exchange Act, as
such Regulation may be amended from time to time.




“Reimbursement Contribution” shall have the meaning set forth in Section 15.2 hereof.



“Related Loan” shall mean a loan to an Affiliate of any Borrower or secured by a Related
Property, that is included in a Securitization with the Loan.



“Related Property” shall mean a parcel of real property, together with improvements thereon
and personal property related thereto, that is “related” within the meaning of the definition of
Significant Obligor, to any Property.



“Release Parcel Release Price” shall have the meaning assigned to such term in the Mortgage
Loan Agreement.



“Release Parcel Purchaser” shall have the meaning set forth in Section 2.5.1(a)
hereof.



“Release Parcel Sale” shall have the meaning set forth in Section 2.5.1(a) hereof.


 


36









 





“Remaining Adjacent Property” shall mean that portion of the Adjacent Property that does not
constitute the Partial Release Parcel.



“Rents” shall mean, with respect to each Property, all rents (including, without limitation,
percentage rents), rent equivalents, moneys payable as damages (including payments by reason of the
rejection of a Lease in a Bankruptcy Action) or in lieu of rent or rent equivalents, royalties
(including, without limitation, all oil and gas or other mineral royalties and bonuses), income,
receivables, receipts, revenues (including liquor revenues), deposits (including, without
limitation, security deposits, utility deposits and deposits for rental of rooms, but excluding
deposits for rental of banquet space or business or conference meeting rooms), accounts, cash,
issues, profits, charges for services rendered, all other amounts payable as rent under any Lease
or other agreement relating to any Property (including without limitation the Liquor Management
Agreement or Replacement Liquor Management Agreement and any future gaming lease or sublease), and
other payments and consideration of whatever form or nature received by or paid to or for the
account of or benefit of any Mortgage Borrower, any Manager or any of their respective agents or
employees from any and all sources arising from or attributable to any Property and/or the
Improvements thereon, and proceeds, if any, from business interruption or other loss of income
insurance, including, without limitation, all hotel receipts, revenues and net credit card receipts
collected from guest rooms, restaurants, bars, meeting rooms, banquet rooms and recreational
facilities, revenues from telephone services, internet services, laundry services and television,
all receivables, customer obligations, installment payment obligations and other obligations now
existing or hereafter arising or created out of the sale, lease, sublease, license, concession or
other grant of the right of the use and occupancy of any Property or rendering of services by any
Mortgage Borrower or any operator or manager of the hotel or the commercial space located in any of
the Improvements or acquired from others (including, without limitation, from the rental of any
office space, retail space, guest rooms or other space, halls, stores, and offices, and deposits
securing reservations of such space), net license, lease, sublease and net concession fees and
rentals, health club membership fees, food and beverage wholesale and retail sales, service charges
and vending machine sales.



“Replacement Collateral Assignment of Interest Rate Cap” shall mean any collateral assignment
of Interest Rate Cap Agreement executed by Borrowers for the benefit of Lender in connection with
any of the Qualified Extension Terms, as the same may be amended, restated, replaced, supplemented
or otherwise modified from time to time.



“Replacement Interest Rate Cap Agreement” shall mean an interest rate cap agreement from an
Acceptable Counterparty with terms substantially identical to the Interest Rate Cap Agreement
except that the same shall be effective in connection with replacement of the Interest Rate Cap
Agreement following a downgrade of the long-term unsecured debt rating of the Counterparty;
provided, that with respect to any Replacement Interest Rate Cap Agreement to be delivered
by Borrowers to Lender in connection with Borrowers’ exercise of any Extension Option, the strike
price shall be the Strike Price applicable to such Extension Option being exercised; and,
provided, further, that to the extent any such interest rate cap agreement does not
meet the foregoing requirements, a “Replacement Interest Rate Cap Agreement” shall be such interest
rate cap agreement reasonably approved in writing by Lender.


 


37









 





“Replacement Liquor Management Agreement” shall mean, collectively, (a) either (i) a
management agreement with a Qualified Liquor Manager substantially in the same form and substance
as the Liquor Management Agreement being replaced, or (ii) a liquor management agreement with a
Qualified Liquor Manager, which liquor management agreement shall be reasonably acceptable to
Lender in form and substance, provided, with respect to this subclause (ii), after
the occurrence of a Securitization, Lender, at its option, may require that Loan Parties obtain
confirmation from the applicable Rating Agencies that such liquor management agreement will not
cause a downgrade, withdrawal or qualification of the then current rating of the Securities or any
class thereof; and (b) an assignment of liquor management agreement and subordination of liquor
management fees in a form reasonably acceptable to Lender, executed and delivered to Lender by
Borrowers and such Qualified Liquor Manager at Borrowers’ expense.



“Replacement Management Agreement” shall mean, collectively, (a) either (i) a management
agreement with a Qualified Manager substantially in the same form and substance as the Management
Agreement being replaced, or (ii) a management agreement with a Qualified Manager, which management
agreement shall be reasonably acceptable to Lender in form and substance, provided, with
respect to this subclause (ii), after the occurrence of a Securitization, Lender, at its
option, may require that Loan Parties obtain confirmation from the applicable Rating Agencies that
such management agreement will not cause a downgrade, withdrawal or qualification of the then
current rating of the Securities or any class thereof; and (b) an assignment of management
agreement and subordination of management fees substantially in the form then used by Lender (or
such other form and substance reasonably acceptable to Lender), executed and delivered to Lender by
Borrowers and such Qualified Manager at Borrowers’ expense.



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



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



“Reserve Funds” shall mean, collectively, the Tax and Insurance Escrow Fund, the Replacement
Reserve Fund, the Working Capital Reserve Fund, the Initial Renovation Reserve Fund, the Interest
Reserve Fund, the General Reserve Fund, any funds on deposit in the Construction Loan Reserve
Account, any Shortfall Funds and any other escrow fund established pursuant to the Loan Documents.




“Restoration” shall have the meaning assigned to such term in the Mortgage Loan Agreement.




“Restoration Threshold” shall mean Ten Million Dollars ($10,000,000.00).



“Restoration Value Threshold” shall mean that (i) in the case of a Condemnation, the Net
Proceeds are less than 15% of the then current fair market value of the applicable Property,



 


38









 






and (ii) in the case of a Casualty, the Net Proceeds are less than 30% of the then current
fair market value of the applicable Property.



“Restricted Party” shall mean, collectively, each Loan Party, each Mezzanine Borrower, HRHI,
HR Holdings and each Guarantor.




“S&P” shall mean Standard & Poor’s Ratings Group, a division of the McGraw-Hill Companies.



“Sale or Pledge” shall mean a voluntary or involuntary sale, conveyance, assignment, transfer,
encumbrance or pledge of, or a grant of option with respect to, a legal or beneficial interest.




“Sale Request” shall have the meaning assigned to such term in the Mortgage Loan Agreement.



“Second Amended and Restated Mortgage Loan Agreement” shall have the meaning set forth in the
recitals hereof.



“Second Mezzanine Borrower” and “Second Mezzanine Borrowers” shall mean, individually or
collectively, as applicable, HRHH Gaming Junior Mezz, LLC, a Delaware limited liability company,
and HRHH JV Junior Mezz, LLC, a Delaware limited liability company, each in its capacity as a
borrower under the Second Mezzanine Loan, together with its or their successors or permitted
assigns.



“Second Mezzanine Debt” shall mean the “Debt” as defined in the Second Mezzanine Loan
Agreement.



“Second Mezzanine Default” shall mean a “Default” as defined in the Second Mezzanine Loan
Agreement.



“Second Mezzanine Event of Default” shall mean an “Event of Default” as defined in the Second
Mezzanine Loan Agreement.



“Second Mezzanine Lender” shall mean NRFC WA Holdings, LLC (as successor in interest to Column
Financial, Inc.), in its capacity as holder of the Second Mezzanine Loan, together with its
successors and assigns.



“Second Mezzanine Loan” shall mean the loan in the original principal amount of One Hundred
Million and No/100 Dollars ($100,000,000), made by Second Mezzanine Lender to Second Mezzanine
Borrowers pursuant to the Second Mezzanine Loan Agreement.



“Second Mezzanine Loan Agreement” shall mean that certain First Amended and Restated Second
Mezzanine Loan Agreement, dated as of the date hereof, among Second Mezzanine Lender and Second
Mezzanine Borrowers, as the same may be amended, restated, replaced, supplemented or otherwise
modified from time to time subject to the Intercreditor Agreement.


 


39









 





“Second Mezzanine Loan Documents” shall mean the Second Mezzanine Loan Agreement and all other
documents evidencing and/or securing the Second Mezzanine Loan, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time subject to the terms of
the Intercreditor Agreement.



“Second Mezzanine Loan Outstanding Principal Balance” shall mean the “Outstanding Principal
Balance” as defined in the Second Mezzanine Loan Agreement.



“Second Mezzanine Obligations” shall mean the “Obligations” as defined in the Second Mezzanine
Loan Agreement.



“Second Mortgage Loan Document Modification Agreement” shall mean that certain Omnibus
Amendment, dated as of the date hereof, by and among Mortgage Borrowers, Guarantors, HRHI, Manager
and Mortgage Lender.



“Second Mortgage Modification Agreement” shall mean that certain Second Modification of
Construction Deed of Trust, Assignment of Leases and Rents, Security Agreement and Financing
Statement (Fixture Filing) and Second Modification of Assignment of Leases and Rents, dated as of
the date hereof, by and among Mortgage Borrowers and Mortgage Lender.




“Second Qualified Extended Maturity Date” shall mean February 9, 2012.



“Second Qualified Extension Option” shall have the meaning set forth in Section
2.7.2(b) hereof.



“Second Qualified Extension Term” shall have the meaning set forth in Section 2.7.2(b)
hereof.




“Securities” shall have the meaning set forth in Section 9.1(a) hereof.




“Securities Act” shall have the meaning set forth in Section 9.3(a) hereof.




“Securitization” shall have the meaning set forth in Section 9.1(a) hereof.




“Servicer” shall have the meaning set forth in Section 9.7 hereof.




“Servicing Agreement” shall have the meaning set forth in Section 9.7 hereof.




“Severed Loan Documents” shall have the meaning set forth in Section 8.2(c) hereof.




“Shortfall” shall have the meaning assigned to such term in the Mortgage Loan Agreement.




“Shortfall Funds” shall have the meaning assigned to such term in the Mortgage Loan Agreement.



“Side Letter Agreement” shall mean that certain Side Letter Agreement, dated as of the date
hereof, among the Borrowers, Mortgage Borrowers, Second Mezzanine Borrowers, Third



 


40









 






Mezzanine Borrowers, Lender, Mortgage Lender, Second Mezzanine Lender and Third Mezzanine
Lender.



“Significant Obligor” shall have the meaning set forth in Item 1101(k) of Regulation AB under
the Securities Act.



“Special Purpose Entity” shall mean a limited partnership or limited liability company that
since the date of its formation and at all times on and after the date thereof, has complied with
and shall at all times comply with the following requirements:



(a) was, is and will be organized solely for the purpose of (i) (A) acquiring, owning,
holding, selling, transferring, managing and operating the Collateral, (B) entering into the Loan
Documents (as and when executed), including any predecessor loan agreement and documents related
thereto, (C) refinancing the Collateral in connection with repayment of the Loan, and/or (D)
transacting lawful business that is incident, necessary and appropriate to accomplish any of the
foregoing; or (ii) acting as a general partner of the limited partnership that owns the Collateral
or managing member of the limited liability company that owns the Collateral;



(b) has not been and is not engaged in, and will not engage in, any business unrelated to (i)
the acquisition, ownership, management, sale, transfer or operation of the Collateral, (ii) acting
as general partner of the limited partnership that owns the Collateral, or (iii) acting as managing
member of the limited liability company that owns the Collateral;



(c) has not had, does not have, and will not have, any assets other than those related to the
Collateral, or, if such entity is a general partner in a limited partnership, its general
partnership interest in the limited partnership that owns the Collateral, or, if such entity is a
managing member of a limited liability company, its membership interest in the limited liability
company that owns the Collateral;



(d) has not engaged, sought or consented to, and to the fullest extent permitted by law, will
not engage in, seek or consent to, any: (i) dissolution, winding up, liquidation, consolidation,
merger or sale of all or substantially all of its assets outside of its ordinary course of business
and other than as expressly permitted in this Agreement; (ii) other than as expressly permitted in
this Agreement, transfer of partnership or membership interests (if such entity is a general
partner in a limited partnership or a managing member in a limited liability company); or (iii)
amendment of its limited partnership agreement, articles of organization, certificate of formation
or operating agreement (as applicable) with respect to the matters set forth in this definition
unless Lender issues its prior written consent, which consent shall not be unreasonably withheld,
and, after the occurrence of a Securitization, the confirmation in writing from the applicable
Rating Agencies that such amendment will not, in and of itself, result in a downgrade, withdrawal
or qualification of the then current ratings assigned to any Securities or any class thereof in
connection with any Securitization;



(e) if such entity is a limited partnership, has had, now has, and will have, as its only
general partners, Special Purpose Entities that are limited liability companies;



(f) if such entity is a limited liability company with more than one member, has had, now has
and will have at least one member that is a Special Purpose Entity that is a corporation



 


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that has at least two (2) Independent Directors that will not cause or allow the taking of any
Material Action with respect to the limited liability company or its subsidiary(ies) without the
unanimous consent of each Independent Director or a limited liability company that has at least two
(2) Independent Managers that will not cause or allow the taking of any Material Action with
respect to the limited liability company or its subsidiary(ies) without the unanimous consent of
each Independent Manager and that, in either instance, owns at least one-tenth of one percent
(.10%) of the equity of the limited liability company;



(g) if such entity is a limited liability company with only one member, has been, now is, and
will be, a limited liability company organized in the State of Delaware that (i) has as its only
member a non-managing member; (ii) has at least two (2) Independent Managers and has not caused or
allowed and will not cause or allow the taking of any “Material Action” (as defined in such
entity’s operating agreement) without the unanimous affirmative vote of one hundred percent (100%)
of the member and such entity’s two (2) Independent Managers; (iii) at least one (1) springing
member (or two (2) springing members if such springing members are natural persons who will replace
a member of such entity seriatim not simultaneously) that will become a member of such entity upon
the occurrence of an event causing the member to cease to be a member of such limited liability
company; and (iv) whose membership interests constitute and will constitute “certificated
securities” (as defined in the Uniform Commercial Code of the States of New York and Delaware);



(h) if such entity is (i) a limited liability company, has had, now has and will have an
operating agreement, or (ii) a limited partnership, has had, now has and will have a limited
partnership agreement, that, in each case, provides that such entity will not: (A) to the fullest
extent permitted by law, take any actions described in clause (d)(i) above; (B) engage in
any other business activity, or amend its organizational documents with respect to the matters set
forth in this definition, in each instance, without the prior written consent of Lender, which
consent shall not be unreasonably withheld, and, after the occurrence of a Securitization,
confirmation in writing from the applicable Rating Agencies that engaging in such other business
activity or such amendment, as applicable, will not, in and of itself, result in a downgrade,
withdrawal or qualification of the then current ratings assigned to any Securities or any class
thereof in connection with any Securitization; or (C) without the affirmative vote of two (2)
Independent Managers and of all the partners or members of such entity, as applicable (or the vote
of two (2) Independent Managers of its general partner or managing member, if applicable), file a
bankruptcy or insolvency petition or otherwise institute insolvency proceedings with respect to
itself or to any other entity in which it has a direct or indirect legal or beneficial ownership
interest;



(i) has been, is and will remain solvent and has paid and will pay its debts and liabilities
(including, as applicable, shared personnel and overhead expenses) from its assets as the same have
or shall become due, and has maintained, is maintaining and will maintain adequate capital for the
normal obligations reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations; provided, however, this provision shall not
require the equity owner(s) of such entity to make any additional capital contributions; and
provided further that in the event a Funding Borrower makes any Contribution to the other Borrower
by paying any of the debts and liabilities of such other Borrower such Contribution



 


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shall not in and of itself be deemed to violate the provisions of this clause (i) and shall
entitle such Funding Borrower to the benefits set forth in Article XV of this Agreement;



(j) has not failed and will not fail to correct any known misunderstanding regarding the
separate identity of such entity;



(k) other than as provided in the Cash Management Agreement with respect to one or more other
Borrowers, has maintained and will maintain its accounts, books and records separate from any other
Person (except other Borrowers) and has filed and will file its own tax returns, except to the
extent that it has been or is (i) required to file consolidated tax returns by law; or (ii) treated
as a “disregarded entity” for tax purposes and is not required to file tax returns under applicable
law;



(l) has maintained and will maintain its own (except with the other Borrower) records, books,
resolutions (if any) and agreements;



(m) other than as provided in the Cash Management Agreement with respect to one or more other
Borrowers, (i) has not commingled and will not commingle its funds or assets with those of any
other Person; and (ii) has not participated and will not participate in any cash management system
with any other Person;




(n) has held and will hold its assets in its own name;



(o) has conducted and will conduct its business in its name or in a name franchised or
licensed to it by an entity other than an Affiliate of any Borrower or any Mortgage Borrower,
except for services rendered under a business management services agreement with an Affiliate that
complies with the terms contained in clause (dd) below, so long as the manager, or
equivalent thereof, under such business management services agreement holds itself out as an agent
of such Borrower;



(p) has maintained and will maintain its financial statements, accounting records and other
entity documents separate from any other Person and has not permitted and will not permit its
assets to be listed as assets on the financial statement of any other entity except as required by
GAAP (or such other accounting basis acceptable to Lender); provided, however, that
a Borrower’s assets may be included in a consolidated financial statement of its Affiliate,
provided that (i) an appropriate notation shall be made on such consolidated financial statements
to indicate its separateness from such Affiliate and to indicate that its assets and credit are not
available to satisfy the debts and other obligations of such Affiliate or of any other Person and
(ii) such assets shall also be listed on such Special Purpose Entity’s own separate balance sheet;



(q) has paid and will pay its own liabilities and expenses, including the salaries of its own
employees (if any), out of its own funds and assets, and has maintained and will maintain, or will
enter into a contract with an Affiliate to maintain, which contract shall be reasonably
satisfactory to Lender in form and substance and shall be subject to the requirements of clause
(dd) below, a sufficient number of employees (if any) in light of its contemplated business
operations; provided, however, this provision shall not require the equity owner(s)
of such entity to make any additional capital contributions; and provided further that in
the event any Funding Borrower makes any Contribution to any Borrower by paying any of the
liabilities and expenses



 


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of such other Borrower such Contribution shall not in and of itself be deemed to violate the
provisions of this clause (q) and shall entitle such Funding Borrower to the benefits set forth in
Article XV of this Agreement;



(r) has observed and will observe all Delaware partnership or limited liability company
formalities, as applicable;



(s) has not incurred and will not incur any Indebtedness other than (i) the Debt, and (ii)
unsecured trade payables and operational debt not evidenced by a note and in an aggregate amount
not exceeding $50,000; provided that any Indebtedness incurred pursuant to subclause
(ii) shall be (A) paid within sixty (60) days of the date incurred (other than attorneys’ and
other professional fees) and (B) incurred in the ordinary course of business;



(t) except as contemplated under Article XV with respect to the other Borrower, has not
assumed or guaranteed or become obligated for, and will not assume or guarantee or become obligated
for, the debts of any other Person and has not held out and will not hold out its credit or assets
as being available to satisfy the obligations of any other Person except as permitted pursuant to
this Agreement; except, if such entity is a general partner of a limited partnership, in such
entity’s capacity as general partner of such limited partnership;



(u) has not acquired and will not acquire obligations or securities of its partners, members
or shareholders or any other Affiliate except with respect to the ownership of the limited
liability company interests or partnership interests (as applicable) of the Special Purpose
Entities as shown on the organizational chart attached to this Agreement as Schedule VI;



(v) has allocated and will allocate fairly and reasonably any overhead expenses that are
shared with any Affiliate, including, but not limited to, paying for shared office space and
services performed by any employee of an Affiliate; provided, however, to the
extent invoices for such services are not allocated and separately billed to each entity, there is
a system in place that provides that the amount thereof that is to be allocated among the relevant
parties will be reasonably related to the services provided to each such party; and
provided further in the event a Funding Borrower makes any Contribution to the other
Borrower by paying any such overhead expenses of the other Borrower such Contribution shall not in
and of itself be deemed to violate the provisions of this clause (v) and shall entitle such Funding
Borrower to the benefits set forth in Article XV of this Agreement;



(w) has maintained and used, now maintains and uses and will maintain and use separate
invoices and checks bearing its name. The invoices and checks utilized by the Special Purpose
Entity or utilized to collect its funds or pay its expenses have borne and shall bear its own name
and have not borne and shall not bear the name of any other entity unless such entity is clearly
designated as being the Special Purpose Entity’s agent;



(x) except as provided in the Mortgage Loan Documents, the Loan Documents, the Second
Mezzanine Loan Documents or the Third Mezzanine Loan Documents, as applicable, has not pledged and
will not pledge its assets to secure the obligations of any other Person;



(y) has held itself out and identified itself and will hold itself out and identify itself as
a separate and distinct entity under its own name or in a name franchised or licensed to it by an



 


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entity other than an Affiliate of the other Borrower or any Mortgage Borrower and not as a
division or department of any other Person, except for services rendered under a business
management services agreement with an Affiliate that complies with the terms contained in
clause (dd) below, so long as the manager, or equivalent thereof, under such business
management services agreement holds itself out as an agent of such Borrower;



(z) except as provided in the Cash Management Agreement, has maintained and will maintain its
assets in such a manner that it will not be costly or difficult to segregate, ascertain or identify
its individual assets from those of any other Person;



(aa) has not made and will not make loans to, or own or acquire any stock or securities of,
any Person or hold evidence of indebtedness issued by any other Person or entity (other than cash
and investment grade securities issued by an entity that is not an Affiliate of or subject to
common ownership with such entity);



(bb) has not identified and will not identify its partners, members or shareholders, or any
Affiliate of any of them, as a division or department of it, and has not identified itself and
shall not identify itself as a division of any other Person;



(cc) except for capital contributions and capital distributions expressly permitted under the
terms and conditions of its organizational documents and properly reflected in its books and
records, has not entered into or been a party to and will not enter into or be a party to, any
transaction with its partners, members, shareholders or Affiliates except in the ordinary course of
its business and on terms which are commercially reasonable and are no less favorable to it than
would be obtained in a comparable arm’s length transaction with an unrelated third party;



(dd) except with respect to any indemnity provided to the Independent Managers (it being
acknowledged and agreed that any such indemnification obligations as may be owed to the Independent
Managers shall be expressly subject and subordinated to the payment in full of the Loan and the
other Mezzanine Loans), has not had and will not have any obligation to indemnify, and has not
indemnified and will not indemnify, its partners, officers, directors or members, as the case may
be, unless such an obligation was and is fully subordinated to the Debt and will not constitute a
claim against it in the event that cash flow in excess of the amount required to pay the Debt is
insufficient to pay such obligation;



(ee) does not and will not have any of its obligations guaranteed by any Affiliate except for
(i) Guarantors pursuant to the Non-Recourse Guaranty, the Closing Completion Guaranty and the
Construction Completion Guaranty, and (ii) HRHI pursuant to the HRHI Guaranty; provided,
that if such entity is a limited partnership, such entity’s general partner will be generally
liable for its obligations;



(ff) has complied and will comply with all of the terms and provisions contained in its
organizational documents since its formation;



(gg) has not and will not form, acquire or hold any subsidiary or own any other entity, except
for the Mortgage Borrowers; and


 


45









 





(hh) has no material contingent or actual obligations not related to its purpose set forth in
subparagraph (a) of this definition of Special Purpose Entity.




“State” shall mean the State of Nevada.




“Strike Price” shall mean, as applicable, with respect to:



(i) the period commencing on the Closing Date through and including the Initial Maturity Date,
five and one-half percent (5.5%) per annum; and



(ii) for each Extension Term, a rate to be selected by Borrowers no later than ten (10) days
prior to the first day of such Extension Term, which shall in no event exceed one percent (1%) in
excess of LIBOR as of the most recent Determination Date.



“Subsequent Interest Differential Amounts” shall mean the aggregate sum of the positive
difference, if any, between (a) the Monthly Interest Payment with respect to any Payment Date
occurring from and after the Payment Date occurring in March, 2011 through and including the
Maturity Date (as the same may be extended in accordance with the terms hereof) and (b) the Current
Pay Interest Payment payable on each such date.



“Subsequent Required Equity Amount” shall have the meaning assigned to such term in the
Mortgage Loan Agreement.



“Subsidiary Transferee” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.



“Substantial Completion” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.



“Survey” shall mean a current survey of each of the Properties, certified to the Title Company
and Mortgage Lender and their successors and assigns, in form and content reasonably satisfactory
to Mortgage Lender.



“Tax and Insurance Escrow Fund” shall have the meaning assigned to such term in the Mortgage
Loan Agreement or such comparable fund as shall be established under this Agreement in accordance
with Section 7.2 hereof.



“Taxes” shall mean all real estate and personal property taxes, assessments, water rates or
sewer rents, now or hereafter levied or assessed or imposed against any Property or part thereof,
together with all interest and penalties thereon.



“Third Mezzanine Borrower” and “Third Mezzanine Borrowers” shall mean, individually or
collectively, as applicable, HRHH Gaming Junior Mezz Two, LLC, a Delaware limited liability
company, and HRHH JV Junior Mezz Two, LLC, a Delaware limited liability company, each in its
capacity as a borrower under the Third Mezzanine Loan, together with its or their successors or
permitted assigns.


 


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“Third Mezzanine Debt” shall mean the “Debt” as defined in the Third Mezzanine Loan Agreement.



“Third Mezzanine Default” shall mean a “Default” as defined in the Third Mezzanine Loan
Agreement.



“Third Mezzanine Event of Default” shall mean an “Event of Default” as defined in the Third
Mezzanine Loan Agreement.



“Third Mezzanine Lender” shall mean Hard Rock Mezz Holdings LLC (as successor in interest to
Column Financial, Inc.), in its capacity as holder of the Third Mezzanine Loan, together with its
successors and assigns.



“Third Mezzanine Loan” shall mean the loan in the original principal amount of up to Sixty
Five Million and No/100 Dollars ($65,000,000), made by Third Mezzanine Lender to Third Mezzanine
Borrowers.



“Third Mezzanine Loan Agreement” shall mean that certain First Amended and Restated Third
Mezzanine Loan Agreement, dated as of the date hereof, between Third Mezzanine Lender and Third
Mezzanine Borrowers, as the same may be amended, restated, replaced, supplemented or otherwise
modified from time to time subject to the terms of the Intercreditor Agreement.



“Third Mezzanine Loan Documents” shall mean the Third Mezzanine Loan Agreement and all other
documents evidencing and/or securing the Third Mezzanine Loan, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time subject to the terms of
the Intercreditor Agreement.



“Third Mezzanine Loan Outstanding Principal Balance” shall mean the “Outstanding Principal
Balance” as defined in the Third Mezzanine Loan Agreement.




“Third Party IP License” shall have the meaning set forth in Section 5.1.26(c) hereof.



“Third Party Lenders” shall mean third party institutional lenders which are in the business
of providing loans similar to the Refinancing Loans.




“Third Qualified Extended Maturity Date” shall mean February 9, 2013.



“Third Qualified Extension Option” shall have the meaning set forth in Section
2.7.2(c) hereof.



“Third Qualified Extension Term” shall have the meaning set forth in Section 2.7.2(c)
hereof.



“Title Company” shall mean First American Title Insurance Company, or any successor title
company reasonably acceptable to Mortgage Lender and licensed to issue title insurance in the State
of Nevada.


 


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“Title Insurance Policy” shall have the meaning assigned to such term in the Mortgage Loan
Agreement.




“Transfer” shall have the meaning set forth in Section 5.2.10(b) hereof.



“Transfer Restricted Party” shall mean, collectively, each Loan Party, each Mezzanine
Borrower, each Constituent Member of each Loan Party, HRHI, HR Holdings and each Guarantor.




“Trust” shall have the meaning set forth in Section 10.25(a) hereof.



“UCC” or “Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect in the
State of Nevada, the State of New York or the State of Delaware, as applicable.



“UCC Financing Statements” shall mean the UCC Financing Statement delivered in connection with
the Pledge Agreement and the other Loan Documents and filed in the applicable filing offices.



“Uniform System of Accounts” shall mean the most recent edition of the Uniform System of
Accounts for Hotels, as adopted by the American Hotel and Motel Association.



“U.S. Obligations” shall mean non-redeemable securities evidencing an obligation to timely pay
principal and/or interest in a full and timely manner that are direct obligations of the United
States of America for the payment of which its full faith and credit is pledged.



“Working Capital Reserve Fund” shall have the meaning assigned to such term in the Mortgage
Loan Agreement or such comparable fund as shall be established under this Agreement in accordance
with Section 7.1 hereof.



“Working Capital Reserve Account” shall have the meaning assigned to such term in the Mortgage
Loan Agreement or such comparable account as shall be established under this Agreement in
accordance with Section 7.1 hereof.




Section 1.2 Principles of Construction.



(a) All references to sections, subsections, clauses, exhibits and schedules are to sections,
subsections, clauses, exhibits and schedules in or to this Agreement unless otherwise specified.
All uses of the word “including” shall mean “including, without limitation” unless the context
shall indicate otherwise. Unless otherwise specified, the words “hereof,” “herein” and “hereunder”
and words of similar import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement. All uses in this Agreement of the phrase
“any Borrower” shall be deemed to mean “any one or more of the Borrowers including all of the
Borrowers”. All uses in this Agreement of the phrase “any Property” or “any of the Properties”
shall be deemed to mean “any one or more of the Properties including all of the Properties”. All
uses in this Agreement of the phrase “the IP” shall be deemed to mean “all or any part of the IP”.
Unless otherwise specified, all meanings attributed to defined terms herein shall be equally
applicable to both the singular and plural forms of the terms so defined.


 


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(b) With respect to terms defined by cross-reference to the Mortgage Loan Documents, the
Second Mezzanine Loan Documents and/or the Third Mezzanine Loan Documents, as applicable, such
defined terms shall have the definitions set forth in the Mortgage Loan Documents, the Second
Mezzanine Loan Documents and/or the Third Mezzanine Loan Documents as of the date hereof, and no
modifications to the Mortgage Loan Documents, the Second Mezzanine Loan Documents and/or the Third
Mezzanine Loan Documents, as the case may be, shall have the effect of changing such definitions
for the purpose of this Agreement unless Lender expressly agrees that such definitions as used in
this Agreement have been revised or Lender consents to the modification documents. With respect to
any provisions incorporated by reference herein from the Mortgage Loan Agreement, such provisions
shall be deemed a part of this Agreement notwithstanding the fact that the Mortgage Loan shall no
longer be effective for any reason. The words “Borrowers shall cause Mortgage Borrowers to” or
“Borrowers shall cause Mortgage Borrowers not to” (or words of similar meaning) shall mean
Borrowers, as the direct or indirect sole members of Mortgage Borrowers, shall cause Mortgage
Borrowers to so act or not to so act, as applicable.



ARTICLE II.

GENERAL TERMS





Section 2.1 Loan Commitment; Disbursement to Borrowers.



2.1.1 Agreement to Lend and Borrow. Subject to and upon the terms and conditions set
forth in the Original Loan Agreement, Lender agreed to make and Borrowers jointly and severally
agreed to accept the Loan on the Closing Date.




2.1.2 Loan.



(a) Borrowers hereby acknowledge and agree that, on the Closing Date, Lender made the Loan to
Borrowers in the principal amount of $200,000,000.00, which represented a full disbursement of all
proceeds of the Loan. On August 1, 2008, Borrower prepaid a portion of the Loan with the Release
Parcel Release Price received in connection with the sale of certain property by Adjacent Borrower,
resulting in an Outstanding Principal Balance of $177,956,341.32. The Loan is evidenced by the
Note and this Agreement, is secured by the Pledge Agreement and the other Loan Documents and shall
be repaid with interest, costs and charges as more particularly set forth in the Note, this
Agreement, the Pledge Agreement and the other Loan Documents. Principal amounts of the Loan which
are repaid for any reason may not be reborrowed. Lender shall not fund any portion of the Loan
from any account holding “plan assets” of one or more plans within the meaning of 29 C.F.R.
2510.3-101 unless such Loan will not constitute a non-exempt prohibited transaction under ERISA.



(b) Borrowers used the proceeds of the Loan to make a contribution to Mortgage Borrowers for
use by Mortgage Borrowers to make the Mezzanine Prepayment.




Section 2.2 Interest Rate.




2.2.1 Interest Generally.


 


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(a) Interest on the Outstanding Principal Balance shall accrue from the date hereof to and
excluding January 1, 2010 at the rate of LIBOR plus 5.20%. Interest on the Outstanding Principal
Balance shall accrue from January 1, 2010 to and excluding the Maturity Date at the Monthly
Interest Rate.



(b) Interest on the Initial Interest Differential Amounts and the Subsequent Interest
Differential Amounts shall accrue from and after the date hereof at the Monthly Interest Rate. All
interest accruing on the Initial Interest Differential Amounts or on the Subsequent Interest
Differential Amounts shall compound monthly and be determined by Lender (which determination shall
be conclusive and binding upon Borrowers absent manifest error).



2.2.2 Interest Calculation. Interest on the Outstanding Principal Balance shall be
calculated by multiplying (a) the actual number of days elapsed in the period for which the
calculation is being made by (b) a daily rate determined in accordance with Section 2.2.1
above and Section 2.2.3 below and based on a three hundred sixty (360) day year by (c) the
Outstanding Principal Balance or the Accrued Interest amounts, as applicable (it being understood
that the portion of Accrued Interest amounts that represents interest on the Initial Interest
Differential Amounts or the Subsequent Interest Differential Amounts shall compound monthly). If,
at any time, Lender or Borrowers determine that Lender has miscalculated the Applicable Interest
Rate, the Monthly Interest Rate or Accrued Interest (whether because of a miscalculation of LIBOR
or otherwise), such party shall notify the other of the necessary correction. Upon the agreement
of the parties as to the correction, if the corrected Applicable Interest Rate, the Monthly
Interest Rate or Accrued Interest represents an increase in the applicable monthly (or other)
payment, Borrowers shall, within ten (10) days after receipt of notice from Lender, pay to Lender
the corrected amount. Upon the agreement of the parties as to the correction, if the corrected
Applicable Interest Rate, Monthly Interest Rate or Accrued Interest (if such Accrued Interest shall
have been paid) represents an overpayment by Borrowers to Lender and no Event of Default then
exists, Lender shall promptly refund the overpayment to Borrowers or, at Borrowers’ option, credit
such amounts against Borrowers’ payment next due hereunder. Without limiting the foregoing, the
parties hereto hereby agree that the Debt Service payment due on the Payment Date occurring in
January, 2010 shall be $$564,329.17.




2.2.3 Determination of Interest Rate.



(a) If the Loan is converted to a Prime Rate Loan pursuant to the provisions of Section
2.2.3(c) or (f) hereof, the Loan shall bear interest at the Prime Rate plus the Prime Rate Spread.



(b) Subject to the terms and conditions of this Section 2.2.3, the Loan shall be a
LIBOR Loan and Borrowers shall pay interest on the Loan at the Applicable Interest Rate for the
applicable Interest Period and shall pay the Accrued Interest as set forth in Section 2.2.1 hereof.
Any change in the Applicable Interest Rate hereunder due to a change in LIBOR shall become
effective as of the opening of business on the first day of the applicable Interest Period.



(c) In the event that Lender shall have determined in good faith (which determination shall be
conclusive and binding upon Borrowers’ absent manifest error) that by



 


50









 






reason of circumstances affecting the interbank eurodollar market, adequate and reasonable
means do not exist for ascertaining LIBOR, then Lender shall forthwith give notice by telephone of
such determination, confirmed in writing, to Borrowers at least one (1) Business Day prior to the
last day of the related Interest Period. If such notice is given, the related outstanding LIBOR
Loan shall be converted, on the first day of the next occurring Interest Period, to a Prime Rate
Loan.



(d) If, pursuant to the terms of this Agreement, any portion of the Loan has been converted to
a Prime Rate Loan and Lender shall determine in good faith (which determination shall be conclusive
and binding upon Borrowers absent manifest error) that the event(s) or circumstance(s) which
resulted in such conversion shall no longer be applicable, Lender shall give notice by telephone of
such determination, confirmed in writing, to Borrowers at least one (1) Business Day prior to the
last day of the related Interest Period. If such notice is given, the related outstanding Prime
Rate Loan shall be converted to a LIBOR Loan on the first day of the next occurring Interest
Period.



(e) (i) Except as otherwise expressly provided in this Section 2.2.3(e), with respect
to a LIBOR Loan, all payments made by Borrowers hereunder shall be made free and clear of, and
without reduction for or on account of, any Indemnified Taxes or Other Taxes; provided that
if Borrowers shall be required to deduct any Indemnified Taxes or Other Taxes from such payments,
then (A) the sum payable shall be increased as necessary so that after making all such required
deductions (including deductions applicable to additional sums payable under this Section
2.2.3) Lender receives an amount equal to the sum it would have received had no such deductions
been made, (B) Borrowers shall make such deductions, and (C) Borrowers shall pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable law. If Lender gives
Borrowers written notice that any such amounts are payable by Borrowers, Borrowers shall pay all
such amounts to the relevant Governmental Authority in accordance with applicable Legal
Requirements by the later of (1) five (5) Business Days after receipt of demand from Lender and (2)
their due date, and, as promptly as possible thereafter, Borrowers shall send to Lender an original
official receipt, if available, or certified copy thereof showing payment of such Indemnified Taxes
or Other Taxes.



(ii) Without duplication of any additional amounts paid pursuant to this Section
2.2.3(e), each Borrower shall indemnify Lender, within ten (10) days after written demand
therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes
or Other Taxes imposed or asserted on or attributable to amounts payable under this Section
2.2.3) paid by Lender, and any penalties, interest and reasonable expenses arising therefrom or
with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or
legally imposed or asserted by the relevant Governmental Authority, provided that, if
Borrowers determine that any such Indemnified Taxes or Other Taxes were not correctly or legally
imposed or asserted, Lender shall, upon payment by Borrowers of the full amount of any Indemnified
Taxes or Other Taxes, allow Borrowers to contest (and shall cooperate in such contest), the
imposition of such tax upon the reasonable request of Borrowers and at Borrowers’ expense;
provided, however, that Lender shall not be required to participate in any contest
that would, in its reasonable judgment, expose it to a material commercial disadvantage or require
it to disclose any information it considers confidential or proprietary. A certificate as to the
amount of such payment or liability delivered to Borrowers by Lender (together with any



 


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supporting detail reasonably requested by Borrowers), shall be conclusive, provided that
such amounts are determined on a reasonable basis.



(iii) Any Non-U.S. Lender that is entitled to an exemption from or reduction of withholding
tax under U.S. law, the law of the jurisdiction in which Borrowers are located (if other than the
U.S.), or any treaty to which such jurisdiction is a party, with respect to payments under this
Agreement shall deliver to Borrowers, at the time or times prescribed by applicable law, or as
reasonably requested by Borrowers, such properly completed and executed documentation prescribed by
applicable law or reasonably requested by Borrowers as will permit such payments to be made without
withholding or at a reduced rate of withholding. Each Non-U.S. Lender shall deliver to Borrowers
(or, in the case of a participant, to the Lender from which the related participation shall have
been purchased), on or before the date that such Non-U.S. Lender becomes a party to this Agreement,
two (2) properly completed and duly executed copies of U.S. Internal Revenue Service Form W-8BEN,
Form W-8IMY, Form W-8EXP or Form W-8ECI, as applicable (or successor forms thereto), claiming a
complete exemption from, or reduction of, U.S. federal withholding tax on all payments by Borrowers
under this Agreement. Each Non-U.S. Lender shall promptly provide such forms upon becoming aware
of the obsolescence, expiration or invalidity of any form previously delivered by such Non-U.S.
Lender (unless it is legally unable to do so as a result of a change in law) and shall promptly
notify Borrowers at any time it determines that any previously delivered forms are no longer valid.



(iv) Lender or any successor and/or assign of Lender that is incorporated under the laws of
the United States of America or a state thereof agrees that, on or before it becomes a party to
this Agreement and from time to time thereafter before the expiration or obsolescence of the
previously delivered form, it will deliver to Borrowers a United States Internal Revenue Service
Form W-9 or successor applicable form, as the case may be, to establish exemption from United
States backup withholding tax. If required by applicable law, Borrowers are hereby authorized to
deduct from any payments due to Lender pursuant to Section 2.2.3 hereof the amount of any
withholding taxes resulting from Lender’s failure to comply with this Section 2.2.3(e)(iv).



(v) If Lender determines, in its reasonable discretion, that it has received a refund of or
will receive a credit for Indemnified Taxes or Other Taxes with respect to which Borrowers have
paid additional amounts pursuant to this Section 2.2.3(e), it shall pay over to Borrowers
an amount equal to the additional amounts paid by Borrowers under this Section 2.2.3(e)
(with respect to the Indemnified Taxes or Other Taxes giving rise to such refund or credit), net of
all out-of-pocket expenses of Lender and without interest (other than any interest paid by the
relevant Governmental Authority with respect to such refund); provided that Borrowers, upon
the request of Lender, agrees to repay the amount paid over to Borrowers (plus any interest to the
extent accrued from the date such refund is paid over to Borrowers) to Lender in the event Lender
is required to repay such refund to such Governmental Authority or is unable to claim the credit.
This Section 2.2.3(e)(v) shall not be construed to require Lender to make available its tax
returns (or any other information relating to its taxes which it deems confidential) to Borrowers
or any other Person.



(f) Except as otherwise expressly provided in Section 2.2.3(e) hereof, if any
requirement of law or any change therein or in the interpretation or application thereof,



 


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shall hereafter make it unlawful for Lender to make or maintain a LIBOR Loan as contemplated
hereunder (i) the obligation of Lender hereunder to make a LIBOR Loan or to convert a Prime Rate
Loan to a LIBOR Loan shall be canceled forthwith and (ii) any outstanding LIBOR Loan shall be
converted automatically to a Prime Rate Loan on the next succeeding Payment Date or within such
earlier period as required by law. Borrowers hereby agree promptly to pay Lender, upon demand, any
additional amounts necessary to compensate Lender for any actual out-of-pocket costs incurred by
Lender in making any conversion in accordance with this Agreement, including, without limitation,
any interest or fees payable by Lender to lenders of funds obtained by it in order to make or
maintain the LIBOR Loan hereunder; provided that such additional amount is generally charged by
Lender to other borrowers with loans similar to the Loan.



(g) Except as otherwise expressly provided in Section 2.2.3(e) hereof, in the event
that any change in any requirement of law or in the interpretation or application thereof, or
compliance by Lender with any request or directive having the force of law hereafter issued from
any central bank or other Governmental Authority:




(i) shall hereafter impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by, or deposits
or other liabilities in or for the account of, advances or loans by, or other credit
extended by, or any other acquisition of funds by, any office of Lender which is not
otherwise included in the determination of LIBOR hereunder;




(ii) shall hereafter have the effect of reducing the rate of return on Lender’s
capital as a consequence of its obligations hereunder to a level below that which
Lender could have achieved but for such adoption, change or compliance (taking into
consideration Lender’s policies with respect to capital adequacy) by any material
amount; or




(iii) shall hereafter impose on Lender any other condition and the result of
any of the foregoing is to increase the actual out-of-pocket cost to Lender of
maintaining loans or extensions of credit or to reduce any amount receivable
hereunder;



then, in any such case, Borrowers shall promptly pay Lender, upon demand, any additional amounts
necessary to compensate Lender for such additional cost or reduced amount receivable;
provided that such additional amount is generally charged by Lender to other borrowers with
loans similar to the Loan. If Lender becomes entitled to claim any additional amounts pursuant to
this Section 2.2.3(g), Lender shall provide Borrowers with not less than ninety (90) days
notice specifying in reasonable detail the event by reason of which it has become so entitled and
the additional amount required to fully compensate Lender for such additional cost or reduced
amount.



(h) Each Borrower agrees to pay to Lender and to hold Lender harmless from any actual
out-of-pocket expense which Lender sustains or incurs as a consequence of (i) any default by
Borrowers in payment of the principal of or interest on a LIBOR Loan, including, without
limitation, any such loss or expense arising from interest or fees payable by Lender to lenders of
funds obtained by it in order to maintain a LIBOR Loan



 


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hereunder, (ii) any prepayment (whether voluntary or mandatory) of the LIBOR Loan on a day
that (A) is not the Payment Date immediately following the last day of an Interest Period with
respect thereto or (B) is the Payment Date immediately following the last day of an Interest Period
with respect thereto if Borrowers did not give the prior notice of such prepayment required
pursuant to the terms of this Agreement, including, without limitation, such loss or expense
arising from interest or fees payable by Lender to lenders of funds obtained by it in order to
maintain the LIBOR Loan hereunder, and (iii) the conversion (for any reason whatsoever, whether
voluntary or involuntary) of the Applicable Interest Rate to the Prime Rate plus the Prime Rate
Spread with respect to any portion of the Outstanding Principal Balance then bearing interest at
the Applicable Interest Rate on a date other than the Payment Date immediately following the last
day of an Interest Period, including, without limitation, such actual out-of-pocket expenses
arising from interest or fees payable by Lender to lenders of funds obtained by it in order to
maintain a LIBOR Loan hereunder (the amounts referred to in clauses (i), (ii) and
(iii) are herein referred to collectively as the “Breakage Costs”); provided,
however, that Borrowers shall not indemnify Lender from any loss or expense arising from
Lender’s willful misconduct, fraud, illegal acts or gross negligence. No Breakage Costs shall be
due or payable if, in connection with any prepayment of the Loan by Borrowers, Borrowers pay
interest through the next Payment Date as provided in Section 2.4.1 hereof.



(i) Subject to Section 2.2.3(e) above, Lender shall not be entitled to claim
compensation pursuant to this Section 2.2.3 for any Indemnified Taxes or Other Taxes,
increased cost or reduction in amounts received or receivable hereunder, or any reduced rate of
return, which was incurred or which accrued more than ninety (90) days before the date Lender
notified Borrowers in writing of the change in law or other circumstance on which such claim of
compensation is based and delivered to Borrowers a written statement setting forth in reasonable
detail the basis for calculating the additional amounts owed to Lender under this Section
2.2.3, which statement, made in good faith, shall be conclusive and binding upon all parties
hereto absent manifest error.



2.2.4 Additional Costs. Lender will use reasonable efforts (consistent with legal and
regulatory restrictions) to maintain the availability of the LIBOR Loan and to avoid or reduce any
increased or additional costs payable by Borrowers under Section 2.2.3 hereof, including,
if requested by Borrowers, a transfer or assignment of the Loan to a branch, office or Affiliate of
Lender in another jurisdiction, or a redesignation of its lending office with respect to the Loan,
in order to maintain the availability of the LIBOR Loan or to avoid or reduce such increased or
additional costs, provided that the transfer or assignment or redesignation (a) would not result in
any additional costs, expenses or risk to Lender that are not separately agreed to by Borrowers to
be reimbursed by Borrowers and (b) would not be disadvantageous in any other material respect to
Lender as determined by Lender in its reasonable discretion.



2.2.5 Default Rate. In the event that, and for so long as, any Event of Default shall
have occurred and be continuing, the Outstanding Principal Balance and, to the extent permitted by
law, all accrued and unpaid interest in respect of the Loan and any other amounts due pursuant to
the Loan Documents (including, without limitation, Accrued Interest), shall accrue interest at the
Default Rate, calculated from the date such payment or amount was due without regard to any grace
or cure periods or any other provision contained herein.


