Exhibit 10.1





Exhibit 10.1




THIRD AMENDED AND RESTATED LOAN AGREEMENT




Dated as of December 24, 2009




Among




HRHH HOTEL/CASINO, LLC,

as Hotel/Casino Borrower




and




HRHH CAFE, LLC,

as Café Borrower




and




HRHH DEVELOPMENT, LLC,

as Adjacent Borrower




and




HRHH IP, LLC,

as IP Borrower




and




HRHH GAMING, LLC,

as Gaming Borrower




and




VEGAS HR PRIVATE LIMITED,

as Lender



 


 









 





EXHIBITS AND 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

	 	—
	 	Intentionally Deleted
	Schedule IV

	 	—
	 	Allocated Loan Amounts
	Schedule V

	 	—
	 	FF&E, Capital & Equipment Leases
	Schedule VI

	 	—
	 	Organizational Structure
	Schedule VII

	 	—
	 	Form of Cash Profit and Loss Statement
	Schedule VIII

	 	—
	 	Litigation
	Schedule IX

	 	—
	 	Operating Permits
	Schedule X

	 	—
	 	Rent Roll
	Schedule XI

	 	—
	 	IP
	Schedule XII

	 	—
	 	Morton Indemnification Claims
	Schedule XIII

	 	—
	 	Schedule and Budget for Initial Renovations
	Schedule XIV

	 	—
	 	Intentionally Deleted
	Schedule XV

	 	—
	 	Net Worth Requirements
	Schedule XVI

	 	—
	 	Intentionally Deleted
	Schedule XVII

	 	—
	 	Intentionally Deleted
	Schedule XVIII

	 	—
	 	Intentionally Deleted
	Schedule XIX

	 	—
	 	Intentionally Deleted.
	Schedule XX

	 	—
	 	Intentionally Deleted
	Schedule XXI

	 	—
	 	Intentionally Deleted
	Schedule XXII

	 	—
	 	Allocated Principal Balance






 


 









 





	 	 	 
	Exhibit A

	 	Advance Request
	Exhibit B

	 	Anticipated Cost Report
	Exhibit C

	 	Architect’s Consent
	Exhibit D

	 	Annual Budget
	Exhibit E

	 	Construction Schedule
	Exhibit F

	 	General Contractor’s Consent
	Exhibit G

	 	Major Contractor’s Consent
	Exhibit H

	 	Application and Certificate for Payment
	Exhibit I

	 	Architect’s Certificate
	Exhibit J

	 	Loan Budget
	Exhibit K

	 	Contractor’s Certificate
	Exhibit L-1

	 	Lien Waiver — Progress Payment/Conditional
	Exhibit L-2

	 	Lien Waiver — Progress Payment/Unconditional
	Exhibit L-3

	 	Lien Waiver — Final Payment/Conditional
	Exhibit L-4

	 	Lien Waiver — Final Payment/Unconditional
	Exhibit M

	 	Affirmation of Payment
	Exhibit N

	 	General Contractor’s Certificate
	Exhibit O

	 	Intentionally Deleted
	Exhibit P

	 	Letter of Credit Reduction Notice
	Exhibit Q

	 	Intentionally Deleted
	Exhibit R

	 	Intentionally Deleted







 


 











 




THIRD AMENDED AND RESTATED LOAN AGREEMENT




THIS
THIRD AMENDED AND RESTATED LOAN AGREEMENT, dated as of December 24, 2009 (as amended,
restated, replaced, supplemented or otherwise modified from time to time, this “Agreement”), among
VEGAS HR PRIVATE LIMITED, a Singapore corporation, having an address c/o GIC Real Estate, Inc., 156
W. 56th Street, Suite 1900, New York, New York 10019 (together with its successors and assigns,
“Lender”), as successor to Column Financial, Inc. (“Original Lender”), and HRHH HOTEL/CASINO, 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 (“Hotel/Casino Borrower”), HRHH CAFE, 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 (“Café Borrower”), HRHH DEVELOPMENT, 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 (“Adjacent Borrower”), HRHH IP, 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 (“IP Borrower”), and HRHH GAMING, LLC, a
Nevada 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 Borrower”; and each of Hotel/Casino Borrower, Café Borrower, Adjacent Borrower, IP
Borrower and Gaming Borrower, individually, a “Borrower”, and collectively, “Borrowers”), jointly
and severally.



WITNESSETH:




WHEREAS, pursuant to that certain Loan Agreement dated as of February 2, 2007 by and between
Borrowers and Original Lender (the “Original Loan Agreement”) and that certain Promissory Note
dated as of February 2, 2007 in the principal amount of up to $1,360,000,000.00 made by Borrowers
in favor of Original Lender (the “Original Note”), Borrowers obtained a loan in the original
principal amount of up to $1,360,000,000.00 (the “Loan”);



WHEREAS, Borrowers and Original Lender entered into that certain Amended and Restated Loan
Agreement dated as of November 6, 2007 (the “First Amended and Restated Loan Agreement”), pursuant
to which (i) Borrowers prepaid $350,000,000.00 of the Loan from the proceeds of three (3) mezzanine
loans made to the direct and/or indirect owners of equity interests in Borrowers (each a “Mezzanine
Prepayment”), and (ii) Original Lender increased the maximum amount of the Loan that may be funded
in the future under the Construction Loan (as defined in the Original Loan Agreement) by
$20,000,000.00, and, in connection with both of the foregoing, (a) certain terms and conditions of
the Original Loan Agreement were modified in accordance with the terms and conditions of the First
Amended and Restated Loan Agreement; (b) the Original Note was replaced by the following two (2)
replacement promissory notes: (i) that certain Replacement Construction Loan Promissory Note dated
November 6, 2007 in the principal amount of up to $620,000,000.00 made by Borrowers in favor of
Original Lender (the “Original Construction Loan Note”), and (ii) that certain Replacement Reduced
Acquisition



 


 









 






Loan Promissory Note dated November 6, 2007 in the principal amount of $410,000,000.00 made by
Borrowers in favor of Original Lender (the “Original Reduced Acquisition Loan Note”; the Original
Reduced Acquisition Loan Note and the Original Construction Loan Note are collectively referred to
herein as the “Original Reduced Notes”), both of the foregoing resulting in the original principal
amount of the Loan being $1,030,000,000; (c) certain terms and conditions of the Loan Documents (as
defined in the Original Loan Agreement) were modified in accordance with the terms and conditions
of (i) that certain Modification of Construction Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Financing Statement (Fixture Filing) and Other Loan Documents dated as of
November 6, 2007 by and among Borrowers and Original Lender (the “First Loan Document Modification
Agreement”); (ii) that certain Modification of HRHI Loan Documents and Ratification of HRHI
Guaranty dated as of November 6, 2007 by and among HRHI (as hereinafter defined) and Original
Lender (the “First HRHI Modification Agreement”); (iii) that certain Modification and Ratification
of Guaranties dated as of November 6, 2007 by and among Guarantors (as hereinafter defined) and
Original Lender (the “First Guaranty Modification Agreement”); and (iv) that certain Amended and
Restated Cash Management Agreement dated as of November 6, 2007 by and among Borrowers, HRHI and
Original Lender and acknowledged and agreed to by Manager (as hereinafter defined) (the “First
Amended and Restated Cash Management Agreement”);



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



WHEREAS, on August 1, 2008, Borrowers prepaid a portion of the Loan with the Release Parcel
Release Price (as hereinafter defined) received in connection with the sale of certain property by
Adjacent Borrower and additional Construction Loan proceeds have been advanced from and after the
date of such Partial Release, resulting in (i) a Reduced Acquisition Loan Outstanding Principal
Balance (as hereinafter defined) of $364,810,499.71 as of the date hereof and (ii) a Construction
Loan Outstanding Principal Balance (as hereinafter defined) of $467,443,347.38 as of the date
hereof;



WHEREAS, Borrowers and Lender both desire to amend and restate the Second Amended and Restated
Loan Agreement in the manner set forth herein to, among other things, provide for certain
additional extension options; and



WHEREAS, in connection with this Agreement and the modification of the Loan, Borrowers, HRHI,
Guarantors and Lender (as applicable) are herewith executing and delivering, among other things,
(i) 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 (as the same may be amended, restated, replaced, supplemented or otherwise
modified from time to time, the “Second Mortgage Modification”), (ii) that certain Omnibus
Amendment of Loan Documents (as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time, the “Second Loan Document Modification Agreement”), (iii)
that certain Second



 


2









 






Modification and Ratification of Guaranties (as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time, the “Second Guaranty Modification
Agreement”), (iv) that certain Second 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 “Second HRHI Modification Agreement”), (v) that certain Amended and Restated
Replacement Reduced Acquisition Loan Promissory Note of even date herewith in the principal amount
of Four Hundred Ten Million and No/100 Dollars ($410,000,000.00) 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 “Reduced Acquisition Loan Note”), which Reduced
Acquisition Loan Note replaces, amends and restates the Original Reduced Acquisition Loan Note in
its entirety, (vi) that certain Amended and Restated Replacement Construction Loan Promissory Note
of even date herewith in the principal amount of up to Six Hundred Twenty Million and No/100
Dollars ($620,000,000.00) 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
“Construction Loan Note”; each of the Construction Loan Note and the Reduced Acquisition Loan Note
are referred to herein individually as a “Note,” and together, the “Notes”), which Construction
Loan Note replaces, amends and restates the Original Construction Loan Note in its entirety, and
(vii) that certain Second Amended and Restated Cash Management Agreement, by and among Borrowers,
HRHI and Lender and acknowledged and agreed to by Manager (as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time, the “Cash Management Agreement”),
which Cash Management Agreement amends and restates the First Amended and Restated Cash Management
Agreement in its entirety. The Notes do not create any new or additional indebtedness, but
evidence the same indebtedness evidenced by the Original Reduced Notes, as applicable.



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 Second
Amended and Restated 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.



“Accrual Amounts” shall mean, as of the date of determination, the aggregate outstanding
balance as of such date of the First Mezzanine Initial Accrual Amount, the First Mezzanine
Subsequent Accrual Amount, the Second Mezzanine Initial Accrual Amount, the



 


3









 






Second Mezzanine Subsequent Accrual Amount, the Third Mezzanine Initial Accrual Amount and the
Third Mezzanine Subsequent Accrual Amount.



“Acquisition Costs” shall mean $932,576,584.29, representing the costs paid directly or
indirectly in connection with the acquisition of the Properties and the IP and/or in making the
Loan (including, without limitation, required deposits to Reserve Funds).



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



“Additional Interest Reserve Contributions” shall mean, in the aggregate, any and all
contributions to the Interest Reserve Account made under the provisions of Section 3.23, 7.5.5 and
7.7.3 hereof together with any amounts withdrawn under Section 7.7.2 with respect to “Pre-Opening
Funds” and “Property Reimbursement Funds” (each as determined by Lender) and applied to the
Interest Reserve Account (it being acknowledged and agreed that (a) Borrowers have requested that
the above-referenced advance with respect to such “Pre-Opening Funds” be made on or about the date
hereof in accordance with the provisions of Section 7.7.2 hereof in the amount of $2,464,513.36,
and (b) Lender has agreed to fund such amounts into the Interest Reserve Account contemporaneous
with the execution of this Agreement and the Borrowers funding of the Working Capital Reserve
Account in accordance with the provisions of Section 7.1.1 hereof, with such $2,464,513.36 being
credited against the Additional Interest Reserve Contributions).



“Administrative Agent” shall have the meaning set forth in Section 3.19.1 hereof.



“Administrative Agent Fee” shall mean an annual fee payable to the Administrative Agent equal
to $200,000.00, payable in equal quarterly installments, in advance.



“Adjacent Borrower” shall have the meaning set forth in the introductory paragraph hereto,
together with its successors and assigns.



“Adjacent Property” shall mean that or those certain parcel(s) of real property more
particularly described on Schedule I-C attached hereto and made a part hereof, the
Improvements thereon and all personal property owned by Adjacent Borrower and encumbered by the
Mortgage, together with all rights pertaining to such property and Improvements, as more
particularly described in the granting clause of the Mortgage and referred to therein as the
“Adjacent Property”.



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



“Advance Request” shall mean that certain form of Advance Request attached hereto as
Exhibit A.



“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.


 


4









 





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



“Affiliate Joint Venture Counterparty” shall mean any party to an Affiliate Joint Venture who
is a Restricted Party or any Affiliate thereof.



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



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



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



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



“Affirmation of Payment” shall have the meaning set forth in Section 3.3(b)(iii).



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



“Aggregate Monthly Amount” shall have the meaning set forth in Section 2.6.2(b)(xiv)
hereof.



“Aggregate Monthly Interest Payment” shall mean, collectively, the Reduced Acquisition Loan
Monthly Interest Payment, the Construction Loan Monthly Interest Payment, the First Mezzanine
Monthly Interest Payment, the Second Mezzanine Monthly Interest Payment and the Third Mezzanine
Monthly Interest Payment.



“Agreement Regarding Morton Indemnification and Escrow” shall mean that certain Collateral
Assignment and Acknowledgment (Morton Indemnification), dated as of February 2, 2007, made by PM
Realty, LLC, Red, White and Blue Pictures, Inc., Peter A. Morton, 510 Development Corporation,
Morgans Hotel Group Co., Morgans Group LLC and Chicago Title Agency of Nevada, Inc. in favor of
Lender, (i) acknowledging that Lender is a third party beneficiary of the Morton Indemnification
and the PWR/RWB Escrow Agreement, and (ii) consenting to Lender’s rights under Section
5.2.11 hereof.



“Allocated Loan Amount” shall mean, with respect to the Adjacent Property (on a per acre
basis) and the IP, the aggregate amount of the Loan, the First Mezzanine Loan, the Second Mezzanine
Loan and the Third Mezzanine Loan allocated to each of the Adjacent Property (on a per acre basis)
and the IP as set forth on Schedule IV attached hereto and made a part hereof.



“Alteration Threshold Amount” shall mean (i) prior to Substantial Completion of the Project
(but excluding any portion of the Project), Two Million and No/100 Dollars


 


5









 




($2,000,000.00), and (ii) following Substantial Completion of the Project, Three Million and
No/100 Dollars ($3,000,000.00).




“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 Borrowers or the applicable Manager(s) for the
applicable Fiscal Year or other period. The current Annual Budget is attached hereto as
Exhibit D.



“Anticipated Cost Report” shall mean a report in the form set forth in Exhibit B
executed by the General Contractor which sets forth the anticipated costs to complete construction
of the Project, after giving effect to costs incurred during the previous month and any anticipated
Change Orders.



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



“Applicable Interest Rate” shall mean (i) with respect to the Reduced Acquisition Loan, the
rate or rates at which the Reduced Acquisition Loan Outstanding Principal Balance bears interest
from time to time in accordance with the provisions of Section 2.2.3 hereof, and (ii) with
respect to the Construction Loan, the rate or rates at which the Construction Loan Outstanding
Principal Balance bears interest from time to time in accordance with the provisions of Section
2.2.3 hereof.



“Appraised Value” shall mean the appraised value of the applicable Property or the applicable
portion thereof based on one or more appraisals reasonably acceptable to Lender conducted by one or
more licensed appraisers.



“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.



“Architect” shall mean each of (i) Klai Juba Architects, the architect engaged by (or on
behalf of) one or more Borrowers or an Affiliate thereof with respect to the Project on the date
hereof, (ii) any other architect engaged by (or on behalf of) one or more Borrowers with respect to
the Project after the date hereof and approved by Lender in its reasonable discretion, and (iii)
any successor of any of the foregoing, in each case as approved by Lender in its reasonable
discretion; provided, that in no event shall any Architect (a) be an Affiliate of any
Restricted



 


6









 






Party or (b) have any equity interest or any equivalent thereof in any of the Properties or in
any Restricted Party.



“Architect’s Certificate” shall mean a certificate from the Architect in substantially the
form attached hereto as Exhibit I.



“Architect’s Contract” shall mean a contract for architectural services to be entered into by
and between one or more Borrowers and Architect in respect of the Project and approved by Lender in
its reasonable discretion.



“Architect’s Consent” shall mean an Architect Certification and Consent Agreement executed and
delivered by the Architect in favor of Lender and substantially in the form attached as Exhibit
C.



“Asbestos Survey” shall have the meaning set forth in Section 3.18(b).



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



“Assignment Agreement” shall have the meaning set forth in Section 10.26.



“Assignment of Contracts” shall mean that certain Assignment of Contracts, Operating Permits
and Construction Permits, dated as of February 2, 2007, from Borrowers to Lender, as modified by
the First Loan Document Modification Agreement, the Second Loan Document Modification Agreement and
as the same hereafter may be amended, restated, replaced, supplemented or otherwise modified from
time to time.



“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 Lender, as assignee, assigning to Lender all of each such
Borrower’s right, title and interest in and to the Leases and Rents of its Property as security for
the Loan, as modified by the First 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 Assignment of Liquor
Management Agreement and Subordination of Management Fees, dated as of February 2, 2007, among
Lender, Hotel/Casino Borrower and HRHI, in its capacity as the Liquor Manager, as modified by the
First Loan Document Modification Agreement, the First HRHI Modification Agreement, the Second HRHI
Modification Agreement and the Second 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” shall mean that certain Assignment of Management
Agreement and Subordination of Management Fees (All Properties), dated as of February 2, 2007,
among Lender, Café Borrower, Hotel/Casino Borrower, Adjacent Borrower and the Affiliated Manager of
such Properties, as modified by the First Loan Document Modification Agreement and the Second Loan
Document Modification Agreement, and as the



 


7









 






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.



“Basic Carrying Costs” shall mean, for any period, with respect to each Property, the sum of
the following costs associated with such Property: (a) Taxes, (b) Other Charges, and (c) Insurance
Premiums.



“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).



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



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



“Borrower Advance Date” shall have the meaning set forth in Section 3.21 hereof.



“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 have the meaning set forth in the introductory paragraph hereto,
together with its successors and assigns.


 


8









 





“Café Property” shall mean that or those certain parcel(s) of real property more particularly
described on Schedule 1-B attached hereto and made a part hereof, the Improvements thereon
and all personal property owned by Café Borrower and encumbered by the Mortgage, together with all
rights pertaining to such property and Improvements, as more particularly described in the granting
clause of the Mortgage and referred to therein as the “Cafe Property”.



“Cage Reserve” shall mean the amount of cash funds and reserves then held by the Gaming
Borrower on-site at the Hotel/Casino Property (including, without limitation, casino chips, tokens,
checks and markers, and any funds of Gaming Borrower or any other Borrower deposited into any of
Gaming Borrower’s automated teller machines located in the Hotel/Casino Property).



“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 2.6.2(a) hereof.



“Cash Management Agreement” shall have the meaning set forth in the recitals to this
Agreement.



“Cash Profit and Loss Statement” shall have the meaning set forth in Section 5.1.11(c)
hereof.



“Casino Account” shall mean an Eligible Account established with Wells Fargo Bank, National
Association, entitled HRHH Gaming, LLC Operating Account or any successor Casino Account
established in accordance with the provisions of Section 12.3.1 hereof, which such Casino
Account shall be established and maintained pursuant to, and in accordance with, all applicable
Gaming Laws and shall be subject to a security interest in favor of Lender pursuant to the Loan
Documents (as evidenced by the Casino Account Control Agreement).



“Casino Account Control Agreement” shall mean that certain Restricted Account and Securities
Account Control Agreement dated on or about May 30, 2008 by and among Gaming Borrower, Lender and
Wells Fargo Bank, National Association or any replacement Casino Account Control Agreement
acceptable to Lender as described in Section 12.3.1 hereof.



“Casino Account Reimbursement Date” shall have the meaning set forth in Section
2.6.2(d) hereof.



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



 


9









 






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 mean the lease dated as of February 29, 2007, by and between
Hotel/Casino Borrower, as lessor, and Gaming Borrower, as lessee, pursuant to which Hotel/Casino
Borrower leases the Casino Component to Gaming Borrower for the operation of the Casino Component
as a casino, as the same may be amended, restated, replaced, supplemented or otherwise modified
from time to time in accordance with the terms hereof.



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



“Casualty Consultant” shall have the meaning set forth in Section 6.4(c)(iii) hereof.



“Casualty Retainage” shall have the meaning set forth in Section 6.4(c)(iv) hereof.



“Certificate of Occupancy” shall mean a permanent or temporary certificate of occupancy, in
either case, for the portion of the Project specified in such certificate of occupancy issued by
the applicable Governmental Authority pursuant to applicable Legal Requirements which permanent or
temporary certificate of occupancy shall permit such portion of the Project covered thereby to be
lawfully occupied and used for its intended purposes, shall be in full force and effect and, in the
case of a temporary certificate of occupancy, shall permit full use and lawful occupancy of the
portion(s) of the Project covered thereby, and if such temporary certificate of occupancy shall
provide for an expiration date, any Punch List Items which must be completed in order for such
temporary certificate of occupancy to be renewed or extended shall be completed no later than
fifteen (15) days prior to the applicable expiration date thereof.



“Change Order” shall mean any change order, amendment, deviation, supplement, addition,
deletion, revision or other modification in any respect to the Plans and Specifications, the Loan
Budget, the Construction Schedule, the Architect’s Agreement, any Major Contract or any other
contract or subcontract with a Trade Contractor, including minor departures from the Plans and
Specifications pursuant to field orders.



“Closing Completion Guaranty” shall mean that certain Closing Guaranty of Completion, dated as
of February 2, 2007, from Guarantors to Lender, as modified by the First Guaranty Modification
Agreement, the Second Guaranty Modification Agreement and the Second 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 February 2, 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 Assignments of Interest Rate Caps” shall mean, collectively, (i) that certain
Collateral Assignment of Interest Rate Cap Agreement (Acquisition Mortgage Loan), dated as of
November 6, 2007, executed by Borrowers in connection with the Loan for the



 


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benefit of Lender, and acknowledged by the applicable counterparty as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time, and (ii) that certain
Collateral Assignment of Interest Rate Cap Agreement (Construction Mortgage Loan), dated as of
November 6, 2007, executed by Borrowers in connection with the Loan for the benefit of Lender, as
modified by the First Loan Document Modification Agreement and the Second Loan Document
Modification Agreement, and as the same may be hereafter 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 the Closing Date, 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 mean each of the Reduced Acquisition Loan and the Construction Loan.



“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.



“Condemnation Proceeds” shall have the meaning set forth in Section 6.4(c) hereof.



“Constituent Member” shall mean any direct member or partner in any 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
Borrower or any Guarantor.



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



“Construction Consultant” shall mean a Person engaged by Lender to inspect the Project and the
Properties as construction progresses and to consult with and to provide advice to, and to render
reports to, Lender which, at Lender’s option, may be either an officer or employee of Lender or a
consulting architect, engineer or inspector appointed or engaged by Lender at the sole cost and
expense of Borrowers. On the date hereof, the Construction Consultant is Inspection & Valuation
International, Inc.



“Construction Consultant Approval” shall mean, with respect to any Advance Request delivered
hereunder, a certificate or report of the Construction Consultant approving such Advance Request
and confirming the satisfaction (or waiver in writing by Lender) of the conditions to the
applicable Construction Loan Advance set forth in Section 3.2, 3.3 and/or
3.4, hereof, as applicable, based upon a site observation of the Project made by the
Construction



 


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Consultant not more than thirty (30) days prior to the applicable Requested Disbursement Date,
which shall include, among other things, the following:



(a) a certification that the Construction Consultant has received and approved (i) with
respect to the Initial Construction Loan Advance, all known Plans and Specifications, or (ii) with
respect to all subsequent Construction Loan Advances, all known Change Orders;



(b) a certification, in the Construction Consultant’s reasonable professional opinion, that
the work performed as of the date thereof is substantially in accordance with the Plans and
Specifications, and the Construction Loan Advance requested pursuant to the Advance Request is
substantially in accordance with the Loan Budget and the Construction Schedule;



(c) (i) verification of the portion of the Project completed as of the date of such site
observation, and (ii) an estimate of (A) the percentage of the construction of the Project
completed as of the date of such site observation on the basis of work in place as part of the
Project and the approved Loan Budget and the value of such completed construction, (B) the Hard
Costs actually incurred for work in place as part of the Project as of the date of such site
observation, (C) the sum necessary to complete construction of the Project in accordance with the
Plans and Specifications, and (D) the amount of time from the date of such site observation that
will be required to achieve Substantial Completion of the Project;



(d) a certification that all amounts requested under the Advance Request that are for the
payment of Hard Costs have been incurred for work and materials actually performed and delivered
and consistent with the Plans and Specifications for such Project to date, except as set forth in
Section 3.11 hereof;



(e) a certification that no Shortfall then exists;



(f) a certification that the Advance Request does not include any amounts in respect of Stored
Materials or, if the Advance Request does include amounts in respect of Stored Materials, then a
certification (i) as to the value of Stored Materials stored at the Hotel/Casino Property or the
Adjacent Property, (ii) as to the value of Stored Materials stored off-site, and (iii) that the
requirements of Section 3.11 hereof are satisfied with respect to all such Stored
Materials;



(g) a certification, to the best knowledge of the Construction Consultant (for which purpose
it has, to the extent reasonably appropriate in its professional judgment, relied upon
observations, certifications and responses of the applicable Architect and Persons employed for the
construction of the Project), that the construction of the Project to the date of the Advance
Request has been performed in a good and workmanlike manner, in conformity with good construction
and engineering practices and in compliance in all material respects with the Plans and
Specifications and the Construction Schedule;



(h) a certification that the Construction Consultant has reviewed all Advance Requests made
prior to the date thereof and compared the invoices or other documentation supporting such prior
Construction Loan Advances with the Line Item categories



 


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presently in effect and that the total advances to date in each such Line Item category do not
exceed the budgeted amount for such category in any material respect, except as permitted pursuant
to Sections 3.9, 3.10 and/or 3.15 hereof; and



(i) a certification that (i) the Loan Budget fairly represents in all material respects the
Project Costs that it reasonably anticipates will be incurred through the date of Final Completion
in the aggregate and for each Line Item substantially in accordance with the Plans and
Specifications, and (ii) the Construction Consultant is not aware of any material costs that will
be needed to be paid or incurred by Borrowers in order to cause Substantial Completion or Final
Completion to occur other than the Project Costs identified in the Loan Budget.



“Construction Loan” shall mean that portion of the Loan (a) previously made by Original Lender
to Borrowers pursuant to the Original Loan Agreement, and (b) to be made by Lender to Borrowers
pursuant to this Agreement in an aggregate principal amount not to exceed the Construction Loan
Amount, which Construction Loan is evidenced by the Construction Loan Note.



“Construction Loan Advance” shall mean any advance of any portion of the Construction Loan
Amount pursuant to this Agreement, including, without limitation, (i) the Remaining Construction
Loan Advance, if applicable and (ii) any disbursement out of the Construction Loan Reserve Account
of funds previously advanced into the Construction Loan Reserve Account pursuant to the Remaining
Construction Loan Advance as contemplated under Section 3.1(d) hereof, if applicable, in
each of the foregoing instances, in accordance with the terms hereof.



“Construction Loan Amount” shall mean $620,000,000.00. As of the date hereof, a portion of
the Construction Loan Amount in the amount of $492,024,170.00 has been advanced in accordance with
the terms hereof and $127,975,830.00 remains to be advanced subject to and in accordance with the
terms hereof.



“Construction Loan Debt” shall mean the aggregate outstanding principal amount set forth in,
and evidenced by, the Construction Loan Note, together with all interest accrued and unpaid thereon
and all other sums (including, the applicable Unused Advance Fee, Administrative Agent Fee and
Exit Fee payable in connection with the applicable transaction) due to Lender in respect of the
Construction Loan Note.



“Construction Loan Monthly Interest Payment” shall have the meaning set forth in Section
2.3.1 hereof.



“Construction Loan Note” shall have the meaning set forth in the recitals of this Agreement.



“Construction Loan Outstanding Principal Balance” shall mean, as of any date, the then
outstanding principal balance of the Construction Loan. For avoidance of doubt, any disbursement
out of the Construction Loan Reserve Account of Third Mezzanine Construction Funds previously
advanced into the Construction Loan Reserve Account pursuant to Section 3.4.2 of the Third
Mezzanine Loan Agreement shall not comprise a portion of the Construction Loan Outstanding
Principal Balance for any purpose hereunder.


 


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“Construction Loan Reserve Account” shall have the meaning set forth in Section 7.7.1
hereof.



“Construction Loan Spread” shall mean, subject to application of the Default Rate, (i) prior
to the First Qualified Extended Maturity Date, 4.25%; provided, however, that if
Substantial Completion has not occurred on or before May 1, 2010, the Construction Loan Spread
shall increase to 4.75% from and including May 1, 2010 through but excluding the first Payment Date
following Substantial Completion, following which the Construction Loan Spread shall again be 4.25%
until the First Qualified Extended Maturity Date and (ii) from and after the First Qualified
Extended Maturity Date, 5.65%.



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



“Construction Schedule” shall mean a schedule for the construction and completion of the
Project, in form and substance acceptable to Lender in its reasonable discretion, and including,
without limitation, (i) a construction progress schedule reflecting the anticipated dates of
completion of specified subcategories of the Loan Budget, (ii) a trade-by-trade breakdown of the
estimated periods of commencement and completion of the work to be completed in connection with the
Project, and (iii) such other information as the Construction Consultant shall reasonably require.
The approved Construction Schedule, as of the date hereof, is attached as Exhibit E.



“Contingency” shall mean, collectively, the Contingency (Hard Costs) and the Contingency (Soft
Costs).



“Contingency (Hard Costs)” shall mean the amount allocated as a contingency reserve in the
Loan Budget for Hard Costs, which shall in no event start out being less than ten percent (10%) of
the total amount of the Hard Costs included in the Loan Budget.



“Contingency Line Item” shall have the meaning set forth in Section 3.10(a).



“Contingency (Soft Costs)” shall mean the amount allocated as a contingency reserve in the
Loan Budget for Soft Costs, which shall in no event start out being less than five percent (5%) of
the total amount of the Soft Costs included in the Loan Budget.



“Contractor’s Certificate” shall mean a certificate from any Major Contractor substantially in
the form attached hereto as Exhibit K.



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



“Control” shall mean the possession, directly or indirectly, of the power to direct or cause
the direction of management, policies or activities of a Person, whether through ownership of
voting securities, by contract or otherwise. “Controlled” and “Controlling” shall have correlative
meanings.



“Cost Savings” shall have the meaning set forth in Section 3.9(b) hereof.


 


14









 





“Cost Savings Fee” shall mean an amount equal to the lesser of (a) any cost savings determined
and distributed in accordance with the provisions of Section 3.1(k) hereof multiplied by 3.16337%
and (b) $150,000.



“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 Status” shall mean such time as the Second Mezzanine Applicable Interest Payment
is equal to the Second Mezzanine Monthly Interest Payment and the Third Mezzanine Applicable
Interest Payment is equal to the Third Mezzanine Monthly Interest Payment.



“Debt” shall mean the aggregate outstanding principal amount set forth in, and evidenced by,
this Agreement and the Notes (which is comprised of both Components) together with all interest
accrued and unpaid thereon and all other sums (including, if applicable, the Unused Advance Fee,
the Administrative Agent Fee and the Exit Fee) due to Lender in respect of the Loan under the
Notes, this Agreement, the Mortgage and the other Loan Documents.



“Debt Service” shall mean, with respect to any particular period of time, scheduled interest
payments due under this Agreement and each of the Notes (computed at the contract rate of interest
provided for under each 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 (a) interest that was due and payable on the
Reduced Acquisition Loan Outstanding Principal Balance and the Construction Loan Outstanding
Principal Balance (computed as if the Construction Loan has been fully funded), (b) the interest
that was due and payable or would have been due and payable, as applicable, under the First
Mezzanine Loan as determined based on the contract rate of interest set forth in the First
Mezzanine Loan Agreement (without giving effect to any accrual of interest on the First Mezzanine
Loan), (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 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 due and 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



 


15









 






interest rate is equal to the greater of actual LIBOR in effect for the applicable time period
and a rate equal to one percent (1.0%)) .



“Debt Yield” shall mean:



(a) for all calculations of Debt Yield except in connection with the determination of the
Second Mezzanine Applicable Interest Payment and Third Mezzanine Applicable Interest Payment, Debt
Yield shall mean a ratio (expressed as a percentage) in which: (i) the numerator is the Net Cash
Flow for the trailing twelve (12) calendar month period ending with the last calendar month prior
to the date of determination for which financial reports have been delivered under Section
5.1.11 hereof, as reasonably determined by Lender based on the financial statements delivered
to Lender pursuant to Section 5.1.11 hereof, and (ii) the denominator is the Aggregate
Outstanding Principal Balance as of such date of determination; and



(b) for purposes of determining the Second Mezzanine Applicable Interest Payment and the Third
Mezzanine Applicable Interest Payment, Debt Yield shall mean a ratio (expressed as a percentage) in
which: (i) the numerator is the Net Cash Flow for the trailing twelve (12) calendar month period
ending with the last calendar month prior to the date of determination for which financial reports
have been delivered under Section 5.1.11 hereof, as reasonably determined by Lender based
on the financial statements delivered to Lender pursuant to Section 5.1.11 hereof, and (ii)
the denominator is the sum of the Reduced Acquisition Loan Outstanding Principal Balance, the
Construction Loan Outstanding Principal Balance and the First Mezzanine Loan Outstanding Principal
Balance.



“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 Applicable Interest Rate.



“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.



“Disbursement Schedule” shall mean the schedule of the amounts of Construction Loan Advances
anticipated to be requisitioned by Borrowers each month during the term of the Loan, as certified
by Borrower and reasonably approved by Lender and the Construction Consultant.



“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.


 


16









 





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



“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 this Agreement to be furnished to Lender as a
condition to such Construction Loan Advance.



“Eligible Account” shall mean a separate and identifiable “deposit account”, as such term is
defined in any applicable Uniform Commercial Code, from all other funds held by the holding
institution that is either (a) an account or accounts maintained with a federal or state-chartered
depository institution or trust company which complies with the definition of Eligible Institution
or (b) a segregated trust account or accounts maintained with a federal or state chartered
depository institution or trust company acting in its fiduciary capacity which, in the case of a
state chartered depository institution or trust company, is subject to regulations substantially
similar to 12 C.F.R. §9.10(b), having in either case a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by federal and state authority. An Eligible
Account will not be evidenced by a certificate of deposit, passbook or other instrument.



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



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



“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.


 


17









 





“Environmental Indemnity” shall mean that certain Borrowers Environmental Indemnity Agreement,
dated as of February 2, 2007, executed by Borrowers in connection with the Loan for the benefit of
Lender, as modified and ratified by the First Loan Document Modification Agreement and the Second
Loan Document Modification Agreement, and as the same hereafter may be amended, restated, replaced,
supplemented or otherwise modified from time to time.



“Equipment” shall have the meaning set forth in the granting clause of the Mortgage.



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



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



“Excess Cash Flow” shall have the meaning set forth in Section 2.6.2(b) hereof.



“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, First Mezzanine Event of Default, Second Mezzanine Event of
Default or Third Mezzanine Event of Default shall have occurred and be continuing.



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



“Excess Lender Applied Funds” shall have the meaning set forth in Section 7.6.3
hereof.



“Excess Requested Funds” shall have the meaning set forth in Section 7.6.2(b) hereof.



“Excess Cash Release Date” shall mean the date upon which the Properties have achieved and
maintained a Debt Service Coverage Ratio of not less than 1.20 to 1.00 for the immediately
preceding two (2) consecutive calendar quarters.



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



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



“Excluded Taxes” shall mean, with respect to the Administrative Agent, any 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 the Administrative Agent, such 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



 


18









 






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
Borrower and not arising out of (a) the negligence, willful misconduct or illegal act of any
Borrower or any Affiliate of any Borrower, or (b) any cause or circumstance resulting from the
insolvency, bankruptcy or lack of funds of any Borrower, any Guarantor or any Affiliate of any
Borrower or any Guarantor.



“Existing FF&E Leases” shall have the meaning set forth in the definition of “Special Purpose
Entity” set forth below.



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



“Extension Option” shall mean any Qualified Extension Option.



“Extension Term” shall mean any Qualified Extension Term.



“Extra Non-Accrued Interest” shall have the meaning set forth in Section 2.4.5 hereof.



“Extraordinary Expenses” shall mean any and all actual out-of-pockets costs and expenses (a)
incurred by any Borrower on an irregular basis and (b) not associated with the day-to-day operation
of the Property, provided that the following costs and expenses shall not be or be deemed to be
Extraordinary Expenses hereunder: (i) any cost or expense that (A) is a Pre-Opening Expense,
Capital Expenditure, or Project Cost (including, without limitation, any and all items set forth
in the Loan Budget and other costs or expenses incurred in connection with the construction of the
Property or any component thereof) or any cost or expense that is an actual cash Operating Expense
subject to disbursement in accordance with the applicable terms of Section 2.6.2 hereof, (B) is
incurred by any Manager or HRHI (other than in connection with their respective obligations under
the Management Agreement or Liquor Management Agreement, respectively), (C) is incurred in
connection with the payment of debt service under any loan (including, without limitation, the
Loan) or (D) arises in connection with any contributions to any reserves required under the Loan
Documents, and (ii) any cost or expense incurred in connection with the entertainment of any
guests, licensees, investors or other Persons.



“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



 


19









 






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 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 mean that, in addition to Substantial Completion, (i) all Punch List
Items shall have been completed Lien free and substantially in accordance with the Plans and
Specifications, all Legal Requirements and this Agreement, (ii) one or more Certificates of
Occupancy shall have been issued (if subject to any conditions, such conditions being acceptable to
Lender in its sole and absolute discretion) for the entire Project, and (iii) reasonably
satisfactory evidence shall have been delivered to Lender confirming that all other Governmental
Approvals have been issued and all other Legal Requirements have been satisfied in all material
respects so as to allow the Project to be used and operated in accordance with the Loan Documents.



“First Amended and Restated Cash Management Agreement” has the meaning set forth in the
recitals to this Agreement.



“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 to
this Agreement.



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



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



“First Mezzanine Applicable Interest Payment” shall mean with respect to the interest payments
on the First Mezzanine Loan commencing on and including the interest payment due on the Payment
Date occurring in (a) January, 2010, shall be equal to 558,397.29, (b) February, 2010 through and
including the interest payment due on the Payment Date occurring in June, 2010, an interest payment
computed in accordance with the terms of the First Mezzanine Loan Agreement based on an interest
rate equal to “LIBOR” (as defined in the First Mezzanine Loan Agreement) plus 4.00%, and (c) July,
2010 through the Maturity Date (as the same may be extended in accordance with the terms of the
First Mezzanine Loan Agreement), an interest payment computed in accordance with the terms of the
First Mezzanine Loan Agreement based



 


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on an interest rate equal to LIBOR plus 5.20%. Without limiting the foregoing, the interest
payments comprising the First Mezzanine Applicable Interest Payment shall be computed on the then
outstanding principal balance of the First Mezzanine Loan, which for purposes of computing such
interest payments shall not include any First Mezzanine Initial Accrual Amount or First Mezzanine
Subsequent Accrual Amount.



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



“First Mezzanine Cash Management Account” shall mean the “First Mezzanine Cash Management
Account” established under the First Mezzanine Loan Documents.



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



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



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



“First Mezzanine Initial Accrual Amount” shall mean the aggregate amount of all First
Mezzanine Initial Interest Differential Amounts, together with interest thereon computed at an
interest rate equal to (a) “LIBOR” (as defined in the First Mezzanine Loan Agreement) plus 5.20%,
with respect to all time periods occurring from and after the date hereof through and including the
Payment Date occurring in February, 2011 and (b) “LIBOR” plus 6.50%, with respect to all time
periods occurring after the Payment Date occurring in February, 2011, in all instances compounded
monthly in accordance with the terms of the First Mezzanine Loan Agreement.



“First Mezzanine Initial Interest Differential Amount” shall mean the positive difference, if
any, between (a) the First Mezzanine Monthly Interest Payment with respect to any Payment Date
occurring from and after the Payment Date occurring in January, 2010 through and including the
Payment Date occurring in June, 2010 (as the same may be extended in accordance with the terms
hereof) and (b) the First Mezzanine Applicable Interest Payment payable on each such date.



“First Mezzanine Lender” shall mean Brookfield Financial, LLC as to its Series B (as successor
in interest to Column Financial, Inc.), in its capacity as holder of the First Mezzanine Loan, its
successors or assigns.



“First Mezzanine Loan” shall mean a loan in the original principal amount of Two Hundred
Million and No/100 Dollars ($200,000,000.00) made by First Mezzanine Lender to First Mezzanine
Borrowers.


 


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



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



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



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



“First Mezzanine Monthly Interest Payment” shall mean the “Monthly Interest Payment” as
defined in the First Mezzanine Loan Agreement (which Monthly Interest Payment shall be computed at
the contract rate of interest set forth in the First Mezzanine Loan Agreement of (a) “LIBOR” (as
defined in the First Mezzanine Loan Agreement) plus 5.20% or, as applicable, the “Prime Rate” plus
the “Prime Rate Spread” (each as defined in the First Mezzanine Loan Agreement), with respect to
all payments due from and including the Payment Date occurring in January, 2010 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 from
and after the Payment Date occurring in March, 2011). Without limiting the foregoing, the interest
payments comprising the First Mezzanine Monthly Interest Payment shall be computed on the then
outstanding principal balance of the First Mezzanine Loan, which for purposes of computing such
interest payments shall not include any First Mezzanine Initial Accrual Amount or First Mezzanine
Subsequent Accrual Amount.



“First Mezzanine Subsequent Accrual Amount” shall mean the aggregate amount of all First
Mezzanine Subsequent Interest Differential Amounts, together with interest thereon computed at an
interest rate equal to “LIBOR” (as defined in the First Mezzanine Loan Agreement) plus 6.50%,
compounded monthly in accordance with the terms of the First Mezzanine Loan Agreement.



“First Mezzanine Subsequent Interest Differential Amounts” shall mean the positive difference,
if any, between (a) the First Mezzanine 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 First
Mezzanine Applicable Interest Payment payable on each such date.



“First Modification Agreements” shall mean, collectively, the First Loan Document Modification
Agreement, the First HRHI Modification Agreement and the First Guaranty Modification Agreement.



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


 


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“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 15.3 hereof.



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



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



“Gaming Account” shall mean, collectively, the Casino Account and the Cage Reserve. For
purposes of interpretation, references contained herein to amounts or funds on deposit in the
Gaming Account shall refer to the aggregate (without duplication) of all amounts then on deposit in
the Casino Account and all amounts then comprising the Cage Reserve.



“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 have the meaning set forth in the introductory paragraph hereto,
together with its successors and assigns.



“Gaming Day” shall mean the 24 hour period commencing at 3:00 a.m. Las Vegas time on a
particular calendar day and ending at 2:59 a.m. Las Vegas time on the following calendar day or
such other 24 hour period under which Gaming Borrower shall operate the Casino in accordance with
applicable Gaming Laws.



“Gaming Equipment” shall mean any and all gaming devices (as defined in NRS 463.0155), gaming
device parts, inventory and other related gaming equipment and supplies used



 


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in connection with the operation of a casino, including, without limitation, slot machines,
gaming tables, cards, dice, chips, tokens (including slot machine tokens not currently in
circulation, and “reserve” chips, if any, not currently in circulation), player tracking systems,
cashless wagering systems (as defined in NRS 463.014) and associated equipment (as defined in NRS
463.0136), which are located at any Property, are owned or leased by any Borrower and are used or
useable exclusively in the present or future operation of slot machines and live games at any
Property, together with all improvements and/or additions thereto, mobile gaming systems (as
defined in Regulation 14.010(11) under NRS Chapter 463), all contracts necessary to own or operate
any of the Gaming Equipment and/or to conduct gaming operations for the Casino Component, all
assignable manufacturers and other warranties applicable to the Gaming Equipment, all computer
hardware and software used to operate the Gaming Equipment and/or to conduct gaming operations for
the Casino Component.



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



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



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



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



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



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


 


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



“Gaming Revenue Disbursement Date” shall have the meaning set forth in Section 2.6.1(c) of
this Agreement.



“General Contract” shall mean one or more guaranteed maximum price contracts (or work
authorizations) with the General Contractor entered into by one or more Borrowers or any Affiliate
thereof in connection with the Project and approved by Lender in its reasonable discretion;
provided, that (i) such contract(s) (or work authorizations under such contract(s)) shall
be based on Plans and Specifications that are at least eighty percent (80%) complete in the
Construction Consultant’s reasonable opinion and have been approved up to such point of completion
by Lender and Construction Consultant in their reasonable discretion, and (ii) in no event shall
allowances applicable to such contract(s) or work authorization(s) exceed fifteen percent (15%) of
the aggregate guaranteed maximum price for the Project, and provided further, that in no
event shall allowances within any such individual contract or work authorization exceed thirty
percent (30%) of the guaranteed maximum price for each such individual contract or work
authorization.



“General Contractor” shall mean each of (i) M.J. Dean Construction, Inc. or (ii) any
replacement general contractor engaged by (or on behalf of) one or more Borrowers or any Affiliate
thereof with respect to the Project from time to time after the date hereof and approved by Lender
in its reasonable discretion (which approval may take into account, without limitation, the
financial condition and stability of any proposed general contractor), and (iii) any successor of
any of the foregoing approved by Lender in its reasonable discretion (which approval may also take
into account, without limitation, the financial condition and stability of any such successor);
provided, that in no event shall the General Contractor (a) be an Affiliate of any
Restricted Party or (b) have any equity interest or any equivalent thereof in any of the Properties
or in any Restricted Party.