 


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2.2.6 Usury Savings. This Agreement, the Note and the other Loan Documents are
subject to the express condition that at no time shall any Borrower be obligated or required to pay
interest on the Outstanding Principal Balance or on or in connection with Accrued Interest at a
rate which could subject Lender to either civil or criminal liability as a result of being in
excess of the Maximum Legal Rate. If, by the terms of this Agreement or the other Loan Documents,
any Borrower is at any time required or obligated to pay interest on the Outstanding Principal
Balance or on or in connection with Accrued Interest at a rate in excess of the Maximum Legal Rate,
the Applicable Interest Rate, the rate applicable to Accrued Interest or the Default Rate, as the
case may be, shall be deemed to be immediately reduced to the Maximum Legal Rate and all previous
payments in excess of the Maximum Legal Rate shall be deemed to have been payments in reduction of
principal and not on account of the interest due hereunder. All sums paid or agreed to be paid to
Lender for the use, forbearance, or detention of the sums due under the Loan, shall, to the extent
permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full
stated term of the Loan until payment in full so that the rate or amount of interest on account of
the Loan does not exceed the Maximum Legal Rate of interest from time to time in effect and
applicable to the Loan for so long as the Loan is outstanding.




2.2.7 Interest Rate Cap Agreement.



(a) Prior to the date hereof, Borrowers shall have entered into one or more Interest Rate Cap
Agreements with a blended LIBOR strike price equal to the Strike Price. Each Interest Rate Cap
Agreement (i) shall be in a form and substance reasonably acceptable to Lender, (ii) shall be with
an Acceptable Counterparty, (iii) shall direct such Acceptable Counterparty to deposit directly
into the Cash Management Account any amounts due Borrowers under such Interest Rate Cap Agreement
so long as any portion of the Debt exists, provided that the Debt shall be deemed to exist even if
one or more of the Properties, the IP or the Collateral is transferred by judicial or non-judicial
foreclosure or deed-in-lieu thereof, (iv) shall be for a period equal to the current term of the
Loan, and (v) when aggregated with all other Interest Rate Cap Agreements, shall have an initial
notional amount equal to the Outstanding Principal Balance as of the date hereof. Borrowers shall
collaterally assign to Lender, pursuant to the Collateral Assignment of Interest Rate Cap
Agreement, all of its right, title and interest to receive any and all payments under all Interest
Rate Cap Agreements, and shall deliver to Lender an executed counterpart of such Interest Rate Cap
Agreements (which shall, by their respective terms, authorize the assignment to Lender and require
that payments be deposited directly into the Cash Management Account).



(b) Borrowers shall comply with all of their obligations under the terms and provisions of
each Interest Rate Cap Agreement. All amounts paid by the Counterparty under each Interest Rate
Cap Agreement to Borrowers or Lender shall be deposited immediately into the Cash Management
Account. Borrowers shall take all actions reasonably requested by Lender to enforce Lender’s
rights under each Interest Rate Cap Agreement in the event of a default by the Counterparty and
shall not waive, amend or otherwise modify any of its rights thereunder.



(c) In the event of any downgrade of the rating of the Acceptable Counterparty below “A+” by
S&P or “A1” by Moody’s, Borrowers shall replace the applicable Interest Rate Cap Agreement(s) with
one or more Replacement Interest Rate Cap Agreements



 


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not later than ten (10) Business Days following receipt of notice from Lender of such
downgrade.



(d) In the event that Borrowers fail to purchase and deliver to Lender any Interest Rate Cap
Agreement or fail to maintain each Interest Rate Cap Agreement in accordance with the terms and
provisions of this Agreement, after ten (10) Business Days notice to Borrowers and Borrowers’
failure to cure, Lender may purchase the required Interest Rate Cap Agreement(s) and the actual
out-of-pocket cost incurred by Lender in purchasing such Interest Rate Cap Agreement(s) shall be
paid by Borrowers to Lender with interest thereon at the Default Rate from the date such cost was
incurred by Lender until such actual out-of-pocket cost is reimbursed by Borrowers to Lender.



(e) In connection with each Interest Rate Cap Agreement, Borrowers shall obtain and deliver to
Lender an opinion from counsel (which counsel may be in-house counsel for the Counterparty) for the
Counterparty (upon which Lender and its successors and assigns may rely) which shall provide, in
relevant part, that:




(i) the Counterparty is duly organized, validly existing, and in good standing
under the laws of its jurisdiction of incorporation and has the organizational power
and authority to execute and deliver, and to perform its obligations under, such
Interest Rate Cap Agreement;




(ii) the execution and delivery of such Interest Rate Cap Agreement by the
Counterparty, and any other agreement which the Counterparty has executed and
delivered pursuant thereto, and the performance of its obligations thereunder have
been and remain duly authorized by all necessary action and do not contravene any
provision of its certificate of incorporation or by-laws (or equivalent
organizational documents) or any law, regulation or contractual restriction binding
on or affecting it or its property;




(iii) all consents, authorizations and approvals required for the execution and
delivery by the Counterparty of such Interest Rate Cap Agreement, and any other
agreement which the Counterparty has executed and delivered pursuant thereto, and
the performance of its obligations thereunder have been obtained and remain in full
force and effect, all conditions thereof have been duly complied with, and no other
action by, and no notice to or filing with any governmental authority or regulatory
body is required for such execution, delivery or performance; and




(iv) such Interest Rate Cap Agreement, and any other agreement which the
Counterparty has executed and delivered pursuant thereto, has been duly executed and
delivered by the Counterparty and constitutes the legal, valid and binding
obligation of the Counterparty, enforceable against the Counterparty in accordance
with its terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors’ rights generally, and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a proceeding in
equity or at law).


 


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(f) At such time as the Loan is repaid in full, all of Lender’s right, title and interest in
all Interest Rate Cap Agreements shall terminate and Lender shall, at Borrowers’ reasonable
expense, promptly execute and deliver such documents as may be reasonably required and prepared by
the Counterparty and/or Borrowers to evidence release of each Interest Rate Cap Agreement.



Section 2.3 Loan Payment.



2.3.1 Payments Generally.



(a) Borrowers shall pay to Lender on the Payment Date occurring in January, 2010 the Initial
Debt Service Payment.



(b) Borrowers shall pay to Lender on each Payment Date commencing with the Payment Date
occurring in February, 2010 the Current Pay Interest Payment.



(c) Borrowers shall pay (and cause Mortgage Borrower to pay) to Lender the Accrued Interest in
accordance with and at the times provided in Sections 2.6.2(b)(xiv), 2.6.2(c)(xiv),
7.6.2 and 7.6.3 of the Mortgage Loan Agreement. For the avoidance of doubt,
Borrowers confirm and agree that Accrued Interest shall for all purposes of this Agreement be
defined to include (and be determined taking into account) interest accruing on the sum of all of
the Initial Differential Amounts and the sum of all of the Subsequent Interest Differential Amounts
at the rates and for the periods set forth in Section 2.2.1(b), and compounded monthly.



(d) If applicable, Borrowers may cause Mortgage Borrower to pay to Lender or have be applied
from the applicable Mortgage Reserve Fund all amounts payable to Lender on account of Debt Service
in accordance with Sections 7.1.2 and 7.6.2 of the Mortgage Loan Agreement or any
other Loan Document.



(e) For purposes of making payments hereunder, but not for purposes of calculating Interest
Periods, if the day on which any such payment (including, without limitation, payments due on the
Maturity Date) is due is not a Business Day, then amounts due on such date shall be due on the
immediately preceding Business Day. Interest shall be payable at the rates set forth in this
Agreement through and including the day immediately preceding the Maturity Date (unless interest at
the Default Rate shall apply, in which case interest shall be determined as and for the periods
described in Section 2.2.5). All amounts due pursuant to this Agreement and the other Loan
Documents shall be payable without setoff, counterclaim, defense or any other deduction whatsoever
(except if there shall be an offset on account of any Extra Non-Accrued Interest as described in
Section 2.4.6, or if there shall be a credit as described in the last sentence of
Section 2.2.2, which shall be the only offset or credit permitted under this Agreement).



(f) Lender shall have the right from time to time, in its sole discretion, upon not less than
ten (10) days prior written notice to Borrowers, to change the monthly Payment Date to a different
calendar day and to correspondingly adjust the Interest Period and Lender and Borrowers shall
promptly execute an amendment to this Agreement to evidence any such changes.


 


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2.3.2 Payment on Maturity Date. Borrowers shall pay to Lender on the Maturity Date
the Outstanding Principal Balance, all accrued and unpaid interest (including, without limitation,
all Accrued Interest including interest accrued thereon as provided in this Agreement), and all
other amounts due hereunder and under the Note, the Pledge Agreement and the other Loan Documents
(including, without limitation, the Exit Fee).



Late Payment Charge. If any principal, interest or any other sums due under the Loan
Documents (other than the payment of principal due on the Maturity Date) is not paid by
Borrowers by the date on which it is due, Borrowers shall pay to Lender upon demand an amount
equal to the lesser of (a) four percent (4%) of such unpaid sum or (b) the maximum amount
permitted by applicable law, in order to defray the expense incurred by Lender in handling and
processing such delinquent payment and to compensate Lender for the loss of the use of such
delinquent payment. Any such amount shall be secured by the Pledge Agreement and the other Loan
Documents to the extent permitted by applicable law.



2.3.3 Method and Place of Payment. Except as otherwise specifically provided
herein, all payments and prepayments under this Agreement and the Note shall be made to Lender
not later than 2:00 P.M., New York City time, on the date when due and shall be made in lawful
money of the United States of America in immediately available funds at Lender’s office at
Brookfield Financial, LLC—Series B, c/o Brookfield Financial Real Estate Financial Partners LLC,
Three World Financial Center, 200 Vesey Street, 11th Floor, New York, New York 10281,
Attention: Justin Monge, or as otherwise directed by Lender, and any funds received by Lender
after such time shall, for all purposes hereof, be deemed to have been paid on the next
succeeding Business Day.




Section 2.4 Prepayments.



2.4.1 Voluntary Prepayments. From and after the date hereof, so long as no Event
of Default has occurred and is continuing, Borrowers may, at their option and upon at least ten
(10) days prior written notice to Lender (or such shorter period as may be permitted by Lender),
prepay the Debt in whole or in part, but in no event shall any partial prepayment be less than
$1,000,000.00; provided that any prepayment is accompanied by (a) if such prepayment
occurs on a date other than a Payment Date, all interest (including, without limitation, all
Accrued Interest and any interest due in connection therewith) which would have accrued on the
amount of the Loan to be paid through, but not including, the next succeeding first
(1st) day of a calendar month, or, if such prepayment occurs on a Payment Date,
through and including the last day of the Interest Period that commenced immediately prior to
the applicable Payment Date; (b) the Exit Fee (on all amounts other than amounts representing
Accrued Interest, if any, being so prepaid or repaid); and (c) all other sums due and payable
under this Agreement, the Note, and the other Loan Documents, including, but not limited to, the
Breakage Costs, if any, and all of Lender’s costs and expenses (including reasonable attorney’s
fees and disbursements) incurred by Lender in connection with such prepayment. If a notice of
prepayment is given by Borrowers to Lender pursuant to this Section 2.4.1, the amount
designated for prepayment and all other sums required under this Section 2.4 shall be
due and payable on the proposed prepayment date; provided, however, Borrowers
shall have the right to postpone or revoke such prepayment upon written notice to Lender not
less than two (2) Business Days prior to the date such prepayment is due so long



 


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as Borrowers pay Lender and/or Servicer all actual out-of-pocket third party costs and
expenses incurred by Lender and/or Servicer in connection with such postponement or revocation.



2.4.2 Intentionally Deleted.



2.4.3 Prepayment Upon Occurrence of Liquidation Events.



(a) In the event of (i) any Casualty to all or any portion of the Property, (ii) any
Condemnation of all or any portion of any Property, (iii) a Transfer of any Property in connection
with realization thereon by Mortgage Lender following a Mortgage Event of Default, including,
without limitation, a foreclosure sale, or (iv) any refinancing of any Property or the Mortgage
Loan (each, a “Liquidation Event”), Borrowers shall cause the related Net Liquidation Proceeds
After Debt Service to be deposited with Lender or directly into the Cash Management Account. On
each date on which Lender actually receives a distribution of Net Liquidation Proceeds After Debt
Service, if such date is a Payment Date, such Net Liquidation Proceeds After Debt Service shall be
applied first to Accrued Interest and then to the Outstanding Principal Balance in an amount equal
to one hundred percent (100%) of such Net Liquidation Proceeds After Debt Service and all other
sums then due to prepay the Loan. In the event Lender receives a distribution of Net Liquidation
Proceeds After Debt Service on a date other than a Payment Date, such amounts shall be held by
Lender as collateral security for the Loan in an interest bearing account, with such interest
accruing to the benefit of Borrowers, and shall be applied by Lender on the next Payment Date. Any
such prepayment shall be applied to all accrued and unpaid interest amounts and other amounts then
due to Lender under this Agreement or any of the other Loan Documents (including, without
limitation, any Accrued Interest and the Exit Fee, and then to the Outstanding Principal Balance.



(b) Borrowers shall immediately notify Lender of any Liquidation Event once any Borrower has
knowledge of such event. Borrowers shall be deemed to have knowledge of (i) a sale (other than a
foreclosure sale) of any Property on the date on which a contract of sale for such sale is entered
into, and a foreclosure sale, on the date notice of such foreclosure sale is given, and (ii) a
refinancing of the Property, on the date on which a binding commitment for such refinancing is
entered into and a closing date for the funding of such refinancing has been scheduled. The
provisions of this Section 2.4.3 shall not be construed to contravene in any manner either
(i) the restrictions and other provisions regarding refinancing of the Mortgage Loan or Transfer of
any Property set forth in this Agreement, any other Loan Document or any Mortgage Loan Document,
whether or not notice is given pursuant to this Section 2.4.3 or (ii) Borrowers’ right to
prepay set forth in this Agreement and the other Loan Documents or the Mortgage Loan Documents.



(c) Upon payment in full of the Debt and all other Obligations, Lender shall disburse any Net
Liquidation Proceeds After Debt Service to:




(i) in the event the Second Mezzanine Loan is outstanding, to Second Mezzanine
Lender;


 


59









 






(ii) in the event the Second Mezzanine Loan has been paid in full, to Third
Mezzanine Lender; and




(iii) in the event each of the Second Mezzanine Loan and the Third Mezzanine
Loan has been paid in full, to Borrowers.



2.4.4 Application of Payments of Principal. Notwithstanding anything to the contrary
contained in this Agreement, the following principal payments shall be allocated among the Loan
(without limiting any other provisions set forth herein, Borrowers hereby acknowledge and agree
that an Exit Fee shall be payable in connection with any principal prepayment of all or any portion
of the Loan), the Mortgage Loan and the Mezzanine Loans as follows:



(a) so long as no Mortgage Event of Default shall have occurred and be continuing, any
voluntary prepayment, including, without limitation, any prepayment pursuant to Section 2.7.3
or Section 3.3(d) of the Mortgage Loan Agreement, shall be applied in the following order (i)
first, to the Reduced Acquisition Loan Debt, until such Reduced Acquisition Loan Debt is paid in
full, (ii) then, to the Construction Loan Debt, until such Construction Loan Debt is paid in full,
(iii) then, any remaining amounts shall be disbursed by Mortgage Lender to Lender to be applied to
the Debt, until the Debt is paid in full, (iv) then, any remaining amounts shall be disbursed by
Lender to Second Mezzanine Lender to be applied to the Second Mezzanine Debt, until the Second
Mezzanine Debt is paid in full, (v) then, any remaining amounts shall be disbursed by Second
Mezzanine Lender to Third Mezzanine Lender to be applied to the Third Mezzanine Debt, until the
Third Mezzanine Debt is paid in full; provided, however, that upon the occurrence
and during the continuance of a Mortgage Event of Default, any voluntary prepayment shall be
applied (i) first, by Mortgage Lender, to payment of the Mortgage Debt (including, without
limitation, the Exit Fee payable pursuant to the Mortgage Loan Agreement), in any order, priority
and proportion as Mortgage Lender shall elect in its sole discretion from time to time, until the
Mortgage Debt (including, without limitation, the Exit Fee payable pursuant to the Mortgage Loan
Agreement) is paid in full, and (ii) then, Mortgage Lender shall disburse any remainder to Lender
for application in accordance with the terms of the Loan Documents if the Debt (or any portion
thereof) is then outstanding, until the Debt is paid in full, and (iii) then, Lender shall disburse
any remainder to Second Mezzanine Lender for application in accordance with the terms of the Second
Mezzanine Loan Documents if the Second Mezzanine Debt (or any portion thereof) is then outstanding,
until the Second Mezzanine Debt is paid in full, and (iv) then, Second Mezzanine Lender shall
disburse to Third Mezzanine Lender for application in accordance with the terms of the Third
Mezzanine Loan Documents if the Third Mezzanine Debt (or any portion thereof) is then outstanding,
until the Third Mezzanine Debt is paid in full, and (v) then, Third Mezzanine Lender shall disburse
the balance, if any, to Mortgage Borrowers;




(b) Intentionally Deleted;



(c) all Net Proceeds not required to be made available for Restoration, and as to which
Mortgage Lender has not otherwise elected in its sole discretion to make available for Restoration,
shall be applied (i) first, to the Mortgage Debt (including, without limitation, the Exit Fee and
any related Breakage Costs payable pursuant to the Mortgage Loan Agreement), in any order, priority
and proportion as Mortgage Lender shall elect in its sole



 


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discretion from time to time, until the Mortgage Debt (including, without limitation, the Exit
Fee payable pursuant to the Mortgage Loan Agreement) is paid in full, (ii) then, Mortgage Lender
shall disburse any remaining amounts to Lender to be applied to the Debt, until the Debt is paid in
full, (iii) then, Lender shall disburse any remaining amounts to Second Mezzanine Lender to be
applied to the Second Mezzanine Debt, until the Second Mezzanine Debt is paid in full, (iv) then,
Second Mezzanine Lender shall disburse any remaining amounts to Third Mezzanine Lender to be
applied to the Third Mezzanine Debt, until the Third Mezzanine Debt is paid in full, and (v) then,
Third Mezzanine Lender shall disburse any remaining amounts to Mortgage Borrowers;



(d) any Mortgage Reserve Funds or other cash collateral held by or on behalf of Mortgage
Lender, whether in the Mortgage Cash Management Account or any of the Mortgage Reserve Funds, or
otherwise, including, without limitation, any Net Proceeds and/or any Excess Cash Flow then being
held by Mortgage Lender, shall, upon the occurrence and during the continuance of a Mortgage Event
of Default, be applied by Mortgage Lender as follows or may continue to be held by Mortgage Lender
as additional collateral for the Mortgage Loan, all in Mortgage Lender’s sole discretion: (i)
first, to the Mortgage Debt (including, without limitation, the Exit Fee payable pursuant to the
Mortgage Loan Agreement), in any order, priority and proportions as Mortgage Lender shall elect in
its sole discretion from time to time, until the Mortgage Debt (including, without limitation, the
Exit Fee payable pursuant to the Mortgage Loan Agreement) is paid in full, (ii) then, disbursed by
Mortgage Lender to Lender for application in accordance with the terms of the Loan Documents if the
Debt (or any portion thereof) is then outstanding, until the Debt is paid in full, (iii) then,
disbursed by Lender to Second Mezzanine Lender for application in accordance with the terms of the
Second Mezzanine Loan Documents if the Second Mezzanine Debt (or any portion thereof) is then
outstanding, until the Second Mezzanine Debt is paid in full, (iv) then, disbursed by Second
Mezzanine Lender to Third Mezzanine Lender for application in accordance with the terms of the
Third Mezzanine Loan Documents if the Third Mezzanine Debt (or any portion thereof) is then
outstanding, until the Third Mezzanine Debt is paid in full, (v) then, the balance, if any,
disbursed by Third Mezzanine Lender to Mortgage Borrowers;



(e) the proceeds of any Release Parcel Release Price shall be applied in the following order
(i) first, to the Reduced Acquisition Loan Debt, until such Reduced Acquisition Loan Debt is paid
in full, (ii) then, to the Construction Loan Debt, until such Construction Loan Debt is paid in
full, (iii) then, any remaining amounts shall be disbursed by Mortgage Lender to Lender to be
applied to the Debt, until the Debt is paid in full, (iv) then, any remaining amounts shall be
disbursed by Lender to Second Mezzanine Lender to be applied to the Second Mezzanine Debt, until
the Second Mezzanine Debt is paid in full, (v) then, any remaining amounts shall be disbursed by
Second Mezzanine Lender to Third Mezzanine Lender to be applied to the Third Mezzanine Debt, until
the Third Mezzanine Debt is paid in full, and (vi) then any remaining amounts shall be disbursed by
Third Mezzanine Lender to Mortgage Borrowers;




(f) Intentionally Deleted;



(g) the proceeds of any IP Release Price shall be allocated as follows: (A) the first
$60,000,000 of any such IP Release Price payable in connection with such IP Sale



 


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shall be applied in the following order (i) first, to the Reduced Acquisition Loan Debt, until
such Reduced Acquisition Loan Debt is paid in full, (ii) then, to the Construction Loan Debt, until
such Construction Loan Debt is paid in full, (iii) then, any remaining amounts shall be disbursed
to Lender to be applied to the Debt, until the Debt is paid in full, (iv) then, any remaining
amounts shall be disbursed to Second Mezzanine Lender to be applied to the Second Mezzanine Debt,
until the Second Mezzanine Debt is paid in full, and (v) then, any remaining amounts shall be
disbursed to Third Mezzanine Lender to be applied to the Third Mezzanine Debt, until the Third
Mezzanine Debt is paid in full; and (B) in the event the proceeds of any IP Release Price payable
in connection with any IP Sale exceed $60,000,000 (the “Excess IP Release Price Proceeds”), such
Excess IP Release Price Proceeds shall be applied in accordance with Section 2.4.3(g) of the
Mortgage Loan Agreement;



(h) all Rents received by Mortgage Lender upon the occurrence and during the continuance of a
Mortgage Event of Default pursuant to Section 3.1 of the Assignment of Leases shall be applied by
Mortgage Lender as follows or may continue to be held by Mortgage Lender as additional collateral
for the Mortgage Loan, all in Mortgage Lender’s sole discretion: first, (i) to the expenses of
managing and securing any of the Properties, as contemplated by clause (a) of said Section 3.1 of
the Assignment of Leases, and/or (ii) to the Reduced Acquisition Loan Debt, until the Reduced
Acquisition Loan Debt is paid in full, then to the Construction Loan Debt, until the Construction
Loan Debt is paid in full, and then (A) disbursed by Mortgage Lender to Lender for application in
accordance with the terms of the Loan Documents if the Debt (or any portion thereof) is then
outstanding, until the Debt is paid in full, and then (B) disbursed to Second Mezzanine Lender for
application in accordance with the terms of the Second Mezzanine Loan Documents if the Second
Mezzanine Debt (or any portion thereof) is then outstanding, until the Second Mezzanine Debt is
paid in full, and then (C) disbursed to Third Mezzanine Lender for application in accordance with
the terms of the Third Mezzanine Loan Documents if the Third Mezzanine Debt (or any portion
thereof) is then outstanding, until the Third Mezzanine Debt is paid in full and then (D) the
balance disbursed by Third Mezzanine Lender to Mortgage Borrowers;




(i) Intentionally Deleted; and




(j) Intentionally Deleted.



Upon payment in full of the Debt (including, without limitation, the Exit Fee), Lender’s sole
obligation under this Section 2.4.4 shall be to disburse any remaining funds described
herein and held by Lender to Second Mezzanine Lender for application in accordance with the terms
of the Second Mezzanine Loan Documents.



2.4.5 Prepayments After Default. If during the continuance of an Event of Default
payment of all or any part of the Debt is tendered by Borrowers or otherwise recovered by Lender
(including through application of any Reserve Funds or any Net Liquidation Proceeds After Debt
Service), (a) such tender or recovery shall be deemed made on the next occurring Payment Date
together with the monthly Debt Service or Accrued Interest amount calculated at the Default Rate
from and after the date of such Event of Default, (b) Intentionally Deleted, (c) Borrower shall
also pay an amount equal to one percent (1%) of the amount of the Loan being



 


62









 






prepaid or satisfied, and (d) Borrowers shall also pay the Exit Fee (or the applicable portion
thereof).



2.4.6 Prepayments Made on Dates Other Than Payment Dates. With respect to any
provision herein or in any other Loan Document providing that if a payment or prepayment of the
Loan is made on a date other than a Payment Date such payment or prepayment shall be accompanied by
any and all related Breakage Costs and all interest which would have accrued on the amount of the
Loan so paid or prepaid through, but not including, the next succeeding first (1st) day
of a calendar month, Borrowers shall be entitled to a credit toward the following month’s Current
Pay Interest Payment or any other amounts due under the Loan in an amount equal to the amount of
interest actually earned by Lender on the portion of such interest payment in excess of the amount
of interest actually accrued on the date of such payment or prepayment (the “Extra Non-Accrued
Interest”). In order to effectuate the foregoing, upon any prepayment resulting in any Extra
Non-Accrued Interest pursuant to the terms hereof, Lender shall deposit such Extra Non-Accrued
Interest in an interest-bearing account for the benefit of Lender until the next Payment Date in
order to determine the credit against the next Current Pay Interest Payment due to Borrowers under
this Section 2.4.6, following which Payment Date (a) Lender may withdraw such Extra
Non-Accrued Interest, together with all interest accrued thereon, from such account and apply the
amount of the interest accrued on such Extra Non-Accrued Interest to amounts due and payable to
Lender on such Payment Date, (b) such Extra Non-Accrued Interest, together with all interest
accrued thereon, shall constitute the sole and exclusive property of Lender, and (c) Lender shall
have no further obligations to Borrowers with respect to such Extra Non-Accrued Interest and/or the
interest accrued thereon. Lender shall not be responsible for obtaining any particular interest
rate with respect to any Extra Non-Accrued Interest.



2.4.7 Intentionally Deleted.



Section 2.5 Release of Property. Except as set forth in this Section 2.5, no
repayment or prepayment of all or any portion of the Note shall cause, give rise to a right to
require, or otherwise result in, the release of the Lien of the Pledge Agreement or any other Loan
Document.




2.5.1 Releases of Adjacent Property.



(a) Section 2.5.1 of the Mortgage Loan Agreement contains provisions permitting Adjacent
Borrower to (i) sell one or more portions of the Adjacent Property (each, including the entire
Adjacent Property, a “Partial Release Parcel”) either to a bonafide third party purchaser (a
“Bonafide Release Parcel Purchaser”) or to an Affiliate of Mortgage Borrower or any other
Restricted Party (an “Affiliate Release Parcel Purchaser”; and together with a Bonafide Release
Parcel Purchaser, individually, a “Release Parcel Purchaser”), or (2) refinance one or more Partial
Release Parcels (each of the foregoing, including a sale or refinancing of the entire Adjacent
Property, a “Release Parcel Sale”), and obtain a release of such Partial Release Parcel from the
Liens of the Mortgage upon satisfaction of certain conditions and requirements set forth in Section
2.5.1 of the Mortgage Loan Agreement.


 


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(b) Lender hereby consents to any Release Parcel Sale conducted in accordance with the terms
of Section 2.5.1 of the Mortgage Loan Agreement provided that:




(i) Borrowers deliver to Lender a copy of all requests and other notices
relating to such Release Parcel Sale (including the Sale Request) delivered to
Mortgage Lender concurrently with delivery of the same to Mortgage Lender;




(ii) all certifications made by Adjacent Borrower in connection with such
Release Parcel Sale also run for the benefit of Lender;




(iii) contemporaneously with such Release Parcel Sale, Borrowers shall cause
Adjacent Borrower to deposit directly into the Mortgage Cash Management Account an
amount equal to the sum of (A) the Release Parcel Release Price for the applicable
Parcel determined in accordance with the Mortgage Loan Agreement, which funds shall
be applied by Mortgage Lender as provided in Section 2.4.3(e) of the Mortgage Loan
Agreement and Section 2.4.4(e) hereof, plus (B) all accrued and
unpaid interest on said amount prepaid in accordance with the terms of this
Agreement and the Mortgage Loan Agreement, plus (C) if such prepayment
occurs on a day other than a Payment Date, interest on the Release Parcel Release
Price to, but not including, the next succeeding first (1st) day of a
calendar month;




(iv) Borrowers shall have paid all of the actual out-of-pocket reasonable third
party legal fees and actual out-of pocket reasonable third party expenses incurred
by Lender in connection with (A) reviewing and processing any Sale Request with
respect to a Release Parcel Sale, whether or not the Release Parcel Sale which is
the subject of a Sale Request actually closes, (B) the satisfaction of any of the
conditions set forth in Section 2.5.1(a) of the Mortgage Loan Agreement, and (C)
providing all release documents in connection with any Release Parcel Sale as
provided in Section 2.5.1(d) of the Mortgage Loan Agreement; and




(v) No monetary Default, monetary Mortgage Default or any monetary Mezzanine
Default, and no Event of Default, Mortgage Event of Default or any Mezzanine Event
of Default, shall have occurred and be continuing at the time of the submission by
Adjacent Borrower of a Sale Request or at the time of the closing of such Release
Parcel Sale.



(c) Upon repayment in full of the Mortgage Loan, if the Loan or any portion thereof is then
outstanding, the provisions of Section 2.5.1 of the Mortgage Loan Agreement and all related
definitions shall be incorporated into this Agreement in their entirety, but the terms used therein
shall mean and refer to the correlative terms defined herein.


 


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2.5.2 Intentionally Deleted.




2.5.3 Release of IP.



(a) Section 2.5.3 of the Mortgage Loan Agreement contains provisions permitting IP Borrower to
sell the IP (in whole but not in part) (an “IP Sale”), to a bonafide third party purchaser (an “IP
Purchaser”), and obtain a release of the IP from the Liens of the Mortgage upon satisfaction of
certain conditions and requirements set forth in Section 2.5.3 of the Mortgage Loan Agreement.



(b) Lender hereby consents to any IP Sale conducted in accordance with the terms of Section
2.5.3 of the Mortgage Loan Agreement provided that:




(i) Borrowers deliver to Lender a copy of all requests and other notices
relating to such IP Sale delivered to Mortgage Lender concurrently with delivery of
the same to Mortgage Lender;




(ii) all certifications made by IP Borrower in connection with such IP Sale
also run for the benefit of Lender;




(iii) contemporaneously with such IP Sale, Borrowers shall cause IP Borrower to
deposit directly into the Mortgage Cash Management Account an amount equal to the
sum of (A) the IP Release Price determined in accordance with the Mortgage Loan
Agreement, which funds shall be applied by Mortgage Lender as provided in Section
2.4.3(g) of the Mortgage Loan Agreement and Section 2.4.4(g) hereof,
plus (B) all accrued and unpaid interest on said amount prepaid in
accordance with the terms of this Agreement and the Mortgage Loan Agreement,
plus (C) if such prepayment occurs on a day other than a Payment Date,
interest on the IP Release Price to, but not including, the next succeeding first
(1st) day of a calendar month;




(iv) Borrowers shall have paid all of the actual out-of-pocket reasonable third
party legal fees and actual out-of pocket reasonable third party expenses incurred
by Lender in connection with (A) reviewing and processing any Sale Request with
respect to an IP Sale, whether or not the IP Sale which is the subject of a Sale
Request actually closes, (B) the satisfaction of any of the conditions set forth in
Section 2.5.3(a) of the Mortgage Loan Agreement, and (C) providing all release
documents in connection with any IP Sale as provided in Section 2.5.3(d) of the
Mortgage Loan Agreement; and




(v) No monetary Default, monetary Mortgage Default or any monetary Mezzanine
Default, and no Event of Default, Mortgage Event of Default or any Mezzanine Event
of Default, shall have occurred and be continuing at the time of the submission by
IP Borrower of a sale request or at the time of the closing of such IP Sale.



(c) Upon repayment in full of the Mortgage Loan, if the Loan or any portion thereof is then
outstanding, the provisions of Section 2.5.3 of the Mortgage Loan



 


65









 






Agreement and all related definitions shall be incorporated into this Agreement in their
entirety, but the terms used therein shall mean and refer to the correlative terms defined herein.



2.5.4 Sale of Properties or IP during Event of Default. Notwithstanding the
provisions of the foregoing Sections 2.5.1 and 2.5.3 or any other provision to the
contrary in this Agreement or the other Loan Documents, it is expressly acknowledged and agreed by
Borrowers that, upon the occurrence and during the continuance of an Event of Default: (i) no
Borrower shall have any right to cause any Mortgage Borrower to sell any Property or any portion
thereof or any IP without, in each instance, Lender’s prior written consent, which consent may be
given or withheld in Lender’s sole discretion, (ii) any such sale of one or more of the Properties
or any portion thereof and/or any IP shall be on such terms and conditions as to which Lender and
Borrowers shall agree, Lender, however, having the right to impose such terms and conditions as it
shall elect in its sole discretion, (iii) Intentionally Deleted, (iv) Intentionally Deleted and (v)
in the event any such sale shall occur, without limiting any other provisions set forth herein, the
proceeds of such sale shall be applied in accordance with the applicable provisions of Section
2.4.4 hereof.



2.5.5 Release on Payment in Full. Upon the written request and payment by Borrowers
of the customary recording fees and the actual out-of-pocket third-party costs and expenses of
Lender and upon payment in full of all principal and interest due on the Loan and all other amounts
due and payable under the Loan Documents in accordance with the terms and provisions of the Note
and this Agreement, Lender shall release the Lien of the Pledge Agreement and the other Loan
Documents.




Section 2.6 Cash Management.




2.6.1 Lockbox Account.



(a) During the term of the Loan, Borrowers shall cause Mortgage Borrowers to establish and
maintain a segregated Eligible Account (the “Lockbox Account”) with Lockbox Bank in trust for the
benefit of Mortgage Lender, which Lockbox Account shall be under the sole dominion and control of
Mortgage Lender pursuant to and in accordance with the Mortgage Loan Documents and shall comply
with all of the terms and conditions set forth in Section 2.6.1 of the Mortgage Loan Agreement.



(b) Borrowers shall (i) cause each Mortgage Borrower, and its Manager and HRHI, to (i) deposit
all amounts received by such Mortgage Borrower, Manager and HRHI constituting Rents, receipts,
license or sublicense payments or payments received under any sponsorship agreements (and any other
amounts described in Section 2.6.1(b) of the Mortgage Loan Agreement) into the Lockbox Account and
(ii) cause Gaming Borrower to comply with the provisions of Section 2.6.1(c) of the Mortgage Loan
Agreement with respect to the Prior Day’s Cash Receipts.



(c) In the event (i) Mortgage Lender waives the requirements of Mortgage Borrowers to maintain
the Lockbox Account pursuant to the terms of Section 2.6.1 of the Mortgage Loan Agreement, or (ii)
the Mortgage Loan has been repaid in full, Lender shall have the right to require Borrowers to
establish and maintain an account that would operate in



 


66









 






the same manner as the Lockbox Account in Section 2.6.1 of the Mortgage Loan Agreement and the
provisions of Section 2.6.1 of the Mortgage Loan Agreement shall be incorporated herein by
reference.




2.6.2 Mortgage Cash Management Account.



(a) During the term of the Loan, Borrowers shall cause Mortgage Borrowers to establish and
maintain a segregated Eligible Account (the “Mortgage Cash Management Account”), which Mortgage
Cash Management Account shall be under the sole dominion and control of Mortgage Lender and shall
comply with all of the terms and conditions set forth in Section 2.6.2 of the Mortgage Loan
Agreement.



(b) Borrowers shall direct or cause Mortgage Borrowers to direct that all cash contributions
from the Lockbox Account and the Mortgage Cash Management Account to be paid to or for the benefit
of Lender in accordance with the Mortgage Loan Agreement and the Mortgage Cash Management Agreement
shall be deposited into the Cash Management Account maintained in accordance with this Agreement
and the Cash Management Agreement. Lender agrees that it shall deliver to Mortgage Lender, not
less than five (5) days prior to each Payment Date, a written notice setting forth (i) the amount
of the Current Pay Interest Payment that will be due on the next Payment Date, and (ii) an itemized
list of any other amounts that will be due on such next Payment Date pursuant to the terms of this
Agreement and/or the other Loan Documents.



(c) In the event (i) Mortgage Lender waives the requirements of Mortgage Borrowers to maintain
the Mortgage Cash Management Account pursuant to the terms of Section 2.6.2 of the Mortgage Loan
Agreement, or (ii) the Mortgage Loan has been repaid in full, Lender shall have the right to
require Borrowers to establish and maintain an account that would operate in the same manner as the
Mortgage Cash Management Account in Section 2.6.2 of the Mortgage Loan Agreement and the provisions
of Section 2.6.2 of the Mortgage Loan Agreement shall be incorporated herein by reference;
provided, however, that references to “Lender,” “Cash Management Account,” and
other applicable terms shall be deemed to refer to the Lender, Cash Management Account and other
applicable terms hereunder.




2.6.3 Cash Management Account.



(a) There shall be established and maintained a segregated Eligible Account (the “Cash
Management Account”) to be held by Servicer in trust for the benefit of Lender, which Cash
Management Account shall be under the sole dominion and control of Lender. The Cash Management
Account shall be entitled “TriMont Real Estate Advisors, Inc. as Servicer for Vegas HR Limited
Investor P&I Collection Account” or such other title as shall be reasonably acceptable to Lender
and the bank holding the Cash Management Account. Each Borrower hereby grants to Lender a first
priority security interest in the Cash Management Account and all deposits at any time contained
therein and the proceeds thereof, and will take all actions requested by Lender that are necessary
to maintain in favor of Lender a perfected first priority security interest in the Cash Management
Account, including, without limitation, executing and filing UCC-1 Financing Statements and
continuations thereof. Lender and Servicer shall have the sole right to make withdrawals from the
Cash Management Account for



 


67









 






application pursuant to the terms of this Agreement and the other Loan Documents and all
reasonable costs and expenses for establishing and maintaining the Cash Management Account shall be
paid by Borrowers.



(b) All funds on deposit in the Cash Management Account following the occurrence of an Event
of Default may be applied by Lender in such order and priority as Lender shall determine.



(c) Provided no Event of Default shall have occurred and be continuing, all funds on deposit
in the Cash Management Account shall be applied by Lender in accordance with the terms of this
Agreement (including, without limitation, Section 2.4.3 and Section 2.4.4 hereof)
and the Cash Management Agreement.



2.6.4 Intentionally Deleted.



Section 2.7 Extensions of the Initial Maturity Date.



2.7.1 Intentionally Deleted.



2.7.2 Qualified Extensions. As provided in this Section 2.7.2, Borrowers
shall have the option (each, a “Qualified Extension Option”) to extend the term of the Loan beyond
the Initial Maturity Date for four (4) successive terms (each, a “Qualified Extension Term”) of one
(1) year each (the Initial Maturity Date following the exercise of each Qualified Extension Option
being the “Qualified Extended Maturity Date”).



(a) First Qualified Extension Option. Borrowers shall have the right to extend the
Initial Maturity Date to the First Qualified Extended Maturity Date (the “First Qualified Extension
Option”; and the period commencing on the first (1st) day following the Initial Maturity Date and
ending on the First Qualified Extended Maturity Date being referred to herein as the “First
Qualified Extension Term”), provided that all of the following conditions are satisfied:




(i) no monetary Default, Event of Default, monetary Mortgage Default, Mortgage
Event of Default, monetary Mezzanine Default or Mezzanine Event of Default shall
have occurred and be continuing at the time the First Qualified Extension Option is
exercised or on the date that the First Qualified Extension Term commences;




(ii) Borrowers shall notify Lender of their irrevocable election to exercise
the First Qualified Extension Option not earlier than six (6) months, and not later
than thirty (30) days, prior to the Initial Maturity Date;




(iii) if the Interest Rate Cap Agreement is scheduled to mature prior to the
First Qualified Extended Maturity Date, Borrowers shall obtain and deliver to Lender
not later than one (1) Business Day immediately preceding the first day of the First
Qualified Extension Term, one or more Replacement Interest Rate Cap Agreements (or
extension(s) of the existing Interest Rate Cap Agreement(s)) from an Acceptable
Counterparty, which Replacement Interest Rate Cap Agreement(s)



 


68









 






(or extension(s) of the existing Interest Rate Cap Agreement(s)) shall (i) be
effective commencing on the first day of the First Qualified Extension Term, (ii)
have a LIBOR strike price equal to the applicable Strike Price, (iii) have a
maturity date not earlier than the First Qualified Extended Maturity Date and (iv)
shall have a notional amount equal to the Outstanding Principal Balance. Borrowers
shall (x) assign to Lender, as collateral for the Loan, pursuant to a Replacement
Collateral Assignment of Interest Rate Cap, all of its right, title and interest to
receive any and all payments under such Replacement Interest Rate Cap Agreement, and
the Counterparty shall execute an acknowledgment to such Replacement Collateral
Assignment of Interest Rate Cap agreeing to make deposits directly into the Cash
Management Account and (y) obtain and deliver to Lender an opinion from counsel
(which counsel may be in-house counsel for the Counterparty) for the Counterparty
(upon which Lender and its successors and assigns may rely), which opinion shall
comply with Section 2.2.7(e) hereof;




(iv) not later than one (1) Business Day immediately preceding the first day of
the First Qualified Extension Term, all accrued and unpaid interest and any unpaid
or unreimbursed amounts in respect of the Loan and any other sums then due to Lender
hereunder or under any of the other Loan Documents shall have been paid in full;




(v) Intentionally Deleted;




(vi) not later than one (1) Business Day immediately preceding the first day of
the First Qualified Extension Term, Borrowers shall have caused Mortgage Borrowers
to deposit with Mortgage Lender in immediately available funds, for deposit by
Mortgage Lender into the applicable Mortgage Reserve Fund(s) (other than the
Interest Reserve Fund), any shortfalls in such Reserve Fund(s) with respect to the
First Qualified Extension Term, if any, as determined by Mortgage Lender in
accordance with the applicable provisions of the Mortgage Loan Agreement, and which
amounts thereafter shall constitute a part of the applicable Reserve Fund(s) and
shall be held and disbursed by Mortgage Lender as set forth in Article VII of the
Mortgage Loan Agreement (or, if the Mortgage Loan has been paid in full, Borrowers
shall have deposited such amount with Lender for deposit into the applicable Reserve
Fund(s) to be held and disbursed by Lender as set forth in Article VII hereof);




(vii) Intentionally Deleted;




(viii) the maturity date of the Mortgage Loan, if the Mortgage Loan is then
outstanding, shall be extended to not earlier than the First Qualified Extended
Maturity Date on the same terms and conditions as in effect on the date hereof;




(ix) the maturity date of the Second Mezzanine Loan, if the Second Mezzanine
Loan is then outstanding, shall be extended to not earlier than the First



 


69









 






Qualified Extended Maturity Date on the same terms and conditions as in effect
on the date hereof;




(x) the maturity date of the Third Mezzanine Loan, if the Third Mezzanine Loan
is then outstanding, shall be extended to not earlier than the First Qualified
Extended Maturity Date on the same terms and conditions as in effect on the date
hereof;




(xi) there shall exist no Shortfall as of the Business Day immediately
preceding the first day of the First Qualified Extension Term; and




(xii) Borrowers shall have reimbursed Lender for all costs reasonably incurred
by Lender in processing the extension request, including, without limitation,
reasonable legal fees and expenses; provided, however, that in no event shall
Borrowers be required to pay any such fees, costs or expenses in excess of Twenty
Thousand Dollars ($20,000).



(b) Second Qualified Extension Option. Borrowers shall have the right to extend the
First Qualified Extended Maturity Date to the Second Qualified Extended Maturity Date (the “Second
Qualified Extension Option”; and the period commencing on the first (1st) day following the First
Qualified Extended Maturity Date and ending on the Second Qualified Extended Maturity Date being
referred to herein as the “Second Qualified Extension Term”), provided that all of the
following conditions are satisfied:




(i) no monetary Default, Event of Default, monetary Mortgage Default, Mortgage
Event of Default, monetary Mezzanine Default or Mezzanine Event of Default shall
have occurred and be continuing at the time the Second Qualified Extension Option is
exercised or on the date that the Second Qualified Extension Term commences;




(ii) Borrowers shall notify Lender of their irrevocable election to exercise
the Second Qualified Extension Option not earlier than six (6) months, and not later
than thirty (30) days, prior to the First Qualified Extended Maturity Date;




(iii) if the Interest Rate Cap Agreement is scheduled to mature prior to the
Second Qualified Extended Maturity Date, Borrowers shall obtain and deliver to
Lender not later than one (1) Business Day immediately preceding the first day of
the Second Qualified Extension Term, one or more Replacement Interest Rate Cap
Agreements (or extension(s) of the existing Interest Rate Cap Agreement(s)) from an
Acceptable Counterparty, which Replacement Interest Rate Cap Agreement(s) (or
extension(s) of the existing Interest Rate Cap Agreement(s)) shall (i) be effective
commencing on the first day of the Second Qualified Extension Term, (ii) have a
LIBOR strike price equal to the applicable Strike Price, (iii) have a maturity date
not earlier than the Second Qualified Extended Maturity Date and (iv) shall have a
notional amount equal to the Outstanding Principal Balance. Borrowers shall (x)
assign to Lender, as collateral for the Loan,



 


70









 






pursuant to a Replacement Collateral Assignment of Interest Rate Cap, all of
its right, title and interest to receive any and all payments under such Replacement
Interest Rate Cap Agreement, and the Counterparty shall execute an acknowledgment to
such Replacement Collateral Assignment of Interest Rate Cap agreeing to make
deposits directly into the Cash Management Account and (y) obtain and deliver to
Lender an opinion from counsel (which counsel may be in-house counsel for the
Counterparty) for the Counterparty (upon which Lender and its successors and assigns
may rely), which opinion shall comply with Section 2.2.7(e) hereof;




(iv) not later than one (1) Business Day immediately preceding the first day of
the Second Qualified Extension Term, all accrued and unpaid interest and any unpaid
or unreimbursed amounts in respect of the Loan and any other sums then due to Lender
hereunder or under any of the other Loan Documents shall have been paid in full;




(v) Intentionally Deleted;




(vi) not later than one (1) Business Day immediately preceding the first day of
the Second Qualified Extension Term, Borrowers shall have caused Mortgage Borrowers
to deposit with Mortgage Lender in immediately available funds, for deposit by
Mortgage Lender into the applicable Mortgage Reserve Fund(s) (other than the
Interest Reserve Fund), any shortfalls in such Reserve Fund(s) with respect to the
Second Qualified Extension Term, if any, as determined by Mortgage Lender in
accordance with the applicable provisions of the Mortgage Loan Agreement, and which
amounts thereafter shall constitute a part of the applicable Reserve Fund(s) and
shall be held and disbursed by Mortgage Lender as set forth in Article VII of the
Mortgage Loan Agreement (or, if the Mortgage Loan has been paid in full, Borrowers
shall have deposited such amount with Lender for deposit into the applicable Reserve
Fund(s) to be held and disbursed by Lender as set forth in Article VII hereof);




(vii) there shall exist no Shortfall as of the Business Day immediately
preceding the first day of the Second Qualified Extension Term; provided, however,
that this condition shall be of no further force or effect after the date on which
Final Completion is achieved;




(viii) the maturity date of the Mortgage Loan, if the Mortgage Loan is then
outstanding, shall be extended to not earlier than the Second Qualified Extended
Maturity Date on the same terms and conditions as in effect on the date hereof;




(ix) the maturity date of the Second Mezzanine Loan, if the Second Mezzanine
Loan is then outstanding, shall be extended to not earlier than the Second Qualified
Extended Maturity Date on the same terms and conditions as in effect on the date
hereof;


 


71









 






(x) the maturity date of the Third Mezzanine Loan, if the Third Mezzanine Loan
is then outstanding, shall be extended to not earlier than the Second Qualified
Extended Maturity Date on the same terms and conditions as in effect on the date
hereof;




(xi) Intentionally Deleted;




(xii) Intentionally Deleted;




(xiii) Borrowers shall have paid to Lender an extension fee equal to
one-quarter of one percent (0.25%) of the sum of the Outstanding Principal Balance
and all Accrued Interest then due not later than one (1) Business Day immediately
preceding the first day of the Second Qualified Extension Term; and




(xiv) Borrowers shall have reimbursed Lender for all costs reasonably incurred
by Lender in processing the extension request, including, without limitation,
reasonable legal fees and expenses; provided, however, that in no
event shall Borrowers be required to pay any such fees, costs or expenses in excess
of Twenty Thousand Dollars ($20,000).



(c) Third Qualified Extension Option. Borrowers shall have the right to extend the
Second Qualified Extended Maturity Date to the Third Qualified Extended Maturity Date (the “Third
Qualified Extension Option”; and the period commencing on the first (1st) day following the Second
Qualified Extended Maturity Date and ending on the Third Qualified Extended Maturity Date being
referred to herein as the “Third Qualified Extension Term”), provided that all of the
following conditions are satisfied:




(i) no monetary Default, Event of Default, monetary Mortgage Default, Mortgage
Event of Default, monetary Mezzanine Default or Mezzanine Event of Default shall
have occurred and be continuing at the time the Third Qualified Extension Option is
exercised or on the date that the Third Qualified Extension Term commences;




(ii) Borrowers shall notify Lender of their irrevocable election to exercise
the Third Qualified Extension Option not earlier than six (6) months, and not later
than thirty (30) days, prior to the Second Qualified Extended Maturity Date;




(iii) if the Interest Rate Cap Agreement is scheduled to mature prior to the
Third Qualified Extended Maturity Date, Borrowers shall obtain and deliver to Lender
not later than one (1) Business Day immediately preceding the first day of the Third
Qualified Extension Term, one or more Replacement Interest Rate Cap Agreements (or
extension(s) of the existing Interest Rate Cap Agreement(s)) from an Acceptable
Counterparty, which Replacement Interest Rate Cap Agreement(s) (or extension(s) of
the existing Interest Rate Cap Agreement(s)) shall (i) be effective commencing on
the first day of the Third Qualified Extension Term, (ii) have a LIBOR strike price
equal to the applicable Strike Price, (iii) have a maturity date not earlier than
the Third Qualified Extended Maturity Date and (iv)



 


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shall have a notional amount equal to the Outstanding Principal Balance.
Borrowers shall (x) assign to Lender, as collateral for the Loan, pursuant to a
Replacement Collateral Assignment of Interest Rate Cap, all of its right, title and
interest to receive any and all payments under such Replacement Interest Rate Cap
Agreement, and the Counterparty shall execute an acknowledgment to such Replacement
Collateral Assignment of Interest Rate Cap agreeing to make deposits directly into
the Cash Management Account and (y) obtain and deliver to Lender an opinion from
counsel (which counsel may be in-house counsel for the Counterparty) for the
Counterparty (upon which Lender and its successors and assigns may rely), which
opinion shall comply with Section 2.2.7(e) hereof;




(iv) not later than one (1) Business Day immediately preceding the first day of
the Third Qualified Extension Term, all accrued and unpaid interest and any unpaid
or unreimbursed amounts in respect of the Loan and any other sums then due to Lender
hereunder or under any of the other Loan Documents shall have been paid in full;




(v) the maturity date of the Mortgage Loan, if the Mortgage Loan is then
outstanding, shall be extended to not earlier than the Third Qualified Extended
Maturity Date on the same terms and conditions as in effect on the date hereof;




(vi) the maturity date of the Second Mezzanine Loan, if the Second Mezzanine
Loan is then outstanding, shall be extended to not earlier than the Third Qualified
Extended Maturity Date on the same terms and conditions as in effect on the date
hereof;




(vii) the maturity date of the Third Mezzanine Loan, if the Third Mezzanine
Loan is then outstanding, shall be extended to not earlier than the Third Qualified
Extended Maturity Date on the same terms and conditions as in effect on the date
hereof;




(viii) Borrowers shall have reimbursed Lender for all costs reasonably incurred
by Lender in processing the extension request, including, without limitation,
reasonable legal fees and expenses; provided, however, that in no
event shall Borrowers be required to pay any such fees, costs or expenses in excess
of Twenty Thousand Dollars ($20,000);




(ix) not later than one (1) Business Day immediately preceding the first day of
the Third Qualified Extension Term, Borrowers shall have caused Mortgage Borrowers
to deposit with Mortgage Lender in immediately available funds, for deposit by
Mortgage Lender into the applicable Mortgage Reserve Fund(s) (other than the
Interest Reserve Fund), any shortfalls in such Reserve Fund(s) with respect to the
Third Qualified Extension Term, if any, as determined by Mortgage Lender in
accordance with the applicable provisions of the Mortgage Loan Agreement, and which
amounts thereafter shall constitute a part of the applicable Reserve Fund(s) and
shall be held and disbursed by Mortgage Lender



 


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as set forth in Article VII of the Mortgage Loan Agreement (or, if the Mortgage
Loan has been paid in full, Borrowers shall have deposited such amount with Lender
for deposit into the applicable Reserve Fund(s) to be held and disbursed by Lender
as set forth in Article VII hereof); and




(x) there shall exist no Shortfall as of the Business Day immediately preceding
the first (1st) day of the Third Qualified Extension Term; provided,
however, that this condition shall be of no further force or effect after the date
on which Final Completion is achieved.



(d) Fourth Qualified Extension Option. Borrowers shall have the right to extend the
Third Qualified Extended Maturity Date to the Fourth Qualified Extended Maturity Date (the “Fourth
Qualified Extension Option”; and the period commencing on the first (1st) day following the Third
Qualified Extended Maturity Date and ending on the Fourth Qualified Extended Maturity Date being
referred to herein as the “Fourth Qualified Extension Term”), provided that all of the
following conditions are satisfied:



(i) no monetary Default, Event of Default, monetary Mortgage Default, Mortgage Event of
Default, monetary Mezzanine Default or Mezzanine Event of Default shall have occurred and be
continuing at the time the Fourth Qualified Extension Option is exercised or on the date that the
Fourth Qualified Extension Term commences;



(ii) Borrowers shall notify Lender of their irrevocable election to exercise the Fourth
Qualified Extension Option not earlier than six (6) months, and not later than thirty (30) days,
prior to the Third Qualified Extended Maturity Date;



(iii) if any Interest Rate Cap Agreement is scheduled to mature prior to the Fourth Qualified
Extended Maturity Date, Borrowers shall obtain and deliver to Lender not later than one (1)
Business Day immediately preceding the first day of the Fourth Qualified Extension Term, one or
more Replacement Interest Rate Cap Agreements (or extension(s) of the existing Interest Rate Cap
Agreement(s)) from an Acceptable Counterparty, which Replacement Interest Rate Cap Agreement(s) (or
extension(s) of the existing Interest Rate Cap Agreement(s)) shall (i) be effective commencing on
the first day of the Fourth Qualified Extension Term, (ii) have a LIBOR strike price equal to the
applicable Strike Price, (iii) have a maturity date not earlier than the Fourth Qualified Extended
Maturity Date and (iv) shall have a notional amount equal to the Outstanding Principal Balance.
Borrowers shall (x) assign to Lender, as collateral for the Loan, pursuant to a Replacement
Collateral Assignment of Interest Rate Cap, all of its right, title and interest to receive any and
all payments under such Replacement Interest Rate Cap Agreement, and the Counterparty shall execute
an acknowledgment to such Replacement Collateral Assignment of Interest Rate Cap agreeing to make
deposits directly into the Cash Management Account and (y) obtain and deliver to Lender an opinion
from counsel (which counsel may be in-house counsel for the Counterparty) for the Counterparty
(upon which Lender and its successors and assigns may rely), which opinion shall comply with
Section 2.2.7(e) hereof;



(iv) not later than one (1) Business Day immediately preceding the first day of the Fourth
Qualified Extension Term, all accrued and unpaid interest and any



 


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unpaid or unreimbursed amounts in respect of the Loan and any other sums then due to Lender
hereunder or under any of the other Loan Documents shall have been paid in full;




(v) not later than one (1) Business Day immediately preceding the first day of the Fourth
Qualified Extension Term, Borrowers shall have caused Mortgage Borrowers to deposit with Mortgage
Lender in immediately available funds, for deposit by Mortgage Lender into the applicable Mortgage
Reserve Fund(s) (other than the Interest Reserve Fund), any shortfalls in such Reserve Fund(s) with
respect to the Fourth Qualified Extension Term, if any, as determined by Mortgage Lender in
accordance with the applicable provisions of the Mortgage Loan Agreement, and which amounts
thereafter shall constitute a part of the applicable Reserve Fund(s) and shall be held and
disbursed by Mortgage Lender as set forth in Article VII of the Mortgage Loan Agreement (or, if the
Mortgage Loan has been paid in full, Borrowers shall have deposited such amount with Lender for
deposit into the applicable Reserve Fund(s) to be held and disbursed by Lender as set forth in
Article VII hereof);



(vi) the maturity date of the Mortgage Loan, if the Mortgage Loan is then outstanding, shall
be extended to not earlier than the Fourth Qualified Extended Maturity Date on the same terms and
conditions as in effect on the date hereof;



(vii) the maturity date of the Second Mezzanine Loan, if the Second Mezzanine Loan is then
outstanding, shall be extended to not earlier than the Fourth Qualified Extended Maturity Date on
the same terms and conditions as in effect on the date hereof;



(viii) the maturity date of the Third Mezzanine Loan, if the Third Mezzanine Loan is then
outstanding, shall be extended to not earlier than the Fourth Qualified Extended Maturity Date on
the same terms and conditions as in effect on the date hereof;



(ix) Borrowers shall have reimbursed Lender for all costs reasonably incurred by Lender in
processing the extension request, including, without limitation, reasonable legal fees and
expenses; provided, however, that in no event shall Borrowers be required to pay
any such fees, costs or expenses in excess of Twenty Thousand Dollars ($20,000); and



(x) there shall exist no Shortfall as of the Business Day immediately preceding the first
(1st) day of the Fourth Qualified Extension Term, provided, however,
that this condition shall be of no further force or effect after the date on which Final Completion
is achieved.



2.7.3 Intentionally Deleted.



Section 2.8 Exit Fees.



(a) In all events and under all circumstances, Borrowers shall (in addition to all other
amounts which may then be payable to Lender hereunder) be obligated to pay to Lender an exit fee
(the “Exit Fee”) as follows: (i) subject to the following clause (ii) and (iii), upon any
(and each) partial prepayment of the Loan (including, without limitation, any voluntary prepayment
pursuant to the provisions of Section 2.4 (including, without limitation,



 


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any prepayment made from the proceeds of any Release Parcel Price or IP Release Price) or
otherwise, and/or any application of amounts to the Debt or any portion thereof following an Event
of Default), Borrowers shall pay an Exit Fee (in addition to the principal amount prepaid or
repaid) in an amount equal to one and one half percent (1.50%) of the principal amount prepaid or
repaid; (ii) upon any (and each) application of any Net Proceeds to the Debt in accordance with the
terms of this Agreement, Borrowers shall pay an Exit Fee in an amount (in addition to the Net
Proceeds so applied) equal to one and one half percent (1.50%) of such Net Proceeds; and (iii) upon
any repayment in full of the Debt or the acceleration thereof in accordance with the terms hereof
or of any other Loan Documents, Borrowers shall pay to Lender an Exit Fee (in addition to the
principal amount of the Debt repaid) equal to the principal amount of the Debt so repaid multiplied
by one and one-half percent (1.50%). In furtherance of the foregoing, each Borrower expressly
acknowledges and agrees that (A) Lender shall have no obligation to accept any prepayment of the
Loan unless and until Borrowers shall have complied with this Section 2.8, and (B) Lender
shall have no obligation to release any Loan Document upon payment of the Debt unless and until
Lender shall have received the entire Exit Fee.



(b) Each Borrower expressly acknowledges and agrees that the Exit Fee (i) shall constitute
additional consideration for the Loan, and (ii) shall, upon payment, be the sole and exclusive
property of Lender.



ARTICLE III.

CONDITIONS PRECEDENT.





Section 3.1 Intentionally Deleted.



Section 3.2 Submission of Construction Loan Advance Documents to Lender. Borrowers
shall submit, or shall cause Mortgage Borrowers to submit, to Lender, contemporaneously with any
submission thereof by Mortgage Borrowers to Mortgage Lender, a copy of each Draw Request related to
each Construction Loan Advance and all documents required to be delivered by Mortgage Borrowers to
Mortgage Lender in connection therewith pursuant to Article III of the Mortgage Loan Agreement;
provided, however, that any breach of this provision shall not constitute an Event
of Default hereunder.



ARTICLE IV.

REPRESENTATIONS AND WARRANTIES.




Section 4.1 Representations of Borrowers. Each Borrower represents and warrants as to
itself that as of the date hereof:




4.1.1 Organization.



(a) Such Borrower has been duly organized and is validly existing and in good standing with
requisite power and authority to own its assets and to transact the businesses in which it is now
engaged. Such Borrower is duly qualified to do business and is in



 


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good standing in each jurisdiction where it is required to be so qualified in connection with
its assets, businesses and operations. Such Borrower possesses all material rights, licenses,
permits and authorizations, governmental or otherwise, necessary to entitle it to own its
properties and to transact the businesses in which it is now engaged, and the sole business of such
Borrower is the ownership and management of the relevant Mortgage Borrower. The ownership
interests of such Borrower are as set forth on the organizational chart attached hereto as
Schedule VI.



(b) Such Borrower has the power and authority and the requisite ownership interests to control
the actions of the relevant Mortgage Borrower and upon the realization of the Pledged Collateral
under the Pledge Agreement, Lender or any other party succeeding to such Borrower’s interest in the
Pledged Collateral described in the Pledge Agreement would have such control. Without limiting the
foregoing, such Borrower has sufficient control over the relevant Mortgage Borrower to cause such
Mortgage Borrower to (i) take any action on Mortgage Borrower’s part required by the Mortgage Loan
Documents and (ii) refrain from taking any action prohibited by the Mortgage Loan Documents.



4.1.2 Proceedings. Such Borrower has taken all necessary action to authorize the
execution, delivery and performance of this Agreement and the other Loan Documents. This Agreement
and the other Loan Documents have been duly executed and delivered by or on behalf of such Borrower
and constitute legal, valid and binding obligations of such Borrower enforceable against such
Borrower in accordance with their respective terms, subject only to applicable bankruptcy,
insolvency and similar laws affecting rights of creditors generally, and subject, as to
enforceability, to general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).



4.1.3 No Conflicts. The execution, delivery and performance of this Agreement and the
other Loan Documents by such Borrower will not materially conflict with or result in a material
breach of any of the terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance (other than pursuant to the Loan
Documents) upon any of the property or assets of such Borrower pursuant to the terms of any
indenture, mortgage, deed of trust, loan agreement, partnership agreement, management agreement or
other agreement or instrument to which such Borrower is a party or by which any of such Borrower’s
property or assets is subject, nor will such action result in any violation of the provisions of
any statute or any order, rule or regulation of any Governmental Authority having jurisdiction over
such Borrower or any of such Borrower’s properties or assets, and any consent, approval,
authorization, order, registration or qualification of or with any such Governmental Authority
necessary to permit the execution, delivery and performance by such Borrower of this Agreement or
any other Loan Documents has been obtained and is in full force and effect.




4.1.4 Litigation. Except as set forth on Schedule VIII attached hereto:



(a) There is no action, suit, claim, proceeding or investigation pending against any Loan
Party, HRHI or any Guarantor or, to such Borrower’s actual knowledge, pending against any Property,
the IP or the Collateral or, to such Borrower’s actual knowledge, threatened in writing against any
Loan Party, HRHI or any Guarantor, or any Property, the IP or the Collateral in any court or by or
before any other Governmental Authority that would have a material adverse effect on (i) the
business operations, economic performance, assets, financial



 


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condition, equity, contingent liabilities, material agreements or results of operations of
such Loan Party, HRHI, any Guarantor, any Property, the IP or the Collateral, (ii) the
enforceability or validity of any Loan Document, the perfection or priority of any Lien created
under any Loan Document or the remedies of Lender under any Loan Document, (iii) the ability of any
Loan Party, HRHI or any Guarantor to perform, in all material respects, its respective obligations
under each of the Mortgage Loan Documents or the Loan Documents, as applicable, or (iv) the value
of, or cash flow from, any Property, the IP or the Collateral.



(b) There is no proceeding, investigation or disciplinary action (including, without
limitation, before any Gaming authority, under any Gaming Law or under any Gaming License or other
Operating Permit) pending or, to Borrower’s actual knowledge, threatened in writing, either (i) in
connection with, or that seeks to restrain, enjoin, prevent the consummation of or otherwise
challenge, any of the Loan Documents or the Mortgage Loan Documents or any of the transactions
contemplated therein, or (ii) to Borrower’s actual knowledge, that, either singly or in the
aggregate, could reasonably be expected to have an adverse effect on any Gaming License currently
in effect with respect to the Casino Component, including, without limitation, any such proceeding,
investigation or disciplinary action pending or, threatened against Gaming Operator, any Loan Party
or any of their respective directors, members, managers, officers, key personnel or Persons holding
a five percent (5%) or greater direct or indirect equity or economic interest in such Borrower or
any Mortgage Borrower. Additionally, there is no proceeding (including, without limitation, before
any Gaming Authority, under any Gaming Law or under any Gaming License or other Operating Permit)
pending or, to Borrowers’ actual knowledge, threatened in writing that could reasonably be expected
to have a material adverse effect on any Gaming License or other Operating Permit by Gaming
Borrower or any Affiliate thereof or any officer, director, employee or agent of any Loan Party or
any Affiliate of any Loan Party.



4.1.5 Agreements. Such Borrower is not a party to any agreement or instrument or
subject to any restriction which would be reasonably likely to materially and adversely affect any
Loan Party, any Property, the IP or the Collateral, or such Borrower’s business, properties or
assets, operations or condition, financial or otherwise. To the best of such Borrower’s actual
knowledge, no Loan Party is in default in any material respect in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any agreement, license
or instrument to which it is a party or by which such Loan Party or any of the Properties, the IP
or the Collateral are bound. Such Borrower has no material financial obligation under any
indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which such
Borrower is a party or by which such Borrower or its properties or assets is otherwise bound, other
than (a) obligations incurred in the ordinary course of business relating to such Borrower’s
ownership and operation of the Collateral permitted pursuant to clause (s) of the
definition of “Special Purpose Entity” set forth in Section 1.1 hereof, (b) obligations
incurred in the ordinary course of the business relating to Mortgage Borrowers’ ownership and
operation of the Properties as permitted pursuant to clause (s) of the definition of
“Special Purpose Entity” set forth in Section 1.1 of the Mortgage Loan Agreement as in effect on
the date hereof, and (c) obligations under the Loan Documents.


 


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4.1.6 Title.



(a) Such Borrower is the record and beneficial owner of, and has good and valid title to, its
Pledged Interests, free and clear of all Liens, except those Liens granted to Lender under the Loan
Documents. The Pledge Agreement, together with the UCC Financing Statements relating to the
Pledged Collateral that have been properly filed in the appropriate records, created and continue
to create a valid, perfected first priority security interest in and to the portion of the Pledged
Collateral covered thereby, all in accordance with the terms thereof for which a Lien can be
perfected by filing a UCC Financing Statement. For so long as the Lien of the Pledge Agreement is
outstanding, such Borrower shall forever warrant, defend and preserve such title and the validity
and priority of the Lien of the Pledge Agreement and shall forever warrant and defend such title,
validity and priority to Lender against the claims of all persons whomsoever.



(b) Each Mortgage Borrower has good, marketable and insurable fee simple title to the real
property comprising part of its Property and good title to the balance of such Property, free and
clear of all Liens whatsoever except the Permitted Encumbrances, such other Liens as are permitted
pursuant to the Mortgage Loan Documents and the Liens created by the Mortgage Loan Documents.



(c) To the best of each Borrower’s actual knowledge, the Permitted Encumbrances in the
aggregate do not materially and adversely affect the operation or use of the Properties (as
currently used) or such Borrower’s ability to repay the Loan or Mortgage Borrowers ability to repay
the Mortgage Loan.



(d) To such Borrower’s actual knowledge after due inquiry, there are no claims for payment for
work, labor or materials affecting any of the Properties that are or may become a Lien prior to, or
of equal priority with, the Liens created by the Mortgage Loan Documents, except any Lien then
being contested pursuant to, and in accordance with, Section 3.6(b) of the Mortgage.



4.1.7 Solvency. Borrowers have (a) not entered into the transaction or executed the
Note, this Agreement or any other Loan Documents with the actual intent to hinder, delay or defraud
any creditor and (b) received reasonably equivalent value in exchange for their respective
obligations under such Loan Documents. Taking into account the Loan, the aggregate fair saleable
value of Borrowers’ assets collectively exceeds and will exceed Borrowers’ total aggregate
liabilities, including, without limitation, subordinated, unliquidated, disputed and contingent
liabilities. Taking into account the Loan, the aggregate fair saleable value of Borrowers’ assets
collectively is and will be greater than Borrowers’ probable aggregate liabilities, including the
maximum amount of their contingent liabilities on its debts as such debts become absolute and
matured. Taking into account the Loan, each Borrower’s assets do not and will not constitute
unreasonably small capital to carry out its business as conducted or as proposed to be conducted.
Borrowers do not intend to, and do not believe that they will, incur Indebtedness and liabilities
(including contingent liabilities and other commitments) beyond their respective abilities to pay
such Indebtedness and liabilities as they mature (taking into account the timing and amounts of
cash to be received by each Borrower and the amounts to be payable on or in respect of obligations
of each Borrower). No petition in bankruptcy has been filed



 


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against any Loan Party, HRHI or any Guarantor, and none of the Loan Parties, HRHI nor any
Guarantor has ever made an assignment for the benefit of creditors or taken advantage of any
insolvency act for the benefit of debtors. None of the Loan Parties, HRHI nor any Guarantor are
contemplating either the filing of a petition by it under any state or federal bankruptcy or
insolvency laws or the liquidation of all or a major portion of its assets or properties, and no
Borrower has any actual knowledge of any Person contemplating the filing of any such petition
against any Loan Party, HRHI or any Guarantor.



4.1.8 Full and Accurate Disclosure. To such Borrower’s actual knowledge, no statement
of fact made by any Borrower in this Agreement or in any of the other Loan Documents contains any
untrue statement of a material fact or omits to state any material fact necessary to make
statements contained herein or therein not misleading. There is no fact or circumstance presently
known to such Borrower which has not been disclosed to Lender and which will have a material
adverse effect on (a) the use and operation of any of the Properties, the IP, or the Collateral,
(b) the enforceability or validity of any Loan Document, the perfection or priority of any Lien
created under any Loan Document or the remedies of Lender under any Loan Document, or (c) the
ability of such Borrower, any Mortgage Borrower, HRHI or any Guarantor to perform, in all material
respects, its respective obligations under each of the Loan Documents and the Mortgage Loan
Documents, as applicable.



4.1.9 No Plan Assets. From the Closing Date and throughout the term of the Loan (a)
no Borrower is nor will any Borrower be an “employee benefit plan,” as defined in Section 3(3) of
ERISA, subject to Title I of ERISA, (b) none of the assets of any Borrower constitutes or will
constitute “plan assets” of one or more such plans within the meaning of 29 C.F.R. Section
2510.3-101, (c) no Borrower is nor will any Borrower be a “governmental plan” within the meaning of
Section 3(32) of ERISA, and (d) none of the assets of any Borrower constitute “plan assets” of a
governmental plan within the meaning of 29 C.F.R. Section 2510.3-101 for purposes of any state law
provisions regulating investments of, or fiduciary obligations with respect to, governmental plans.



4.1.10 Compliance. Except as set forth in the applicable Zoning Report, each Loan
Party and, to the best of such Borrower’s actual knowledge after due inquiry, the Land and
Improvements (including the use thereof) comply in all material respects with all applicable Legal
Requirements, including, without limitation, building and zoning ordinances and codes and
Prescribed Laws. No Loan Party is in default or violation of any order, writ, injunction, decree
or demand of any Governmental Authority. There has not been committed by any Loan Party or, to any
Borrower’s actual knowledge, any other Person in occupancy of or involved with the operation or use
of any of the Properties or the Collateral any act or omission affording the federal government or
any other Governmental Authority the right of forfeiture as against any Property, the Collateral or
any part of either of the foregoing or any monies paid in performance of any Mortgage Borrower’s
obligations under any of the Mortgage Loan Documents or paid in performance of any Borrower’s
obligations under any of the Loan Documents.



4.1.11 Financial Information. To such Borrower’s actual knowledge, all historical
financial data, including, without limitation, the statements of cash flow and income and operating
expense, that have been delivered to Lender in connection with the Loan (i) are true, complete and
correct in all material respects, (ii) accurately represent in all material respects



 


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the financial condition of the Properties (and each Property) and the Collateral, as
applicable, as of the date of such reports, and (iii) to the extent prepared or audited by an
independent certified public accounting firm, have been prepared in accordance with the Uniform
System of Accounts and reconciled with GAAP throughout the periods covered, except as disclosed
therein. Except for Permitted Encumbrances and except as referred to or reflected in said
financial statements previously delivered to Lender in connection with the Loan, no Loan Party has
any contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments that are known to any Borrower
and are reasonably likely to have a materially adverse effect on the Collateral or any Property or
(a) the operation of the Hotel/Casino Property as a hotel and casino at a standard at least equal
to Comparable Hotel/Casinos, including, without limitation, comparable food and beverage outlets
and other amenities, and/or (b) the operation of the Café Property and the Adjacent Property for a
use or uses that is/are consistent with the operation of the Hotel/Casino Property as a hotel and
casino at a standard at least equal to Comparable Hotel/Casinos, which use may include, without
limitation, expansion of the Hotel/Casino Property, restaurants, retail and residential complexes
(the “Permitted Adjacent/Café Uses”). Since the date of such financial statements, there has been
no material adverse change in the financial condition, operation or business of any Loan Party or,
to each Borrower’s actual knowledge after due inquiry, to the Collateral and, to the extent not
prohibited by the Merger Agreement, any Property from that set forth in said financial statements.



4.1.12 Condemnation. No Condemnation or other proceeding has been commenced or, to
each Borrower’s actual knowledge, is threatened in writing received by such Borrower or
contemplated with respect to all or any portion of any Property or for the relocation of any
roadway providing direct access to any Property.



4.1.13 Federal Reserve Regulations. No part of the proceeds of the Loan will be used
for the purpose of purchasing or acquiring any “margin stock” within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System or for any other purpose which would be
inconsistent with such Regulation U or any other Regulations of such Board of Governors, or for any
purposes prohibited by any Legal Requirements or by the terms and conditions of this Agreement or
the other Loan Documents.



4.1.14 Utilities and Public Access. To such Borrower’s actual knowledge after due
inquiry, each Property has rights of access to public ways and is served by water, sewer, sanitary
sewer and storm drain facilities adequate to service such Property for its intended uses. All
public utilities necessary to the continued current use and enjoyment of each Property are located
either in the public right-of-way abutting such Property (which are connected so as to serve such
Property without passing over other property) or in recorded easements serving such Property and
such easements are set forth in and insured by the Title Insurance Policy covering such Property.
To such Borrower’s actual knowledge after due inquiry, all roads necessary for the use of each
Property for its current purpose have been completed and dedicated to public use and accepted by
all Governmental Authorities or are located in recorded easements serving such Property and such
easements are set forth in and insured by the Title Insurance Policy.



4.1.15 Not a Foreign Person. No Borrower is a “foreign person” within the meaning of
§1445(f)(3) of the Code.


 


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4.1.16 Separate Lots. Each Property is comprised of one (1) or more parcels which
constitute a separate tax lot or lots and does not constitute a portion of any other tax lot not a
part of such Property.



4.1.17 Assessments. Except as disclosed in the Title Insurance Policy, to each
Borrower’s actual knowledge, there are no pending or proposed special or other assessments for
public improvements or otherwise affecting any Property, nor are there any contemplated
improvements to any Property that may result in such special or other assessments.



4.1.18 Enforceability. The Loan Documents are not subject to any right of rescission,
set-off, claim, counterclaim or defense by any Restricted Party, including the defense of usury,
nor would the operation of any of the terms of the Loan Documents, or the exercise of any right
thereunder, render the Loan Documents unenforceable (subject to principles of equity and
bankruptcy, insolvency and other laws generally affecting creditors’ rights and the enforcement of
debtors’ obligations), and no Restricted Party has asserted any right of rescission, set-off,
claim, counterclaim or defense with respect thereto.



4.1.19 No Prior Assignment. Other than the assignment in favor of Mortgage Lender
under the Mortgage Loan Documents, there are no prior assignments by Mortgage Borrowers of the
Leases or any portion of the Rents due and payable or to become due and payable which are presently
outstanding. There are no prior assignments of the Collateral which are presently outstanding
except in accordance with the Loan Documents.



4.1.20 Insurance. Mortgage Borrowers have obtained and Borrowers have delivered to
Lender certified copies of all Policies (or “Accord” certificates evidencing coverage thereof)
reflecting the insurance coverages, amounts and other requirements set forth in this Agreement. No
claims have been made under any such Policies, and no Person, including any Loan Party, has done,
by act or omission, anything which would impair the coverage of any such Policies.



4.1.21 Use of the Properties. (a) The Hotel/Casino Property is used exclusively as a
hotel and casino at a standard at least equal to Comparable Hotel/Casinos, including, without
limitation, comparable food and beverage outlets and other amenities, and otherwise as a top-end
hotel and other appurtenant and related uses, and (b) the Café Property and the Adjacent Property
are used for Permitted Adjacent/Café Uses and other appurtenant and related uses.



4.1.22 Certificate of Occupancy; Operating Permits. To the best of each Borrower’s
actual knowledge after due inquiry, all certifications, permits, licenses and approvals, including,
without limitation, certificates of completion and occupancy permits, all environmental, health and
safety licenses, gaming licenses and permits and any applicable liquor license necessary to permit
the legal use, occupancy and operation of (a) the Hotel/Casino Property as a hotel and casino at a
standard at least equal to Comparable Hotel/Casinos, including, without limitation, comparable food
and beverage outlets and other amenities, and (b) the Café Property and the Adjacent Property as
currently operated on the date hereof, or, subsequent to the date hereof, for Permitted
Adjacent/Café Uses (collectively, the “Operating Permits”), have been obtained and are in full
force and effect. Each Borrower shall cause Mortgage Borrowers to keep and maintain, or cause to
be kept and maintained, all Operating



 


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Permits necessary for the operation of (i) the Hotel/Casino Property as a hotel and casino at
a standard at least equal to Comparable Hotel/Casinos, and (ii) the Café Property and the Adjacent
Property for one or more Permitted Adjacent/Café Purposes. To the best of each Borrower’s actual
knowledge after due inquiry, the use being made of each Property is in conformity with the
Certificate(s) of Occupancy issued for such Property. Attached hereto as Schedule IX is, to the
best of each Borrower’s actual knowledge after due inquiry, a true and complete list of all current
Operating Permits and those which are subject to renewal.



4.1.23 Flood Zone. None of the Improvements on any Property are located in an area
identified by the Federal Emergency Management Agency as an area having special flood hazards or,
if so located, the flood insurance required pursuant to Section 6.1(a)(i) of the Mortgage
Loan Agreement is in full force and effect with respect to each such Property.



4.1.24 Physical Condition. Except as provided in the Physical Conditions Reports, to
each Borrower’s actual knowledge after due inquiry, (a) each Property, including, without
limitation, all buildings, improvements, parking facilities, sidewalks, storm drainage systems,
roofs, plumbing systems, HVAC systems, fire protection systems, electrical systems, equipment,
elevators, exterior sidings and doors, landscaping, irrigation systems and all structural
components, are in good condition, order and repair in all material respects; (b) there exists no
material structural or other material defects or damages in any Property, whether latent or
otherwise; and (c) no Loan Party has received notice from any insurance company or bonding company
of any defects or inadequacies in any Property, or any part thereof, which would adversely affect
the insurability of the same or cause the imposition of extraordinary premiums or charges thereon
or of any termination or threatened termination of any policy of insurance or bond.



4.1.25 Boundaries. Except as disclosed on the Surveys, to each Borrower’s actual
knowledge, all of the Improvements which were included in determining the appraised value of each
Property lie wholly within the boundaries and building restriction lines of such Property, and no
improvements on adjoining properties encroach upon such Property, and no easements or other
encumbrances upon any Property encroach upon any of the Improvements, so as to materially and
adversely affect the value or marketability of such Property except those which are insured against
by the applicable Title Insurance Policy for such Property.



4.1.26 Leases. To each Borrower’s actual knowledge after due inquiry and except as
set forth on Schedule X attached hereto or as otherwise disclosed in the estoppel
certificates delivered to Lender in connection with the origination of the Loan, (a) the Properties
are not subject to any Leases other than the Leases described in said Schedule X, (b) each
Mortgage Borrower is the owner and lessor of the landlord’s interest in each such Lease affecting
its Property, (c) no Person has any possessory interest in any Property or any right to occupy the
same except under and pursuant to the provisions of such Leases, (d) all commercial Leases are in
full force and effect and there are no material defaults thereunder by either party and there are
no conditions that, with the passage of time or the giving of notice, or both, would constitute
material defaults thereunder, (e) the copies of the commercial Leases delivered to Lender are true
and complete, and there are no oral agreements with respect thereto, (f) no Rent (including
security deposits) has been paid more than one (1) month in advance of its due date, (g) all work
to be performed by the landlord under each Lease has been performed as required in



 


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such Lease and has been accepted by the applicable tenant, and any payments, free rent,
partial rent, rebate of rent or other payments, credits, allowances or abatements required to be
given by any Mortgage Borrower to any tenant has already been received by such tenant, (h) there
has been no prior sale, transfer or assignment, hypothecation or pledge of any Lease or of the
Rents received therein which is still in effect, (i) no commercial tenant listed on Schedule
X has assigned its Lease or sublet all or any portion of the premises demised thereby, no such
commercial tenant holds its leased premises under assignment or sublease, nor does anyone except
such commercial tenant and its employees occupy such leased premises, (j) no tenant under any Lease
has a right or option pursuant to such Lease or otherwise to purchase all or any part of the
Property of which the leased premises are a part, and (k) no tenant under any Lease has any right
or option for additional space in the Improvements.



4.1.27 Affiliates. Such Borrower does not own any equity interests in any other
Person other than the related Pledged Interests.



4.1.28 Principal Place of Business; State of Organization. Each Borrower’s principal
place of business as of the date hereof is the address set forth in the introductory paragraph of
this Agreement. Each Borrower is organized under the laws of the State of Delaware.



4.1.29 Filing and Recording Taxes. All transfer taxes, deed stamps, intangible taxes
or other amounts in the nature of transfer taxes required to be paid by any Person under applicable
Legal Requirements currently in effect in connection with the transfer of the Properties and/or the
IP to Mortgage Borrowers and/or the transfer of the Collateral to Borrowers have been paid.
Borrowers and each of their Affiliates have filed or caused to be filed all reports relating to
gaming taxes or fees to any Gaming Authority required to be filed by them on or prior to the date
hereof. All mortgage, mortgage recording, stamp, intangible or other similar tax required to be
paid by any Person under applicable Legal Requirements currently in effect in connection with the
execution, delivery, recordation, filing, registration, perfection or enforcement of any of the
Mortgage Loan Documents, including, without limitation, the Mortgage, or of any of the Loan
Documents, including, without limitation, the Pledge Agreement and the related UCC Financing
Statements, have been paid as of the date hereof. The Pledge Agreement and the other Loan
Documents are enforceable against Borrowers in accordance with their respective terms by Lender (or
any subsequent holder thereof), subject to principles of equity and bankruptcy, insolvency and
other laws generally applicable to creditors’ rights and the enforcement of debtors’ obligations.




4.1.30 Special Purpose Entity/Separateness.



(a) Until the Debt has been paid in full and the obligations under the Mortgage Loan
Documents, the Loan Documents and the Mezzanine Loan Documents have been paid in full, each
Borrower hereby represents, warrants and covenants that (i) such Borrower is, shall be and shall
continue to be a Special Purpose Entity and (ii) each Mortgage Borrower is, shall be and shall
continue to be a “Special Purpose Entity” (as such term is defined in Section 1.1 of the Mortgage
Loan Agreement as in effect on the date hereof).


 


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(b) The representations, warranties and covenants set forth in Section 4.1.30(a)
hereof shall survive for so long as any amount remains payable to Lender under this Agreement or
any other Loan Document.



(c) All of the assumptions made in the Insolvency Opinion, including, but not limited to, any
exhibits attached thereto, are true and correct in all respects. Each Borrower has complied and
will comply with all of the assumptions made with respect to such Borrower in the Insolvency
Opinion.



(d) Each Borrower hereby covenants and agrees that (i) any assumptions made in any subsequent
non-consolidation opinion required to be delivered in connection with the Loan Documents (an
“Additional Insolvency Opinion”), including, but not limited to, any exhibits attached thereto,
shall be true and correct in all respects, (ii) each Borrower will comply with all of the
assumptions made with respect to each Borrower in any Additional Insolvency Opinion, and (iii) each
Person other than any Borrower with respect to which an assumption shall be made in any Additional
Insolvency Opinion will comply with all of the assumptions made with respect to it in any
Additional Insolvency Opinion.



(e) Mortgage Borrowers have complied, and each Borrower will cause Mortgage Borrowers to
comply, with all of the assumptions made with respect to Mortgage Borrowers in the Insolvency
Opinion and each Borrower will cause Mortgage Borrowers to comply with all of the assumptions made
with respect to Mortgage Borrowers in any Additional Insolvency Opinion.




4.1.31 Management Agreements; Liquor Management Agreement.



(a) Each of the Management Agreements is in full force and effect and there is no default
thereunder by any party thereto and no event has occurred that, with the passage of time and/or the
giving of notice would constitute a default thereunder (other than the non-payment of certain
management fees and other payments under the Management Agreement outstanding as of December 23,
2009, which non-payment has not given rise to the exercise or enforcement of remedies under such
Management Agreement as of the date hereof). Following the date hereof, there shall be no material
default thereunder (other than the non-payment of certain management fees and other payments under
the Management Agreement outstanding as of December 23, 2009, which non-payment has not given rise
to the exercise or enforcement of remedies under such Management Agreement as of the date hereof).




(b) Intentionally Deleted.



(c) The Liquor Management Agreement is in full force and effect and there is no default
thereunder by any party thereto and no event has occurred that, with the passage of time and/or the
giving of notice would constitute a default thereunder.



4.1.32 Illegal Activity. No portion of any Property, the IP or the Collateral has
been or will be purchased by any Loan Party or any other Restricted Party with proceeds of any
illegal activity.


 


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4.1.33 No Change in Facts or Circumstances; Disclosure. To each Borrower’s actual
knowledge, all material information submitted by any Borrower or Mortgage Borrower to Lender and in
all financial statements, rent rolls, reports, certificates and other documents submitted in
connection with the Loan or in satisfaction of the terms thereof and all statements of fact made by
any Borrower in this Agreement or in any other Loan Document, and, to the knowledge of each
Borrower, all statements of fact made by Mortgage Borrowers in the Mortgage Loan Agreement or in
any other Mortgage Loan Document, are accurate, complete and correct in all material respects. To
each Borrower’s actual knowledge, there has been no material adverse change in any condition, fact,
circumstance or event that would make any such information inaccurate, incomplete or otherwise
misleading in any material respect or that otherwise materially and adversely impairs, or is
reasonably likely to do so after the date hereof, the use or operation of the Properties, the IP or
the Collateral or the business operations or the financial condition of any Loan Party. Each
Borrower has disclosed to Lender all material facts actually known to such Borrower and has not
failed to disclose any material fact actually known to such Borrower that could cause any Provided
Information or representation or warranty made herein to be materially misleading.



4.1.34 Investment Company Act. No Borrower is (a) an “investment company” or a
company “controlled” by an “investment company,” within the meaning of the Investment Company Act
of 1940, as amended; or (b) subject to any other federal or state law or regulation which purports
to restrict or regulate its ability to borrow money.



4.1.35 Embargoed Person. From the Closing Date and at all times throughout the term
of the Loan, including after giving effect to any Transfers permitted pursuant to the Loan
Documents, (a) none of the funds or other assets of any Loan Party, HRHI or any Guarantor shall
constitute property of, or shall be beneficially owned, directly or indirectly, by, any Person
subject to trade restrictions under United States law, including, but not limited to, the
International Emergency Economic Powers Act, 50 U.S.C. § 1701 et seq., The Trading with the Enemy
Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated under any such
United States laws (each, an “Embargoed Person”), with the result that the Loan made by Lender is
or would be in violation of law; (b) no Embargoed Person shall have any interest of any nature
whatsoever in any Loan Party, HRHI or any Guarantor, as applicable, with the result that the Loan
is or would be in violation of law; and (c) none of the funds of any Loan Party, HRHI or any
Guarantor, as applicable, shall be derived from any unlawful activity with the result that the Loan
is or would be in violation of law; provided, however, that Borrowers’
representation in this clause (c) shall not extend to gaming revenues generated at the
Hotel/Casino Property from the general public unless any Loan Party or any other Restricted Party
has actual knowledge that such revenues are derived from any unlawful activity.




4.1.36 Cash Management Account.



(a) This Agreement, together with the other Loan Documents, creates (and as of the Closing
Date, created) a valid and continuing security interest (as defined in the Uniform Commercial Code
of the State of New York) in the Cash Management Account in favor of Lender, which security
interest is prior to all other Liens and is enforceable as such against creditors of and purchasers
from any Borrower. Other than in connection with the Loan Documents, no Borrower has sold or
otherwise conveyed the Cash Management Account;


 


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(b) The Cash Management Account constitutes a “deposit account” within the meaning of the
Uniform Commercial Code of the State of New York; and



(c) The Cash Management Account is not in the name of any Person other than Borrowers, as
pledgors, or Lender, as pledgee.




4.1.37 Intellectual Property.




(a) Intentionally Deleted.



(b) Schedule VII attached hereto is a true, correct and complete list of all the
Registered IP used by any Loan Party in connection with the ownership, operation and/or use of one
or more of the Properties. Part I of said Schedule VII is a true, correct and complete
list of all Registered IP owned by IP Borrower or any Affiliated IP Party, including Registered IP
and that has been assigned to IP Borrower by Morton pursuant to that certain Trademark Assignment
dated as of February 2, 2007 from Morton in favor of IP Borrower (the “Morton Assigned IP”; and all
of the foregoing, collectively, the “Owned IP”). Part II of said Schedule VII is a true,
correct and complete list of all Registered IP licensed from Rank Licensing, Inc. (“Rank”) to
Morton pursuant to that certain Trademark License and Cooperation Agreement, dated June 7, 1996,
between Rank and Morton and which has been assigned from Morton to IP Borrower pursuant to that
certain Assignment and Assumption Agreement dated as of February 2, 2007 (the “Rank License”) from
Morton in favor of IP Borrower and which has been assigned from Rank to Hard Rock Café
International (USA), Inc. (“HCRI”) (all such IP listed on Part II of said Schedule VII, the
“Rank IP”). Part III of said Schedule VII is a true, correct and complete list of all
Registered IP that is licensed from Morton to IP Borrower pursuant to that certain License
Agreement, dated as of February 2, 2007 (the “Pink Taco License”) from Morton in favor of IP
Borrower (all such IP listed on Part IV of said Schedule VII, the “Pink Taco IP”; and the
Pink Taco IP, together with the Rank IP, the “Licensed IP”).




(c) Intentionally Deleted.



(d) Except as set forth on Part IV of Schedule VII, Mortgage Borrowers or an
Affiliated IP Party owns or possesses licenses or other rights in or under all patents, trademarks,
service marks, trade names, domain names, copyrights and any other IP, which is necessary for the
use, ownership, management, promotion and operation of its Property and associated merchandising as
currently so used, except where the failure to so own or possess such IP, licenses or other rights
could not reasonably be expected to have a material adverse effect on such use, ownership or
operations (a “IP Material Adverse Effect”).




(e) Part V of said Schedule VII hereto sets forth:




(i) any written communications from any Loan Party or any Affiliate thereof to
one or more third parties, or from one or more third parties to any Loan Party or
any Affiliate thereof, alleging infringement by any third party or any Loan Party or
any Affiliate thereof, of any of the IP or alleging related acts of unfair
competition or activities or actions of any anti-competitive nature, together with
all responses to such communications and a description of the status of each such
alleged infringement, in each case, which the failure to resolve such alleged



 


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infringement or competition could reasonably be expected to have a IP Material
Adverse Effect; and




(ii) a complete list of any goods and/or services sold by any Person other than
any Loan Party and of whom any Loan Party has actual knowledge, which in the opinion
of any Loan Party infringes upon any IP listed in said Schedule VII hereof
or with respect to which the failure to resolve such alleged infringement could
reasonably be expected to have an IP Material Adverse Effect.




(f) Except as disclosed in said Schedule VII:




(i) IP Borrower or an Affiliated IP Party owns the Owned IP, and IP Borrower
has a valid and enforceable license to use the Licensed IP, in each case free and
clear of any Liens other than the Permitted IP Encumbrances;




(ii) no Loan Party or an Affiliated IP Party has granted nor is obligated to
grant any other Person any rights (including, without limitation licenses) with
respect to any of the Owned IP other than the Permitted IP Encumbrances;




(iii) to Borrowers’ actual knowledge, the trademarks, service marks, domain
names and copyrights included in the Owned IP and in the Licensed IP are valid;




(iv) to Borrowers’ actual knowledge, the trademark registrations, service mark
registrations, domain name registrations and copyright registrations included in the
Owned IP and Licensed IP have been duly issued and have not been canceled, abandoned
or otherwise terminated;




(v) to Borrowers’ actual knowledge, the trademark applications, service mark
applications, domain name applications and copyright applications included in the
Owned IP have been duly filed; and




(vi) to Borrowers’ actual knowledge, all material IP Agreements are valid and
binding in accordance with their terms (except as the enforceability thereof may be
limited by any applicable bankruptcy, reorganization, insolvency or other laws
affecting creditors’ rights generally or by general principles of equity) and are in
full force and effect.



(g) To Borrowers’ actual knowledge, no Loan Party or Affiliated IP Party is obligated to
disclose any of the IP to any other Person.



(h) To Borrowers’ actual knowledge, except for the Licensed IP, no Loan Party requires a
license or right under or in respect of any intellectual property of any other Person (except
another Loan Party) to conduct such Loan Party’s business as presently conducted and no substantial
part of such business is carried on under the agreement or consent of any other Person nor is there
any agreement to which any Loan Party is a party which significantly restricts the fields in which
such business may be carried on.


 


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(i) To Borrowers’ actual knowledge, there are and have been no proceedings, actions or claims
and no proceedings, actions or claims are pending or threatened, impugning the title, validity or
enforceability of any of the IP.