“General Contractor’s Certificate” shall mean a certificate from the General Contractor
substantially in the form attached hereto as Exhibit N.



“General Contractor’s Consent” shall mean a General Contractor’s Performance Letter executed
and delivered by the General Contractor in favor of Lender and substantially in the form attached
as Exhibit F.



“General Reserve Account” shall have the meaning set forth in Section 7.6.1 hereof.



“General Reserve Cap” shall have the meaning set forth in Section 7.6.3 hereof.



“General Reserve Fund” shall have the meaning set forth in Section 7.6.1 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



 


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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 Borrower or by any Manager (on behalf of any Borrower) for the use, occupancy or enjoyment of
any of the Properties, or any part thereof, or received by any 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, 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 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



 


26









 






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 Borrower from any of the Reserve Funds and any interest earned thereon.



“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(c)(D) hereof.



“Hard Costs” shall mean, collectively, the costs set forth in the Loan Budget which are for
labor, materials, equipment, furniture and fixtures and fees and expenses of any construction
manager and/or general contractor engaged in connection with the Project.



“Hotel/Casino Borrower” shall have the meaning set forth in the introductory paragraph hereto,
together with its successors and assigns.



“Hotel/Casino Property” shall mean that or those certain parcel(s) of real property more
particularly described on Schedule I-A attached hereto and made a part hereof, the
Improvements thereon and all personal property owned by Hotel/Casino Borrower and encumbered by the
Mortgage, together with all rights pertaining to such property and Improvements, as more
particularly described in the granting clause of the Mortgage and referred to therein as the “Hotel
Casino Property”.



“HRCI” shall have the meaning set forth in Section 4.1.36(b) hereof.



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



“HRHI Guaranty” shall mean that certain HRHI Guaranty Agreement, dated as of February 2, 2007,
from HRHI to Lender, as modified and ratified by the First HRHI Modification Agreement, the Second
HRHI Modification Agreement and the Second 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 Release of HRHI Documents, dated as of the date hereof,
by and between HRHI and Lender, as the same hereafter may be amended, restated, replaced,
supplemented or otherwise modified from time to time.



“HRHI Security Agreement” shall mean that certain HRHI Security Agreement, dated as of
February 2, 2007, from HRHI to Lender, securing the HRHI Guaranty and covering certain assets of
HRHI described therein, as modified by the First Loan Document Modification Agreement, the First
HRHI Modification Agreement, the Second Loan Document Modification Agreement and the Second HRHI
Modification Agreement, and as the same hereafter may be amended, restated, replaced, supplemented
or otherwise modified from time to time.




 


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“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 or Gaming
Member), officer, employee, partner, member (other than a “special member” or “springing member”),
manager, attorney or counsel of any 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 Borrower, Gaming Member, HRHI or any Affiliate of any of them; (iii) a Person
Controlling or under common Control with any such stockholder, director, officer, employee,
partner, member, manager, customer, supplier or other Person; or (iv) a member of the immediate
family of any such stockholder, director, officer, employee, partner, member, manager, customer,
supplier or other Person and (b) has (i) prior experience as an independent director or independent
manager for a corporation or limited liability company whose charter documents required the
unanimous consent of all independent directors or independent managers thereof before such
corporation or limited liability company could consent to the institution of bankruptcy or
insolvency proceedings against it or could file a petition seeking relief under any applicable
federal or state law relating to bankruptcy and (ii) at least three years of employment experience
with one or more nationally-recognized companies that provides, inter alia,
professional independent directors or independent managers in the ordinary course of their
respective business to issuers of securitization or structured finance instruments, agreements or
securities or lenders originating commercial real estate loans for inclusion in securitization or
structured finance instruments, agreements or


 


28









 





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 or Gaming
Member, 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 or Gaming Member (provided such affiliate does not or did not own a direct or indirect
equity interest in any Borrower or Gaming Member) 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 mean Lender’s first Construction Loan Advance funded
as of May 30, 2008.




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



“Initial Renovation Costs” shall mean the costs and expenses of performing the Initial
Renovations as set forth on the Initial Renovations Budget.



“Initial Renovation Reserve Account” shall have the meaning set forth in Section 7.5.1
hereof.



“Initial Renovation Reserve Fund” shall have the meaning set forth in Section 7.5.1
hereof.




“Initial Renovations” shall have the meaning set forth in Section 7.5.1 hereof.



“Initial Renovations Budget” shall mean a budget, attached hereto as Schedule XIII,
and all amendments and modifications thereto reasonably approved by Lender.



“Initial Renovations Shortfall” shall have the meaning set forth in Section 7.5.2
hereof.



“Insolvency Opinion” shall mean that certain non-consolidation opinion letter dated February
2, 2007 delivered by Latham & Watkins LLP in connection with the Loan.




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




“Insurance Proceeds” shall have the meaning set forth in Section 6.4(c) hereof.



“Intellectual Property Security Agreement” shall mean that certain Intellectual Property
Security Agreement, dated as of February 2, 2007, among IP Borrower and HRHI, as debtors, and
Lender, as secured party, as modified by the First Loan Document Modification Agreement, the First
HRHI Modification Agreement, the Second Loan Document Modification and the HRHI Release and as the
same hereafter may be amended, restated, replaced, supplemented or otherwise modified from time to
time.


 


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“Intercreditor Agreement” shall mean that certain Intercreditor Agreement, dated as of
November 6, 2007, by and among Lender, First Mezzanine 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 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 set forth in Section 7.4.1 hereof.




“Interest Reserve Fund” shall have the meaning set forth in Section 7.4.1 hereof.




“IP” shall have the meaning ascribed to such term in Section 4.1.37(a) hereof.



“IP Agreements” shall have the meaning ascribed to such term in Section 4.1.37(a)
hereof.



“IP Borrower” shall have the meaning set forth in the introductory paragraph hereto, 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 ascribed to such term in Section
4.1.37(d) hereof.




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




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




“IP Subaccount” shall have the meaning set forth in Section 7.6.4 hereof.




“IP Subaccount Funds” shall have the meaning set forth in Section 2.4.3(g) hereof.



“Joint Venture” shall mean any Person in which an Affiliate Joint Venture Counterparty owns a
direct and/or indirect ownership interest, whether in the form of one or more membership interests,
one or more partnership interests or capital stock.



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


 


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



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



“Legal Requirements” shall mean, with respect to each Property, 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 any part thereof, 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 Borrower, at any time in force affecting such Property or any part thereof,
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.



“Lender Monthly Interest Advance” shall have the meaning set forth in Section 3.20
hereof.




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



“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.



“Letter of Credit Reduction Notice” shall mean a notice, in the form attached hereto as
Exhibit P or in such other form as Lender shall reasonably approve, requesting that the
issuer of any Required Equity Letter of Credit amend such Required Equity Letter of Credit to
evidence a reduction in the amount thereof.



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


 


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“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 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, with respect to each Property, any mortgage, deed of trust, lien, pledge,
negative pledge, hypothecation, assignment, security interest, or any other encumbrance, charge or
transfer of, on or affecting any Borrower, the related Property, any portion thereof 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.



“Line Item” shall mean a line item of cost or expense set forth in the Loan Budget, as the
same may be adjusted in compliance with the terms hereof.




“Line Item Component” shall have the meaning set forth in Section 3.9(b) 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


 


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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 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 Note, which was prepaid with the Mezzanine Loans on
November 6, 2007, and the maximum amount of which that may be funded in the future under the
Construction Loan (as defined in the Original Loan Agreement) was increased by $20,000,000.00 on
November 6, 2007, both of the foregoing resulting in a maximum principal amount of the Loan from
and after November 6, 2007 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 Loan is otherwise on the terms and conditions set forth in this
Agreement and the other Loan Documents.



“Loan Amount” shall mean a maximum principal amount of up to ONE BILLION THIRTY MILLION and
00/100 Dollars ($1,030,000,000.00).



“Loan Budget” shall mean the budget for total estimated Project Costs prepared by Borrowers
and approved by Lender in its reasonable discretion, which shall detail all items of direct and
indirect costs estimated to be incurred in connection with the construction of the Project, and all
amendments and modifications thereto approved by Lender in accordance with this Agreement. The
Loan Budget, as of the date hereof, is attached hereto as Exhibit J.



“Loan Documents” shall mean, collectively, this Agreement, the Notes, the Mortgage, the
Assignment of Leases, the Environmental Indemnity, each O&M Agreement, the Assignment of Management
Agreement, the Assignment of Liquor Management Agreement, the Intellectual Property Security
Agreement, the Agreement Regarding Morton Indemnification and Escrow, the Assignment of Contracts,
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
Assignments of Interest Rate Caps, the Side Letter and all other documents executed and/or
delivered in connection with the Loan, as any of the foregoing are modified by any of the First
Modification Agreements and/or the Second Modification Agreements and as any of the foregoing
hereafter may be amended, restated, replaced, supplemented or otherwise modified from time to time.



“Loan-to-Value Ratio” shall mean the ratio, as of a particular date, in which the numerator is
equal to the Aggregate Outstanding Principal Balance and the denominator is equal to the appraised
value of the applicable Properties based on one or more appraisals reasonably acceptable to Lender
conducted by one or more licensed appraisers.


 


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“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.




“Main Property” shall have the meaning set forth in Section 2.5.1(a)(xii).



“Major Contractor” shall mean the General Contractor and any other contractor hired by one or
more Borrowers or an Affiliate thereof or any subcontractor, in any of the foregoing instances,
approved by Lender in its reasonable discretion, and either (i) supplying design services, labor
and/or materials in connection with the Project for an aggregate contract price, initially or
thereafter by virtue of Change Orders, equal to or greater than (a) for purposes of the definition
of “Payment and Performance Bonds” set forth below and all provisions of this Agreement related
thereto, and for purposes of all requirements herein for obtaining Lien waivers (except if a lower
amount is otherwise expressly provided), $2,000,000.00, and (b) for all other provisions of this
Agreement, $5,000,000.00, in each of the foregoing instances, whether pursuant to one contract or
agreement or multiple contracts or agreements, or (ii) which relates to major design elements such
as engineering, traffic flow and landscape architecture, or (iii) which relates to major project
elements such as steel, concrete, HVAC systems, windows, doors and other similar items;
provided, that in no event shall any Major Contractor (a) be an Affiliate of any Restricted
Party or (b) have any equity interest or any equivalent thereof in any of the Properties or in any
Restricted Party.



“Major Contractor’s Consent” shall mean a Major Contractor Certification and Consent Agreement
executed and delivered by the applicable Major Contractor in favor of Lender and substantially in
the form attached as Exhibit G.




“Major Contracts” shall mean any contract with a Major Contractor.



“Major Lease” shall mean any of the following: (i) any Lease of space at any of the
Properties for retail, restaurant or any other use in excess of 20,000 square feet to a single
tenant or by the aggregate of one or more affiliated tenants, (ii) any Lease of space at any of the
Properties for retail, restaurant or any other use providing for net rental payments (including,
without limitation, percentage rent) in excess of $7,500,000 per annum to a single tenant or by the
aggregate of one or more affiliated tenants, it being acknowledged and agreed that for purposes of
determining whether a new Lease is a Major Lease, percentage rent shall be estimated based on
Lender’s reasonable underwriting at the time of Lease execution, (iii) any Lease of space at any of
the Properties with an Affiliate of Borrower, or (iv) any Lease that is not the result of arm’s
length negotiations.



“Management Agreement” shall mean, with respect to each Property, the property management
agreement entered into by and between the applicable Borrower or 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


 


34









 





services with respect to the Property owned by such 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.



“Material Change Order” shall mean any Change Order with respect to the Project, other than
with respect to any guaranteed maximum price Major Contract, that, together with all other Change
Orders theretofore entered into with respect to the Project, (i) increases any Line Item in the
Loan Budget in excess of the greater of (a) ten percent (10%) over the original amount of such Line
Item stated in the Loan Budget, but in no event in excess of $1,000,000.00, or (b) $500,000.00 over
the original amount of such Line Item stated in the Loan Budget, and/or (ii) increases the
aggregate amount of the Loan Budget in excess of ten percent (10%) over the original amount
thereof.



“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 Notes 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 either 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 Prepayment” shall have the meaning set forth in the recitals to this Agreement.


 


35









 





“Minimum Gaming Account Balance” shall mean $10,000,000.00, as the same may be increased
subject to and in accordance with the provisions of Section 12.3.3 hereof.



“Minor Casualty” shall mean any injury or damage to the Improvements on the Hotel/Casino
Property and/or the Adjacent Property, including any partially constructed portion of the Project,
(i) the cost of which to Restore, together with any prior such damages which (A) have not yet been
Restored or (B) with respect to which Net Proceeds in an amount sufficient for Restoration have not
yet been received by Borrowers or Lender as required pursuant to this Agreement, is less than
$5,000,000.00, and (ii) is not materially interfering with, and is not, in Lender’s reasonable
judgment, reasonably likely to materially interfere with, the progress of construction of the
Project.




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



“Monthly Interest Payments” shall mean, collectively, the Reduced Acquisition Loan Monthly
Interest Payment and the Construction Loan Monthly Interest Payment.



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



“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 February 2,
2007, executed and delivered by Borrowers as security for the Loan and encumbering the Properties,
as modified by the First Loan Document Modification Agreement and the Second Mortgage Modification
Agreement, and as the same hereafter may be amended, restated, replaced, supplemented or otherwise
modified from time to time.



“Mortgage and First Mezzanine Debt Service Coverage Ratio” shall 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 (a) interest that was due and payable on the
Reduced Acquisition Loan Outstanding Principal Balance and the Construction Loan Outstanding
Principal Balance (computed as if the Construction Loan has been fully funded), and (b) the
interest that was due and payable or would have been due and payable under the First Mezzanine Loan
as determined based on the contract rate of interest set forth in the First Mezzanine Loan
Agreement without giving effect to any accrual of interest on the First Mezzanine Loan, in all
instances based on such interest that was due and payable or, as applicable, would have been due
and payable for the immediately preceding six (6) calendar months (provided that for purposes of
determining the amount of such denominator all


 


36









 





computation 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%)) .




“Morton” shall mean Peter A. Morton.




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



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




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



“Net Cash Flow” shall mean, for any period, the amount obtained by subtracting (a)(i)
Operating Expenses for the Properties, (ii) monthly contributions to the Replacement Reserve Fund
and (iii) Extraordinary Expenses and/or Pre-Opening Expenses, in each of the foregoing instances,
for such period, from (b) Gross Income from Operations for such period.




“Net Cash Flow Schedule” shall have the meaning set forth in Section 5.1.11(b) hereof.



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




“Net Proceeds” shall have the meaning set forth in Section 6.4(c) hereof.



“Net Proceeds Deficiency” shall have the meaning set forth in Section 6.4(c)(vi)
hereof.



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




“New Mezzanine Loan” shall have the meaning set forth in Section 9.8 hereof.



“Non-Recourse Guaranty” shall mean that certain Guaranty Agreement, dated as of February 2,
2007, from Guarantors to Lender, as modified by the First Guaranty Modification Agreement, the
Second Guaranty Modification Agreement and the Second 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” and “Notes” shall have the meaning set forth in the recitals of this Agreement.



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


 


37









 






“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 Borrower and Lender given in connection with the Loan, as modified by the
First Loan Document Modification Agreement and the Second Loan Document Modification Agreement, and
as the same hereafter may be amended, restated, replaced, supplemented or otherwise modified from
time to time. On the Closing Date, O&M Agreements were entered into by each of Hotel/Casino
Borrower and Lender and Adjacent Borrower and 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 Expense Overfunding” shall have the meaning set forth in Section 5.1.11(d).



“Operating Expense Request” shall have the meaning set forth in Section 2.6.2(b)
hereof.



“Operating Expenses” shall mean, for any period, the total of all expenditures, computed in
accordance with GAAP, of whatever kind during such period relating to the operation, maintenance
and/or management of any of the Properties that are incurred on a regular monthly or other periodic
basis, including without limitation, utilities, ordinary repairs, maintenance, environmental and
engineering (but excluding utilities) (which ordinary repairs, maintenance, environmental and
engineering (but excluding utilities) for the purposes of this definition shall be no less than an
assumed expense of $400,000.00 per month, and following the First Full Operating Month, such
assumed expense shall increase to $600,000.00 per month, insurance, license fees, property taxes
and assessments, sales tax, room occupancy tax, live entertainment tax, advertising expenses, base
and incentive management fees, payroll and related taxes, computer processing charges, tenant
improvements and leasing commissions, interest and fees charged in connection with FF&E, capital
and equipment leases, operational equipment or other lease payments as approved by Lender, and
other similar costs, but excluding depreciation and amortization with respect to the Properties,
Debt Service, debt service under the First Mezzanine Loan, debt service under the Second Mezzanine
Loan, debt service under the Third Mezzanine Loan, 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 the Replacement Reserve Fund, the Tax and Insurance Escrow Fund and any other
reserves required under the Loan Documents. 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


 


38









 





under any Management Agreement. Notwithstanding the foregoing, references herein to Operating
Expenses that are to be funded from amounts on deposit in the Cash Management Account or from any
reserve established hereunder shall refer to actual Operating Expenses incurred by 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 mean that portion of the Loan made by Original Lender to
Borrowers on the Closing Date pursuant to the Original Loan Agreement in the principal amount of
$760,000,000.00.



“Original Acquisition Loan Advance” shall mean the advance of the Original Acquisition Loan
made on the Closing Date pursuant to the provisions of the Original Loan Agreement.



“Original Construction Loan Note” shall have the meaning set forth in the recitals to this
Agreement.




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




“Original Note” shall have the meaning set forth in the recitals to this Agreement.



“Original Reduced Acquisition Loan Note” shall have the meaning set forth in the recitals to
this Agreement.




“Original Reduced Notes” shall have the meaning set forth in the recitals to this Agreement.



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



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


 


39









 





“Outstanding Principal Balance” shall mean, as of any date, the outstanding principal balance
of the Loan (which shall be comprised of the Reduced Acquisition Loan Outstanding Principal Balance
and the Construction Loan Outstanding Principal Balance).




“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 and Performance Bonds” shall mean dual-obligee payment and performance bonds relating
to each Major Contractor other than the General Contractor, issued by a surety company or companies
and in form and content reasonably acceptable to Lender, in each case in an amount not less than
the full contract price, together with a dual obligee and modification rider in form reasonably
acceptable to Lender which shall be attached thereto.



“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 February 9, 2007 for all purposes of this Agreement other than the payment of the
Monthly Interest Payments (because Borrowers and Lender acknowledge that stub interest through
February 9, 2007 was paid on the Closing Date) and the required deposits to the Tax and Insurance
Escrow Fund (because Borrowers and Lender acknowledge that the required initial deposit to the Tax
and Insurance Escrow Fund through February 9, 2007 was deposited on the Closing Date), and the
first Payment Date for purposes of the Monthly Interest Payments and the required deposits to the
Tax and Insurance Escrow Fund was March 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 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 Lender has approved or may approve in writing
in 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 Borrower, 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 Borrower, any Guarantor or any
Property or (ii) the value of, or cash flow from, any Property, (g) the Liens securing any Existing
FF&E Leases and/or any Permitted Future FF&E Leases, and (h) any other Liens which are being duly
contested in accordance with the provisions of Section 5.1.1 or 5.1.2 hereof or
Section 3.6(b) of the Mortgage, but only for so long as such contest shall be permitted pursuant to
said Section 5.1.1 or 5.1.2 hereof or Section 3.6(b) of the Mortgage, as
applicable.


 


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“Permitted Future FF&E Leases” shall have the meaning set forth in the definition of “Special
Purpose Entity” set forth below.




“Permitted Gaming Expense” shall have the meaning set forth in Section 12.3.2 hereof.




“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 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 XI 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 Lender regarding the physical condition of such Property,
reasonably satisfactory in form and substance to 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 Lender in accordance with the terms hereof, as the same
may be amended and supplemented from time to time in accordance with the terms of this Agreement
(including by Change Orders).




“Policies” shall have the meaning specified in Section 6.1(b) hereof.



“Pre-Opening Expenses” shall mean any and all actual out-of-pocket costs and expenses incurred
by any Borrower prior to the opening of any separate and distinct income producing component of the
Property, provided that the following costs and expenses shall not be or be deemed to be a
Pre-Opening Expense hereunder: (a) any Hard Costs and Soft Costs (it being agreed that solely for
purposes of interpreting this definition, Soft Costs shall not include costs of the nature or scope
set forth on the Line Item of the Loan Budget denominated “Pre-Opening Expenses”) or other costs
or expenses incurred in connection with the construction of the Project and/or such income
producing component, (b) any costs or expenses that support in any manner or are in any way related
to the operation or improvement (beyond the initial opening of any such income producing component)
of any other income producing component of the Property, (c) any costs or expenses incurred or to
be incurred in providing entertainment to guests,


 


41









 





investors or other Persons in connection with such income producing component (regardless of
when such cost or expense was or is to be incurred), and (d) any cost or expense (i) constituting
an Operating Expense, Capital Expenditure or Extraordinary Expense, (ii) incurred by any Manager or
HRHI (other than in connection with their respective obligations under the Management Agreement or
Liquor Management Agreement, respectively), (iii) incurred in connection with the payment of Debt
Service and/or debt service under any or all of the First Mezzanine Loan, Second Mezzanine Loan
and/or Third Mezzanine Loan or (iv) arising in connection with any contributions to any reserves
required under the Loan Documents.



“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) LIBOR plus the Reduced Acquisition Loan Spread or the Construction Loan Spread, as
applicable, 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 set forth in Section 2.6.1(c).



“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 this Agreement and the other 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.


 


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“Project Costs” shall mean, collectively, all Hard Costs and Soft Costs incurred or to be
incurred in connection with the financing, development, design, engineering, procurement,
installation and construction of the Project until Final Completion thereof, in each case as set
forth in the Loan Budget.



“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 this Agreement, the Mortgage and the other Loan Documents.



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



“Punch List Items” shall mean, collectively, minor or insubstantial details of construction,
decoration, mechanical adjustment or installation, which do not materially hinder or impede the
use, operation, or maintenance of the Project.



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



“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 the Borrowers, Morgans Group LLC and
Chicago Title Agency of Nevada, Inc., as the same has been and may be amended, modified or
supplemented 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 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 Lender


 


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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 Lender in its reasonable
discretion (including, by way of example but without limitation, a new lease and/or sublease and
related recognition agreement), (ii) after a Securitization has occurred, Borrowers 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 Borrower, (A) if such Affiliate
was covered in the Insolvency Opinion or in any subsequent Additional Insolvency Opinion, Borrowers
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
Borrowers, or (B) if such Affiliate was not covered in the Insolvency Opinion or in any subsequent
Additional Insolvency Opinion, Borrowers shall have obtained and delivered to Lender an Additional
Insolvency Opinion with respect to such Affiliate and Borrowers.




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



(a) 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;



(b) 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;



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



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



(e) 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



(f) 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 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)


 


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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, Borrowers shall have obtained prior written confirmation from the applicable Rating
Agencies that management of all alcoholic beverage services at the Hotel/Casino Property by such
Person will not cause a downgrade, withdrawal or qualification of the then current ratings of the
Securities or any class thereof, and (B) if such Person is an Affiliate of any Borrower, (1) if
such Affiliate was covered in the Insolvency Opinion or in any subsequent Additional Insolvency
Opinion, Borrowers 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 Borrowers, or (2) if such Affiliate was not covered in the Insolvency Opinion or in
any subsequent Additional Insolvency Opinion, Borrowers shall have obtained and delivered to Lender
an Additional Insolvency Opinion with respect to such Affiliate and Borrowers.



“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 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, Borrowers 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 Borrower, (A) if such Affiliate was covered
in the Insolvency Opinion or in any subsequent Additional Insolvency Opinion, Borrowers 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 Borrowers,
or (B) if such Affiliate was not covered in the Insolvency Opinion or in any subsequent Additional
Insolvency Opinion, Borrowers shall have obtained and delivered to Lender an Additional Insolvency
Opinion with respect to such Affiliate and Borrowers.



“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.



“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


 


45









 





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 set forth in Section 2.1.2 hereof.



“Reduced Acquisition Loan Debt” shall mean the aggregate outstanding principal amount set
forth in, and evidenced by, the Reduced Acquisition Loan Note, together with all interest accrued
and unpaid thereon and all other sums (including, the applicable Unused Advance Fee, Administrative
Agent Fee and Exit Fee) payable in connection with the applicable transaction due to Lender in
respect of the Reduced Acquisition Loan Note.



“Reduced Acquisition Loan Monthly Interest Payment” shall have the meaning set forth in
Section 2.3.1 hereof.



“Reduced Acquisition Loan Note” shall have the meaning set forth in the recitals of this
Agreement.



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



“Reduced Acquisition Loan Spread” shall mean, subject to application of the Default Rate,
2.3536585366%; provided, however, that if Substantial Completion has not occurred
on or before May 1, 2010, the Reduced Acquisition Loan Spread shall increase to 2.6305595409% from
and including May 1, 2010 through but excluding the first Payment Date following Substantial
Completion, following which the Reduced Acquisition Loan Spread shall again be 2.3536585366%.



“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 10.26.



“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 or any Component.


 


46









 





“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 set forth in Section
2.5.1(a)(vi) hereof.



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




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



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




“REMIC Requirements” shall have the meaning set forth in Section 2.5.1(a) hereof.



“Remaining Construction Loan Advance” shall have the meaning set forth in Section 3.1
hereof.



“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 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
Borrower or any operator or manager of the hotel or the commercial space located in any of the
Improvements or acquired from others (including, without limitation, from the rental of any office
space, retail space, guest rooms or other space, halls, stores, and offices, and deposits securing
reservations of such space), net license, lease, sublease and net concession fees and rentals,
health club membership fees, food and beverage wholesale and retail sales, service charges and
vending machine sales.



“Replacement Collateral Assignment of Interest Rate Cap” shall mean any collateral assignment
of Interest Rate Cap Agreement executed by Borrowers for the benefit of Lender in


 


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connection with any of the Qualified Extension Terms, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.



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



“Replacement Liquor Management Agreement” shall mean, collectively, (a) either (i) a
management agreement with a Qualified Liquor Manager substantially in the same form and substance
as the Liquor Management Agreement being replaced, or (ii) a liquor management agreement with a
Qualified Liquor Manager, which liquor management agreement shall be reasonably acceptable to
Lender in form and substance, provided, with respect to this subclause (ii), after
the occurrence of a Securitization, Lender, at its option, may require that Borrowers 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 Borrowers 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 set forth in Section 7.3.1
hereof.




“Replacement Reserve Fund” shall have the meaning set forth in Section 7.3.1 hereof.



“Replacements” shall have the meaning set forth in Section 7.3.1 hereof.


 


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“Requested Disbursement Date” shall have the meaning set forth in Section 3.6 hereof.



“Required Equity Amount” shall mean $130,410,044.52, which was delivered to Lender by
Guarantors on behalf of Borrowers in the form of a Required Equity Letter of Credit on the
Construction Qualification Date.



“Required Equity Letter of Credit” shall mean a Letter of Credit delivered by Borrowers (or
one or more Guarantors on behalf of Borrowers) to satisfy the requirement to fund the Required
Equity Amount or any Subsequent Required Equity Amount, and which may include certain Letters of
Credit delivered previously by Borrower in connection with certain pre-construction work that was
commenced prior to the Construction Qualification Date, in each case which satisfies the conditions
set forth in Section 3.3(d) 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 mean the repair and restoration of a Property after a Casualty or
Condemnation as nearly as possible to the condition such Property was in immediately prior to such
Casualty or Condemnation, with such alterations as may be reasonably approved by Lender to the
extent required hereunder.




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



“Restoration Value Threshold” shall mean that (i) in the case of a Condemnation, the Net
Proceeds are less than 15% of the then current fair market value of the applicable Property, and
(ii) in the case of a Casualty, the Net Proceeds are less than 30% of the then current fair market
value of the applicable Property.



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



“Retainage” shall mean, for each construction contract and subcontract, the greater of (i) ten
percent (10%) of all Hard Costs funded to the Trade Contractor (or any General Contractor to the
extent any General Contractor is performing the work) under such contract or subcontract until such
time as the work to be provided thereunder is fifty percent (50%) complete as reasonably determined
and certified by the Construction Consultant, at which time the retainage holdback upon each
subsequent payment under such contract or subcontract shall be reduced to such amount as is
necessary to maintain a retainage holdback, taking into account the amount already being held back,
equal to at least five percent (5%) of the total amount of the applicable contract or subcontract,
including any increases thereto, and (ii) the actual retainage under such contract or subcontract.



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


 


49









 





“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 set forth in Section 2.5.1(a)(i) hereof.



“Second Guaranty Modification Agreement” shall have the meaning set forth in the recitals of
this Agreement.



“Second HRHI Modification Agreement” shall have the meaning set forth in the recitals of this
Agreement.



“Second Loan Document Modification Agreement” shall have the meaning set forth in the recitals
of this Agreement.



“Second Mezzanine Applicable Interest Payment” shall mean (a) with respect to (i) the interest
payment due under the Second Mezzanine Loan on the Payment Date occurring in January, 2010,
$300,207.38, and (ii) each interest payment due under the Second Mezzanine Loan commencing on and
including the interest payment due on the Payment Date occurring in February, 2010 through and
including the interest payment due on the Payment Date occurring in February, 2011, monthly
interest payments on the Second Mezzanine Loan Outstanding Principal Balance based on an interest
rate equal to “LIBOR” (as defined in the Second Mezzanine Loan Agreement) plus 2.25%, and (b) with
respect to each interest payment due under the Second Mezzanine Loan on each Payment Date occurring
on or after March, 2011, monthly interest payments on the Second Mezzanine Loan Outstanding
Principal Balance based on an interest rate equal to “LIBOR” plus 2.25%, unless either (i) the
Mortgage and First Mezzanine Debt Service Coverage Ratio is then equal to or greater than 1.50 to
1.00 or (ii) the Debt Yield is then equal to or greater than 9.0%, and in either such event, the
Second Mezzanine Applicable Interest Payment shall be equal to the Second Mezzanine Monthly
Interest Payment. Without limiting the foregoing, the interest payments comprising the Second
Mezzanine Applicable Interest Payment shall be computed on the then outstanding principal balance
of the Second Mezzanine Loan, which for purposes of computing such interest payments shall not
include any Second Mezzanine Initial Accrual Amount or Second Mezzanine Subsequent Accrual Amount.



“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 Cash Management Account” shall mean the “Second Mezzanine Cash Management
Account” established under the Second Mezzanine Loan Documents.



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


 


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“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 Initial Accrual Amount” shall mean the aggregate of all Second Mezzanine
Initial Interest Differential Amounts, together with interest thereon computed at a rate of
interest equal to “LIBOR” (as defined in the Second Mezzanine Loan Agreement) plus 7.20%,
compounded monthly in accordance with the terms of the Second Mezzanine Loan Agreement.



“Second Mezzanine Initial Interest Differential Amount” shall mean the positive difference, if
any, between (a) the Second Mezzanine Monthly Interest Payment due on any Payment Date occurring
from and after the Payment Date occurring in January, 2010 through and including the Payment Date
occurring in November, 2011 and (b) the Second Mezzanine Applicable Interest Payment payable on
each such date.



“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, its successors and
assigns.



“Second Mezzanine Loan” shall mean a loan in the original principal amount of One Hundred
Million and No/100 Dollars ($100,000,000.00) made by Second Mezzanine Lender to Second Mezzanine
Borrowers.



“Second Mezzanine Loan Agreement” shall mean that certain First Amended and Restated Second
Mezzanine Loan Agreement dated as of the date hereof between 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 terms of the Intercreditor Agreement.



“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, as of any date, the
outstanding principal balance of the Second Mezzanine Loan.



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



“Second Mezzanine Monthly Interest Payment” shall mean the “Monthly Interest Payment” as
defined in the Second Mezzanine Loan Agreement (which Monthly Interest Payment shall be computed at
the contract rate set forth in the Second Mezzanine Loan Agreement of “LIBOR” (as defined in the
Second Mezzanine Loan Agreement) plus 7.20% or, as applicable, the “Prime Rate” plus the “Prime
Rate Spread” (each as defined in the Second Mezzanine Loan Agreement). Without limiting the
foregoing, the interest payments comprising


 


51









 





the Second Mezzanine Monthly Interest Payment shall be computed on the then outstanding
principal balance of the Second Mezzanine Loan, which for purposes of computing such interest
payments shall not include any Second Mezzanine Initial Accrual Amount or Second Mezzanine
Subsequent Accrual Amount.



“Second Mezzanine Subsequent Accrual Amount” shall mean the aggregate of all Second Mezzanine
Subsequent Interest Differential Amounts, together with interest thereon computed at a rate of
interest equal to “LIBOR” (as defined in the Second Mezzanine Loan Agreement) plus 7.20%,
compounded monthly in accordance with the terms of the Second Mezzanine Loan Agreement.



“Second Mezzanine Subsequent Interest Differential Amount” shall mean the positive difference,
if any, between (a) the Second Mezzanine Monthly Interest Payment with respect to any Payment Date
occurring from and after the Payment Date occurring in December, 2011 through and including the
Maturity Date (as the same may be extended in accordance with the terms hereof) and (b) the Second
Mezzanine Applicable Interest Payment payable on each such date.



“Second Modification Agreements” shall mean, collectively, the Second Loan Document
Modification Agreement, the Second Mortgage Modification Agreement, the Second HRHI Modification
Agreement and the Second Guaranty Modification Agreement.



“Second Mortgage Modification Agreement” shall have the meaning set forth in the recitals of
this Agreement.




“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.



“Section 2.6.2(b) Priority Funds” shall have the meanings set forth in Section
2.6.2(b) hereof.



“Section 2.6.2(c) Priority Funds” shall have the meanings set forth in Section
2.6.2(c) hereof.



“Section 7.6.2(b) Accrual/Equity Funds” shall have the meaning set forth in Section
7.6.2(b) hereof.



“Section 7.6.3 Accrual/Equity Funds” shall have the meaning set forth in Section 7.6.3
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 hereof.


 


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“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 mean, at any given time, the amount by which the sum of (i) the unfunded
portion of the Construction Loan Amount, taking into account the existing unapplied Contingency
Line Items and applying a percentage of completion analysis with respect thereto, (ii) any General
Reserve Funds then on deposit in the General Reserve Account, if any, and (iii) any funds then on
deposit in the Construction Loan Reserve Account, is less than the actual sum, as reasonably
estimated by Lender (based on advice of Construction Consultant with respect to construction
related costs), which will be required to complete the Project in accordance with the Plans and
Specifications, the Loan Budget and all Legal Requirements, and to pay all unpaid Project Costs in
connection therewith, excluding, however, the payment of Debt Service, debt service on the First
Mezzanine Loan, debt service on the Second Mezzanine Loan and debt service on the Third Mezzanine
Loan.




“Shortfall Account” shall have the meaning set forth in Section 3.12(b) hereof.




“Shortfall Funds” shall have the meaning set forth in Section 3.12(a) hereof.



“Side Letter” shall mean that certain letter agreement dated as of the date hereof by and
among Borrowers, First Mezzanine Borrowers, Second Mezzanine Borrowers, Third Mezzanine Borrowers,
Lender, First Mezzanine 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.



“Soft Costs” shall mean, collectively, the costs set forth in the Loan Budget which are not
Hard Costs, including, without limitation, fees and expenses of any architect or engineer engaged
in connection with the Project, fees and expenses of Borrowers’ counsel and Lender’s counsel, fees
and expenses of the Construction Consultant and the Administrative Agent, Debt Service, Pre-Opening
Expenses, operating supplies and equipment and such other costs as are set forth in the Loan
Budget.



“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, developing,
constructing, owning, holding, selling, leasing, transferring, exchanging, managing and operating
one of the Properties or the IP and incidental personal and intangible property related thereto,
(B) with respect to Adjacent Borrower, owning all of the membership interests in one or more
Subsidiary Transferees, (C) operating the gaming and/or liquor operations at the


 


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Hotel/Casino Property and owning incidental personal and intangible property related thereto,
(D) entering into the Loan Documents (as and when executed), including any predecessor loan
agreement and documents related thereto, (E) refinancing its Property or the IP in connection with
repayment of the Loan, and/or (F) 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 one of the Properties or the IP or that acts as the gaming operator and/or
liquor manager at the Hotel/Casino Property or managing member of the limited liability company
that owns one of the Properties or the IP or that acts as the gaming operator and/or liquor manager
at the Hotel/Casino Property;



(b) has not been and is not engaged in, and will not engage in, any business unrelated to
(i)(A) the construction, financing, acquisition, development, ownership, management or operation of
one of the Properties or the IP and incidental personal and intangible property related thereto,
(B) with respect to Adjacent Borrower, owning all of the membership interests in one or more
Subsidiary Transferees, or (C) operating the gaming operations and/or liquor operations at the
Hotel/Casino Property and owning incidental personal and intangible property related thereto, (ii)
acting as general partner of the limited partnership that owns one of the Properties or the IP or
that acts as the gaming operator and/or liquor manager at the Hotel/Casino Property, or (ii) acting
as managing member of the limited liability company that owns one of the Properties or the IP or
that acts as the gaming operator and/or liquor manager at the Hotel/Casino Property;



(c) has not had, does not have and will not have any assets other than those related to one of
the Properties or the IP or the gaming and/or liquor operations at the Hotel/Casino Property or,
with respect to Adjacent Borrower, the membership interests in one or more Subsidiary Transferees,
or, if such entity is a general partner in a limited partnership, its general partnership interest
in the limited partnership that owns one of the Properties or the IP or that acts as the gaming
operator and/or liquor manager at the Hotel/Casino Property, or, if such entity is a managing
member of a limited liability company, its membership interest in the limited liability company
that owns one of the Properties or the IP or that acts as the gaming operator and/or liquor manager
at the Hotel/Casino Property;



(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;




 


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



(f) if such entity is a limited liability company with more than one member, has had, now has
and will have at least one member that is a Special Purpose Entity that is a corporation that has
at least two (2) Independent Directors that will not cause or allow the taking of any Material
Action with respect to the limited liability company or its subsidiary(ies) without the unanimous
consent of each Independent Director or a limited liability company that has at least two (2)
Independent Managers that will not cause or allow the taking of any Material Action with respect to
the limited liability company or its subsidiary(ies) without the unanimous consent of each
Independent Manager and that, in either instance, owns at least one-tenth of one percent (.10%) of
the equity of the limited liability company;



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



(h) if such entity is (i) a limited liability company, has had, now has and will have an
operating agreement, or (ii) a limited partnership, has had, now has and will have a limited
partnership agreement, that, in each case, provides that such entity will not: (A) to the fullest
extent permitted by law, take any actions described in Subsection (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



 


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



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



(k) other than as provided in the Cash Management Agreement or in any 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 other Borrowers) records, books,
resolutions (if any) and agreements;



(m) other than as provided in the Cash Management Agreement or in any 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, except for services rendered
under a business management services agreement with an Affiliate that complies with the terms
contained in Subsection (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



 


56









 






reasonably satisfactory to Lender in form and substance and shall be subject to the
requirements of clause (dd) below, a sufficient number of employees (if any) in light of
its contemplated business operations; provided, however, this provision shall not
require the equity owner(s) of such entity to make any additional capital contributions; and
provided further that in the event any Funding Borrower makes any Contribution to any
Borrower by paying any of the liabilities and expenses of such other Borrower such Contribution
shall not in and of itself be deemed to violate the provisions of this clause (q) and shall entitle
such Funding Borrower to the benefits set forth in Article XV of this Agreement;



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



(s) has not incurred and will not incur any Indebtedness other than (i) the Debt, Taxes and
Other Charges, (ii) unsecured trade payables and operational debt not evidenced by a note and in an
aggregate amount not exceeding two percent (2%) of the then Outstanding Principal Balance (not
including any trade payables in an amount not to exceed $200,000 that are the subject of a good
faith dispute by a Borrower, in appropriate proceedings therefor, and for which adequate reserves
have been established by such Borrower); 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, (iii)
the FF&E, capital and equipment leases shown on Schedule V(A) attached hereto and made a
part hereof, provided, that amounts due thereunder shall be paid within sixty (60) days of
the date when due (collectively, the “Existing FF&E Leases”), (iv) any FF&E, capital and equipment
leases hereinafter entered into in connection with any of the Properties in the ordinary course of
business (including, without limitation, the capital and equipment leases shown on Schedule V(B))
(such leases, the “Preapproved Equipment Leases”), provided that the aggregate principal
amount payable thereunder (which aggregate principal amount shall include at all times while the
same are outstanding the aggregate principal amount payable under the PreApproved Equipment Leases)
does not exceed $16,957,739 and shall be paid within sixty (60) days of the date when due (any such
leases, collectively, the “Permitted FF&E Leases”) (it being agreed, however, that (A) with respect
to any Preapproved Equipment Lease with PDS Gaming as disclosed on Schedule V(B), Borrowers shall
be required to deposit into the Construction Loan Reserve Account in accordance with Section 7.7.1
hereof the gross sales proceeds payable in connection with the sale-leaseback transaction that will
result in the execution of any such Preapproved Equipment Lease and (B) with respect to any FF&E,
capital or equipment lease entered into prior to, on or after the date hereof, in which the value
of the property leased (as of the date of such lease as reasonably determined by Lender) is equal
to or in excess of $1,000,000, Borrower shall (1) deliver to Lender a subordination,
non-disturbance and attornment agreement reasonably acceptable to Lender simultaneous with, and as
a condition to, the execution of any such lease, in the event of any such lease which is entered
into on or after the date hereof or (2) use good faith efforts to deliver to Lender on or prior to
the date which is sixty (60) days after the date hereof, a subordination, non-disturbance and
attornment agreement reasonably acceptable to Lender in connection with any such lease entered into
prior to the date hereof) , and (v) any Letters of Credit required or permitted to be furnished
hereunder or any reimbursement obligation with respect thereto;


 


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(t) except as contemplated under Article XV with respect to any 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 any Funding Borrower makes any Contribution to any other
Borrower by paying any such overhead expenses of any 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 Loan Documents, First Mezzanine Loan Documents, Second Mezzanine
Loan Documents or Third Mezzanine Loan Documents, as applicable, has not pledged and will not
pledge its assets to secure the obligations of any other Person;



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


 


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(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 agreement 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
Construction Loan and the Reduced Acquisition Loan), 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 equity interest in
any other entity except that Adjacent Borrower may own one or more Subsidiary Transferees; and



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



“State” shall mean the State of Nevada.



“Stored Materials” shall have the meaning set forth in Section 3.11 hereof.



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


 


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



(b) 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 Construction Loan Reserve Disbursements” shall have the meaning set forth in
Section 3.1(f) hereof.



“Subsequent Required Equity Amount” shall have the meaning set forth in Section 3.3(d)
hereof.



“Subsidiary Transferee” shall have the meaning set forth in Section 2.5.1(f) hereof.



“Substantial Completion” shall mean the Lien free (subject to Borrowers’ rights to contest
certain Liens as provided in Sections 5.1.1 and 5.1.2 hereof and Section 3.6(b) of
the Mortgage) substantial completion of the Project substantially in accordance with the Plans and
Specifications, all Legal Requirements and this Agreement, such compliance to be evidenced to the
reasonable satisfaction of Lender and the Construction Consultant, together with the delivery to
Lender of one or more Certificates of Occupancy (if subject to any conditions, such conditions
being reasonably acceptable to Lender) for the Project (except to the extent third parties under
Leases who are not Affiliates of any Restricted Party have not obtained their Certificate(s) of
Occupancy) and evidence that all other Governmental Approvals have been issued and all other Legal
Requirements have been satisfied as necessary to permit the commencement at the Project of
substantially all gaming, hotel, food and beverage operations contemplated in the space
constituting the Project in accordance with the Plans and Specifications other than immaterial
portions thereof.



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



“Tax and Insurance Escrow Fund” shall have the meaning set forth in 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.



“Terrorism Cap” shall have the meaning set forth in Section 6.1(a)(x) hereof.



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



“Third Mezzanine Applicable Interest Payment” shall mean (a) with respect to (i) the interest
payment due under the Third Mezzanine Loan on the Payment Date occurring in January, 2010,
$207,424.90, and (ii) each interest payment due under the Third Mezzanine Loan commencing on and
including the interest payment due on the Payment Date occurring in



 


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February, 2010 through and including the interest payment due on the Payment Date occurring in
February, 2011, monthly interest payments on the Third Mezzanine Loan Outstanding Principal Balance
based on an interest rate equal to “LIBOR” (as defined in the Third Mezzanine Loan Agreement) plus
1.00%, and (b) with respect to each interest payment due under the Third Mezzanine Loan on each
Payment Date occurring on or after March, 2011, monthly interest payments on the Third Mezzanine
Loan Outstanding Principal Balance based on an interest rate equal to “LIBOR” (as defined in the
Third Mezzanine Loan Agreement) plus 1.00% unless either (i) the Mortgage and First Mezzanine Debt
Service Coverage Ratio is then equal to or greater than 1.50 to 1.00 or (B) the Debt Yield is then
equal to or greater than 9.0%, and in either such event, the Third Mezzanine Applicable Interest
Payment shall be to equal the Third Mezzanine Monthly Interest Payment. For avoidance of doubt,
the interest payments comprising the Third Mezzanine Applicable Interest Payment shall be computed
on the then outstanding principal balance of the Third Mezzanine Loan, which for purposes of
computing such interest payments shall not include any Third Mezzanine Initial Accrual Amount or
Third Mezzanine Subsequent Accrual Amount.



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



“Third Mezzanine Cash Management Account” shall mean the “Third Mezzanine Cash Management
Account” established under the Third Mezzanine Loan Documents.