(j) To Borrowers’ actual knowledge, none of the processes currently used by any Loan Party or
any Affiliated IP Party or any of the properties or products currently sold by any Loan Party or
any Affiliated IP Party, and none of the IP or Licensed IP, infringes the patent, industrial
property, trademark, trade name, domain name, label, other mark, right or copyright or any other
similar right of any other Person, except where such infringement could not reasonably be expected
to have an IP Material Adverse Effect.



(k) To Borrowers’ actual knowledge, no basis exists for any adverse claim by any third party
with respect to any of the IP, and no act has been done or has been omitted to be done by any Loan
Party or any Affiliate thereof to entitle any Person to make such a claim or to cancel, forfeit or
modify any of the IP in a manner that could reasonably be expected to have an IP Material Adverse
Effect.



(l) Except the Licensed IP, no Loan Party requires a license or right under or in respect of
any intellectual property of any other Person (except another Loan Party) to conduct such Loan
Party’s business as presently conducted and no substantial part of such business is carried on
under the agreement or consent of any other Person nor is there any agreement to which any Loan
Party is a party which significantly restricts the fields in which such business may be carried on.



(m) To Borrowers’ actual knowledge, no disclosure has been made to any Person of the know-how
or financial or trade secrets of any Loan Party, except properly and in the ordinary course of
business and on condition that such disclosure is to be treated as being of a confidential nature
and except where such disclosure would not reasonably be expected to have an IP Material Adverse
Effect; and to Borrower’s actual knowledge, none of the IP is being infringed by any other Person,
except where such infringement could not reasonably be expected to have an IP Material Adverse
Effect.



4.1.38 No Franchise Agreement. None of the Loan Parties or Managers has entered into,
and none of the Properties are subject to, any franchise, trademark or license agreement with any
Person with respect to the name and/or operation of any Property, other than the IP Agreements, the
Rank License and the Pink Taco License.



4.1.39 Merger Agreement. The Acquisition and the Other Transaction Closings (as such
capitalized terms are defined in the Merger Agreement) were consummated in accordance with all of
the material terms and conditions of the Merger Agreement and the Other Transaction Documents (as
defined in the Merger Agreement), with only such amendments, supplements and/or modifications
thereto, and waivers and extensions thereof, as Mortgage Lender has approved in writing, to the
extent such approval is required under that certain Commitment Letter dated December 22, 2006
between Morgans Hotel Group Co., MHG HR Acquisition Corp, DLJ Merchant Banking, Inc. and Mortgage
Lender.


 


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4.1.40 Morton Indemnification and PWR/RWB Escrow Agreement. Borrowers have delivered,
or caused Mortgage Borrowers to deliver, to Lender true, correct and complete copies of each of the
Morton Indemnification and the PWR/RWB Escrow Agreement and all amendments thereto. Except for
such amendments thereto as have been delivered to Lender, the Morton Indemnification and the
PWR/RWB Escrow Agreement have not been amended or modified and are in full force and effect. No
Loan Party nor any Affiliate thereof has (a) made any claim under the Morton Indemnification,
except as set forth in Schedule XII hereto, or (b) requested any disbursement of funds
under the PWR/RWB Escrow Agreement with respect to any claim under the Morton Indemnification or
otherwise. No Loan Party nor any Affiliate thereof knows of any state of facts currently existing
that would be reasonably likely to result in a claim under the Morton Indemnification, except as
set forth in Schedule XII hereto.




4.1.41 Gaming Licenses and Other Operating Permits.



(a) HRHI possesses all Operating Permits (including, but not limited to, all liquor licenses)
which are necessary for the execution, delivery and performance of the Liquor Management Agreement.
All of such Operating Permits are in and will be in full force and effect; the Loan Parties and
each of their Affiliates, as applicable, including, without limitation, HRHI, are in compliance in
all material respects with all such Operating Permits; and no event, including, without limitation,
any violation of any Legal Requirement, has occurred which would be reasonably likely to lead to
the suspension, revocation or termination of any such Operating Permit or the imposition of any
restriction thereon.



(b) Gaming Borrower possesses all Operating Permits (including, without limitation, all Gaming
Licenses) which are material to the execution, delivery and performance of the Casino Component
Lease and the use, occupation and operation of the Casino Component; each such Operating Permit and
Gaming License (or any replacement thereof) is and will be in full force and effect; and, Gaming
Borrower is in compliance in all material respects with all Gaming Licenses and all other Operating
Permits applicable to the operation of the Casino Component as contemplated herein. Further,
Borrowers hereby represent and warrant as follows:



(c) Borrowers have no reason to believe that Gaming Borrower will not be able to maintain in
effect all Gaming Licenses and other Operating Permits necessary for the lawful conduct of its
business or operations as now conducted and as planned to be conducted at the Hotel/Casino
Property, including the operation of the Casino Component, pursuant to all applicable Legal
Requirements.



(d) All Gaming Licenses are in full force and effect and have not been amended or otherwise
modified in any material adverse respect or suspended, rescinded or revoked.



(e) None of the Loan Parties is in default in any material respect under, or in violation in
any material respect of, any Gaming License or other Operating Permit, and no event has occurred,
and no condition exists, which, with the giving of notice or passage of time or both, would
constitute such a default thereunder or such a violation thereof, that has



 


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caused or would reasonably be expected to cause the loss, suspension, revocation, impairment,
forfeiture, non-renewal or termination of any Gaming License or the imposition of any restriction
thereon.



(f) None of the Loan Parties nor Gaming Borrower has received any notice of any violation of
any Legal Requirement which has caused or would reasonably be expected to cause any Gaming License
or other Operating Permit to be modified in any material adverse respect or suspended, rescinded or
revoked.



(g) The continuation, validity and effectiveness of all Gaming Licenses and other Operating
Permits will not be adversely affected by the transactions contemplated by this Agreement.



(h) The Casino Component Lease is in full force and effect, none of the Loan Parties nor
Gaming Borrower is in material default thereof and no event has occurred, and no condition exists,
which, with the giving of notice or passage of time, or both, would constitute a material default
thereunder or material violation thereof.



(i) The execution, delivery or performance of any of the Loan Documents will not permit nor
result in the imposition of any material penalty under, or the suspension, revocation or
termination of, any Gaming License or other Operating Permit or any material impairment of the
rights of the holder of any Gaming License.



(j) There are no restrictions on transfer or agreements not to encumber the ownership
interests of any Loan Party in any of the Loan Documents or the Mortgage Loan Documents that
require the approval of the Gaming Authorities in order to become effective, except as set forth in
Section 17 of the Pledge Agreement.



(k) (i) Hotel/Casino Borrower meets the suitability standards for a landlord contemplated or
set forth in the Gaming Laws; and (ii) no Loan Party shall take dominion over the Casino Component
while such Casino Component continues to be used for gaming purposes without first obtaining the
approvals required by the Gaming Laws.



4.1.42 Control of Borrowers and Mortgage Borrowers. Borrowers have the power and
authority and the requisite ownership interests to Control the actions of Mortgage Borrowers.



4.1.43 Separate and Distinct Loans. The Loan, the Mortgage Loan and the Mezzanine
Loans are entirely separate, distinct and independent obligations, made to separate and distinct
borrowers, on separate and distinct terms and secured by separate and distinct collateral.



4.1.44 Mortgage Loan Documents. There are no Mortgage Loan Documents other than those
set forth on Schedule XI attached hereto. True and correct copies of all the Mortgage Loan
Documents have been provided to Lender and none of the Mortgage Loan Documents have been modified
or amended since the delivery thereof, except as forth on such Schedule XI.


 


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4.1.45 No Mortgage Default. No Mortgage Default or Mortgage Event of Default existed
as of the Closing Date or as of the date hereof.




4.1.46 Mortgage Loan Representations and Warranties.



(a) Borrowers have reviewed the representations and warranties made by, and covenants of,
Mortgage Borrowers to and for the benefit of Mortgage Lender contained in the Mortgage Loan
Documents and such representations and warranties are true, correct and complete in all material
respects.



(b) All of the representations and warranties contained in the Mortgage Loan Documents are
hereby incorporated into this Agreement and deemed made hereunder as and when made thereunder and
shall remain incorporated without regard to any waiver, amendment or other modification thereof or
to whether the related Mortgage Loan Document has been repaid or otherwise terminated, unless
otherwise consented to in writing by Lender.



4.1.47 Distributions to Affiliates. Neither of the Borrowers has entered into, and
none of the Collateral is subject to, any agreements to pay any amounts to any Restricted Party,
any DLJMB Party or any direct or indirect equity holder in or affiliate of any of the foregoing,
other than with respect to (a) the fees and expense reimbursements payable to any Affiliated
Manager pursuant to any Management Agreement reasonably approved by Lender and (b) any monitoring
fee due and payable to the DLJMB Parties pursuant to the limited liability company agreement of HR
Holdings.



Section 4.2 Survival of Representations. Borrowers agree that all of the
representations and warranties of any Borrower set forth in Section 4.1 hereof and
elsewhere in this Agreement and in the other Loan Documents shall survive for so long as any amount
remains owing to Lender under this Agreement or any of the other Loan Documents by Borrowers. All
representations, warranties, covenants and agreements made in this Agreement or in the other Loan
Documents by any Borrower shall be deemed to have been relied upon by Lender notwithstanding any
investigation heretofore or hereafter made by Lender or on its behalf.



Section 4.3 Definition of Borrowers’ Knowledge. As used in this Agreement or any
other Loan Document, the phrases “Borrowers’ knowledge”, “any Borrower’s knowledge”, “Borrowers’
actual knowledge”, “any Borrower’s actual knowledge”, “Borrowers’ best knowledge” or “any
Borrower’s best knowledge” or words of similar import, shall mean the actual knowledge, after
commercially reasonable due inquiry, of any of Fred Kleisner, Marc Gordon, David Smail, Matt
Armstrong, Arthur Blee, Ana Nekhamkin, Ryan Sprott, and/or Bobby Kelly (the “Named Knowledge
Parties”) and/or any additional individual or individuals who in the future are delegated or assume
any of the responsibilities of any of the foregoing Named Knowledge Parties with respect to any of
the Properties, and the knowledge of no other Person shall be imputed to any of the Named Knowledge
Parties or any such other individuals, it being expressly represented and warranted to Lender by
Borrowers that it would be unlikely that any material fact regarding any of the Properties or
Borrowers or otherwise covered in the representations and warranties contained herein or in any
other Loan Document would not come



 


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to the attention of one or more of the Named Knowledge Parties, after commercially reasonable
due inquiry. Notwithstanding anything to the contrary contained in this Agreement or any other
Loan Document, none of the Named Knowledge Parties shall have any personal liability hereunder.



ARTICLE V.

COVENANTS OF BORROWERS




Section 5.1 Affirmative Covenants. From the Closing Date and until payment and
performance in full of all obligations of Borrowers under the Loan Documents or the earlier release
of the Lien of the Pledge Agreement encumbering the Collateral (and all related obligations) in
accordance with the terms of this Agreement and the other Loan Documents, Borrowers hereby jointly
and severally covenant and agree with Lender that:



5.1.1 Existence; Compliance with Legal Requirements. Each Borrower shall do or cause
to be done all things necessary to preserve, renew and keep in full force and effect its existence,
rights, licenses, permits and franchises necessary for the conduct of its business and comply, or
cause Mortgage Borrowers to comply, in all material respects with all Legal Requirements applicable
to such Borrower, Mortgage Borrowers, the Collateral, the Properties or the IP, including, without
limitation, Prescribed Laws. There shall never be committed by any Borrower, and no Borrower
shall, nor shall cause Mortgage Borrowers to, knowingly permit any other Person in occupancy of or
involved with the operation or use of any of the Properties to commit, any act or omission
affording the federal government or any state or local government the right of forfeiture against
the Collateral and/or any Property or any part thereof or any monies paid in performance of any
Borrower’s obligations under any of the Loan Documents or paid in performance of Mortgage
Borrowers’ obligations under any of the Mortgage Loan Documents. Each Borrower hereby covenants
and agrees not to commit, permit or suffer to exist any act or omission affording such right of
forfeiture. Each Borrower shall, and shall cause Mortgage Borrowers to, at all times maintain,
preserve and protect in all material respects all franchises and trade names and preserve all the
remainder of its property necessary for the conduct of its business as contemplated hereunder, and,
subject to Mortgage Borrowers’ right to demolish the Improvements on the Adjacent Property subject
to, and in accordance with, the provisions of Section 3.18 of the Mortgage Loan Agreement, shall
keep the Properties in good working order and repair in all material respects, and from time to
time make, or cause to be made, all reasonably necessary repairs, renewals, replacements,
betterments and improvements thereto, all as more fully provided in the Mortgage. Borrowers shall
cause Mortgage Borrowers to keep the Properties insured at all times by financially sound and
reputable insurers, to such extent and against such risks, and maintain liability and such other
insurance, as is more fully provided in the Mortgage Loan Agreement. Borrowers shall cause
Mortgage Borrowers to operate the Properties in accordance with the terms and provisions of the O&M
Agreements in all material respects. After prior notice to Lender, any Borrower, at its own
expense, may contest, or may cause Mortgage Borrowers to contest, by appropriate legal proceeding
promptly initiated and conducted in good faith and with due diligence, the validity of any Legal
Requirement, the applicability of any Legal Requirement to any Loan Party, the Collateral or the
Property or any alleged violation of any Legal Requirement, provided that (a) no Event of
Default, Mortgage Event of Default or any Mezzanine Event of Default has occurred and remains
uncured; (b) such proceeding shall be permitted under and be conducted in accordance with the
provisions of any



 


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instrument to which such Loan Party is subject and shall not constitute a default thereunder
and such proceeding shall be conducted in accordance with all applicable statutes, laws and
ordinances; (c) neither any Property nor the Collateral or any part thereof or interest therein
will be in imminent danger of being sold, forfeited, terminated, cancelled or lost; (d) such
Borrower shall, and shall cause Mortgage Borrowers to, promptly upon final determination thereof
comply with any such Legal Requirement determined to be valid or applicable or cure any violation
of any Legal Requirement; (e) such proceeding shall suspend the enforcement of the contested Legal
Requirement against such Loan Party, the Collateral or any Property; and (f) such Borrower shall
furnish, or shall cause Mortgage Borrowers to furnish, such security as may be required in the
proceeding, or as may be reasonably requested by Lender, to insure compliance with such Legal
Requirement, together with all interest and penalties payable in connection therewith. Following
any non-compliance with such Legal Requirement as determined by a court of competent jurisdiction,
Lender may apply any such security, as necessary to cause compliance with such Legal Requirement at
any time when, in the reasonable judgment of Lender, the validity, applicability or violation of
such Legal Requirement is finally established or the Collateral or any Property (or any part
thereof or interest therein) shall be in imminent danger of being sold, forfeited, terminated,
cancelled or lost.



5.1.2 Taxes and Other Charges. Borrowers shall pay, or shall cause Mortgage Borrowers
to pay, all Taxes and Other Charges now or hereafter levied or assessed or imposed against the
Properties or any part thereof prior to the date upon which any interest or late charges shall
begin to accrue thereon; provided, however, Mortgage Borrowers’ obligation to
directly pay Taxes shall be suspended for so long as Mortgage Borrowers comply with the terms and
provisions of Section 7.2 of the Mortgage Loan Agreement or Borrowers comply with the terms and
provisions of Section 7.2 hereof, if applicable. Borrowers will deliver, or will cause
Mortgage Borrowers to deliver, to Lender receipts for payment or other evidence satisfactory to
Lender that the Taxes and Other Charges have been so paid or are not then delinquent. Borrowers
shall furnish, or shall cause Mortgage Borrowers to furnish, to Lender receipts for the payment of
the Taxes and the Other Charges prior to the date upon which any interest or late charges shall
begin to accrue thereon; provided, however, Mortgage Borrowers shall not be
required to furnish such receipts for payment of Taxes in the event that such Taxes have been paid
by Mortgage Lender pursuant to Section 7.2 of the Mortgage Loan Agreement or by Lender pursuant to
Section 7.2 hereof, if applicable. Borrowers shall not suffer, and shall not permit
Mortgage Borrowers to suffer, and shall promptly cause to be paid and discharged (or provide
reasonable security for) any Lien or charge against any of the Properties or the Collateral, and
shall promptly pay, or shall cause Mortgage Borrowers to promptly pay, for all utility services
provided to any of the Properties. After prior notice to Lender, any Borrower, at its own expense,
may contest, or may cause Mortgage Borrowers to contest, by appropriate legal proceeding, promptly
initiated and conducted in good faith and with due diligence, the amount or validity or application
in whole or in part of any Taxes or Other Charges, provided that (a) no Event of Default,
Mortgage Event of Default or Mezzanine Event of Default exists; (b) such proceeding shall be
permitted under and be conducted in accordance with the provisions of any other instrument to which
such Borrower or Mortgage Borrowers is subject and shall not constitute a default thereunder and
such proceeding shall be conducted in accordance with all applicable statutes, laws and ordinances;
(c) neither any Property, the Collateral nor any part thereof or interest therein will be in
imminent danger of being sold, forfeited, terminated, cancelled or lost; (d) such Borrower shall
promptly upon final determination thereof pay, or shall



 


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cause Mortgage Borrowers to pay, the amount of any such Taxes or Other Charges, together with
all costs, interest and penalties which may be payable in connection therewith; (e) such proceeding
shall suspend the collection of such contested Taxes or Other Charges from the applicable Property
and the Collateral; and (f) such Borrower shall furnish, or shall cause Mortgage Borrowers to
furnish, such security as may be required in the proceeding, or as may be reasonably requested by
Lender, to insure the payment of any such Taxes or Other Charges, together with all interest and
penalties thereon. Lender may pay over any such cash deposit or part thereof held by Lender to the
claimant entitled thereto at any time when, in the reasonable judgment of Lender, the entitlement
of such claimant is established or the Collateral or any Property (or part thereof or interest
therein) shall be in danger of being sold, forfeited, terminated, cancelled or lost or there shall
be any imminent danger of the Lien of the Pledge Agreement being primed by any related Lien.



5.1.3 Litigation. Borrowers shall give prompt notice to Lender of any litigation or
governmental proceedings pending or threatened in writing against any Loan Party, HRHI or any
Guarantor which, if adversely determined, would have a material adverse effect on (a) the business
operations, economic performance, assets, financial condition, equity, contingent liabilities,
material agreements or results of operations of any Loan Party, HRHI, any Guarantor, any Property,
the IP or the Collateral, (b) the enforceability or validity of any Loan Document, the perfection
or priority of any Lien created under any Loan Document or the remedies of Lender under any Loan
Document, (c) the ability of any Loan Party, HRHI or any Guarantor to perform, in all material
respects, its respective obligations under each of the Mortgage Loan Documents or the Loan
Documents, as applicable, or (d) the value of, or cash flow from, any Property, the IP or the
Collateral.



5.1.4 Access to the Properties. Borrowers shall cause Mortgage Borrowers to permit
agents, representatives and employees of Lender to inspect the Properties or any part thereof at
reasonable hours upon reasonable advance notice (which may be given verbally), subject to the
rights of tenants under their Leases (other than the Casino Component Lease).



5.1.5 Special Distributions. On each date on which amounts are required to be
disbursed to the Cash Management Account or otherwise to be paid to Borrowers or Lender pursuant to
the terms of the Mortgage Loan Documents (including the Mortgage Loan Agreement and/or the Mortgage
Cash Management Agreement), or are required to be paid to Lender under any of the Loan Documents,
Borrowers shall exercise their rights to cause Mortgage Borrowers to make to Borrowers
distributions in an aggregate amount such that Lender shall receive the amount required to be
disbursed to Lender from the Cash Management Account or otherwise paid to Lender on such date.



5.1.6 Cooperate in Legal Proceedings. Borrowers shall reasonably cooperate, and shall
cause Mortgage Borrowers to reasonably cooperate, fully with Lender with respect to any proceedings
before any court, board or other Governmental Authority which in any way materially affects the
rights of Lender hereunder or any rights obtained by Lender under any of the other Loan Documents
and, in connection therewith, permit Lender, at its election, to participate in any such
proceedings.


 


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5.1.7 Perform Loan Documents. Borrowers shall observe, perform and satisfy all the
terms, provisions, covenants and conditions of, and shall pay when due all costs, fees and expenses
to the extent required under the Loan Documents executed and delivered by, or applicable to, any
Borrower. Payment of the costs and expenses associated with any of the foregoing shall be in
accordance with the terms and provisions of this Agreement, including, without limitation, the
provisions of Section 10.13 hereof.



5.1.8 Award and Insurance Benefits. Subject to the terms of Article VI
hereof, Borrowers shall reasonably, and shall cause Mortgage Borrowers to reasonably, cooperate
with Lender in obtaining for Lender the benefits of any Awards or Insurance Proceeds to which
Lender is entitled under the Loan Documents and which is lawfully or equitably payable in
connection with any Property, and Lender shall be reimbursed for any actual, reasonable expenses
incurred in connection therewith (including attorneys’ fees and disbursements, and the payment by
Borrowers of the expense of an appraisal on behalf of Lender in case of Casualty or Condemnation
affecting any Property or any part thereof) out of such Insurance Proceeds or Awards.



5.1.9 Further Assurances. Borrowers shall, and shall cause each other Loan Party to,
at Borrowers’ sole cost and expense (subject to the terms and conditions of this Agreement):



(a) execute and deliver to Lender such documents, instruments, certificates, assignments and
other writings, and do such other acts necessary or desirable, to evidence, preserve and/or protect
the Collateral at any time securing or intended to secure the obligations of Borrowers under the
Loan Documents, as Lender may reasonably require, including, without limitation, if permitted by
applicable law, the execution and delivery of all such writings necessary to transfer any Operating
Permits with respect to any Property into the name of Lender or its designee after the occurrence
of an Event of Default; and



(b) do and execute all and such further lawful and reasonable acts, conveyances and assurances
for the better and more effective carrying out of the intents and purposes of this Agreement and
the other Loan Documents, as Lender shall reasonably require from time to time.



5.1.10 Personal Property Taxes. Borrowers represent that as of the Closing Date
Borrowers have paid all state, county and municipal recording and all other taxes imposed upon the
execution and filing of the UCC Financing Statements.




5.1.11 Financial Reporting.



(a) Borrowers will keep and maintain or will cause to be kept and maintained on a Fiscal Year
basis, in accordance with the Uniform System of Accounts and reconciled each year in accordance
with GAAP (or such other accounting basis acceptable to Lender), proper and accurate books, records
and accounts reflecting all of the financial affairs of each Borrower and all items of income and
expense in respect of the Collateral. Borrowers shall cause each other Loan Party to keep and
maintain on a Fiscal Year basis, in accordance with the Uniform System of Accounts and reconciled
each year in accordance with GAAP (or such other



 


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accounting basis acceptable to Lender), Borrowers shall also keep and maintain or will cause
to be kept and maintained, on a cash accounting basis, proper and accurate books, and records
reflecting the information contained in the Cash Profit and Loss Statements. Lender shall have the
right from time to time at all times during normal business hours upon reasonable notice (which may
be verbal) to examine such books, records and accounts (including, without limitation, the Cash
Profit and Loss Statement) at the office of any Loan Party or any other Person maintaining such
books, records and accounts and to make such copies or extracts thereof as Lender shall desire.
After the occurrence and during the continuance of an Event of Default, Borrowers shall pay any
actual costs and expenses incurred by Lender to examine Borrowers’ and Mortgage Borrowers’
accounting records with respect to the Properties, the IP and the Collateral, as Lender shall
reasonably determine to be necessary or appropriate in the protection of Lender’s interest.



(b) Borrowers will furnish to Lender annually, within one hundred twenty (120) days following
the end of each Fiscal Year of Borrowers, a complete copy of each Borrower’s, Mortgage Borrower’s,
HRHI’s and each Guarantor’s annual financial statements audited by a “Big Four” accounting firm or
other independent certified public accountant reasonably acceptable to Lender (it being hereby
understood and agreed that BDO Seidman, LLP is acceptable to Lender) in accordance with the Uniform
System of Accounts (or, in the case of Guarantors, GAAP) and reconciled each year in accordance
with GAAP (or such other accounting basis acceptable to Lender) covering the Collateral and the
Properties for such Fiscal Year and containing statements of profit and loss for Borrowers,
Mortgage Borrowers, HRHI, each Guarantor, the Collateral and each Property and a balance sheet for
Borrowers, Mortgage Borrowers, HRHI and each Guarantor; provided, however, that in
the event that any Guarantor is not otherwise required to, and does not, cause to be prepared such
audited financial statements in the ordinary course of its business, it may deliver the unaudited
statements which are delivered to its investors or otherwise prepared in the ordinary course of its
business, accompanied by the Officer’s Certificate required under Section 5.1.11(b)(B) of the
Mortgage Loan Agreement. Borrowers shall also deliver to Lender a Cash Profit and Loss Statement
annualized for the applicable prior Fiscal Year, which Cash Profit and Loss Statement shall be
prepared on a cash accounting basis. Notwithstanding anything to the contrary set forth in this
Agreement, the financial statements of Borrowers and Mortgage Borrowers may be consolidated with
those of (1) HRHI for so long as (y) HRHI owns no other assets other than the ownership interests
in one or more of the Loan Parties and/or other assets related to one or more of the Loan Parties,
one or more of the Properties and/or the IP, and (z) engages in no other business other than those
related to owning one or more of the Loan Parties and/or other assets related to one or more of the
Loan Parties, one or more of the Properties and/or the IP, and (2) HR Holdings for so long as (x)
the provisions of the foregoing clause (1) remain true, (y) HR Holdings owns no other
assets other than the ownership interests in HRHI and/or one or more of the Loan Parties and/or
other assets related to HRHI, one or more of the Loan Parties, one or more of the Properties and/or
the IP, and (z) engages in no other business other than those related to owning HRHI and/or one or
more of the Loan Parties and/or other assets related to HRHI, one or more of the Loan Parties, one
or more of the Properties and/or the IP. Borrowers will furnish, or will cause Mortgage Borrowers
to furnish, to Lender a copy of the financial statements and all other materials which Mortgage
Borrowers are required to provide to Mortgage Lender under Section 5.1.11 of the Mortgage Loan
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(c) For each Fiscal Year during the term of the Loan, Borrowers shall submit to Lender (and
Borrowers shall cause Mortgage Borrowers to submit to Mortgage Lender) an Annual Budget not later
than twenty (20) days prior to the commencement of such Fiscal Year.



(d) In the event that any Mortgage Borrower must incur any Extraordinary Expense, then
Borrowers shall promptly deliver to Lender (and Borrowers shall cause Mortgage Borrowers to
promptly deliver to Mortgage Lender) a reasonably detailed explanation of such proposed
Extraordinary Expense for Lender’s approval, provided that Mortgage Borrower shall be permitted to
obtain a disbursement of funds for payment of Extraordinary Expenses prior to obtaining Lender
approval thereof and to the extent provided under the provisions of Section 2.6.2(b)(iii) and
2.6.2(c)(v) of the Mortgage Loan Agreement (further provided that, inter alia, the same when
combined with any disbursements made with respect to Pre-Opening Expenses in such calendar month do
not exceed $586,000 in the aggregate) but shall be subject to the provisions of Section 2.6.2(h)
and Borrowers’ obligations thereunder. Notwithstanding the foregoing, no prior approval by Lender
shall be required for any Extraordinary Expense needed to be incurred immediately to prevent
imminent injury to person or damage to property, provided that within three (3) Business Days
thereafter Borrowers shall provide reasonably satisfactory evidence to Lender to demonstrate the
imminent necessity and reasonableness of the Extraordinary Expense incurred.



(e) If, at the time a Disclosure Document is being prepared for a Securitization, Lender
expects that any or more Borrowers alone or any one or more Borrowers and one or more Affiliates of
any Borrower collectively, or the Collateral or any one or more of the Properties alone or any one
or more of the Properties and any one or more Related Properties collectively, will be a
Significant Obligor, Borrowers shall furnish, or shall cause Mortgage Borrowers to furnish, to
Lender upon request (i) the selected financial data or, if applicable, Net Operating Income,
required under Item 1112(b)(1) of Regulation AB, if Lender expects that the principal amount of the
Loan together with any Related Loans as of the cut-off date for such Securitization may, or if the
principal amount of the Loan together with any Related Loans as of the cut-off date for such
Securitization and at any time during which the Loan and any Related Loans are included in a
Securitization does, equal or exceed ten percent (10%) (but less than twenty percent (20%)) of the
aggregate principal amount of all mezzanine loans included or expected to be included, as
applicable, in the Securitization, or (ii) the financial statements required under Item 1112(b)(2)
of Regulation AB, if Lender expects that the principal amount of the Loan together with any Related
Loans as of the cut-off date for such Securitization may, or if the principal amount of the Loan
together with any Related Loans as of the cut-off date for such Securitization and at any time
during which the Loan and any Related Loans are included in a Securitization does, equal or exceed
twenty percent (20%) of the aggregate principal amount of all mezzanine loans included or expected
to be included, as applicable, in the Securitization. Such financial data or financial statements
shall be furnished to Lender (A) within fifteen (15) Business Days after notice from Lender in
connection with the preparation of Disclosure Documents for the Securitization, (B) not later than
forty-five (45) days after the end of each calendar quarter of Borrowers, and (C) not later than
one hundred twenty (120) days after the end of each calendar year of Borrowers; provided,
however, that Borrowers shall not be obligated to furnish financial data or financial
statements pursuant to clauses (B) or (C) of this sentence with respect to any
period for which a filing pursuant to the Exchange Act in



 


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connection with or relating to the Securitization (an “Exchange Act Filing”) is not required.
If requested by Lender, Borrowers shall furnish, or shall cause Mortgage Borrowers to furnish, to
Lender financial data and/or financial statements for any tenant of any Property, but only to the
extent such tenant is required to provide such financial data and/or financial statements under its
Lease, if, in connection with a Securitization, Lender expects there to be, with respect to such
tenant or group of Affiliated tenants, a concentration within all of the mezzanine loans included
or expected to be included, as applicable, in the Securitization such that such tenant or group of
affiliated tenants would constitute a Significant Obligor.



(f) All financial data and financial statements provided by Borrowers pursuant to Section
5.1.11(e) hereof shall be prepared in accordance with GAAP (unless otherwise specified) and
shall meet the requirements of Regulation AB and all other applicable Legal Requirements. All
financial statements referred to in Section 5.1.11(e) hereof shall be audited by
independent accountants of Borrowers or Mortgage Borrowers reasonably acceptable to Lender in
accordance with Regulation AB and all other applicable Legal Requirements, shall be accompanied by
the manually executed report of the independent accountants thereon, which report shall meet the
requirements of Regulation AB and all other applicable Legal Requirements, and shall be further
accompanied by a manually executed written consent of the independent accountants, in form and
substance reasonably acceptable to Lender, to the inclusion of such financial statements in any
Disclosure Document and any Exchange Act Filing and to the use of the name of such independent
accountants and the reference to such independent accountants as “experts” in any Disclosure
Document and Exchange Act Filing, all of which shall be provided at the same time as the related
financial statements are required to be provided. All financial data and financial statements
(audited or unaudited) provided by Borrowers or Mortgage Borrowers under Section 5.1.11(e)
hereof shall be accompanied by an Officer’s Certificate of each Borrower, which certification shall
state that such financial statements meet the requirements set forth in the first sentence of this
Section 5.1.11(f).



(g) If requested by Lender, Borrowers shall provide, or shall cause Mortgage Borrowers to
provide, Lender, promptly upon request, with any other or additional financial statements, or
financial, statistical or operating information, as Lender shall reasonably determine to be
required pursuant to Regulation AB or any amendment, modification or replacement thereto or other
Legal Requirements in connection with any Disclosure Document or any Exchange Act Filing or as
shall otherwise be reasonably requested by Lender.



(h) In the event Lender reasonably determines, in connection with a Securitization, that the
financial data and financial statements required in order to comply with Regulation AB or any
amendment, modification or replacement thereto or any other Legal Requirements are other than as
provided herein, then notwithstanding the provisions of Sections 5.1.11(e) and (f)
hereof, Lender may request, and Borrowers shall promptly provide, or shall cause Mortgage Borrowers
to provide, such other financial data and financial statements as Lender determines to be necessary
or appropriate for such compliance.



(i) Borrowers hereby agree to provide Lender with at least five (5) Business Days’ written
notice prior to the effectiveness of any change (and each change) in any of the Independent
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(j) Any reports, statements or other information required to be delivered under this
Section 5.1.11 shall be delivered (i) in paper form, (ii) on a compact disk or DVD, and
(iii) if requested by Lender and within the capabilities of Borrowers’ or Mortgage Borrowers’ data
systems without change or modification thereto, in electronic form and prepared using Microsoft
Word for Windows or WordPerfect for Windows files (which files may be prepared using a spreadsheet
program and saved as word processing files). Borrowers agree that Lender may disclose information
regarding the Properties, the Collateral and any Loan Party that is provided to Lender pursuant to
this Section 5.1.11 in connection with any Securitization to such parties requesting such
information in connection with such Securitization.



5.1.12 Business and Operations. Borrowers will continue, and will cause Mortgage
Borrowers to continue, to engage in the businesses presently conducted by it as and to the extent
the same are necessary for the ownership, maintenance, management and operation of the Collateral,
the Properties or the IP, as applicable. Each Borrower will qualify, and will cause Mortgage
Borrowers to qualify, to do business and will remain, and will cause Mortgage Borrowers to remain,
in good standing under the laws of each jurisdiction as and to the extent the same are required for
the ownership, maintenance, management and operation of the Collateral, the Properties or the IP,
as applicable.



5.1.13 Title to the Collateral, the Properties and the IP. Borrowers will warrant and
defend (i) the title to the Collateral and every part thereof, subject only to Liens permitted
hereunder (including Permitted Encumbrances) or under the Pledge Agreement, and (ii) the validity
and priority of the Lien of the Pledge Agreement, subject only to Liens permitted hereunder
(including Permitted Encumbrances), in each case against the claims of all Persons whomsoever.



(a) Borrowers will cause Mortgage Borrowers to warrant and defend (i) the title to each
Property, the Owned IP and any right in and under all IP Agreements with respect to Licensed IP,
and every part thereof, subject only to Liens permitted hereunder (including Permitted
Encumbrances, Permitted IP Encumbrances and the asset sales and releases permitted under this
Agreement), and (ii) the validity and priority of the Liens of the Mortgage, the Assignment of
Leases and the IP Assignments, subject only to Liens permitted hereunder (including Permitted
Encumbrances and Permitted IP Encumbrances), in each case against the claims of all Persons
whomsoever.



(b) Borrowers shall reimburse Lender for any actual losses, actual costs, actual damages
(excluding lost profits, diminution in value and other consequential damages) or reasonable
expenses (including reasonable attorneys’ fees and court costs) incurred by Lender if an interest
in the Collateral, any Property or the IP, other than as permitted hereunder, is claimed by another
Person.



5.1.14 Costs of Enforcement. In the event (a) that the Pledge Agreement is foreclosed
in whole or in part or that the Pledge Agreement is put into the hands of an attorney for
collection, suit, action or foreclosure, (b) of the foreclosure of any pledge prior to or
subsequent to the Pledge Agreement in which proceeding Lender is made a party, or (c) of the
bankruptcy, insolvency, rehabilitation or other similar proceeding in respect of any Borrower or
any of its Constituent Members or an assignment by any Borrower or any of its Constituent



 


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Members for the benefit of its creditors, and Lender incurs costs in connection with any such
proceeding as a direct or indirect result of the Loan, then, in any of the foregoing instances,
each Borrower, on behalf of itself and its successors or assigns, shall be chargeable with and
shall pay all actual out-of-pocket costs of collection and defense, including attorneys’ fees and
costs, incurred by Lender or any Borrower in connection therewith and in connection with any
appellate proceeding or post-judgment action involved therein.




5.1.15 Estoppel Statement.



(a) After request by Lender from time to time, but in no event more than two (2) times in any
twelve (12) month period except in connection with a Securitization, Borrowers shall within ten
(10) Business Days furnish Lender with a statement, duly acknowledged and certified, setting forth
(i) the original principal amount of the Loan, (ii) the Outstanding Principal Balance and all
Accrued Interest then due, (iii) the Applicable Interest Rate and the Monthly Interest Rate of the
Loan, (iv) the date an installment of interest was last paid, (v) any offsets or, to the best of
each Borrower’s actual knowledge, defenses to the payment of the Debt, if any, and (vi) that the
Note, this Agreement, the Pledge Agreement and the other Loan Documents are valid, legal and
binding obligations of Borrowers and have not been modified or, if modified, giving particulars of
such modification.



(b) After request by Borrowers, but in no event more than two (2) times in any twelve (12)
month period, Lender shall within ten (10) Business Days furnish Borrowers with a statement, duly
acknowledged and certified, stating (i) the Outstanding Principal Balance and all Accrued Interest
then due, (ii) the Applicable Interest Rate and the Monthly Interest Rate, (iii) the date an
installment of interest was last paid, and (iv) whether or not Lender has sent any notice of
default under the Loan Documents which remains uncured in the opinion of Lender.



(c) Borrowers shall use commercially reasonable efforts to deliver, or cause to be delivered,
to Lender within thirty (30) days of receipt of written request, tenant estoppel certificates from
each commercial tenant leasing space at any of the Properties, in form and substance reasonably
satisfactory to Lender; provided that, except in connection with a Securitization,
Borrowers shall not be required to deliver such certificates more frequently than once in any
calendar year or less frequently if, and to the extent, so restricted by the terms of any Leases
entered into prior to the Closing Date.



(d) Borrowers shall deliver, within ten (10) Business Days after request by Lender from time
to time, estoppel certificates from each Mortgage Borrower and/or each Mezzanine Borrower, covering
substantially the same matters as set forth in clause (a) above and any other matters
reasonably requested by Lender.



5.1.16 Loan Proceeds. Borrowers used the proceeds of the Loan received by them on the
Closing Date only for the purposes set forth in Section 2.1.2 hereof.




5.1.17 Performance by Borrowers.



(a) Borrowers shall, in a timely manner and in all material respects, observe, perform and
fulfill each and every covenant, term and provision of each Loan



 


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Document executed and delivered by, or applicable to, any Borrower, and shall not enter into
or otherwise suffer or permit any amendment, waiver, supplement, termination or other modification
of any Loan Document executed and delivered by, or applicable to, any Borrower without the prior
consent of Lender.



(b) Except for changes to the Mortgage Loan Documents that Mortgage Borrowers are obligated to
enter into pursuant to the terms of the Mortgage Loan Documents, Borrowers shall not from and after
the date hereof cause or permit Mortgage Borrowers to enter into or otherwise suffer or permit any
amendment, waiver, supplement, termination or other modification of any Mortgage Loan Document
executed and delivered by, or applicable to, Mortgage Borrowers without the prior written consent
of Lender which consent shall not be unreasonably withheld, conditioned or delayed. Borrowers
shall cause Mortgage Borrowers to provide Lender with a copy of any amendment, waiver, supplement,
termination or other modification to the Mortgage Loan Documents within five (5) days after the
execution thereof.



(c) Borrowers shall not, and shall not permit any other Loan Party to, (i) amend or modify the
organizational documents of such Loan Party in any respect without Lender’s prior written consent,
or (ii) take any action that would cause the membership interests of any other Loan Party to cease
to constitute “certificated securities” (as defined in the Uniform Commercial Code of the States of
New York and Delaware) without Lender’s prior written consent.



5.1.18 Confirmation of Representations. Borrowers shall deliver, in connection with
any Securitization, (a) one or more Officer’s Certificates certifying as to the accuracy of all
representations made by Borrowers in the Loan Documents as of the date of the closing of such
Securitization in all relevant jurisdictions (or if any such representations are no longer
accurate, providing an explanation as to the reason for such inaccuracy), and (b) certificates of
the relevant Governmental Authorities in all relevant jurisdictions indicating the good standing
and qualification of each Borrower and each Mortgage Borrower as of the date of the Securitization.



5.1.19 No Joint Assessment. Borrowers shall not suffer, permit or initiate, and shall
not cause or permit Mortgage Borrowers to suffer, permit or initiate, the joint assessment of any
Property (a) with any other real property constituting a tax lot separate from such Property, and
(b) which constitutes real property with any portion of such Property which may be deemed to
constitute personal property, or any other procedure whereby the lien of any taxes which may be
levied against such personal property shall be assessed or levied or charged to such real property
portion of the Property.



5.1.20 Leasing Matters. Any Major Leases with respect to any Property executed after
the date hereof shall be subject to Lender’s approval, which approval shall not be unreasonably
withheld, conditioned or delayed, provided, however, that renewals of any Major
Lease by Mortgage Borrowers initially executed prior to the Closing Date shall not require the
approval of Lender if the terms of any such Lease provided for renewals at a reasonably
determinable rent. Upon request, Borrowers shall furnish, or shall cause Mortgage Borrowers to
furnish, Lender with executed copies of all Leases. All proposed Major Leases shall be on



 


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commercially reasonable terms and no Lease shall contain any terms which would materially
adversely affect Lender’s rights under the Loan Documents or Mortgage Lender’s rights under the
Mortgage Loan Documents. All Leases executed after the date hereof shall provide that they are
subordinate to the Mortgage and that the lessee agrees to attorn to Mortgage Lender or any
purchaser at a sale by foreclosure or power of sale, provided that, with respect to Major
Leases, Mortgage Lender provides commercially reasonable non-disturbance language. Borrowers shall
cause Mortgage Borrowers to (i) observe and perform the obligations imposed upon the lessor under
the Leases in a commercially reasonable manner; (ii) enforce the terms, covenants and conditions
contained in the Leases upon the part of the lessee thereunder to be observed or performed in a
commercially reasonable manner and in a manner not to impair the value of any Property involved,
except that no termination by any Mortgage Borrower or acceptance of surrender by a tenant of any
Major Lease will be permitted without the consent of Lender; (iii) not collect any of the rents
more than one (1) month in advance (other than security deposits); (iv) not execute any other
assignment of lessor’s interest in the Leases or the Rents (except as contemplated by the Mortgage
Loan Documents); and (v) not alter, modify or change the terms of any Major Lease in any material
manner, in each of the foregoing instances, without the prior written approval of Lender, not to be
unreasonably withheld. To the extent Lender’s approval is required pursuant to this Section
5.1.20, Lender shall endeavor to respond to a request for Lender’s approval within ten (10)
Business Days after Borrowers’ written request therefor, delivered together with any documents or
information required to be provided by Borrowers hereunder in connection with Lender’s review of
the proposed Major Lease, Major Lease amendment or Major Lease termination. If the correspondence
from Borrowers requesting such approval contains the following statement at the top of the first
page thereof in capitalized, boldfaced, 14 point type lettering: “IF YOU FAIL TO RESPOND TO OR TO
EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) BUSINESS DAYS, YOUR APPROVAL
SHALL BE DEEMED GIVEN”, and if Lender shall fail to respond to or to expressly deny such request
for approval in writing (stating in reasonable detail the reason for such disapproval) within ten
(10) Business Days after receipt of Borrowers’ written request therefor together with the documents
and information required above and any other information reasonably requested by Lender in writing
prior to the expiration of such ten (10) Business Day period in order to adequately review the
same, then Borrowers shall re-submit such proposed Major Lease, Major Lease amendment or Major
Lease termination and accompanying information to Lender with a request for approval containing the
following statement at the top of the first page thereof in capitalized, boldfaced, 14 point type
lettering: “IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING
WITHIN FIVE (5) BUSINESS DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN”, and if Lender does not respond
to such second request by approving such proposed Major Lease, Major Lease amendment or Major Lease
termination or stating its objection thereto within five (5) Business Days of Lender’s receipt of
such second submission, Lender’s approval shall be deemed given. Notwithstanding anything to the
contrary contained herein, Borrowers shall not permit or cause Mortgage Borrowers to enter into a
lease of all or substantially all of any Property without Lender’s prior consent.



5.1.21 Alterations. Other than the construction of the Project, which shall be
governed by the provisions of Article III of the Mortgage Loan Agreement, Borrowers shall, or shall
cause Mortgage Borrowers to, obtain Lender’s prior consent to any material alterations to any
Improvements, which consent shall not be unreasonably withheld, conditioned or delayed.


 


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Notwithstanding the foregoing, Lender’s consent shall not be required in connection with any
alterations that will not have a material adverse effect on any Borrower’s or Mortgage Borrower’s
financial condition, the value of the Collateral, the applicable Property or the Net Operating
Income, provided that such alterations (a) are made in connection with tenant improvement
work performed pursuant to the terms of any Lease, (b) do not materially adversely affect any
structural component of any Improvements, any utility or HVAC system contained in any Improvements
or the exterior of any building constituting a part of any Improvements and the aggregate cost
thereof does not exceed the Alteration Threshold Amount, or (c) are performed in connection with
the Restoration of a Property after the occurrence of a Casualty or Condemnation in accordance with
the terms and provisions of the Mortgage Loan Agreement and this Agreement. To the extent Lender’s
prior written approval is required pursuant to this Section 5.1.21, Lender shall have
fifteen (15) Business Days from receipt of written request and any and all reasonably required
information and documentation relating thereto in which to approve or disapprove such request and
such written request shall state thereon in bold letters of 14 point font or larger that action is
required by Lender. If Lender fails to approve or disapprove the request within such fifteen (15)
Business Days, Lender’s approval shall be deemed given. Should Lender fail to approve any such
request, Lender shall give Borrowers written notice setting forth in reasonable detail the basis
for such disapproval. In no event shall Lender require any “consent fee” as a condition to any
required approval. If the total unpaid amounts due and payable with respect to alterations to the
Improvements at any Property (other than such amounts to be paid or reimbursed by tenants under the
Leases) shall at any time exceed the Alteration Threshold Amount, Borrowers shall promptly deliver
to Lender as security for the payment of such amounts and as additional security for Borrowers’
obligations under the Loan Documents any of the following: (A) cash, (B) U.S. Obligations, (C)
other securities having a rating acceptable to Lender and that the applicable Rating Agencies have
confirmed in writing will not, in and of itself, result in a downgrade, withdrawal or qualification
of the then current ratings assigned to any Securities or any class thereof in connection with any
Securitization, (D) a Letter of Credit, or (E) a completion and performance bond issued by an
Approved Bank; provided, however, that (i) in the event Mortgage Borrowers are
required to and do deliver such security to Mortgage Lender under the Mortgage Loan Agreement, and
(ii) upon request, Lender receives evidence reasonably acceptable to it of the delivery of such
security by Mortgage Borrowers to Mortgage Lender, then Borrowers shall not be required to deliver
any such security to Lender. Such security (if given as set forth above) shall be in an amount
equal to the excess of the total unpaid amounts with respect to alterations to the Improvements on
the applicable Property (other than such amounts to be paid or reimbursed by tenants under the
Leases) over the Alteration Threshold Amount and during the continuance of an Event of Default,
Lender may apply such security from time to time at the option of Lender to pay for such
alterations.




5.1.22 Operation of the Properties.



(a) Borrowers shall cause Mortgage Borrowers to operate the Properties, in all material
respects, in accordance with the applicable Management Agreement. In the event that any Management
Agreement expires or is terminated (without limiting any obligation of Borrowers to obtain Lender’s
consent to any termination or modification of any Management Agreement, if applicable, in
accordance with the terms and provisions of this Agreement), Borrowers shall cause Mortgage
Borrowers to promptly enter into a Replacement



 


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Management Agreement with the applicable Manager or another Qualified Manager, as applicable.