“Third Mezzanine Construction Funds” shall mean the $10,000,000.00 in proceeds of the Third
Mezzanine Loan funded into the Construction Loan Reserve Account pursuant to Section 3.4.2 of the
Third Mezzanine Loan Agreement on or about November 30, 2007.



“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 Initial Accrual Amount” shall mean the aggregate of all Third Mezzanine
Initial Interest Differential Amounts, together with interest thereon computed at a rate of
interest equal to “LIBOR” (as defined in the Third Mezzanine Loan Agreement) plus 8.75%, compounded
monthly in accordance with the terms of the Third Mezzanine Loan Agreement.



“Third Mezzanine Initial Interest Differential Amount” shall mean the positive difference, if
any, between (a) the Third Mezzanine Monthly Interest Payment with respect to any Payment Date
occurring from and after the Payment Date occurring in January, 2010 through and including the
Payment Date occurring in November, 2011 and (b) the Third Mezzanine Applicable Interest Payment
payable on each such date.


 


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“Third Mezzanine Initial Renovation Funds” shall mean the $2,894,363.08 in proceeds of the
Third Mezzanine Loan funded into the Initial Renovation Reserve Account on November 6, 2007
pursuant to Section 2.1.3.(a) of 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, its successors or
assigns.



“Third Mezzanine Loan” shall mean a loan in the original principal amount of up to Sixty-Five
Million and No/100 Dollars ($65,000,000.00) 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, as of any date, the
outstanding principal balance of the Third Mezzanine Loan.



“Third Mezzanine Monthly Interest Payment” shall mean the “Monthly Interest Payment” as
defined in the Third Mezzanine Loan Agreement (which Monthly Interest Payment shall be computed at
the contract rate of interest set forth in the Third Mezzanine Loan Agreement of LIBOR or Prime
Rate, as applicable, plus 8.75%). Without limiting the foregoing, the interest payments comprising
the Third Mezzanine Monthly Interest Payment shall be computed on the then outstanding principal
balance of the Third Mezzanine Loan, which for purposes of computing such interest payments shall
not include any Third Mezzanine Initial Accrual Amount or Third Mezzanine Subsequent Accrual
Amount.



“Third Mezzanine Subsequent Accrual Amount” shall mean the aggregate of all Third Mezzanine
Subsequent Interest Differential Amounts, together with interest thereon computed at a rate of
interest equal to “LIBOR” (as defined in the Third Mezzanine Loan Agreement) plus 8.75%, compounded
monthly in accordance with the terms of the Third Mezzanine Loan Agreement.



“Third Mezzanine Subsequent Interest Differential Amount” shall mean the positive difference,
if any, between (a) the Third Mezzanine Monthly Interest Payment with respect to any Payment Date
occurring from and after the Payment Date occurring in December, 2011 through and including the
Maturity Date (as the same may be extended in accordance with the terms hereof) and (b) the Third
Mezzanine Applicable Interest Payment payable on each such date.


 


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



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



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



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



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



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



“Title Insurance Policy” shall mean one or more ALTA mortgagee title insurance policies in a
form reasonably acceptable to Lender (or, if the Properties are in a State which does not permit
the issuance of such ALTA policy, such form as shall be permitted in such State and reasonably
acceptable to Lender) issued with respect to the Properties and insuring the lien of the Mortgage
as against such Properties, together with any endorsements thereto issued since the Closing Date or
from time to time in accordance with the terms hereof.



“Total Cost Ratio” shall mean, as of any date of determination, a ratio, expressed as a
percentage, in which (i) the numerator is the Aggregate Outstanding Principal Balance as of such
date of determination (less any Remaining Construction Loan Advance advanced into the Construction
Loan Reserve Account but not yet advanced for payment of Project Costs), and (ii) the denominator
is the Total Costs as of such date of determination.



“Total Costs” shall mean, as of any date of determination, (i) the sum of all Acquisition
Costs and all Project Costs, less (ii) any Release Parcel Release Price and/or IP Release
Price prior to such date of determination.



“Trade Contractor” shall mean any contractor, subcontractor or supplier that provides labor,
materials, equipment or services in connection with the construction of the Project, including
specifically any Major Contractor, but excluding specifically the Architect.



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



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



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



“Twenty-Five Percent Distribution Provisions” shall have the meaning set forth in Section
7.6.2(b) hereof.


 


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“Unaffiliated Joint Venture Counterparty” shall mean any party to any Affiliate Joint Venture
other than any Affiliate Joint Venture Counterparty.



“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.



“Unused Advance Fee” shall have the meaning set forth in Section 2.9 hereof.



“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 set forth in Section 7.1 hereof.



“Working Capital Reserve Account” shall have the meaning set forth in Section 7.1
hereof.



Section 1.2. Principles of Construction.



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



(b) Without limiting any other provisions contained herein or in the Intercreditor Agreement,
all references herein to terms and/or provisions set forth in any First Mezzanine Loan Document,
Second Mezzanine Loan Document or Third Mezzanine Loan Document, as applicable, shall refer to such
documents as in effect on the date hereof (taking into consideration the amendments to such
documents being entered into simultaneous with the execution of this Agreement), without regard to
any modifications to any First Mezzanine Loan Document, Second Mezzanine Loan Document or Third
Mezzanine Loan Document (unless and to the extent such modifications have been expressly consented
to by Lender in writing).



ARTICLE II.

GENERAL TERMS




Section 2.1. Loan Commitment; Disbursement to Borrowers.


 


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




2.1.2. Acquisition Loan. Borrowers hereby acknowledge and agree that, on the
Closing Date, Lender made the Original Acquisition Loan Advance to Borrowers in the
principal amount of $760,000,000.00, which Original Acquisition Loan Advance represented a
full disbursement of all proceeds of the Original Acquisition Loan. As a result of the
application of the Mezzanine Prepayments to the partial prepayment of the Original
Acquisition Loan on November 6, 2007, and the partial prepayment made with the Release
Parcel Release Price in connection with the sale of certain property by Adjacent Borrower,
the Original Acquisition Loan is now in the reduced amount of $364,810,499.71 (the “Reduced
Acquisition Loan”). The Reduced Acquisition Loan is evidenced by the Reduced Acquisition
Loan Note and this Agreement, is secured by the Mortgage and the other Loan Documents and
shall be repaid with interest, costs and charges as more particularly set forth in the
Reduced Acquisition Loan Note, this Agreement, the Mortgage and the other Loan Documents.
Principal amounts of the Original Acquisition Loan or the Reduced Acquisition Loan which are
repaid for any reason may not be reborrowed. Lender did not fund any portion of the
Original Acquisition 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 Original Acquisition Loan did not constitute
a non-exempt prohibited transaction under ERISA. Borrowers used the proceeds of the
Original Acquisition Loan to (a) directly or indirectly acquire the Properties and the IP,
(b) repay and discharge existing loans relating, directly or indirectly, to the Properties
and/or the IP, (c) make deposits into the Reserve Funds on the Closing Date in the amounts
provided herein, (d) pay costs and expenses incurred in connection with the closing of the
Loan, as reasonably approved by Lender, as set forth on a sources and uses of funds schedule
executed by Borrowers and Lender on the Closing Date, and (e) for such other purposes as
were reasonably approved by Lender, as set forth on a sources and uses of funds schedule
executed by Borrowers and Lender on the Closing Date.




2.1.3. Construction Loan. Subject to the conditions and upon the terms
provided in the Original Loan Agreement and herein, Lender agreed and hereby agrees to lend
to Borrowers, and Borrowers agreed and hereby agree to borrow from Lender, the Construction
Loan in a maximum principal amount not to exceed the Construction Loan Amount. As a result
of the partial prepayment of the Construction Loan made in connection with the sale of
certain property by Adjacent Borrower and accounting for advances of the Construction Loan
to date, the Construction Loan Outstanding Principal Balance is $467,443,347.38. The
Construction Loan is evidenced by the Construction Loan Note and this Agreement, is secured
by the Mortgage and the other Loan Documents and shall be repaid with interest, costs and
charges as more particularly set forth in the Construction Loan Note, this Agreement, the
Mortgage and the other Loan Documents. Principal amounts of the Construction Loan which are
repaid for any reason may not be reborrowed. Lender shall not fund any portion of the
Construction 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 Construction Loan will not constitute a
non-exempt prohibited


 


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transaction under ERISA. Borrowers have used and shall use the proceeds of the
Construction Loan to pay Project Costs as contemplated hereunder. The Construction Loan
shall be advanced in accordance with the provisions of Article III hereof.




2.1.4. Maximum Aggregate Loan Amount. Notwithstanding anything contained
herein or in any other Loan Document to the contrary, the aggregate amount advanced under
the Reduced Acquisition Loan and the Construction Loan shall not under any circumstances
exceed the Loan Amount. Other than the disbursement of the Original Acquisition Loan
Advance made on the Closing Date and any Construction Loan Advances made pursuant to the
Original Loan Agreement or this Agreement, Lender shall have no obligation to loan any
additional funds in respect of the Loan.



Section 2.2. Interest Rate.




2.2.1. Interest Generally. Interest on each of the Reduced Acquisition Loan
Outstanding Principal Balance and the Construction Loan Outstanding Principal Balance shall
accrue from the Closing Date to but excluding the Maturity Date at the Applicable Interest
Rate. Borrowers shall pay to Lender on each Payment Date the interest accrued on the Loan
for the preceding Interest Period.




2.2.2. Interest Calculation. Interest on each of the Reduced Acquisition Loan
Outstanding Principal Balance and the Construction Loan 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
2.2.3 below and based on a three hundred sixty (360) day year by (c) the Reduced Acquisition
Loan Outstanding Principal Balance or the Construction Loan Outstanding Principal Balance,
as applicable. If, at any time, Lender or Borrowers determine that Lender has miscalculated
any Applicable Interest Rate (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 represents an
increase in the applicable monthly 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 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 $1,941,773.03.




2.2.3. Determination of Interest Rate. (a) The Applicable Interest Rate with
respect to each Component shall be: (i) LIBOR plus the Reduced Acquisition Loan Spread or
the Construction Loan Spread, as applicable, with respect to the applicable Interest Period
for a LIBOR Loan or (ii) the Prime Rate plus the applicable Prime Rate Spread for a Prime
Rate Loan if the applicable Component(s) is/are converted to a Prime Rate Loan pursuant to
the provisions of Section 2.2.3(c) or (f) hereof.


 


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(b) Subject to the terms and conditions of this Section 2.2.3, each Component shall be
a LIBOR Loan and Borrowers shall pay interest on each of the Reduced Acquisition Loan Outstanding
Principal Balance and the Construction Loan Outstanding Principal Balance at LIBOR plus the Reduced
Acquisition Loan Spread or the Construction Loan Spread, as applicable, for the applicable Interest
Period. Any change in any Applicable Interest Rate hereunder due to a change in LIBOR shall become
effective as of the opening of business on the first day of the applicable Interest Period.



(c) In the event that Lender shall have determined in good faith (which determination shall be
conclusive and binding upon Borrowers absent manifest error) that by reason of circumstances
affecting the interbank eurodollar market, adequate and reasonable means do not exist for
ascertaining LIBOR, then Lender shall forthwith give notice by telephone of such determination,
confirmed in writing, to Borrowers at least one (1) Business Day prior to the last day of the
related Interest Period. If such notice is given, any 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, each 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) the Administrative Agent or Lender (as the case may be) 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, such Borrower 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 the Administrative Agent and 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


 


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asserted on or attributable to amounts payable under this Section) paid by the Administrative
Agent or Lender, as the case may be, 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, the Administrative Agent or the Lender, as applicable, 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 the
Administrative Agent or 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 a Lender, or by the Administrative Agent on its own
behalf or on behalf of a Lender (together with any supporting detail reasonably requested by
Borrowers), shall be conclusive, provided that such amounts are determined on a reasonable
basis.




(iii) Any Non-U.S. Lender that is entitled to an exemption from or reduction of withholding
tax under U.S. law, the law of the jurisdiction in which Borrowers are located (if other than the
U.S.), or any treaty to which such jurisdiction is a party, with respect to payments under this
Agreement shall deliver to Borrowers (with a copy to the Administrative Agent), 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 and the Administrative Agent (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).


 


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(v) If the Administrative Agent or a 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 the Administrative Agent or such 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 the Administrative Agent or
such 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 the Administrative Agent or such
Lender in the event the Administrative Agent or such 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 the Administrative Agent or any Lender to make available its tax
returns (or any other information relating to its taxes which it deems confidential) to Borrowers
or any other Person.



(f) Except as otherwise expressly provided in Section 2.2.3(e) hereof, if any
requirement of law or any change therein or in the interpretation or application thereof, shall
hereafter make it unlawful for Lender to make or maintain a LIBOR Loan as contemplated hereunder
(i) the obligation of Lender hereunder to make a LIBOR Loan or to convert a Prime Rate Loan to a
LIBOR Loan shall be canceled forthwith and (ii) any outstanding LIBOR Loan shall be converted
automatically to a Prime Rate Loan on the next succeeding Payment Date or within such earlier
period as required by law. Borrowers hereby agree promptly to pay Lender, upon demand, any
additional amounts necessary to compensate Lender for any actual out-of-pocket costs incurred by
Lender in making any conversion in accordance with this Agreement, including, without limitation,
any interest or fees payable by Lender to lenders of funds obtained by it in order to make or
maintain any 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


 


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(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 any 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 any LIBOR Loan hereunder, (ii) any prepayment (whether
voluntary or mandatory) of any 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 any LIBOR Loan hereunder, and (iii) the
conversion (for any reason whatsoever, whether voluntary or involuntary) of any Applicable Interest
Rate from LIBOR plus the Reduced Acquisition Loan Spread or the Construction Loan Spread, as
applicable, to the Prime Rate plus the applicable Prime Rate Spread with respect to any portion of
the Reduced Acquisition Loan Outstanding Principal Balance or the Construction Loan Outstanding
Principal Balance, as applicable, then bearing interest at LIBOR plus the Reduced Acquisition Loan
Spread or the Construction Loan Spread, as applicable, 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 any 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,



 


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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 all LIBOR Loans 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 all
LIBOR Loans 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, each of the Reduced Acquisition Loan
Outstanding Principal Balance and the Construction Loan 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, shall accrue interest at the Default
Rate, calculated from the date such payment was due without regard to any grace or cure
periods contained herein.




2.2.6. Usury Savings. This Agreement, the Notes 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 any portion of the Outstanding Principal Balance 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 any portion of the
Outstanding Principal Balance at a rate in excess of the Maximum Legal Rate, the Applicable
Interest Rate 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 for each of the Components
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 Lockbox Account any amounts due Borrowers


 


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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 or the IP 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 Reduced Acquisition Loan Outstanding Principal Balance or the
Construction Loan Outstanding Principal Balance, as applicable, as of the date hereof.
Borrowers shall collaterally assign to Lender, pursuant to the Collateral Assignments of
Interest Rate Caps, 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 Lockbox
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 Lockbox Account.
Borrowers shall take all actions reasonably requested by Lender to enforce Lender’s rights under
each Interest Rate Cap Agreement in the event of a default by the Counterparty and shall not waive,
amend or otherwise modify any of its rights thereunder.



(c) In the event of any downgrade of the rating of the Acceptable Counterparty below “A+” by
S&P or “A1” by Moody’s, Borrowers shall replace the applicable Interest Rate Cap Agreement(s) with
one or more Replacement Interest Rate Cap Agreements not later than ten (10) Business Days
following receipt of notice from Lender of such downgrade.



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



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



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


 


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(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).



(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. Borrowers shall pay to Lender on each Payment Date
(a) the interest accrued on the Reduced Acquisition Loan for the preceding Interest Period
(the “Reduced Acquisition Loan Monthly Interest Payment”), and (b) the interest accrued on
the Construction Loan for the preceding Interest Period (the “Construction Loan Monthly
Interest Payment”), except that Borrowers paid to Lender an amount equal to the interest
accrued on the Outstanding Principal Balance for the initial Interest Period on the Closing
Date. For purposes of making payments hereunder, but not for purposes of calculating
Interest Periods, if the day on which 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. With respect to payments of principal due
on the Maturity Date, interest shall be payable at the Applicable Interest Rate or the
Default Rate, as the case may be, through and including the day immediately preceding such
Maturity Date. 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 as otherwise expressly provided in Section 2.2.3(e) hereof.


 


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




2.3.2. Payment on Maturity Date. Borrowers shall pay to Lender on the Maturity
Date the Outstanding Principal Balance, all accrued and unpaid interest, the Exit Fee and
all other amounts due hereunder and under the Notes, the Mortgage and the other Loan
Documents.




2.3.3. 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
Mortgage and the other Loan Documents to the extent permitted by applicable law.




2.3.4. Method and Place of Payment. Except as otherwise specifically provided
herein, all payments and prepayments under this Agreement and the Notes 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 156 West 56th Street, Suite 1900, New York, New York 10019, Attention:
Jesse Hom, 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.



(a) 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 (i) if such prepayment occurs on a date other than a Payment Date, all
interest which would have accrued on the amount of each Component paid (in accordance with
Section 2.4.3(a) hereof) through, but not including, the first (1st) day of the
next succeeding 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; (ii) the Exit Fee; and (iii) all other sums due and payable under this Agreement, the
Notes, 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


 


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designated for prepayment and all other sums required under this Section 2.4 shall be
due and payable on the proposed prepayment date; provided, however, Borrowers shall
have the right to postpone or revoke such prepayment upon written notice to Lender not less than
two (2) Business Days prior to the date such prepayment is due so long as Borrowers pay Lender
and/or Servicer all actual out-of-pocket third party costs and expenses incurred by Lender and/or
Servicer in connection with such postponement or revocation.




(b) Notwithstanding anything to the contrary contained herein, Borrowers and Lender expressly
acknowledge and agree that on November 6, 2007, Borrowers, with the permission of Lender, made
Mezzanine Prepayments of the Loan in the aggregate amount of $350,000,000.00 and that no portion of
such prepaid amount of the Loan shall be readvanced to Borrowers or any other Person.




2.4.2. Application of Net Proceeds.



(a) On the next occurring Payment Date following the date on which Lender actually receives
any Net Proceeds, if Lender is not obligated to, and does not otherwise elect in its sole
discretion to, make such Net Proceeds available to Borrowers for Restoration in accordance with
Section 6.4 hereof, Borrowers shall prepay, or authorize Lender to apply Net Proceeds as a
prepayment of, the Outstanding Principal Balance in an amount equal to one hundred percent (100%)
of such Net Proceeds. No penalty or premium shall be due in connection with any prepayment made
pursuant to this Section 2.4.2(a) (but the Exit Fee and any related Breakage Costs shall be
payable in connection with any such prepayment). Any prepayment under this Section
2.4.2(a) shall be applied in accordance with Section 2.4.3(c) hereof. Any Net Proceeds
in excess of the amount required to pay the Debt in full (including the Exit Fee and any related
Breakage Costs) shall be (a) disbursed by Lender to First Mezzanine Lender for application in
accordance with the terms of the First Mezzanine Loan Documents if the First Mezzanine Debt (or any
portion thereof) is then outstanding, until the First Mezzanine Debt is paid in full, and then (b)
disbursed by First Mezzanine 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, and then (c)
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, and then (d) the
balance disbursed shall be disbursed by Third Mezzanine Lender to Borrowers.



(b) Intentionally Deleted.



(c) Intentionally Deleted.



(d) Intentionally Deleted.



(e) Intentionally Deleted.



(f) Intentionally Deleted.


 


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2.4.3. 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 First Mezzanine Loan, the Second
Mezzanine Loan and the Third Mezzanine Loan as follows:



(a) so long as no 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) hereof, 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 Lender to First Mezzanine Lender to be applied to the First
Mezzanine Debt, until the First Mezzanine Debt is paid in full, (iv) then, any remaining amounts
shall be disbursed by First Mezzanine Lender to 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 an Event of Default, Lender shall apply any
voluntary prepayment first, to payment of the Debt (including, without limitation, the Exit Fee),
in any order, priority and proportion as Lender shall elect in its sole discretion from time to
time, until the Debt (including, without limitation, the Exit Fee) is paid in full, and (A) Lender
shall then disburse any remainder to First Mezzanine Lender for application in accordance with the
terms of the First Mezzanine Loan Documents if the First Mezzanine Debt (or any portion thereof) is
then outstanding, until the First Mezzanine Debt is paid in full, and then (B) First Mezzanine
Lender shall then 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 then (C) Second
Mezzanine Lender shall then disburse any remainder 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)
Third Mezzanine Lender shall then disburse the balance, if any, to Borrowers;



(b) Intentionally Deleted;



(c) all Net Proceeds not required to be made available for Restoration, and as to which Lender
has not otherwise elected in its sole discretion to make available for Restoration, shall be
applied first, to the Debt (including, without limitation, the Exit Fee and any related Breakage
Costs), in such order, priority and proportion as Lender shall elect in its discretion from time to
time, until the Debt (including, without limitation, the Exit Fee) is paid in full, and (i) then,
Lender shall disburse any remaining amounts to First Mezzanine Lender to be applied to the First
Mezzanine Debt, until the First Mezzanine Debt is paid in full, (ii) then, First Mezzanine 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, (iii) then, Second Mezzanine
Lender shall disburse any remaining amounts to Third Mezzanine


 


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Lender to be applied to the Third Mezzanine Debt, until the Third Mezzanine Debt is paid in
full, and (vi) then, Third Mezzanine Lender shall disburse any remaining amounts to Borrowers;




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



(f) Intentionally Deleted;



(g) the proceeds of any IP Release Price shall be allocated as follows: (i) the first
$60,000,000 of any such IP Release Price payable in connection with each IP Sale, shall be applied
in the following order (A) first, to the Reduced Acquisition Loan Debt, until such Reduced
Acquisition Loan Debt is paid in full, (B) then, to the Construction Loan Debt, until such
Construction Loan Debt is paid in full, (C) then, any remaining amounts shall be disbursed to First
Mezzanine Lender to be applied to the First Mezzanine Debt, until the First Mezzanine Debt is paid
in full, (D) then, any remaining amounts shall be disbursed to Second Mezzanine Lender to be
applied to the Second Mezzanine Debt, until the Second Mezzanine



 


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Debt is paid in full, and (E) 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 (ii) 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 as follows: (A) seventy-five percent (75%) of such Excess IP Release
Price Proceeds shall be applied to the payment of the Loan in the following order: (1) first, to
the Reduced Acquisition Loan Debt, until such Reduced Acquisition Loan Debt is paid in full and (2)
second, to the Construction Loan Debt, until such Construction Loan Debt is paid in full, and (B)
the balance of such Excess IP Release Price Proceeds after application in accordance with the
foregoing clause (1), shall be applied as follows: (1) first, an amount equal to the
lesser of (I) twelve and one-half percent (12.5%) of the Excess IP Release Price Proceeds or (II)
the amount which when added to the then current balance of the General Reserve Fund would cause the
General Reserve Fund Cap to be met, shall be deposited in the General Reserve Fund to be held and
applied in accordance with the terms hereof and (2) after deposit of the amounts described in
clause (1) above, the balance of the Excess IP Release Price Proceeds (such amounts described in
subclauses (1) and (2) of this Section 2.4.3(g), the “IP Subaccount Funds”) shall be deposited in
the IP Subaccount to be held and applied in accordance with the terms of Section 7.6.4
hereof;



(h) all Rents received by Lender upon the occurrence and during the continuance of an Event of
Default pursuant to Section 3.1 of the Assignment of Leases shall be applied by Lender as follows
or may continue to be held by Lender as additional collateral for the Loan, all in 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 to
First Mezzanine Lender for application in accordance with the terms of the First Mezzanine Loan
Documents if the First Mezzanine Debt (or any portion thereof) is then outstanding, until the First
Mezzanine Debt is paid in full, and then (B) disbursed to 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 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 2.4.3 shall be to disburse any remaining funds described herein and
then held by Lender to the First Mezzanine Lender for application in accordance with the terms of
the First Mezzanine Loan Agreement.




2.4.4. 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


 


78









 






any Net Proceeds), (a) such tender or recovery shall be deemed made on the next
occurring Payment Date together with the monthly Debt Service amount calculated at the
Default Rate from and after the date of such Event of Default, (b) Intentionally Deleted,
(c) Borrower shall also pay an amount equal to one percent (1%) of the amount of the Loan
being prepaid or satisfied, and (d) Borrower shall also pay the Exit Fee (or the applicable
portion thereof).




2.4.5. 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 each Component 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 Monthly Interest Payments 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 Monthly Interest Payments due to Borrowers under this
Section 2.4.5, 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.




2.4.6. 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 either of the Notes shall cause, give rise to a
right to require, or otherwise result in, the release of the Lien of the Mortgage or any other Loan
Document on any Property or the IP.




2.5.1. Releases of Adjacent Property.



(a) Conditions for Release. Notwithstanding anything to the contrary set forth in
this Agreement or the other Loan Documents, Adjacent Borrower shall have the right, without the
prior consent of Lender and without violating the Loan Documents, to (1) 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 Borrower or any other Restricted Party (an “Affiliate Release Parcel Purchaser”; and
together with a Bonafide Release Parcel Purchaser,



 


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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”, it being agreed that, for purposes of this Section 2.5.1, a
refinancing of a Partial Release Parcel, including the entire Adjacent Property, shall be treated
as a Release Parcel Sale thereof to an Affiliate Release Parcel Purchaser), and obtain a release of
such Partial Release Parcel from the Liens of the Mortgage and the other Loan Documents encumbering
such Partial Release Parcel, provided that all of the following conditions shall be
satisfied with respect to each such Release Parcel Sale:



(i) At least ten (10) Business Days prior to the anticipated date of such Release Parcel Sale,
Adjacent Borrower shall have submitted to Lender a written request for release (a “Sale Request”),
specifically identifying and legally describing the Partial Release Parcel that Adjacent Borrower
intends to sell, which proposed Partial Release Parcel shall, unless it is the entire Adjacent
Property, be reasonably acceptable to Lender taking into account its potential impact on the value
of the Remaining Adjacent Property, which Sale Request shall include a copy of the contract of sale
relating to such Release Parcel Sale and an Officer’s Certificate providing a certification that
(A) as of the date of such Sale Request, no monetary Default, monetary First Mezzanine Default,
monetary Second Mezzanine Default or monetary Third Mezzanine Default, and no Event of Default,
First Mezzanine Event of Default, Second Mezzanine Event of Default or Third Mezzanine Event of
Default, shall have occurred and be continuing, (B) the proposed purchaser is a Bonafide Release
Parcel Purchaser or an Affiliate Release Parcel Purchaser, as applicable, and (C) the copy of the
contract of sale relating to such Release Parcel Sale attached to such certification is true,
correct and complete;



(ii) Adjacent Borrower shall have delivered to Lender reasonably detailed information
regarding the terms of, and the actual and reasonably anticipated costs and expenses associated
with, such Release Parcel Sale in order to enable Lender to reasonably determine the Release Parcel
Release Price with respect thereto, all of which shall be certified by Adjacent Borrower to Lender
as true, complete and correct;



(iii) All accrued and unpaid interest and any unpaid or unreimbursed amounts in respect of the
Reduced Acquisition Loan and/or the Construction Loan and/or the First Mezzanine Loan and/or the
Second Mezzanine Loan and/or the Third Mezzanine Loan and any other sum then due hereunder or under
any of the other Loan Documents and/or under any of the First Mezzanine Loan Documents and/or under
any of the Second Mezzanine Loan Documents and/or under any of the Third Mezzanine Loan Documents,
including, without limitation, the Exit Fee and any applicable Breakage Costs, shall have been paid
in full or shall have been arranged to be paid in full contemporaneously with the closing of such
Release Parcel Sale; provided, however, if such Release Parcel Sale closes on a
date which is not a Payment Date, Borrowers shall also have paid or shall have arranged to be paid
contemporaneously with the closing of such Release Parcel Sale interest on the Release Parcel
Release Price to, but not including, the next succeeding first (1st) day of a calendar
month;



(iv) Intentionally Deleted;



(v) If the Release Parcel Purchaser is a Bonafide Release Parcel Purchaser, in addition to the
amounts set forth in the foregoing clause (iii), Borrowers



 


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shall have paid, or shall have arranged to be paid contemporaneously with the closing of such
Release Parcel Sale, to Lender a release price with respect to the sale of such Partial Release
Parcel equal to the greater of the following (whichever of the following subclause (A) or
(B) is greater, such Partial Release Parcel’s “Bonafide Release Parcel Release Price”),
which Bonafide Release Parcel Release Price shall be applied as contemplated by Section
2.4.3 hereof:




(A) (1) the gross sales price for such Partial Release Parcel, less (2)
the amount of all reasonable and customary closing costs in connection with
such Release Parcel Sale actually paid by any Borrower to any Person who is
not a Restricted Party or any Affiliate thereof; provided,
however, that in no event shall such closing costs exceed eight
percent (8%) of such gross sales price; or




(B) one hundred twenty-five percent (125%) of the per acre Allocated
Loan Amount for such portion of the Adjacent Property;



(vi) If the Release Parcel Purchaser is an Affiliate Release Parcel Purchaser, in addition to
the amounts set forth in the foregoing clause (iii), Borrowers shall have paid, or shall
have arranged to be paid contemporaneously with the closing of such Release Parcel Sale, to Lender
a release price with respect to the sale of such Partial Release Parcel equal to the greater of the
following (whichever of the following subclause (A) or (B) is greater, the
“Affiliate Release Parcel Release Price”; and whichever of the Bonafide Release Parcel Release
Price or the Affiliate Release Parcel Release Price shall be applicable in any instance, the
“Release Parcel Release Price”), which Affiliate Release Parcel Release Price shall be applied as
contemplated by Section 2.4.3 hereof:




(A) Eighty-five percent (85%) of the Appraised Value of such Partial
Release Parcel; or




(B) one hundred twenty-five percent (125%) of the per acre Allocated
Loan Amount for such portion of the Adjacent Property;



(vii) If the Release Parcel Purchaser is an Affiliate Release Parcel Purchaser, simultaneously
with the closing of such Release Parcel Sale, (A) if such Release Parcel Purchaser is a Joint
Venture, at Lender’s election, the ownership interest(s) of any Affiliate Joint Venture
Counterparty shall be pledged to Lender as additional collateral for the Obligations, which pledge
shall constitute a first priority Lien thereon, and Borrowers shall have (1) obtained the consent
of each Unaffiliated Joint Venture Counterparty to such pledge, and (2) executed and delivered, and
caused any such Affiliate Joint Venture Counterparty and Unaffiliated Joint Venture Counterparty to
execute and deliver, such documents and instruments, and taken such further actions, and caused any
such Affiliate Joint Venture Counterparty and Unaffiliated Joint Venture Counterparty to take any
such further actions, as reasonably requested by Lender to evidence, secure and perfect such pledge
of the ownership interest(s) of any Affiliate Joint Venture Counterparty, or (B) if such Release
Parcel Purchaser is an Affiliate Release Parcel Purchaser of any kind, whether or not a Joint
Venture, at Lender’s election, which in the case of a Release Parcel Purchaser who is a Joint
Venture, would be in lieu of the foregoing clause (A), a security interest in any future
sales proceeds from the sale of such Partial



 


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Release Parcel shall be pledged to Lender as additional collateral for the Obligations, which
pledge shall constitute a first priority Lien thereon, and Borrowers shall have executed such
documents and instruments, and taken such further actions, as reasonably requested by Lender to
evidence, secure and perfect such pledge; provided, however, that in the case of
either clause (A) or clause (B) above, such pledge (y) shall not prohibit, or
require Lender’s consent to, a subsequent sale by the Release Parcel Purchaser of such Partial
Release Parcel, but shall only require that the net proceeds of any such subsequent sale, which are
payable to such Release Parcel Purchaser be delivered to Lender and be used as a prepayment of the
Loan pursuant to the same terms and conditions as governed the payment of the Release Parcel
Release Price that was paid in connection with such Partial Release Parcel (it being understood
that any such net proceeds of any such subsequent sale shall be deemed a part of the
previously-paid Release Parcel Release Price for such Partial Release Parcel for all purposes under
this Agreement), provided, however that such pledge agreement shall provide that any
transfer by Affiliate Release Parcel Purchaser to an affiliate thereof for the sole purpose of
avoiding the payment of the future sales proceeds which would otherwise be payable to Lender in
connection with a subsequent sale of the Partial Release Parcel or the equity interests therein in
accordance with such pledge shall be void ab initio, and (z) shall terminate upon the earlier of
(I) one (1) year from the date of such Release Parcel Sale or (II) the repayment in full of the
Debt;



(viii) Intentionally Deleted;



(ix) Intentionally Deleted;



(x) 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 this Section 2.5.1(a), and (C) providing
all release documents in connection with any Release Parcel Sale as provided in Section
2.5.1(d) hereof;



(xi) No monetary Default, monetary First Mezzanine Default, monetary Second Mezzanine Default
or monetary Third Mezzanine Default, and no Event of Default, First Mezzanine Event of Default,
Second Mezzanine Event of Default or Third 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;



(xii) After giving effect to the sale and release of such Partial Release Parcel, each of the
Remaining Adjacent Property, the Hotel/Casino Property and the Café Property (the Hotel Casino
Property and Café Property, collectively, the “Main Property”) will (A) comply, in all material
respects, with all zoning ordinances, including, without limitation, those related to parking, lot
size and density, (B) constitute one or more separate tax parcels, and not be subject to any lien
for taxes due or not yet due attributable to such Partial Release Parcel, and (C) comply, in all
material respects, with all applicable Legal Requirements, including, without limitation, those
relating to land use and certificates of occupancy, except to the extent of any legal
non-conforming use permitted as of the Closing Date;




 


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(xiii) Adjacent Borrower shall have certified to Lender that, with respect to the Remaining
Adjacent Property and the Main Property, it continues to have or has obtained through one or more
reciprocal easement or other agreements approved by Lender in its reasonable judgment,
substantially the same (A) access for all of the Improvements on such remaining portions of the
Remaining Adjacent Property and the Main Property to parking, vehicular and pedestrian ingress and
egress from public roads and common areas, and (B) utility services in all of the Improvements on
the Remaining Adjacent Property and the Main Property, in each instance as exists as of the date
immediately preceding such Release Parcel Sale, it being agreed that Lender will subordinate the
lien of the Mortgage to any such reciprocal easement agreement or other agreement approved by
Lender in its reasonable judgment;



(xiv) Borrowers shall deliver to Lender, at Borrowers’ sole cost and expense, new or updated
ALTA/ASCM surveys of the Remaining Adjacent Property and such Partial Release Parcel, which surveys
shall substantially conform to Lender’s then-current requirements for surveys to be delivered in
connection with its loans;



(xv) The Title Company shall issue an endorsement to the Title Insurance Policy regarding the
validity of Lender’s lien on the Remaining Adjacent Property after such Release Parcel Sale and any
other endorsements reasonably requested by Lender in connection with such Release Parcel Sale;



(xvi) If a Securitization has occurred and the Release Parcel Sale covers less than the entire
Adjacent Property, Borrowers shall have provided to Lender an opinion letter from counsel
reasonably satisfactory to Lender confirming that such Release Parcel Sale shall not constitute a
“significant modification” of the Loan within the meaning of Section 1.1001-3 of the regulations of
the United States Department of the Treasury or would otherwise violate any of the provisions of
the federal income tax law relating to real estate mortgage investment conduits, which appear at
Section 860A through 860G of Subchapter M of Chapter 1 of the Code, as amended, and related
provisions and regulations (including any applicable proposed regulations) and rulings promulgated
thereunder, as the foregoing may be in effect from time to time (collectively, the “REMIC
Requirements”), and Lender shall not otherwise have any reasonable belief (based on an opinion of
counsel or a certified public accountant) that such Release Parcel Sale will constitute such a
“significant modification” or otherwise violate such REMIC Requirements; and



(xvii) Borrowers shall have delivered to Lender (A) any amendments to the Loan Documents
deemed reasonably necessary by Lender in order to effectuate the release of such Partial Release
Parcel and/or to continue to retain all of its rights in the Remaining Adjacent Property and the
Main Property, and (B) all documents and information reasonably requested by Lender in order to
verify the satisfaction of the foregoing conditions.



(b) With respect to any proposed Release Parcel Sale that does not close for any reason, on
the earlier to occur of (i) five (5) Business Days after the date on which Lender is notified that
such Release Parcel Sale will not close, or (ii) the one hundred thirty-fifth (135th) day following
the delivery to Lender of the related Sale Request, Lender shall be reimbursed for all reasonable
out-of-pocket costs and expenses (including reasonable attorneys’ fees) incurred in connection
therewith.


 


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(c) In the event that a Release Parcel Sale with respect to which a Sale Request was submitted
to Lender does not close within one hundred thirty-five (135) days after the date of such Sale
Request, if Adjacent Borrower wishes to proceed with such Release Parcel Sale, Adjacent Borrower
shall be required to re-submit an updated Sale Request to Lender and satisfy the conditions set
forth in Section 2.5.1(a) hereof with respect to the Release Parcel Sale which is the
subject of such resubmitted Sale Request as of the date of such resubmission.



(d) With respect to any Release Parcel Sale, upon satisfaction of the conditions set forth in
Section 2.5.1(a) hereof, Lender, at the sole cost and expense of Borrowers, shall execute
and deliver to Borrowers releases, satisfactions, reconveyances, discharges, terminations and/or
assignments, as applicable and as reasonably requested by Borrowers, of the Mortgage and the other
Loan Documents relating to the applicable Partial Release Parcel.



(e) With respect to a Release Parcel Sale, upon the full execution, delivery and, as
appropriate, recordation or filing of the applicable documents contemplated under Section
2.5.1(d) hereof, all references in this Agreement to the term “Adjacent Property” shall be
deemed to exclude the applicable Partial Release Parcel for all purposes hereunder. In the event
that the entire Adjacent Property is sold in accordance with the terms hereof, then the terms and
provisions of this Section 2.5.1 are deemed of no further force and effect.



(f) With respect to any Release Parcel Sale, Lender hereby acknowledges and agrees that
Adjacent Borrower shall have the right to consummate such a Release Parcel Sale through the
following process: (i) the formation of a Special Purpose Entity that is a wholly-owned, Delaware
limited liability company subsidiary of Adjacent Borrower, the organizational documentation with
respect to which shall be reasonably satisfactory to Lender (a “Subsidiary Transferee”);
provided, however, that no Subsidiary Transferee shall be required to have any
springing member or any Independent Director or Independent Manager; and, provided,
further, that such Subsidiary Transferee shall only be required to satisfy all of the other
requirements of a Special Purpose Entity when Adjacent Borrower owns all or any portion of the
membership interests therein, and (ii) the occurrence of the following events, all of which shall
occur substantially contemporaneously through an escrow established with an escrow agent reasonably
acceptable to Lender and pursuant to escrow instructions reasonably acceptable to Lender: (A) the
transfer by deed of the applicable Partial Release Parcel from Adjacent Borrower to such Subsidiary
Transferee subject to the Mortgage and the other Loan Documents, (B) the immediately subsequent
purchase of all of the equity interests held by Adjacent Borrower in such Subsidiary Transferee by
the applicable Bonafide Release Parcel Purchaser or Affiliate Release Parcel Purchaser, as the case
may be, and (C) the payment of the applicable Release Parcel Release Price and all other amounts
due under Section 2.5.1(a) hereof in connection with such Release Parcel Sale. In
connection with the foregoing, Lender and Borrowers hereby agree that, with respect to any Release
Parcel Sale consummated in accordance with this Section 2.5.1(f), (1) the applicable
Bonafide Release Parcel Purchaser or Affiliate Release Parcel Purchaser, as the case may be, shall
refer to the ultimate purchaser of the equity interests held by Adjacent Borrower in the Subsidiary
Transferee, rather than to the Subsidiary Transferee, (2) the gross sales price used in the
calculation of the applicable Release Parcel Release Price with respect to a Bonafide Release
Parcel Purchaser shall refer to the gross sales price for the purchase of the equity interests held
by Adjacent Borrower in the Subsidiary Transferee, rather than to any consideration paid by the
Subsidiary Transferee to Adjacent Borrower, and


 


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(3) without limiting the generality of the foregoing, for purposes of the satisfaction of the
conditions set forth in Section 2.5.1(a), all references to such Release Parcel Sale and/or
to the related contract of sale, gross sales price, Release Parcel Purchaser, Release Parcel
Release Price and all other related terms and items shall be deemed to be references to, and shall
include, the sale of the equity interests held by Adjacent Borrower to the ultimate Bonafide
Release Parcel Purchaser or Affiliate Release Parcel Purchaser, as the case may be, rather than to
the transfer by deed of the applicable Partial Release Parcel from Adjacent Borrower to the
Subsidiary Transferee.




2.5.2. Intentionally Deleted.




2.5.3. Release of IP.



(a) Conditions for Release. Notwithstanding anything to the contrary set forth in
this Agreement or the other Loan Documents, in the event that IP Borrower shall desire to sell the
IP (in whole but not in part) (an “IP Sale”) to a bonafide third party purchaser (a “IP
Purchaser”), IP Borrower shall have the right, without the prior consent of Lender and without
violating the Loan Documents, to sell the entire IP and obtain a release of the IP from the Liens
of the Mortgage and the other Loan Documents encumbering the IP to an IP Purchaser,
provided that all of the following conditions shall be satisfied with respect to such IP
Sale:



(i) IP Borrower shall have submitted a Sale Request to Lender at least ten (10) Business Days
prior to the anticipated date of such IP Sale, which shall include a copy of the contract of sale
relating to such IP Sale and an Officer’s Certificate providing a certification that (A) as of the
date of such Sale Request, no monetary Default, monetary First Mezzanine Default, monetary Second
Mezzanine Default or monetary Third Mezzanine Default, and no Event of Default, First Mezzanine
Event of Default, Second Mezzanine Event of Default or Third Mezzanine Event of Default, shall have
occurred and be continuing and (B) the copy of the contract of sale relating to such IP Sale
attached to such certification is true, correct and complete;



(ii) IP Borrower shall have delivered to Lender reasonably detailed information regarding the
terms of, and the actual and reasonably anticipated costs and expenses associated with, such IP
Sale in order to enable Lender to reasonably determine the IP Release Price with respect thereto,
all of which shall be certified by IP Borrower to Lender as true, complete and correct;



(iii) All accrued and unpaid interest and any unpaid or unreimbursed amounts in respect of the
Reduced Acquisition Loan and/or the Construction Loan and/or the First Mezzanine Loan and/or the
Second Mezzanine Loan and/or the Third Mezzanine Loan and any other sum then due hereunder or under
any of the other Loan Documents and/or under any of the First Mezzanine Loan Documents and/or under
any of the Second Mezzanine Loan Documents and/or under any of the Third Mezzanine Loan Documents,
including, without limitation, any applicable Breakage Costs, shall have been paid in full or shall
have been arranged to be paid in full contemporaneously with the closing of such IP Sale;
provided, however, if such IP Sale closes on a date which is not a Payment Date,
Borrowers shall also have paid or shall have arranged to be paid contemporaneously with the closing
of such IP Sale,


 


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interest on the IP Release Price to, but not including, the next succeeding first
(1st) day of a calendar month;



(iv) Intentionally Deleted;



(v) In addition to the amounts set forth in the foregoing clause (iii), Borrowers
shall have paid, or shall have arranged to be paid contemporaneously with the closing of the IP
Sale, to Lender a release price with respect to the IP equal to the greater of the following
(whichever of the following subclause (A) or (B) is greater, the “IP Release
Price”), which IP Release Price shall be applied as contemplated by Section 2.4.3 hereof:




(A) (1) the gross sales price for the IP, less (2) the amount of all
reasonable and customary closing costs in connection with such IP Sale
actually paid by any Borrower to any Person who is not a Restricted Party or
any Affiliate thereof; provided, however, that in no event
shall such closing costs exceed three percent (3%) of such gross sales
price; or




(B) one hundred twenty-five percent (125%) of the Allocated Loan Amount
for the IP;



(vi) Intentionally Deleted;



(vii) Intentionally Deleted;



(viii) 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 this Section 2.5.3(a), and (C) providing all release documents in
connection with any IP Sale as provided in Section 2.5.3(d) hereof;



(ix) No monetary Default, monetary First Mezzanine Default, monetary Second Mezzanine Default
or monetary Third Mezzanine Default, and no Event of Default, First Mezzanine Event of Default,
Second Mezzanine Event of Default or Third 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 an IP Sale;



(x) There shall only be one (1) IP Sale;



(xi) The IP Purchaser shall enter into one or more royalty free license agreements, in form
and substance reasonably satisfactory to Borrowers and Lender, applying the standards of a prudent
commercial mortgage loan lender, pursuant to which such IP Purchaser shall license to each Borrower
all of the 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 (collectively, the “Purchaser
Licensed IP”), and each applicable Borrower, at Borrowers’ sole cost and expense, shall execute and
deliver, or cause to be executed and delivered, to and for the benefit of Lender, a security
interest agreement covering such Purchaser Licensed IP, together


 


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with such other financing statements, documents and/or instruments reasonably required by
Lender in order to perfect its security interest in the Purchaser Licensed IP and to enable Lender
to foreclose on such Purchaser Licensed IP upon the occurrence and during the continuance of an
Event of Default, all of the foregoing to be in form and substance reasonably satisfactory to
Lender; and



(xii) Borrowers shall have delivered to Lender (A) any amendments to the Loan Documents deemed
reasonably necessary by Lender in order to effectuate the release of the IP, and (B) all documents
and information reasonably requested by Lender in order to verify the satisfaction of the foregoing
conditions.