(b) Borrowers shall cause each Mortgage Borrower to: (i) promptly perform and/or observe, in
all material respects, all of the covenants and agreements required to be performed and observed by
such Mortgage Borrower under the Management Agreement to which such Mortgage Borrower is a party
and do all things necessary to preserve and to keep unimpaired such Mortgage Borrower’s material
rights thereunder; (ii) promptly notify Lender of any material default under the Management
Agreement of which such Mortgage Borrower or Borrower is aware; (iii) promptly deliver to Lender a
copy of each financial statement, business plan, capital expenditures plan, notice, report and
estimate received by such Mortgage Borrower under the Management Agreement; and (iv) enforce the
performance and observance of all of the material covenants and agreements required to be performed
and/or observed by the Manager under the Management Agreement in a commercially reasonable manner.



(c) Borrowers shall cause Hotel/Casino Borrower to, at all times, operate and maintain (or
cause to be operated and maintained) the Hotel/Casino Property and the Casino Component as a hotel
and casino resort in accordance with standards at least equivalent to the Comparable Hotel/Casinos.
The theme of the Hotel/Casino Property and the Casino Component shall not be materially changed
without the prior written consent of Lender, which consent shall not be unreasonably withheld.
Borrowers shall cause Hotel/Casino Borrower to cause the Hotel/Casino Property to be at all times
open for business as a hotel and the Casino Component to be open at all times for business as a
casino, other than as provided under the Casino Component Lease, pursuant to Legal Requirements,
temporary closures as a result of Casualty or other events outside the reasonable control of
Borrowers and Mortgage Borrowers.




5.1.23 Liquor Management at Hotel/Casino Property.



(a) Unless and until Hotel/Casino Borrower has obtained all Governmental Approvals necessary
to provide all alcoholic beverage services provided at the Hotel/Casino Property as of the Closing
Date, Borrowers shall cause Hotel/Casino Borrower to cause all alcoholic beverage services at the
Hotel/Casino Property to be managed by a Liquor Manager in accordance with a Liquor Management
Agreement and Borrowers shall use, or shall cause Hotel/Casino Borrower to use, commercially
reasonable best efforts to conduct and/or to cause to be conducted the alcoholic beverage services
at the Hotel/Casino Property in such a manner so as to maximize Gross Income from Operations at the
Properties in the aggregate. In the event that a Liquor Management Agreement expires or is
terminated (without limiting any obligation of Hotel/Casino Borrower to obtain Lender’s consent to
any termination or modification of any Liquor Management Agreement, if applicable, in accordance
with the terms and provisions of this Agreement), Borrowers shall cause Hotel/Casino Borrower to
promptly enter into a Replacement Liquor Management Agreement with the Liquor Manager or another
Qualified Liquor Manager, as applicable.



(b) Borrowers shall cause Hotel/Casino Borrower to: (i) promptly perform and/or observe, in
all material respects, all of the covenants and agreements required to be performed and observed by
it under the Liquor Management Agreement and do all things necessary to preserve and to keep
unimpaired its material rights thereunder; (ii) promptly notify



 


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Lender of any material default under the Liquor Management Agreement of which it is aware;
(iii) promptly deliver to Lender a copy of each financial statement, business plan, capital
expenditures plan, notice, report and estimate received by it under the Liquor Management
Agreement; and (iv) enforce the performance and observance of all of the material covenants and
agreements required to be performed and/or observed by the Liquor Manager under the Liquor
Management Agreement, in a commercially reasonable manner.



(c) Upon the occurrence and during the continuance of an Event of Default, Borrowers shall, at
the request of Lender, cause the Liquor Manager, if one of the Loan Parties or an Affiliate of any
Loan Party, to continue to perform all obligations under the Liquor Management Agreement.
Additionally, Borrowers shall, upon and after the foreclosure, deed in lieu of foreclosure or other
similar transfer of the Hotel/Casino Property to Mortgage Lender, its designee or nominee (a
“Mortgage Lender Successor Owner”), cause Mortgage Borrowers to comply with the provisions of
Section 5.1.23 (c) of the Mortgage Loan Agreement.





5.1.24 Gaming Operations at the Hotel/Casino Property.



(a) All gaming operations conducted at the Hotel/Casino Property shall at all times be
operated by a Qualified Gaming Operator and Borrowers shall cause Mortgage Borrowers to use
commercially reasonable best efforts to conduct and/or to cause to be conducted the gaming
operations in such a manner so as to maximize Gross Income from Operations at the Properties in the
aggregate.



(b) Borrowers shall cause Hotel/Casino Borrower to comply with the provisions of Section
5.1.24(b) of the Mortgage Loan Agreement.




5.1.25 Intellectual Property.



(a) Each Borrower shall take, and shall cause Mortgage Borrowers to take, all actions
reasonably necessary to protect the IP, subject to, and in compliance with, applicable IP
Agreements, including, without limitation, (i) maintaining all material registrations and
applications with respect to any IP owned by any Loan Party, (ii) maintaining and complying with
the terms of all licenses necessary for the use of any IP licensed to any Loan Party, (iii)
expeditiously and diligently seeking to stop any acts of infringement or unfair competition with
respect to the Owned IP that are brought to any Loan Party’s attention, and using commercially
reasonable efforts to cause HRCI or Morton, as the case may be, to diligently seek to stop any acts
of infringement or unfair competition with respect to the Licensed IP that are brought to any Loan
Party’s attention and (iii) refraining from any act or omission that might jeopardize any Loan
Party’s ability to use any of the IP.



(b) Borrowers shall cause Hotel/Casino Borrower to operate the Hotel/Casino Property as a
“Hard Rock” hotel unless otherwise consented to in writing by Lender and shall cause Hotel/Casino
Borrower to refrain from any act or omission, including, without limitation, any act contemplated
under Section 5.1.26 hereof, that would result in, or would be reasonably likely to result
in, the loss of its ability to so operate the Hotel/Casino Property as a “Hard Rock” hotel.


 


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5.1.26 Licensing and Sublicensing of the IP.



(a) Except as set forth in Sections 5.1.26(b), (c) and (d) hereof, Borrowers shall not
permit or cause Mortgage Borrowers to license any of the Owned IP or sublicense any of the Licensed
IP (an “IP License”) without Lender’s consent in each instance.



(b) Notwithstanding the foregoing or anything else to the contrary set forth in this Agreement
or the other Loan Documents, IP Borrower shall have the right, without the consent of Lender and
without violating the Loan Documents, to license or sublicense, as applicable, the IP (or any
portion thereof) (an “Adjacent Property IP License”) to any subsequent purchaser of all or any
portion of the Adjacent Property and its successors and assigns, whether or not any such subsequent
purchaser, successor or assign is an Affiliate of any Loan Party or any other Restricted Party;
provided that all of the following conditions shall be satisfied with respect to any such
Adjacent Property IP License:




(i) IP Borrower shall notify Lender in writing of its intent to enter into an
Adjacent Property IP License within five (5) days prior to the execution thereof,
and within ten (10) days following the execution and delivery of such Adjacent
Property IP License, shall deliver to Lender (A) a copy of the Adjacent Property IP
License, and (B) an Officer’s Certificate providing a certification that such
Adjacent Property IP License (1) does not and will not adversely affect any Mortgage
Borrower’s ownership and/or operation of, or any activities conducted on, its
Property, (2) does not and will not materially diminish any Mortgage Borrower’s
rights to use any of the Owned IP or Licensed IP that is reasonably necessary or
desirable to operate its Property as then being operated and as then contemplated to
be operated in the future, and (3) does not, and is not reasonably anticipated in
the future to, materially diminish the value of any Owned IP or Licensed IP;




(ii) Such Adjacent Property IP License shall be granted and used only in
connection with the ownership, development and/or use of improvements and/or
activities on the Adjacent Property or any portion thereof;




(iii) Such Adjacent Property IP License may be granted (A) without
consideration beyond that which is paid to Adjacent Borrower in connection with the
sale of the applicable portion of the Adjacent Property and/or (B) on a royalty free
basis; provided, however, that, notwithstanding the foregoing, any
consideration and/or royalties that is/are paid to IP Borrower in connection with
such Adjacent Property IP License shall constitute Gross Income from Operations for
all purposes under this Agreement and the other Loan Documents and Borrowers shall
cause IP Borrower to deposit the same directly into the Lockbox Account within one
(1) Business Day following receipt by IP Borrower from time to time;




(iv) Such Adjacent Property IP License shall not violate or result in a
violation of Section 5.1.25(b) hereof; and


 


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(v) Such Adjacent Property IP License shall not adversely affect Lender’s Liens
and security interests in the Owned IP and Licensed IP, all of which shall remain in
full force and effect and, at Lender’s request in its sole discretion, Borrowers
shall cause IP Borrower to collaterally assign to Lender such Adjacent Property IP
License pursuant to a security agreement reasonably satisfactory to Lender and IP
Borrower in form and substance.



(c) Notwithstanding the foregoing or anything else to the contrary set forth in this Agreement
or the other Loan Documents, IP Borrower shall have the right, without the consent of Lender and
without violating the Loan Documents, to license or sublicense, as applicable, the IP (or any
portion thereof) to any bonafide third party who is not an Affiliate of any Loan Party or any other
Restricted Party (a “Third Party IP License”); provided that all of the following
conditions shall be satisfied with respect to any such Third Party IP License:




(i) IP Borrower shall notify Lender in writing of its intent to enter into an
Third Party IP License within five (5) days prior to the execution thereof, and
within ten (10) days following the execution and delivery of such Third Party IP
License, shall deliver to Lender (A) a copy of the proposed Third Party IP License,
and (B) an Officer’s Certificate providing a certification that (1) as of the date
of such notice, no monetary Default, monetary Mortgage Default or monetary Mezzanine
Default, and no Event of Default, Mortgage Event of Default or Mezzanine Event of
Default, shall have occurred and be continuing, (2) the proposed licensee or
sublicensee, as applicable, is a bonafide third party who is not an Affiliate of any
Borrower or any other Restricted Party, (3) the total consideration paid and to be
paid under such proposed Third Party IP License, (4) other than the proposed Third
Party IP License, there are no other written or oral agreements between any Borrower
or any other Restricted Party or any Affiliate of any thereof, on the one hand, and
the proposed licensee or sublicensee, as applicable, on the other hand, relating to
such proposed Third Party IP License or the IP covered thereunder, (5) the proposed
Third Party IP License does not and will not adversely affect any Mortgage
Borrower’s ownership and/or operation of, or any activities conducted on, its
Property, (6) the proposed Third Party IP License does not and will not materially
diminish any Mortgage Borrower’s rights to use any of the Owned IP or Licensed IP
that is reasonably necessary or desirable to operate its Property as then being
operated and as then contemplated to be operated in the future, and (7) the proposed
Third Party IP License does not, and is not reasonably anticipated in the future to,
materially diminish the value of any Owned IP or Licensed IP;




(ii) Such proposed Third Party IP License shall, without limitation, (A) be on
arm’s-length, market terms, (B) require cash consideration only, (C) prohibit any
material amendment thereof without Lender’s prior reasonable approval, other than
any amendment that does not violate any of the requirements of this Section
5.1.26(c)(ii), (D) prohibit the assignment or sub-licensing thereof without
Lender’s prior reasonable approval, other than an assignment to a bonafide third
party who is not an Affiliate of any Loan Party or any other Restricted Party, and
(E) require the proposed licensee or sublicensee, as



 


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applicable, to deposit all consideration payable thereunder or otherwise in
connection therewith from time to time directly into the Lockbox Account;




(iii) All consideration and/or royalties that is/are paid under or otherwise in
connection with such Third Party IP License shall constitute Gross Income from
Operations for all purposes under this Agreement and the other Loan Documents and
if, notwithstanding the provisions of the foregoing Section 5.1.26(c)(ii)(E)
hereof, any Mortgage Borrower shall receive any such consideration and/or royalties,
Borrowers shall cause such Mortgage Borrower to deposit the same directly in the
Lockbox Account within one (1) Business Day following receipt by such Mortgage
Borrower from time to time;




(iv) Such Third Party IP License shall not violate or result in a violation of
Section 5.1.25(b) hereof;




(v) Without limiting the generality of the foregoing, such Third Party IP
License shall in no event prohibit or limit in any manner the use of the “Hard Rock”
name in connection with the operation of the Hotel/Casino Property or any other
Property;




(vi) Such Third Party IP License shall not adversely affect Lender’s Liens and
security interests in the Owned IP and Licensed IP, all of which shall remain in
full force and effect and, at Lender’s request in its sole discretion, Borrowers
shall cause IP Borrower to collaterally assign to Lender such Third Party IP License
pursuant to a security agreement reasonably satisfactory to Lender and IP Borrower
in form and substance; and




(vii) On the date of the full execution and delivery of such Third Party IP
License, no monetary Default, monetary Mortgage Default or monetary Mezzanine
Default, and no Event of Default, Mortgage Event of Default or Mezzanine Event of
Default, shall have occurred and be continuing.



(d) Notwithstanding the foregoing or anything else to the contrary set forth in this Agreement
or the other Loan Documents, IP Borrower shall have the right to license or sublicense, as
applicable, the IP (or any portion thereof) to an Affiliate of any Loan Party or any other
Restricted Party (an “Affiliate IP License”); provided that (i) all of the conditions set
forth in Section 5.1.26(c) hereof shall be satisfied with respect to any such Affiliate IP
License, other than the condition set forth in Section 5.1.26(c)(i)(2) hereof, and (ii)
such Affiliate IP License shall have been approved in writing by Lender, which approval shall not
be unreasonably withheld.



(e) With respect to any IP License, Adjacent Property IP License, Third Party IP License or
Affiliate IP License permitted hereunder, upon satisfaction of such conditions as Lender shall
impose with respect to its consent to any IP License, or upon satisfaction of the conditions set
forth in Section 5.1.26(b) hereof with respect to any Adjacent Property IP License, or upon
satisfaction of the conditions set forth in Section 5.1.26(c) hereof with respect to any
Third Party IP License, or upon satisfaction of the conditions set forth in


 


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Section 5.1.26(d) hereof with respect to any Affiliate IP License, Lender, at the sole
cost and expense of Borrowers, shall execute and deliver to Borrowers (for the benefit of the
licensee or sublicensee, as applicable, under such IP License, Adjacent Property IP License, Third
Party IP License or Affiliate IP License, as applicable), provided that Borrowers cause the
applicable licensee or sublicensee, as applicable, to also execute and deliver, a customary and
mutually acceptable non-disturbance and attornment agreement as reasonably requested by IP
Borrower.



5.1.27 Mortgage Reserve Funds. (1) Borrowers shall cause Mortgage Borrowers to
deposit and maintain each of the Mortgage Reserve Funds as required pursuant to the terms of the
Mortgage Loan Agreement and to perform and comply with all the terms and provisions relating
thereto.



(a) Each Borrower grants to Lender a security interest in such Borrower’s interest in each of
the Mortgage Reserve Funds, if any, subject to the prior rights of Mortgage Lender, and any and all
monies now or hereafter deposited in each Mortgage Loan Reserve Fund as additional security for
payment of the Debt to the extent such Borrower has an interest in same. Subject to the
qualifications regarding Borrowers’ interest in the Mortgage Reserve Funds, if any, until expended
or applied in accordance with the Mortgage Loan Documents or the Loan Documents, Borrowers’
interest in the Mortgage Reserve Funds shall constitute additional security for the Debt and upon
the occurrence of an Event of Default, Lender may, in addition to any and all other remedies
available to Lender, but subject to the prior rights of Mortgage Lender thereto, apply any sums
then present in any or all of the Mortgage Reserve Funds to the payment of the Debt in any order in
its sole discretion.




5.1.28 Mortgage Loan Notices.



(a) Borrowers shall give notice, or cause notice to be given to Lender, promptly upon the
occurrence and during the continuance of a Mortgage Event of Default.



(b) Borrowers shall cause Mortgage Borrowers to promptly notify Lender of all notices received
by Mortgage Borrowers under or in connection with the Mortgage Loan, including, without limitation,
any notice by Mortgage Lender to Mortgage Borrowers of any default by Mortgage Borrowers in the
performance or observance of any of the terms, covenants or conditions of the Mortgage Loan
Documents on the part of Mortgage Borrowers to be performed or observed, and deliver to Lender a
true copy of each such notice, together with any other consents, notices, requests or other written
correspondence between Mortgage Borrowers and Mortgage Lender.



5.1.29 Compliance with Mortgage Loan Documents. Borrowers shall cause Mortgage
Borrowers to comply with all of the terms, covenants and conditions set forth in the Mortgage Loan
Documents. Borrowers acknowledge that the obligation to comply with this covenant is separate
from, and may be enforced independently from, the obligations of Mortgage Borrowers under the
Mortgage Loan Documents.



Section 5.2 Negative Covenants. From the Closing Date until payment and performance
in full of all obligations of Borrowers under the Loan Documents or the earlier release of the Lien
of the Pledge Agreement in accordance with the terms of this Agreement and



 


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the other Loan Documents, each Borrower covenants and agrees with Lender that it will not do,
directly or indirectly, any of the following:




5.2.1 Operation of the Properties; Liquor Management.



(a) Borrowers shall not, and shall cause Mortgage Borrowers not to, without Lender’s prior
consent (which consent shall not be unreasonably withheld, conditioned or delayed): (i) subject to
Section 9.5.1 hereof, surrender, terminate or cancel any Management Agreement;
provided, that Borrowers may, without Lender’s consent, replace, or cause Mortgage
Borrowers to replace, any Manager so long as the replacement manager is a Qualified Manager
pursuant to a Replacement Management Agreement; (ii) reduce or consent to the reduction of the term
of any Management Agreement; (iii) increase or consent to the increase of the amount of any charges
or fees under any Management Agreement; or (iv) otherwise modify, change, supplement, alter or
amend, or waive or release any of its rights and remedies under, any Management Agreement in any
material respect.



(b) Following the occurrence and during the continuance of an Event of Default, Borrowers
shall not, and shall cause Mortgage Borrowers not to, exercise any rights, make any decisions,
grant any approvals or otherwise take any action under any Management Agreement without the prior
consent of Lender, which consent may be withheld in Lender’s sole discretion.



(c) Borrowers shall not cause or permit Hotel/Casino Borrower to, without Lender’s prior
consent (which consent shall not be unreasonably withheld, conditioned or delayed): (i) subject to
Section 9.5.2 hereof, surrender, terminate or cancel any Liquor Management Agreement;
provided, that Borrowers may replace, or may cause or permit Hotel/Casino Borrower to
replace, without Lender’s consent, the Liquor Manager so long as the replacement liquor manager is
a Qualified Liquor Manager pursuant to a Replacement Liquor Management Agreement; (ii) reduce or
consent to the reduction of the term of the Liquor Management Agreement; (iii) increase or consent
to the increase of the amount of any charges or fees under the Liquor Management Agreement; or (iv)
otherwise modify, change, supplement, alter or amend, or waive or release any of its rights and
remedies under, any Liquor Management Agreement in any material respect.



(d) Following the occurrence and during the continuance of an Event of Default, Borrowers
shall cause Hotel/Casino Borrower not to exercise any rights, make any decisions, grant any
approvals or otherwise take any action under the Liquor Management Agreement without the prior
consent of Lender, which consent may be withheld in Lender’s sole discretion.




5.2.2 Liens.



(a) Borrowers shall not create, incur, assume or suffer to exist any Lien on (i) any portion
of the Pledged Collateral except for the Lien created by the Pledge Agreement or (ii) any portion
of the other Collateral, except for Permitted Encumbrances and Liens created by or permitted
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(b) Borrowers shall not permit or cause Mortgage Borrowers to create, incur, assume or suffer
to exist any Lien on any portion of any Property or the IP or knowingly permit any such action to
be taken, except: (i) Permitted Encumbrances and Permitted IP Encumbrances; (ii) Liens created by
or permitted pursuant to the Mortgage Loan Documents; and (iii) Liens for Taxes or Other Charges
not yet delinquent.




5.2.3 Dissolution.



(a) No Borrower shall (i) engage in any dissolution, liquidation or consolidation or merger
with or into any other business entity; (ii) engage in any business activity not related to the
ownership and operation of the Collateral; (iii) transfer, lease or sell, in one transaction or any
combination of transactions, the assets or all or substantially all of the assets of such Borrower
except to the extent permitted by the Loan Documents; or (iv) modify, amend, waive or terminate (A)
its organizational documents in any material respect or in any respect with regard to the
provisions concerning such Borrower’s status as a Special Purpose Entity, or (B) its qualification
and good standing in any jurisdiction, in each case, without obtaining the prior consent of Lender.



(b) Borrowers shall not cause or permit any Mortgage Borrower to (i) engage in any
dissolution, liquidation or consolidation or merger with or into any other business entity, (ii)
engage in any business activity not related to the ownership and operation of its Property or the
IP; (ii) transfer, lease or sell, in one transaction or any combination of transactions, the assets
or all or substantially all of the properties or assets of such Mortgage Borrower except to the
extent permitted by the Mortgage Loan Documents and the Loan Documents; or (iii) modify, amend,
waive or terminate (A) its organizational documents in any material respect or in any respect with
regard to the provisions concerning such Mortgage Borrower’s status as a “Special Purpose Entity”
(as such term is defined in Section 1.1 of the Mortgage Loan Agreement as in effect on the date
hereof), or (B) its qualification and good standing in any jurisdiction, in each case, without
obtaining the prior consent of Lender.




5.2.4 Change in Business.



(a) No Borrower shall enter into any line of business other than the ownership and management
of the Collateral, or make any material change in the scope or nature of its business objectives,
purposes or operations, or undertake or participate in a material manner in activities other than
the continuance of its present business.



(b) No Borrower shall permit or cause any Mortgage Borrower to enter into any line of business
other than the ownership and operation of its Property or the IP, or make any material change in
the scope or nature of its business objectives, purposes or operations, or undertake or participate
in a material manner in activities other than the continuance of its present business.




5.2.5 Debt Cancellation.



(a) No Borrower shall cancel or otherwise forgive or release any material claim or debt owed
to such Borrower by any Person, except for adequate consideration and in the ordinary course of
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(b) No Borrower shall permit or cause any Mortgage Borrower to cancel or otherwise forgive or
release any material claim or debt (other than termination of Leases in accordance with the
Mortgage Loan Agreement) owed to such Mortgage Borrower by any Person, except for adequate
consideration and in the ordinary course of such Mortgage Borrower’s business.



5.2.6 Zoning. No Borrower shall cause or permit any Mortgage Borrower to initiate or
consent to any zoning reclassification of any portion of any Property or seek any variance under
any existing zoning ordinance or use or permit the use of any portion of any Property in any manner
that could result in such use becoming a non-conforming use under any zoning ordinance or any other
applicable land use law, rule or regulation, in each case, without the prior consent of Lender not
to be unreasonably withheld.



5.2.7 Removal of FF&E. Except in the ordinary course of business, no Borrower shall
cause or permit any Mortgage Borrower to remove or transfer any material article of FF&E or other
personal property owned by any Mortgage Borrower used in the operation of any Property unless the
same is replaced with substantially similar FF&E or is obsolete, without the prior written consent
of Lender in each instance, which consent shall not be unreasonably withheld, conditioned or
delayed. To the extent Lender’s prior written approval is required pursuant to this Section
5.2.7, Lender shall endeavor to respond to a request for Lender’s approval within five (5)
Business Days after Borrowers’ written request therefor, delivered together with any documents or
information required to be provided by Borrowers hereunder in connection with Lender’s review of
the proposed action or matter. Lender’s approval of any action or matter requiring Lender’s
consent under this Section 5.2.7 shall be deemed to have been given if (i) a request for
approval, together with any documents or information required to be provided by Borrowers hereunder
in connection with Lender’s review of the proposed action or matter, is submitted to Lender with a
request for approval set forth in a written notice that states clearly (in 14-point type or
larger): “THIS IS A REQUEST FOR APPROVAL AND IF LENDER DOES NOT RESPOND TO OR EXPRESSLY DENY THIS
REQUEST FOR APPROVAL IN WRITING WITHIN FIVE (5) BUSINESS DAYS, BORROWERS MAY DELIVER A DEEMED
APPROVAL NOTICE”, and Lender does not respond by approving such proposed action or matter or
stating in reasonable detail its objections to such proposed action or matter within five (5)
Business Days of Lender’s receipt thereof, and (ii) after Lender’s failure to respond to the
initial request for approval of such proposed action or matter within the time period set forth in
the foregoing clause (i), Borrowers shall re-submit such request to Lender in a written notice that
states clearly (in 14-point type or larger): “THIS IS A REQUEST FOR APPROVAL. APPROVAL WILL BE
DEEMED GIVEN IF LENDER DOES NOT RESPOND WITHIN FIVE (5) BUSINESS DAYS”, and Lender does not respond
to such second submission by approving such proposed action or matter or stating in reasonable
detail its objection thereto within five (5) Business Days of Lender’s receipt of such second
submission.



5.2.8 Principal Place of Business and Organization. No Borrower shall change its
principal place of business set forth in the introductory paragraph of this Agreement without first
giving Lender thirty (30) days prior notice. No Borrower shall change the place of its
organization as set forth in Section 4.1.28 hereof without the consent of Lender, which
consent shall not be unreasonably withheld. Upon Lender’s request, Borrowers shall execute and
deliver additional financing statements, security agreements and other instruments which



 


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may be necessary to effectively evidence or perfect Lender’s security interest in the
Collateral as a result of such change of principal place of business or place of organization.




5.2.9 ERISA.



(a) Assuming that Lender is not, and is not lending the assets of, an “employee benefit plan”
as defined in Section 3(3) of ERISA, no Borrower shall engage in any transaction which would cause
any obligation, or action taken or to be taken, hereunder (or the exercise by Lender of any of its
rights under the Note, this Agreement or the other Loan Documents) to be a non-exempt (under a
statutory or administrative class exemption) prohibited transaction under ERISA.



(b) Each Borrower shall deliver to Lender such certifications or other evidence from time to
time throughout the term of the Loan, as requested by Lender in its reasonable discretion, that (i)
such Borrower is not an “employee benefit plan” as defined in Section 3(3) of ERISA, which is
subject to Title I of ERISA, or a “governmental plan” within the meaning of Section 3(32) of ERISA;
(ii) none of the assets of such Borrower constitute “plan assets” within the meaning of Section
3(3) of ERISA for purposes of any state law provisions regulating investments of, or fiduciary
obligations with respect to, governmental plans; and (iii) one or more of the following
circumstances is true:




(A) Equity interests in such Borrower are publicly offered securities,
within the meaning of 29 C.F.R. §2510.3 101(b)(2);




(B) Less than twenty five percent (25%) of each outstanding class of
equity interests in such Borrower is held by “benefit plan investors” within
the meaning of 29 C.F.R. §2510.3 101(f)(2); or




(C) Such Borrower qualifies as an “operating company”, a “venture
capital operating company” or a “real estate operating company” within the
meaning of 29 C.F.R. §2510.3 101(c), (d) or (e).




5.2.10 Transfers.



(a) Borrowers acknowledge that Lender has examined and relied on the experience of Borrowers
and their direct and indirect members in owning and operating the Collateral and Mortgage Borrowers
in agreeing to make the Loan, and will continue to rely on Borrowers’ ownership of the Collateral
as a means of maintaining the value of the Collateral as security for repayment of the Debt and the
performance of the obligations contained in the Loan Documents. Additionally, Borrowers
acknowledge that Lender has examined and relied on the experience of Mortgage Borrowers and their
general partners, members, principals and (if any Mortgage Borrower is a trust) beneficial owners,
as applicable, in owning and operating properties such as the Properties and in owning intellectual
property such as the IP, in agreeing to make the Loan, and will continue to rely on Mortgage
Borrowers’ ownership of the Properties and the IP as a means of maintaining the value of the
Properties and the IP and, therefore, indirectly the value of the Collateral, as security for
repayment of the Debt and the performance of the obligations contained in the Loan Documents.
Borrowers acknowledge that Lender has a valid interest in maintaining the value of the Collateral
so as to ensure that, should Borrowers



 


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default in the repayment of the Debt or the performance of the obligations contained in the
Loan Documents, Lender can recover the Debt by a sale of the Collateral.



(b) Without the prior consent of Lender and except to the extent otherwise set forth in this
Section 5.2.10, Borrowers shall not, and shall not permit any Transfer Restricted Party to,
(i) sell, convey, mortgage, grant, bargain, encumber, pledge, assign, license, grant options with
respect to, or otherwise transfer or dispose of (directly or indirectly, voluntarily or
involuntarily, by operation of law or otherwise, and whether or not for consideration or of record)
any Property or any part thereof or any legal or beneficial interest therein, or any IP or any part
thereof or any legal or beneficial interest therein, or the Collateral or any part thereof or any
legal or beneficial interest therein; or (ii) permit a Sale or Pledge of any interest in any
Transfer Restricted Party (any of the actions in the foregoing clauses (i) or (ii),
a “Transfer”), other than, notwithstanding anything to the contrary contained in this Section
5.2.10:




(A) pursuant to Leases of space in the Improvements to tenants in accordance
with the provisions of Section 5.1.20 hereof;




(B) the pledge of the membership interests in each Mortgage Borrower as
collateral for the Loan and, if applicable, the exercise of remedies by Lender
including, without limitation, any Transfer of all or a portion of such membership
interests in connection with a foreclosure, strict foreclosure, public or private
sale or transfer in lieu of foreclosure under the Loan Documents, provided that
any such exercise of remedies is performed in accordance with and subject to the
conditions and restrictions set forth in the Intercreditor Agreement and as a
condition precedent to any foreclosure, strict foreclosure, public or private sale
or transfer in lieu of foreclosure of such membership interests the Lender shall
pay to Mortgage Lender a transfer fee in an amount equal to 1.00% of the sum of
the Reduced Acquisition Loan Outstanding Principal Balance and the Construction
Loan Outstanding Principal Balance;




(C) the pledge of the membership interests in Borrower as collateral for the
Second Mezzanine Loan and, if applicable, the exercise of remedies by Second
Mezzanine Lender, including, without limitation, any Transfer of all or a portion
of such membership interests in connection with a foreclosure, strict foreclosure,
public or private sale or transfer in lieu of foreclosure under the Second
Mezzanine Loan Documents, provided that any such exercise of remedies is performed
in accordance with and subject to the conditions and restrictions set forth in the
Intercreditor Agreement and as a condition precedent to any foreclosure, strict
foreclosure, public or private sale or transfer in lieu of foreclosure of such
membership interests the Second Mezzanine Lender shall pay to Mortgage Lender a
transfer fee in an amount equal to 1.00% of the sum of the Reduced Acquisition
Loan Outstanding Principal Balance and the Construction Loan Outstanding Principal
Balance;




(D) the pledge of the membership interests in each Second Mezzanine Borrower
as collateral for the Third Mezzanine Loan and, if applicable, the



 


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exercise of remedies by Third Mezzanine Lender, including, without
limitation, any Transfer of all or a portion of such membership interests in
connection with a foreclosure, strict foreclosure, public or private sale or
transfer in lieu of foreclosure under the Third Mezzanine Loan Documents, provided
that any such exercise of remedies is performed in accordance with and subject to
the conditions and restrictions set forth in the Intercreditor Agreement and as a
condition precedent to any foreclosure, strict foreclosure, public or private sale
or transfer in lieu of foreclosure of such membership interests the Third
Mezzanine Lender shall pay to Mortgage Lender a transfer fee in an amount equal to
1.00% of the sum of the Reduced Acquisition Loan Outstanding Principal Balance and
the Construction Loan Outstanding Principal Balance;




(E) any Release Parcel Sale or an IP Sale, in each instance in accordance
with the applicable provisions of Section 2.5 of the Mortgage Loan Agreement;




(F) Intentionally Deleted;




(G) any IP License or Adjacent Property IP License granted in accordance with
the provisions of Section 5.1.26 hereof;




(H) the Permitted Encumbrances and Permitted IP Encumbrances;




(I) the issuance of new stock in, the merger or consolidation of, and/or the
Sale or Pledge of the stock in, any Publicly Traded Entity who owns a direct or
indirect ownership interest in any Transfer Restricted Party;




(J) the transfer of indirect ownership interests in any Mortgage Borrower in
order to create one or more new mezzanine borrowers for any New Mezzanine Loan as
contemplated under the Mortgage Loan Agreement, including, without limitation, the
transfers of ownership interests which were necessary to create Third Mezzanine
Borrowers and the admission of a new member in each of Second Mezzanine Borrowers
in connection with the creation of Third Mezzanine Borrowers; and




(K) the transfer by deed of any applicable Partial Release Parcel to a
Subsidiary Transferee and the subsequent transfer of all of the membership
interests held by Adjacent Borrower in such Subsidiary Transferee, in each
instance in accordance with Section 2.5.1(f) of the Mortgage Loan Agreement;



provided,
however, that in the case of each of the foregoing clauses
(A) — (K), such Transfer shall only be permitted hereunder if it does not violate any Legal
Requirements, including specifically, but without limitation, any Gaming Laws, or suspend or
terminate any liquor license applicable to a Property.



(c) A Transfer shall include, but not be limited to, (i) an installment sales agreement
wherein any Borrower or Mortgage Borrower, as applicable, agrees to sell a Property or any part
thereof, the IP, the Collateral or any part thereof for a price to be paid in



 


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installments; (ii) an agreement by any Mortgage Borrower leasing all or a substantial part of
a Property for other than actual occupancy by a space tenant thereunder or a sale, assignment or
other transfer of, or the grant of a security interest in, any Mortgage Borrower’s right, title and
interest in and to any Leases or any Rents; (iii) if a Transfer Restricted Party is a corporation,
any merger, consolidation or Sale or Pledge of such corporation’s stock or the creation or issuance
of new stock; (iv) if a Transfer Restricted Party is a limited or general partnership or joint
venture, any merger or consolidation or the change, removal, resignation, admission or addition of
a general partner or the Sale or Pledge of the general partnership interest of any general partner
or any profits or proceeds relating to such partnership interest, or the Sale or Pledge of limited
partnership interests or any profits or proceeds relating to such limited partnership interest or
the creation or issuance of new limited partnership interests; (v) if a Transfer Restricted Party
is a limited liability company, any merger or consolidation or the change, removal, resignation,
admission or addition of a managing member or non-member manager (or if no managing member, any
member) or the Sale or Pledge of the membership interest of a managing member (or if no managing
member, any member) or any profits or proceeds relating to such membership interest, or the Sale or
Pledge of non-managing or managing membership interests or the creation or issuance of new
non-managing or managing membership interests; (vi) if a Transfer Restricted Party is a trust or
nominee trust, any merger, consolidation or the Sale or Pledge of the legal or beneficial interest
in a Transfer Restricted Party or the creation or issuance of new legal or beneficial interests;
(vii) the removal or the resignation of any Manager (including, without limitation, an Affiliated
Manager) other than in accordance with the Mortgage Loan Agreement and Section 5.1.22
hereof; or (viii) any deed-in-lieu or consensual foreclosure relating to any Property with or for
the benefit of Mortgage Lender or any Affiliate thereof.



(d) Notwithstanding the provisions of this Section 5.2.10, so long as the following
Transfers do not violate any Legal Requirements in any instance, including specifically, but
without limitation, any Gaming Laws, or cause or otherwise result in the suspension, termination
and/or revocation of any Gaming License or the Casino Component Lease or any liquor license
applicable to a Property, as applicable, the following Transfers may occur without the consent of
Lender or the payment of any transfer or other fee, excluding, however, any Transfer of (i) any
direct interest in any Mortgage Borrower for so long as the Loan, the Mortgage Loan or any
Mezzanine Loan is outstanding, and/or (ii) any direct interest in any Borrower for so long as the
Loan or any Mezzanine Loan is outstanding:




(A) the Transfer of any direct or indirect interest in any Transfer
Restricted Party, provided that (1) no Event of Default, Mortgage Event of
Default or any Mezzanine Event of Default has occurred and is continuing, (2) (y)
one or both Guarantors continue to Control, directly or indirectly, each Loan
Party and HRHI, and (z) one or both Guarantors own, directly or indirectly, at
least a fifty-one percent (51%) economic interest in each Loan Party and in HRHI,
(3) Lender receives (y) at least ten (10) days prior written notice of any such
voluntary Transfer and copies of the documents transferring such interest, or (z)
written notice of any such involuntary Transfer and copies of the documents
transferring such interest within thirty (30) days following such involuntary
Transfer, (4) if after such Transfer any Person and its Affiliates collectively
would own more than forty-nine (49%) in the aggregate of the direct and/or
indirect interests of any Loan Party and as of the Closing Date



 


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such Person and its Affiliates collectively owned forty-nine percent (49%) or
less in the aggregate of the direct and/or indirect interests of any Loan Party,
Lender shall have received, prior to such Transfer, an Additional Insolvency
Opinion reasonably satisfactory to Lender and the Rating Agencies and, if a
Securitization has occurred, a confirmation in writing from the Rating Agencies to
the effect that such Transfer will not result in a re-qualification, reduction or
withdrawal of the then current rating assigned to the Securities or any class
thereof in any applicable Securitization, and (5) Borrowers deliver, or cause
Mortgage Borrowers to deliver, to Lender a copy of any consents or approvals
required by any Governmental Authority, including specifically, but without
limitation, any Gaming Authority, in connection with such Transfer;




(B) the Transfer of any direct or indirect interest in any Transfer
Restricted Party to any other Person who is, as of the Closing Date, a holder of
any direct or indirect interest in any Transfer Restricted Party, provided
that (1) no Event of Default, Mortgage Event of Default or any Mezzanine Event of
Default has occurred and is continuing, (2) (y) one or both Guarantors continue to
Control, directly or indirectly, each Loan Party and HRHI, and (z) one or both
Guarantors own, directly or indirectly, at least a fifty-one percent (51%)
economic interest in each Loan Party and in HRHI, (3) Lender receives (y) at least
ten (10) days prior written notice of any such voluntary Transfer and copies of
the documents transferring such interest, or (z) written notice of any such
involuntary Transfer and copies of the documents transferring such interest within
thirty (30) days following such involuntary Transfer, and (4) Borrowers deliver,
or cause Mortgage Borrowers to deliver, to Lender a copy of any consents or
approvals required by any Governmental Authority, including specifically, but
without limitation, any Gaming Authority, in connection with such Transfer;




(C) the Transfer of any direct or indirect interest in any Transfer
Restricted Party by inheritance, devise, bequest or operation of law upon the
death of a natural person who owned such interest, provided that (1) such
Transfer is to a non-minor member of the immediate family of the deceased holder
of such interest or a trust established for the benefit of one or more members of
the immediate family of the deceased holder of such interest, (2) (y) one or both
Guarantors continue to Control, directly or indirectly, each Loan Party and HRHI,
and (z) one or both Guarantors own, directly or indirectly, at least a fifty-one
percent (51%) economic interest in each Loan Party and in HRHI, (3) such Transfer
shall not result in a change of Control of the day-to-day operations of any of the
Properties, (4) Lender receives written notice of such Transfer and copies of the
documents transferring such interest not later than thirty (30) days following
such Transfer, (5) the legal and financial structure of each Loan Party and the
other Transfer Restricted Parties, and the single purpose nature and bankruptcy
remoteness of each Loan Party and the other Transfer Restricted Parties, after
such Transfer shall satisfy the applicable provisions of the Loan Documents and/or
the Mortgage Loan Documents (including, without limitation, Section 4.1.30
hereof and/or Section 4.1.30 of the



 


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Mortgage Loan Agreement, as applicable), (6) if after such Transfer any
Person and its Affiliates would collectively own more than forty-nine (49%) in the
aggregate of the direct and/or indirect interests of any Loan Party and as of the
Closing Date such Person and its Affiliates collectively owned forty-nine percent
(49%) or less in the aggregate of the direct and/or indirect interests of any Loan
Party, Lender shall have received an Additional Insolvency Opinion reasonably
satisfactory to Lender and the Rating Agencies and, if a Securitization has
occurred, a confirmation in writing from the Rating Agencies to the effect that
such Transfer will not result in a re-qualification, reduction or withdrawal of
the then current rating assigned to the Securities or any class thereof in any
applicable Securitization, and (7) Borrowers deliver, or cause Mortgage Borrowers
to deliver, to Lender a copy of any consents or approvals required by any
Governmental Authority, including specifically, but without limitation, any Gaming
Authority, in connection with such Transfer; and




(D) (1) the merger or consolidation of any Guarantor or any Constituent
Member of any Guarantor with or into any other Person, (2) the sale of any
Guarantor or substantially all of any Guarantor’s assets to any other Person, or
(3) the issuance of new stock or limited partnership or membership interests in,
and/or the Sale or Pledge of stock, limited partnership or membership interests
in, any Guarantor or any Constituent Member thereof (any of the occurrences in the
foregoing clauses (1), (2) or (3), a “Guarantor Transfer”);
provided, that, in each of the foregoing instances, whether or not the
applicable Guarantor or the applicable Constituent Member of a Guarantor is or is
not a Publicly Traded Company, (I) after giving effect to such Guarantor Transfer,
when viewed both individually and together with any prior Guarantor Transfers, (y)
the Guarantors, collectively, shall continue to satisfy the Net Worth
Requirements, and (z) at least one of the Guarantors shall be a Qualified Real
Estate Guarantor, (II) except if the applicable Guarantor or the applicable
Constituent Member of a Guarantor is a Publicly Traded Company, Lender receives at
least ten (10) days prior written notice of any such Guarantor Transfer, (III) if
after such Guarantor Transfer any Person and its Affiliates collectively would own
more than forty-nine (49%) in the aggregate of the direct and/or indirect
interests of any Loan Party and as of the Closing Date such Person and its
Affiliates collectively owned forty-nine percent (49%) or less in the aggregate of
the direct and/or indirect interests of any Loan Party, Lender shall have
received, prior to such Guarantor Transfer, an Additional Insolvency Opinion
reasonably satisfactory to Lender and the Rating Agencies and, if a Securitization
has occurred, a confirmation in writing from the Rating Agencies to the effect
that such Guarantor Transfer will not result in a re-qualification, reduction or
withdrawal of the then current rating assigned to the Securities or any class
thereof in any applicable Securitization, and (IV) Borrowers deliver, or cause
Mortgage Borrowers to deliver, to Lender a copy of any consents or approvals
required by any Governmental Authority, including specifically, but without
limitation, any Gaming Authority, in connection with such Guarantor Transfer.


 


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(e) With respect to any Transfer permitted under this Section 5.2.10 or otherwise
consented to by Lender, Borrowers shall pay, or shall cause Mortgage Borrowers to pay, all fees and
expenses incurred by Lender in connection with such Transfer, including, without limitation, the
cost of any third party reports, reasonable legal fees and expenses, Rating Agency fees and
expenses and required legal opinions.



(f) Notwithstanding anything to the contrary set forth in this Agreement or in any of the
other Loan Documents, Borrowers expressly acknowledge and agree, on behalf of themselves and the
other Transfer Restricted Parties, that any Transfer or Guarantor Transfer stated to be permitted
hereunder or thereunder shall only be permitted if it does not violate any Legal Requirements,
including specifically, but without limitation, any Gaming Laws.



5.2.11 Morton Indemnification and PWR/RWB Escrow Agreement. Borrowers shall not do,
and Borrowers shall not permit any Mortgage Borrower or any Affiliate to do, any of the following,
in each instance without the prior approval of Lender, which approval shall not be unreasonably
withheld: (a) modify, amend, waive any right under, or terminate the Morton Indemnification or the
PWR/RWB Escrow Agreement, other than any ministerial, non-monetary amendment or modification; (b)
make any claim or otherwise exercise any rights or remedies under the Morton Indemnification or the
PWR/RWB Escrow Agreement; or (c) other than the funds released on February 2, 2007 pursuant to the
express terms of the PWR/RWB Escrow Agreement, cause any funds escrowed under the PWR/RWB Escrow
Agreement to be used for any purpose other than the satisfaction of indemnification claims pursuant
to the Morton Indemnification until such time as the Morton Indemnification shall expire by its
terms. Borrowers shall cause Mortgage Borrowers to comply with the provisions of Section 5.2.11 of
the Mortgage Loan Agreement.



5.2.12 Distributions to Affiliates. Other than (a) the fees and expense
reimbursements payable to any Affiliated Manager pursuant to any Management Agreement reasonably
approved by Lender and (b) any monitoring fee due and payable to the DLJMB Parties pursuant to the
limited liability company agreement of HR Holdings, no Borrower shall, and Borrower shall not cause
or permit Mortgage Borrower to, make any distributions to, or otherwise pay any dividends or make
any payments to, any Restricted Party, which payments to Affiliated Managers and/or the DLJMB
Parties, as and to the extent permitted hereunder, may only be made when no Event of Default,
Mortgage Event of Default and/or Mezzanine Event of Default shall have occurred and be continuing
and only under the circumstances and up to the limitations specifically provided under Section
7.6.2 and Section 7.6.3 of the Mortgage Loan Agreement.




5.2.13 Limitation on Securities Issuances.



(a) Borrowers shall not cause any ownership interests in any Mortgage Borrower to be issued
other than those that have been issued as of the Closing Date nor shall Borrowers cause or permit
any Mortgage Borrower to enter into or grant any option, warrant or other agreement or right with
respect to any ownership interest in such Mortgage Borrower or with respect to any income or
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(b) No Borrower shall issue any ownership interests or other securities other than those that
have been issued as of the Closing Date nor shall any Borrower enter into or grant any option,
warrant or other agreement or right with respect to any ownership interest in such Borrower.




5.2.14 Distributions.



(a) Any and all dividends, including capital dividends, stock or liquidating dividends,
distributions of property, redemptions or other distributions made by any Mortgage Borrower on or
in respect of any interests in such Mortgage Borrower, and any and all cash and other property
received in payment of the principal of or in redemption of or in exchange for any such interests
(collectively, the “Mortgage Distributions”), shall become part of the Collateral.



(b) If any Mortgage Distributions shall be received by any Borrower or any Affiliate of any
Borrower after the occurrence and during the continuance of an Event of Default, each Borrower
shall hold, or shall cause the same to be held, in trust for the benefit of Lender. Any and all
revenue derived from any Property paid directly by tenants, subtenants or occupants of such
Property shall be held and applied in accordance with the terms and provisions of the Mortgage Loan
Agreement.



5.2.15 Refinancing or Prepayment of the Mortgage Loan. Borrowers or Mortgage
Borrowers shall not be required to obtain the consent of Lender to refinance the Mortgage Loan,
provided that the Loan shall have been (or shall simultaneously be) paid in full in accordance with
the terms of this Agreement (including the Accrued Interest, the Exit Fee or any other amounts due
and payable to Lender under the Loan Documents). Borrowers shall cause Mortgage Borrowers to
obtain the prior written consent of Lender to enter into any other refinancing of the Mortgage Loan
which consent shall not be unreasonably withheld, conditioned or delayed.




5.2.16 Acquisition of the Mortgage Loan.



(a) No Loan Party, Guarantor, or any Affiliate of any of them or any Person acting at any such
Person’s request or direction, shall acquire or agree to acquire Mortgage Lender’s interest in the
Mortgage Loan, or any portion thereof or any interest therein, or any direct or indirect ownership
interest in the holder of the Mortgage Loan (other than any passive minority interest in the holder
of the Mortgage Loan obtained by any Person), via purchase, transfer, exchange or otherwise, and
any breach or attempted breach of this provision shall constitute an Event of Default hereunder.
If, solely by operation of applicable subrogation law, Borrowers shall have failed to comply with
the foregoing, then Borrowers: (i) shall immediately notify Lender of such failure; (ii) shall
cause any and all such prohibited parties acquiring any interest in the Mortgage Loan Documents:
(A) not to enforce the Mortgage Loan Documents; and (B) upon the request of Lender, to the extent
any of such prohibited parties has or have the power or authority to do so, to promptly: (1) cancel
the promissory note evidencing the Mortgage Loan, (2) reconvey and release the Lien securing the
Mortgage Loan and any other collateral under the Mortgage Loan Documents, and (3) discontinue and
terminate any enforcement proceeding(s) under the Mortgage Loan Documents.


 


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(b) Lender shall have the right at any time to acquire all or any portion of the Mortgage Loan
or any interest in any holder of, or participant in, the Mortgage Loan without notice or consent of
Borrowers or any other Loan Party, in which event Lender shall have and may exercise all rights of
Mortgage Lender thereunder (to the extent of its interest), including the right (i) to declare that
the Mortgage Loan is in default and (ii) to accelerate the Mortgage Loan indebtedness, in
accordance with the terms thereof and (iii) to pursue all remedies against any obligor under the
Mortgage Loan Documents.



5.2.17 Other Limitations. Prior to the payment and performance in full of the
Obligations, no Borrower shall, nor shall permit or cause any Mortgage Borrower or any of its
respective Affiliates to, without the prior written consent of Lender, which consent shall not be
unreasonably withheld, give its consent or approval to any of the following actions or items:



(a) any Mortgage Borrower creating, incurring, assuming or suffering to exist any additional
Liens on any portion of any Property except for Permitted Encumbrances;



(b) any modification, amendment, consolidation, spreading, restatement, waiver or termination
of any of the Mortgage Loan Documents;




(c) Intentionally Deleted;



(d) any material change in the method of conduct of the business of any Borrower or any
Mortgage Borrower; or



(e) the settlement of any claim against any Borrower or any Mortgage Borrower, other than a
fully insured third party.



ARTICLE VI.

INSURANCE; CASUALTY; CONDEMNATION; RESTORATION





Section 6.1 Insurance.



(a) Borrowers shall cause Mortgage Borrowers to obtain and maintain, or cause to be
maintained, at all times during the term of the Loan the insurance required under Section 6.1 of
the Mortgage Loan Agreement, including, without limitation, meeting all insurer requirements
thereunder. In addition, Borrowers shall cause Mortgage Borrower to cause Lender to be named as an
additional named insured under each of the insurance policies described in Section 6.1(a)(ii),
(iii), (v), (vii), and (xii) of the Mortgage Loan Agreement, and Borrowers shall cause Mortgage
Borrowers to cause Lender to be named as a named insured together with Mortgage Lender, as their
interest may appear, under the insurance policies required under Section 6.1 (a)(i), (iv), (vi),
(viii), (ix), (x) and (xi) of the Mortgage Loan Agreement. Borrowers shall cause Mortgage
Borrowers to cause all insurance policies required under this Section 6.1 to provide for at least
thirty (30) days prior notice to Lender in the event of policy cancellation or material changes.
Not less than five (5) Business Days prior to the expiration dates of the Policies theretofore
furnished to Lender pursuant to the terms hereof, certificates of insurance evidencing the Policies
reasonably satisfactory to Lender and accompanied by evidence reasonably satisfactory to Lender of
payment of the premiums due thereunder (the “Insurance Premiums”) shall be delivered by Borrowers
to Lender; provided, however, that in the case of



 


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renewal Policies, Borrowers may furnish Lender with binders therefor to be followed by the
original Policies when issued.



(b) If at any time Lender is not in receipt of written evidence that all Policies are in full
force and effect, Lender shall have the right, upon two (2) Business Days’ written notice to
Borrowers, to take such reasonable action as Lender deems necessary to protect its interest in the
Collateral, including, without limitation, the obtaining of such insurance coverage as Lender in
its sole discretion deems appropriate. All premiums incurred by Lender in connection with such
action or in obtaining such insurance and keeping it in effect shall be paid by Borrowers to Lender
within ten (10) days after demand and, until paid, shall be secured by the Pledge Agreement and
shall bear interest at the Default Rate from the date of demand.



(c) Notwithstanding anything to the contrary set forth herein, proof of all property coverages
required under Section 6.1(a) of the Mortgage Loan Agreement shall be on an Acord 28 Evidence of
Property Form (2003/10 version) or on such other binding form as is then generally used or is
otherwise reasonably acceptable to Lender.



(d) For purposes of this Agreement, Lender shall have the same approval rights over the
insurance referred to above (including, without limitation, the insurers, deductibles and coverages
thereunder, as well as the right to require other reasonable insurance pursuant to Section
6.1(a)(xii) of the Mortgage Loan Agreement) as are provided in favor of Mortgage Lender in the
Mortgage Loan Agreement. All liability insurance provided for in the Mortgage Loan Agreement shall
provide insurance with respect to the liabilities of each of the Loan Parties. The Policies
delivered pursuant to the Mortgage Loan Agreement shall include endorsements of the type described
in Section 6.1(e) of the Mortgage Loan Agreement, but pursuant to which Lender shall have the same
rights as Mortgage Lender as referred to in such Section 6.1(e).



(e) Upon repayment in full of the Mortgage Loan, the provisions of Section 6.1 of the Mortgage
Loan Agreement and all related definitions shall be incorporated into this Agreement in their
entirety.



Section 6.2 Casualty. If any Property shall be damaged or destroyed, in whole or
in part, by fire or other casualty (a “Casualty”), Borrowers shall cause Mortgage Borrowers to
give prompt notice of such damage to Lender and shall cause Mortgage Borrowers to promptly
commence and diligently prosecute the completion of the Restoration so that such Property
resembles, as nearly as possible, the condition such Property was in immediately prior to such
Casualty, with such alterations as may be reasonably approved by Lender (to the extent such
alterations are of a type that would require Lender’s approval under Section 5.1.21 hereof) and
otherwise in accordance with Section 6.4 of the Mortgage Loan Agreement, provided, that if (A)
Mortgage Lender is obligated to make Net Proceeds available to Mortgage Borrowers for purposes
of Restoration in accordance with Section 6.4 of the Mortgage Loan Agreement, (B) Mortgage
Lender has received such Net Proceeds, and (C) Mortgage Lender has not made such Net Proceeds
available to Mortgage Borrowers, then Borrowers shall not be required to cause Mortgage
Borrowers to repair and restore such Property unless and until such Net Proceeds are made
available to Mortgage Borrowers. It is expressly understood, however, that Mortgage Borrowers
shall not be obligated to restore



 


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such Property to the precise condition of such Property prior to such Casualty provided
such Property is restored, to the extent practicable, to be of at least equal value and of
substantially the same character as prior to the Casualty. Borrowers shall pay, or shall cause
Mortgage Borrowers to pay, all costs of such Restoration whether or not such costs are covered
by insurance. Lender may, but shall not be obligated to make proof of loss if not made promptly
by any Borrower or any Mortgage Borrower. In addition, Lender may participate in any settlement
discussions with any insurance companies (and shall approve any final settlement) with respect
to any Casualty in which the Net Proceeds or the costs of completing the Restoration are equal
to or greater than the Restoration Threshold and the applicable Borrower shall, or shall cause
the applicable Mortgage Borrower to, deliver to Lender all instruments reasonably required by
Lender to permit such participation. In the event of a Casualty in which the Net Proceeds and
the costs of completing the Restoration are each less than the Restoration Threshold, Borrowers
may settle and adjust such claim without Lender’s consent or participation.



Section 6.3 Condemnation. Borrowers shall promptly give Lender notice of the
actual or threatened commencement of any proceeding for the Condemnation of any Property or any
part thereof and shall cause Mortgage Borrowers to deliver to Lender copies of any and all
papers served in connection with such proceedings. Lender may participate in any such
proceedings with respect to any Condemnation in which Borrowers’ reasonable estimate (based on
any statement of value submitted to the condemning authority or any other reasonable evidence in
Lender’s reasonable judgment) of the Net Proceeds or the costs of completing the Restoration are
equal to or greater than the Restoration Threshold, and the applicable Borrower shall, or shall
cause the applicable Mortgage Borrower to, from time to time deliver to Lender all instruments
reasonably requested by it to permit such participation. Borrowers shall, or shall cause
Mortgage Borrowers to, at their expense, diligently prosecute any such proceedings, and shall,
to the extent required hereunder, consult with Lender, its attorneys and experts, and cooperate
with them in the carrying on or defense of any such proceedings. Notwithstanding any taking by
any public or quasi-public authority through Condemnation or otherwise (including, but not
limited to, any transfer made in lieu of or in anticipation of the exercise of such taking),
Borrowers shall continue to pay the Debt at the time and in the manner provided for its payment
in the Note and in this Agreement and the Debt shall not be reduced until any Award shall have
been actually received and applied by Lender, after the deduction of expenses of collection, to
the reduction or discharge of the Debt in accordance with the provisions of Section
2.4.3(c) hereof and, with respect to the determination of the Exit Fee payable in connection
therewith, Section 2.8 hereof. Lender shall not be limited to the interest paid on the
Award by the condemning authority but shall be entitled to receive out of the Award interest at
the rate or rates provided herein or in the Note. If any Property or any portion thereof is
taken by a condemning authority, Borrowers shall, or shall cause Mortgage Borrowers to, promptly
commence and diligently prosecute the Restoration of the applicable Property and otherwise
comply with the provisions of Section 6.4 of the Mortgage Loan Agreement, provided, that if (A)
Mortgage Lender is obligated to make Net Proceeds available to Mortgage Borrowers for purposes
of Restoration in accordance with Section 6.4 of the Mortgage Loan Agreement, (B) Mortgage
Lender has received such Net Proceeds, and (C) Mortgage Lender has not made such Net Proceeds
available to Mortgage Borrowers, then Mortgage Borrowers shall not be obligated to repair and
restore such Property unless and until such Net Proceeds are made available to Mortgage



 


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Borrowers. If such Property is sold, through foreclosure or otherwise, prior to the
receipt by Lender of the Award, Lender shall have the right, whether or not a deficiency
judgment on the Note shall have been sought, recovered or denied, to receive the Award, or a
portion thereof sufficient to pay the Debt (and all components thereof, including, without
limitation, the Exit Fee).




Section 6.4 Restoration.



(a) Borrowers shall, or shall cause Mortgage Borrowers to, deliver to Lender copies of all
reports, plans, specifications, documents and other materials that are delivered to Mortgage Lender
under Section 6.4 of the Mortgage Loan Agreement in connection with a Restoration of any Property
after a Casualty or Condemnation. If any insurance proceeds or condemnation awards are to be
disbursed by Mortgage Lender for Restoration, Borrowers shall deliver or cause to be delivered to
Lender copies of all written correspondence delivered to and received from Mortgage Lender that
relates to the restoration and release of the insurance proceeds or condemnation awards.



(b) Notwithstanding any provision in this Agreement to the contrary, all insurance proceeds
and condemnation awards will be made available to Mortgage Borrowers in accordance with the
Mortgage Loan Agreement. In the event the Mortgage Loan has been paid in full and Lender receives
any insurance proceeds or condemnation award, Lender shall either apply such proceeds to the Debt
or for the Restoration of any Property in accordance with the same terms and conditions contained
in Section 6.4 of the Mortgage Loan Agreement.



(c) Upon repayment in full of the Mortgage Loan, if the Loan or any portion thereof is then
outstanding, the provisions of Section 6.4 of the Mortgage Loan Agreement and all related
definitions shall be incorporated into this Agreement in their entirety.



Section 6.5 Rights of Lender. For purposes of this Article VI, Borrowers shall obtain
the approval of Lender for each matter requiring the approval of Mortgage Lender under the
provisions of Sections 6.4 of the Mortgage Loan Agreement, with each reference in any such
provisions to the “Loan” to include the Mortgage Loan and the Loan, and the reference in any such
provisions to the “Maturity Date” to mean the Maturity Date, as defined herein. If Mortgage Lender
does not require the deposit by Mortgage Borrowers of the “Net Proceeds Deficiency” pursuant to
Section 6.4(c)(vi) of the Mortgage Loan Agreement, Lender shall have the right to demand that
Borrowers make a deposit of said “Net Proceeds Deficiency” in accordance with the terms of such
Section (as if each reference therein to “Borrowers” and “Lender” referred to Borrowers and Lender,
respectively).



ARTICLE VII.

RESERVE FUNDS





Section 7.1 Working Capital Reserve Fund.



(a) Borrowers shall cause Mortgage Borrowers to comply with all of the terms and conditions
set forth in Section 7.1 of the Mortgage Loan Agreement.


 


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(b) In the event (i) Mortgage Lender waives the requirements of Mortgage Borrowers to maintain
the Working Capital Reserve Fund and the Working Capital Reserve Account pursuant to the terms of
Section 7.1 of the Mortgage Loan Agreement, or (ii) the Mortgage Loan has been repaid in full
(without a prepayment of the Loan in full), Lender shall have the right to require Borrowers to
establish and maintain an escrow that would operate in the same manner as the Working Capital
Reserve Fund and the Working Capital Reserve Account in Section 7.1 of the Mortgage Loan Agreement
and the provisions of Section 7.1 of the Mortgage Loan Agreement and all related definitions shall
be incorporated herein by reference; provided, however, that all references to
“Borrowers,” “Lender” and “Event of Default” therein shall be deemed references to Borrowers,
Lender and Event of Default as defined herein.




Section 7.2 Tax and Insurance Escrow Fund.



(a) Borrowers shall cause Mortgage Borrowers to comply with all of the terms and conditions
set forth in Section 7.2 of the Mortgage Loan Agreement.



(b) In the event (i) Mortgage Lender waives the requirements of Mortgage Borrowers to maintain
the Tax and Insurance Escrow Fund pursuant to the terms of Section 7.2 of the Mortgage Loan
Agreement, or (ii) the Mortgage Loan has been repaid in full (without a prepayment of the Loan in
full), Lender shall have the right to require Borrowers to establish and maintain an escrow that
would operate in the same manner as the Tax and Insurance Escrow Fund in Section 7.2 of the
Mortgage Loan Agreement and the provisions of Section 7.2 of the Mortgage Loan Agreement and all
related definitions shall be incorporated herein by reference; provided, however,
that all references to “Borrowers,” “Lender” and “Event of Default” therein shall be deemed
references to Borrowers, Lender and Event of Default as defined herein.




Section 7.3 Replacement Reserve Fund.



(a) Borrowers shall cause Mortgage Borrowers to comply with all of the terms and conditions
set forth in Section 7.3 of the Mortgage Loan Agreement.



(b) In the event (i) Mortgage Lender waives the requirements of Mortgage Borrowers to maintain
the Replacement Reserve Fund and the Replacement Reserve Account pursuant to the terms of Section
7.3 of the Mortgage Loan Agreement, or (ii) the Mortgage Loan has been repaid in full (without a
prepayment of the Loan in full), Lender shall have the right to require Borrowers to establish and
maintain an escrow that would operate in the same manner as the Replacement Reserve Fund and the
Replacement Reserve Account in Section 7.3 of the Mortgage Loan Agreement and the provisions of
Section 7.3 of the Mortgage Loan Agreement and all related definitions shall be incorporated herein
by reference; provided, however, that all references to “Borrowers,” “Lender” and
“Event of Default” therein shall be deemed references to Borrowers, Lender and Event of Default as
defined herein.




Section 7.4 Interest Reserve Fund.



(a) Borrowers shall cause Mortgage Borrowers to comply with all of the terms and conditions
set forth in Section 7.4 of the Mortgage Loan Agreement.


 


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(b) In the event (i) Mortgage Lender waives the requirements of Mortgage Borrowers to maintain
the Interest Reserve Fund pursuant to the terms of Section 7.4 of the Mortgage Loan Agreement, or
(ii) the Mortgage Loan has been repaid in full (without a prepayment of the Loan in full), Lender
shall have the right to require Borrowers to establish and maintain an escrow that would operate in
the same manner as the Interest Reserve Fund in Section 7.4 of the Mortgage Loan Agreement and the
provisions of Section 7.4 of the Mortgage Loan Agreement and all related definitions shall be
incorporated herein by reference; provided, however, that all references to
“Borrowers,” “Lender” and “Event of Default” therein shall be deemed references to Borrowers,
Lender and Event of Default as defined herein.




Section 7.5 Initial Renovation Reserve Fund.



(a) Borrowers shall cause Mortgage Borrowers to comply with all of the terms and conditions
set forth in Section 7.5 of the Mortgage Loan Agreement.



(b) In the event (i) Mortgage Lender waives the requirements of Mortgage Borrowers to maintain
the Initial Renovation Reserve Fund and the Initial Renovation Reserve Account pursuant to the
terms of Section 7.5 of the Mortgage Loan Agreement, or (ii) the Mortgage Loan has been repaid in
full (without a prepayment of the Loan in full), Lender shall have the right to require Borrowers
to establish and maintain an escrow that would operate in the same manner as the Initial Renovation
Reserve Fund and the Initial Renovation Reserve Account in Section 7.5 of the Mortgage Loan
Agreement and the provisions of Section 7.5 of the Mortgage Loan Agreement and all related
definitions shall be incorporated herein by reference; provided, however, that all
references to “Borrowers,” “Lender” and “Event of Default” therein shall be deemed references to
Borrowers, Lender and Event of Default as defined herein.




Section 7.6 General Reserve Fund.



(a) Borrowers shall cause Mortgage Borrowers to comply with all of the terms and conditions
set forth in Section 7.6 of the Mortgage Loan Agreement.



(b) In the event (i) Mortgage Lender waives the requirements of Mortgage Borrowers to maintain
the General Reserve Fund and the General Reserve Account pursuant to the terms of Section 7.6 of
the Mortgage Loan Agreement, or (ii) the Mortgage Loan has been repaid in full (without a
prepayment of the Loan in full), Lender shall have the right to require Borrowers to establish and
maintain an escrow that would operate in the same manner as the General Reserve Fund and the
General Reserve Account in Section 7.6 of the Mortgage Loan Agreement and the provisions of Section
7.6 of the Mortgage Loan Agreement and all related definitions shall be incorporated herein by
reference; provided, however, that all references to “Borrowers,” “Lender” and
“Event of Default” therein shall be deemed references to Borrowers, Lender and Event of Default as
defined herein.



(c) In the event (i) Mortgage Lender waives the requirements of Mortgage Borrowers to maintain
the IP Subaccount pursuant to the terms of Section 7.6 of the Mortgage Loan Agreement, or (ii) the
Mortgage Loan has been repaid in full (without a prepayment of the Loan in full), Lender shall have
the right to require Borrowers to establish and maintain an subaccount of the General Reserve
Account that would operate in the same manner



 


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as the IP Subaccount in Section 7.6 of the Mortgage Loan Agreement and the provisions of
Section 7.6 of the Mortgage Loan Agreement and all related definitions shall be incorporated herein
by reference; provided, however, that all references to “Borrowers,” “Lender” and
“Event of Default” therein shall be deemed references to Borrowers, Lender and Event of Default as
defined herein.




Section 7.7 Construction Loan Reserve Fund.



(a) Borrowers shall cause Mortgage Borrowers to comply with all of the terms and conditions
set forth in Section 7.7 of the Mortgage Loan Agreement.



(b) In the event (i) Mortgage Lender waives the requirements of Mortgage Borrowers to maintain
the Construction Loan Reserve Fund and the Construction Loan Reserve Account pursuant to the terms
of Section 7.7 of the Mortgage Loan Agreement, or (ii) the Mortgage Loan has been repaid in full
(without a prepayment of the Loan in full), Lender shall have the right to require Borrowers to
establish and maintain an escrow that would operate in the same manner as the Construction Loan
Reserve Fund and the Construction Loan Reserve Account in Section 7.7 of the Mortgage Loan
Agreement and the provisions of Section 7.7 of the Mortgage Loan Agreement and all related
definitions shall be incorporated herein by reference; provided, however, that all
references to “Borrowers,” “Lender” and “Event of Default” therein shall be deemed references to
Borrowers, Lender and Event of Default as defined herein.




Section 7.8 Reserve Funds, Generally.



(a) Borrowers hereby grant to Lender a first-priority perfected security interest in each of
the Reserve Funds held by Lender and any and all monies now or hereafter deposited in each Reserve
Fund as additional security for payment of the Debt. Until expended or applied in accordance
herewith, the Reserve Funds shall constitute additional security for the Debt.



(b) Upon the occurrence and during the continuance of an Event of Default, Lender may, in
addition to any and all other rights and remedies available to Lender, apply any sums then present
in any or all of the Reserve Funds to the reduction of the Debt in accordance with the provisions
of Section 2.4.4 hereof (with the determination of the Exit Fee payable in connection
therewith being made in accordance with the provisions of Section 2.8), which Section
2.4.4 provides for the application of such amounts to the Debt in such order, proportion and
priority as Lender may determine in its sole discretion, until the Debt is paid in full, with any
amounts remaining being disbursed as follows: (i) first, to Second Mezzanine Lender for
application by Second Mezzanine Lender in accordance with the terms of the Second Mezzanine Loan
Documents if the Second Mezzanine Debt (or any portion thereof) is outstanding, until the Second
Mezzanine Debt is paid in full, (ii) then, to Third Mezzanine Lender for application by Third
Mezzanine Lender in accordance with the terms of the Third Mezzanine Loan Documents if the Third
Mezzanine Debt (or any portion thereof) is outstanding, until the Third Mezzanine Debt is paid in
full, and (iii) then, any balance remaining to Borrowers.


 


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(c) Any amount remaining in any of the Reserve Funds after the Obligations have been satisfied
shall be released to Borrowers; provided, however, that Borrowers and Lender hereby
agree and acknowledge that (A) if (1) all of the Obligations have been satisfied, (2) there is any
amount remaining in any of the Reserve Funds, and (3) the Second Mezzanine Debt (or any portion
thereof) is outstanding, then Lender will not pay any such remaining amount in any of the Reserve
Funds to Borrowers, but rather shall deliver such amount to Second Mezzanine Lender to be held in
accordance with the terms of the Second Mezzanine Loan Documents; or (B) if (1) all of the
Obligations and the Second Mezzanine Obligations have been satisfied, (2) there is any amount
remaining in any of the Reserve Funds, and (3) the Third Mezzanine Debt (or any portion thereof) is
outstanding, then Lender will not pay any such remaining amount in any of the Reserve Funds to
Borrowers, but rather shall deliver such amount to Third Mezzanine Lender to be held in accordance
with the terms of the Third Mezzanine Loan Documents. The Reserve Funds shall not constitute trust
funds and may be commingled with other monies held by Lender.



(d) Except to the extent provided in the Mezzanine Loan Documents, Borrowers shall not,
without obtaining the prior consent of Lender, further pledge, assign or grant any security
interest in any Reserve Fund or the monies deposited therein or permit any lien or encumbrance to
attach thereto, or any levy to be made thereon, or any UCC-1 Financing Statements, except those
naming Lender as the secured party, to be filed with respect thereto.



(e) The Reserve Funds shall be held in an Eligible Account in Permitted Investments pursuant
to the Cash Management Agreement. All interest or other earnings on a Reserve Fund (with the
exception of the Tax and Insurance Escrow Fund) shall be added to and become a part of such Reserve
Fund and shall be disbursed in the same manner as other monies deposited in such Reserve Fund,
except that all interest or other earnings on the Tax and Insurance Escrow Fund shall be retained
by Lender. Borrowers shall have the right to direct Lender to invest sums on deposit in the
Eligible Account in Permitted Investments provided (i) such investments are then regularly offered
by Lender for accounts of this size, category and type, (ii) such investments are permitted by
applicable Legal Requirements, (iii) the maturity date of the Permitted Investment is not later
than the date on which the applicable Reserve Fund is required for payment of an obligation for
which such Reserve Fund was created, and (iv) no Event of Default shall have occurred and be
continuing. Borrowers shall be responsible for payment of any federal, state or local income or
other tax applicable to the interest or income earned on the Reserve Funds (with the exception of
the Tax and Insurance Escrow Fund). No other investments of the sums on deposit in the Reserve
Funds shall be permitted except as set forth in this Section 7.9. Borrowers shall bear all
reasonable costs associated with the investment of the sums in the account in Permitted
Investments. Such costs shall be deducted from the income or earnings on such investment, if any,
and to the extent such income or earnings shall not be sufficient to pay such costs, such costs
shall be paid by Borrowers promptly on demand by Lender. Lender shall have no liability for the
rate of return earned or losses incurred on the investment of the sums in Permitted Investments.



(f) Borrowers, jointly and severally, shall indemnify Lender and hold Lender harmless from and
against any and all actions, suits, third party claims, demands, liabilities, actual losses, actual
damages (excluding lost profits, diminution in value and other consequential damages), obligations
and reasonable costs and expenses (including litigation



 


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costs and reasonable attorneys’ fees and expenses) arising from or in any way connected with
the Reserve Funds held by Lender or the performance of the obligations for which the Reserve Funds
were established, excluding matters arising from Lender’s or its agents’ fraud, willful misconduct,
illegal acts or gross negligence. Borrowers shall assign to Lender all rights and claims any
Borrower may have against all Persons supplying labor, materials or other services which are to be
paid from or secured by the Reserve Funds; provided, however, that Lender may not
pursue any such right or claim unless an Event of Default has occurred and remains uncured.



Section 7.9 Transfer of Mortgage Reserve Funds. If Mortgage Lender waives any
reserves or escrow accounts required in accordance with the terms of the Mortgage Loan Agreement,
which reserves or escrow accounts are also required in accordance with the terms of this
Article VII, or if the Mortgage Loan is paid off in full (without a prepayment of the Loan
in full), then Borrowers shall cause any amounts that had been, or would have been, deposited into
any reserves or escrow accounts in accordance with the terms of the Mortgage Loan Agreement to be
deposited or transferred to Lender in accordance with the terms of this Article VII (and
Borrowers shall enter into a cash management and lockbox agreement for the benefit of Lender
substantially similar to the arrangement entered into between Mortgage Borrowers and Mortgage
Lender at the time of the closing of the Mortgage Loan).



ARTICLE VIII.

DEFAULTS




Section 8.1 Event of Default. Each of the following events shall constitute an
event of default hereunder (an “Event of Default”):




(i) if (A) the Debt is not paid in full on the Maturity Date, (B) any Current
Pay Interest Payment or any required monthly deposit to any Reserve Fund is not paid
in full on or before the related Payment Date, or (C) any other portion of the Debt
is not paid within three (3) Business Days following notice to Borrowers that the
same is due and payable;




(ii) if any of the Taxes or Other Charges are not paid prior to the date upon
which any interest or late charges shall begin to accrue thereon, subject to Section
7.2 of the Mortgage Loan Agreement or Section 7.2 hereof, as applicable;




(iii) if the Policies are not kept in full force and effect;




(iv) if any Borrower Transfers or otherwise encumbers any portion of the
Collateral or any interest therein, or if any Mortgage Borrower Transfers or
otherwise encumbers any portion of any Property or any interest therein or the IP or
any portion thereof, or any direct or indirect interest in any Transfer Restricted
Party is Transferred, in each instance, in violation of the provisions of this
Agreement and not otherwise consented to by Lender;




(v) if any representation or warranty made by any Borrower herein or in any
other Loan Document, or in any report, certificate, financial statement or other
instrument, agreement or document furnished to Lender by or on behalf of any
Borrower or any Restricted Party shall have been false or misleading in any



 


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material respect as of the date the representation or warranty was made,
provided, however, if such representation or warranty is susceptible
of being cured, and Lender has not theretofore materially adversely relied thereon,
Borrowers shall have the right to cure such representation or warranty within ten
(10) Business Days of notice thereof;




(vi) if any Loan Party, HRHI or any Guarantor shall make an assignment for the
benefit of any creditor (other than Lender);




(vii) if a receiver, liquidator or trustee shall be appointed for any Loan
Party, HRHI or any Guarantor, or if any Loan Party, HRHI or any Guarantor shall be
adjudicated a bankrupt or insolvent, or if any petition for bankruptcy,
reorganization or arrangement pursuant to federal bankruptcy law, or any similar
federal or state law, shall be filed by or against, consented to, or acquiesced in
by, any Loan Party, HRHI or any Guarantor, or if any proceeding for the dissolution
or liquidation of any Loan Party, HRHI or any Guarantor shall be instituted;
provided, however, if such appointment, adjudication, petition or
proceeding was involuntary and not consented to by any Loan Party, HRHI or any
Guarantor, upon the same not being discharged, stayed or dismissed within ninety
(90) days, and provided that such appointment was not initiated by Lender;




(viii) if any Borrower attempts to assign its rights under this Agreement or
any of the other Loan Documents or any interest herein or therein in contravention
of the Loan Documents;




(ix) if any Borrower breaches any of its respective negative covenants
contained in Section 5.2 hereof or any covenant contained in Section
4.1.30 or Section 5.1.11 hereof, provided, however,
that, unless otherwise addressed in any other clause of this Section 8.1(a),
a breach of any covenant contained in Section 4.1.30, Section 5.1.11
or Section 5.2 hereof shall not constitute an Event of Default if (A) such
breach is inadvertent and non-recurring, (B) if such breach is curable, Borrowers
shall promptly cure such breach within thirty (30) days after notice thereof from
Lender, and (C) with respect to a material breach of any material covenant contained
in Section 4.1.30 hereof, within fifteen (15) Business Days of the request
of Lender, Borrowers deliver to Lender an Additional Insolvency Opinion, or a
modification of the Insolvency Opinion, to the effect that such breach shall not in
any way impair, negate or amend the opinions rendered in the Insolvency Opinion,
which opinion or modification and the counsel delivering such opinion or
modification shall be acceptable to Lender in its reasonable discretion;




(x) with respect to any term, covenant or provision set forth herein which
specifically contains a notice requirement or grace period, if any Borrower shall be
in default under such term, covenant or condition after the giving of such notice or
the expiration of such grace period;


 


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(xi) if any of the assumptions contained in the Insolvency Opinion delivered to
Lender in connection with the Loan, or in any Additional Insolvency Opinion
delivered subsequent to the closing of the Loan, is or shall become untrue in any
material respect;




(xii) if a material default by any Mortgage Borrower has occurred and continues
beyond any applicable cure period under any Management Agreement (or any Replacement
Management Agreement) and as a result of such default the Manager thereunder
terminates or cancels such Management Agreement (or any Replacement Management
Agreement);




(xiii) if (A) a material default by Gaming Borrower or any other Gaming
Operator has occurred and continues beyond any applicable cure period under the
Casino Component Lease (or any similar replacement Lease for purposes of operating
the Casino Component) and as a result of such default the Gaming Borrower or any
other Gaming Operator thereunder terminates or cancels such Casino Component Lease
(or any similar replacement Lease for purposes of operating the Casino Component) or
(B) without Lender’s prior written consent, Hotel/Casino Borrower or Gaming Borrower
shall terminate (or consent to or approve any such termination), change, modify or
amend the Casino Component Lease or any similar replacement Lease, consented to by
Lender, for purposes of operating the Casino Component, other than ministerial
non-monetary amendments or modifications;




(xiv) if any Borrower or any Mortgage Borrower fails to comply in any material
respect with the covenants as to Prescribed Laws set forth in Section 5.1.1
hereof and such failure to comply continues after ten (10) Business Days notice
thereof;




(xv) except as otherwise contemplated by the Loan Documents, if Hotel/Casino
Borrower ceases to do business as a hotel and casino at a standard at least equal to
Comparable Hotel/Casinos, including, without limitation, comparable food and
beverage outlets and other amenities, (other than temporary cessation in connection
with any diligent Restoration of the Hotel/Casino Property following a Casualty or
Condemnation) and such failure continues after thirty (30) days notice from Lender
thereof; provided, however, that if any such failure is susceptible
of cure but cannot reasonably be cured within such thirty (30) day period, and
provided, further, that Borrowers shall have caused Mortgage
Borrowers to commence to cure such failure within such thirty (30) day period and
shall thereafter diligently and expeditiously proceed to cure the same, such thirty
(30) day period shall be extended for such time as is reasonably necessary for
Mortgage Borrowers in the exercise of due diligence to cure such Default, such
additional period not to exceed sixty (60) days, subject to Excusable Delay;




(xvi) if a material default by Hotel/Casino Borrower has occurred and continues
beyond any applicable cure period under the Liquor Management Agreement (or any
Replacement Liquor Management Agreement) and as a result



 


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of such default the Liquor Manager thereunder terminates or cancels such Liquor
Management Agreement (or any Replacement Liquor Management Agreement);




(xvii) if (A) any revenues generated from gaming activities at the Property are
applied other than in accordance with the provisions of Section 2.6.1(c) of the
Mortgage Loan Agreement and/or in the event any funds on deposit in the Cage Reserve
or Casino Account are applied to any items other than Permitted Gaming Expenses and
Gaming Borrower fails to cure any such misapplication within five (5) Business Days
of the earlier of (1) the date on which Mortgage Lender notifies Gaming Borrower of
the same or (2) Borrower’s actual knowledge of such misapplication or (B) Gaming
Borrower fails to notify Lender of any such misapplication as required under and in
accordance with the provisions of Section 12.3.2 of the Mortgage Loan
Agreement;




(xviii) if at any time during the term of the Loan, for any reason (including,
without limitation, the revocation, suspension or surrender of any required
Governmental Approval), (A) the Gaming Operating Condition is not satisfied, or (B)
any Gaming License or finding of suitability held by the Gaming Operator shall be
materially adversely modified, denied, suspended, revoked or canceled or allowed to
lapse or if a notice of a material violation is issued under any Gaming License by
the issuing agency or other Governmental Authority having jurisdiction, or any
proceeding is commenced by any Governmental Authority for the purpose of modifying
in any materially adverse respect, suspending, revoking or canceling any Gaming
License in any materially adverse respect, in each case, which is not stayed within
sixty (60) days after commencement thereof and the result of which is reasonably
likely to be Mortgage Borrowers’ inability to continue to conduct gaming operations
at the Hotel/Casino Property; provided, however, that during the
course of any of the foregoing, substantially the same gaming operations are
permitted to continue to operate at the Hotel/Casino Property, or any Governmental
Authority shall have appointed a conservator, supervisor or trustee with respect to
the Casino Component or the Hotel/Casino Property;




(xix) if at any time during the term of the Loan, for any reason (including,
without limitation, the revocation, suspension or surrender of any required
Governmental Approval), the alcoholic beverage services at the Hotel/Casino Property
are not being managed by a Qualified Liquor Manager pursuant to the Liquor
Management Agreement or a Replacement Liquor Management Agreement;




(xx) if HRHI shall fail to provide liquor management services following an
Event of Default or a foreclosure of the Mortgage as and to the extent required
pursuant to Sections 5(a) or 5(b) of the Assignment of Liquor Management Agreement;


 


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(xxi) if Gaming Borrower shall fail to provide gaming operation services for
the Hotel/Casino Property following an Event of Default or a foreclosure of the
Mortgage as and to the extent required pursuant to Section 12.1(e) hereof;




(xxii) in the event that Gaming Borrower, any other Mortgage Borrower or any
Affiliate thereof shall ever become the Liquor Manager, if Gaming Borrower, such
other Mortgage Borrower or such Affiliate thereof thereafter shall fail to provide
liquor management services following an Event of Default or following the transfer
of the Hotel/Casino Property to a Mortgage Lender Successor Owner as and to the
extent required pursuant to Section 5.1.23(c) of the Mortgage Loan Agreement and
Section 5.1.23(c) hereof;




(xxiii) if any Borrower shall continue to be in Default under any of the other
terms, covenants or conditions of this Agreement or any other Loan Document, in each
instance, not specified in subsections (i) to (xxii) above, for ten
(10) Business Days after notice to Borrowers from Lender, in the case of any Default
which can be cured by the payment of a sum of money, or for thirty (30) days after
notice from Lender in the case of any other Default; provided,
however, that if any such non-monetary Default is susceptible of cure but
cannot reasonably be cured within such thirty (30) day period, and provided further
that Borrowers shall have commenced to cure such Default within such thirty (30) day
period and thereafter diligently and expeditiously proceed to cure the same, such
thirty (30) day period shall be extended for such time as is reasonably necessary
for Borrowers in the exercise of due diligence to cure such Default, such additional
period not to exceed ninety (90) days, subject to Excusable Delay;




(xxiv) the occurrence of any event that is expressly specified to be an Event
of Default in this Agreement or any other Loan Document;




(xxv) if the Liens created pursuant to the Pledge Agreement or any other Loan
Document shall cease to be a fully perfected enforceable first priority security
interest effective under the Gaming Laws or if there shall be a default under the
Pledge Agreement beyond any applicable notice and cure periods contained in the
Pledge Agreement;




(xxvi) if any other event shall occur or condition shall exist, if the effect
of such event or condition is to accelerate the maturity of any portion of the Debt
or to permit Lender to accelerate the maturity of all or any portion of the Debt;




(xxvii) if a Mortgage Event of Default shall occur and be continuing; or




(xxviii) if Borrowers fail to comply with the provisions of Section
2.7.2(b)(xii) hereof.



(b) Upon the occurrence and during the continuance of an Event of Default (other than an Event
of Default described in clauses (vi) or (vii) above) and at any time thereafter, in
addition to any other rights or remedies available to it pursuant to this Agreement and the other
Loan Documents or at law or in equity, to the extent permitted by applicable law,



 


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Lender may take such action, without notice or demand, that Lender deems advisable to protect
and enforce its rights against Borrowers and in and to any Property and/or the IP and/or the
Collateral, including, without limitation, declaring the Debt to be immediately due and payable,
and Lender may enforce or avail itself of any or all rights or remedies provided in the Loan
Documents against Borrowers, any Property and/or the IP and/or the Collateral, including, without
limitation, all rights or remedies available at law or in equity; and upon any Event of Default
described in clauses (vi) or (vii) above, the Debt and all Other Obligations of
Borrowers hereunder and under the other Loan Documents shall, to the extent permitted by applicable
law, immediately and automatically become due and payable, without notice or demand, and each
Borrower hereby expressly waives any such notice or demand, anything contained herein or in any
other Loan Document to the contrary notwithstanding.




Section 8.2 Remedies.



(a) Upon the occurrence and during the continuance of an Event of Default, subject to
applicable Gaming Laws, all or any one or more of the rights, powers, privileges and other remedies
available to Lender against Borrowers under this Agreement or any of the other Loan Documents
executed and delivered by, or applicable to, Borrowers or at law or in equity may be exercised by
Lender at any time and from time to time, whether or not all or any of the Debt shall be declared
due and payable, and whether or not Lender shall have commenced any foreclosure proceeding or other
action for the enforcement of its rights and remedies under any of the Loan Documents, in each case
to the extent permitted by applicable law. Any such actions taken by Lender shall be cumulative
and concurrent and may be pursued independently, singularly, successively, together or otherwise,
at such time and in such order as Lender may determine in its sole discretion, to the fullest
extent permitted by law, without impairing or otherwise affecting the other rights and remedies of
Lender permitted by law, equity or contract or as set forth herein or in the other Loan Documents.
Without limiting the generality of the foregoing, each Borrower agrees, to the extent permitted by
applicable law, that if an Event of Default is continuing (i) Lender shall not be subject to any
“one action” or “election of remedies” law or rule, and (ii) all liens and other rights, remedies
or privileges provided to Lender shall remain in full force and effect until Lender has exhausted
all of its remedies against the Collateral and the Pledge Agreement has been foreclosed, sold
and/or otherwise realized upon in satisfaction of the Debt or the Debt has been paid in full.



(b) During the continuance of an Event of Default, with respect to each Borrower and the
Collateral, nothing contained herein or in any other Loan Document shall be construed as requiring
Lender to resort to the Collateral or any particular portion of the Collateral for the satisfaction
of any of the obligations in preference or priority to any other collateral, and Lender may seek
satisfaction out of the Collateral or any part thereof, in its absolute discretion in respect of
the Obligations. In addition, to the extent permitted by applicable law, Lender shall have the
right from time to time to partially foreclose upon the Collateral under the Pledge Agreement in
any manner and for any amounts secured by the Pledge Agreement then due and payable as determined
by Lender in its sole discretion, including, without limitation, the following circumstances: (i)
in the event Borrowers default beyond any applicable grace period in the payment of one or more
scheduled payments of interest, Lender may foreclose upon the Collateral under the Pledge Agreement
to recover such delinquent payments, and/or (ii) in the event Lender elects to accelerate less than
the sum of the



 


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entire Outstanding Principal Balance and all Accrued Interest, Lender may foreclose upon the
Collateral under the Pledge Agreement to recover so much of the Outstanding Principal Balance (or
amounts owing) as Lender may accelerate and such other sums secured by the Pledge Agreement as
Lender may elect in its sole discretion. Notwithstanding one or more partial foreclosures, the
Collateral and any other collateral shall remain subject to the Pledge Agreement to secure payment
of sums secured by the Pledge Agreement and not previously recovered.



(c) Subject to applicable Gaming Laws, Lender shall have the right, at Lender’s sole cost and
expense except during the continuance of an Event of Default, in which event the same shall be at
Borrowers’ sole cost and expense, from time to time to sever the Note and the other Loan Documents
into one or more separate notes, pledges and other security documents (the “Severed Loan
Documents”) in such denominations as Lender shall determine in its sole discretion for purposes of
evidencing and enforcing its rights and remedies provided hereunder, provided that Borrowers’
liability or obligation shall not be increased by such severance. Borrowers shall execute and
deliver to Lender from time to time, promptly after the request of Lender, a severance agreement
and such other documents as Lender shall reasonably request in order to effect the severance
described in the preceding sentence, all in form and substance reasonably satisfactory to Lender.
Subject to applicable Gaming Laws, each Borrower hereby absolutely and irrevocably appoints Lender
as its true and lawful attorney, coupled with an interest, in its name and stead to make and
execute all documents necessary or desirable to effect the aforesaid severance, each Borrower
ratifying all that its said attorney shall do by virtue thereof; provided, however,
Lender shall not make or execute any such documents under such power until five (5) Business Days
after notice has been given to Borrowers by Lender of Lender’s intent to exercise its rights under
such power. Except as may be required in connection with a Securitization and expressly provided
pursuant to Section 9.1 hereof, (i) Borrowers shall not be obligated to pay any costs or
expenses incurred in connection with the preparation, execution, recording or filing of the Severed
Loan Documents, and (ii) the Severed Loan Documents shall not contain any representations,
warranties or covenants not contained in the Loan Documents (modified to reflect the current status
of such representations and warranties) and any such representations and warranties contained in
the Severed Loan Documents will be given by Borrowers only as of the Closing Date.



(d) The rights, powers and remedies of Lender under this Agreement shall be cumulative and not
exclusive of any other right, power or remedy which Lender may have against Borrowers pursuant to
this Agreement or the other Loan Documents, or existing at law or in equity or otherwise. Lender’s
rights, powers and remedies may be pursued singularly, concurrently or otherwise, at such time and
in such order as Lender may determine in Lender’s sole discretion. No delay or omission to
exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy,
right or power or shall be construed as a waiver thereof, but any such remedy, right or power may
be exercised from time to time and as often as may be deemed expedient. A waiver of one Default or
Event of Default with respect to any Borrower shall not be construed to be a waiver of any
subsequent Default or Event of Default by any Borrower or to impair any remedy, right or power
consequent thereon.



(e) To the extent permitted by applicable law, any amounts recovered from the Collateral or
any other collateral for the Loan after an Event of Default may be applied by Lender toward the
payment of any interest and/or principal of the Loan and/or any other



 


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amounts due under the Loan Documents in such order, priority and proportions as Lender in its
sole discretion shall determine.



(f) Upon the occurrence and during the continuance of an Event of Default, Lender may declare
all unpaid principal of and accrued interest on the Note, together with all other sums payable
under the Loan Documents, to be immediately due and payable, whereupon the same shall become and be
immediately due and payable, anything in the Loan Documents to the contrary notwithstanding, and
without presentation, protest or further demand or notice of any kind, all of which are expressly
hereby waived by Borrowers to the extent permitted by applicable law.



Section 8.3 Right to Cure Defaults. Upon the occurrence and during the continuance of
any Event of Default, Lender may, but without any obligation to do so and without notice to or
demand on Borrowers and without releasing Borrowers from any obligation hereunder, make any payment
or do any act required of Borrowers hereunder in such manner and to such extent as Lender may deem
necessary to protect the security hereof. Subject to the terms of the Mortgage Loan Agreement,
Lender is authorized to enter upon any Property for such purposes, or appear in, defend, or bring
any action or proceeding to protect its interest in the Properties for such purposes, and the cost
and expense thereof (including reasonable attorneys’ fees to the extent permitted by law), with
interest as provided in this Section 8.3, shall constitute a portion of the Debt and shall be due
and payable to Lender upon demand. All such costs and expenses incurred by Lender in remedying
such Event of Default or such failed payment or act or in appearing in, defending, or bringing any
action or proceeding shall bear interest at the Default Rate, for the period after notice from
Lender that such cost or expense was incurred to the date of payment to Lender. All such costs and
expenses incurred by Lender together with interest thereon calculated at the Default Rate shall be
deemed to constitute a portion of the Debt and shall be secured by the Pledge Agreement and
enforced as a lien against the Collateral and shall be immediately due and payable upon demand by
Lender therefor.



ARTICLE IX.

SPECIAL PROVISIONS




Section 9.1 Sale of Note and Securitization. Borrowers acknowledge and agree that, at
any time from and after the Closing Date, Lender may sell all or any portion of the Loan and the
Loan Documents, or require Borrowers to restructure the Loan into multiple notes (which may include
component notes and/or senior and junior notes) and/or issue one or more participations therein
and/or syndicate the Loan, which restructuring may include the restructuring of a portion of the
Loan to one or more of the foregoing or into one or more additional mezzanine loans to the direct
and/or indirect owners of the equity interests in Borrowers as reasonably, mutually determined by
Lender and Borrowers and that are direct or indirect subsidiaries of HR Holdings, secured by a
pledge of such interests, or consummate one or more private or public securitizations of rated
single- or multi-class securities (the “Securities”) secured by or evidencing ownership interests
in all or any portion of the Loan and the Loan Documents or a pool of assets that include the Loan
and the Loan Documents (such sales, participations and/or securitizations, collectively, a
“Securitization”). At the request of Lender, and to the extent not already required to be provided
by Borrowers under this Agreement, Borrowers shall use commercially reasonable good faith efforts
to provide



 


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information not in the possession of Lender or which may be reasonably required by Lender in
order to satisfy the market standards to which Lender customarily adheres or which may be
reasonably required by prospective investors (including, without limitation, any purchaser of all
or any portion of the Loan, the Mortgage Loan and/or a Mezzanine Loan and/or any purchaser of any
participation interest in any such loan) and/or the Rating Agencies in connection with any such
Securitization, including, without limitation, to:




(i) provide additional and/or updated Provided Information or other information with
respect to the Properties, the IP and/or the Collateral reasonably requested or reasonably
required by Lender, prospective investors or the Rating Agencies, together with, if
customary or if otherwise requested by any Rating Agency, appropriate verification and/or
consents related to the Provided Information through letters of auditors or opinions of
counsel of independent attorneys reasonably acceptable to Lender and the Rating Agencies;




(ii) review descriptive materials for presentations to any or all of the Rating
Agencies, and work with third-party service providers engaged to obtain, collect, and
deliver information reasonably requested or reasonably required by Lender, prospective
investors or the Rating Agencies;




(iii) if required by any Rating Agency or reasonably required by any above-referenced
investor in the applicable loan, (A) deliver updated opinions of counsel as to
non-consolidation, due execution and enforceability with respect to the Properties, the
IP, the Collateral, any Loan Party, HRHI, any Guarantor, any of their respective
Affiliates and the Loan Documents, and (B) amend the Special Purpose Entity provisions of
the organizational documents for each Loan Party, which counsel opinions and amendments to
the organizational documents shall be reasonably satisfactory to Lender and the Rating
Agencies;




(iv) if required by any Rating Agency, use commercially reasonable efforts to deliver
such additional tenant estoppel letters, subordination agreements and/or other agreements
from parties to agreements that affect any of the Properties, the IP or the Collateral,
which estoppel letters, subordination agreements and other agreements shall be reasonably
satisfactory to Lender and the Rating Agencies;




(v) provide, as of the closing date of the Securitization, updated representations
and warranties made in the Loan Documents as may be reasonably requested by Lender or the
Rating Agencies and consistent with the facts covered by such representations and
warranties made in the Loan Documents to the extent they are true as of the closing of the
Securitization;




(vi) execute such amendments to the Loan Documents as may be reasonably requested by
Lender or the Rating Agencies to effect such Securitization and/or deliver one or more new
component notes to replace the original note or modify the original note to reflect
multiple components of the Loan (and such new notes or modified note shall have the same
initial weighted average coupon of the original note, but such new notes or modified note
may change the interest rate of the Loan), and



 


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modify the Cash Management Agreement with respect to the newly created components
such that the pricing and marketability of the Securities and the size of each class of
Securities and the rating assigned to each such class by the Rating Agencies shall provide
the most favorable rating levels and achieve the optimum rating levels for the Loan,
provided, however, that (A) such new notes or modified note will not
change the interest rate, the stated maturity or the amortization of principal set forth
in the Note unless the varying interest rates shall have the same initial weighted average
coupon of the original Note, (B) such amendments to the Loan Documents or the new notes or
modified note will not modify or amend any other economic or material term of the Loan in
a manner materially adverse to any Loan Party, HRHI or Guarantors or any of their
respective Constituent Members, or (C) such amendments to the Loan Documents will not
materially increase any Loan Party’s or Guarantors’ obligations and liabilities under the
Loan Documents or materially decrease the rights of Borrowers under the Loan Documents;




(vii) if requested by Lender, review any information regarding any Property, the IP,
the Collateral, any Loan Party, any Mezzanine Borrower, HRHI, the Gaming Operator, any
Manager, the Liquor Manager and/or the Loan which is contained in any preliminary or final
private placement memorandum, prospectus, prospectus supplement (including any amendment
or supplement to either thereof), or other disclosure document to be used by Lender or any
affiliate thereof; and




(viii) supply to Lender such documentation, financial statements and reports
concerning any Loan Party, any Mezzanine Borrower, HRHI, any Guarantor, the Loan, any
Property, the IP and/or the Collateral in form and substance required in order to comply
with any applicable securities laws.