(b) With respect to any proposed IP Sale that does not close for any reason, on the earlier to
occur of (i) five (5) Business Days after the date on which Lender is notified that such IP Sale
will not close, or (B) the one hundred thirty-fifth (135th) day following the delivery to Lender of
the related Sale Request, Lender shall be reimbursed for all reasonable out-of-pocket costs and
expenses (including reasonable attorneys’ fees) incurred in connection therewith.



(c) In the event that an IP Sale with respect to which a Sale Request was submitted to Lender
does not close within one hundred thirty-five (135) days after the date of such Sale Request, if IP
Borrower wishes to proceed with such IP Sale, IP Borrower shall be required to re-submit an updated
Sale Request to Lender and satisfy the conditions set forth in Section 2.5.3(a) hereof with
respect to the IP Sale which is the subject of such resubmitted Sale Request as of the date of such
resubmission.



(d) With respect to an IP Sale, upon satisfaction of the conditions set forth in Section
2.5.3(a) hereof, Lender, at the sole cost and expense of Borrowers, shall execute and deliver
to Borrowers releases, satisfactions, discharges and/or assignments, as applicable and as
reasonably requested by Borrowers, of the Mortgage and the other Loan Documents relating to the IP.




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 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.


 


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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 Notes and this Agreement, Lender shall release the Lien of the
Mortgage and the other Loan Documents.




Section 2.6. Cash Management.




2.6.1. Lockbox Account. (a) Borrowers shall establish and maintain a
segregated Eligible Account (the “Lockbox Account”) with Lockbox Bank in trust for the
benefit of Lender, which Lockbox Account shall be under the sole dominion and control of
Lender. The Lockbox Account shall be entitled “HRHH Hotel/Casino, LLC, HRHH Cafe, LLC, HRHH
Development, LLC, HRHH IP, LLC and HRHH Gaming, LLC, for the benefit of Vegas HR Private
Limited and Trimont Real Estate Advisors, Inc. as Agent, their respective successors and/or
assigns — Lockbox Account” or such other title as shall be reasonably acceptable to Lender
and the applicable Lockbox Bank. Each Borrower hereby grants to Lender a first priority
security interest in the Lockbox 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 Lockbox
Account, including, without limitation, executing and filing UCC-1 Financing Statements and
continuations thereof. Lender shall have the sole right to make withdrawals from the
Lockbox Account for application pursuant to the terms of this Agreement and all reasonable
costs and expenses for establishing and maintaining the Lockbox Account shall be paid by
Borrowers.



(b) Each Borrower shall, or shall cause its Manager and HRHI , to (i) deliver irrevocable
written instructions to (A) all non-residential tenants under Leases of space at such Borrower’s
Property, instructing such tenants to deliver all Rents payable thereunder directly to the Lockbox
Account and (B) each of the credit card companies or credit card clearing banks with which such
Borrower, Manager or HRHI has entered into merchant’s agreements, instructing such credit card
companies or credit card clearing banks to deliver all receipts payable with respect to any
Property directly to the Lockbox Account and (ii) direct (A) all licensors or sublicensors of the
IP (or any portion thereof) and any party to a sponsorship agreement with any Borrower pursuant to
which such party pays such Borrower(s) certain amounts in exchange for certain rights granted to
such party by such Borrower(s) and (B) all Persons that maintain open accounts with such Borrower,
Manager or HRHI, as applicable, or with whom such Borrower, Manager or HRHI, as applicable, does
business on an “accounts receivable” basis with respect to any Property or HRHI’s liquor management
services at the Hotel/Casino Property, to deliver all payments due under such accounts directly to
the Lockbox Account (and neither any Borrower, Manager nor HRHI shall direct any such Person to
make payments due under such account in any other manner). Without the prior written consent of
Lender or Servicer, neither Manager, any Borrower nor HRHI, as applicable, shall (x) terminate,
amend, revoke or modify any direction letter described in clause (i)(A) above, any credit card
company direction letter or credit card bank payment direction letter described in clause (i)(B)
above and/or any other direction letter described in clause (ii) above or (y) direct or cause any
Person (including, without limitation, any Tenant, any credit card company or credit card



 


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clearing bank, any licensor or sublicensor of the IP (or any portion thereof), any party to any
sponsorship agreement, or any other Person that maintains open accounts with any Borrower, Manager
or HRHI (or with whom such Borrower, Manager or HRHI does business on an “accounts receivable”
basis) to pay any Rent or other amounts payable to such Borrower, Manager or HRHI in any manner
other than by wire transfer to the Lockbox Account.



(c) Without limiting the provisions of the preceding clause (b), Gaming Borrower shall collect
and account for all cash receipts attributable to gaming activities at the Property at the end of
each Gaming Day (such cash receipts, the “Prior Day’s Cash Receipts”). All such Prior
Day’s Cash Receipts shall be held by Gaming Borrower in the Gaming Account, provided that on or
prior to 4:00 p.m. Las Vegas time on the calendar day on which such Gaming Day shall end (or if
such calendar day is not a Business Day the first Business Day immediately following the Gaming Day
on which the applicable Prior Day’s Cash Receipts were collected) (any such day, the “Gaming
Revenue Disbursement Date”) Gaming Borrower shall deposit into the Lockbox Account the amount
by which the sum of all Prior Day’s Cash Receipts together with the balance of funds on deposit in
the Gaming Account exceeds the Minimum Gaming Account Balance. For avoidance of doubt and for
illustration purposes only, in the event the Prior Day’s Cash Receipts relate to cash receipts
attributable to gaming activities at the Property on the Gaming Day commencing at 3:00 a.m. Las
Vegas time on Tuesday, January 12, 2010 and ending at 2:59 a.m. Las Vegas time on Wednesday,
January 13, 2010, then on or prior to 4:00 p.m. Las Vegas time on January 13, 2010 Borrower shall
deposit into the Lockbox Account the amount by which the sum of all Prior Day’s Cash Receipts
together with the balance of funds on deposit in the Gaming Account exceeds the Minimum Gaming
Account Balance.



(d) Hotel/Casino Borrower shall deliver irrevocable written instructions to HRHI, as the
Liquor Manager, to deliver an amount equal to all revenues earned by Liquor Manager pursuant to the
Liquor Management Agreement to the Lockbox Account on account of the payments due from HRHI to
Hotel/Casino Borrower.



(e) Notwithstanding the foregoing, in the event any Borrower, Manager or HRHI receives any
Rents (including, without limitation, Rents from tenants under any residential Lease and/or any
forfeited security deposits under any Lease and/or any payments due under any IP license or
sublicense) or other Gross Income from Operations (other than Gaming Borrower’s receipt of cash
attributable to gaming activities at the Property which cash is to be applied in accordance with
the provisions of clause (c) above), then such amounts shall be deemed to be collateral for the
Loan and each Borrower hereby grants and shall cause Manager or HRHI to hereby grant Lender a
security interest in such amounts and each Borrower shall or shall cause Manager and HRHI, as
applicable, to (i) hold the same in trust for the benefit, and as the property, of Lender, (ii) not
commingle the same with any other funds or property of such Borrower or of Manager or HRHI, as
applicable and (iii) deposit all amounts into the Lockbox Account within one (1) Business Day after
receipt by such Borrower or Manager or HRHI, as applicable.



(f) Borrowers shall obtain from Lockbox Bank its agreement to transfer to the Cash Management
Account in immediately available funds by federal wire


 


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transfer all amounts on deposit in the Lockbox Account once every Business Day throughout the
term of the Loan.




2.6.2. Cash Management Account. (a) There shall be established and maintained
a segregated Eligible Account (the “Cash Management Account”), which Cash Management Account
shall be under the sole dominion and control of Lender. The Cash Management Account shall
be entitled “HRHH Hotel/Casino, LLC, HRHH Cafe, LLC, HRHH Development, LLC, HRHH IP, LLC and
HRHH Gaming, LLC Cash Management Account for the benefit of Vegas HR Private Limited and
TriMont Real Estate Advisors, Inc. as Agent” 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 shall
have the sole right to make withdrawals from the Cash Management Account for application
pursuant to the terms of this Agreement and the other Loan Documents and all reasonable
costs and expenses for establishing and maintaining the Cash Management Account shall be
paid by Borrowers.



(b) Subject to Section 2.6.2(c) hereof, provided no Event of Default shall
have occurred and is then continuing, on each Wednesday occurring during any Interest Period (or
such other date as is expressly set forth in the Cash Management Agreement) all funds on deposit in
the Cash Management Account shall be credited towards payment of items (i) through (xv) below in
the order indicated below (but except as expressly provided herein none of the same shall be
disbursed prior to the Payment Date occurring on the day immediately following the end of such
Interest Period), it being acknowledged and agreed by Borrowers and Lender, however, that subject
to Section 2.6.2(c) and provided no Event of Default shall have occurred and is then continuing (1)
in the event any amounts described under the provisions of Section 2.6.2(d) hereof and/or
the provisions of the last sentence of Section 2.6.2(h) hereof shall then be required to be
deposited into the Gaming Account, Interest Reserve Account and/or General Reserve Account, as
applicable, any funds on deposit in the Cash Management Account (and in the event such funds are
not sufficient to fund such amounts, any funds credited but not disbursed to the payment of items
(i) through (xv) below), shall be deposited into the Gaming Account, Interest Reserve Account
and/or General Reserve Account on, as applicable, the Casino Account Reimbursement Date or the
Operating Expense Overfunding Reimbursement Date (or the earliest day thereafter on which any funds
shall be deposited into the Cash Management Account), (2) subject to the provisions of the
immediately preceding clause (1), as soon as there are sufficient funds available in the Cash
Management Account to satisfy the amounts that will be due under clauses (i) and (ii) below on the
Payment Date immediately following the end of the then current Interest Period (such funds together
with any funds then required to be applied in accordance with the provisions of clause (1) above,
the “Section 2.6.2(b) Priority Funds”), on any Wednesday occurring during the applicable Interest
Period, Lender shall upon Borrowers’ written request therefor (which request may be made
electronically in a manner and to a recipient acceptable to Lender) disburse to Borrowers all or a
portion of the funds on deposit in the Cash Management Account in excess of the Section


 


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2.6.2(b) Priority Funds to the extent such funds would otherwise be distributable to Borrower
under clauses (iii) and (iv) below on the Payment Date immediately following the
end of such Interest Period, for application by Borrowers to the applicable cash Operating
Expenses, Pre-Opening Expenses and/or Extraordinary Expenses detailed in such written request (it
being acknowledged and agreed that any such written request shall be in the form of an Operating
Expense Request, shall be delivered at least one (1) Business Day prior to the requested
disbursement date and shall include a Borrower certification that the amounts requested therein are
in Borrower’s good faith estimate limited to such amounts as are then necessary to pay Operating
Expenses, Extraordinary Expenses and Pre-Opening Expenses that are then due and payable and that
Borrower would otherwise be entitled to receive under clauses (iii) and (iv) below on the Payment
Date immediately following the date of such request), and (3) all remaining funds in the Cash
Management Account shall be disbursed on the applicable Payment Date in accordance with the
following order indicated, except to the extent already disbursed in accordance with the provisions
of clauses (1) — (2) above:



(i) First, payments to Lender in respect of the Tax and Insurance Escrow Fund in accordance
with the terms and conditions of Section 7.2 hereof;



(ii) Second, payment to Lender in respect of the Replacement Reserve Fund in accordance with
the terms and conditions of Section 7.3 hereof;



(iii) Third, subject to Section 2.6.2(i) hereof, payment to Borrowers of an amount
sufficient to pay (A) the actual cash monthly Operating Expenses, including base management fees
payable to any Manager but excluding incentive management fees payable to any Manager, and Capital
Expenditures and (B) Extraordinary Expenses and Pre-Opening Expenses (provided that Borrower shall
not be entitled to any disbursements under this clause (iii) with respect to Extraordinary Expenses
and/or Pre-Opening Expenses in the event such amounts in any particular month shall exceed
$586,000.00 in the aggregate), but in either case specifically excluding any reimbursements to
Borrowers, Sponsor or any Affiliates thereof of any such amounts previously paid or advanced as
capital contributions or otherwise, in each instance as requested by Borrowers in a written request
(which request may be made electronically in a manner and to a recipient acceptable to Lender)
(each, an “Operating Expense Request”) delivered to Lender no later than three (3) Business Days
prior to such Payment Date (which shall not include (A) Taxes and Insurance Premiums to be paid for
out of the Tax and Insurance Escrow Funds, and (B) Operating Expenses, Capital Expenditures and/or
other expenses to be paid for out of any Reserve Funds); provided, however that if,
without limiting the foregoing, Borrowers shall have failed to deliver the Cash Profit and Loss
Statement for the immediately preceding month on or prior to the date on which such statement is
due in accordance with Section 5.1.11(c) hereof, then Borrowers shall not be entitled to
any disbursement under this subclause (iii) until the date on which Borrowers deliver such
Cash Profit and Loss Statement to Lender as required by Section 5.1.11(c) hereof;



(iv) Fourth, payment to Borrowers for Extraordinary Expenses in excess of any such
Extraordinary Expenses disbursed pursuant to subclause (iii) above, if any, as approved by
Lender pursuant to the provisions of Section 5.11(e) hereof,;


 


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(v) Fifth, on the first Payment Date in each calendar quarter, payment to the Administrative
Agent of the Administrative Agent Fee then due and payable;



(vi) Sixth, payment to Lender of the Unused Advance Fee then due and payable, if any;



(vii) Seventh, payment to Lender of the Reduced Acquisition Loan Monthly Interest Payment
calculated at the Applicable Interest Rate and the Construction Loan Monthly Interest Payment
computed at the Applicable Interest Rate;



(viii) Eighth, payment to Lender of (or reimbursement of Lender for) any reasonable
miscellaneous fees or expenses (including, without limitation, any “protective advances” made by
Lender in respect of the Loan) then due and payable pursuant to the terms of the Loan Documents;



(ix) Ninth, a transfer by Lender to the First Mezzanine Cash Management Account in the amount
of the First Mezzanine Applicable Interest Payment indicated in the then most recent written
payment notice letter delivered pursuant to the Intercreditor Agreement by First Mezzanine Lender
to Lender at least five (5) days prior to such Payment Date, to be applied in accordance with the
terms of the First Mezzanine Loan Documents;



(x) Tenth, a transfer by Lender to the Second Mezzanine Cash Management Account in the amount
of the Second Mezzanine Applicable Interest Payment indicated in the then most recent written
payment notice letter delivered pursuant to the Intercreditor Agreement by Second Mezzanine Lender
to Lender at least five (5) days prior to such Payment Date, to be applied in accordance with the
terms of the Second Mezzanine Loan Documents;



(xi) Eleventh, a transfer by Lender to the Third Mezzanine Cash Management Account in the
amount of the Third Mezzanine Applicable Interest Payment indicated in the then most recent written
payment notice letter delivered pursuant to the Intercreditor Agreement by Third Mezzanine Lender
to Lender at least five (5) days prior to such Payment Date, to be applied in accordance with the
terms of the Third Mezzanine Loan Documents;



(xii) Intentionally Deleted;



(xiii) Twelfth, payment to Borrowers of any incentive management fees payable to any Manager
(the aggregate sum of the amounts required to fully fund items (i) through (xii)
above and this item (xiii), collectively, the “Aggregate Monthly Amount”; and such amounts
as remain after application to fully fund the Aggregate Monthly Amount, the “Excess Cash Flow”);



(xiv) Thirteenth, payment to First Mezzanine Lender in an amount equal to the First Mezzanine
Initial Accrual Amount until such time as the same is paid in full; and


 


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(xv) Fourteenth, as applicable, either (A) prior to the date on which the Excess Cash
Termination Condition has been satisfied, payment of all Excess Cash Flow for deposit into the
General Reserve Account, or (B) from and after the date on which the Excess Cash Termination
Condition has been satisfied, payment of all Excess Cash Flow for deposit into the Working Capital
Reserve Account until the amount on deposit therein equals $7,000,000, then payment of all
remaining Excess Cash Flow for deposit into the General Reserve Account.



(c) Notwithstanding the provisions of Section 2.6.2(b) hereof, from and after the
earlier to occur of (A) the Interest Period in which the amount on deposit in the Interest Reserve
Account shall equal zero and (B) the Excess Cash Release Date, and provided no Event of Default
shall have occurred and be continuing, on each Wednesday during any Interest Period (or such other
date as is expressly set forth in the Cash Management Agreement) all funds on deposit in the Cash
Management Account shall be credited towards payment of items (i) through (xv) below in the order
indicated below (but except as expressly provided herein none of the same shall be disbursed prior
to the Payment Date occurring on the day immediately following the end of such Interest Period), it
being acknowledged and agreed by Borrowers and Lender, however, that provided no Event of Default
shall have occurred and is then continuing (1) in the event any amounts described under the
provisions of Section 2.6.2(d) hereof and/or the provisions of the last sentence of
Section 2.6.2(h) hereof shall then be required to be deposited into the Gaming Account,
Interest Reserve Account and/or General Reserve Account, as applicable, any funds on deposit in the
Cash Management Account (and in the event such funds are not sufficient to fund such amounts, any
funds credited but not disbursed to the payment of items (i) through (xv) below), shall be
deposited into the Gaming Account, Interest Reserve Account and/or General Reserve Account on, as
applicable, the Casino Account Reimbursement Date or the Operating Expense Overfunding
Reimbursement Date (or the earliest day thereafter on which any funds shall be deposited into the
Cash Management Account), (2) subject to the provisions of the preceding clause (1), as soon as
there are sufficient funds in the Cash Management Account to satisfy the amounts that will be due
under clauses (i), (ii), (iii) and (iv) below on the Payment Date immediately
following the end of the applicable Interest Period (such funds together with any funds then
required to be applied in accordance with the provisions of clause (1) above, the “Section 2.6.2(c)
Priority Funds”), on any Wednesday occurring during the applicable Interest Period, Lender shall at
Borrowers’ written request therefor (which request may be made electronically in a manner and to a
recipient acceptable to Lender) disburse to Borrowers all or a portion of the funds on deposit in
the Cash Management Account in excess of the Section 2.6.2(c) Priority Funds to the extent such
funds would otherwise be distributable to Borrowers under clause (v) and (vi) on
the Payment Date immediately following the end of such Interest Period, for application by
Borrowers to the applicable Operating Expenses, Pre-Opening Expenses and/or Extraordinary Expenses
detailed in such written request (which request shall be in the form of an Operating Expense
Request, shall be delivered at least one (1) Business Day prior to the requested disbursement date
and shall include a Borrower certification that the amounts requested therein are in Borrower’s
good faith estimate limited to such amounts as are then necessary to pay Operating Expenses,
Extraordinary Expenses and Pre-Opening Expenses that are then due and payable and that Borrower
would otherwise be entitled to receive under clauses (v) and (vi) below on the Payment Date
immediately following the date of such request), and (3) subject to there being sufficient funds on
deposit in the Cash Management Account to make any deposits described in clauses


 


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(1)-(2) above as and when required above, on each Payment Date, all remaining funds in the
Cash Management Account shall be disbursed in accordance with the following in the order indicated,
except to the extent already disbursed in accordance with the provisions of clauses (1) — (2)
above:



(i) First, payments to Lender in respect of the Tax and Insurance Escrow Fund in accordance
with the terms and conditions of Section 7.2 hereof;



(ii) Second, payment to Lender of the Reduced Acquisition Loan Monthly Interest Payment
calculated at the Applicable Interest Rate and the Construction Loan Monthly Interest Payment
computed at the Applicable Interest Rate;



(iii) Third, payment to Lender of (or reimbursement of Lender for) any reasonable
miscellaneous fees or expenses (including, without limitation, any “protective advances” made by
Lender in respect of the Loan) then due and payable pursuant to the terms of the Loan Documents;



(iv) Fourth, payment to Lender in respect of the Replacement Reserve Fund in accordance with
the terms and conditions of Section 7.3 hereof;



(v) Fifth, payment to Borrowers of an amount sufficient to pay (A) the actual cash monthly
Operating Expenses, including base management fees payable to any Manager but excluding incentive
management fees payable to any Manager, and Capital Expenditures and (B) Extraordinary Expenses and
Pre-Opening Expenses (provided that Borrower shall not be entitled to any disbursements under this
clause (v) with respect to Extraordinary Expenses and/or Pre-Opening Expenses in the event such
amounts in any particular month shall exceed $586,000.00 in the aggregate), in each instance as
requested by Borrowers in an Operating Expense Request (which request may be made electronically in
a manner and to a recipient acceptable to Lender) delivered to the Servicer (with a copy to Lender)
no later than three (3) Business Days prior to such Payment Date (which shall not include (A) Taxes
and Insurance Premiums to be paid for out of the Tax and Insurance Escrow Funds, and (B) Operating
Expenses, Capital Expenditures and/or other expenses to be paid for out of any Reserve Funds);
provided, however that if Borrowers shall have failed to deliver the Cash Profit and Loss Statement
for the immediately preceding month on or prior to the date on which such statement is due in
accordance with Section 5.1.11(c) hereof, then Borrowers shall not be entitled to any
disbursement under this subclause (iii) until the date on which Borrowers deliver such Cash
Profit and Loss Statement to Lender as required by Section 5.1.11(c) hereof;



(vi) Sixth, payment to Borrowers for Extraordinary Expenses in excess of any such
Extraordinary Expenses disbursed pursuant to subclause (iii) above, if any approved by
Lender pursuant to the provisions of Section 5.11(e) hereof;



(vii) Seventh, on the first Payment Date in each calendar quarter, payment to the
Administrative Agent of the Administrative Agent Fee then due and payable, if any;



(viii) Eighth, payment to Lender of the Unused Advance Fee then due and payable, if any;


 


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(ix) Ninth, a transfer by Lender to the First Mezzanine Cash Management Account in the amount
of the First Mezzanine Applicable Interest Payment indicated in the then most recent written
payment notice letter delivered pursuant to the Intercreditor Agreement by First Mezzanine Lender
to Lender at least five (5) days prior to such Payment Date, to be applied in accordance with the
terms of the First Mezzanine Loan Documents;



(x) Tenth, a transfer by Lender to the Second Mezzanine Cash Management Account in the amount
of the Second Mezzanine Applicable Interest Payment indicated in the then most recent written
payment notice letter delivered pursuant to the Intercreditor Agreement by Second Mezzanine Lender
to Lender at least five (5) days prior to such Payment Date, to be applied in accordance with the
terms of the Second Mezzanine Loan Documents;



(xi) Eleventh, a transfer by Lender to the Third Mezzanine Cash Management Account in the
amount of the Third Mezzanine Applicable Interest Payment indicated in the then most recent written
payment notice letter delivered pursuant to the Intercreditor Agreement by Third Mezzanine Lender
to Lender at least five (5) days prior to such Payment Date, to be applied in accordance with the
terms of the Third Mezzanine Loan Documents;



(xii) Intentionally Deleted;



(xiii) Twelfth, payment to Borrowers of any incentive management fees payable to any Manager;



(xiv) Thirteenth, payment to First Mezzanine Lender in an amount equal to the First Mezzanine
Initial Accrual Amount until such time as the same is paid in full; and



(xv) Fourteenth, as applicable, either (A) prior to the date on which the Excess Cash
Termination Condition has been satisfied, payment of all Excess Cash Flow for deposit into the
General Reserve Account, or (B) from and after the date on which the Excess Cash Termination
Condition has been satisfied, payment of all Excess Cash Flow for deposit into the Working Capital
Reserve Account until the amount on deposit therein equals $7,000,000, then payment of all
remaining Excess Cash Flow for deposit into the General Reserve Account.



(d) In the event that the amounts on deposit in the Gaming Account are at any time less than
the Minimum Gaming Account Balance as a result of (i) the application of amounts previously on
deposit therein to Permitted Gaming Expenses and/or (ii) the increase of such Minimum Gaming
Account Balance in accordance with and subject to the provisions of Section 12.3.3 hereof,
Borrowers may submit a written request that funds equal to the positive difference, if any,
between the Minimum Gaming Account Balance less the funds then on deposit in the Gaming Account be
transferred from the Cash Management Account to the Casino Account, and provided that no Event of
Default has then occurred and is continuing and there is then sufficient funds available in the
Cash Management Account, Lender shall in accordance


 


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with and subject to the provisions of Sections 2.6.1(b)(1) or 2.6.1(c)(1), as applicable, use
good faith efforts to transfer available funds on deposit in the Cash Management Account to the
Casino Account on the Business Day immediately following the date on which Lender receives such
request in accordance with the terms hereof, provided that Lender shall receive such request on or
prior to 2:00 pm New York City time on the preceding Business Day (the applicable date described in
(a) and (b) above on which such transfer is to occur, the “Casino Account Reimbursement Date”).



(e) Subject to Sections 2.6.3, 3.20 and 7.4.2 hereof, the
insufficiency of funds on deposit in the Cash Management Account shall not relieve Borrowers from
the obligation to make any payments, as and when due pursuant to this Agreement and the other Loan
Documents, including, without limitation, the payments set forth in clauses (i) through
(xi), inclusive, in Section 2.6.2(b) or 2.6.2(c) hereof, as applicable, and
such obligations shall be separate and independent, and not conditioned on any event or
circumstance whatsoever.



(f) All funds on deposit in the Cash Management Account following the occurrence and during
the continuation of an Event of Default may be applied by Lender to the Debt, and applied to the
Debt in any order, priority and proportions as Lender shall elect in its sole discretion from time
to time until the Debt is paid in full, with any amounts remaining being disbursed to (i) First
Mezzanine Lender for application in accordance with the terms of the First Mezzanine Loan Documents
if the First Mezzanine Debt (or any portion thereof) is then outstanding, until the First Mezzanine
Debt is paid in full, and then (ii) 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 (iii) 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 (iv) any balance to Borrowers. Borrowers and Lender hereby agree
and acknowledge that if (A) all of the Obligations have been satisfied, (B) there are funds
remaining in any of the Reserve Funds, and (C) the First Mezzanine Debt (or any portion thereof) is
outstanding, then Lender will not pay any such remaining funds in any of the Reserve Funds to
Borrowers, but rather shall deliver such funds to First Mezzanine Lender to be held and applied in
accordance with the terms of the First Mezzanine Loan Documents until the First Mezzanine Debt is
paid in full, and then deliver any remaining funds to Second Mezzanine Lender to be applied in
accordance with the Second Mezzanine Loan Documents, until the Second Mezzanine Debt is paid in
full, and then deliver any remaining funds to Third Mezzanine Lender to be applied in accordance
with the Third Mezzanine Loan Documents, until the Third Mezzanine Debt is paid in full, with any
balance delivered to Borrowers.



(g) Transfers of Borrowers’ funds from any of the Reserve Funds or any other source to or for
the benefit of any First Mezzanine Borrower(s) or any Second Mezzanine Borrower(s) or any Third
Mezzanine Borrower(s) shall constitute distributions to such First Mezzanine Borrower(s), and
deemed distributions by such First Mezzanine Borrower(s) to such Second Mezzanine Borrower(s), or
by such First Mezzanine Borrower(s) to such Second Mezzanine Borrower(s) to such Third Mezzanine
Borrower(s), as applicable, and, in each case, must comply with the requirements as to
distributions in the Delaware Limited Liability Company Act. The provisions of this Agreement, the
Cash Management Agreement


 


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and the other Loan Documents shall not create a debtor-creditor relationship between any
Borrower and First Mezzanine Lender, Second Mezzanine Lender and/or Third Mezzanine Lender.



(h) If the Cash Profit and Loss Statement for any calendar month demonstrates that (i) the
amount of Operating Expenses, Capital Expenditures, Extraordinary Expenses or Pre-Opening Expenses
disbursed by Lender in accordance with Section 2.6.2(b)(iii) or 2.6.2(c)(v) hereof
was (A) in excess of the actual amounts needed to pay actual cash expenses payable in the
applicable calendar month for Operating Expenses, Capital Expenditures, Extraordinary Expenses or
Pre-Opening Expenses (as applicable), (ii) the amount of Extraordinary Expenses or Pre-Opening
Expenses distributed by Lender was in excess of the amounts Borrower were entitled to receive under
the applicable provisions of Sections 2.6.2(b)(iii) or 2.6.2(c)(v) hereof and/or
(ii) the amount of Extraordinary Expenses disbursed by Lender in accordance with Section
2.6.2(b)(iv) or 2.6.2(c)(vi) hereof was in excess of the actual amounts needed to pay that actual
Extraordinary Expenses, then, within two (2) Business Days after the date on which such Cash Profit
and Loss Statement was delivered to Lender (such date, the “Operating Expense Overfunding
Reimbursement Date”), Borrowers shall deposit any such excess disbursed amount (the “Operating
Expense Overfunding”) into the Interest Reserve Account up to the amount of the depletion of the
Interest Reserve Fund (calculated in Lender’s reasonable discretion) as a result of any such
Operating Expense Overfunding during the immediately preceding month, and, if no such depletion of
the Interest Reserve Fund has so occurred then the amount of any such Operating Expense Overfunding
shall be deposited into the General Reserve Account. If Borrower shall fail to deposit such excess
on or prior to the Operating Expense Overfunding Reimbursement Date, then Lender shall have the
right to apply any funds then on deposit in the Cash Management Account in an amount not to exceed
the applicable Operating Expense Overfunding into, as applicable, the Interest Reserve Account
and/or the General Reserve Account.



(i) Notwithstanding anything to the contrary herein, in addition to the monthly Operating
Expense Requests submitted by Borrower pursuant to Section 2.6.2(b) and Section 2.6.2(c)
hereof in connection with disbursements to be made on a Payment Date or otherwise on any Wednesday
occurring during any Interest Period, Borrower shall have the right to submit additional Operating
Expense Requests to Lender for disbursements from the Cash Management Account on dates other than a
Payment Date, to the extent Borrower requires additional funds necessary to pay actual cash monthly
Operating Expenses, Extraordinary Expenses and Pre-Opening Expenses (subject to the limitations set
forth in Section 2.6.2(b) and Section 2.6.2(c)). Borrower shall submit any such
Operating Expense Request (which request may be made electronically in a manner and to a recipient
acceptable to Lender) to Lender no later than one (1) Business Day prior to the requested
disbursement for such Operating Expenses (which request shall include a Borrower certification that
the amounts requested therein are in Borrower’s good faith estimate limited to such amounts as are
then necessary to pay Operating Expenses that are then due and payable and that Borrower would
otherwise be entitled to receive under Section 2.6.2(b) hereof or Section 2.6.2(c) hereof on the
Payment Date immediately following the date of such request). Each Operating Expense Request shall
include a Borrower certification that the amounts requested therein are in Borrower’s good faith
estimate limited to such amounts as are then necessary to pay actual cash monthly Operating
Expenses, Extraordinary Expenses and Pre-Opening Expenses that are then due and payable and that


 


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Borrower would otherwise be entitled to receive under Section 2.6.2(b) or Section 2.6.2(c) on
the Payment Date immediately following the date of such request.




2.6.3. Payments Received Under the Cash Management Agreement. Notwithstanding
anything to the contrary contained in this Agreement and the other Loan Documents, and
provided no Event of Default has occurred and is continuing, Borrowers’ obligations
with respect to amounts due for the Tax and Insurance Escrow Fund, the Replacement Reserve
Fund and any other payment reserves established pursuant to this Agreement or any other Loan
Document shall be deemed satisfied to the extent sufficient amounts (together with any
amounts paid by or on behalf of Borrowers) are deposited in the Cash Management Account
established pursuant to the Cash Management Agreement to satisfy such obligations on the
dates each such payment is required and are available for the payment of such amounts in
accordance with the applicable provisions of Section 2.6.2 hereof and the Cash Management
Agreement (i.e. are not applied to other amounts in accordance with the provisions of said
Section 2.6.2), regardless of whether any of such available funds are so applied by Lender.
Provided that sufficient funds are on deposit in the Tax and Insurance Escrow Fund, Lender
shall be responsible for any penalty or interest resulting from a failure to pay Taxes or
Insurance Premiums when due.




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 First Mezzanine Default, First Mezzanine
Event of Default, monetary Second Mezzanine Default, Second Mezzanine Event of Default, monetary
Third Mezzanine Default or Third 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;


 


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(iii) if any Interest Rate Cap Agreement is scheduled to mature prior to the First Qualified
Extended Maturity Date, Borrowers shall obtain and deliver to Lender not later than one (1)
Business Day immediately preceding the first day of the First Qualified Extension Term, one or more
Replacement Interest Rate Cap Agreements (or extension(s) of the existing Interest Rate Cap
Agreement(s)) from an Acceptable Counterparty, which Replacement Interest Rate Cap Agreement(s) (or
extension(s) of the existing Interest Rate Cap Agreement(s)) shall (i) be effective commencing on
the first day of the First Qualified Extension Term, (ii) have a LIBOR strike price equal to the
applicable Strike Price, (iii) have a maturity date not earlier than the First Qualified Extended
Maturity Date and (iv) shall have a notional amount equal to the Reduced Acquisition Loan
Outstanding Principal Balance and the Construction Loan 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 Lockbox 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 deposited with Lender in immediately available
funds, for deposit by Lender into the applicable 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 reasonably estimated and underwritten by Lender based on (A) the Annual Budget then in
effect and (B) underwriting criteria consistent with that used by Lender to determine the amount of
the deposit to the applicable Reserve Fund(s) on the Closing Date (and throughout the term of the
Loan), which amount thereafter shall constitute a part of the applicable Reserve Fund(s) and shall
be held and disbursed by Lender as set forth in Article VII hereof;



(vii) Intentionally Deleted;



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



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


 


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(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 First Mezzanine Default, First Mezzanine
Event of Default, monetary Second Mezzanine Default, Second Mezzanine Event of Default, monetary
Third Mezzanine Default or Third 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 any 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 Reduced Acquisition Loan
Outstanding Principal Balance and the Construction Loan 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 Lockbox Account and (y) obtain and deliver to Lender an opinion from
counsel (which


 


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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 deposited with Lender in immediately available
funds, for deposit by Lender into the applicable 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 reasonably estimated and underwritten by Lender based on (A) the Annual Budget then in
effect and (B) underwriting criteria consistent with that used by Lender to determine the amount of
the deposit to the applicable Reserve Fund(s) on the Closing Date (and throughout the term of the
Loan), which amount thereafter shall constitute a part of the applicable Reserve Fund(s) and shall
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
(1st) 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 First Mezzanine Loan, if the First Mezzanine Loan is then
outstanding, shall be extended to not earlier than the Second Qualified Extended Maturity Date on
the same terms and conditions as in effect on the date hereof;



(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;



(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 Outstanding Principal Balance not later than one (1) Business Day
immediately preceding the first day of the Second Qualified Extension Term; and


 


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


 


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



(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 deposited with Lender in immediately available
funds, for deposit by Lender into the applicable 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 reasonably estimated and underwritten by Lender based on (A) the Annual Budget then in
effect and (B) underwriting criteria consistent with that used by Lender to determine the amount of
the deposit to the applicable Reserve Fund(s) on the Closing Date (and throughout the term of the
Loan), which amount thereafter shall constitute a part of the applicable Reserve Fund(s) and shall
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 First Mezzanine Default, First Mezzanine
Event of Default, monetary Second Mezzanine Default, Second Mezzanine Event of Default, monetary
Third Mezzanine Default or Third Mezzanine Event of Default shall have occurred and be continuing
at the time the Fourth Qualified


 


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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 Reduced Acquisition Loan
Outstanding Principal Balance and the Construction Loan 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 Lockbox Account and (y) obtain and deliver to Lender an opinion from
counsel (which counsel may be in-house counsel for the Counterparty) for the Counterparty (upon
which Lender and its successors and assigns may rely), which opinion shall comply with Section
2.2.7(e) hereof;



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



(v) not later than one (1) Business Day immediately preceding the first day of the Fourth
Qualified Extension Term, Borrowers shall have deposited with Lender in immediately available
funds, for deposit by Lender into the applicable 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 reasonably estimated and underwritten by Lender based on (A) the Annual Budget then in
effect and (B) underwriting criteria consistent with that used by Lender to determine the amount of
the deposit to the applicable Reserve Fund(s) on the Closing Date (and throughout the term of the
Loan), which amount thereafter shall constitute a part of the applicable Reserve Fund(s) and shall
be held and disbursed by Lender as set forth in Article VII hereof;



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


 


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(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 Fee.



(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 clauses (ii) and (iii) upon any
(and each) partial prepayment of the Loan (including, without limitation, any voluntary prepayment
pursuant to the provisions of Section 2.4 (including, without limitation, any prepayment made from
the proceeds of any Release Parcel Price or IP Release Price) or otherwise, any involuntary
prepayment pursuant to the provisions of Section 7.6.3 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 an amount equal to two and one half percent (2.50%) 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, a portion of the Net Proceeds in an amount equal to two and one half
percent (2.50%) of such Net Proceeds shall be applied to the Exit Fee with the balance of such Net
Proceeds being applied to the Debt; 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 equal to the principal amount of the Debt so repaid multiplied by
two and one-half percent (2.50%). 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. Notwithstanding anything to the contrary set forth
herein, from and after the date on which any portion of the membership interests in any of the
Borrowers, First Mezzanine Borrowers, Second Mezzanine Borrowers or Third Mezzanine Borrowers is
Transferred in connection with


 


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the First Mezzanine Lender’s, Second Mezzanine Lender’s or Third Mezzanine Lender’s
enforcement of its remedies (whether by judicial foreclosure, strict foreclosure, public or private
sale or any transfer in lieu of foreclosure) under the applicable loan documents, all references in
this Section 2.8 to two and one-half percent (2.50%) shall thereafter refer instead to four and
one-half percent (4.50%).




(b) Intentionally Deleted.



(c) 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.



Section 2.9. Unused Advance Fee. On each Payment Date Borrowers shall pay the
following fee to Lender (whichever of the following applies at any given time, the “Unused Advance
Fee”): a fee equal to the product of (i) one-quarter of one percent (0.25%) per annum
multiplied by (ii) the difference between (A) the Construction Loan Amount less (B)
the aggregate amount of all Construction Loan Advances actually advanced from the Closing Date up
to such Payment Date (excluding any Construction Loan Advances made out of the Construction Loan
Reserve Account). The Unused Advance Fee shall be payable on the basis of the applicable annual
rate set forth above and shall be calculated by multiplying (1) the actual number of days elapsed
in the period for which the calculation is being made by (2) a daily rate based on a three hundred
sixty (360) day year by (3) the amount set forth in the foregoing clause (a)(ii) or
(b)(ii), as applicable. Without limiting the foregoing, the parties hereto hereby agree
that the Unused Advance Fee due on the Payment Date occurring in January, 2010 shall be $20,440.58.



ARTICLE III.

CONSTRUCTION LOAN.





Section 3.1. Construction Loan Advances.



(a) Provided no monetary Default or Event of Default shall have occurred and be continuing and
subject to the terms and conditions of this Agreement, the Construction Loan shall be advanced to
or for the account of Borrowers in Construction Loan Advances made in accordance with Section
3.6 hereof.




(b) Intentionally Deleted.




(c) Intentionally Deleted.



(d) Notwithstanding anything to the contrary set forth in this Agreement or the other Loan
Documents, at any time on or after the date hereof, Lender shall have the right to advance the
entire unfunded portion of the Construction Loan into the Construction Loan Reserve Account (the
“Remaining Construction Loan Advance”), it being agreed that (i) such Remaining Construction Loan
Advance shall accrue interest in accordance with the terms hereof from and after the date it is so
advanced into the Construction Loan Reserve Account (regardless of whether the same has been
advanced from the Construction Loan Reserve Account in accordance with the terms hereof) and (ii)
following which (A) the unfunded


 


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portion of the Construction Loan shall be held in accordance with the provisions of
Sections 7.7 and 7.8 hereof and shall constitute a Reserve Fund for all purposes
under this Agreement and the other Loan Documents, and (B) all subsequent Construction Loan
Advances shall be advanced from the Construction Loan Reserve Account until there are no funds
remaining on deposit therein, subject, in each instance, to the satisfaction of all conditions to
funding with respect thereto set forth in this Agreement (and shall continue to constitute
Construction Loan Advances for all purposes under this Agreement (except where specifically
excluded) notwithstanding that they are being advanced out of a Reserve Fund).




(e) Intentionally Deleted.



(f) All Construction Loan Advances (including the Remaining Construction Loan Advance),
excluding, however, (i) any subsequent disbursement out of the Construction Loan Reserve Account of
funds previously advanced into the Construction Loan Reserve Account pursuant to the Remaining
Construction Loan Advance as contemplated under Section 3.1(d) hereof, if applicable, and
(ii) any subsequent disbursement out of the Construction Loan Reserve Account of the Third
Mezzanine Construction Funds previously advanced into the Construction Loan Reserve Account
pursuant to Section 3.4.2 of the Third Mezzanine Loan Agreement (the foregoing clauses (i)
and (ii), collectively, the “Subsequent Construction Loan Reserve Disbursements”), shall
for all purposes be deemed part of the Outstanding Principal Balance (and the Construction Loan
Outstanding Principal Balance) upon the making of such Construction Loan Advance by Lender, it
being understood and agreed that the Subsequent Construction Loan Reserve Disbursements are not to
be deemed included in the Outstanding Principal Balance (and the Construction Loan Outstanding
Principal Balance) because (A) in the case of the foregoing clause (i), the entire amount
of the Remaining Construction Loan Advance will be included in the Outstanding Principal Balance
(and the Construction Loan Outstanding Principal Balance) as of the date of its advance into the
Construction Loan Reserve Account, and (B) in the case of the foregoing clause (ii), the
entire amount of the Third Mezzanine Construction Funds was included in the Third Mezzanine Loan
Outstanding Principal Balance as of the date of its advance under the Third Mezzanine Loan
Agreement.



(g) In no event shall any Construction Loan Advance (excluding the Remaining Construction Loan
Advance) exceed the full amount of Project Costs theretofore paid or to be paid with the proceeds
of such Construction Loan Advance, plus any Project Costs incurred by Borrowers through the
date of the Draw Request for such Construction Loan Advance, minus (i) with respect to any
Hard Costs, the applicable Retainage for each contract and subcontract, (ii) the aggregate amount
of any Construction Loan Advances (excluding the Remaining Construction Loan Advance) previously
made by Lender, and (iii) any Shortfall payments required to be made by Borrowers pursuant to
Section 3.12 hereof. It is further understood that, as between Lender and Borrowers, the
Retainage described above is intended to provide a contingency fund protecting Lender against
failure of Borrowers or Guarantors to fulfill any obligations under the Loan Documents, and that
Lender may charge amounts against such Retainage in the event Lender is required or elects to
expend funds to cure any continuing Event of Default.



(h) The Retainage, as applicable, shall be advanced on a contract by contract basis as
follows: (i) with respect to Major Contracts which have been previously


 


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approved by Lender in accordance with the terms hereof, the Retainage shall be released in
accordance with the Retainage release provisions contained therein, it being acknowledged and
agreed by Borrowers, however, that Lender’s consent of any such Major Contract may reasonably take
into account such Retainage release provisions and their relationship to the progress of the
construction work required under such Major Contract, and (ii) with respect to any other contract
or subcontract, after final completion of all construction work provided for under such contract or
subcontract and pursuant to a Construction Loan Advance made in accordance with the provisions of
Sections 3.3 and/or 3.4 hereof, as applicable.



(i) No Construction Loan Advance by Lender shall be deemed to be an approval or acceptance by
Lender of any work performed thereon or the materials furnished with respect thereto.



(j) Lender shall not be required to disburse for any category or Line Item more than the
amount specified therefor in the Loan Budget, subject to Sections 3.9, 3.10 and
3.15 hereof (or other reallocations approved by Lender in its sole and absolute
discretion).



(k) In connection with the final Construction Loan Advance hereunder (which shall be made
under and in accordance with the provisions of Section 3.4 hereof), upon satisfaction of the
conditions to such Construction Loan Advance as set forth in Section 3.4 and payment of a fee to
Lender equal to the Cost Savings Fee, Borrowers shall be entitled to receive a Construction Loan
Advance in an amount not to exceed the lesser of (i) all actual cost savings as determined by
Lender at Final Completion based on Lender’s consultation with the Construction Consultant (which
costs savings shall not be duplicative of costs savings which any Borrower received or is entitled
to receive a reimbursement for or payment from the General Contractor under the terms of the
General Contract as a result of actual amounts previously paid to such General Contractor) and (ii)
the unadvanced portion of the Construction Loan Amount (after taking into consideration all other
amounts to be advanced in connection with such final Construction Loan Advance). Any amounts to be
advanced in accordance with the terms of the preceding sentence shall be advanced by Lender into
the General Reserve Fund to be held and applied in accordance with the terms hereof.



Section 3.2. Initial Construction Loan Advance. Lender hereby acknowledges and agrees
that all conditions precedent to the Initial Construction Loan Advance were satisfied or waived on
the Construction Qualification Date, including, without limitation, the posting of the Required
Equity Letter of Credit in the Required Equity Amount as determined as of the Construction
Qualification Date, and Borrower hereby acknowledges receipt of such Initial Construction Loan
Advance as well as Advances made subsequent thereto prior to the date hereof.



Section 3.3. Conditions Precedent to Subsequent Construction Loan Advances. The
obligation of Lender to make any Construction Loan Advances from and after the date hereof shall be
subject to the satisfaction by Borrower or written waiver by Lender (in its sole discretion) of the
following conditions precedent with respect to each subsequent Construction Loan Advance:


 


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(a) Prior Conditions Satisfied. All conditions to any prior Construction Loan
Advances set forth herein or in any predecessor loan agreement (except, with respect to any
Construction Loan Advance requested pursuant to a Draw Request submitted after the date hereof, to
the extent any such conditions have been specifically modified by this Agreement) shall continue to
be satisfied by Borrower or waived in writing by Lender as of the date of such subsequent
Construction Loan Advance.