(b) Lender shall pay all reasonable third party costs and expenses (excluding fees and
expenses of Borrowers’ legal counsel) in excess of Twenty Thousand Dollars ($20,000) incurred by
Borrowers in connection with Borrowers’ complying with requests made under this Section 9.1
and/or under Section 9.2 hereof, provided, however, the fees and expenses
of Borrowers’ legal counsel and Borrowers’ administrative costs shall not be included in such
amount and Borrowers shall remain at all times responsible for the fees and expenses of their legal
counsel and their own administrative costs. In addition to the foregoing, Lender expressly
acknowledges and agrees that Borrowers shall not be required to pay any Rating Agency surveillance
charges.



(c) Notwithstanding anything to the contrary contained in this Agreement, in the event of a
Securitization that involves a participation or restructuring into one or more additional mezzanine
loans, Borrowers shall not be required to deliver Rating Agency confirmations in accordance with
the terms and conditions of this Agreement at any time that rated Securities are not outstanding.



Section 9.2 Re-Dating. In connection with a Securitization or other sale of all or a
portion of the Loan, Lender shall have the right to modify all operative dates (including, but not
limited to, payment dates, interest period start dates and end dates, etc.) under the Loan
Documents, by up to ten (10) days (such action and all related action is a “Re-Dating”) so long



 


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as such modification shall not have a materially adverse effect on Borrowers. Borrowers shall
cooperate with Lender to implement any Re-Dating. If any Borrower fails to cooperate with Lender
within ten (10) Business Days of written request by Lender, Lender is hereby appointed as each
Borrower’s attorney-in-fact to execute any and all documents necessary to accomplish the Re-Dating,
the foregoing power of attorney being coupled with an interest.




Section 9.3 Securitization Indemnification.



(a) Each Borrower understands that information provided to Lender by Borrowers and their
agents, counsel and representatives may be included in Disclosure Documents in connection with the
Securitization and may also be included in filings with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended (the “Securities Act”), or the Securities and
Exchange Act of 1934, as amended (the “Exchange Act”), and may be made available to investors or
prospective investors in the Securities, the Rating Agencies, and service providers relating to a
Securitization. In the event that the Disclosure Document is required to be revised prior to the
sale of all Securities, Borrowers will cooperate with the holder of the Note in updating the
Disclosure Document by providing all current information necessary to keep the Disclosure Document
accurate and complete in all material respects.



(b) Upon Lender’s reasonable request, Borrowers shall provide in connection with each of (i) a
preliminary and a final private placement memorandum or (ii) a preliminary and final prospectus or
prospectus supplement, as applicable, an agreement (A) certifying that Borrowers have examined such
Disclosure Documents specified by Lender and that to each Borrower’s actual knowledge, each such
Disclosure Document, as it relates to the Loan Parties, the Loan Parties’ Affiliates, Guarantors,
HRHI, the Properties, the IP, the Collateral, the Managers, the Liquor Manager, the Gaming Operator
and/or the Loan, does not contain any untrue statement of a material fact or omit to state a
material fact in each Borrower’s actual knowledge necessary in order to make the statements made,
in the light of the circumstances under which they were made, not materially misleading, (B)
jointly and severally indemnifying Lender or any Affiliate of Lender that has filed any
registration statement relating to the Securitization or has acted as the sponsor or depositor in
connection with the Securitization, any Affiliate of Lender that acts as an underwriter, placement
agent or initial purchaser of Securities issued in the Securitization, any other co-underwriters,
co-placement agents or co-initial purchasers of Securities issued in the Securitization, and each
of their respective officers, directors, partners, employees, representatives, agents and
Affiliates and each Person or entity who controls any such Person within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act (collectively, the “Indemnified Persons”),
for any out-of-pocket losses, third party claims, actual damages (but not lost revenues, diminution
in value and other consequential damages) or liabilities (collectively, the “Liabilities”) to which
any such Indemnified Person may become subject insofar as the Liabilities arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact contained in any such
Disclosure Document specified by Lender for Borrowers’ review, as it relates to any Loan Party, any
Loan Party’s Affiliates, Guarantors, HRHI, the Properties, the IP, the Collateral, the Managers,
the Liquor Manager, the Gaming Operator and/or the Loan, known by any Borrower to be untrue or
arise out of or are based upon the omission or alleged omission to state therein a material fact in
any Borrower’s actual knowledge, required to be stated therein or necessary in



 


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order to make the statements therein, in light of the circumstances under which they were
made, not misleading, and (C) agreeing to reimburse each Indemnified Person for any reasonable
legal or other reasonable expenses reasonably incurred by such Indemnified Person in connection
with investigating or defending the Liabilities; provided, however, that Borrowers
will be liable in any such case under clauses (B) or (C) above only to the extent
that any such Liabilities arise out of or are based upon any such untrue statement or omission made
therein in reliance upon and in conformity with information furnished to Lender by Borrowers in
connection with the preparation of any Disclosure Document(s) or in connection with the
underwriting or closing of the Loan or in the ordinary course of the Loan, including, without
limitation, financial statements of any Loan Party, operating statements and rent rolls with
respect to any of the Properties. This indemnity agreement will be in addition to any liability
which any Borrower may otherwise have. Moreover, the indemnification provided for in clauses
(B) and (C) above shall be effective whether or not a separate indemnification
agreement is provided.



(c) In connection with Exchange Act Filings, Borrowers, jointly and severally, shall (i)
indemnify the Indemnified Persons for Liabilities to which any such Indemnified Persons may become
subject insofar as the Liabilities arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact in any Disclosure Documents specified by Lender for
Borrowers’ review, as it relates to the Loan Parties, the Loan Parties’ Affiliates, Guarantors,
HRHI, the Properties, the IP, the Collateral, the Managers, the Liquor Manager, the Gaming Operator
and/or the Loan, or the omission or alleged omission to state in any such Disclosure Document a
material fact in any Loan Party’s actual knowledge, required to be stated in such Disclosure
Document in order to make the statements in such Disclosure Document, in light of the circumstances
under which they were made, not misleading, and (ii) reimburse each Indemnified Person for any
reasonable legal or other expenses reasonably incurred by such Indemnified Person in connection
with defending or investigating the Liabilities; provided, however, that Borrowers
will be liable in any such case under clauses (i) or (ii) above only to the extent
that any such Liabilities arise out of or are based upon any such untrue statement or omission made
therein in reliance upon and in conformity with information furnished to Lender by Borrowers in
connection with the preparation of any Disclosure Document(s) or in connection with the
underwriting or closing of the Loan or in the ordinary course of the Loan, including, without
limitation, financial statements of any Loan Party, operating statements and rent rolls with
respect to any of the Properties.



(d) Promptly after receipt by an Indemnified Person under this Section 9.3 of notice
of the commencement of any action, such Indemnified Person will, if a claim in respect thereof is
to be made against Borrowers under this Section 9.3, notify Borrowers in writing of the
commencement thereof, but the omission to so notify Borrowers will not relieve any Borrower from
any liability which any Borrower may have to any Indemnified Person hereunder except to the extent
that such failure to notify causes material prejudice to any Borrower. In the event that any
action is brought against any Indemnified Person, and it notifies Borrowers of the commencement
thereof, Borrowers will be entitled to participate therein and, to the extent that they may elect
by written notice delivered to such Indemnified Person promptly after receiving the aforesaid
notice from such Indemnified Person, to assume the defense thereof with counsel reasonably
satisfactory to such Indemnified Person. After notice from Borrowers to such Indemnified Person
under this Section 9.3, such Indemnified Person shall pay for any legal or other expenses
subsequently incurred by such Indemnified Person in connection with the



 


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defense thereof other than reasonable costs of investigation; provided,
however, if the defendants in any such action include both the Indemnified Person and any
Borrower and the Indemnified Person shall have reasonably concluded that there are any legal
defenses available to it and/or other Indemnified Persons that are different from or additional to
those available to Borrowers, the Indemnified Person(s) shall have the right to select separate
counsel to assert such legal defenses and to otherwise participate in the defense of such action on
behalf of such Indemnified Person(s) at the cost of Borrowers. Borrowers shall not be liable for
the expenses of more than one separate counsel unless any Indemnified Person shall have reasonably
concluded that there may be legal defenses available to it that are different from or additional to
those available to another Indemnified Person.



(e) Without the prior consent of Lender, (which consent shall not be unreasonably withheld),
no Borrower shall settle or compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding in respect of which indemnification may be sought
hereunder (whether or not any Indemnified Person is an actual or potential party to such claim,
action, suit or proceeding) unless Borrowers shall have given Lender reasonable prior notice
thereof and shall have obtained an unconditional release of each Indemnified Person hereunder from
all liability arising out of such claim, action, suit or proceeding. As long as Borrowers have
complied with their obligations to defend and indemnify hereunder, Borrowers shall not be liable
for any settlement made by any Indemnified Person without the consent of Borrowers (which consent
shall not be unreasonably withheld).



(f) Borrowers agree that if any indemnification or reimbursement sought pursuant to this
Section 9.3 is finally judicially determined to be unavailable for any reason or is
insufficient to hold any Indemnified Person harmless (with respect only to the Liabilities that are
the subject of this Section 9.3), then Borrowers, on the one hand, and such Indemnified
Person, on the other hand, shall contribute to the Liabilities for which such indemnification or
reimbursement is held unavailable or is insufficient: (i) in such proportion as is appropriate to
reflect the relative benefits to Borrowers, on the one hand, and such Indemnified Person, on the
other hand, from the transactions to which such indemnification or reimbursement relates; or (ii)
if the allocation provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred to in clause
(i) but also the relative faults of Borrowers, on the one hand, and all Indemnified Persons, on
the other hand, as well as any other equitable considerations. In determining the amount of
contribution to which the respective parties are entitled, the following factors shall be
considered: (A) Lender’s and Borrowers’ relative knowledge and access to information concerning the
matter with respect to which the claim was asserted; and (B) the opportunity to correct and prevent
any statement or omission. Notwithstanding the provisions of this Section 9.3, no Person
found liable for a fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any other Person who is not also found
liable for such fraudulent misrepresentation.



(g) Borrowers agree that the indemnification, contribution and reimbursement obligations set
forth in this Section 9.3 shall apply whether or not any Indemnified Person is a formal
party to any lawsuits, claims or other proceedings. Borrowers further agree that the Indemnified
Persons are intended third party beneficiaries under this Section 9.3.


 


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(h) Subject to the provisions of Section 9.4 hereof, the liabilities and obligations
of Borrowers and Lender under this Section 9.3 shall survive the termination of this
Agreement and the satisfaction and discharge of the Debt.



Section 9.4 Exculpation. Subject to the qualifications below, Lender shall not
enforce the liability and obligation of Borrowers to perform and observe the obligations contained
in the Note, this Agreement, the Pledge Agreement or the other Loan Documents by any action or
proceeding wherein a money judgment shall be sought against any Borrower, except that Lender may
bring a foreclosure action, an action for specific performance or any other appropriate action or
proceeding to enable Lender to enforce and realize upon its interest under the Note, this
Agreement, the Pledge Agreement and the other Loan Documents, or in the Collateral given to Lender
pursuant to the Loan Documents; provided, however, that, except as specifically
provided herein, any judgment in any such action or proceeding shall be enforceable against any
Borrower only to the extent of such Borrower’s interest in the Collateral, and Lender, by accepting
the Note, this Agreement, the Pledge Agreement and the other Loan Documents, agrees that it shall
not sue for, seek or demand any deficiency judgment against any Borrower in any such action or
proceeding under, or by reason of, or in connection with, the Note, this Agreement, the Pledge
Agreement or the other Loan Documents. The provisions of this Section 9.4 shall not,
however, (a) constitute a waiver, release or impairment of any obligation evidenced or secured by
any of the Loan Documents; (b) impair the right of Lender to name any Borrower as a party defendant
in any action or suit for foreclosure and sale under the Pledge Agreement; (c) affect the validity
or enforceability of or any guaranty made in connection with the Loan, including, without
limitation, the Non-Recourse Guaranty, the Closing Completion Guaranty, the Construction Completion
Guaranty and the HRHI Guaranty, or any of the rights and remedies of Lender thereunder; (d) impair
the right of Lender to obtain the appointment of a receiver; (e) constitute a prohibition against
Lender seeking a deficiency judgment against any Borrower in order to fully realize the security
granted by the Pledge Agreement or commencing any other appropriate action or proceeding in order
for Lender to exercise its remedies against the Collateral; or (f) constitute a waiver of the right
of Lender to enforce the liability and obligation of any Borrower, by money judgment or otherwise,
to the extent of any actual loss, damage (excluding any lost revenue, diminution of value and other
consequential damages), reasonable cost, reasonable expense, liability, claim or other obligation
incurred by Lender (including attorneys’ fees and costs reasonably incurred) arising out of or in
connection with the following:




(i) fraud or intentional misrepresentation by any Loan Party, HRHI, any
Guarantor or any of their respective principals, officers, agents or employees in
connection with the Loan;




(ii) physical waste to any Property arising from the intentional misconduct or
gross negligence of any Loan Party, HRHI, any Guarantor or any of their respective
principals, officers, agents or employees and/or any removal of any asset forming a
part of any Property in violation of this Agreement or the other Loan Documents;




(iii) Intentionally Deleted;


 


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(iv) the misappropriation or conversion by any Loan Party, by any Person
Controlled by any Loan Party, including, without limitation, any Affiliated Manager,
a Liquor Manager who is an Affiliate of any Loan Party or a Gaming Operator who is
an Affiliate of any Loan Party, by any agent of any Loan Party, or by any other
Person with whom any Loan Party shall collude or cooperate, of (A) any Insurance
Proceeds paid by reason of any Casualty, to the extent so misappropriated or
converted; (B) any Awards received in connection with a Condemnation, to the extent
so misappropriated or converted; (C) any Rents or other Gross Income from Operations
not delivered to Lender following and during the continuance of an Event of Default
and not otherwise used to pay actual, customary Operating Expenses, including,
without limitation, (I) any income, proceeds or other amounts received by any Loan
Party under the Casino Component Lease, and/or (II) without duplication of the
foregoing clause (I), any income, proceeds or revenue generated from gaming
activities at any Property, in each of the foregoing instances, to the extent so
misappropriated or converted; (D) any Rents paid more than one (1) month in advance
in violation of this Agreement or the other Loan Documents, to the extent so
misappropriated or converted; and/or (E) any security deposits, to the extent so
misappropriated or converted;




(v) the failure of any Loan Party to pay (or to deposit into the Mortgage
Reserve Funds or the Reserve Funds, if applicable, amounts sufficient to pay) all
Taxes and all other costs giving rise to any Lien on any portion of the Collateral
or any Property or the IP with priority over or equal to the Lien of the Loan
Documents in violation of this Agreement or the other Loan Documents, to the extent
that there is sufficient Gross Income from Operations to make such payments (or
deposits, as applicable);




(vi) if any Loan Party fails to maintain its status as a Special Purpose Entity
as required pursuant to the terms hereof;




(vii) if any Loan Party fails to obtain Lender’s consent to any subordinate
financing, mortgage or other voluntary Lien encumbering the Collateral, any Property
or the IP other than Permitted Encumbrances and Permitted IP Encumbrances;




(viii) the failure to maintain insurance coverage under blanket insurance
policies to the extent permitted under this Agreement;




(ix) if any of the events set forth in clauses (a), (b) or (c)
of Section 5.2.11 hereof shall occur without the prior approval of Lender;




(x) if any of the restrictions to Transfer set forth in Section 5.2.10
hereof or in any of the other Loan Documents are violated (provided that a Transfer
to Lender or any Mezzanine Lender in connection with a foreclosure, an assignment in
lieu of foreclosure, or other consensual Transfer to Lender or any Mezzanine Lender
shall in no event give rise to any liability under this clause 9.4(x) and provided
further, that any such Transfer to Lender or any Mezzanine



 


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Lender shall not limit or waive any other liability of the Borrowers or
Guarantor under the other provisions of this Section 9.4 or the Non-Recourse
Guaranty, as applicable);




(xi) Intentionally Deleted;




(xii) Intentionally Deleted;




(xiii) if HRHI shall fail to provide Assigned Employees for the operation of
gaming activities at the Hotel/Casino Property as and to the extent required
pursuant to Paragraph 3 of the First HRHI Modification Agreement;




(xiv) if Gaming Borrower shall fail to provide gaming operation services for
the Hotel/Casino Property following an Event of Default, a foreclosure of the
Mortgage or a deed in lieu of foreclosure, as and to the extent required pursuant to
Section 12.1(e) hereof;




(xv) in the event that HRHI, Gaming Borrower, any other Loan Party or any
Affiliate thereof shall be the Liquor Manager, if HRHI, Gaming Borrower, such other
Loan Party or such Affiliate thereof shall fail to provide liquor management
services for the Hotel/Casino Property following an Event of Default or a
foreclosure of the Mortgage or a deed in lieu of foreclosure, as and to the extent
required (A) as to HRHI, pursuant to Sections 5(a) or 5(b) of the Assignment of
Liquor Management Agreement, as applicable, and (B) as to Gaming Borrower, any other
Mortgage Borrower or any Affiliate thereof, pursuant to Section 5.1.23(c)
hereof;




(xvi) in connection with the $250,000.00 lease termination fee pursuant to
Section 3.2(B) of that certain Lease by and between PM Realty, LLC and HRHI, as
landlord, and Mr. Chow of Las Vegas, LLC, as tenant, dated December 24, 2004;




(xvii) as a result of the imposition of any tax provided in NRS §§375.020 and
375.023 with respect to the merger transaction contemplated under the Merger
Agreement and/or the subsequent conveyance of the Hotel/Casino Property (A) to HRHH
Gaming Junior Mezz, LLC, and then (B) to Gaming Mezz Borrower, and then (iii) to
Hotel/Casino Borrower, provided, however, that any liability under
this clause (xvii) shall terminate upon the payment in full of the Debt;
and/or




(xviii) as a result of Adjacent Borrower selling or attempting to sell any
Partial Release Parcel (including, without limitation, the sale of approximately
11.1 acres that occurred on August 1, 2008, regardless of whether such property
meets the definition of a “Partial Release Parcel” under this Agreement) in
accordance with the procedures set forth in Section 2.5.1(f) of the Mortgage Loan
Agreement, as applicable, rather than pursuant to a customary direct deed transfer,
including, without limitation, (A) the imposition of any tax (including interest and
penalties) provided in NRS §§375.020 and 375.023, (B) in connection with any



 


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Bankruptcy Action filed by or against any Subsidiary Transferee prior to or
following the consummation of such sale, and/or (C) in connection with any delay in
accomplishing any of the steps identified in said Section 2.5.1(f) of the Mortgage
Loan Agreement.




(xix) the occurrence of an Event of Default under Section 8.1(a)(xvii)(A)
hereof.



Notwithstanding anything to the contrary in this Agreement, the Note or any of the other Loan
Documents, (A) Lender shall not be deemed to have waived any right which Lender may have under
Section 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code to file a claim for
the full amount of the Debt secured by the Pledge Agreement or to require that all collateral shall
continue to secure all of the Debt owing to Lender in accordance with the Loan Documents, and (B)
the Debt shall be fully recourse to Borrowers in the event of: (i) any Loan Party, HRHI or both
Guarantors filing a voluntary petition under the Bankruptcy Code or any other Federal or state
bankruptcy or insolvency law; (ii) the filing of an involuntary petition against any Loan Party,
HRHI or both Guarantors under the Bankruptcy Code or any other Federal or state bankruptcy or
insolvency law by or on behalf of any Person other than Lender, and such petition is not dismissed
within ninety (90) days after filing, or any Loan Party, or any Affiliate of any of them who
Controls any Loan Party, or HRHI or both Guarantors, solicit or cause to be solicited petitioning
creditors for any involuntary petition against any Loan Party, HRHI or both Guarantors from any
Person (other than if requested to do so by or on behalf of Lender); (iii) any Loan Party, HRHI or
both Guarantors filing an answer consenting to, or any Loan Party, HRHI or both Guarantors, or any
Affiliate of any of them who Controls any Loan Party, otherwise consenting to or acquiescing or
joining in, any involuntary petition filed against any Loan Party, HRHI or both Guarantors, by any
other Person (other than if filed by or on behalf of Lender) under the Bankruptcy Code or any other
Federal or state bankruptcy or insolvency law; (iv) any Loan Party, HRHI or both Guarantors, or any
Affiliate of any of them who Controls any Loan Party, consenting to or acquiescing or joining in an
application for the appointment of a custodian, receiver, trustee or examiner for any Loan Party or
any portion of any Property or any portion of the IP or the Collateral (other than any such
appointment at the request or petition of Lender); (v) any Loan Party, HRHI or both Guarantors
voluntarily making an assignment for the benefit of creditors (other than Lender), or admitting, in
writing or in any legal proceeding, its insolvency or inability to pay its debts as they become
due; and/or (vi) Gaming Mezz Borrower failing to comply, or cause compliance by the applicable
Mortgage Borrower, with the requirements of the Gaming Laws to obtain the approval of the Gaming
Authorities of the pledge of the Gaming Securities pursuant to Section 17(b) of the Pledge
Agreement (it being understood and agreed that Borrowers shall have no liability under this
clause (vi) to the extent arising from the failure of Lender to reasonably cooperate with
the Gaming Authorities in connection with such Gaming Law requirements to the extent necessary);
unless, in the case of any of the foregoing clauses (i), (ii), (iii), (iv), (v) or
(vi) as it relates to or affects both Guarantors, one or more guarantors acceptable to
Lender in its sole discretion remains or becomes a guarantor of the Loan.



Notwithstanding anything to the contrary in this Agreement or any other Loan Document, and
except for (1) Guarantors’ obligations under the Non-Recourse Guaranty, the Closing Completion
Guaranty and the Construction Completion Guaranty, (2) HRHI’s obligations under



 


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the HRHI Guaranty, and (3) with respect to the DLJ Guarantor, DLJ Merchant Banking Partners
IV, L.P., MBP IV Plan Investors, L.P., DLJMB HRH Co-Investments, L.P., DLJ Offshore Partners IV,
L.P., and DLJ Merchant Banking Partners IV (Pacific), L.P. (such limited partnerships,
collectively, the “DLJMB Parties”) as provided in the DLJMB Commitment Letter, no present or future
Constituent Member in any Borrower, nor any present or future shareholder, officer, director,
employee, trustee, beneficiary, advisor, member, partner, principal, participant or agent of or in
any Borrower or of or in any Person that is or becomes a Constituent Member in any Borrower, shall
have any personal liability, directly or indirectly, under or in connection with this Agreement or
any of the Loan Documents, or any amendment or amendments to any of the foregoing made at any time
or times, heretofore or hereafter, and Lender on behalf of itself and its successors and assigns,
hereby waives any and all such personal liability. In addition, Lender, for itself and its
successors and assigns, acknowledges and agrees that neither Borrowers, nor any Constituent Member,
nor any other party, is assuming any personal liability, directly or indirectly, under or in
connection with any agreement, lease, instrument, claim or right constituting a part of any
Property, the IP or the Collateral or to which any Property, the IP or the Collateral is now or
hereafter subject, except as may be expressly set forth therein.



For purposes of this Agreement and each of the other Loan Documents, neither the negative
capital account of any Constituent Member in any Borrower nor any obligation of any Constituent
Member in any Borrower to restore a negative capital account or to contribute or loan capital to
any Borrower or to any other Constituent Member in any Borrower shall at any time be deemed to be
the property or an asset of such Borrower (or any such other Constituent Member) and neither Lender
nor any of its successors or assigns shall have any right to collect, enforce or proceed against
any Constituent Member with respect to any such negative capital account or obligation to restore,
contribute or loan.




Section 9.5 Matters Concerning Managers and Liquor Manager.



9.5.1 If (a) an Event of Default occurs and is continuing, (b) without the consent of Lender,
Morgans Parent ceases to Control any Manager, unless following such change of Control, each
affected Manager still constitutes a Qualified Manager, (c) any Manager shall become bankrupt or
insolvent, or (d) any Manager commits fraud, gross negligence, willful misconduct or
misappropriation of funds with respect to any Mortgage Borrower and/or any Property and/or the IP
or any material default otherwise occurs under any Management Agreement beyond any applicable grace
and cure periods, Borrowers shall cause the applicable Mortgage Borrower to, at the request of
Lender, terminate the applicable Management Agreement and replace the Manager thereunder with a
Qualified Manager pursuant to a Replacement Management Agreement, it being understood and agreed
that the management fee for such Qualified Manager shall not exceed then prevailing market rates.



9.5.2 If (a) an Event of Default occurs and is continuing, (b) without the consent of Lender,
HR Holdings ceases to Control the Liquor Manager, unless following such change of Control, the
Liquor Manager still constitutes a Qualified Liquor Manager, (c) the Liquor Manager shall become
bankrupt or insolvent, or (d) the Liquor Manager commits fraud, gross negligence, willful
misconduct or misappropriation of funds with respect to Hotel/Casino Borrower and/or the
Hotel/Casino Property or any material default otherwise occurs under the



 


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Liquor Management Agreement beyond any applicable grace and cure periods, Borrowers shall
cause Hotel/Casino Borrower to, at the request of Lender, terminate the Liquor Management Agreement
and replace the Liquor Manager thereunder with a Qualified Liquor Manager pursuant to a Replacement
Liquor Management Agreement, it being understood and agreed that the management fee for such
Qualified Liquor Manager shall not exceed then prevailing market rates; provided,
however, that in no event shall Hotel/Casino Borrower be required to terminate such Liquor
Manager if such immediate termination would require cessation of liquor-related activities at any
of the Properties and, in such event, (i) such termination shall occur immediately upon the ability
of Hotel/Casino Borrower to transfer such liquor operations to a Qualified Liquor Manager as
required herein, and (ii) Borrowers shall cause Hotel/Casino Borrower to, at its sole cost and
expense, diligently pursue the engagement and licensing of a replacement Qualified Liquor Manager.



Section 9.6 Matters Concerning Gaming Operator. If (a) the Gaming Operator commits
fraud, gross negligence or willful misconduct with respect to the Hotel/Casino Property or any
material default otherwise occurs under the Casino Component Lease beyond any applicable grace and
cure periods, or (b) the Gaming Operator (i) has its gaming license suspended or revoked, (ii)
allows its gaming license to lapse, or (iii) may not lawfully operate gaming at the Hotel/Casino
Property pursuant to any Legal Requirements or the order of any Governmental Authority, Borrowers
shall cause Hotel/Casino Borrower to, at the request of Lender and to the extent permitted by
applicable Legal Requirements and the requirements of any Gaming Authorities, terminate the Casino
Component Lease and replace the Gaming Operator with a Qualified Gaming Operator pursuant to a new
gaming lease or similar agreement and a new recognition agreement, in each instance reasonably
acceptable to Lender; provided, however, that in no event shall Hotel/Casino Borrower be required
to terminate such Gaming Operator if such immediate termination would require cessation of
gaming-related activities at the Hotel/Casino Property and, in such event, (A) such termination
shall occur immediately upon the ability of Hotel/Casino Borrower to transfer such gaming
operations to a Qualified Gaming Operator as required herein, and (B) Borrowers shall cause
Hotel/Casino Borrower to, at its sole cost and expense, diligently pursue the engagement and
licensing of a replacement Qualified Gaming Operator.




Section 9.7 Servicer.



(a) At the option of Lender, the Loan may be serviced by a servicer/trustee (the “Servicer”)
selected by Lender and Lender may delegate all or any portion of its responsibilities under this
Agreement and the other Loan Documents to the Servicer pursuant to a servicing agreement (the
“Servicing Agreement”) between Lender and Servicer. Borrowers shall not be responsible for any set
up fees or any other initial costs relating to or arising under the Servicing Agreement nor shall
Borrowers be responsible for payment of the monthly servicing fee due to the Servicer under the
Servicing Agreement.



(b) Lender shall endeavor in good faith (without liability for failure to do so) to provide
Borrowers with notification of any change in the Person servicing the Loan; provided that
it is expressly acknowledged and agreed by Lender that it shall not constitute a Default or Event
of Default hereunder if due to such failure to provide notification Borrowers



 


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send any payments required to be made hereunder to Lender or any predecessor Person servicing
the Loan.



ARTICLE X.

MISCELLANEOUS




Section 10.1 Survival. This Agreement and all covenants, agreements, representations
and warranties made herein and in the certificates delivered pursuant hereto shall survive the
making by Lender of the Loan and the execution and delivery to Lender of the Note, and shall
continue in full force and effect so long as all or any of the Debt is outstanding and unpaid
unless a longer period is expressly set forth herein or in the other Loan Documents. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be deemed to include
the legal representatives, successors and assigns of such party. All covenants, promises and
agreements in this Agreement, by or on behalf of any Borrower, shall inure to the benefit of the
legal representatives, successors and assigns of Lender.



Section 10.2 Lender’s Discretion. Whenever pursuant to this Agreement, Lender
exercises any right given to it to approve or disapprove, or any arrangement or term is to be
satisfactory to Lender, the decision of Lender to approve or disapprove or to decide whether
arrangements or terms are satisfactory or not satisfactory shall (except as is otherwise
specifically herein provided) be in the sole discretion of Lender and shall be final and
conclusive. Whenever this Agreement expressly provides that Lender may not unreasonably withhold
its consent or its approval of an arrangement or term, such provisions shall also be deemed to
prohibit Lender from unreasonably delaying or conditioning such consent or approval. Prior to a
Securitization, whenever pursuant to this Agreement the Rating Agencies are given any right to
approve or disapprove, or any arrangement or term is to be satisfactory to the Rating Agencies, the
decision of Lender to approve or disapprove or to decide whether arrangements or terms are
satisfactory or not satisfactory, based upon Lender’s determination of Rating Agency criteria,
shall be substituted therefor.




Section 10.3 Governing Law.



(a) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, THE LOAN WAS MADE BY LENDER AND
ACCEPTED BY BORROWERS IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE LOAN DELIVERED PURSUANT
HERETO WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL
RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS,
INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS ARISING
HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS) AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT
THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, PRIORITY AND



 


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ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS IN ANY REAL PROPERTY INTEREST CREATED PURSUANT
HERETO AND PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE
LAW OF THE STATE IN WHICH THE APPLICABLE REAL PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE
FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL GOVERN
THE CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE OBLIGATIONS
ARISING HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW, EACH BORROWER HEREBY
UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION
GOVERNS THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS, AND THIS AGREEMENT, THE NOTE AND THE
OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.



(b) NOTWITHSTANDING THE FOREGOING, THIS AGREEMENT IS SUBJECT TO THE GAMING LAWS. LENDER
EXPRESSLY ACKNOWLEDGES AND AGREES THAT ALL RIGHTS, REMEDIES, POWERS AND OBLIGATIONS OF EACH PARTY
UNDER THIS AGREEMENT MAY BE EXERCISED ONLY TO THE EXTENT THAT THE EXERCISE THEREOF DOES NOT VIOLATE
ANY APPLICABLE PROVISIONS OF THE GAMING LAWS AND ONLY TO THE EXTENT THAT ANY APPLICABLE REQUIRED
APPROVAL OF ANY GAMING AUTHORITY (INCLUDING PRIOR APPROVALS) IS OBTAINED. NOTWITHSTANDING THE
FOREGOING, BORROWERS EXPRESSLY ACKNOWLEDGE AND AGREE THAT THE FACT THAT ANY GAMING LAW OR THE LACK
OF APPROVAL FROM ANY GAMING AUTHORITY MAY PREVENT ANY BORROWER OR ANY OTHER PERSON FROM TAKING ANY
ACTION OR FULFILLING ANY OBLIGATION HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT WHICH RESULTS IN THE
OCCURRENCE OF AN EVENT OF DEFAULT AND/OR A CIRCUMSTANCE GIVING RISE TO RECOURSE LIABILITY UNDER
SECTION 9.4 HEREOF, SHALL NOT, IN ANY MANNER, LIMIT OR VITIATE OR BE DEEMED TO LIMIT OR
VITIATE SUCH EVENT OF DEFAULT OR SUCH CIRCUMSTANCE GIVING RISE TO RECOURSE LIABILITY IN ANY MANNER
WHATSOEVER.



(c) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR ANY BORROWER ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL, AT LENDER’S OPTION, BE INSTITUTED IN
ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF NEW YORK, PURSUANT TO SECTION 5-1402
OF THE NEW YORK GENERAL OBLIGATIONS LAW AND, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
EACH BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR FORUM
NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND EACH BORROWER HEREBY IRREVOCABLY SUBMITS
TO THE JURISDICTION OF ANY SUCH COURT IN ANY



 


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SUIT, ACTION OR PROCEEDING. EACH BORROWER DOES HEREBY DESIGNATE AND APPOINT:




CT CORPORATION SYSTEM

111 EIGHTH AVENUE

NEW YORK, NEW YORK 10011



AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS
WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW
YORK, NEW YORK, AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND NOTICE OF
SAID SERVICE MAILED OR DELIVERED TO SUCH BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN
EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON SUCH BORROWER IN ANY SUCH SUIT, ACTION OR
PROCEEDING IN THE STATE OF NEW YORK. EACH BORROWER (I) SHALL GIVE PROMPT NOTICE TO LENDER OF ANY
CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME
DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE
AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III)
SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW
YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.



Section 10.4 Modification, Waiver in Writing. No modification, amendment, extension,
discharge, termination or waiver of any provision of this Agreement, or of the Note, or of any
other Loan Document, nor consent to any departure by any Borrower therefrom, shall in any event be
effective unless the same shall be in a writing signed by the party against whom enforcement is
sought, and then such waiver or consent shall be effective only in the specific instance, and for
the purpose, for which given. Except as otherwise expressly provided herein, no notice to, or
demand on any Borrower, shall entitle such Borrower or any other Borrower to any other or future
notice or demand in the same, similar or other circumstances.



Section 10.5 Delay Not a Waiver. Neither any failure nor any delay on the part of
Lender in insisting upon strict performance of any term, condition, covenant or agreement, or
exercising any right, power, remedy or privilege hereunder, or under the Note or under any other
Loan Document, or under any other instrument given as security therefor, shall operate as or
constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other
future exercise, or the exercise of any other right, power, remedy or privilege. In particular,
and not by way of limitation, by accepting payment after the due date of any amount payable under
this Agreement, the Note or any other Loan Document, Lender shall not be deemed to have waived any
right either to require prompt payment when due of all other amounts due under this Agreement, the
Note or the other Loan Documents, or to declare a default for failure to effect prompt payment of
any such other amount.



Section 10.6 Notices. Except as otherwise required by applicable law, all notices,
consents, approvals and requests required or permitted hereunder or under any other Loan



 


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Document (each, a “Notice”) shall be given in writing and shall be effective for all purposes
if (a) hand delivered, (b) sent by reputable overnight courier, (c) sent by (i) certified or
registered United States mail, postage prepaid, return receipt requested or (ii) expedited prepaid
delivery service, either commercial or United States Postal Service, with proof of attempted
delivery, or (d) sent by telecopier (with answer back acknowledged and followed by a hard copy via
one of the other methods described above), addressed as follows (or to such other address and
Person as shall be designated from time to time by any party hereto, as the case may be, in a
Notice to the other parties hereto in the manner provided for in this Section 10.6):



	 	 	 
	If to Lender:

	 	Brookfield Financial, LLC — Series B
	 

	 	c/o Brookfield Real Estate Financial Partners LLC

	 

	 	Three World Financial Center
	 

	 	200 Vesey Street, 11th Floor 
	 

	 	New York, New York 10281
	 

	 	Attention: Terry Hoyt
	 

	 	Facsimile No.: (212) 417-7292
	 
	 	 
	with a copy to:

	 	Cadwalader, Wisckersham & Taft LLP
	 

	 	One World Financial Center
	 

	 	New York, New York 10281
	 

	 	Attention: John M. Zizzo, Esq.
	 

	 	Facsimile No.: (212) 504-6666
	 
	 	 
	If to Borrowers:

	 	HRHH Gaming Senior Mezz, LLC
	 

	 	and
	 

	 	HRHH JV Senior Mezz, LLC
	 

	 	c/o Morgans Hotel Group Co.
	 

	 	475 Tenth Avenue 
	 

	 	New York, New York 10018
	 

	 	Re: Hard Rock
	 

	 	Attention: Marc Gordon, Chief Investment Officer
	 

	 	Facsimile No.: (212) 277-4201
	 
	 	 
	With a copy to:

	 	Wachtell, Lipton, Rosen & Katz
	 

	 	51 West 52nd Street
	 

	 	29th Floor 
	 

	 	New York, New York 10019
	 

	 	Attention: Stephen Gellman, Esq.
	 

	 	Facsimile No.: (212) 403-2000
	 
	 	 
	With a copy to:

	 	DLJ Merchant Banking Partners
	 

	 	11 Madison Avenue 
	 

	 	New York, New York 10010
	 

	 	Attention: Ryan Sprott
	 

	 	Facsimile No.: (212) 743-1667






 


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	With a copy to:

	 	Latham & Watkins LLP
	 

	 	885 Third Avenue 
	 

	 	Suite 1000
	 

	 	New York, New York 10022
	 

	 	Attention: Michelle Kelban, Esq.
	 

	 	Facsimile No.: (212) 751-4864
	 
	 	 
	With a copy to:

	 	Latham & Watkins LLP
	 

	 	633 West Fifth Street 
	 

	 	Suite 4000
	 

	 	Los Angeles, California 90071
	 

	 	Attention: Tom Sadler, Esq.
	 

	 	Facsimile No.: (213) 891-8763






A Notice shall be deemed to have been given: in the case of hand delivery or delivery by a
reputable overnight courier, at the time of delivery; in the case of registered or certified mail,
when delivered or the first attempted delivery on a Business Day; in the case of expedited prepaid
delivery and telecopy, upon the first attempted delivery on a Business Day; or in the case of
telecopy, upon sender’s receipt of a machine-generated confirmation of successful transmission on a
Business Day after advice by telephone to recipient that a telecopy Notice is forthcoming;
provided, that within three (3) Business Days thereafter, a hard copy of such Notice shall
have been delivered pursuant to the provisions of clause (a), (b)or (c) of this
Section 10.6. Any failure to deliver a Notice by reason of a change of address not given
in accordance with this Section 10.6, or any refusal to accept a Notice, shall be deemed to
have been given when delivery was attempted. Any Notice required or permitted to be given by any
party hereunder or under any other Loan Document may be given by its respective counsel.
Additionally, any Notice required or permitted to be given by Lender hereunder or under any other
Loan Document may also be given by the Servicer. Any Notice sent to one Borrower shall constitute
and shall be deemed to constitute such Notice to all Borrowers. Any notice given hereunder may
also be given via electronic mail; provided that no such notice shall be deemed to have been given
in accordance with the requirements of this Section 10.6 unless a hard copy of such Notice shall
have been delivered pursuant to the provisions of clause (a), (b) or (c) of this Section 10.6.



Section 10.7 Trial by Jury. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH
BORROWER AND LENDER EACH HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT
BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR
HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION
ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND
VOLUNTARILY BY EACH BORROWER AND LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE
AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. EACH PARTY IS
HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS
WAIVER BY THE OTHER.


 


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Section 10.8 Headings. The Article and/or Section headings and the Table of Contents
in this Agreement are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.



Section 10.9 Severability. Wherever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.



Section 10.10 Preferences. Lender shall have the continuing and exclusive right to
apply or reverse and reapply any and all payments by Borrowers to any portion of the Obligations of
Borrowers hereunder. To the extent Borrowers make a payment or payments to Lender, which payment
or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, receiver or any other party under
any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of
such payment or proceeds received, the Obligations hereunder or part thereof intended to be
satisfied shall be revived and continue in full force and effect, as if such payment or proceeds
had not been received by Lender.



Section 10.11 Waiver of Notice. Each Borrower hereby expressly waives, and shall not
be entitled to, any notices of any nature whatsoever from Lender except with respect to matters for
which this Agreement or the other Loan Documents specifically and expressly provide for the giving
of notice by Lender to Borrowers and except with respect to matters for which Borrowers are not,
pursuant to applicable Legal Requirements, permitted to waive the giving of notice.



Section 10.12 Remedies of Borrowers. In the event that a claim or adjudication is
made that Lender or its agents have acted unreasonably or unreasonably delayed acting in any case
where by law or under this Agreement or the other Loan Documents, Lender or such agent, as the case
may be, has an obligation to act reasonably or promptly, each Borrower agrees that neither Lender
nor its agents shall be liable for any monetary damages, and Borrowers’ sole remedies shall be
limited to commencing an action seeking injunctive relief or declaratory judgment. The parties
hereto agree that any action or proceeding to determine whether Lender has acted reasonably shall
be determined by an action seeking declaratory judgment.




Section 10.13 Expenses; Indemnity.



(a) Borrowers jointly and severally covenant and agree to pay or, if Borrowers fail to pay, to
reimburse, Lender, within ten (10) days of receipt of notice from Lender, for all reasonable costs
and expenses (including reasonable attorneys’ fees and disbursements) incurred by Lender in
connection with (i) Borrowers’ ongoing performance of and compliance with Borrowers’ respective
agreements and covenants contained in this Agreement and the other Loan Documents on their part to
be performed or complied with after the Closing Date, including, without limitation, confirming
compliance with environmental, gaming and insurance requirements; (ii) the negotiation,
preparation, execution, delivery and administration of any consents, amendments, waivers or other
modifications to this Agreement



 


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and the other Loan Documents and any other documents or matters requested by or benefiting any
Borrower; (iii) securing Borrowers’ compliance with their obligations pursuant to the provisions of
this Agreement and the other Loan Documents; (iv) the filing and recording fees and expenses, title
insurance and reasonable fees and expenses of counsel for providing to Lender all required legal
opinions, and other similar expenses incurred in creating and perfecting the Liens in favor of
Lender pursuant to this Agreement and the other Loan Documents; (v) all fees payable hereunder,
including, without limitation, the Exit Fee; (vi) dealing with any Letter of Credit delivered to
Lender hereunder; (vii) enforcing or preserving any of Lender’s rights, either in response to third
party claims or in prosecuting or defending any action or proceeding or other litigation, in each
case against, under or affecting any Borrower, this Agreement, the other Loan Documents, any
Property, the IP, the Collateral or any other security given for the Loan; and (viii) enforcing any
obligations of or collecting any payments due from any Borrower under this Agreement or the other
Loan Documents or with respect to any Property, the IP or the Collateral or in connection with any
refinancing or restructuring of the credit arrangements provided under this Agreement in the nature
of a “work-out” or of any insolvency or bankruptcy proceedings; provided, however,
that Borrowers shall not be liable for the payment of any such costs and expenses to the extent the
same arise by reason of the gross negligence, illegal acts, fraud or willful misconduct of Lender.
Notwithstanding the provisions set forth in this Section 10.13(a) or in any other provision
of this Agreement or the other Loan Documents, in the event that (A) Lender employs counsel to
collect the Debt, protect or foreclose the Pledge Agreement or as otherwise permitted in this
Agreement and the other Loan Documents and (B) Lender has sold or transferred any interests in the
Note, then Borrowers shall only be responsible for the attorneys’ fees and expenses of the counsel
of one Lender.



(b) Borrowers shall, jointly and severally, indemnify, defend and hold harmless Lender from
and against any and all other liabilities, obligations, out-of-pocket losses, actual damages (but
not lost revenues, diminution in value and other consequential damages), penalties, actions,
judgments, third party suits, third party claims, reasonable costs, reasonable expenses and
disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees
and disbursements of counsel for Lender in connection with any investigative, administrative or
judicial proceeding commenced or threatened, whether or not Lender shall be designated a party
thereto), that may be imposed on, incurred by, or asserted against Lender in any manner relating to
or arising out of (i) any breach by any Borrower of its obligations under, or any material
misrepresentation by any Borrower contained in, this Agreement or the other Loan Documents, or (ii)
the use or intended use of the proceeds of the Loan (collectively, the “Indemnified Liabilities”);
provided, however, that Borrowers shall not have any obligation to Lender hereunder
to the extent that such Indemnified Liabilities arise from the gross negligence, illegal acts,
fraud or willful misconduct of Lender. To the extent that the undertaking to indemnify, defend and
hold harmless set forth in the preceding sentence may be unenforceable because it violates any law
or public policy, Borrowers shall pay the maximum portion that they are permitted to pay and
satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities
incurred by Lender.



(c) Borrowers, jointly and severally, covenant and agree to pay for or, if Borrowers fail to
pay, to reimburse Lender for, any fees and expenses incurred by any Rating Agency in connection
with any consent, approval, waiver or confirmation obtained from such Rating Agency and required
pursuant to the terms and conditions of this Agreement or any other



 


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Loan Document in connection with any request or approval sought by Borrowers, and Lender shall
be entitled to require payment of such fees and expenses as a condition precedent to the obtaining
of any such consent, approval, waiver or confirmation; provided, however, that
Lender expressly acknowledges and agrees that Borrowers shall not be required to pay any Rating
Agency surveillance charges.



Section 10.14 Schedules Incorporated. The Schedules annexed hereto are hereby
incorporated herein as a part of this Agreement with the same effect as if set forth in the body
hereof.



Section 10.15 Offsets, Counterclaims and Defenses. Any assignee of Lender’s interest
in and to this Agreement, the Note and the other Loan Documents shall take the same free and clear
of all offsets, counterclaims or defenses which are unrelated to such documents which Borrowers may
otherwise have against any assignor of such documents, and no such unrelated counterclaim or
defense shall be interposed or asserted by any Borrower in any action or proceeding brought by any
such assignee upon such documents and any such right to interpose or assert any such unrelated
offset, counterclaim or defense in any such action or proceeding is hereby expressly waived by each
Borrower to the extent permitted by applicable law.




Section 10.16 No Joint Venture or Partnership; No Third Party Beneficiaries.



(a) Borrowers and Lender intend that the relationships created hereunder and under the other
Loan Documents be solely that of borrower and lender. Nothing herein or therein is intended to
create a joint venture, partnership, tenancy-in-common, or joint tenancy relationship between any
Borrower and Lender nor to grant Lender any interest in the Collateral other than that of secured
party, pledgee or lender.



(b) This Agreement and the other Loan Documents are solely for the benefit of Lender and
Borrowers and nothing contained in this Agreement or the other Loan Documents shall be deemed to
confer upon anyone other than Lender and Borrowers any right to insist upon or to enforce the
performance or observance of any of the obligations contained herein or therein. All conditions to
the obligations of Lender to make the Loan hereunder and/or to disbursements from the Reserve Funds
are imposed solely and exclusively for the benefit of Lender and no other Person shall have
standing to require satisfaction of such conditions in accordance with their terms or be entitled
to assume that Lender will refuse to make the Loan and/or will refuse to make any disbursement from
any Reserve Fund in the absence of strict compliance with any or all thereof and no other Person
shall under any circumstances be deemed to be a beneficiary of such conditions, any or all of which
may be freely waived in whole or in part by Lender if, in Lender’s sole discretion, Lender deems it
advisable or desirable to do so.



(c) Without limiting the generality of Section 10.16(a) hereof, Borrowers expressly
acknowledge and agree that: (i) DLJ Merchant Banking, Inc. is an affiliate of Original Lender and
various of its indirect subsidiaries and/or affiliates own indirect ownership interests in each
Borrower (the “DLJ Entities”), and (ii) neither the Lender named herein nor any successor or assign
thereof shall have any liability to Borrower as a result of such



 


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relationship between Original Lender and the DLJ Entities, including, without limitation,
under any theory of lender liability.



(d) The benefits of this Agreement shall not inure to any third party, nor shall this
Agreement be construed to make or render Lender liable to any Trade Contractors including any Major
Contractors or others for goods and materials supplied or work and labor furnished in connection
with the construction or rehabilitation of the Project or for debts or claims accruing to any such
Persons against Mortgage Borrowers or Borrowers. Notwithstanding anything contained in the Loan
Documents, or any conduct or course of conduct by the parties hereto, before or after signing the
Loan Documents, this Agreement shall not be construed as creating any rights, claims or causes of
action against Lender, or any of its officers, directors, agents or employees, in favor of any
Major Contractor or other Trade Contractor, or any of their respective creditors, or any other
Person.



(e) Observation, inspection and approvals, if applicable, by Lender of the Plans and
Specifications, the construction of the Project and/or the workmanship and materials used therein
shall impose no responsibility or liability of any nature whatsoever on Lender and no Borrower,
Mortgage Borrower, Trade Contractor or other interested Person, under any circumstances, shall be
entitled to rely upon such inspections and approvals by Lender for any reason. Approvals granted
by Lender for any matters covered under this Agreement shall be narrowly construed to cover only
the parties and facts identified in any such approval.



Section 10.17 Publicity. All news releases, publicity or advertising by any Borrower
or their Affiliates through any media intended to reach the general public which refers to the Loan
Documents or the financing evidenced by the Loan Documents or to Lender, Credit Suisse or any of
their Affiliates shall be subject to the prior approval of Lender not to be unreasonably withheld,
conditioned or delayed. Notwithstanding the foregoing, disclosure required by applicable state or
federal securities laws, rules or regulations or other applicable Legal Requirements, or as
customarily and reasonably requested by any Gaming Authorities, shall not be subject to Lender’s
prior written approval.



Section 10.18 Waiver of Marshalling of Assets. To the fullest extent permitted by
law, each Borrower, for itself and its successors and assigns, waives all rights to a marshalling
of the assets of any Borrower, any Borrower’s partners and others with interests in any Borrower,
and of the Collateral, or to a sale in inverse order of alienation in the event of foreclosure of
the Pledge Agreement, and agrees not to assert any right under any laws pertaining to the
marshalling of assets, the sale in inverse order of alienation, homestead exemption, the
administration of estates of decedents, or any other matters whatsoever to defeat, reduce or affect
the right of Lender under the Loan Documents to a sale of the Collateral for the collection of the
Debt without any prior or different resort for collection or of the right of Lender to the payment
of the Debt out of the net proceeds of the Collateral in preference to every other claimant
whatsoever.



Section 10.19 Waiver of Counterclaim. To the fullest extent permitted by law, each
Borrower hereby waives the right to assert a counterclaim, other than a compulsory counterclaim, in
any action or proceeding brought against it by Lender or its agents or otherwise to offset any
Obligations under the Loan Documents. No failure by Lender to perform any of its



 


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obligations hereunder shall be a valid defense to, or result in any offset against, any
payments which any Borrower is obligated to make under any of the Loan Documents.



Section 10.20 Conflict; Construction of Documents; Reliance. In the event of any
conflict between the provisions of this Agreement and any of the other Loan Documents, the
provisions of this Agreement shall control. The parties hereto acknowledge that they were
represented by competent counsel in connection with the negotiation, drafting and execution of the
Loan Documents and that such Loan Documents shall not be subject to the principle of construing
their meaning against the party which drafted same. Each Borrower acknowledges that, with respect
to the Loan, such Borrower shall rely solely on its own judgment and advisors in entering into the
Loan without relying in any manner on any statements, representations or recommendations of Lender
or any parent, subsidiary or Affiliate of Lender. Lender shall not be subject to any limitation
whatsoever in the exercise of any rights or remedies available to it under any of the Loan
Documents or any other agreements or instruments which govern the Loan by virtue of the ownership
by it or any parent, subsidiary or Affiliate of Lender of any equity interest any of them may
acquire in any Borrower, and each Borrower hereby irrevocably waives the right to raise any defense
or take any action on the basis of the foregoing with respect to Lender’s exercise of any such
rights or remedies. Each Borrower acknowledges that Lender engages in the business of real estate
financings and other real estate transactions and investments which may be viewed as adverse to or
competitive with the businesses of Borrowers or their Affiliates.




Section 10.21 Brokers and Financial Advisors.



(a) Each Borrower hereby represents that neither it nor any of its Affiliates has dealt with
any financial advisors, brokers, underwriters, placement agents, agents or finders in connection
with the transactions contemplated by this Agreement. Each Borrower hereby agrees to indemnify,
defend and hold Lender harmless from and against any and all third-party claims, liabilities,
out-of-pocket costs and reasonable expenses of any kind (including Lender’s reasonable attorneys’
fees and expenses (but only for one (1) set of attorneys)) in any way relating to or arising from a
claim by any Person that such Person acted on behalf of any Borrower or an Affiliate of any
Borrower in connection with the transactions contemplated herein. The provisions of this
Section 10.21(a) shall survive the expiration and termination of this Agreement and the
payment of the Debt.



(b) Lender hereby represents that neither it nor any of its Affiliates has dealt with any
financial advisors, brokers, underwriters, placement agents, agents or finders in connection with
the transactions contemplated by this Agreement. Lender hereby agrees to indemnify, defend and
hold Borrowers harmless from and against any and all third-party claims, liabilities, out-of-pocket
costs and reasonable expenses of any kind (including Borrowers’ reasonable attorneys’ fees and
expenses (but only for one (1) set of attorneys)) in any way relating to or arising from a claim by
any Person that such Person acted on behalf of Lender or an Affiliate of Lender in connection with
the transactions contemplated herein. The provisions of this Section 10.21(b) shall
survive the expiration and termination of this Agreement and the payment of the Debt.


 


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Section 10.22 Prior Agreements. This Agreement and the other Loan Documents contain
the entire agreement of the parties hereto and thereto in respect of the transactions contemplated
hereby and thereby, and all prior agreements among or between such parties, whether oral or
written, including, without limitation, (i) the Commitment Letter dated May 11, 2006 between
Morgans Hotel Group Co., MHG HR Acquisition Corp and Lender, and (ii) the Commitment Letter dated
December 22, 2006 between Morgans Hotel Group Co., MHG HR Acquisition Corp, DLJ Merchant Banking,
Inc. and Lender, are superseded by the terms of this Agreement and the other Loan Documents.



Section 10.23 Joint and Several Liability. The representations, covenants,
warranties and obligations of Borrowers hereunder are joint and several.



Section 10.24 Certain Additional Rights of Lender (VCOC). Notwithstanding anything to
the contrary contained in this Agreement, Lender shall have:



(a) subject to applicable Gaming Laws, the right to routinely consult with and advise each
Borrower’s management regarding the significant business activities and business and financial
developments of each Borrower; provided, however, that such consultations shall not
include discussions of environmental compliance programs or disposal of hazardous substances.
Consultation meetings should occur on a regular basis (no less frequently than quarterly) with
Lender having the right to call special meetings at any reasonable times and upon reasonable
advance notice;



(b) the right, in accordance with the terms of this Agreement, to examine the books and
records of each Borrower at any reasonable times upon reasonable notice;



(c) the right, in accordance with the terms of this Agreement, including, without limitation,
Section 5.1.11 hereof, to receive monthly, quarterly and year-end financial reports,
including balance sheets, statements of income, shareholder’s equity and cash flow, a management
report and schedules of outstanding indebtedness; and



(d) the right, without restricting any other rights of Lender under this Agreement (including
any similar right), to approve any acquisition by any Borrower of any other significant property
(other than personal property required for the day to day operation of any Property).



The rights described above in this Section 10.24 may be exercised by any entity which
owns and Controls, directly or indirectly, substantially all of the interests in Lender.



Section 10.25 Note Register. Administrative Agent shall maintain on behalf of
Borrowers pursuant to the last sentence of this Section 10.25, or cause to be maintained,
(i) a copy of each assignment of all or any portion of the Note (an “Assignment Agreement”)
delivered to it and (ii) a register within the meaning of US Treasury Regulation Section
5(f).103-1(c) (the “Register”), in which it will register the name and address of Lender and the
name and address of each assignee of Lender under this Agreement, and the principal amount of the
Loan owing to each such Lender pursuant to the terms hereof and of each Assignment Agreement.
Borrowers, Lender and the Administrative Agent may not treat any Person whose name is not recorded
in the Register pursuant to the terms hereof as a Lender for the purposes of this



 


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Agreement, notwithstanding notice to the contrary or any notation of ownership or other
writing on the Note. The Register shall be available for inspection by any Lender at
Administrative Agent’s principal place of business, at any reasonable time and from time to time,
upon reasonable prior notice. Borrowers hereby appoint Administrative Agent as their agent for
purposes of compliance with US Treasury Regulation Section 5(f).103-1(c) and Administrative Agent
hereby accepts such appointment.



ARTICLE XI.

MORTGAGE LOAN AND MEZZANINE LOANS





Section 11.1 Mortgage Loan and Mezzanine Loan Deliveries.



(a) Promptly after receipt, Borrowers shall deliver (or cause Mortgage Borrowers, Second
Mezzanine Borrowers or Third Mezzanine Borrowers, as applicable, to deliver) to Lender a true,
correct and complete copy of all material notices, demands, requests or material correspondence
(including electronically transmitted items) received from (i) Mortgage Lender by any Mortgage
Borrower or any guarantor under the Mortgage Loan Documents, (ii) Second Mezzanine Lender by any
Second Mezzanine Borrower or any guarantor under the Second Mezzanine Loan Documents, or (iii)
Third Mezzanine Lender by any Third Mezzanine Borrower or any guarantor under the Third Mezzanine
Loan Documents.



(b) Unless otherwise delivered to Lender pursuant to the provisions of Section 5.1.11
hereof, Borrowers shall deliver (or cause Mortgage Borrowers, Second Mezzanine Borrowers or Third
Mezzanine Borrowers, as applicable, to deliver) to Lender all of the financial statements, reports,
material certificates and related items delivered or required to be delivered by (i) Mortgage
Borrowers to Mortgage Lender under the Mortgage Loan Documents as and when due under the Mortgage
Loan Documents, (ii) Second Mezzanine Borrowers to Second Mezzanine Lender under the Second
Mezzanine Loan Documents as and when due under the Second Mezzanine Loan Documents, and (iii) Third
Mezzanine Borrowers to Third Mezzanine Lender under the Third Mezzanine Loan Documents as and when
due under the Third Mezzanine Loan Documents.




Section 11.2 Mortgage Loan and Mezzanine Loan Estoppels.



(a) After written request by Lender but in no event more than two (2) times in any twelve (12)
month period, Borrowers shall (or shall cause Mortgage Borrowers to) from time to time, use
reasonable efforts to obtain from Mortgage Lender such estoppel certificates with respect to the
status of the Mortgage Loan and compliance by Mortgage Borrowers with the terms of the Mortgage
Loan Documents as may reasonably be requested by Lender. In the event or to the extent that
Mortgage Lender is not legally obligated to deliver such estoppel certificates and is unwilling to
deliver the same, or is legally obligated to deliver such estoppel certificates but breaches such
obligation, then Borrowers shall not be in breach of this provision so long as Borrowers furnish to
Lender estoppels executed by Borrowers and Mortgage Borrowers expressly representing to Lender the
information requested by Lender regarding the status of the Mortgage Loan and the compliance by
Mortgage Borrowers with the



 


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terms of the Mortgage Loan Documents. Borrowers hereby jointly and severally indemnify Lender
from and against all liabilities, obligations, losses, damages, penalties, assessments, actions, or
causes of action, judgments, suits, claims, demands, costs, expenses (including reasonable
attorneys’ and other professional fees, whether or not suit is brought and settlement costs) and
reasonable disbursements of any kind or nature whatsoever which may be imposed on, actually
incurred by, or asserted against Lender based in whole or in part upon any fact, event, condition
or circumstance relating to the Mortgage Loan which was misrepresented in any material respect by
Borrowers in, or which warrants disclosure and was omitted from, such estoppel executed by
Borrowers and Mortgage Borrowers.



(b) After written request by Lender but in no event more than two (2) times in any twelve (12)
month period, Borrowers shall (or shall cause Second Mezzanine Borrowers to) from time to time, use
reasonable efforts to obtain from Second Mezzanine Lender such estoppel certificates with respect
to the status of the Second Mezzanine Loan and compliance by Second Mezzanine Borrowers with the
terms of the Second Mezzanine Loan Documents as may reasonably be requested by Lender. In the
event or to the extent that Second Mezzanine Lender is not legally obligated to deliver such
estoppel certificates and is unwilling to deliver the same, or is legally obligated to deliver such
estoppel certificates but breaches such obligation, then Borrowers shall not be in breach of this
provision so long as Borrowers furnish to Lender estoppels executed by Borrowers and Second
Mezzanine Borrowers expressly representing to Lender the information requested by Lender regarding
the status of the Second Mezzanine Loan and the compliance by Second Mezzanine Borrowers with the
terms of the Second Mezzanine Loan Documents. Borrowers hereby jointly and severally indemnify
Lender from and against all liabilities, obligations, losses, damages, penalties, assessments,
actions, or causes of action, judgments, suits, claims, demands, costs, expenses (including
reasonable attorneys’ and other professional fees, whether or not suit is brought and settlement
costs) and reasonable disbursements of any kind or nature whatsoever which may be imposed on,
actually incurred by, or asserted against Lender based in whole or in part upon any fact, event,
condition or circumstance relating to the Second Mezzanine Loan which was misrepresented in any
material respect by Borrowers in, or which warrants disclosure and was omitted from, such estoppel
executed by Borrowers and Second Mezzanine Borrowers.



(c) After written request by Lender but in no event more than two (2) times in any twelve (12)
month period, Borrowers shall (or shall cause Third Mezzanine Borrowers to) from time to time, use
reasonable efforts to obtain from Third Mezzanine Lender such estoppel certificates with respect to
the status of the Third Mezzanine Loan and compliance by Third Mezzanine Borrowers with the terms
of the Third Mezzanine Loan Documents as may reasonably be requested by Lender. In the event or to
the extent that Third Mezzanine Lender is not legally obligated to deliver such estoppel
certificates and is unwilling to deliver the same, or is legally obligated to deliver such estoppel
certificates but breaches such obligation, then Borrowers shall not be in breach of this provision
so long as Borrowers furnish to Lender estoppels executed by Borrowers and Third Mezzanine
Borrowers expressly representing to Lender the information requested by Lender regarding the status
of the Third Mezzanine Loan and the compliance by Third Mezzanine Borrowers with the terms of the
Third Mezzanine Loan Documents. Borrowers hereby jointly and severally indemnify Lender from and
against all liabilities, obligations, losses, damages, penalties, assessments, actions, or causes
of action, judgments, suits, claims, demands, costs, expenses (including reasonable attorneys’ and
other



 


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professional fees, whether or not suit is brought and settlement costs) and reasonable
disbursements of any kind or nature whatsoever which may be imposed on, actually incurred by, or
asserted against Lender based in whole or in part upon any fact, event, condition or circumstance
relating to the Third Mezzanine Loan which was misrepresented in any material respect by Borrowers
in, or which warrants disclosure and was omitted from, such estoppel executed by Borrowers and
Third Mezzanine Borrowers.




Section 11.3 Mortgage Loan Defaults.



(a) Without limiting the generality of the other provisions of this Agreement, and without
waiving or releasing Borrowers from any of their obligations hereunder, if there shall occur any
Mortgage Event of Default, Borrowers hereby expressly agree that Lender shall have the immediate
right, without notice to or demand on any Loan Party, but shall be under no obligation: (i) to pay
all or any part of the Mortgage Loan, and any other sums, that are then due and payable and to
perform any act or take any action on behalf of Mortgage Borrowers, as may be appropriate, to cause
all of the terms, covenants and conditions of the Mortgage Loan Documents on the part of Mortgage
Borrowers to be performed or observed thereunder to be promptly performed or observed; and (ii) to
pay any other amounts and take any other action as Lender, in its sole and absolute discretion,
shall deem advisable to protect or preserve the rights and interests of Lender in the Loan and/or
the Collateral. Lender shall have no obligation to complete any cure or attempted cure undertaken
or commenced by Lender. All sums so paid and the costs and expenses incurred by Lender in
exercising rights under this Section 11.3 (including, without limitation, reasonable
attorneys’ and other professional fees), with interest at the Default Rate, for the period from the
date of demand by Lender to Borrowers for such payments to the date of payment to Lender, shall
constitute a portion of the Debt, shall be secured by the Pledge Agreement and shall be due and
payable to Lender upon demand therefor.



(b) Subject to the rights of tenants and the Mortgage Loan Agreement, Borrowers hereby grant,
and shall cause Mortgage Borrowers to grant, Lender and any Person designated by Lender the right
to enter upon any Property at any time for the purpose of carrying out the rights granted to Lender
under this Section 11.3.



(c) Borrowers shall not, and shall not cause or permit Mortgage Borrowers or any other Person
to, impede, interfere with, hinder or delay, any effort or action on the part of Lender to cure any
default or asserted default under the Mortgage Loan, or to otherwise protect or preserve Lender’s
interests in the Loan and the Collateral (including the Properties) following a default or asserted
default under the Mortgage Loan, in accordance with the provisions of this Agreement and the other
Loan Documents.



(d) Borrowers hereby indemnify Lender from and against all liabilities, obligations, losses,
damages, penalties, assessments, actions, or causes of action, judgments, suits, claims, demands,
costs, expenses (including, without limitation, reasonable attorneys’ and other professional fees,
whether or not suit is brought, and settlement costs), and disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against Lender as a result of the
foregoing actions described in Section 11.3(a). Lender



 


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shall have no obligation to any Loan Party or any other party to make any such payment or
performance.



(e) If Lender shall receive a copy of any notice of default under the Mortgage Loan Documents,
such notice shall constitute full protection to Lender for any action taken or omitted to be taken
by Lender, in good faith, in reliance thereon. As a material inducement to Lender in making the
Loan, Borrowers hereby absolutely and unconditionally release and waive all claims against Lender
arising out of Lender’s exercise of its rights and remedies provided in this Section 11.3
other than claims arising out of the fraud, illegal acts, gross negligence or willful misconduct of
Lender.



(f) In the event that Lender cures any Mortgage Event of Default, any such cure by Lender
shall not waive or be deemed to have cured such Mortgage Event of Default and shall constitute an
immediate Event of Default under this Agreement without any notice, grace or cure period otherwise
applicable under this Agreement.



(g) In the event that Lender makes any payment in respect of the Mortgage Loan, Lender shall
be subrogated to all of the rights of Mortgage Lender under the Mortgage Loan Documents against the
Properties and Mortgage Borrowers, in addition to all other rights which Lender may have under the
Loan Documents or applicable law (including, without limitation, reasonable attorneys’ and other
professional fees), and any such payments made by Lender together with interest at the Default
Rate, for the period from the date of demand by Lender to Borrowers for such payments to the date
of payment to Lender, (i) shall constitute a portion of the Debt, (ii) shall be secured by the
Pledge Agreement and (iii) shall be due and payable to Lender upon demand therefor.



Section 11.4 Discussions with Mortgage Lender. In connection with the exercise of its
rights set forth in the Loan Documents, Lender shall have the right at any time to discuss the
Properties, the Mortgage Loan, the Loan or any other matter directly with Mortgage Lender or
Mortgage Lender’s consultants, agents or representatives without notice to or permission from any
Borrower or any other Loan Party, nor shall Lender have any obligation to disclose such discussions
or the contents thereof with any Borrower or any other Loan Party.




Section 11.5 Independent Approval Rights.



(a) If any action, proposed action or other decision is consented to or approved by Mortgage
Lender, such consent or approval shall not be binding or controlling on Lender; provided,
however, that, notwithstanding anything to the contrary which may be contained in this
Agreement, and as between Lender and Borrowers only, Lender shall be deemed to have approved or
waived any document delivered or action taken, or required to be delivered or taken, by Mortgage
Borrowers to Mortgage Lender under the Mortgage Loan Agreement related to the construction of the
Project which is approved or waived in writing by Mortgage Lender under the Mortgage Loan
Documents.



(b) Borrowers hereby acknowledge and agree that (i) the risks of Mortgage Lender in making the
Mortgage Loan are different from the risks of Lender in making the Loan, (ii) in determining
whether to grant, deny, withhold or condition any requested consent



 


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or approval Mortgage Lender and Lender may reasonably reach different conclusions, and (iii)
Lender has an absolute independent right to grant, deny, withhold or condition any requested
consent or approval based on its own point of view. Further, the denial by Lender of a requested
consent or approval shall not create any liability or other obligation of Lender if the denial of
such consent or approval results directly or indirectly in a default under the Mortgage Loan, and
Borrowers hereby waive any claim of liability against Lender arising from any such denial.




Section 11.6 Intercreditor Agreement.



(a) Borrowers hereby acknowledge and agree that (i) the Intercreditor Agreement entered into
by and among Lender, Mortgage Lender, Second Mezzanine Lender and Third Mezzanine Lender will be
solely for the benefit of Lender, Mortgage Lender, Second Mezzanine Lender and Third Mezzanine
Lender; (ii) none of Borrowers, Mortgage Borrowers, Second Mezzanine Borrowers or Third Mezzanine
Borrowers shall be intended third-party beneficiaries of any of the provisions therein; and (iii)
none Borrowers, Mortgage Borrowers, Second Mezzanine Borrowers or Third Mezzanine Borrowers shall
have any rights thereunder or shall be entitled to rely on any of the provisions contained therein.
None of Lender, Mortgage Lender, Second Mezzanine Lender or Third Mezzanine Lender shall have any
obligation to disclose to Borrowers the contents of the Intercreditor Agreement. Borrowers’
obligations hereunder are and will be independent of the Intercreditor Agreement and shall remain
unmodified by the terms and provisions thereof.



(b) In the event that Lender, pursuant to the terms of the Intercreditor Agreement, is
required to pay over to Mortgage Lender any payment or distribution of assets, whether in cash,
property or securities which otherwise would have been applied to the Debt, including, without
limitation, any proceeds of any property previously received by Lender on account of the Loan or
any payments under the Guaranties, pursuant to voluntary payment or judgment or otherwise, then
Borrowers agree to indemnify Lender for any amounts so paid, and any amount so paid shall continue
to be owing pursuant to the Loan Documents as part of the Debt notwithstanding the prior receipt of
such payment by Lender.



ARTICLE XII.

GAMING PROVISIONS





Section 12.1 Operation of Casino Component.



(a) Borrowers shall (i) cause Mortgage Borrower to observe, perform and enforce the
obligations imposed under the Casino Component Lease or any similar replacement Lease for purposes
of operating the Casino Component in a commercially reasonable manner and in a manner not to impair
the value of the Casino Component or the Hotel/Casino Property; (ii) not allow any amendment to or
termination or modification of the Casino Component Lease or any similar replacement Lease for
purposes of operating the Casino Component without Lender consent, other than modifications of a
ministerial or non-monetary nature; and (iii) not permit Hotel/Casino Borrower to collect any of
the rents or other payments due under the Casino Component Lease more than one (1) month in advance
and (iv) not permit any assignment by Mortgage Borrowers of their respective interests in the
Casino Component



 


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Lease or any similar replacement Lease for purposes of operating the Casino Component except
to the extent otherwise permitted by the Mortgage Loan Documents or the Loan Documents.



(b) Borrowers shall cause Gaming Borrower to operate the Casino Component pursuant to the
Casino Component Lease and in accordance with all Gaming Laws and all other applicable Legal
Requirements.



(c) Borrowers shall cause Mortgage Borrowers to maintain all Gaming Licenses (in the name of
Gaming Borrower), Operating Permits and Governmental Approvals necessary for the lawful operation
of the Casino Component as a casino consistent with Comparable Hotel/Casinos and use its
commercially reasonable efforts to operate the Casino Component in a manner designed to maximize
revenues from the Properties in the aggregate. Borrowers shall not permit Mortgage Borrowers to
take, permit or omit any action that would adversely affect the status or good standing of Gaming
Borrower under such Operating Permits, Gaming Licenses or Governmental Approvals.



(d) Borrowers hereby acknowledge and agree that the Casino Component Lease and any and all
rights and interests (whether choate or inchoate and including, without limitation, all mechanic’s
and materialmen’s liens under applicable law) owned, claimed or held, by Gaming Borrower thereunder
or otherwise in and to the Casino Component, shall be in all respects subordinate and inferior to
the liens and security interests created, or to be created, for the benefit of Lender under the
Loan Documents, and securing the repayment of the Note and the performance of the Obligations, and
all renewals, extensions, increases, supplements, amendments, modifications or replacements
thereof.



(e) Borrowers hereby agree that (i) upon the occurrence and during the continuance of an Event
of Default and at the request of Lender, Gaming Borrower shall continue to perform all of its
obligations under the terms of the Casino Component Lease with respect to the Casino Component,
(ii) upon and after foreclosure, deed in lieu of foreclosure or other similar transfer of the
Casino Component to a Mortgage Lender Successor Owner, Gaming Borrower shall (A) recognize such
Mortgage Lender Successor Owner as the lessor under the Casino Component Lease, (B) not exercise
any right to terminate the Casino Component Lease, and (C) at the request of such Mortgage Lender
Successor Owner, continue to operate and manage the Casino Component and maintain all applicable
Gaming Licenses with respect to the Casino Component for a period not to exceed fifteen (15) months
after the effective date of such transfer to such Mortgage Lender Successor Owner (which period
shall in all events terminate upon Mortgage Lender Successor Owner’s appointment of a new gaming
operator possessing all Gaming Licenses and other Governmental Approvals necessary to conduct all
gaming operations at the Hotel/Casino Property, subject to Gaming Borrower’s obligation to transfer
its responsibilities under the Casino Component Lease to such new gaming operator and to reasonably
cooperate with the transition of the gaming operations from Gaming Borrower to such new gaming
operator), in accordance with the terms of the Casino Component Lease; provided that such
Mortgage Lender Successor Owner shall be obligated to pay a then market rate casino management fee
which is reasonable and customary for similar casinos in Las Vegas, Nevada, and (iii) at any time
after foreclosure, deed in lieu of foreclosure or other similar transfer of the Casino Component to
a Mortgage Lender Successor Owner, at the option of such Mortgage Lender Successor Owner exercised
by written notice to Gaming Borrower, such



 


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Mortgage Lender Successor Owner shall have the right to terminate the Casino Component Lease
without penalty or termination fee.



(f) Upon the occurrence and during the continuance of an Event of Default, Lender may elect,
upon written notice, to require Borrowers to cause Gaming Borrower or any other Loan Party to
surrender or relinquish one or more or all of the Gaming Licenses held by such Person(s). If
Gaming Borrower or such other Loan Party fails or refuses to so relinquish such Gaming License(s)
within five (5) Business Days after receipt of such written notice, then Lender is hereby appointed
(which appointment is coupled with an interest) as each Loan Party’s attorney in fact with full
authority to surrender or relinquish each such Gaming License on each such Loan Party’s behalf, the
foregoing power being irrevocable and coupled with an interest.



(g) Borrowers agree to cause Gaming Borrower to (i) execute such affidavits and certificates
as Lender shall reasonably require to further evidence the agreements herein contained, (ii) on
request from Lender, furnish Lender with copies of such information as Hotel/Casino Borrower is
entitled to receive under the Casino Component Lease, and (iii) cooperate with Lender’s
representative in any inspection of all or any portion of the Casino Component from time to time at
reasonable times during business hours.



(h) Lender agrees to cooperate with all Gaming Authorities in connection with the
administration of its regulatory jurisdiction over the Gaming Operator, Gaming Borrower and any
other Person licensed by or registered with the Gaming Authorities, including the provision of such
documents or other information as may be requested by the Gaming Authorities relating to the Casino
Component Lease or the Loan Documents. Additionally, Lender acknowledges and understands that (a)
it is subject to being called forward by the Gaming Authorities, in their discretion, for licensing
or a finding of suitability, (b) all rights, remedies and powers provided in this Agreement may be
exercised only to the extent the exercise thereof does not violate any applicable Gaming Laws, and
(c) to the extent prior approval of the Gaming Authorities is required pursuant to applicable
Gaming Laws for the exercise, operation and effectiveness of any remedy hereunder or under any
other Loan Document, or the taking of any action that may be taken by Lender hereunder or under any
other Loan Document, such remedy or action shall be subject to such prior approval of the Gaming
Authorities, but the foregoing acknowledgements shall not be read or construed, in any manner or at
any time, to qualify or limit any representation, warranty, covenant, agreement or obligation of
any Loan Party herein, including, without limitation, any of the same relating to the due
authorization, execution, delivery, performance and/or enforceability of any Loan Document, or any
assignment, issuance, granting or remedy evidenced, created or effected thereby. Notwithstanding
the foregoing, Borrowers expressly acknowledge and agree that Lender shall not be liable to any
Loan Party or any other Person for any loss, cost, damage, fine or other expense suffered by any
Loan Party or any other Person resulting from Lender’s cooperation with, appearance before, or
provision of information or documents to, any Gaming Authority as contemplated in this Section
12.1(h), except for Lender’s gross negligence, willful misconduct or fraud.



Section 12.2 Gaming Liquidity Requirements. Borrowers shall furnish, or shall
cause Gaming Borrower to furnish, to Lender, within five (5) Business Days following the



 


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end of each calendar month, an Officer’s Certificate certifying as to the actual amount of
the Gaming Liquidity Requirement (including a calculation of the determination thereof) and the
Gaming Operating Reserve with respect to such month, including any changes to the foregoing
during such month, the foregoing to be in form and substance reasonably acceptable to Lender
(the “Monthly Gaming Requirement Certificate”).




Section 12.3
Cage Reserve, Casino Account, Increases to Minimum Balance.



12.3.1 Borrowers shall cause Mortgage Borrowers to comply with all of the terms and conditions
set forth in Sections 2.6.1 and 12.3 of the Mortgage Loan Agreement.



12.3.2 In the event (i) Mortgage Lender waives the requirements of Mortgage Borrowers to
maintain the Casino Account and/or Cage Reserve pursuant to the terms of Sections 2.6.1 and 12.3 of
the Mortgage Loan Agreement, or (ii) the Mortgage Loan has been repaid in full (without a
prepayment of the Loan in full), Lender shall have the right to require Borrowers to establish and
maintain accounts that would operate in the same manner as the Casino Account and Cage Reserve in
Sections 2.6.1 and 12.3 of the Mortgage Loan Agreement and the provisions of Section 2.6.1 and 12.3
of the Mortgage Loan Agreement and all related definitions shall be incorporated herein by
reference; provided, however, that all references to “Borrowers,” “Lender” and
“Event of Default” therein shall be deemed references to Borrowers, Lender and Event of Default as
defined herein.



ARTICLE XIII.

INTENTIONALLY DELETED


ARTICLE XIV.




Section 14.1 Amendment and Restatement. Borrowers and Lender hereby agree that the
Original Loan Agreement is hereby amended and restated in its entirety, and that from and after
the date hereof, all of the terms and conditions contained in this Agreement shall replace the
terms and conditions of the Original Loan Agreement, it being understood and agreed that the
execution of this Agreement shall not impair the liens of any of the Loan Documents.



ARTICLE XV.

CONTRIBUTION AGREEMENT




Section 15.1 Contribution Generally. As a result of the transactions contemplated
by this Agreement, each individual Borrower may benefit, directly and indirectly, from the
payment of the Debt and the performance of the Obligations by other Borrowers (or the
application of the collateral owned by such other Borrowers to the payment of the Debt or the
performance of the Obligations) and, in consideration therefor, each Borrower (i) desires to
enter into an allocation and contribution agreement with the other Borrowers as set forth in
this Article XV to provide a fair and equitable agreement to



 


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make contributions among each of the applicable Borrowers in the event any obligation of
any Borrower is performed by any other Borrower and (ii) agrees to subordinate and subrogate any
rights or claims it may have against other Borrowers as and to the extent set forth in this
Article XV.



Section 15.2 Reimbursement Contribution. In the event any one or more Borrowers
(any such Borrower, a “Funding Borrower”) pays or is deemed to have paid an amount in excess of
the principal amount set forth for such Borrower in Schedule XXII (such principal amount, the
“Allocable Principal Balance”) (any such payment or deemed payment in excess of the applicable
Allocable Principal Balance, a “Contribution”) as a result of (a) such Funding Borrower’s
payment of the Debt and/or performance of any of the other Obligations and/or (b) Lender’s
realization on the Collateral or other assets owned by such Funding Borrower (whether by
foreclosure, assignment in lieu of foreclosure, private sale or other means), then after (i)
payment in full of the Loan and the satisfaction of all of all Borrowers’ other obligations to
Lender and (ii) payment in full of the Mortgage Loan, the Loan and the Mezzanine Loans, such
Funding Borrower shall be entitled to contribution from each benefited Borrower for the amount
of the Contribution so paid, advanced or benefited (any such contribution, a “Reimbursement
Contribution”), up to such benefited Borrower’s then current Allocable Principal Balance. The
parties acknowledge that the Allocable Principal Balances shown on Schedule XXII were computed
assuming the Loan is or has been fully advanced, and that each amount shown in Schedule XXII
shall be re-computed (or reduced) proportionally if Reimbursement Contributions are required to
be determined for purposes of this Article XV at a time when the Loan has not been fully
advanced. Any Reimbursement Contributions required to be made hereunder shall, subject to the
balance of the provisions in this Article XV regarding payment, subordination and subrogation,
be made within ten (10) days after demand therefor.



Section 15.3 Defaulting Borrower. If a Borrower (a “Defaulting Borrower”) shall
have failed to make a Reimbursement Contribution as hereinabove provided, after the later to
occur of (a) payment of the Loan in full and the satisfaction of all of all Borrowers’ other
obligations to Lender and after payment in full by the Mortgage Borrower of the Mortgage Loan
and payment in full by the Mezzanine Borrowers of the Mezzanine Loans or (b) the date which is
366 days after payment in full of the Loan, the Funding Borrower to whom such Reimbursement
Contribution is owed shall be subrogated to the rights of Lender against such Defaulting
Borrower, including the right to receive a portion of such Defaulting Borrower’s Collateral or
assets in an amount equal to the Reimbursement Contribution payment required hereunder that such
Defaulting Borrower failed to make; provided, however, if Lender returns any payments in
connection with a bankruptcy of a Borrower, all other Borrowers shall jointly and severally pay
to Lender all such amounts returned, together with interest at the Default Rate accruing from
and after the date on which such amounts were returned. For avoidance of doubt, until such time
as the Loan, the Mortgage Loan and the Mezzanine Loans are indefeasibly paid in full and
satisfied, each of the Borrowers hereby subjects and subordinates to payment of the Loan to the
Lender and to payment of distributions to its Member (in accordance with the Cash Management
Agreement) any and all rights of such Borrower under this Article XV, including its right to
Reimbursement Contribution, and waives any right of subrogation such Funding Borrower may have
with respect thereto.


 


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Section 15.3 Maximum Liability. Each Borrower shall be liable under this Article
XV with respect to the Obligations only for such total maximum amount (if any) that would not
render its Obligations hereunder or under any of the Loan Documents subject to avoidance under
Chapter 5 of the Bankruptcy Code or any comparable provisions of any State law.



Section 15.5 Applicable Contributions. In the event that at any time there exists
more than one Funding Borrower with respect to any Contribution (in any such case, the
“Applicable Contribution”), then Reimbursement Contributions from Defaulting Borrowers pursuant
hereto shall be allocated among such Funding Borrowers in proportion to the total amount of the
Contributions made for or on account of the other Borrowers by each such Funding Borrower
pursuant to the Applicable Contribution. In the event that at any time any Borrower pays an
amount hereunder in excess of the amount calculated pursuant to this Section 15.5, that Borrower
shall be deemed to be a Funding Borrower to the extent of such excess and shall be entitled to a
Reimbursement Contribution from the other Borrowers in accordance with the provisions of this
Section.



Section 15.5 Reimbursement Contribution as Asset. Each Borrower acknowledges that
the right to receive any Reimbursement Contributions in accordance with the terms hereof shall
constitute an asset of the Borrower to which any such Reimbursement Contribution is owing.



Section 15.7 Subordination. No Reimbursement Contribution payments payable by a
Borrower pursuant to the terms of this Article XV shall be paid until (i) all amounts then due
and payable by the Borrowers to Lender, pursuant to the terms of the Loan Documents, (ii) all
amounts then due and payable by the Mortgage Borrowers to the Mortgage Lender pursuant to the
terms of any of the Mortgage Loan Documents and (iii) all amounts then due and payable by any of
the Mezzanine Borrowers to any of the Mezzanine Lenders pursuant to the terms of any of the
Mezzanine Loan Documents are each paid in full in cash. Nothing contained in this Article XV
shall limit or affect in any way the Obligations of any Borrower to Lender under this Agreement
or any other Loan Documents.



Section 15.8 Waivers. With respect to the agreements set forth in this Article XV
only, each Borrower waives, to the extent permitted by applicable law:



(a) any right to require Lender to proceed against any other Borrower or any other Person or
to proceed against or exhaust any security held by Lender at any time or to pursue any other remedy
in Lender’s power before proceeding against any Borrower;



(b) the defense of the statute of limitations in any action against any other Borrower or for
the collection of any indebtedness or the performance of any obligation under the Loan or the
repayment of any Contribution and/or collection of any Reimbursement Contribution;



(c) any defense based upon any legal disability or other defense of any other Borrower, any
guarantor of any other person or by reason of the cessation or limitation of



 


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the liability of any other Borrower or any guarantor from any cause other than full payment of
all sums payable under the Note, this Agreement and any of the other Loan Documents;



(d) any defense based upon any lack of authority of the officers, directors, partners or
agents acting or purporting to act on behalf of any other Borrower or any principal of any other
Borrower or any defect in the formation of any other Borrower or any principal of any other
Borrower;



(e) any defense based upon any statute or rule of law which provides that the obligation of a
surety must be neither larger in amount nor in any other respects more burdensome than that of a
principal;



(f) any defense based upon any failure by Lender to obtain collateral for the indebtedness or
failure by Lender to perfect a lien on any collateral;




(g) presentment, demand, protest and notice of any kind;



(h) any defense based upon any failure of Lender to give notice of sale or other disposition
of any collateral to any other Borrower or to any other person or entity or any defect in any
notice that may be given in connection with any sale or disposition of any collateral;



(i) any defense based upon any failure of Lender to comply with Applicable Laws in connection
with the sale or other disposition of any collateral, including, without limitation, any failure of
Lender to conduct a commercially reasonable sale or other disposition of any collateral;



(j) any defense based upon any election by Lender, in any bankruptcy proceeding, of the
application or non-application of Section 1111(6)(2) of the Bankruptcy Code or any successor
statute;



(k) any defense based upon any use of cash collateral under Section 363 of the Bankruptcy
Code;



(l) any defense based upon any agreement or stipulation entered into by Lender with respect to
the provision of adequate protection in any bankruptcy proceeding;



(m) any defense based upon any borrowing or any grant of a security interest under Section 364
of the Bankruptcy Code;



(n) any defense based upon the avoidance of any security interest in favor of Lender for any
reason;



(o) any defense based upon any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, liquidation or dissolution proceeding, including any discharge of, or bar or
stay against collecting, all or any of the obligations evidenced by the Note or owing under any of
the Loan Documents;


 


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(p) any defense or benefit based upon any Borrower’s, or any other party’s, resignation of the
portion of any obligation secured by the Pledge Agreement or other Loan Documents to be satisfied
by any payment from any other Borrower or any such party;



(q) all rights and defenses arising out of an election of remedies by Lender even though the
election of remedies, such as non-judicial foreclosure with respect to security for the Loan or any
other amounts owing under the Loan Documents, has destroyed any Borrower’s rights of subrogation
and reimbursement against any other Borrower;



(r) any claim or other right which any Borrower might now have or hereafter acquire against
any other Borrower or any other person that arises from the existence or performance of any
obligations under the Note, this Agreement, the Pledge Agreement or the other Loan Documents,
including, without limitation, any of the following: (i) any right of subrogation, reimbursement,
exoneration, contribution, or indemnification; or (ii) any right to participate in any claim or
remedy of Lender against any other Borrower or any collateral security therefor, whether or not
such claim, remedy or right arises in equity or under contract, statute or common law; and



(s) any rights of Borrowers of subrogation, reimbursement, indemnification, and/or
contribution against any other Borrower or any other person or entity, and any other rights and
defenses that are or may become available to any Borrower or any other person or entity by reasons
of applicable law.



The statements and provisions set forth in this Article XV are intended to effectuate, inter
alia, a subordination agreement which shall be effective in any bankruptcy or other similar
proceeding involving any or all of the Borrowers and/or the Collateral or any portion thereof.



ARTICLE XVI.

CERTAIN BANKRUPTCY WAIVERS




Section 16.1 Consideration. Each Borrower hereby acknowledges and agrees that (i)
it has received good and valuable consideration for its agreement to the terms and provisions of
this Agreement, including without limitation, this Article XVI, (ii) its agreement to such terms
and provisions is a material condition and inducement to Lender’s willingness to enter into this
Agreement and the restructuring of the Loan contemplated herein, (iii) Lender has relied upon
the agreement of each such Borrower to such terms and provisions in entering into this Agreement
and the restructuring contemplated herein and Lender would not have entered into this Agreement
or the restructuring contemplated herein without the agreement of each such Borrower to the
terms and provisions of this Agreement and this Article XVI in particular, (iv) it has been
represented by competent counsel of its own choosing in the negotiation of this Agreement and
this Article XVI in particular, and it has discussed this provisions with counsel and hereby
knowingly and willingly waives its rights as described in this Article XVI. This Agreement (and
this Article XVI) may be introduced as evidence in any judicial or other proceeding, without
further authentication or foundation, and shall constitute prima facie evidence of the facts and
agreements set forth herein.


 


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Section 16.2 Waiver of Automatic Stay. To the maximum extent permitted by
applicable law, Lender is and shall be entitled to, and Borrowers and Guarantor hereby consent
to, Lender’s obtaining immediate relief from the stay imposed by Section 362(a) of the
Bankruptcy Code, as amended, in any proceeding under the Bankruptcy Code involving Borrower or
Guarantor or any similar stay in any other similar proceeding involving Borrower or Guarantor.
Each Borrower represents, warrants and agrees that (i) it is a sophisticated commercial party
experienced in transactions similar to the transaction contemplated herein and is represented by
counsel of its own choosing, which counsel is experienced in transactions similar to the
transaction contemplated herein, as determined by each such Borrower in its sole discretion,
(ii) it has been given good and valuable consideration for the waiver described in this Section
16.2, including without limitation, Lender’s agreement to the restructuring described herein,
(iii) it has not entered into this Agreement with the intention, expectation or belief that its
performance in accordance with the terms of this Agreement will adversely affect such Borrower’s
secured or unsecured creditors other than Lender, if any, and it is entering into this Agreement
with a reasonable, good faith expectation that it will be able to perform and satisfy its
obligations to its secured and unsecured creditors, if any, as and when such obligations become
due, and (iv) it has been advised of, and discussed with its counsel, alternatives to entering
into this Agreement, and it has determined that the transactions described herein are more
favorable to it than any such alternatives and are in the best interests of its businesses and
creditors.



Section 16.3 Consolidation. In furtherance of each Borrower’s intent to maintain
its separateness as set forth in Section 4.1.30 of this Agreement, in the event of any
bankruptcy or other similar proceeding, whether voluntary or involuntary, no Borrower,
Guarantor, Restricted Party or any Affiliate thereof shall seek, consent to or acquiesce in any
action or proceeding to substantively consolidate the assets and/or liabilities of any Borrower
(or any of the collateral for the Loan) with the assets and/or liabilities of any other Person,
including, specifically, the Mortgage Borrowers, the Second Mezzanine Borrower, the Third
Mezzanine Borrower or any Guarantor.



Section 16.4 Cooperation and Noninterference. Upon the occurrence and during the
continuance of any Event of Default, no Borrower shall take any action of any kind or nature
whatsoever, directly or indirectly, to delay, oppose, impede, obstruct, hinder, enjoin, or
otherwise interfere with, and Borrowers will cooperate and comply with, the exercise by Lender
of any and all of Lender’s rights and remedies against Borrowers, Guarantor and/or the
Collateral and any other collateral for the Loan, this Agreement or the other Loan Documents,
including the rights and remedies of Lender set forth in this Article XVI.



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IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated First Mezzanine
Loan Agreement to be duly executed by their duly authorized representatives, all as of the day and
year first above written.



	 	 	 	 	 	 	 	 	 
	 	 	HRHH GAMING SENIOR MEZZ, LLC,	 	 
	 	 	a Delaware limited liability company	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Fred J. Kleisner	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Fred J. Kleisner	 	 
	 

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

	 	 	 	Name:
	 	Fred J. Kleisner	 	 
	 

	 	 	 	Title:
	 	President	 	 









 


 









 





	 	 	 	 	 	 	 	 	 
	 	 	BROOKFIELD FINANCIAL, LLC — SERIES B,	 	 
	 	 	a Delaware limited liability company	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Theresa A. Hoyt	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Theresa A. Hoyt	 	 
	 

	 	 	 	Title:
	 	Vice President	 	 









 


 









 







Schedules Omitted