(b) Deliveries. The following items or documents shall have been delivered to Lender:



(i) A Draw Request complying with the provisions of this Agreement which shall constitute
Borrowers’ representation and warranty to Lender that: (A) any completed construction is
substantially in accordance with the Plans and Specifications, (B) all costs for the payment of
which Lender has previously advanced funds have in fact been paid or are being held by Borrowers
pending the resolution of a bonafide dispute with a Trade Contractor; provided,
however, that (1) in such event, the Draw Request shall include a description of the
dispute, the identity of the Trade Contractor and the maximum amount in dispute, (2) in no event
shall Borrowers be holding, in the aggregate at any one time, Construction Loan proceeds of more
than $1,500,000.00 on account of all such pending disputes with Trade Contractors, and (3) if the
dispute is not resolved within sixty (60) days following the date on which the Construction Loan
Advance which was intended to pay the disputed cost was advanced, Borrowers shall return to Lender
the amount of Construction Loan proceeds advanced to pay such disputed cost, which amount may be
requested again by Borrowers when the dispute is resolved, (C) all the representations and
warranties contained in Article IV of this Agreement continue to be true and correct in all
material respects (except to the extent of changes in circumstances or conditions which are not
otherwise prohibited by this Agreement, including a specific statement that all Borrowers are in
compliance with Section 4.1.30 hereof), (D) no monetary Default or any Event of Default
shall have occurred and be continuing hereunder, and (E) Borrowers continue to be in compliance in
all material respects with all of the other terms, covenants and conditions contained in this
Agreement.



(ii) An Advance Request accompanied by a completed and itemized Application and Certificate
for Payment (AIA Document No. G702) attached hereto as Exhibit H or similar form approved
by Lender, containing the certification of the General Contractor or Trade Contractor to whom such
payment is made, as applicable, and the Architect as to the material accuracy of same, together
with invoices relating to all items of Hard Costs covered thereby and accompanied by a cost
breakdown showing the cost of work on, and the cost of materials incorporated into, the Project to
the date of the requisition. The cost breakdown shall also show the percentage of completion of
each Line Item on the Loan Budget, and the accuracy of the cost breakdown shall be certified by
Borrowers and by the Architect. All such applications for payment shall also show all Trade
Contractors, including Major Contractors, by name and trade, the total amount of each contract or
subcontract, the amount theretofore paid to each Trade Contractor as of the date of such
application, and the amount to be paid from the proceeds of the Construction Loan Advance to each
Trade Contractor.



(iii) A General Contractor Affirmation of Payment (an “Affirmation of Payment”) (AIA Form
G706) in the form attached hereto as Exhibit M.


 


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(iv) All invoices relating to all items of Soft Costs identified in the Advance Request or
Borrowers’ receipted bills therefor, or other reasonable proof of expenditure or payments for Soft
Costs due reasonably acceptable to Lender.



(v) An Anticipated Cost Report in respect of the Project, which shall be reasonably
satisfactory in form and substance to Lender and the Construction Consultant.



(vi) An endorsement to the Title Insurance Policy dated the date of such requested
Construction Loan Advance and showing the Mortgage as a prior and paramount Lien on each of the
Properties, subject only to (A) the Permitted Encumbrances, (B) any other Liens or encumbrances
consented to in writing by Lender, and (C) any other Liens which are then being contested in
accordance with the provisions of Section 3.6(b) of the Mortgage, and which shall have the effect
of increasing the coverage of the Title Insurance Policy by an amount equal to the amount of the
Construction Loan Advance then being made, along with co-insurance or reinsurance in such forms and
amounts as may be reasonably required by Lender. Any reinsurance agreements shall provide for
direct access with the other title companies satisfactory to Lender.



(vii) (A) An updated lien waiver log, (B) duly executed conditional Lien waivers in the form
set forth in Exhibit L-1 (progress payment) or L-3 (final payment) hereto, as
applicable, from all Major Contractors who have performed work, for the work so performed, and/or
who have supplied labor and/or materials, for the labor and/or materials so supplied, except for
such work or labor and/or materials for which payment thereof is requested, as to which duly
executed unconditional Lien waivers in the form set forth in Exhibit L-2 (progress payment)
or L-4 (final payment) hereto, as applicable, shall be delivered to Lender with the next
request for a Construction Loan Advance, and (C) duly executed unconditional Lien waivers in the
form set forth in Exhibit L-2 (progress payment) or L-4 (final payment) hereto, as
applicable, with respect to all payments which were requested to be paid with the immediately
preceding Construction Loan Advance and from whom a conditional Lien waiver in the form set forth
in Exhibit L-1 (progress payment) or L-3 (final payment) hereto, as applicable, was
delivered in the immediately preceding request for a Construction Loan Advance.



(viii) An updated (A) Architect’s Certificate, (B) General Contractor’s Certificate, and (C)
at Lender’s request, an updated Contractor’s Certificate from any Major Contractor, together with
(1) copies of any amendments to the Architect’s Contract, General Contract, and any Major Contract
(all of which amendments shall be approved by Lender as and to the extent Lender approval is
required in accordance with the terms hereof) and (2) copies of any new contracts and subcontracts
for the Project which do not constitute Major Contracts entered into subsequent to the date of the
immediately preceding Draw Request.



(ix) A spreadsheet of Loan Budget Line Items in form reasonably satisfactory to Lender showing
amounts expended under each Line Item to date and amounts under each Line Item remaining to be paid
out.




 


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(x) Evidence that all Government Approvals necessary to permit the construction of that/those
portion(s) of the Project to be funded with the proceeds of the proposed Construction Loan Advance
have been obtained, including, without limitation, one or more acceptable building permits.



(xi) A monthly progress report from the General Contractor and/or the General Contractor,
including, without limitation, a Loan Budget status (with respect to Hard Costs only), Construction
Schedule status, Governmental Approval status, if applicable, and a description of any issues to be
resolved between Borrowers and any designer or Trade Contractor, which report shall be reasonably
satisfactory to Lender and Construction Consultant.



(xii) Evidence reasonably satisfactory to Lender that the notional amount of the Interest Rate
Cap Agreement(s) with respect to the Construction Loan shall be no less than the Construction Loan
Outstanding Principal Balance, after giving effect to the proposed Construction Loan Advance,
pursuant to one or more modified or new Interest Rate Cap Agreements complying with the terms of
Section 2.2.7 hereof.



(xiii) Lender and the Construction Consultant shall have received and approved any changes to
the Disbursement Schedule.



(c) Payment of Fees and Expenses. Payment by Borrowers of all fees and expenses
required by this Agreement, to the extent then due and payable, including, without limitation, (i)
any fees and expenses referred to in Section 10.13 hereof then due and payable, (ii) any
reasonable fees and expenses then due and payable to the Construction Consultant, (iii) any Unused
Advance Fee then due and payable, (iv) any Administrative Agent Fee then due and payable, and/or
(v) any title premiums and/or other title charges then due and payable.



(d) Required Equity. In the event that, as of the date of the proposed Construction
Loan Advance, the Total Cost Ratio exceeds eighty-one percent (81%) (the amount in excess of such
eighty-one percent (81%) threshold being referred to herein as a “Subsequent Required Equity
Amount”), Borrowers shall be required to provide to Lender, as an additional equity contribution,
the Subsequent Required Equity Amount, which may be provided in one of, or by a combination of, the
following manners: (A) a voluntary prepayment of the Loan in accordance with all of the terms of
Section 2.4.1 hereof and to be applied as set forth in Section 2.4.3(a) hereof
(with the Exit Fee payable in connection therewith being determined in accordance with the
provisions of Section 2.8 hereof), (B) the delivery to Lender of evidence satisfactory to
Lender in its reasonable discretion that Borrowers or one or more Affiliates thereof have
previously expended cash to satisfy Project Costs included on the Loan Budget, which shall result
in a credit against the amount of the Required Equity Amount by the amount of such cash expended,
and/or (C) the delivery of a Required Equity Letter of Credit.



If Borrowers elect to deliver any Required Equity Letter of Credit, the following shall apply
to each such Required Equity Letter of Credit, including, without limitation, the Required Equity
Letter of Credit on deposit with Lender as of the date hereof representing the Required Equity
Amount and any Required Equity Letter of Credit delivered to Lender in accordance with the terms
hereof representing any Subsequent Required Equity Amount:


 


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(A) Borrowers shall pay to Lender all of Lender’s reasonable
out-of-pocket costs and expenses in connection therewith, including, without
limitation, any costs or expenses incurred in drawing down on such Required
Equity Letter of Credit. Borrowers shall not be entitled to draw from any
such Required Equity Letter of Credit. Upon five (5) days notice to Lender
and provided that no Event of Default, First Mezzanine Event of
Default, Second Mezzanine Event of Default or Third Mezzanine Event of
Default shall have occurred and be continuing, Borrowers may replace such
Required Equity Letter of Credit with a voluntary prepayment of the Loan,
the First Mezzanine Loan, the Second Mezzanine Loan and the Third Mezzanine
Loan in an aggregate amount equal to such Required Equity Letter of Credit,
which prepayment shall be applied in accordance with Section
2.4.3(a) hereof (with the Exit Fee payable in connection therewith being
determined in accordance with the provisions of Section 2.8
hereof), following which prepayment, Lender shall promptly return such
Required Equity Letter of Credit to Borrowers.




(B) Each Required Equity Letter of Credit delivered under this
Agreement shall be additional security for the payment of the Debt. Upon
the occurrence and during the continuance of an Event of Default, Lender
shall have the right, at its option, to draw on any Required Equity Letter
of Credit and to apply all or any part thereof in accordance with the
provisions of Section 2.4.3(a) hereof applicable to a prepayment
following the occurrence and during the continuance of an Event of Default.




(C) In addition to any other right Lender may have to draw upon a
Required Equity Letter of Credit pursuant to the terms and conditions of
this Agreement, Lender shall have the additional rights to draw in full on
any Required Equity Letter of Credit: (1) with respect to any evergreen
Required Equity Letter of Credit, if Lender has received a notice from the
issuing bank that such Required Equity Letter of Credit will not be renewed
and a substitute Required Equity Letter of Credit is not provided at least
ten (10) Business Days prior to the date on which the outstanding Required
Equity Letter of Credit is scheduled to expire; (2) with respect to any
Required Equity Letter of Credit with a stated expiration date, if Lender
has not received a notice from the issuing bank that it has renewed such
Required Equity Letter of Credit at least ten (10) Business Days prior to
the date on which such Required Equity Letter of Credit is scheduled to
expire and a substitute Required Equity Letter of Credit is not provided at
least ten (10) Business Days prior to the date on which the outstanding
Required Equity Letter of Credit is scheduled to expire; (3) upon receipt of
notice from the issuing bank that such Required Equity Letter of Credit will
be terminated and a substitute Required Equity Letter of Credit is not
provided at least ten (10) Business Days prior to the date on which the
outstanding Required Equity Letter of Credit is scheduled to be terminated;
or (4) if Lender has received notice that the bank issuing any Required
Equity Letter of Credit shall cease to be an


 


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Approved Bank and within ten (10) Business Days after Lender notifies
Borrowers in writing of such circumstance, Borrowers shall fail to deliver
to Lender a substitute Required Equity Letter of Credit issued by an
Approved Bank or deposit with Lender into the Construction Loan Reserve
Account, cash in an amount equal to the Required Equity Letter of Credit
then in effect less any amounts previously drawn thereunder or converted
with respect thereto (unless such amounts were previously drawn or converted
as a result of any event specified in clause (1), (2), (3) or (4)
above or as a result of the exercise of remedies with respect to an Event of
Default that has occurred and is continuing). Notwithstanding anything to
the contrary contained in the above, Lender is not obligated to draw upon
any Required Equity Letter of Credit upon the happening of an event
specified in clause (1), (2), (3) or (4) above and shall not
be liable for any losses sustained by Borrowers due to the insolvency of the
bank issuing any such Required Equity Letter of Credit if Lender has not
drawn upon such Required Equity Letter of Credit.




(D) With respect to any Required Equity Letter of Credit permitted to
be delivered pursuant to this Section 3.3(d) and/or Section
3.12 hereof, instead of delivering separate Required Equity Letters of
Credit, Borrowers shall have the right, at any time, to deliver a
replacement Required Equity Letter of Credit in an amount which reflects the
aggregate amount of the separate Required Equity Letters of Credit then in
effect and/or then desired by Borrowers to be in effect and, upon delivery
of any such replacement Required Equity Letter of Credit, Lender shall
promptly return to Borrowers that/those previously issued Required Equity
Letter(s) of Credit the amount of which has been included in such
replacement Required Equity Letter of Credit.



(e) Shortfalls. Lender shall have received evidence reasonably satisfactory to Lender
that no Shortfall shall then exist.



(f) Change Orders. Lender shall have approved all Major Contracts and all Change
Orders entered into since the last Construction Loan Advance and, with respect to Change Orders,
that require Lender’s approval pursuant to Section 3.15 hereof.



(g) Certification Regarding Chattels. Lender shall have received, at Borrowers’
expense, a search of the public records that, subject to Section 3.11 hereof and the
Permitted Encumbrances, discloses no conditional sales contracts, chattel mortgages, leases of
personalty, financing statements or title retention agreements which affect any of the Properties.



(h) Notices. All notices required by any Governmental Authority or by any Legal
Requirement to be filed prior to commencement of construction of that/those portion(s) of the
Project to be funded with the proceeds of the proposed Construction Loan Advance shall have been
filed.


 


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(i) No Monetary Default or Event of Default. On the date of the Construction Loan
Advance there shall exist no monetary Default or any Event of Default.



(j) Representations and Warranties. All representations and warranties made by
Borrowers and/or Guarantors in the Loan Documents or otherwise made by or on behalf of Borrowers
and/or Guarantors in connection therewith or after the date thereof shall continue to be true and
correct in all material respects on the date of the Construction Loan Advance (except to the extent
of changes in circumstances or conditions which are not otherwise prohibited by this Agreement).



(k) No Damage. The Improvements (including any partially constructed portion of the
Project) shall not have been injured or damaged by fire, explosion, accident, flood or other
casualty, unless (i) such injury or damage constitutes a Minor Casualty, or (ii) the damage
therefrom shall have been fully Restored, or (iii) Net Proceeds in an amount sufficient for
Restoration shall have been received by Borrowers or Lender as required pursuant to this Agreement.



(l) Construction Consultant Approval. Lender shall have received a Construction
Consultant Approval with respect to the Construction Loan Advance, it being expressly agreed by
Lender that Lender shall diligently pursue obtaining Construction Consultant’s response within a
commercially reasonable time period following any Draw Request which includes all the required
items as set forth herein.



(m) Loan Document Modifications. Modifications to any Loan Documents, in form and
substance reasonably satisfactory to Lender, as shall be required in accordance with the terms of
this Agreement, shall have been duly executed and delivered by the parties thereto and shall be in
full force and effect, and Lender shall have received the originals or fully executed counterparts
thereof.



Section 3.4. Conditions of Final Construction Loan Advance. In addition to the
conditions set forth in Section 3.3 hereof, Lender’s obligation to make the final
Construction Loan Advance, including, without limitation, in respect of any Retainage pursuant to
this Agreement, shall be subject to the occurrence of Final Completion as evidenced by Lender’s
receipt (or waiver of receipt by Lender in its sole discretion) of the following:



(a) Approval by Construction Consultant. Notification from the Construction
Consultant that the Project (including the Punch List Items) has been completed substantially in
accordance with the Plans and Specifications, all Legal Requirements, all material Permitted
Encumbrances and this Agreement.



(b) Certificates. An updated (A) Architect’s Certificate, (B) General Contractor’s
Certificate, and (C) at Lender’s request, an updated Contractor’s Certificate from any Major
Contractor.



(c) Certificates of Occupancy. A copy of the Certificate(s) of Occupancy (it being
agreed that if the same is subject to any conditions, such conditions shall be acceptable to Lender
in its reasonable discretion) and all other material Governmental Approvals for the Project.


 


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(d) Lien Waivers. (i) An updated lien waiver log, (ii) duly executed conditional Lien
waivers in the form set forth in Exhibit L-3 (final payment) hereto from all Major
Contractors who have performed work, for the work so performed, and/or who have supplied labor
and/or materials, for the labor and/or materials so supplied, except for such work or labor and/or
materials for which payment thereof is requested, as to which duly executed unconditional Lien
waivers in the form set forth in Exhibit L-4 (final payment) hereto shall be delivered to
Lender within thirty (30) days following such final Construction Loan Advance, and (iii) duly
executed unconditional Lien waivers in the form set forth in Exhibit L-4 (final payment)
hereto with respect to all payments which were requested to be paid with the immediately preceding
Construction Loan Advance and from whom a conditional Lien waiver in the form set forth in
Exhibit L-1 (progress payment) or L-3 (final payment) hereto, as applicable, was delivered
in the immediately preceding request for a Construction Loan Advance.



(e) Final Survey. Final Surveys of the Hotel/Casino Property and the Adjacent
Property acceptable to Lender showing the as-built location of the completed Project Improvements
(all of which shall be within lot lines of the real property comprising a portion of the applicable
Property and in compliance with all set-back requirements) and all easements appurtenant thereto.



(f) Payment of Costs. Evidence satisfactory to Lender that (i) all sums due in
connection with the construction of the Project have been paid in full (or will be paid out of the
funds requested to be advanced in the final Construction Loan Advance), as evidenced by (A) with
respect to any party with Lien rights, an executed Lien waiver substantially in the form attached
hereto as Exhibit L-3 or L-4, as applicable (as required under the foregoing
clause (d)), or (B) with respect to any party without Lien rights, an invoice and proof of
payment or such other evidence of payment as shall be reasonably satisfactory to Lender, and (ii)
except for any Lien then being contested pursuant to, and in accordance with, Section 3.6(b) of the
Mortgage, no party claims or has a right to claim any statutory or common law Lien arising out of
the construction of the Project or the supplying of labor, material and/or services in connection
therewith.



(g) “As-Built” Plans and Specifications. A full and complete set of “as built” Plans
and Specifications certified to by the Architect.



(h) Title Insurance Policy. Endorsements to the Title Insurance Policy referencing
the final Surveys and indicating no Liens other than Permitted Encumbrances and including an update
to the Form 9 Comprehensive Endorsement, in each case in form and substance reasonably acceptable
to Lender.



(i) Payment of Fees and Expenses. Payment by Borrowers of all fees and expenses
required by this Agreement, to the extent then due and payable, including, without limitation, (i)
any fees and expenses referred to in Section 10.13 hereof then due and payable, (ii) any
reasonable fees and expenses then due and payable to the Construction Consultant, (iii) any Unused
Advance Fee then due and payable, (iv) any Administrative Agent Fee then due and payable, and/or
(v) any title premiums and/or other title charges then due and payable.


 


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(j) Other Documents. If requested by Lender, a completed AIA Form G704 (Certificate
of Substantial Completion) and/or a completed AIA Form G707 (Consent of Surety to Final Payments).



Section 3.5. No Reliance. All conditions and requirements of this Agreement with
respect to any Construction Loan Advance are for the sole benefit of Lender and no other Person or
party (including, without limitation, the Construction Consultant and Trade Contractors, including
Major Contractors and materialmen engaged in the construction of the Project) shall have the right
to rely on the satisfaction of such conditions and requirements by Borrowers. Lender shall have
the right, in its sole and absolute discretion, to waive any such condition or requirement.



Section 3.6. Procedures for Construction Loan Advances.



(a) At such time as Borrowers shall desire to obtain a Construction Loan Advance (other than
the Remaining Construction Loan Advance), but in no event more frequently than twice every thirty
(30) days, Borrower shall complete, execute and deliver to Lender and Construction Consultant a
Draw Request not less than ten (10) Business Days prior to the date of the requested Construction
Loan Advance (the “Requested Disbursement Date”).



(b) In addition to the conditions set forth in Sections 3.3 and 3.4 hereof, as
applicable, each Construction Loan Advance shall be conditioned on satisfaction of the following
conditions precedent:



(i) The amount of any Construction Loan Advance shall not exceed the unfunded amount of the
Construction Loan Amount; and



(ii) Lender shall have received from Borrowers a statement, duly acknowledged, certifying the
Construction Loan Outstanding Principal Balance and the Reduced Acquisition Loan Outstanding
Principal Balance, which may be included in the applicable Draw Request.



(c) Each Draw Request shall be accompanied by:



(i) a written request of Borrowers for any necessary changes in the Plans and Specifications,
the Loan Budget, the Disbursement Schedule and/or the Construction Schedule; and



(ii) (A) copies of all executed Change Orders, (B) copies of all executed Major Contracts, (C)
a list of all other contracts and subcontracts which are not Major Contracts and a copy of any such
contract(s) and/or subcontract(s) requested by Lender, and (D) to the extent reasonably requested
by Lender, copies of all inspection or test reports and other documents relating to the
construction of the Project, in each of the foregoing instances, to the extent not previously
delivered to Lender.



(d) With respect to Construction Loan Advances for a deposit under any contract or subcontract
for the purchase of materials or FF&E, the applicable Draw Request shall be accompanied by (i) a
copy of the executed contract, subcontract or purchase order which



 


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requires such deposit, which contract or subcontract either (A) shall have been approved by
Lender in its reasonable judgment prior to execution if it is a Major Contract, or (B) shall
contain a deposit which is customary for similar materials or FF&E, as applicable, in similar
projects as the Project (or such deposit is otherwise reasonably acceptable to Lender), and (ii) an
invoice for payment of such deposit from the applicable contractor or subcontractor. Additionally,
Borrowers shall not have outstanding at any one time aggregate deposits exceeding $5,000,000.00
(Lender agreeing that it shall not unreasonably withhold its consent to an increase of such limit),
it being acknowledged and agreed by Lender and Borrowers that once a deposit is used to purchase
materials or FF&E and Borrowers receive a bill of sale with respect thereto and/or the same are
delivered on-site to the Hotel/Casino Property or the Adjacent Property, the amount thereof shall
no longer constitute a deposit for purposes of the foregoing limit.



(e) Provided that all of the conditions for the disbursement of Construction Loan Advances set
forth in Sections 3.2, 3.3 and/or 3.4 hereof, as applicable, have been satisfied,
Lender shall make the Construction Loan Advance on the Requested Disbursement Date. Each
Construction Loan Advance shall be made by wire transfer to a checking account of Borrowers or, at
the option of Lender, as provided in Section 3.7 hereof. All proceeds of all Construction
Loan Advances shall be used by Borrowers only for the purposes for which such Construction Loan
Advances were made. Borrowers shall not commingle such funds with other funds of Borrowers.



Section 3.7. Direct Advances to Third Parties. Lender may make any or all
Construction Loan Advances to (a) General Contractor or any Major Contractor, as applicable, for
construction expenses which shall theretofore have been approved by Lender and for which Borrowers
shall have failed to make payment after receipt by Borrowers of such applicable Construction Loan
Advance, (b) the Architect, to pay its fees to the extent funds are allocated thereto in the Loan
Budget and for which Borrowers shall have failed to make payment after receipt by Borrowers of such
applicable Construction Loan Advance, (c) the Construction Consultant, to pay its fees, (d)
Lender’s counsel, to pay its fees, (e) the Administrative Agent, to pay its Administrative Agent
Fee, (f) Lender, to pay (i) the Unused Advance Fee, (ii) any expenses incurred by Lender which are
reimbursable by Borrowers under the Loan Documents, provided that Borrowers shall
theretofore have received notice from Lender that such expenses have been incurred and Borrowers
shall have failed to reimburse Lender for said expenses beyond any grace periods provided for said
reimbursement under this Agreement or any of the other Loan Documents, and/or (iii) following the
occurrence and during the continuance of an Event of Default, any other sums due to Lender under
the Notes, this Agreement or any of the other Loan Documents, all to the extent that the same are
not paid by the respective due dates thereof (including any applicable grace periods), and in each
case subject to the approval of Lender, and (g) any other Person to whom Lender determines payment
is due to the extent provided in the Loan Budget, after written notice to Borrowers and Borrowers
failure to make such payment within ten (10) Business Days following such notice, subject to
Borrowers’ right to dispute any such payment in accordance with the terms and provisions of this
Agreement. The execution of this Agreement by Borrowers shall, and hereby does, constitute an
irrevocable authorization to so advance the proceeds of the Construction Loan directly to any such
Persons described in the foregoing clauses (a) — (g), above, as amounts become due and
payable to them hereunder. No further authorization from Borrowers or any other Person shall be
necessary to warrant such direct Construction Loan Advances as provided in this Section
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Construction Loan Advances shall be secured by the Mortgage and the other applicable Loan
Documents as fully as if made directly to Borrowers.



Section 3.8. Construction Loan Advances Do Not Constitute a Waiver. No Construction
Loan Advance shall constitute a waiver of any of the conditions of Lender’s obligation to make
further Construction Loan Advances nor, in the event Borrowers are unable to satisfy any such
condition, which inability also constitutes a Default or an Event of Default, shall any
Construction Loan Advance have the effect of precluding Lender from thereafter declaring such
inability (following any applicable notice and grace period) to be an Event of Default hereunder.



Section 3.9. Cost Overruns; Reallocation of Line Items.



(a) Subject to Borrowers’ rights to reallocate (i) among Line Item Components as provided in
this Section 3.9, (ii) from Contingency Line Items as provided in Section 3.10
hereof, and (iii) with respect to Change Orders as provided in Section 3.15 hereof, if, at
any time after the date of the Initial Construction Loan Advance, Borrowers become aware of any
change in the Project Costs that will materially increase a category or Line Item reflected in the
Loan Budget, Borrowers shall promptly notify Lender in writing and promptly submit to Lender for
Lender’s and the Construction Consultant’s approval a revised Loan Budget; provided,
however, that only those Line Items and components which are proposed to be changed shall
be subject to Lender’s and the Construction Consultant’s approval at that time. Any reallocation
of any category or Line Items in the Loan Budget in connection with cost overruns shall be subject
to Lender’s approval in its reasonable discretion, subject to Borrowers’ rights under Section
3.15 hereof with respect to Change Orders that do not require Lender’s approval. Lender shall
have no obligation to make any further Construction Loan Advances unless and until the proposed
changes to the Loan Budget so submitted by Borrowers are approved by Lender in its reasonable
discretion.



(b) Borrowers, without the consent of Lender but after notice to Lender, may reallocate to any
Line Item all or any portion of any Cost Savings not previously reallocated, provided that
(i) no single Line Item is increased by more than ten percent (10%), and (ii) except as provided in
Section 3.10(b) hereof, under no circumstances shall Borrowers be entitled to reallocate
any amount allocated to any Contingency Line Item without Lender’s approval, to be granted or
withheld in Lender’s sole and absolute discretion. All other reallocations of Cost Savings shall
require Lender’s prior consent, not to be unreasonably withheld. Upon any such reallocation of all
or any portion of any such Cost Savings to any Line Item, the amount of such Cost Savings shall no
longer be deemed “Cost Savings” hereunder, but shall be deemed to be part of the Line Item to which
such amount was reallocated and the Loan Budget shall be deemed automatically amended without
further action. As used in this Agreement, “Cost Savings” shall mean and be determined as follows:




(A) If Lender reasonably determines that any component of the
construction of the Project which is the subject of a Line Item (a “Line
Item Component”) has been completed without the expenditure by Borrowers of
the entire amount allocated in the Loan Budget to such Line Item Component,
and all Major Contractors have been paid in full for


 


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work performed and materials provided with respect to such Line Item
Component, the difference between the amount of such Line Item Component in
the Loan Budget and the amount so expended for such Line Item Component
shall be deemed to be a “Cost Savings”; or




(B) If prior to the completion of the Line Item Component (other than
the Line Item for interest or any Contingency Line Item), Borrowers shall
demonstrate to Lender’s reasonable satisfaction that upon completion of such
Line Item Component a Cost Savings will be realized pursuant to the
foregoing clause (i) with respect to such Line Item Component, the
amount of such Cost Savings which is demonstrated to Lender’s reasonable
satisfaction shall also be deemed to be a “Cost Savings”. Lender shall not
be required to allow such a reallocation with respect to a Line Item
constituting Hard Costs unless (1) such Line Item has a firm or guaranteed
maximum price or fixed price contract or sub-contract in place, (2) the work
has commenced and is proceeding substantially in accordance with the
Construction Schedule, and (3) the Construction Consultant is satisfied with
said contract or sub-contract, including, without limitation, with regard to
the scope of said contract or sub-contract.



(c) New Line Items may not be created without Lender’s prior written consent in its reasonable
discretion and, if created with Lender’s consent, no portion of any Contingency Line Item shall be
reallocated to any such new Line Item, except as provided in Section 3.10 hereof. To the
extent not paid for by reallocating Cost Savings among Line Items or by reallocating any
Contingency Line Item in accordance with Section 3.10 hereof, new Line Items must be paid
for by Borrowers from sources other than the Loan.



Section 3.10. Contingency Reallocations.



(a) The amounts allocated as Contingency (Hard Costs) or Contingency (Soft Costs) in the Loan
Budget and that are intended to cover the eventuality of unforeseen costs or cost overruns (the
“Contingency Line Items”) shall be disbursed from time to time upon request by Borrowers and,
subject to Section 3.10(b) below, upon approval by Lender, not to be unreasonably withheld,
and may be used only for appropriate, as applicable, Hard Costs of, or Soft Costs associated with,
the Project. Any expenditure of Contingency (Hard Costs) for Soft Costs or Contingency (Soft
Costs) for Hard Costs shall be prohibited unless expressly approved by Lender in its sole and
absolute discretion.



(b) Borrowers, without the consent of Lender but after notice to Lender, may reallocate up to
ten percent (10%) of the Contingency (Hard Costs) to any Hard Cost Line Item and/or may reallocate
up to ten percent (10%) of the Contingency (Soft Costs) to any Soft Cost Line Item,
provided that, in either event, (i) no single Line Item is increased by more than ten
percent (10%) in connection with this or any prior reallocation of any Contingency Line Item and
(ii) after giving effect to any such reallocation, (A) the sum of the aggregate of all amounts so
reallocated and any amounts previously reallocated from the Contingency (Hard Costs) (including,
without limitation, amounts previously reallocated to satisfy the amount of



 


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the contingency required to be maintained under the General Contract) or Contingency (Soft
Costs), as applicable, when added to the remaining amount of the Contingency (Hard Costs) or
Contingency (Soft Costs), as applicable, shall be equal to or greater than (y) in the instance of a
reallocation of amounts from the Contingency (Hard Costs), at least 10% of the total Hard Costs set
forth in the Loan Budget (including estimated and incurred Hard Costs) and (z) in the instance of a
reallocation of amounts from the Contingency (Soft Costs), at least 5% of the total Soft Costs set
forth in the Loan Budget (including such estimated and incurred Soft Costs) and (B) the remaining
amount of the Contingency (Hard Costs) shall be equal to or greater than five percent (5%) of the
difference between (y) the total Project Costs estimated in the Loan Budget (including estimated or
incurred Project Costs) less (z) any Project Costs actually incurred (provided that, in the
event such Project Costs identified in this clause (z) relate to items over which Lender and/or
Construction Consultant has consent rights hereunder, such Project Costs shall have been approved
by Lender and/or Construction Consultant in accordance with the terms hereof). All other
reallocations of any Contingency shall require Lender’s prior consent, not to be unreasonably
withheld. Notwithstanding the foregoing (and without limiting Lender’s consent rights relative to
reallocations of the Contingency (Hard Costs) and the Contingency (Soft Costs)), Lender expressly
acknowledges that the General Contractor shall have the right to apply contingency under the
General Contract as permitted thereunder. Upon any such reallocation of all or any portion of any
Contingency to any Line Item, the amount of such Contingency shall no longer be deemed
“Contingency” hereunder, but shall be deemed to be part of the Line Item to which such amount was
reallocated. In giving or withholding its approval to any reallocation of any Contingency, Lender
may take into account the then current state of completion of the Project, any existing cost
overruns and any potential cost overruns as may then be reasonably foreseen or reasonably
anticipated by Lender.



Section 3.11. Stored Materials. Lender shall not be required to authorize any
disbursement of funds for any materials, machinery or other Personal Property not yet incorporated
into the Project (the “Stored Materials”), unless the following conditions are satisfied or waived
in writing by Lender:



(a) Borrowers shall deliver to Lender bills of sale or other evidence reasonably satisfactory
to Lender of the cost of, and, subject to the payment therefor, Borrowers’ title in and to, such
Stored Materials;



(b) The Stored Materials are identified to the Hotel/Casino Property or the Adjacent Property
and Borrowers, are segregated so as to adequately give notice to all third parties of Borrowers’
title in and to such materials, and are components in substantially final form ready for
incorporation into the Project;



(c) The Stored Materials are stored at the Hotel/Casino Property or the Adjacent Property or
at such other third party owned and operated site as Lender shall reasonably approve (which shall
specifically exclude any site located outside of the continental United States) and are protected
against theft and damage in a manner reasonably satisfactory to Lender, including, if requested by
Lender, storage in a bonded warehouse in Las Vegas, Nevada;



(d) The Stored Materials will be paid for in full with the funds to be disbursed and all Lien
rights or claims of the supplier will be released upon full payment;


 


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(e) Lender has or will have upon payment with disbursed funds a perfected, first priority
security interest in the Stored Materials;



(f) The Stored Materials are insured for an amount equal to their replacement costs in
accordance with Section 6.1 hereof;



(g) The aggregate cost of Stored Materials to be stored at the Hotel/Casino Property and/or
the Adjacent Property at any one time shall not exceed $10,000,000.00; and



(h) The aggregate cost of Stored Materials to be stored off-site from the Hotel/Casino
Property and the Adjacent Property at any one time shall not exceed $20,000,000.00.



Section 3.12. Loan Balancing and Shortfalls.



(a) Notwithstanding anything contained herein to the contrary, if at any time or from time to
time during the term of this Agreement, Lender shall reasonably determine that there exists any
Shortfall, Lender shall deliver notice of such determination to Borrowers and thereafter until such
Shortfall no longer exists, Lender will not be obligated to make any Construction Loan Advances
(but may or may not, in its sole discretion, make the Remaining Construction Loan Advance), and,
within ten (10) days of receipt of such notice of determination, Borrowers shall take any one of,
or a combination of, the following actions: (i) deposit with Lender an amount equal to the
Shortfall (such deposited funds, the “Shortfall Funds”), (ii) deliver a Required Equity Letter of
Credit in the amount of the Shortfall, or (iii) make one or more payments on account of Hard Costs
and/or Soft Costs until the Shortfall has been reduced to zero and deliver to Lender reasonably
satisfactory evidence thereof.



(b) Any payment of Shortfall Funds made to Lender pursuant to Section 3.12(a)(i)
hereof shall be deposited into an account with Lender (the “Shortfall Account”). Provided no Event
of Default has occurred and is continuing, any funds held in the Shortfall Account will be advanced
by Lender to Borrowers as though such funds were proceeds of the Construction Loan and subject to
all of the conditions with respect thereto set forth in Sections 3.2, 3.3 and/or
3.4 hereof, as applicable, prior to any further Construction Loan Advances. Until so
advanced to Borrowers pursuant to the provisions of Sections 3.2, 3.3 and/or 3.4
hereof, as applicable, all such Shortfall Funds on deposit in the Shortfall Account shall be held
as cash collateral and additional security for the Debt and the Other Obligations and shall
constitute a Reserve Fund in which Lender shall have a Lien and security interest pursuant to the
provisions of Section 7.8 hereof.



(c) Upon the taking of any of the actions contemplated under Section 3.12(a)
hereof to cure any Shortfall, such Shortfall shall be deemed to no longer exist for the purposes of
this Agreement.



Section 3.13. Quality of Work. No Construction Loan Advance or any portion thereof
shall be made with respect to materially defective work or to any Trade Contractor that has
performed work that is materially defective and that has not been cured, as confirmed by the report
of the Construction Consultant, but Lender may disburse all or part of any Construction



 


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Loan Advance before the sum shall become due if Lender reasonably believes it advisable to do
so, and all such Construction Loan Advances or parts thereof shall be deemed to have been made
pursuant to this Agreement.



Section 3.14. Imported Materials. No Construction Loan Advance or any portion thereof
shall be made with respect to any materials imported from outside the domestic United States unless
and until such materials clear United States customs and are either incorporated in the Project or
stored in accordance with the provisions of Section 3.11 hereof.



Section 3.15. Approval of Change Orders. Except as provided in this Section
3.15, Borrowers will not amend, alter or change (pursuant to Change Order, amendment or
otherwise) the Plans and Specifications, the Loan Budget or any Major Contract unless the same
shall have been approved in advance in writing by Lender, by all applicable Governmental
Authorities and by each surety under the Payment and Performance Bonds (if required thereunder).
Borrowers will provide to Lender upon execution, copies of approved Change Orders with respect to
any Major Contract. Notwithstanding the foregoing, Borrowers shall be allowed to make changes in
the Plans and Specifications without the consent of Lender upon and subject to all of the following
conditions and requirements:



(a) The Change Order is not a Material Change Order;



(b) Intentionally Deleted;



(c) Such proposed Change Order, together with all other Change Orders theretofore entered into
with respect to the Project, will not increase the guaranteed maximum price of any Major Contract
in excess of $2,500,000.00 over the original amount;



(d) Such proposed Change Order will not cause any Line Item in the Loan Budget to be exceeded
(after taking into account use of the Contingency Line Items to the extent permitted under
Section 3.10 hereof, reallocations under Section 3.9 hereof and any other
reallocations approved by Lender in its sole and absolute discretion), unless Borrowers eliminate
the Shortfall caused thereby in accordance with the provisions of Section 3.12 hereof;



(e) Such proposed Change Order, together with all other Changes Orders in the aggregate, shall
not, in any material fashion, alter or change (i) any structural components, construction design,
layout, scope and/or square footage of the Project, and/or (ii) the structural integrity, utility,
quality of materials and/or asset quality of the Project;



(f) Such proposed Change Order, together with all other Changes Orders in the aggregate, shall
not result in any material adverse differences in the Construction Schedule submitted to and
approved by Lender;



(g) With respect to any Change Order which does not satisfy one or more of the foregoing
conditions in this Section 3.15, or which pursuant to such provisions require Lender’s
approval, Borrower shall have submitted to Lender and the Construction Consultant, and the
applicable Major Contractors and/or other Trade Contractors, the requested change, together with
changes in the Plans and Specifications necessary to accomplish such change, a certificate of the
Architect in regard to same, and a Change Order to the applicable



 


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Trade Contractor reflecting such change; and Lender shall have received the approval of such
change by the Construction Consultant, and the approved and signed Change Order from the applicable
Trade Contractor reflecting the increase in cost of construction of the Project and/or the
extension of time for completion of the work to be performed under the applicable Major Contract or
other contract or subcontract with a Trade Contractor, and Borrowers shall have received (i)
Lender’s written approval thereof, which approval shall not be unreasonably withheld and (ii) in
the event of a Material Change Order relating to a change in the design of the Project, First
Mezzanine Lender’s approval thereof, which pursuant to the terms of the First Mezzanine Loan
Agreement shall not be unreasonably withheld; and



(h) If a Change Order is permitted without Lender’s approval as provided in this Section
3.15 or is approved by Lender as required by this Section 3.15, then the Loan Budget
shall be deemed amended by such Change Order and all references to the Loan Budget contained in
this Agreement and the other Loan Documents shall be deemed to refer to the Loan Budget as so
amended.



Section 3.16. Construction Covenants.



(a) Intentionally Deleted.



(b) General Contract. The construction of the Project shall be managed by the General
Contractor pursuant to the General Contract. The General Contractor and the General Contract shall
be subject to approval by Lender in its reasonable discretion. Borrowers shall (i) use
commercially reasonable efforts to enforce the General Contract, (ii) waive none of the material
obligations of any of the parties thereunder, (iii) do no act which would relieve the General
Contractor from its material obligations thereunder, and (iv) make no material amendment to or
Change Order under the General Contract, except as permitted under Section 3.15 hereof,
without the prior approval of Lender in its reasonable discretion.



(c) Architect’s Contract. Borrowers shall (i) enforce the Architect’s Contract, (ii)
waive none of the material obligations of the Architect thereunder, (iii) do no act which would
relieve the Architect from its material obligations under the Architect’s Contract, and (iv) make
no material amendment to or Change Order under the Architect’s Contract, except as permitted under
Section 3.15 hereof, without the prior approval of Lender in its reasonable discretion.



(d) Insurance. In addition to maintaining the Policies required under Section
6.1 hereof, prior to the commencement of any construction on the Project (including any
demolition or site work), Borrowers shall also furnish Lender with evidence or certificates from
insurance companies reasonably acceptable to Lender indicating that the Architect and the Major
Contractors responsible for the design and/or construction of the Project are covered by
professional liability insurance or other liability insurance, as applicable, as required by the
applicable Architect’s Contract or Major Contract, as applicable, approved by Lender.



(e) Application of Construction Loan Proceeds. Borrowers shall use the proceeds of
the Construction Loan and the Third Mezzanine Construction Funds solely and



 


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exclusively in accordance with the Loan Budget that shall not be subject to change, except as
permitted hereby.



(f) Project Costs. Borrower shall promptly pay when due all Project Costs, unless and
to the extent any such Project Cost is the subject of a good faith dispute; provided,
however, that in such event (i) Borrowers shall diligently pursue resolution of such
dispute, and (ii) to the extent applicable, Borrowers shall be contesting such Project Cost in
accordance with the provisions of Section 5.1.1 or 5.1.2 hereof or Section 3.6(b)
of the Mortgage.



(g) Completion of Construction. Subject to Lender’s obligation to continue to fund
the Construction Loan as and to the extent set forth in this Agreement, Borrowers shall diligently
pursue construction of the entire Project to completion and obtain one or more Certificates of
Occupancy (and to the extent the same are conditional or require performance by Borrowers,
Borrowers shall diligently satisfy all conditions to the issuance of, and/or diligently perform all
obligations required for the continued validity of, the same) for the Project and individual
leasable space therein, if required by law, in accordance with the Plans and Specifications
(subject to Change Orders thereto permitted under Section 3.15 hereof) and in compliance
with all restrictions, covenants and easements affecting the Properties, all applicable Legal
Requirements and all Governmental Approvals, in each case, in all material respects, and with all
terms and conditions of the Loan Documents, free from any Liens (other than Permitted
Encumbrances), claims or assessments (actual or contingent) asserted against any of the Properties
for any material, labor or other items furnished in connection therewith unless (i) bonded and
removed as a Lien on the affected Property or (ii) being contested in accordance with the
provisions of Section 3.6(b) of the Mortgage. Reasonable evidence of satisfactory compliance with
the foregoing shall be furnished by Borrowers to Lender upon Final Completion. In addition, if any
such Certificate of Occupancy or other Governmental Approvals are temporary in nature, Borrowers
shall diligently pursue procuring final Certificates of Occupancy and/or Governmental Approvals, as
applicable.



(h) Inspection of Property. Borrowers shall permit Lender, the Construction
Consultant and their respective representatives, upon reasonable advance notice (which may be given
verbally) during business hours when possible, to enter upon any Property, inspect the progress of
the Project and all materials to be used in the construction thereof and to examine the Plans and
Specifications which are or may be kept at the construction site at all reasonable times and with
reasonable advance written notice (which may be given verbally) and will cooperate, and use
reasonable efforts to cause the General Contractor and the Major Contractors to cooperate, with the
Construction Consultant to enable him/her to perform his/her functions hereunder.



(i) Construction Consultant. Borrowers acknowledge that (i) the Construction
Consultant has been retained by Lender, at the sole expense of Borrowers, to act as a consultant
and only as a consultant to Lender in connection with the construction of the Project and has no
duty to Borrowers, (ii) the Construction Consultant shall in no event have any power or authority
to give any approval or consent or to do any other act or thing which is binding upon Lender, (iii)
Lender reserves the right to make any and all decisions required to be made by Lender under this
Agreement and to give or refrain from giving any and all consents or approvals



 


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required to be given by Lender under this Agreement and to accept or not accept any matter or
thing required to be accepted by Lender under this Agreement, and without being bound or limited in
any manner or under any circumstance whatsoever by any opinion expressed or not expressed, or
advice given or not given, or information, certificate or report provided or not provided, by the
Construction Consultant with respect thereto, (iv) Lender reserves the right in its sole and
absolute discretion to disregard or disagree, in whole or in part, with any opinion expressed,
advice given or information, certificate or report furnished or provided by the Construction
Consultant to Lender or any other Person or party, and (v) Lender reserves the right to replace the
Construction Consultant with another inspecting engineer at any time and without prior notice to or
approval by Borrowers (but Lender agrees to provide Borrowers with reasonably prompt notice of any
decision to change the Construction Consultant). Lender hereby advises Borrowers that it has
advised the Construction Consultant of the restrictions contained in this Section 3.16(i).
Construction Consultant shall perform the following services on behalf of Lender:



(i) review and advise Lender whether, in the opinion of the Construction Consultant, the Plans
and Specifications are satisfactory;



(ii) review Draw Requests, Advance Requests and Change Orders submitted by Borrowers; and



(iii) make periodic inspections (approximately at the date of each Draw Request) for the
purpose of assuring that construction of the Project to date is in substantial accordance with the
Plans and Specifications and to approve Borrowers’ then current Draw Request as being consistent
with Borrowers’ obligations under this Agreement, including, among other things, an opinion as to
whether a Shortfall exists at any time.


The reasonable fees of the Construction Consultant shall be paid by Borrowers within ten (10) days
after billing therefor and expenses incurred by Lender shall be reimbursed to Lender within ten
(10) days after request therefor, but neither Lender nor the Construction Consultant shall have any
liability to Borrowers on account of (1) the services performed by the Construction Consultant, (2)
any neglect or failure on the part of the Construction Consultant to properly perform its services,
or (3) any approval by the Construction Consultant of construction of the Project, except that
Construction Consultant shall be liable for any material physical damage to any Property caused
directly by the actions of Construction Consultant or any agent or employee thereof. Neither
Lender nor the Construction Consultant assumes any obligation to Borrowers or any other Person
concerning the quality of construction of the Project or the absence therefrom of defects.




(j) Correction of Defects. Borrowers shall promptly correct all defects in the
Project or any departure from the Plans and Specifications not approved by Lender to the extent
required hereunder unless any such departure is required under applicable Legal Requirements.
Borrowers agree that the advance of any proceeds of the Construction Loan, whether before or after
such defects or departures from the Plans and Specifications are discovered by, or brought to the
attention of, Lender, shall not constitute a waiver of Lender’s right to require compliance with
this covenant. Whether there exists a defect in the Project or a departure from the Plans and
Specifications shall be reasonably determined by the Architect and



 


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the Construction Consultant or, if the Architect and the Construction Consultant cannot
reasonably agree, then shall be determined pursuant to the most expedited form of arbitration
available for such disagreement under the rules of the American Arbitration Association, such
arbitration to be held in New York, New York.



(k) Books and Records. Borrowers shall keep and maintain, or cause to be kept and
maintained, detailed, complete and accurate books, records and accounts reflecting all items of
income and expense of Borrowers in connection with the construction of the Project and, upon the
request of Lender, shall make such books, records and accounts available to Lender for inspection
or independent audit at reasonable times upon reasonable advance written notice to Borrowers. Any
independent audit conducted hereunder shall be at Lender’s expense unless such audit shall uncover
a material error in statements previously delivered to Lender, in which case Borrowers shall pay
all reasonable costs related thereto. Lender hereby agrees to keep, and to use reasonable efforts
to cause its employees and consultants to keep, any information acquired hereby confidential unless
already known to the general public or as required by law.



(l) Financing Publicity. Borrowers shall permit Lender to obtain publicity in
connection with the construction of the Project through press releases and participation in such
events as ground-breaking and opening ceremonies, and to give Lender ample advance notice of such
events and to give Lender such assistance as is reasonable in connection with obtaining such
publicity as Lender may reasonably request.



(m) Default Notice or Notice of Lien. Borrowers shall notify Lender promptly, and in
writing, if any Borrower receives any written default notice or notice of Lien from any Trade
Contractor.



(n) Further Assurance of Title. If at any time Lender has reason to believe in its
reasonable opinion that any Construction Loan Advance is not secured or will or may not be secured
by the Mortgage as a Lien on the Properties (subject only to the Permitted Encumbrances), then
Borrowers shall, within ten (10) days after written notice from Lender, do all things and matters
necessary (including execution and delivery to Lender of all further documents and performance of
all other acts which Lender reasonably deems necessary or appropriate) to assure to the reasonable
satisfaction of Lender that any Construction Loan Advances previously made hereunder or to be made
hereunder are secured or will be secured by the Mortgage (subject only to the Permitted
Encumbrances). Lender, at Lender’s option, may decline to make further Construction Loan Advances
hereunder until Lender has received such assurance.



Section 3.17. Intentionally Deleted.



Section 3.18. Work at Adjacent Property.



(a) Borrowers shall notify and reasonably consult with Lender regarding any work to be
undertaken at or on the Adjacent Property and shall conduct all work in accordance with all Legal
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(b) Notwithstanding anything to the contrary set forth in this Agreement or in any other Loan
Document, (i) Borrowers shall not commence demolition of any building on the Adjacent Property,
whether such demolition is to be funded out of any Borrower’s own funds, out of the Initial
Renovation Reserve Fund, out of a Construction Loan Advance or otherwise, unless and until
Borrowers have obtained, at their sole cost and expense, and delivered a copy to Lender of, an
asbestos survey with respect to the buildings to be demolished, prepared by a firm reasonably
acceptable to Lender, that complies with the requirements of the EPA Asbestos Hazard Emergency
Response Act, 15 U.S.C. 2641 et seq. promulgated at 40 CFR 763 (an “Asbestos
Survey”), and (ii) if any such Asbestos Survey discloses the presence of asbestos and/or any
asbestos-containing material, Borrowers, at their sole cost and expense, shall cause all demolition
activities to comply with the requirements of the EPA National Emission Standard for Hazardous Air
Pollutants promulgated at 40 CFR Part 61 for asbestos-containing materials.



Section 3.19. Administrative Agent.




3.19.1. Appointment of Administrative Agent. At all times throughout the term
of the Loan, including any Extension Terms, there shall be an administrative agent to
administer the Loan and the Advances thereunder (the “Administrative Agent”). Trimont Real
Estate Advisors (“Trimont”) shall be the Administrative Agent as of the date hereof, but
Lender shall have the right, from time to time, without the consent of any Borrower but upon
written notice to Borrowers, to designate a replacement Administrative Agent, who may or may
not own an interest in the Loan. Upon notice to Borrowers of the identity of a replacement
Administrative Agent for Trimont or any subsequent replacement Administrative Agent and the
address(es) for notice to such replacement Administrative Agent, Borrowers thereafter shall
copy such replacement Administrative Agent on all Notices sent to Lender.




3.19.2. Responsibilities of Administrative Agent. The Administrative Agent
shall have such responsibilities as shall be delegated by Lender to the Administrative Agent
in a separate agreement between them; provided, however, that upon notice to
Borrowers from Lender as to the identity of the Administrative Agent, such identified
Administrative Agent shall have the right to send notices on behalf of Lender upon which
Borrowers may rely. The Administrative Agent shall maintain, acting solely for this purpose
as an agent of Borrowers, a register for the recordation of the names and addresses of the
Lenders and principal portion of the Loan owing to each Lender. The entries in the register
shall be conclusive, and the Administrative Agent, Borrowers and any Lender shall treat each
Person whose name is recorded in the register pursuant to the terms hereof as a Lender for
all purposes of this Agreement. Any assignment or transfer of any interest in the Loan
shall be effective only upon proper entries with respect thereto being made in the register.




3.19.3. Non-Liability of Administrative Agent and Lender. Each Borrower
acknowledges and agrees that with respect to each of Lender and the Administrative Agent
carrying out its responsibilities hereunder and otherwise with respect to the Loan:


 


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(a) any inspections of the construction of the Project made by or through the Administrative
Agent or Lender are for purposes of administration of the Loan only and Borrowers are not entitled
to rely upon the same with respect to the quality, adequacy or suitability of materials or
workmanship, conformity to the Plans and Specifications, state of completion or otherwise;
Borrowers shall make their own inspections of such construction to determine that the quality of
the Project and all other requirements of such construction are being performed in a manner
satisfactory to Borrowers and in conformity with the Plans and Specifications and all other
requirements; and Borrowers shall immediately notify Lender, in writing, should the same not be in
conformity in all material respects with the Plans and Specifications and all other requirements
hereunder;



(b) by accepting or approving anything required to be observed, performed, fulfilled or given
to Lender pursuant to the Loan Documents, including any certificate, statement of profit and loss
or other financial statement, survey, appraisal, lease or insurance policy, neither the
Administrative Agent nor Lender shall be deemed to have warranted or represented the sufficiency,
legality, effectiveness or legal effect of the same, or of any term, provision or condition thereof
and such acceptance or approval thereof shall not constitute a warranty or representation to anyone
with respect thereto by the Administrative Agent or Lender;



(c) neither the Administrative Agent nor Lender undertake nor assume any responsibility or
duty to Borrowers to select, review, inspect, supervise, pass judgment upon or inform Borrowers of
any matter in connection with any of the Properties, including, without limitation, matters
relating to the quality, adequacy or suitability of: (i) the Plans and Specifications, (ii)
architects, contractors, subcontractors and materialmen employed or utilized in connection with the
construction of the Project, or the workmanship of or the materials used by any of them, or (iii)
the progress or course of construction and its conformity or nonconformity with the Plans and
Specifications; and Borrowers shall rely entirely upon their own judgment with respect to such
matters, and any review, inspection, supervision, exercise of judgment or supply of information to
Borrowers by the Administrative Agent or Lender in connection with such matters is for the
protection of the Administrative Agent and/or Lender only and neither Borrowers nor any third party
is entitled to rely thereon;



(d) neither the Administrative Agent nor Lender owe any duty of care to protect Borrowers
against negligent, faulty, inadequate or defective building or construction; and



(e) neither the Administrative Agent nor Lender shall be directly or indirectly liable or
responsible for any loss, claim, cause of action, liability, indebtedness, damage or injury of any
kind or character to any Person or property arising from any construction on, or occupancy or use
of, any of the Properties, including, without limitation, any loss, claim, cause of action,
liability, indebtedness, damage or injury caused by, or arising from: (i) any defect in any
building, structure, grading, fill, landscaping or other improvements thereon or in any on-site or
off-site improvement or other facility therein or thereon; (ii) any act or omission of any
Borrower, the parties comprising any Borrower or any of any Borrower’s agents, employees,
independent contractors, licensees or invitees; (iii) any accident in or on any of the Properties
or any fire, flood or other casualty or hazard thereon; (iv) the failure of any



 


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Borrower or any of any Borrower’s licensees, employees, invitees, agents, independent
contractors or other representatives to maintain any of the Properties in a safe condition; and/or
(v) any nuisance made or suffered on any part of any Property, in each of the foregoing instances,
except to the extent directly resulting from the Administrative Agent’s or Lender’s fraud, willful
misconduct or gross negligence (but Lender shall be solely liable for its fraud, willful misconduct
or gross negligence and the Administrative Agent shall be solely liable for its fraud, willful
misconduct or gross negligence).




3.19.4. Administrative Agent Fee. On the Closing Date and on the first Payment
Date occurring in each calendar quarter thereafter, Borrower shall pay the Administrative
Agent the sum of $50,000.00 in respect of the Administrative Agent Fee.



Section 3.20. Lender’s Right to Make Construction Loan Advance to Pay Monthly
Interest. From and after any Payment Date following the Initial Construction Loan Advance upon
which the Interest Reserve Fund is in an insufficient amount to pay the Aggregate Monthly Interest
Payment due on such Payment Date, if Borrowers fail to pay, as and when due on any Payment Date,
the Reduced Acquisition Loan Monthly Interest Payment and the Construction Loan Monthly Interest
Payment in accordance with the terms hereof, Lender shall have the right (but not the obligation),
in its sole and absolute discretion, without the necessity of notifying, or obtaining the approval
of, any Borrower or any other Person, and without any Borrower’s specific request, to advance a
portion of the Construction Loan necessary to pay the Reduced Acquisition Loan Monthly Interest
Payment and the Construction Loan Monthly Interest Payment then due (a “Lender Monthly Interest
Advance”). With respect to the foregoing, Borrowers and Lender expressly acknowledge and agree
that (i) the fact that Lender makes a Lender Monthly Interest Advance shall not relieve Borrowers,
First Mezzanine Borrowers, Second Mezzanine Borrowers and Third Mezzanine Borrowers from the
obligation to make all future Reduced Acquisition Loan Monthly Interest Payments, Construction Loan
Monthly Interest Payments, First Mezzanine Monthly Interest Payments, Second Mezzanine Monthly
Interest Payments and Third Mezzanine Monthly Interest Payments, as applicable, (ii) the fact that
Lender makes a Lender Monthly Interest Advance in any instance shall not obligate Lender to make
any subsequent Lender Monthly Interest Advance in the same or in any other instance, and (iii) a
Lender Monthly Interest Advance, when made, shall constitute a Construction Loan Advance for all
purposes under this Agreement and shall constitute one of the two (2) Construction Loan Advances
available to Borrowers for the subsequent thirty (30) days.



Section 3.21. Construction Loan Advances of Required Equity Amount. Lender and
Borrowers acknowledge and agree that as of the date hereof, Lender has funded $467,443,347.38 in
Construction Loan Advances. Subject to Lender’s right to fund the Remaining Construction Loan
Advance in accordance with Section 3.1(d) hereof, (a) Lender and Borrowers have agreed that
Lender shall not fund any further Construction Loan Advances until the Required Equity Amount and
any Subsequent Required Equity Amounts, as and to the extent required under this Agreement, have
been fully funded in accordance with the terms and conditions of this Section 3.21 (such
time being referred to herein as the “Borrower Advance Date”) and (b) from and after the Borrower
Advance Date, Lender shall, subject to the terms and conditions applicable to the making of
Construction Loan Advances (including, without limitation, the delivery of any Subsequent Required
Equity Amounts, as and to the extent required under this Agreement), advance the remainder of the
Construction Loan to Borrowers in accordance with and subject to



 


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the terms of this Agreement. Until the Borrower Advance Date, the following shall apply to
each advance of funds on account of the Required Equity Amount and/or any Subsequent Required
Equity Amounts (and, for purposes of this Section 3.21 only, each funding of the Required
Equity Amount in accordance with the terms hereof shall be considered a “Construction Loan Advance”
solely for the purposes of determining whether the conditions to the funding of any such amount
have been satisfied as set forth in this Section 3.21 and for no other purpose under this
Agreement):



(a) Conditions to Advances.



(i) Satisfaction of Standard Conditions. Borrowers shall satisfy and/or cause to be
satisfied the conditions to such Construction Loan Advance set forth in Section 3.3 (other
than that relating to title endorsements) and, if applicable, 3.4 hereof.



(ii) Deposit of Funds. Not later than seven (7) days (or the next succeeding Business
Day if such seventh (7th) day is not a Business Day) prior to the Requested Disbursement Date,
Borrowers shall deliver to Lender, for deposit into the Construction Loan Reserve Account, funds in
the amount of the requested Construction Loan Advance.



(iii) Letter of Credit Reduction Request. Borrowers’ Advance Request shall include a
Letter of Credit Reduction Notice with the amount of the requested Construction Loan Advance and
any other required information (other than Lender’s signature) filled in.



(b) Funding Construction Loan Advances. Subject to the satisfaction of each of the
foregoing conditions, Lender shall fund the applicable Construction Loan Advance from the funds on
deposit in the Construction Loan Reserve Account and otherwise in accordance with all of the terms
of this Article III.



(c) Delivery of Letter of Credit Reduction Notice. Promptly following the funding of
the applicable Construction Loan Advance from the Construction Loan Reserve Account, Lender shall
deliver or cause Servicer or the Administrative Agent to deliver, the Letter of Credit Reduction
Notice to the applicable issuing bank; provided, however, that none of Lender,
Servicer or the Administrative Agent shall be liable to Borrowers for any delay in so delivering
any such Letter of Credit Reduction Notice, other than any actual out-of-pocket losses, costs and
damages resulting from their willful misconduct or fraud; and, provided, further,
however, that Lender expressly acknowledges that upon Borrowers providing the funds to make
a particular Construction Loan Advance, Lender agrees never to seek to recover the amount of such
Construction Loan Advance in the event Lender shall ever draw down on any Required Equity Letter of
Credit and apply the proceeds thereof.



(d) Failure to Deliver Funds for the Construction Loan Reserve Account. With respect
to any Construction Loan Advance, in the event that Borrowers fail to deliver the applicable funds
for deposit in the Construction Loan Reserve Account not later than seven (7) days (or the next
succeeding Business Day if such seventh (7th) day is not a Business Day) prior to the Requested
Disbursement Date, Lender shall have the right at any time



 


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thereafter, in its sole discretion, to draw down on such Required Equity Letter(s) of Credit
in its/their entirety, without the consent of, or notice to, Borrowers or any other Person other
than the issuing bank(s) of any such Required Equity Letter(s) of Credit, and to deposit the
proceeds thereof in the Construction Loan Reserve Account, following which, all further
Construction Loan Advances shall be funded in accordance with all of the terms of this Agreement
from the Construction Loan Reserve Account.



(e) Provisions of this Agreement Continue to Apply. Borrowers and Lender expressly
acknowledge and agree that the funding of any Construction Loan Advance in accordance with this
Section 3.21 shall not affect the other provisions of this Article 3, and
Borrowers, each Construction Loan Advance and the construction of the Project shall continue to be
governed by the provisions of this Article III.



Section 3.22. Intentionally Deleted.



Section 3.23. Release of Required Equity Letter of Credit(s) and Cost Savings to
Borrowers. Upon satisfaction of the following conditions: (i) Substantial Completion has
occurred; (ii) Borrower’s equity requirement set forth in Section 3.3(d) hereof remains
satisfied (provided, however, in order to meet such equity requirement, Borrower may make a
voluntary prepayment of the Loan in accordance with all of the terms of Section 2.4.1
hereof and to be applied as set forth in Section 2.4.3(a) hereof, with the Exit Fee payable
in connection therewith being determined in accordance with the provisions of Section 2.8
hereof); and (iii) either (A) General Contractor has certified to Lender that all amounts due under
the General Contract (which shall include, without limitation, all work authorizations entered into
under the General Contract and all amounts payable by General Contractor to any subcontractor in
connection with the General Contract and/or any such work authorization) have been paid in full and
Borrowers have delivered lien waivers or other evidence of such payment satisfactory to Lender or
(B) Lender’s approval has been obtained, simultaneous with any draw specified in the following
sentence Lender shall return to Borrowers all Required Equity Letters of Credit then held by (or on
behalf of) Lender or the remaining proceeds thereof if Lender has previously drawn down on the
Required Equity Letters of Credit but not applied all of the proceeds thereof or evidenced thereby,
and Lender shall, at Borrowers’ expense, execute such documents and take such actions as Borrowers
shall reasonably request to evidence its release of the Required Equity Letters of Credit. Such
released Required Equity Letters of Credit shall be drawn in full and the proceeds thereof (or cash
in the amount equal to the face value of such released Required Equity Letters of Credit) shall be
deposited into the Interest Reserve Account, provided that in the event that the aggregate
Additional Interest Reserve Contributions deposited into the Interest Reserve Account under the
provisions of this sentence and/or any other provision of this Agreement total $8,000,000, then all
such proceeds (or all such remaining proceeds, as the case may be) shall instead be deposited into
the General Reserve Fund and not the Interest Reserve Account. Additionally, to the extent that
Borrowers are entitled to payment from General Contractor of any cost savings or unused contingency
amounts under the General Contract, Borrower shall have the right to receive the same from General
Contractor (as and to the extent provided in the General Contract) and any such amounts shall be
deposited into the Interest Reserve Account, provided that in the event that the aggregate
Additional Interest Reserve Contributions deposited into the Interest Reserve Account under the
provisions of this sentence and/or any other provision of this Agreement total $8,000,000, then all
such proceeds (or all such remaining



 


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proceeds, as the case may be) shall instead be deposited into the General Reserve Fund and not
the Interest Reserve Account.



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. Such Borrower has been duly organized and is validly
existing and in good standing with requisite power and authority to own its properties and
to transact the businesses in which it is now engaged. Such Borrower is duly qualified to
do business and is in good standing in each jurisdiction where it is required to be so
qualified in connection with its properties, 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, management
and operation of its Property or the IP. The ownership interests of such Borrower are as
set forth on the organizational chart attached hereto as Schedule VI.




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.


 


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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 such
Borrower, HRHI or any Guarantor or, to such Borrower’s actual knowledge, pending against any
Property or the IP or, to such Borrower’s actual knowledge, threatened in writing against such
Borrower, HRHI or any Guarantor or any Property or the IP in any court or by or before any other
Governmental Authority that would have a material adverse effect on (i) the business operations,
economic performance, assets, financial condition, equity, contingent liabilities, material
agreements or results of operations of such Borrower, HRHI, any Guarantor, any Property or the IP,
(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 such Borrower, HRHI or any Guarantor to perform, in all material respects, its
obligations under each of the Loan Documents, or (iv) the value of, or cash flow from any Property
or the IP.



(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 Borrowers’ 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 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 Borrower 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 any 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 Borrower or any Affiliate of any Borrower.




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 such Borrower or its Property or the IP, or such Borrower’s business, properties or
assets, operations or condition, financial or otherwise. To the best of such Borrower’s
actual knowledge, such Borrower is not 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
Borrower or any of the Properties or the IP 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
Property or the IP is otherwise bound, other than (a) obligations incurred in the ordinary
course of the operation of the Properties as permitted pursuant to clause (t) of the
definition of “Special Purpose Entity” set forth in Section 1.1 hereof, (b)
obligations under the Existing FF&E Leases, (c) obligations under the Loan


 


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Documents, (d) obligations pursuant to its Management Agreement, and (e) as to Hotel/Casino
Borrower, obligations pursuant to the Liquor Management Agreement.




4.1.6. Title. Such 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 Loan Documents and the Liens created by
the Loan Documents. 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
such Borrower’s Property (as currently used) or Borrowers’ ability to repay the Loan. The
Mortgage has been properly recorded in the appropriate records and, together with the
Uniform Commercial Code financing statements required to be filed in connection therewith,
has created and continues to create (a) a valid, perfected first priority lien on the real
property portion of the Properties, subject only to Permitted Encumbrances and the Liens
created by the Loan Documents, and (b) together with the filing of the required Uniform
Commercial Code financing statements and the proper recording of the Assignment of Leases,
perfected security interests in and to, and perfected collateral assignments of, all
personalty (including the Leases), all in accordance with the terms thereof, in each case
subject only to any applicable Permitted Encumbrances, such other Liens as are permitted
pursuant to the Loan Documents and the Liens created by the Loan Documents. 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 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 Notes, 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 its 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 their debts as such debts become absolute and matured. Taking into account
the Loan, each Borrower’s assets do not and will not constitute unreasonably small capital
to carry out its business as conducted or as proposed to be conducted. Borrowers do not
intend to, and do not believe that they will, incur Indebtedness and liabilities (including
contingent liabilities and other commitments) beyond their respective abilities to pay such
Indebtedness and liabilities as they mature (taking into account the timing and amounts of
cash to be received by each Borrower and the amounts to be payable on or in respect of
obligations of each Borrower). No petition in bankruptcy has been filed against any
Borrower, HRHI or any Guarantor, and none of any Borrower, 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 any Borrower, HRHI nor any Guarantor are contemplating
either the filing of a petition by it


 


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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 it, 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 or the IP, (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 any Borrower, HRHI or any Guarantor to
perform, in all material respects, its obligations under each of the Loan Documents.




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, such
Borrowers 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 Borrower is in default or violation of any order, writ,
injunction, decree or demand of any Governmental Authority. There has not been committed by
any Borrower 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 any act or omission affording
the federal government or any other Governmental Authority the right of forfeiture as
against any Property or any part thereof or any monies paid in performance of Borrowers’
obligations under any of the Loan Documents.




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


 


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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 Borrower
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 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 Borrower
or, to each Borrower’s actual knowledge after due inquiry, 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 and no
Restricted Party has 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 such 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. There are no prior assignments by Borrowers of
the Leases or any portion of the Rents due and payable or to become due and payable which
are presently outstanding.




4.1.20. Insurance. Borrowers have obtained and 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
Borrower, 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


 


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




4.1.23. Flood Zone. None of the Improvements on any Property are located in an
area identified by the Federal Emergency Management Agency as an area having special flood
hazards or, if so located, the flood insurance required pursuant to Section
6.1(a)(i) hereof 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 the 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 Borrower 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 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


 


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passage of time or the giving of notice, or both, would constitute material defaults
thereunder, (e) the copies of the commercial Leases delivered to Lender are true and
complete, and there are no oral agreements with respect thereto, (f) no Rent (including
security deposits) has been paid more than one (1) month in advance of its due date, (g) all
work to be performed by the landlord under each Lease has been performed as required in such
Lease and has been accepted by the applicable tenant, and any payments, free rent, partial
rent, rebate of rent or other payments, credits, allowances or abatements required to be
given by any 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. Intentionally Deleted.




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 (other than Gaming Borrower) is
organized under the laws of the State of Delaware and, with respect to Gaming Borrower, the
State of Nevada.




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 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 Loan Documents, including, without limitation, the Mortgage, have been paid as of the
date hereof, and the Mortgage 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 First Mezzanine Loan Documents, the Second Mezzanine
Loan Documents and the Third Mezzanine Loan Documents have been paid in full, each Borrower
hereby represents, warrants and covenants that such Borrower has been, is, shall be and
shall continue to be a Special Purpose Entity.




 


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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) Borrowers hereby agree to provide Lender with at least five (5) Business Days’ prior
written notice prior to the effectiveness of any change (and each change) in any Independent
Director or Independent Manager.




4.1.31. Management Agreement; 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 any Management Agreement which non-payment has not given
rise to the exercise or enforcement of remedies under such Management Agreement). Following the
date hereof, there shall be no material default under any Management Agreement (other than the
non-payment of certain management fees and other payments under any Management Agreement which
non-payment has not given rise to the exercise or enforcement of remedies under such Management
Agreement).




(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 or the IP has been or
will be purchased by any Borrower or any other Restricted Party with proceeds of any illegal
activity.




4.1.33. No Change in Facts or Circumstances; Disclosure. To each Borrower’s
actual knowledge, all material information submitted by any Borrower 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


 


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statements of fact made by any Borrower in this Agreement or in any other 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 or the IP or the business operations or the financial condition of any Borrower.
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 Borrower, 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 Borrower, 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 Borrower, 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 Borrower 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 Lockbox Account and 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 Lockbox Account and/or the Cash Management Account;


 


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(b) Each of the Lockbox Account and the Cash Management Account constitute “deposit accounts”
within the meaning of the Uniform Commercial Code of the State of New York; and



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




4.1.37. Intellectual Property.



(a) The Intellectual Property Security Agreement created and creates a valid and continuing
security interest (as defined in the Uniform Commercial Code of the State of New York) in all of IP
Borrower’s rights, title and interest in and to all of the following (collectively, the “IP”):



(i) all trademarks, service marks, domain names, trademark registrations, service mark
registrations, domain name registrations, applications for trademark registrations, applications
for service mark registrations, applications for domain name registrations, trade names, brand
names, product names and common law marks, and the renewals thereof owned or used by any Borrower
or any Affiliated IP Party in connection with the operation and/or use of one or more of the
Properties;



(ii) all copyrights, and the renewals thereof, owned or used by any Borrower or any Affiliated
IP Party in connection with the operation and/or use of one or more of the Properties;



(iii) all trade secrets, discoveries, formulae, proprietary processes, improvements and
inventions for which no patent applications are pending and all other industrial property rights
presently owned, in whole or in part, or used, by any Borrower or any Affiliated IP Party in
connection with the ownership, operation and/or use of one or more of the Properties; and



(iv) all trademark licenses, service mark licenses, copyright licenses, royalty agreements,
assignments, grants and contracts with employees or others relating in whole or in part to any of
the foregoing IP to which any Borrower and/or any Affiliated IP Party is a party, which is related
to the ownership, operation and/or use of one or more of the Properties (collectively, the “IP
Agreements”).



(b) Schedule XI attached hereto is a true, correct and complete list of all the
Registered IP used by any Borrower in connection with the ownership, operation and/or use of one or
more of the Properties. Part I of said Schedule XI 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 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 XI 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
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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. (“HRCI”) (all such IP listed on Part
II of said Schedule XI, the “Rank IP”). Part III of said Schedule XI 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 XI, 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 XI, 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 XI hereto sets forth:



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



(ii) a complete list of any goods and/or services sold by any Person other than any Borrower
and of whom any Borrower has actual knowledge, which in the opinion of any Borrower infringes upon
any IP listed in said Schedule XI 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 XI:



(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 Borrower 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;


 


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(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 Borrower 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 Borrower requires a license
or right under or in respect of any intellectual property of any other Person (except another
Borrower) to conduct such Borrower’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 Borrower is a party which significantly restricts the fields in which such
business may be carried on.



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



(j) To Borrowers’ actual knowledge, none of the processes currently used by any Borrower or
any Affiliated IP Party or any of the properties or products currently sold by any Borrower 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
Borrower 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 Borrower requires a license or right under or in respect of any
intellectual property of any other Person (except another Borrower) to conduct such Borrower’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 Borrower is a
party which significantly restricts the fields in which such business may be carried on.


 


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(m) To Borrowers’ actual knowledge, no disclosure has been made to any Person of the know-how
or financial or trade secrets of any Borrower, 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 Borrowers’ 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 Borrowers or Manager 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 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 Lender.




4.1.40. Morton Indemnification and PWR/RWB Escrow Agreement. Borrowers have
delivered 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 Borrower
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. Neither Borrower 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; Borrowers 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.


 


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(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) No Borrower is in default in any material respect under, or in violation in any material
respect of, any Gaming License or other Operating Permit, and no event has occurred, and no
condition exists, which, with the giving of notice or passage of time or both, would constitute
such a default thereunder or such a violation thereof, that has caused or would reasonably be
expected to cause the loss, suspension, revocation, impairment, forfeiture, non-renewal or
termination of any Gaming License or the imposition of any restriction thereon.



(f) Borrowers have not 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, neither Borrowers 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 Borrower in any of the Loan Documents that require the approval of the Gaming
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(k) (i) Hotel/Casino Borrower meets the suitability standards for a landlord contemplated or
set forth in the Gaming Laws; and (ii) no Borrower 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. Distributions to Affiliates. None of the Borrowers has entered into,
and none of the Properties are subject to, any agreements to pay any amounts to any
Restricted Party, any DLJMB Party or any direct or indirect equity holder in or Affiliate of
any of the foregoing, other than with respect to (a) the fees and expense reimbursements
payable to any Affiliated Manager pursuant to any Management Agreement reasonably approved
by Lender and (b) any monitoring fee due and payable to the DLJMB Parties pursuant to the
limited liability company agreement of HR Holdings.



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



Section 4.3. Definition of Borrowers’ Knowledge. As used in this Agreement or any
other Loan Document, the phrases “Borrowers’ knowledge”, “any Borrower’s knowledge”, “Borrowers’
actual knowledge”, “any Borrower’s actual knowledge”, “Borrowers’ best knowledge” or “any
Borrower’s best knowledge” or words of similar import, shall mean the actual knowledge, after
commercially reasonable due inquiry, of any of Fred Kleisner, Marc Gordon, David Smail, Matt
Armstrong, Arthur Blee, Ana Nekhamkin, Ryan Sprott, and/or Bobby Kelly (the “Named Knowledge
Parties”) and/or any additional individual or individuals who in the future are delegated or assume
any of the responsibilities of any of the foregoing Named Knowledge Parties with respect to any of
the Properties, and the knowledge of no other Person shall be imputed to any of the Named Knowledge
Parties or any such other individuals, it being expressly represented and warranted to Lender by
Borrowers that it would be unlikely that any material fact regarding any of the Properties or
Borrowers or otherwise covered in the representations and warranties contained herein or in any
other Loan Document would not come to the attention of one or more of the Named Knowledge Parties,
after commercially reasonable due inquiry. Notwithstanding anything to the contrary contained in
this Agreement or any other Loan Document, none of the Named Knowledge Parties shall have any
personal liability hereunder. Notwithstanding the foregoing, Borrowers expressly acknowledge and
agree that the Named Knowledge Parties included Jennifer Nellany from the Closing Date through the
last date of her employment with any Person affiliated with any Borrower, Manager or Guarantor.


 


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ARTICLE V.

COVENANTS OF BORROWERS




Section 5.1. Affirmative Covenants. From the Closing Date and until payment and
performance in full of all obligations of Borrowers under the Loan Documents or the earlier release
of the Lien of the Mortgage encumbering the Properties (and all related obligations) and the IP 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 in all material respects with all Legal Requirements applicable to
such Borrower and its Property or the IP, including, without limitation, Prescribed Laws.
There shall never be committed by any Borrower, and no Borrower shall 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 any Property or any part thereof or any monies
paid in performance of Borrowers’ obligations under any of the 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 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 Borrowers’ right to demolish the Improvements on the Adjacent
Property subject to, and in accordance with, the provisions of Section 3.18 hereof,
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 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 this Agreement. Borrowers shall 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 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 such Borrower or its Property or any alleged violation of any Legal Requirement,
provided that (a) no Event of Default, First Mezzanine Event of Default, Second
Mezzanine Event of Default or Third Mezzanine Event of Default has occurred and remains
uncured; (b) such proceeding shall be permitted under and be conducted in accordance with
the provisions of any instrument to which such Borrower 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 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 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


 


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Requirement against such Borrower and its Property; and (f) such Borrower shall 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 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 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, Borrowers’ obligation to directly pay Taxes
shall be suspended for so long as Borrowers comply with the terms and provisions of
Section 7.2 hereof. Borrowers will 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 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, Borrowers shall not be required
to furnish such receipts for payment of Taxes in the event that such Taxes have been paid by
Lender pursuant to Section 7.2 hereof. Borrowers shall not suffer and shall
promptly cause to be paid and discharged (or provide reasonable security for) any Lien or
charge against any of the Properties, and shall 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 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, First
Mezzanine Event of Default, Second Mezzanine Event of Default or Third 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 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 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 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 (f)
such Borrower shall 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 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
Mortgage being primed by any related Lien.


 


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5.1.3. Litigation. Borrowers shall give prompt notice to Lender of any
litigation or governmental proceedings pending or threatened in writing against any
Borrower, 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 Borrower, HRHI, any Guarantor, any Property or the IP, (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 Borrower,
HRHI or any Guarantor to perform, in all material respects, its obligations under each of
the Loan Documents, or (d) the value of, or cash flow from, any Property or the IP.




5.1.4. Access to the Properties. Borrowers shall 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. Intentionally Deleted.




5.1.6. Cooperate in Legal Proceedings. Borrowers shall 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.




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 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, at Borrowers’ sole cost and
expense (subject to the terms and conditions of this Agreement):


 


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(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. Mortgage 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 recordation of the Mortgage.




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 connection with the operation of each Property. 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 Statements) at the
office of any Borrower 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’ accounting records with respect to the
Properties and the IP, 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, 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 Properties for such Fiscal Year and
containing statements of profit and loss for Borrowers, HRHI, each Guarantor and each Property and
a balance sheet for 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
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investors or otherwise prepared in the ordinary course of its business, accompanied by the
Officer’s Certificate required under subclause (B) below. Notwithstanding anything to the
contrary set forth in this Agreement, the financial statements of 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 Borrowers and/or other assets related to one or more of the
Borrowers, 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 Borrowers and/or other assets related to one or
more of the Borrowers, 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 Borrowers and/or
other assets related to HRHI, one or more of the Borrowers, 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 Borrowers and/or other assets related to HRHI, one or more of the Borrowers, one or
more of the Properties and/or the IP. Such statements of Borrowers shall set forth the financial
condition and the results of operations for the Properties on a property-by-property basis and also
on an aggregate basis for all Properties for such Fiscal Year, and shall include, but not be
limited to, amounts representing annual Net Cash Flow, Net Operating Income, Gross Income from
Operations and Operating Expenses, in each of the foregoing instances on a combined basis for all
Properties as well as for each individual Property. Borrowers’ annual financial statements shall
be accompanied by (i) a comparison of the budgeted income and expenses and the actual income and
expenses for the prior Fiscal Year, (ii) an unqualified opinion of a “Big Four” accounting firm or
other independent certified public accountant reasonably acceptable to Lender, (iii) with respect
to the Hotel/Casino Property, occupancy statistics for such Property, (iv) a schedule reviewed by
such independent certified public accountant reconciling Net Operating Income to Net Cash Flow (the
“Net Cash Flow Schedule”), which shall itemize all adjustments made to Net Operating Income to
arrive at Net Cash Flow deemed material by such independent certified public accountant, (v) a Cash
Profit and Loss Statement (as defined below) annualized for the applicable prior Fiscal Year, which
Cash Profit and Loss Statement shall be prepared on a cash accounting basis, and (vi) an Officer’s
Certificate from each Borrower certifying that each annual financial statement presents fairly the
financial condition and the results of operations of such Borrower and the Properties being
reported upon and that such financial statements have been prepared in accordance with the Uniform
System of Accounts and reconciled in accordance with GAAP and as of the date thereof whether there
exists an event or circumstance which constitutes a monetary Default or any Event of Default under
the Loan Documents executed and delivered by, or applicable to, any Borrower (including a specific
statement as to Borrowers’ compliance with Section 4.1.30 hereof), and if a monetary
Default or any Event of Default exists, the nature thereof, the period of time it has existed and
the action then being taken to remedy the same. Each Guarantor’s annual financial statements shall
be accompanied by (A) an unqualified opinion of a “Big Four” accounting firm or other independent
certified public accountant reasonably acceptable to Lender, and (B) an Officer’s Certificate
certifying that each annual financial statement presents fairly the financial condition and the
results of operations of such Guarantor being reported upon and that such financial statements have
been prepared in accordance with GAAP and as of the date thereof whether there exists an event or
circumstance which constitutes a monetary Default or any Event of Default under the Loan Documents
executed and delivered by, or applicable to, such Guarantor, and if a monetary Default or any Event
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period of time it has existed and the action then being taken to remedy the same. HRHI’s
annual financial statements shall be accompanied by (I) an unqualified opinion of a “Big Four”
accounting firm or other independent certified public accountant reasonably acceptable to Lender,
and (II) an Officer’s Certificate certifying that each annual financial statement presents fairly
the financial condition and the results of operations of HRHI being reported upon and that such
financial statements have been prepared in accordance with GAAP and as of the date thereof whether
there exists an event or circumstance which constitutes a monetary Default or any Event of Default
under the Loan Documents executed and delivered by, or applicable to, HRHI, and if a monetary
Default or any Event of Default exists, the nature thereof, the period of time it has existed and
the action then being taken to remedy the same.



(c) Borrowers will furnish, or cause to be furnished, to Lender on or before thirty (30) days
after the end of each calendar month during the term of the Loan and on or before forty-five (45)
days after the end of each calendar quarter during the term of the Loan commencing with the first
quarter of 2008 and thereafter (for avoidance of doubt, the monthly reports due in any month in
which the end of a calendar quarter shall occur shall be furnished on or before the date that is
thirty (30) days after the end of such month and the quarterly reports due for the quarter ending
in such month shall be furnished on or before the date that is forty-five (45) days following the
end of such calendar quarter), the following items, accompanied by an Officer’s Certificate stating
that such items are true, correct, accurate, and complete and fairly present the financial
condition and results of the operations of each Borrower and the Properties on a combined basis as
well as each Property individually (subject to normal year-end adjustments) as applicable: (i)
with respect to the Hotel/Casino Property, an occupancy report for the subject month; (ii) a rent
roll for each Property for the subject month (or quarter, as applicable); (iii) monthly (or
quarterly, as applicable) and year-to-date operating statements (including Capital Expenditures)
prepared on a cash accounting and a GAAP basis, for each calendar month (or quarter, as
applicable), noting Net Operating Income, Gross Income from Operations, and Operating Expenses (not
including any contributions to the Replacement Reserve Fund), each in substantially the form
attached hereto as Schedule VII (the “Cash Profit and Loss Statement”), and, within thirty
(30) days following Lender’s reasonable written request, other information necessary and sufficient
to fairly represent the financial position and results of operation of each Property during such
period in form reasonably satisfactory to Lender, and containing a comparison of budgeted income
and expenses and the actual income and expenses together with a detailed explanation of any
variances of five percent (5%) or more between budgeted and actual amounts for such periods, in
each of the foregoing instances on a combined basis for all Properties; (iv) a calculation
reflecting the annual Debt Service Coverage Ratio for the immediately preceding twelve (12) month
period as of the last day of such month (or quarter, as applicable); (v) a Net Cash Flow Schedule;
and (vi) a reasonably detailed schedule of complimentary food, beverages, hotel room (including
any upgrades), markers and/or other amenities provided to any customers or guests of the
Hotel/Casino Property. In addition, such Officer’s Certificate shall also state that the
representations and warranties of each Borrower set forth in Section 4.1.30 hereof are true
and correct as of the date of such certificate, that there are no trade payables outstanding for
more than sixty (60) days and that there has been no change in the identity of the Independent
Directors or Independent Managers of any Borrower or, if such a change has occurred the identity of
any such replacement Independent Director or Independent Manager and a statement that such new
Independent Director or Independent Manager satisfies the requirements with respect thereto as set
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“Independent Director” or “Independent Manager” herein. On or before forty-five (45) days
after the end of each calendar month, Borrowers also will furnish, or cause to be furnished, to
Lender, with respect to the Hotel/Casino Property, the most current Smith Travel Research Reports
or a locally available equivalent, if any, identified by Lender, then available to Borrowers
reflecting market penetration and relevant hotel properties competing with the Hotel/Casino
Property. In addition, Borrowers shall cause Guarantors to furnish, within sixty (60) days after
the end of each calendar quarter, certain financial statements in accordance with the terms of the
Closing Completion Guaranty, Construction Completion Guaranty, and/or Non-Recourse Guaranty, as
applicable.



(d) For each Fiscal Year during the term of the Loan, Borrowers shall deliver to Lender an
Annual Budget not later than twenty (20) days prior to the commencement of such Fiscal Year.



(e) In the event that any Borrower must incur any Extraordinary Expense, then such Borrower
shall promptly deliver to Lender a reasonably detailed explanation of such proposed Extraordinary
Expense for Lender’s approval, provided that Borrowers shall be permitted to obtain disbursement of
funds for payment of Extraordinary Expenses prior to obtaining Lender approval thereof as and to
the extent provided under the provisions of Section 2.6.2(b)(iii) and Section 2.6.2(c)(iv) (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.



(f) 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 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 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 mortgage 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
mortgage loans included or expected to be included, as applicable, in the Securitization. Such
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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 connection with or relating to the
Securitization (an “Exchange Act Filing”) is not required. If requested by Lender, Borrowers shall
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
mortgage 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.



(g) All financial data and financial statements provided by Borrowers pursuant to Section
5.1.11(f) 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(f) hereof shall be audited by
independent accountants of 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 under Section 5.1.11(f) 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(g).



(h) If requested by Lender, Borrowers shall 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.



(i) 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(f) and (g)
hereof, Lender may request, and Borrower shall promptly provide, such other


 


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financial data and financial statements as Lender determines to be necessary or appropriate
for such compliance.



(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’ 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 and Borrowers 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 to engage in the
businesses presently conducted by Borrowers as and to the extent the same are necessary for
the ownership, maintenance, management and operation of the Properties or the IP. Each
Borrower will qualify to do business and will 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 Properties or the IP.




5.1.13. Title to the Properties and the IP. Borrowers will warrant and defend
(a) 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 (b) 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. 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 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 Mortgage is foreclosed
in whole or in part or that the Mortgage is put into the hands of an attorney for
collection, suit, action or foreclosure, (b) of the foreclosure of any mortgage prior to or
subsequent to the Mortgage 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 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
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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 and each Component, (ii) the Reduced Acquisition Loan Outstanding Principal
Balance and the Construction Loan Outstanding Principal Balance, (iii) the Applicable
Interest Rate of each Component, (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 Notes, this Agreement, the Mortgage 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 Reduced Acquisition Loan Outstanding Principal Balance
and the Construction Loan Outstanding Principal Balance, (ii) the Applicable Interest Rate of each
Component, (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 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 First Mezzanine Borrowers, Second Mezzanine Borrowers and/or
Third Mezzanine Borrowers, 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 Original Acquisition
Loan received by them on the Closing Date only for the purposes set forth in Section
2.1.2 hereof. Borrowers have used and shall use the proceeds of the Construction Loan
received by them pursuant to any Construction Loan Advances only for the purposes set forth
in Section 2.1.3 hereof.




5.1.17. Performance by Borrowers. 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 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
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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 as of the date
of the Securitization.




5.1.19. No Joint Assessment. Borrowers shall not 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 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 Lender
with executed copies of all Leases. All proposed Major Leases shall be on commercially
reasonable terms and no Lease shall not contain any terms which would materially adversely
affect Lender’s rights under the 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 Lender or any purchaser at a sale by foreclosure or power of sale, provided that,
with respect to Major Leases, Lender provides commercially reasonable non-disturbance
language. Borrowers (i) shall observe and perform the obligations imposed upon the lessor
under the Leases in a commercially reasonable manner; (ii) shall 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 Borrower or acceptance
of surrender by a tenant of any Major Lease will be permitted without the consent of Lender;
(iii) shall not collect any of the rents more than one (1) month in advance (other than
security deposits); (iv) shall not execute any other assignment of lessor’s interest in the
Leases or the Rents (except as contemplated by the Loan Documents); and (v) shall 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
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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 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 hereof, Borrowers shall obtain Lender’s
prior consent to any material alterations to any Improvements, which consent shall not be
unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, Lender’s
consent shall not be required in connection with any alterations that will not have a
material adverse effect on any Borrower’s financial condition, the value of 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 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
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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. Such
security 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 the Properties to be operated, 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 promptly enter into a Replacement
Management Agreement with the applicable Manager or another Qualified Manager, as applicable.



(b) Each Borrower shall: (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 Management
Agreement to which it is a party and do all things necessary to preserve and to keep unimpaired its
material rights thereunder; (ii) promptly notify Lender of any material default under its
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 its 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 its
Management Agreement in a commercially reasonable manner.



(c) Hotel/Casino Borrower shall 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. Hotel/Casino Borrower
shall 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.


 


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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, Hotel/Casino Borrower shall 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 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),
Hotel/Casino Borrower shall promptly enter into a Replacement Liquor Management Agreement with the
Liquor Manager or another Qualified Liquor Manager, as applicable.



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



(c) Upon the occurrence and during the continuance of an Event of Default, Borrowers shall, at
the request of Lender, cause the Liquor Manager, if one of the Borrowers or an Affiliate of any
Borrower, 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 Lender, its designee or nominee (a “Lender
Successor Owner”), at the request of Lender, cause the Liquor Manager, if one of the Borrowers or
an Affiliate of any Borrower, to perform all obligations under the Liquor Management Agreement for
the benefit of the Lender Successor Owner and to maintain all applicable Operating Permits
necessary for the performance thereof for a period not to exceed fifteen (15) months after the
effective date of such transfer to the Lender Successor Owner (which period shall in all events
terminate upon Lender Successor Owner’s appointment of a new liquor manager possessing all
Governmental Approvals necessary to provide all alcoholic beverage services at the Hotel/Casino
Property, subject to Liquor Manager’s obligation to transfer its responsibilities under the Liquor
Management Agreement to such new liquor manager and to reasonably cooperate with the transition of
the liquor management responsibilities from Liquor Manager to such new liquor manager), either in
accordance with the terms of the Liquor Management Agreement, including, but not limited to, the
obligation to deposit all revenue derived from liquor sales into an account designated by the
Lender Successor Owner, or pursuant to a replacement liquor services management agreement in form
and substance reasonably acceptable to Lender and such Liquor Manager; provided that (i)
the


 


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Lender Successor Owner shall be obligated to pay a then market rate liquor management fee which is
reasonable and customary for similar hotel and casinos in Las Vegas, Nevada, and (ii) all other
terms and arrangements shall be usual and customary for similar hotel and casinos in Las Vegas,
Nevada. Notwithstanding the foregoing, at any time after the foreclosure, deed in lieu of
foreclosure or other similar transfer of the Hotel/Casino Property to a Lender Successor Owner, at
the option of such Lender Successor Owner exercised by written notice to the Liquor Manager, such
Lender Successor Owner shall have the right to terminate the Liquor Management Agreement with any
Liquor Manager without penalty or termination fee and, in connection with the foregoing, Liquor
Manager shall transfer its responsibilities thereunder to a Person selected by such Lender
Successor Owner in its sole discretion.




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 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) Hotel/Casino Borrower acknowledges that Lender has the right (but not the obligation) to
cure any default by Gaming Borrower under the Casino Component Lease. In furtherance of that
right, Hotel/Casino Borrower shall promptly execute, acknowledge and deliver to Lender such
instruments as may reasonably be required to permit Lender to so cure any default under the Casino
Component Lease. Additionally, subject to the Gaming Laws, Hotel/Casino Borrower irrevocably
appoints Lender as its true and lawful attorney-in-fact to do, in its name or otherwise, any and
all acts and to execute any and all documents that are necessary to preserve any rights of
Hotel/Casino Borrower under or with respect to the Casino Component Lease (and the above powers
granted to Lender are coupled with an interest and shall be irrevocable) to the extent that
Hotel/Casino Borrower fails to do any of the same within five (5) Business Days following written
request by Lender.




5.1.25. Intellectual Property.



(a) Each Borrower shall 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 Borrower, (ii)
maintaining and complying with the terms of all licenses necessary for the use of any IP licensed
to any Borrower, (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 Borrower’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 Borrower’s attention and (iii) refraining from any act or omission that might
jeopardize any Borrower’s ability to use any of the IP.



(b) Hotel/Casino Borrower shall operate the Hotel/Casino Property as a “Hard Rock” hotel
unless otherwise consented to in writing by Lender and shall refrain from any act or omission,
including, without limitation, any act contemplated under Section 5.1.26


 


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hereof, that would result in, or would be reasonably likely to result in, the loss of its
ability to so operate the Hotel/Casino Property as a “Hard Rock” hotel.




5.1.26. Licensing and Sublicensing of the IP.



(a) Except as set forth in Sections 5.1.26(b), (c) and (d) hereof, Borrowers shall not
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 Borrower 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 such 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
Borrower’s ownership and/or operation of, or any activities conducted on, its Property, (2) does
not and will not materially diminish any 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 shall be deposited directly
into the Lockbox Account within one (1) Business Day following receipt by IP Borrower from time to
time;



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



(v) Such Adjacent Property IP License shall not adversely affect Lender’s Liens and security
interests in the Owned IP and Licensed IP, all of which shall


 


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remain in full force and effect and, at Lender’s request in its sole discretion, IP Borrower shall
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 Borrower 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 such proposed 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 First Mezzanine
Default, monetary Second Mezzanine Default or monetary Third Mezzanine Default, and no Event of
Default, First Mezzanine Event of Default, Second Mezzanine Event of Default or Third 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 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 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 Borrower or any other Restricted Party, and (E)
require the proposed licensee or sublicensee, as applicable, to deposit all consideration payable
thereunder or otherwise in connection therewith from time to time directly into the Lockbox
Account;



(iii) All consideration and/or royalties that is/are paid under or otherwise in connection
with such Third Party IP License shall constitute Gross Income from Operations for all purposes
under this Agreement and the other Loan Documents and, if notwithstanding the provisions of the
foregoing Section 5.1.26(c)(ii)(E) hereof, any Borrower


 


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shall receive any such consideration and/or royalties, the same shall be deposited directly in
the Lockbox Account within one (1) Business Day following receipt by any 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 effect 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, IP Borrower shall 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 First Mezzanine Default, monetary Second Mezzanine Default or monetary
Third Mezzanine Default, and no Event of Default, First Mezzanine Event of Default, Second
Mezzanine Event of Default or Third 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 Borrower or any other Restricted
Party (an “Affiliate IP License”); provided that (i) all of the conditions set forth in
Section 5.1.26(c) hereof shall be satisfied with respect to any such Affiliate IP License,
other than the condition set forth in Section 5.1.26(c)(i)(2) hereof, and (ii) such
Affiliate IP License shall have been approved in writing by Lender, which approval shall not be
unreasonably withheld.



(e) With respect to any IP License, Adjacent Property IP License, Third Party IP License or
Affiliate IP License permitted hereunder, upon satisfaction of such conditions as Lender shall
impose with respect to its consent to any IP License, or upon satisfaction of the conditions set
forth in Section 5.1.26(b) hereof with respect to any Adjacent Property IP License, or upon
satisfaction of the conditions set forth in Section 5.1.26(c) hereof with respect to any
Third Party IP License, or upon satisfaction of the conditions set forth in Section
5.1.26(d) hereof with respect to any Affiliate IP License, Lender, at the sole cost and expense
of Borrowers, shall execute and deliver to Borrowers (for the benefit of the licensee or
sublicensee, as applicable, under such IP License, Adjacent Property IP License, Third Party IP
License or Affiliate IP License, as applicable), provided that Borrowers cause the
applicable licensee or sublicensee, as applicable, to also execute and deliver, a customary and
mutually acceptable non-disturbance and attornment agreement as reasonably requested by IP
Borrower.



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


 


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release of the Lien of the Mortgage in accordance with the terms of this Agreement and the
other Loan Documents, each Borrower covenants and agrees with Lender that it will not do, directly
or indirectly, any of the following:




5.2.1. Operation of the Properties; Liquor Management.



(a) Borrowers shall not, 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 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 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) Hotel/Casino Borrower shall not, 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 Hotel/Casino
Borrower may, without Lender’s consent, replace 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, Hotel/Casino
Borrower shall not 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. No Borrower shall 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 Loan Documents; and (iii) Liens for Taxes or Other Charges
not yet delinquent.




5.2.3. Dissolution. No Borrower shall (a) engage in any dissolution,
liquidation or consolidation or merger with or into any other business entity, (b) engage in
any business activity not related to the ownership and operation of its Property or the IP,
(c) transfer, lease or sell, in one transaction or any combination of transactions, the


 


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assets or all or substantially all of the properties or assets of such Borrower except to
the extent permitted by the Loan Documents, or (d) modify, amend, waive or terminate (i) its
organizational documents in any material respect or in any respect with regard to the
provisions concerning any Borrower’s status as a Special Purpose Entity, or (ii) its
qualification and good standing in any jurisdiction, in each case, without obtaining the
prior consent of Lender. In connection with the foregoing, Lender hereby acknowledges its
consent to the amendments to the organizational documents of each Borrower that were
submitted to Lender in connection with the creation of Third Mezzanine Borrower.




5.2.4. Change in Business. No Borrower shall 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. No Borrower shall cancel or otherwise forgive or
release any material claim or debt (other than termination of Leases in accordance herewith)
owed to such Borrower by any Person, except for adequate consideration and in the ordinary
course of such Borrower’s business.




5.2.6. Zoning. No Borrower shall 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 remove or transfer any material article of FF&E or other personal property owned by
any 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
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such proposed action or matter within five (5) Business Days of Lender’s receipt
thereof, and (ii) after Lender’s failure to respond to the initial request for approval of
such proposed action or matter within the time period set forth in the foregoing clause (i),
Borrowers shall re-submit such request to Lender in a written notice that states clearly (in
14-point type or larger): “THIS IS A REQUEST FOR APPROVAL. APPROVAL WILL BE DEEMED GIVEN
IF LENDER DOES NOT RESPOND WITHIN FIVE (5) BUSINESS DAYS”, and Lender does not respond to
such second submission by approving such proposed action or matter or stating in reasonable
detail its objection thereto within five (5) Business Days of Lender’s receipt of such
second submission.




5.2.8. Principal Place of Business and Organization. No Borrower shall change
its principal place of business set forth in the introductory paragraph of this Agreement
without first giving Lender thirty (30) days prior notice. No Borrower shall change the
place of its organization as set forth in Section 4.1.28 hereof without the consent
of Lender, which consent shall not be unreasonably withheld. Upon Lender’s request,
Borrowers shall execute and deliver additional financing statements, security agreements and
other instruments which may be necessary to effectively evidence or perfect Lender’s
security interest in the Properties and/or the IP 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 Notes, 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).




 


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5.2.10. Transfers. (a) Borrowers acknowledge that Lender has examined and
relied on the experience of Borrowers and their general partners, members, principals and
(if any 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 Borrowers’ ownership of the
Properties and the IP as a means of maintaining the value of the Properties and the IP 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 Properties and the IP so as to ensure that, should Borrowers default in the
repayment of the Debt or the performance of the obligations contained in the Loan Documents,
Lender can recover the Debt by a sale of the Properties and the IP.



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 (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 Borrower as collateral for the First Mezzanine Loan and, if applicable, the
exercise of remedies by First Mezzanine Lender, including, without limitation, any Transfer of all
or a portion of such membership interests in connection with a foreclosure, strict foreclosure,
public or private sale or transfer in lieu of foreclosure under the First Mezzanine Loan Documents,
provided that any such exercise of remedies is performed in accordance with and subject to the
conditions and restrictions set forth in the Intercreditor Agreement and as a condition precedent
to any foreclosure, strict foreclosure, public or private sale or transfer in lieu of foreclosure
of such membership interests the First Mezzanine Lender shall pay to Lender a transfer fee in an
amount equal to 1.00% of the sum of the Reduced Acquisition Loan Outstanding Principal Balance and
the Construction Loan Outstanding Principal Balance, (C) the pledge of the membership interests in
each First Mezzanine Borrower as collateral for the 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 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 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



 


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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 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 hereof, (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) 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 Borrower(s) in order to create one or more new
mezzanine borrowers for any New Mezzanine Loan as contemplated hereunder, 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 the Second Mezzanine Borrowers in connection
with the creation of the 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) hereof, as applicable; 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.



(b) A Transfer shall include, but not be limited to, (i) an installment sales agreement
wherein any Borrower agrees to sell a Property or any part thereof or the IP or any part thereof
for a price to be paid in installments; (ii) an agreement by any 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 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; or (vii) the removal or the



 


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resignation of any Manager (including, without limitation, an Affiliated Manager) other than
in accordance with Section 5.1.22 hereof.



(c) 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, 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 Borrower for so long as the First Mezzanine Loan, the Second Mezzanine Loan
or the Third Mezzanine Loan is outstanding, and/or (ii) any direct interest in any First Mezzanine
Borrower for so long as the Second Mezzanine Loan or the Third Mezzanine Loan is outstanding,
and/or (iii) any direct interest in any Second Mezzanine Borrower for so long as the Third
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, First
Mezzanine Event of Default, Second Mezzanine Event of Default or Third
Mezzanine Event of Default has occurred and is continuing, (2)(y) one or
both Guarantors continue to Control, directly or indirectly, each Borrower
and HRHI, and (z) one or both Guarantors own, directly or indirectly, at
least a fifty-one percent (51%) economic interest in each Borrower 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 Borrower 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 Borrower, 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 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, First Mezzanine Event of
Default, Second Mezzanine Event of Default or Third Mezzanine Event of


 


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Default has occurred and is continuing, (2)(y) one or both Guarantors
continue to Control, directly or indirectly, each Borrower and HRHI, and (z)
one or both Guarantors own, directly or indirectly, at least a fifty-one
percent (51%) economic interest in each Borrower 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 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 Borrower and HRHI, and (z) one or both Guarantors own,
directly or indirectly, at least a fifty-one percent (51%) economic interest
in each Borrower 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 Borrower and the
other Transfer Restricted Parties, and the single purpose nature and
bankruptcy remoteness of each Borrower and the other Transfer Restricted
Parties, after such Transfer shall satisfy the applicable provisions of the
Loan Documents, including, without limitation, Section 4.1.30
hereof, (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 Borrower 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
Borrower, 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 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


 


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(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 Borrower 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 Borrower, 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 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.



(d) With respect to any Transfer permitted under this Section 5.2.10 or otherwise
consented to by Lender, Borrower shall 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.



(e) 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.


 


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5.2.11. Morton Indemnification and PWR/RWB Escrow Agreement. Borrowers shall
not do, and Borrowers shall not permit 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 the Closing Date 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. Subject to Lender’s
reasonable approval, Borrowers shall diligently pursue their rights and remedies under the
Morton Indemnification and the PWR/RWB Escrow Agreement, and following the occurrence and
during the continuance of an Event of Default, Lender shall have the right to pursue the
same on behalf of, and in the name of, any Borrower, and each Borrower hereby appoints
Lender its attorney-in-fact, coupled with an interest, to pursue the same.




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 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, First Mezzanine
Event of Default, Second Mezzanine Event of Default and/or Third 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
hereof.



ARTICLE VI.

INSURANCE; CASUALTY; CONDEMNATION; RESTORATION




Section 6.1. Insurance. (a) Borrowers shall obtain and maintain, or cause to be
maintained, insurance for each Borrower and each Property providing at least the following
coverages:



(i) comprehensive all risk insurance on the Improvements and the Personal Property (including
any Stored Materials) (A) in an amount equal to one hundred percent (100%) of the “Full Replacement
Cost,” which for purposes of this Agreement shall mean actual replacement value (exclusive of costs
of excavations, foundations, underground utilities and footings) with a waiver of depreciation; (B)
containing an Agreed Amount endorsement with respect to the Improvements and Personal Property
waiving all co-insurance provisions; (C) providing for no deductible in excess of Two Hundred Fifty
Thousand Dollars ($250,000) for all such insurance coverage except that the deductible for
earthquake or windstorm insurance shall not exceed five percent (5%) of the total value of the
Properties and the deductible for flood insurance shall not exceed Two Hundred Fifty Thousand
Dollars


 


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($250,000); and (D) containing an “Ordinance or Law Coverage” or “Enforcement” endorsement if
any of the Improvements or the use of any of the Properties shall at any time constitute legal
non-conforming structures or uses. In addition, Borrowers shall obtain: (x) if any portion of the
Improvements is currently or at any time in the future located in a federally designated “special
flood hazard area”, flood hazard insurance in an amount equal to the lesser of (1) the Aggregate
Outstanding Principal Balance or (2) the maximum amount of such insurance available under the
National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the National
Flood Insurance Reform Act of 1994, as each may be amended, or such greater amount as Lender shall
reasonably require; (y) earthquake insurance in a reasonable amount based on the maximum probable
loss and in form and substance reasonably satisfactory to Lender in the event any Property is
located in an area with a high degree of seismic activity; and (z) windstorm insurance in amounts
and in form and substance reasonably satisfactory to Lender in the event windstorm coverage is
excluded from the all risk insurance coverage required under this subsection (i),
provided that the insurance pursuant to clauses (x), (y) and (z) hereof
shall be on terms consistent with the comprehensive all risk insurance policy required under this
subsection (i);




(ii) commercial general liability insurance against claims for personal injury, bodily injury,
death or property damage occurring upon, in or about any Property, such insurance (A) to be on the
so-called “occurrence” form with a combined limit of not less than Two Million Dollars ($2,000,000)
in the aggregate and One Million Dollars ($1,000,000) per occurrence, with a deductible not to
exceed One Hundred Thousand Dollars ($100,000) (and, if on a blanket policy, containing an
“Aggregate Per Location” endorsement); (B) to continue at not less than the aforesaid limit until
required to be changed by Lender in writing by reason of changed economic conditions making such
protection inadequate; and (C) to cover at least the following hazards: (1) premises and
operations; (2) products and completed operations on an “if any” basis; (3) independent
contractors; (4) blanket contractual liability for all legal contracts; (5) contractual liability
covering the indemnities contained in Article 8 of the Mortgage to the extent the same is
available; (6) owner’s and contractor’s protective liability prior to the commencement and during
the performance of any portion of the Initial Renovations and/or the Project; (7) owner’s
contingent general liability prior to the commencement and during the performance of any portion of
the Initial Renovations and/or the Project; and (8) dram shop coverage;



(iii) rental loss and/or business income interruption insurance (A) with Lender named as loss
payee; (B) covering all risks required to be covered by the insurance provided for in Section
6.1(a)(i) above; (C) containing an extended period of indemnity endorsement which provides that
after the physical loss to the Improvements and Personal Property with respect to the applicable
Property has been repaired, the continued loss of income will be insured until such income either
returns to the same level it was at prior to the loss, or the expiration of six (6) months from the
date that such Property is repaired or replaced and operations are resumed, whichever first occurs,
and notwithstanding that the policy may expire prior to the end of such period; and (D) in an
amount equal to one hundred percent (100%) of the projected Gross Income from Operations from each
Property for a period of eighteen (18) months from the date of such Casualty (assuming such
Casualty had not occurred) and notwithstanding that the policy may expire prior to the end of such
period. The amount of such business income insurance shall be determined prior to the date hereof
and at least once



 


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each year thereafter based on Borrowers’ reasonable estimate of the Gross Income from
Operations from each Property for the succeeding eighteen (18) month period. Provided that
(y) no Event of Default shall have occurred and be continuing, and (z) Lender has not elected (to
the extent Lender has the right to so elect under Section 6.4 hereof) to apply the Net
Proceeds arising from the Casualty giving rise to insurance proceeds under this Section
6.1(a)(iii) to the Obligations in accordance with Section 6.4 hereof, all proceeds
payable to Lender under this Section 6.1(a)(iii) shall be deposited in the Cash Management
Account and applied in the manner set forth in Section 2.6.2(b) or 2.6.2(c) hereof,
as applicable, it being expressly acknowledged and agreed by Borrowers that in the event that the
circumstances in the foregoing clause (y) and/or (z) have occurred (and, in the
case of the foregoing clause (y), are continuing), Lender shall apply all proceeds payable
to Lender under this Section 6.1(a)(iii) 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). Notwithstanding the foregoing, nothing herein contained
shall be deemed to relieve Borrowers of their obligations to pay the Obligations secured by the
Loan Documents on the respective dates of payment provided for in this Agreement and the other Loan
Documents except to the extent such amounts are actually paid out of the proceeds of such business
income insurance;



(iv) at all times during which structural construction, repairs or alterations are being made
with respect to the Improvements on the applicable Property, including, without limitation,
construction of the Initial Renovations and/or the Project, and only if the property coverage form
does not otherwise apply, (A) contractor’s liability insurance covering claims not covered by or
under the terms or provisions of the above mentioned commercial general liability insurance policy;
and (B) the insurance provided for in subsection (i) above written in a so-called builder’s
risk completed value form (1) on a non-reporting basis, (2) against all risks insured against
pursuant to subsection (i) above, (3) including permission to occupy such Property, and (4)
with an Agreed Amount endorsement waiving co-insurance provisions;



(v) worker’s compensation insurance with respect to any employees at any of the Properties, as
required by any Governmental Authority or Legal Requirement, and employers practice liability
insurance in an amount not less than One Million Dollars ($1,000,000) per occurrence with a
deductible not to exceed $350,000;



(vi) comprehensive boiler and machinery insurance, if applicable, in amounts as shall be
reasonably required by Lender on terms consistent with the commercial property insurance policy
required under subsection (i) above;



(vii) umbrella liability insurance in an amount not less than Two Hundred Sixty Million
Dollars ($260,000,000) per occurrence on terms consistent with the commercial general liability
insurance policy required under subsection (ii) above;



(viii) motor vehicle liability coverage for all owned and non-owned vehicles, including rented
and leased vehicles containing minimum limits per occurrence of One Million and No/100 Dollars
($1,000,000);


 


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(ix) if a Property is or becomes a legal “non conforming” use, ordinance or law coverage and
insurance coverage to compensate for the cost of demolition or rebuilding of the undamaged portion
of such Property and the increased cost of construction in amounts as reasonably requested by
Lender;



(x) the commercial property, liability and business income insurance required under
Sections 6.1(a)(i), (ii) and (iii) above shall cover perils of terrorism and acts
of terrorism and Borrowers shall maintain commercial property, liability and business income
insurance for loss resulting from perils and acts of terrorism on terms (including amounts)
consistent with those required under Sections 6.1(a)(i), (ii) and (iii) above at
all times during the term of the Loan (collectively, the “Terrorism Insurance”); provided,
however, that Borrowers shall only be required to maintain Terrorism Insurance in the
amount (the “Terrorism Cap”) that may be purchased by Borrowers at a cost not to exceed (A)
$1,300,000.00 per year until such time as Borrowers are required to carry so-called builder’s risk
coverage with respect to construction of the Project pursuant to the terms of this Agreement, and
(B) $3,900,000.00 per year at all times following such time as Borrowers are required to carry
so-called builder’s risk coverage with respect to construction of the Project pursuant to the terms
of this Agreement;



(xi) crime coverage in an amount not less than (A) Two Million and No/100 Dollars ($2,000,000)
until Substantial Completion of the Project (if the same shall ever occur), and (B) Twenty-Five
Million and No/100 Dollars ($25,000,000) from and after Substantial Completion of the Project (if
the same shall ever occur), to protect against employee dishonesty, on- and off- premises money,
securities, computer and credit card fraud, robbery and safe burglary; and



(xii) upon sixty (60) days’ notice, such other reasonable insurance and in such reasonable
amounts as Lender from time to time may reasonably request against such other insurable hazards
which at the time are commonly insured against for properties similar to the applicable Property
located in or around the region in which such Property is located.



(b) All insurance provided for in Section 6.1(a) hereof shall be obtained under valid
and enforceable policies (collectively, the “Policies” or in the singular, the “Policy”), and shall
be subject to the reasonable approval of Lender. Lender’s approval of any insurance shall be
deemed to have been given if (i) a request for approval, together with a copy of the applicable
proposed insurance and any other documents and information reasonably requested by Lender in
writing in order to adequately review the same, 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 EIGHT (8) DAYS, BORROWERS MAY DELIVER A DEEMED APPROVAL NOTICE”, and Lender does not
respond by approving such proposed insurance or stating in reasonable detail its objections to such
proposed insurance within eight (8) days of Lender’s receipt thereof, and (ii) after Lender’s
failure to respond to the initial request for approval of such proposed insurance 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-



 


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point type or larger): “THIS IS A REQUEST FOR APPROVAL. APPROVAL WILL BE DEEMED GIVEN IF
LENDER DOES NOT RESPOND WITHIN SEVEN (7) DAYS”, and Lender does not respond to such second
submission by approving such proposed insurance or stating in reasonable detail its objection
thereto within seven (7) days of Lender’s receipt of such second submission. The Policies shall be
issued by financially sound and responsible insurance companies authorized to do business in the
State and having a claims paying ability rating of (i) “A-” or better (and the equivalent thereof)
by S&P and by (A) at least two (2) of the Rating Agencies rating the Securities (provided
that if S&P is rating the Securities, than only by one additional Rating Agency rating the
Securities, which shall be Moody’s if they are rating the Securities), or (B) if only one Rating
Agency is rating the Securities, then only by such Rating Agency; (ii) if there are more than one,
but less than five, insurance companies collectively issuing the Policies, (y) seventy-five percent
(75%) or more of the insured amount shall have a claims paying ability rating of “A” or better (and
the equivalent thereof) by S&P and by (A) at least two (2) of the Rating Agencies rating the
Securities (provided that if S&P is rating the Securities, than only by one additional
Rating Agency rating the Securities, which shall be Moody’s if Moody’s is rating the Securities),
or (B) if only one Rating Agency is rating the Securities, then only by such Rating Agency, and (z)
the remaining twenty-five percent (25%) (or lesser remaining amount) of which shall have a claims
paying ability rating of “BBB” or better (and the equivalent thereof) by S&P and by (A) at least
two (2) of the Rating Agencies rating the Securities (provided that if S&P is rating the
Securities, than only by one additional Rating Agency rating the Securities, which shall be Moody’s
if Moody’s is rating the Securities), or (B) if only one Rating Agency is rating the Securities,
then only by such Rating Agency, or (iii) if there are five or more insurance companies
collectively issuing the Policies, (y) sixty percent (60%) or more of the insured amount shall have
a claims paying ability rating of “A” or better (and the equivalent thereof) by S&P and by (A) at
least two (2) of the Rating Agencies rating the Securities (provided that if S&P is rating
the Securities, than only by one additional Rating Agency rating the Securities, which shall be
Moody’s if Moody’s is rating the Securities), or (B) if only one Rating Agency is rating the
Securities, then only by such Rating Agency, and (z) the remaining forty percent (40%) (or lesser
remaining amount) of which shall have a claims paying ability rating of “BBB” or better (and the
equivalent thereof) by S&P and by (A) at least two (2) of the Rating Agencies rating the Securities
(provided that if S&P is rating the Securities, than only by one additional Rating Agency
rating the Securities, which shall be Moody’s if Moody’s is rating the Securities), or (B) if only
one Rating Agency is rating the Securities, then only by such Rating Agency, and shall also have a
rating of “A X” or better by AM Best’s. The Policies described in Section 6.1(a) hereof
(other than those strictly limited to liability protection) shall designate Lender as loss payee.
Not less than five (5) Business Days prior to the expiration dates of the Policies theretofore
furnished to Lender, 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.



(c) Any blanket insurance Policy shall substantially fulfill the requirements contained herein
and shall otherwise provide the same protection as would a separate Policy insuring only each
Property in compliance with the provisions of Section 6.1(a) hereof, and shall only be
permitted so long as no Event of Default has occurred and is continuing.


 


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(d) All Policies provided for or contemplated by Section 6.1(a) hereof, except for the
Policy referenced in Section 6.1(a)(v) hereof, shall name the applicable Borrower(s) as the
insured and Lender as an additional insured, as its interests may appear, and in the case of
property damage, boiler and machinery, flood and earthquake insurance, shall contain a standard
non-contributing mortgagee clause in favor of Lender providing that the loss thereunder shall be
payable to Lender.



(e) All property Policies provided for in Section 6.1 hereof shall contain clauses or
endorsements to the effect that:



(i) no act or negligence of any Borrower, or anyone acting for any Borrower, or of any tenant
or other occupant (including, without limitation, HRHI with respect to the Hotel/Casino Property),
or failure to comply with the provisions of any Policy, which might otherwise result in a
forfeiture of the insurance or any part thereof, shall in any way affect the validity or
enforceability of the insurance insofar as Lender is concerned;



(ii) the Policies shall not be materially changed (other than to increase the coverage
provided thereby) or canceled without at least thirty (30) days’ notice to Lender;



(iii) the issuers thereof shall give notice to Lender if the Policies have not been renewed
fifteen (15) days prior to their expiration; and



(iv) Lender shall not be liable for any Insurance Premiums thereon or subject to any
assessments thereunder.



(f) 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 any
of the Properties, 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 Mortgage and
shall bear interest at the Default Rate from the date of demand.



(g) Notwithstanding anything to the contrary set forth herein, proof of all property coverages
required under Section 6.1(a) hereof 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.



(h) Notwithstanding anything to the contrary set forth in this Agreement or the other Loan
Documents, Lender agrees that by funding the Original Acquisition Loan on the Closing Date, the
existing Policies and coverages covering the Properties as of the Closing Date are satisfactory to
Lender in all respects and are deemed to fully comply with the requirements of this Agreement and
the other Loan Documents as of the Closing Date; provided, however, that the
foregoing shall not prevent Lender from insisting upon strict compliance with the requirements of
this Section 6.1 with respect to any future Policies or coverage.


 


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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 give prompt notice of such damage
to Lender and shall 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 hereof, provided,
that if (A) Lender is obligated to make Net Proceeds available to Borrowers for purposes of
Restoration in accordance with Section 6.4 hereof, (B) Lender has received such Net
Proceeds, and (C) Lender has not made such Net Proceeds available to Borrowers, then Borrowers
shall not be required to repair and restore such Property unless and until such Net Proceeds are
made available to Borrowers. It is expressly understood, however, that Borrowers shall not be
obligated to restore such Property to the precise condition of such Property prior to such Casualty
provided such Property is restored, to the extent practicable, to be of at least equal value and of
substantially the same character as prior to the Casualty. Borrowers shall pay 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. 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 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 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 from time to time deliver to Lender all instruments reasonably
requested by it to permit such participation. Borrowers shall, 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 Notes 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 Notes. If any Property or any
portion thereof is taken by a condemning authority, Borrowers



 


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shall promptly commence and diligently prosecute the Restoration of the applicable Property
and otherwise comply with the provisions of Section 6.4 hereof, provided, that if
(A) Lender is obligated to make Net Proceeds available to Borrowers for purposes of Restoration in
accordance with Section 6.4 hereof, (B) Lender has received such Net Proceeds, and (C)
Lender has not made such Net Proceeds available to Borrowers, then Borrowers shall not be obligated
to repair and restore such Property unless and until such Net Proceeds are made available to
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 either of
the Notes 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. The following provisions shall apply in connection with the
Restoration of any Property:



(a) If the Net Proceeds shall be less than the Restoration Threshold and the costs of
completing the Restoration shall be less than the Restoration Threshold, provided that no
Event of Default shall have occurred and be continuing, the Net Proceeds will be disbursed by
Lender to the Borrower owning such Property upon receipt and Borrowers shall diligently proceed to
Restore the applicable Property.



(b) If (i) the Net Proceeds shall be equal to or greater than the Restoration Threshold and/or
the costs of completing the Restoration shall be equal to or greater than the Restoration
Threshold, but (ii) the Net Proceeds shall be less than the Restoration Value Threshold,
provided that no Event of Default shall have occurred and be continuing, the Net Proceeds
will be held by Lender and Lender shall make the Net Proceeds available for the Restoration of the
applicable Property in accordance with the provisions of this Section 6.4, provided
that the conditions set forth in Section 6.4(c)(i)(A), (B), (D),
(F), (G) and (H) hereof are met.



(c) If (i) the Net Proceeds shall be equal to or greater than the Restoration Threshold and/or
the costs of completing the Restoration shall be equal to or greater than the Restoration
Threshold, and (ii) the Net Proceeds shall equal or exceed the Restoration Value Threshold, the Net
Proceeds shall be held by Lender and Lender shall have the right, in its sole discretion, to (A)
apply the Net Proceeds to the Debt in accordance with the provisions of Section 6.4(d)
hereof, or (B) make the Net Proceeds available for the Restoration of such Property in accordance
with the provisions of this Section 6.4. The term “Net Proceeds” for purposes of this
Agreement shall mean: (i) the net amount of all insurance proceeds received by Lender
pursuant to Sections 6.1(a)(i), (iv), (vi), (ix) and (x) hereof as a result of such
damage or destruction, after deduction of Lender’s reasonable costs and expenses (including, but
not limited to, reasonable counsel fees), if any, in collecting same (“Insurance Proceeds”), or
(ii) the net amount of the Award, after deduction of Lender’s reasonable costs and expenses
(including, but not limited to, reasonable counsel fees), if any, in collecting same (“Condemnation
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(i) Subject to the provisions of Section 6.4(a) above, the Net Proceeds shall be made
available to the applicable Borrower for Restoration of its Property upon the approval of Lender in
its reasonable discretion that the following conditions are met:




(A) no Event of Default shall have occurred and be continuing;




(B) (1) in the event the Net Proceeds are Insurance Proceeds, less than
thirty percent (30%) of the total floor area of the Improvements on such
Property has been damaged, destroyed or rendered unusable as a result of
such Casualty, or (2) in the event the Net Proceeds are Condemnation
Proceeds, less than fifteen percent (15%) of the land constituting such
Property is taken, and such land is located along the perimeter or periphery
of such Property, and no portion of the Improvements is located on such
land;




(C) Intentionally Deleted;




(D) the applicable Borrower shall commence the Restoration as soon as
reasonably practicable (but in no event later than sixty (60) days after
such Casualty or Condemnation, whichever the case may be, occurs, (subject
to Excusable Delay and delays in the claims adjustments process outside the
control of Borrowers)) and shall diligently pursue the same to satisfactory
completion;




(E) Lender shall be satisfied that any operating deficits, including
all scheduled payments of principal and interest under the Notes, which will
be incurred with respect to such Property as a result of the occurrence of
any such Casualty or Condemnation, whichever the case may be, will be
covered out of the aggregate amount of (1) the Net Proceeds, (2) the
insurance coverage referred to in Section 6.1(a)(iii) hereof, if
applicable, and (3) other funds of Borrowers;




(F) Lender shall be satisfied that the Restoration will be completed on
or before the earliest to occur of (1) three (3) months prior to the
Maturity Date (as may be extended), (2) with respect to the Hotel/Casino
Property, the earliest date required for such completion under the terms of
the Casino Component Lease, (3) such time as may be required under
applicable Legal Requirements, or (4) the expiration of the insured period
provided by the insurance coverage referred to in Section
6.1(a)(iii) hereof;




(G) such Property and the use thereof after the Restoration will be in
compliance in all material respects with and permitted under all applicable
Legal Requirements;




(H) the Restoration shall be done and completed by the applicable
Borrower in an expeditious and diligent fashion and in compliance with all
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(I) such Casualty or Condemnation, as applicable, does not result in
the loss of access to any portion of such Property or the related
Improvements;




(J) Lender shall be satisfied that the Debt Yield, after giving effect
to the Restoration, shall be equal to or greater than the Debt Yield
immediately prior to such Casualty or Condemnation, as applicable,
calculated based on the most recent financial statements delivered to Lender
pursuant to Section 5.1.11 hereof prior to such Casualty or
Condemnation;




(K) Lender shall be satisfied that the Loan-to-Value Ratio, after
giving effect to the Restoration, shall be equal to or less than the
Loan-to-Value-Ratio immediately prior to such Casualty or Condemnation;




(L) the applicable Borrower shall deliver, or cause to be delivered, to
Lender a signed detailed budget approved in writing by such Borrower’s
architect or engineer stating the entire cost of completing the Restoration
of such Property, which budget shall be reasonably acceptable to Lender; and




(M) the Net Proceeds together with any cash or cash equivalent
deposited by Borrowers with Lender are sufficient in Lender’s reasonable
discretion to cover the cost of the Restoration of such Property.



(ii) In the event the Net Proceeds are equal to or exceed the Restoration Threshold, the Net
Proceeds shall be paid directly to Lender and shall be held by Lender in an interest-bearing
account and, until disbursed in accordance with the provisions of this Section 6.4(c),
shall constitute additional security for the Debt and the Other Obligations. The Net Proceeds
shall be disbursed by Lender to, or as directed by, the applicable Borrower from time to time
during the course of the Restoration, upon receipt of evidence reasonably satisfactory to Lender
that (A) all materials installed and work and labor performed (except to the extent that they are
to be paid for out of the requested disbursement) in connection with the Restoration have been paid
for in full, and (B) there exist no notices of pendency, stop orders, mechanic’s or materialman’s
liens or notices of intention to file same, or any other liens or encumbrances of any nature
whatsoever on the affected Property arising out of the Restoration which have not either been fully
bonded to the satisfaction of Lender and discharged of record or in the alternative fully insured
to the satisfaction of Lender by the Title Company, except for any Lien then being contested
pursuant to, and in accordance with, Section 3.6(b) of the Mortgage.



(iii) In the event the Net Proceeds are equal to or exceed the Restoration Threshold, all
plans and specifications required in connection with the Restoration shall be subject to prior
reasonable approval by Lender and by an independent consulting engineer selected by Lender (the
“Casualty Consultant”). Lender shall have the use of the plans and specifications and all permits,
licenses and approvals required or obtained in connection with the Restoration. The identity of
the contractors, subcontractors and materialmen engaged in the Restoration the cost of which is
greater than $750,000, as well as the contracts



 


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under which they have been engaged, shall be subject to prior review and reasonable acceptance
by Lender and the Casualty Consultant. All out-of-pocket costs and expenses incurred by Lender in
connection with making the Net Proceeds available for the Restoration, including, without
limitation, reasonable counsel fees and disbursements and the Casualty Consultant’s fees, shall be
paid by Borrowers.



(iv) In the event the Net Proceeds are equal to or exceed the Restoration Threshold, in no
event shall Lender be obligated to make disbursements of the Net Proceeds in excess of an amount
equal to the costs actually incurred from time to time for work in place as part of the
Restoration, as certified by the Casualty Consultant, minus the Casualty Retainage. The term
“Casualty Retainage” shall mean, as to each contractor, subcontractor or materialman engaged in the
Restoration, an amount equal to ten percent (10%) of the costs actually incurred for work in place
as part of the Restoration, as certified by the Casualty Consultant, until the Restoration has been
completed. The Casualty Retainage shall be reduced to five percent (5%) of the costs incurred for
work upon receipt by Lender of reasonably satisfactory evidence that fifty percent (50%) of the
Restoration has been completed. The Casualty Retainage shall in no event, and notwithstanding
anything to the contrary set forth above in this Section 6.4(c), be less than the amount
actually held back by the applicable Borrower from contractors, subcontractors and materialmen
engaged in the Restoration. The Casualty Retainage shall not be released until the Casualty
Consultant certifies to Lender that the Restoration has been completed in accordance with the
provisions of this Section 6.4(c) and that all approvals necessary to permit the
re-occupancy and use of the affected Property have been obtained from all appropriate Governmental
Authorities and quasi-governmental authorities, and Lender receives evidence reasonably
satisfactory to Lender that the costs of the Restoration have been paid in full or will be paid in
full out of the Casualty Retainage; provided, however, that Lender will release the
portion of the Casualty Retainage being held with respect to any contractor, subcontractor or
materialman engaged in the Restoration as of the date upon which the Casualty Consultant certifies
to Lender that such contractor, subcontractor or materialman has satisfactorily completed all work
and has supplied all materials in accordance with the provisions of such contractor’s,
subcontractor’s or materialman’s contract, such contractor, subcontractor or materialman delivers
the lien waivers (if the value of the applicable contract exceeds $175,000.00) and evidence of
payment in full of all sums due to such contractor, subcontractor or materialman as may be
reasonably requested by Lender or by the Title Company, and Lender receives an endorsement to the
applicable Title Insurance Policy insuring the continued priority of the Lien of the Mortgage and
evidence of payment of any premium payable for such endorsement. If required by Lender, the
release of any such portion of the Casualty Retainage shall be approved by the surety company, if
any, which has issued a payment or performance bond with respect to such contractor, subcontractor
or materialman.



(v) Lender shall not be obligated to make disbursements of the Net Proceeds more frequently
than once every calendar month.



(vi) In the event the Net Proceeds are equal to or exceed the Restoration Threshold, if at any
time the Net Proceeds or the undisbursed balance thereof shall not, in the good faith opinion of
Lender in consultation with the Casualty Consultant, be sufficient to pay in full the balance of
the costs which are estimated by the Casualty Consultant to be incurred in connection with the
completion of the Restoration, Borrowers shall deposit the



 


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deficiency (the “Net Proceeds Deficiency”) with Lender before any further disbursement of the
Net Proceeds shall be made. The Net Proceeds Deficiency deposited with Lender shall be held by
Lender and shall be disbursed for costs actually incurred in connection with the Restoration on the
same conditions applicable to the disbursement of the Net Proceeds, and until so disbursed pursuant
to this Section 6.4(c) shall constitute additional security for the Debt and the Other
Obligations.



(vii) The excess, if any, of the Net Proceeds and the remaining balance, if any, of the Net
Proceeds Deficiency deposited with Lender after the Casualty Consultant certifies to Lender that
the Restoration has been completed in accordance with the provisions of this Section
6.4(c), and the receipt by Lender of evidence reasonably satisfactory to Lender that all costs
incurred in connection with the Restoration have been paid in full, shall be applied by Lender to
repayment of the Debt in accordance with Section 2.4.3(c) hereof (with the determination of
the Exit Fee payable in connection therewith being determined in accordance with the provisions of
Section 2.8 hereof).



(d) All Net Proceeds not required to be made available for the Restoration may be retained and
applied by Lender in accordance with Section 2.4.3(c) hereof (with the determination of the
Exit Fee payable in connection therewith being determined in accordance with the provisions of
Section 2.8 hereof). Notwithstanding anything to the contrary contained herein, if Lender
is obligated under this Agreement to disburse the Net Proceeds to Borrowers for Restoration, and if
Lender fails to do so, then any obligation of Borrowers to restore or repair such Property under
the Loan Documents shall not apply until such Net Proceeds have been disbursed to Borrowers.



(e) In the event of foreclosure of the Mortgage with respect to any Property, or other
transfer of title to any Property in extinguishment in whole or in part of the Debt, all right,
title and interest of Borrowers in and to the Policies that are not blanket Policies then in force
concerning such Property and all proceeds payable thereunder shall thereupon vest in the purchaser
at such foreclosure or Lender or other transferee in the event of such other transfer of title.



ARTICLE VII.

RESERVE FUNDS




Section 7.1. Working Capital Reserve Fund.




7.1.1. Deposits to Working Capital Reserve Account. As of the date hereof,
Borrowers have deposited with Lender the amount of $7,000,000 to be held by Lender as
additional collateral for the Loan and to be applied at Borrowers’ direction in accordance
with the terms of this Section 7.1. Additionally, from time to time during the term
of the Loan, pursuant to Sections 2.6.2(b)(xv), 2.6.2(c)(xv) and/or
7.4.3, certain additional amounts may be deposited with Lender with respect to
working capital. All amounts so deposited with respect to working capital with Lender shall
hereinafter be referred to as the “Working Capital Reserve Fund” and the account in which
such amount is held shall hereinafter be referred to as the “Working Capital Reserve
Account”.


 


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7.1.2. Withdrawals from Working Capital Reserve Account. Provided that no
Event of Default shall have occurred and be continuing, Borrowers shall have the right from
time to time to request a disbursement of funds from the Working Capital Reserve Account for
Operating Expenses, Extraordinary Expenses, Capital Expenses, Project Costs, Debt Service,
debt service on the First Mezzanine Loan (but not any Accrual Amounts), debt service on the
Second Mezzanine Loan (but not any Accrual Amounts), debt service on the Third Mezzanine
Loan (but not any Accrual Amounts), Exit Fees, fees due in connection with any Letter of
Credit facilities utilized to post Letters of Credit to be provided hereunder from and after
the date hereof or any other fees or amounts required to be paid to Lender hereunder in each
case without the requirement for Lender approval of any of the foregoing (which request may
be made electronically in a manner and to a recipient acceptable to Lender);
provided, however, that in no event shall funds on deposit in the Working
Capital Reserve Account be disbursed for the distribution to, or otherwise to pay any
dividends to or make any payments to, any Restricted Party, subject to Section 5.2.12
hereof. Within thirty (30) days following the date of any withdrawal from the Working
Capital Reserve Account, Borrowers shall provide an accounting to Lender of all funds so
withdrawn from the Working Capital Reserve Account and the application thereof (without
regard to whether such funds were withdrawn by Borrowers or, in accordance with the
penultimate sentence of this Section 7.1.2, DLJ Guarantor), which certification shall be
accompanied by an Officer’s Certificate certifying that such accounting represents a true,
correct and complete accounting of the application of such funds (it being acknowledged and
agreed that in the instance any funds from the Working Capital Reserve Account were
disbursed at DLJ Guarantor’s request in accordance with the terms of the penultimate
sentence of this Section 7.1.2, then in such instance the Officer’s Certificate shall also
be signed by a duly authorized officer or manager of DLJ Guarantor). Without limiting any
other provisions set forth herein, in the event Borrowers shall fail to provide any such
accounting (and accompanying Officer’s Certificate) or in the event such accounting shall
disclose that Borrowers (or, as applicable, DLJ Guarantor) have failed to apply such funds
to permitted costs in accordance with this Section 7.1, neither Borrowers nor DLJ Guarantor
shall be entitled to any further advances from the Working Capital Reserve Account if,
within fifteen (15) days after receipt of notice from Lender of any such failure, Borrowers
(or, as applicable, DLJ Guarantor) do not remedy the same. Notwithstanding anything to the
contrary set forth herein, Borrowers hereby acknowledge and agree that DLJ Guarantor may
request disbursement of amounts specified in this Section 7.1.2 and that in such instance
Lender shall be entitled to make such disbursements to DLJ Guarantor in lieu of any Borrower
(and Borrowers hereby irrevocably waive any claims that may arise as a result of or in
connection with any disbursement to DLJ Guarantor in accordance with the terms of this
sentence). Borrowers further acknowledge and agree that Lender may condition any such
disbursement to DLJ Guarantor upon Borrowers’ written acknowledgment that Borrowers waive
any claims that may arise as a result of or in connection with any disbursement to DLJ
Guarantor in accordance with the terms of this sentence.



Section 7.2. Tax and Insurance Escrow Fund. Borrowers shall pay to Lender on each
Payment Date (a) one twelfth of the Taxes that Lender estimates will be payable during the next
ensuing twelve (12) months in order to accumulate with Lender sufficient funds to pay all



 


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such Taxes at least fifteen (15) days prior to their respective due dates, and (b) one twelfth
of the Insurance Premiums that Lender estimates will be payable for the renewal of the coverage
afforded by the Policies upon the expiration thereof in order to accumulate with Lender sufficient
funds to pay all such Insurance Premiums at least fifteen (15) days prior to the expiration of the
Policies (said amounts to be deposited pursuant to clauses (a) and (b) above, being
hereinafter called the “Tax and Insurance Escrow Fund”). Lender will apply the Tax and Insurance
Escrow Fund to payments of Taxes and Insurance Premiums required to be made by Borrowers pursuant
to Section 5.1.2 hereof and under the Mortgage. In making any payment relating to the Tax
and Insurance Escrow Fund, Lender may do so according to any bill, statement or estimate procured
from the appropriate public office (with respect to Taxes) or insurer or agent (with respect to
Insurance Premiums), without inquiry into the accuracy of such bill, statement or estimate or into
the validity of any tax, assessment, sale, forfeiture, tax lien or title or claim thereof. If the
amount of the Tax and Insurance Escrow Fund shall exceed the amounts due for Taxes and Insurance
Premiums pursuant to Section 5.1.2 hereof, Lender shall, in its sole discretion, return any
excess to Borrowers or credit such excess against future payments to be made to the Tax and
Insurance Escrow Fund. To the extent sufficient amounts have been deposited into the Tax and
Insurance Fund with Lender in compliance with this Section 7.2, it shall not be an Event of
Default if the Insurance Premiums and/or the Taxes are not paid due to Lender’s failure to apply
such amounts to the payment of the Insurance Premiums and the Taxes on the respective dates on
which each are due provided that Borrowers have not impeded Lender’s attempt to pay such
Insurance Premiums or Taxes. Any amount remaining in the Tax and Insurance Escrow Fund after the
Debt has been paid in full shall be returned to Borrowers. In allocating such excess, Lender may
deal with the Person shown on the records of Lender to be the owner of each of the Properties. If
at any time Lender reasonably determines that the Tax and Insurance Escrow Fund is not or will not
be sufficient to pay Taxes and Insurance Premiums by the dates set forth in clauses (a) and
(b) above, Lender shall notify Borrowers of such determination and Borrowers shall increase
their monthly payments to Lender by the amount that Lender reasonably estimates is sufficient to
make up the deficiency at least fifteen (15) days prior to the due date of the Taxes and/or fifteen
(15) days prior to expiration of the Policies, as the case may be.



Section 7.3. Replacements and Replacement Reserve.




7.3.1. Replacement Reserve Fund. Borrowers shall pay to Lender on each Payment
Date an amount equal to three percent (3%) of the Gross Income from Operations of the
Hotel/Casino Property for the immediately preceding calendar month, to be applied in
accordance with this Agreement to the costs of FF&E Expenditures and FF&E Expenditures Work
required to be made to the Hotel/Casino Property during the calendar year (collectively, the
“Replacements”). Amounts so deposited shall hereinafter be referred to as Borrowers’
“Replacement Reserve Fund” and the account in which such amounts are held shall hereinafter
be referred to as Borrowers’ “Replacement Reserve Account”.




7.3.2. Disbursements from Replacement Reserve Account. So long as no Event of
Default shall have occurred and be continuing, Lender shall make disbursements from the
Replacement Reserve Fund as requested by Borrowers and reasonably approved by Lender, which
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withheld or delayed, no more frequently than once in any thirty (30) day period and of
no less than Five Thousand Dollars ($5,000) per disbursement (or a lesser amount if the
total amount in the Replacement Reserve Account at such time is less than Five Thousand
Dollars ($5,000)), upon delivery by Borrowers of Lender’s or Servicer’s standard form of
draw request specifying the Replacements to be paid for on a Property-by-Property basis and
accompanied by copies of paid invoices for or invoices to be paid with the amounts requested
and, if required by Lender for requests in excess of One Hundred Seventy-Five Thousand
Dollars ($175,000) for a single item, lien waivers and releases from all parties furnishing
materials and/or services in connection with the requested payment. Lender may require an
inspection of the applicable Property at Borrowers’ expense prior to making a monthly
disbursement in order to verify completion of replacements and repairs of items in excess of
Two Hundred Thousand Dollars ($200,000) for which reimbursement is sought. Lender shall
cause any disbursement from the Replacement Reserve Fund to be made within five (5) Business
Days after receipt of Borrowers’ request and all required documentation provided
that such request is reasonably approved by Lender.




7.3.3. Balance in the Replacement Reserve Account. The insufficiency of any
balance in the Replacement Reserve Account shall not relieve Borrowers from their obligation
to fulfill all preservation and maintenance covenants in the Loan Documents.



Section 7.4. Interest Reserve Fund.




7.4.1. Deposits to Interest Reserve Account. As of the date hereof, Borrowers
have deposited with Lender the amount of $1,002,235.00, resulting in a total amount on
deposit in the Interest Reserve Account of $10,672,081.54 to be held by Lender as additional
collateral for the Loan and to be applied in accordance with the terms of this Agreement to
the payment of interest due hereunder, subject to Section 7.8(a). Additionally,
from time to time during the term of the Loan, pursuant to Sections 2.6.2(h),
3.23, 7.5.5, 7.7.2 (to the extent amounts withdrawn under
Section 7.7.2 relate to advances with respect to “Pre-Opening Funds” and “Property
Reimbursement Funds” (each as determined by Lender), which advances will be applied to the
Interest Reserve Account in accordance with the terms hereof) and/or 7.7.3, certain
additional amounts may be deposited with Lender with respect to the Interest Reserve Fund.
All amounts so deposited with Lender shall hereinafter be referred to as Borrowers’
“Interest Reserve Fund” and the account in which such amounts are held shall hereinafter be
referred to as Borrowers’ “Interest Reserve Account.”




7.4.2. Withdrawals from Interest Reserve Account. Provided that no Event of
Default shall have occurred and be continuing, if on any Payment Date the funds available in
the Cash Management Account are insufficient to pay the Reduced Acquisition Loan Monthly
Interest Payment, the Construction Loan Monthly Interest Payment, the First Mezzanine
Applicable Interest Payment, the Second Mezzanine Applicable Interest Payment and/or the
Third Mezzanine Applicable Interest Payment due on such Payment Date after satisfying all
items with a higher priority pursuant to Section 2.6.2 hereof, Lender shall
automatically, without the necessity of notifying, or


 


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obtaining the approval of, any Borrower or any other Person, and without any Borrower’s
request, apply a portion of the Interest Reserve Fund then on deposit to the payment of the
Reduced Acquisition Loan Monthly Interest Payment, the Construction Loan Monthly Interest
Payment, the First Mezzanine Applicable Interest Payment, the Second Mezzanine Applicable
Interest Payment and/or the Third Mezzanine Applicable Interest Payment or the portion of
any of the foregoing for which funds in the Cash Management Account are insufficient as
aforesaid, as applicable, and the Interest Reserve Fund shall be reduced by an equal amount
(provided that notwithstanding anything to the contrary set forth herein, no funds on
deposit in the Interest Reserve Account shall be applied to the payment of any Accrual
Amounts). Borrowers expressly acknowledge and agree that no disbursements from the Interest
Reserve Fund shall be made at any time during which an Event of Default has occurred and is
continuing. Notwithstanding the foregoing, Borrowers expressly acknowledge and agree that
in the event that on any day on which a Reduced Acquisition Loan Monthly Interest Payment
and/or a Construction Loan Monthly Interest Payment is/are due and payable (a) an Event of
Default has occurred and is continuing, Borrowers shall remain liable for the payment of all
Reduced Acquisition Loan Monthly Interest Payments and Construction Loan Monthly Interest
Payments as and when due, First Mezzanine Borrowers shall remain liable for the payment of
all First Mezzanine Applicable Interest Payments as and when due, Second Mezzanine Borrowers
shall remain liable for the payment of all Second Mezzanine Applicable Interest Payments as
and when due, and Third Mezzanine Borrowers shall remain liable for the payment of all Third
Mezzanine Applicable Interest Payments as and when due, or (b) the amount of such Reduced
Acquisition Loan Monthly Interest Payment, Construction Loan Monthly Interest Payment, First
Mezzanine Applicable Interest Payment, Second Mezzanine Applicable Interest Payment and/or
Third Mezzanine Applicable Interest Payment exceeds the Interest Reserve Fund then on
deposit, Borrowers, First Mezzanine Borrowers and Second Mezzanine Borrowers, as applicable,
shall remain liable for the difference between such Reduced Acquisition Loan Monthly
Interest Payment, Construction Loan Monthly Interest Payment, First Mezzanine Applicable
Interest Payment, Second Mezzanine Applicable Interest Payment and/or Third Mezzanine
Applicable Interest Payment, as applicable, and the Interest Reserve Fund then on deposit,
such difference to be due and payable at the time the Reduced Acquisition Loan Monthly
Interest Payment, the Construction Loan Monthly Interest Payment, the First Mezzanine
Applicable Interest Payment, the Second Mezzanine Applicable Interest Payment and the Third
Mezzanine Applicable Interest Payment are due and payable. Borrowers shall have the right,
but not the obligation, to apply amounts on deposit in the Working Capital Reserve Fund with
respect to any such difference or to make payments on account of any such difference with
additional equity provided by Borrowers. Lender acknowledges that if Lender is obligated to
apply Interest Reserve Funds to the payment of any Reduced Acquisition Loan Monthly Interest
Payment and/or Construction Loan Monthly Interest Payment pursuant to this Section
7.4.2, then the failure of Borrowers to pay such Reduced Acquisition Loan Monthly
Interest Payment and/or Construction Loan Monthly Interest Payment to the extent of such
Interest Reserve Fund shall not be deemed an Event of Default.




7.4.3. Remaining Interest Reserve Fund. Upon the satisfaction of the following
conditions: (a) no Event of Default, First Mezzanine Event of Default, Second


 


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Mezzanine Event of Default or Third Mezzanine Event of Default shall have occurred and
be continuing, (b) the later to occur of (i) Substantial Completion and (ii) the Loan having
been extended in February 9, 2011 in accordance with Section 2.7.3(b) hereof and (c)
the Properties having achieved and maintained a Debt Service Coverage Ratio of 1.25 to 1:00
for the immediately preceding six (6) consecutive calendar months as reasonably determined
by Lender, any funds remaining in the Interest Reserve Fund shall be deposited into the
Working Capital Reserve Fund until the amount on deposit therein equals $7,000,000 and
thereafter into the General Reserve Fund.



Section 7.5. Initial Renovation Reserve Fund.




7.5.1. Status of Initial Renovation Reserve Fund. The current balance on
deposit in the Initial Renovation Reserve Fund is $958,319.10 and is being held by Lender as
additional collateral for the Loan for the payment of those initial renovations to the
Properties identified on Schedule XIII attached hereto and made a part hereof, as
the same may be modified from time to time with Lender’s reasonable approval (the “Initial
Renovations”). Additionally, pursuant to Section 7.5.2 hereof, an additional
deposit may hereafter be made with Lender to be used for the payment of the Initial
Renovations. All of the foregoing amounts so deposited or hereafter deposited shall
hereinafter be referred to as the “Initial Renovation Reserve Fund” and the account in which
such amounts are held shall hereinafter be referred to as the “Initial Renovation Reserve
Account.”




7.5.2. Withdrawals from Initial Renovation Reserve Fund.



(a) Lender shall make disbursements from the Initial Renovation Reserve Fund for Initial
Renovation Costs incurred by any Borrower upon satisfaction by Borrowers of each of the following
conditions with respect to each such disbursement:



(i) such disbursement is for Initial Renovation Costs (A) contemplated by the Initial
Renovations Budget, or (B) reasonably approved by Lender;



(ii) prior to commencing any Initial Renovations that consist of constructing or demolishing
any improvements, (A) Lender shall have approved, which approval shall not be unreasonably
withheld, (1) the architect and the architect’s contract, if any, relating thereto, (2) the
construction manager and the construction management agreement, if any, relating thereto, (3) the
general contractor and the general contract, if any, relating thereto, (4) all Major Contracts and
Major Contractors (except relating to such Initial Renovations rather than the Project), if any,
relating thereto, (5) the plans and specifications for such Initial Renovations, if any, and (6) a
construction progress schedule reflecting the anticipated dates of completion of specified
subcategories of the Initial Renovations as set forth in the Initial Renovations Budget; and (B)
Borrowers shall have obtained Payment and Performance Bonds covering each Major Contractor
performing such Initial Renovations; provided, however, that Lender shall, at
Borrowers’ request, review the financial statements of any such Major Contractor and reasonably
consider a request by Borrowers either (A) not to require a Payment and Performance Bond with
respect to such Major Contractor, or (B) to accept, in lieu of a Payment and Performance Bond with
respect to such Major Contractor, a “Subguard Policy” issued by Zurich North America,



 


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together with a financial interest endorsement, all in form and content reasonably acceptable
to Lender and subject to limits acceptable to Lender in its sole and absolute discretion;



(iii) Borrowers shall submit Lender’s or Servicer’s standard form of draw request for payment
to Lender at least ten (10) Business Days prior to the date on which Borrowers request such payment
be made, which request shall specify the Initial Renovation Costs to be paid on a
Property-by-Property basis and shall be accompanied by copies of invoices for the amounts
requested;



(iv) on the date such request is received by Lender and on the date such payment is to be
made, no Event of Default shall exist and remain uncured;



(v) all representations and warranties made by Borrowers and/or Guarantors in the Loan
Documents or otherwise made by or on behalf of Borrowers and/or Guarantors in connection therewith
or after the date thereof shall have been true and correct in all material respects on the date on
which made and shall continue to be true and correct in all material respects on the date of such
disbursement (except to the extent of changes in circumstances or conditions which are not
otherwise prohibited by this Agreement);



(vi) Lender shall have received:



(1) an Officer’s Certificate (A) containing a description of the Initial Renovation Costs to
be funded by such disbursement, (B) stating that all Initial Renovation Costs to be funded by the
requested disbursement have been completed in a good and workmanlike manner and in accordance in
all material respects with all applicable Legal Requirements, (C) identifying each Person that
supplied materials or labor in connection with the Initial Renovation Costs to be funded by the
requested disbursement, (D) stating that each such Person has been paid in full or will be paid in
full upon such disbursement, (E) stating that the Initial Renovation Costs to be funded have not
been the subject of a previous disbursement, (F) stating that all previous disbursements of Initial
Renovation Reserve Funds have been used to pay or reimburse Borrowers for the previously identified
Initial Renovation Costs, and (G) stating that, as of the date of such Officer’s Certificate, no
Event of Default has occurred and is continuing and all representations and warranties made by
Borrowers and/or Guarantors in the Loan Documents or otherwise made by or on behalf of Borrowers
and/or Guarantors in connection therewith or after the date thereof were true and correct in all
material respects on the date on which made and continue to be true and correct in all material
respects on the date of such Officer’s Certificate (except to the extent of changes in
circumstances or conditions which are not otherwise prohibited by this Agreement);



(2) a copy of any license, permit or other approval by any Governmental Authority necessary to
permit the commencement and/or completion of the Initial Renovations to be funded or reimbursed by
the requested disbursement and not previously delivered to Lender;



(3) if required by Lender for requests in excess of One Hundred Seventy-Five Thousand Dollars
($175,000.00) for a single item, lien waivers or other



 


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evidence of payment satisfactory to Lender and releases from all parties furnishing materials
and/or services in connection with the requested payment;



(4) such other evidence as Lender shall reasonably request to demonstrate that the Initial
Renovations to be funded by the requested disbursement have been completed;



(5) payment by Borrowers of all fees and expenses required by this Agreement, to the extent
then due and payable, including, without limitation, (i) any fees and expenses referred to in
Section 10.13 hereof then due and payable, (ii) any reasonable fees and expenses then due
and payable to the Construction Consultant, (iii) any Unused Advance Fee then due and payable, (iv)
any Administrative Agent Fee then due and payable, and/or (v) any title premiums and/or other title
charges then due and payable;



(6) at Borrowers’ expense, a search of the public records that, subject to Section
3.11 hereof and the Permitted Encumbrances, discloses no conditional sales contracts, chattel
mortgages, leases of personalty, financing statements or title retention agreements which affect
any of the Properties; and



(7) Lender shall have received evidence reasonably satisfactory to Lender that Borrowers have
obtained all Policies required by Section 6.1 hereof in connection with the construction of
the Initial Renovations, to the extent not previously delivered to Lender;



(vii) Construction Consultant shall have reasonably determined that, following the making of
the requested disbursement, there shall be sufficient sums remaining in the Initial Renovation
Reserve Fund to complete all of the Initial Renovations, it being understood and agreed by
Borrowers that, in the event that Construction Consultant shall reasonably determine that there are
not sufficient sums remaining in the Initial Renovation Reserve Fund to complete all of the Initial
Renovations in accordance with the Initial Renovations Budget (any such insufficiency, an “Initial
Renovations Shortfall”), Lender shall not make any further disbursements from the Initial
Renovations Reserve Fund until Borrowers have done either one or a combination of the following in
an aggregate amount equal to such Initial Renovations Shortfall: (A) delivered to Lender evidence
satisfactory to Lender in its reasonable discretion that Borrowers or one or more Affiliates
thereof have previously expended cash to satisfy Initial Renovation Costs included on the Initial
Renovations Budget in an amount at least equal to such Initial Renovations Shortfall, and/or (B)
delivered to Lender for deposit in the Initial Renovations Reserve Account an amount equal to such
Initial Renovations Shortfall, which amount shall thereafter constitute a portion of the Initial
Renovations Reserve Fund for all purposes under this Agreement;



(viii) Construction Consultant shall have reasonably approved the requested disbursement, it
being expressly agreed by Lender that Lender shall diligently pursue obtaining Construction
Consultant’s response within a commercially reasonable time period following any such request which
includes all the required items as set forth herein; and


 


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(ix) Borrowers shall retain Retainage with respect to each contract or subcontract relating to
the Initial Renovations as provided herein with respect to the Project.


Lender shall make disbursements as requested by Borrowers not more frequently than once in any
thirty (30) day period and in a minimum amount of no less than five thousand dollars ($5,000.00)
per disbursement (or a lesser amount if the total amount in the Initial Renovation Reserve Account
is less than Five Thousand Dollars ($5,000), in which case only one disbursement of the amount
remaining in the account shall be made);




(b) Nothing in this Section 7.5.2 shall (i) make Lender responsible for performing or
completing any Initial Renovations; (ii) require Lender to expend funds in addition to the Initial
Renovation Reserve Fund to complete any Initial Renovations; (iii) obligate Lender to proceed with
any Initial Renovations; or (iv) obligate Lender to demand from any Borrower additional sums to
complete any Initial Renovations.



(c) Each Borrower shall permit Lender and Lender’s agents and representatives (including
Lender’s engineer, architect or inspector) or third parties to enter onto such Borrower’s Property
during normal business hours (subject to the rights of tenants under their Leases) to inspect the
progress of any Initial Renovations and all materials being used in connection therewith and to
examine all plans and shop drawings relating to such Initial Renovations. Each Borrower shall
cause all contractors and subcontractors to cooperate with Lender or Lender’s representatives or
such other Persons described above in connection with inspections described in this Section
7.5.2(c).



(d) If a requested disbursement will exceed $200,000.00, Lender may require an inspection of
the applicable Property at Borrowers’ expense prior to making a disbursement from the Initial
Renovation Reserve Fund in order to verify completion of the Initial Renovations for which
reimbursement is sought. Lender may require that such inspection be conducted by an appropriate
independent qualified professional selected by Lender and may require a certificate of completion
by an independent qualified professional architect acceptable to Lender prior to the disbursement
from the Initial Renovation Reserve Fund. Borrowers shall pay the expense of the inspection as
required hereunder, whether such inspection is conducted by Lender or by an independent qualified
professional architect.



(e) In addition to any insurance required under the Loan Documents, Borrowers shall provide or
cause to be provided worker’s compensation insurance, builder’s risk, and public liability
insurance and other insurance to the extent required under applicable law in connection with any
Initial Renovations. All such policies shall be in form and amount reasonably satisfactory to
Lender.




7.5.3. Intentionally Deleted.




7.5.4. Balance in the Initial Renovation Reserve Account. The insufficiency of
any balance in the Initial Renovation Reserve Account shall not relieve Borrowers from their
obligation to fulfill all preservation and maintenance covenants in the Loan Documents.


 


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7.5.5. Release of Initial Renovation Funds. Upon completion of the Initial
Renovations and the payment of all costs in connection therewith, all as reasonably
determined by the Construction Consultant, and provided that no Event of Default
shall have occurred and be continuing, Lender shall deposit any and all amounts remaining on
deposit in the Initial Renovation Reserve Account into the Interest Reserve Account,
provided that in the event that the aggregate Additional Interest Reserve Contributions
deposited into the Interest Reserve Account under the provisions of this sentence and/or any
other provisions of this Agreement total $8,000,000, then all such amounts (or all such
remaining amounts, as the case may be) shall instead be deposited into the General Reserve
Fund.



Section 7.6. General Reserve Fund.




7.6.1. Deposits to General Reserve Account. From time to time during the term
of the Loan, pursuant to Sections 2.6.2(b)(xv), 2.6.2(c)(xv),
2.6.2(h), 2.4.3(g), 3.23, 7.4.3, 7.5.5 and/or
7.7.3 hereof, certain amounts may be deposited with Lender for the purpose of
establishing a general reserve fund for the purposes described in this Section 7.6.
All amounts so deposited with Lender shall hereinafter be referred to as the “General
Reserve Fund” and the account in which such amount is held shall hereinafter be referred to
as the “General Reserve Account.”




7.6.2. Withdrawals from General Reserve Account. Borrower shall have the right
from time to time to request a disbursement of funds from the General Reserve Account for
the following purposes:




(a) provided that no monetary Default, Event of Default or First Mezzanine
Event of Default shall have occurred and be continuing, prior to Borrowers’
satisfaction of the Excess Cash Termination Condition, (i) for the payment to
Borrowers, HRHI and/or HR Holdings for the purposes of permitting such parties to
pay federal and state income tax obligations with respect to income allocated to
them from the Properties and/or the IP (but only for so long as any particular
Property or portion thereof or any particular portion of the IP remains as security
for the Loan); provided, however, that in no event shall the
aggregate amount of the General Reserve Fund used for the purposes of this
clause (i) during the entire term of the Loan exceed three million dollars
($3,000,000.00), (ii) for the payment of cost over-runs in connection with the
construction of the Project, as reasonably approved by Lender to the extent required
under Section 3.15 hereof, (iii) for Operating Expenses, Extraordinary
Expenses, Capital Expenses, Project Costs, Debt Service, debt service on the First
Mezzanine Loan (but not any Accrual Amounts, except as and to the extent
specifically provided in Sections 7.6.2(b) and 7.6.3 below)), debt service on the
Second Mezzanine Loan (but not any Accrual Amounts, except as and to the extent
specifically provided in Sections 7.6.2(b) and 7.6.3 below) and debt service on the
Third Mezzanine Loan (but not any Accrual Amounts, except as and to the extent
specifically provided in Sections 7.6.2(b) and 7.6.3 below), Exit Fees, or any other
fees or amounts required to be paid to Lender hereunder (it being acknowledged and
agreed that notwithstanding the occurrence and continuance of a First Mezzanine
Event of


 


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Default Borrowers shall be permitted to apply funds on deposit in the General
Reserve Account to the payment of Debt Service, Exit Fee and/or other amounts
required to be paid to Lender hereunder in the event there is otherwise insufficient
funds available to fund the same in any Account), and Lender shall approve or
withhold the funding of any such amounts in its reasonable discretion (provided that
Lender approval shall not be required for Borrower to apply amounts to Debt Service,
debt service on the First Mezzanine Loan (but not any Accrual Amounts), debt service
on the Second Mezzanine Loan (but not any Accrual Amounts) and debt service on the
Third Mezzanine Loan (but not any Accrual Amounts) in accordance with the provisions
of this clause (a), in the event the balance in the Interest Reserve Account is then
zero) ; provided, however, that in no event shall funds on deposit
in the General Reserve Account be disbursed for the distribution to, or otherwise to
pay any dividends to or make any payments to, any Restricted Party, subject to
Section 5.2.12 hereof;




(b) from and after the date on which Borrowers have satisfied the Excess Cash
Termination Condition and provided (i) no Event of Default shall have
occurred and is then continuing and (ii) the Properties have achieved and maintained
a Debt Service Coverage Ratio of 1.20 to 1.00 for the immediately preceding two (2)
consecutive calendar quarters, in addition to the purposes set forth in the
immediately preceding clause (a), amounts on deposit in the General Reserve Account
may also be disbursed at Borrowers’ direction and in Borrowers’ sole discretion for
the following purposes:




(1) the Excess Requested Funds (which shall be no less than 75% of the
amounts Borrowers have directed to be disbursed under this Section 7.6.2(b))
shall be applied (A) first, to the Reduced Acquisition Loan Outstanding
Principal Balance until the Reduced Acquisition Loan Outstanding Principal
Balance is equal to zero, and (B) second, to the Construction Loan
Outstanding Principal Balance until the Construction Loan Outstanding
Principal Balance is equal to zero (it being understood and agreed that a
portion of all funds described in this Section 7.6.2(b)(1) shall be
applied to the Exit Fee and any related Breakage Costs payable in connection
with any such prepayment, with the balance of such funds being applied to
the Loan as set forth above); and




(2) the Section 7.6.2 Accrual/Equity Funds (as defined below) (which
shall in no event exceed 25% of the amounts Borrower has directed to be
disbursed under this Section 7.6.2(b)), shall be applied as follows: (A) in
the event such amounts are to be disbursed at any time after the Payment
Date occurring in November, 2011, the same shall be applied first to the
payment of any First Mezzanine Initial Accrual Amount until such amounts are
paid in full, then to the payment of any Second Mezzanine Subsequent Accrual
Amount until such amounts are paid in full and then to the payment of any
Third Mezzanine Subsequent Accrual Amount until such amounts are paid in
full, with the balance of such amounts being paid to the applicable DLJMB
Parties in accordance


 


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with the following clause (B); and (B) in all other instances, such
amounts shall be paid to the DLJMB Parties (1) on account of the additional
equity invested by such parties as of the date hereof and any preferred
return due to be paid thereon pursuant to the terms and provisions of the HR
Holdings limited liability company agreement as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time and
related documents and/or (2) on account of the monitoring fee due and
payable to the DLJMB Parties pursuant to the terms and provisions of the HR
Holdings limited liability company agreement; provided that without
limiting any other provisions set forth herein, no disbursements shall be
made under this Section 7.6.2(b)(2) in the event (x) the Second
Mezzanine Loan and Third Mezzanine Loan are not then in Current Pay Status,
it being acknowledged and agreed that in the instance in which the Second
Mezzanine Loan and Third Mezzanine Loan are not then in Current Pay Status
any amounts specified in sub-clause (B) of this Section 7.6.2(b)(2) as being
paid to the DLJMB Parties shall instead be held in a separate sub-account of
the General Reserve Account as additional security for the Loan and shall
not be distributed (other than upon the application of the same by Lender
following the occurrence and continuance of an Event of Default) until such
time as the Second Mezzanine Loan and Third Mezzanine Loan are in Current
Pay Status, and at any time at which the Second Mezzanine Loan and Third
Mezzanine Loan are in Current Pay Status all such amounts shall be applied
first to the First Mezzanine Initial Accrual Amount, then to the Second
Mezzanine Subsequent Accrual Amount and then to the Third Mezzanine
Subsequent Accrual Amount in accordance with subclause (A) of this Section
7.6.2(b)(2) before being paid to the DLJMB Parties in accordance with the
provisions of subclause (B) of this Section 7.6.2(b)(2) (and no such amounts
shall be applied in accordance with said clauses (A) or (B) in the event and
to the extent any such disbursement would cause the aggregate amounts
disbursed under the Twenty-Five Percent Distribution Provisions (as defined
below) to exceed $35,000,000 and in such instance all funds in excess of
such $35,000,000 cap shall be released from the sub-account established
under this clause (x) and deposited into the General Reserve Account for
application in accordance with the terms hereof), (y) a First Mezzanine
Event of Default, Second Mezzanine Event of Default or Third Mezzanine Event
of Default shall have occurred and is then continuing or (z) to the extent
any such disbursement would cause the aggregate amounts disbursed under the
Twenty-Five Percent Distribution Provisions to exceed $35,000,000.




As used herein, the term (a) “Excess Requested Funds” shall mean a portion
of any funds on deposit in the General Reserve Fund that Borrowers are
entitled to direct and actually direct to be applied in accordance with the
provisions of this Section 7.6.2(b), which amount shall equal the difference
between the total amount Borrowers have so directed to be applied and the
related Section 7.6.2(b) Accrual/Equity


 


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Funds and (b) “Section 7.6.2(b) Accrual/Equity Funds” shall mean an amount
equal to the lesser of (i) 25% of the total amounts Borrowers are entitled
to direct and actually direct to be applied in accordance with the
provisions of this Section 7.6.2(b) and (ii) the amount that when added to
any prior amounts applied under this Section 7.6.2(b)(2) and/or under
Section 7.6.3(b) below (such provisions, collectively, the “Twenty-Five
Percent Distribution Provisions”) would cause the aggregate amount of funds
disbursed pursuant to the Twenty-Five Percent Distribution Provisions to
equal $35,000,000.




Notwithstanding anything to the contrary set forth herein, Lender shall make
disbursements as requested by Borrowers not more frequently than once in any
thirty (30) day period and in a minimum amount of no less than five thousand
dollars ($5,000.00) per disbursement (or a lesser amount if the total amount
in the General Reserve Account is less than Five Thousand Dollars ($5,000),
in which case only one disbursement of the amount remaining in the account
shall be made).




7.6.3. Application of Excess Funds to Loan. In the event the amounts on
deposit in the General Reserve Account less (1) any amounts deposited into the IP Subaccount
in accordance with the terms of Section 7.6.4, (2) any amounts on deposit in the
Excess IP Subaccount, (3) any amounts held in a sub-account described in sub-clause (x) of
either Section 7.6.2(b)(2) or Section 7.6.3(b) and (4) any amounts that Borrower has
requested to be disbursed pursuant to the provisions of Section 7.6.2 (and with respect to
which Borrower is entitled to receive such a disbursement) shall at any time exceed
$20,000,000.00 (such amount, the “General Reserve Cap”), then at Lender’s election the funds
on deposit in the General Reserve Account in excess of the General Reserve Cap shall be
applied as follows:




(a) the Excess Lender Applied Funds (as defined below) (which shall be no less than 75%
of the amounts Lender has elected to apply in accordance with the provision of this Section
7.6.3) shall be applied (A) first, to the Reduced Acquisition Loan Outstanding Principal
Balance until the Reduced Acquisition Loan Outstanding Principal Balance is equal to zero,
and (B) second, to the Construction Loan Outstanding Principal Balance until the
Construction Loan Outstanding Principal Balance is equal to zero (it being understood and
agreed that a portion of all funds described in this Section 7.6.3(a) shall be
applied to the Exit Fee and any related Breakage Costs payable in connection with any such
prepayment, with the balance of such funds being applied to the Loan as set forth above);
and




(b) In the event that as of the date Lender so elects to apply the funds on deposit in
excess of the General Reserve Cap in accordance with the provisions of the preceding clause
(a) and this clause (b) (such date, the “applicable determination date”), the Properties
shall have achieved and maintained a Debt Service Coverage Ratio of at least 1.20 to 1.00
for the immediately preceding two (2) fiscal quarters, then the Section 7.6.3 Equity/Accrual
Funds (as defined below) (which shall in no event exceed 25% of


 


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the amounts Lender elects to apply in accordance with the provisions of this Section
7.6.3) shall be applied as follows: (i) in the event such amounts are to be disbursed at any
time after the Payment Date occurring in November, 2011, the same shall be applied first to
the payment of any First Mezzanine Initial Accrual Amount until such amounts are paid in
full, then to the payment of any Second Mezzanine Subsequent Accrual Amount until such
amounts are paid in full and then to the payment of any Third Mezzanine Subsequent Accrual
Amount until such amounts are paid in full, with the balance of such amounts being paid to
the applicable DLJMB Parties in accordance with the following clause (ii) and (ii) in all
other instances, such amounts shall be disbursed to the DLJMB Parties (aa) on account of the
additional equity invested by such parties as of the date hereof and any preferred return
due to be paid thereon pursuant to the terms and provisions of the HR Holdings limited
liability company agreement as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time and related documents and/or (bb) on account of the
monitoring fee due and payable to the DLJMB Parties pursuant to the terms and provisions of
the HR Holdings limited liability company agreement, provided that without limiting
any other provisions set forth herein, no disbursements shall be made under this Section
7.6.3(b) in the event (x) the Second Mezzanine Loan and Third Mezzanine Loan are not
then in Current Pay Status, it being acknowledged and agreed that in the instance in which
the Second Mezzanine Loan and Third Mezzanine Loan are not in Current Pay Status any amounts
specified in sub-clause (ii) of this Section 7.6.3 as being paid to the DLJMB Parties shall
instead be held in a separate sub-account of the General Reserve Account as additional
security for the Loan and shall not be distributed (other than upon the application of the
same by Lender following the occurrence and continuance of an Event of Default) until such
time as the Second Mezzanine Loan and Third Mezzanine Loan are in Current Pay Status, and at
any time at which the Second Mezzanine Loan and Third Mezzanine Loan are in Current Pay
Status all such amounts shall be applied first to the First Mezzanine Initial Accrual
Amount, then to the Second Mezzanine Subsequent Accrual Amount and then to the Third
Mezzanine Subsequent Accrual Amount in accordance with sub-clause (i) of this Section
7.6.3(b) before being paid to the DLJMB Parties in accordance with the provisions of
sub-clause (ii) of this Section 7.6.3 (and no such amounts shall be applied in accordance
with said clauses (i) or (ii) in the event and to the extent any such disbursement would
cause the aggregate amounts disbursed under the Twenty-Five Percent Distribution Provisions
to exceed $35,000,000 and in such instance all funds in excess of such $35,000,000 cap shall
be released from the sub-account established under this clause (x) and deposited into the
General Reserve Account for application in accordance with the terms hereof), (y) a First
Mezzanine Event of Default, Second Mezzanine Event of Default or Third Mezzanine Event of
Default shall have occurred and is then continuing or (z) and to the extent any such
disbursement would cause the aggregate amounts disbursed under the Twenty-Five Percent
Distribution Provisions to exceed $35,000,000.




Notwithstanding the foregoing, (A) in the event that as of the applicable determination
date, the Properties have not achieved and maintained a Debt Service Coverage Ratio of at
least 1.20 to 1.00 for the immediately preceding two (2) fiscal quarters, all Section 7.6.3
Equity/Accrual Funds shall be held as additional collateral for the Loan in a subaccount of
the General Reserve Account (the “Section 7.6.3


 


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Equity/Accrual Subaccount”) and shall not be available for distribution except in
connection with any application of the same by Lender following the occurrence and during
the continuance of an Event of Default or as otherwise set forth in this Section 7.6.3; it
being acknowledged and agreed that in the event the Properties shall (y) achieve and
maintain such Debt Service Coverage Ratio at any time within the twelve (12) month period
commencing on the applicable determination date, then provided that no Event of Default,
First Mezzanine Event of Default, Second Mezzanine Event of Default or Third Mezzanine Event
of Default shall have occurred and is then continuing all such funds shall be immediately
applied in accordance with the foregoing provisions of sub-clauses (i) and (ii) this Section
7.6.3(b) or (z) not achieve and maintain such Debt Service Coverage Ratio at any time within
the twelve (12) month period commencing on the applicable determination date, such funds
shall be deemed to be Excess Lender Applied Funds and as such at Lender’s election all of
such amounts may be applied to the repayment of the Loan as set forth in Section
7.6.3(a) above. Notwithstanding anything to the contrary set forth herein, the amounts
disbursed under the Twenty-Five Percent Distribution Provisions shall not exceed $35,000,000
in the aggregate and in the event the same at any time equal $35,000,000 any funds on
deposit in the Section 7.6.3 Equity/Accrual Subaccount shall be deemed to be Excess Lender
Applied Funds and as such at Lender’s election all of such amounts may be applied to the
repayment of the Loan in accordance with the provisions of Section 7.6.3(a) above.




As used in this Section 7.6.3, the term (a) “Excess Lender Applied Funds” shall mean a
portion of any funds on deposit in the IP Subaccount that Lender elects to apply in
accordance with the provisions of this 7.6.3, which funds shall be in an amount equal to
the difference between the total amount Lender has elected to apply in accordance with the
provisions of this Section 7.6.3. less the Section 7.6.3 Accrual/Equity Funds an (b)
“Section 7.6.3 Accrual/Equity Funds” shall mean an amount equal to the lesser of (i) 25% of
the total amounts Lender elects to apply in accordance with the provisions of this Section
7.6.3 and (ii) that when added to any prior amounts applied under the Twenty-Five Percent
Distribution Provisions would cause the aggregate funds distributed pursuant to the
Twenty-Five Percent Distribution Provisions to exceed $35,000,000.




7.6.4. IP Subaccount. Upon the occurrence of any transaction that results in
Excess IP Release Proceeds, Lender shall establish a subaccount of the General Reserve
Account into which any IP Subaccount Funds resultant from such transaction shall be
deposited (such subaccount, the “IP Subaccount”). All funds on deposit in the IP Subaccount
shall constitute additional collateral for the Loan. Notwithstanding anything to the
contrary set forth herein, from and after the date on which any IP Subaccount Funds are
deposited into the IP Subaccount, half of any and all disbursements made from the General
Reserve Account under Section 7.6.2 shall be funded from the IP Subaccount until the IP
Subaccount Funds on deposit in the IP Subaccount are reduced to zero, with the balance of
any such disbursements being made from funds otherwise on deposit in the General Reserve
Account. In the event funds are disbursed from the IP Subaccount to fund any distribution
under any of the Twenty-Five Percent Distribution Provisions, then such funds shall be
deemed to have been advanced under said Twenty Five Percent Distributions for all purposes
hereunder.




 


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Section 7.7. Construction Loan Reserve Fund.




7.7.1. Deposits to Construction Loan Reserve Account. On or about November 30,
2007, The Third Mezzanine Construction Funds were deposited with Lender in the Construction
Loan Reserve Account. Additionally, (a) contemporaneous with the closing of any
sale-leaseback transaction pursuant to which the applicable Borrower(s) will enter into any
Preapproved Equipment Lease with PDS Gaming (as any such lease is disclosed in Schedule V(B)
hereto), Borrowers shall deposit into the Construction Loan Reserve Account the gross sale
proceeds payable in connection with the sale-leaseback transaction of which such lease forms
a part and (b) Borrowers shall deposit amounts into the Construction Loan Reserve Fund in
accordance with Section 2.7.3(a), 2.7.3(b), 2.7.3(c),
2.7.3(d), 3.12 and Section 3.21 hereof. In addition, the Remaining
Construction Loan Advance may be advanced into the Construction Loan Reserve Account in
accordance with Section 3.1(d) hereof. All amounts so deposited with Lender shall
hereinafter be referred to as the “Construction Loan Reserve Fund” and the account in which
such amount is held shall hereinafter be referred to as the “Construction Loan Reserve
Account.”




7.7.2. Withdrawals from Construction Loan Reserve Account. The funds in the
Construction Loan Reserve Account shall be disbursed subject to, and in accordance with, the
provisions of Article III hereof, it being understood and agreed that in any
instance hereunder in which Borrowers would be entitled to a Construction Loan Advance from
the Construction Loan, Borrowers may elect, at their option, to receive a disbursement from
the Construction Loan Reserve Account in lieu thereof, to the extent of the funds then on
deposit therein.




7.7.3. Release of Construction Loan Reserve Fund. Any remaining portion of the
Construction Loan Reserve Fund representing funds on deposit from the Required Equity Amount
shall be deposited into the Interest Reserve Account provided that at such time as the
Additional Interest Reserve Contributions shall total $8,000,000 any and all of such funds
shall be deposited into the General Reserve Fund, upon satisfaction of the following
conditions: (i) Substantial Completion has occurred; (ii) Borrower’s equity requirement set
forth in Section 3.3(d) hereof remains satisfied (provided, however, in order to
meet such equity requirement, Borrower may make a voluntary prepayment of the Loan in
accordance with all of the terms of Section 2.4.1 hereof and to be applied as set
forth in Section 2.4.3(a) hereof, with the Exit Fee payable in connection therewith
being determined in accordance with the provisions of Section 2.8); and (iii) either
(A) General Contractor has certified to Lender that all amounts due under the General
Contract (which shall include, without limitation, all work authorizations entered into
under the General Contract and all amounts payable by General Contractor to any
subcontractor in connection with the General Contract and/or any such work authorization)
have been paid in full and delivered lien waivers or other evidence of payment satisfactory
to Lender or (B) Lender’s approval has been obtained.


 


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Section 7.8. Reserve Funds, Generally.



(a) Borrowers hereby grant to Lender a first-priority perfected security interest in each of
the Reserve Funds held by Lender and any and all monies now or hereafter deposited in each Reserve
Fund as additional security for payment of the Debt. Until expended or applied in accordance
herewith, the Reserve Funds shall constitute additional security for the Debt. 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 to (i) First Mezzanine Lender for application by First Mezzanine Lender in accordance
with the terms of the First Mezzanine Loan Documents if the First Mezzanine Debt (or any portion
thereof) is outstanding, until the First Mezzanine Debt is paid in full, and then (ii) 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, and then (iii) 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 then (iv) any balance remaining to Borrowers. Any amount
remaining in any of the Reserve Funds after the Obligations have been satisfied shall be released
to Borrowers; provided, however, that Borrowers and Lender hereby agree and
acknowledge that if (A)(1) all of the Obligations have been satisfied, (2) there is any amount
remaining in any of the Reserve Funds, and (3) the First 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 First Mezzanine Lender to be held in accordance
with the terms of the First Mezzanine Loan Documents; or (B)(1) all of the Obligations and the
First Mezzanine 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 (C)(1) all of the Obligations, the First Mezzanine 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.



(b) Except to the extent provided in the First Mezzanine Loan Documents, the Second Mezzanine
Loan Documents and/or the Third 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


 


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Financing Statements, except those naming Lender as the secured party, to be filed with
respect thereto.



(c) 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 7.8. 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.



(d) Borrowers, jointly and severally, shall indemnify Lender and hold Lender harmless from and
against any and all actions, suits, third party claims, demands, liabilities, actual losses, actual
damages (excluding lost profits, diminution in value and other consequential damages), obligations
and reasonable costs and expenses (including litigation costs and reasonable attorneys’ fees and
expenses) arising from or in any way connected with the Reserve Funds held by Lender or the
performance of the obligations for which the Reserve Funds were established, excluding matters
arising from Lender’s or its agents’ fraud, willful misconduct, illegal acts or gross negligence.
Borrowers shall assign to Lender all rights and claims any Borrower may have against all Persons
supplying labor, materials or other services which are to be paid from or secured by the Reserve
Funds; provided, however, that Lender may not pursue any such right or claim unless
an Event of Default has occurred and remains uncured.



ARTICLE VIII.

DEFAULTS




Section 8.1. Event of Default. (a) 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 Reduced Acquisition Loan
Monthly Interest Payment or Construction Loan Monthly Interest Payment or any required monthly
deposit to any Reserve Fund is not paid in full on or



 


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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 hereof;



(iii) if the Policies are not kept in full force and effect;



(iv) if any Borrower Transfers or otherwise encumbers any portion of any Property or any
interest therein or the IP or any portion thereof, or any direct or indirect interest in any
Transfer Restricted Party is Transferred, in each instance, in violation of the provisions of this
Agreement and not otherwise consented to by Lender;



(v) if any representation or warranty made by any Borrower herein or in any other Loan
Document, or in any report, certificate, financial statement or other instrument, agreement or
document furnished to Lender by or on behalf of any Borrower or any Restricted Party shall have
been false or misleading in any material respect as of the date the representation or warranty was
made, provided, however, if such representation or warranty is susceptible of being
cured, and Lender has not theretofore materially adversely relied thereon, Borrowers shall have the
right to cure such representation or warranty within ten (10) Business Days of notice thereof;



(vi) if any Borrower, 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 Borrower, HRHI or any
Guarantor, or if any Borrower, 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 Borrower, HRHI or any Guarantor, or if any proceeding for the dissolution or liquidation
of any Borrower, HRHI or any Guarantor shall be instituted; provided, however, if
such appointment, adjudication, petition or proceeding was involuntary and not consented to by any
Borrower, 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


 


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material covenant contained in Section 4.1.30 hereof, within fifteen (15) Business Days of
the request of Lender, Borrowers deliver to Lender an Additional Insolvency Opinion, or a
modification of the Insolvency Opinion, to the effect that such breach shall not in any way impair,
negate or amend the opinions rendered in the Insolvency Opinion, which opinion or modification and
the counsel delivering such opinion or modification shall be acceptable to Lender in its reasonable
discretion;



(x) with respect to any term, covenant or provision set forth herein which specifically
contains a notice requirement or grace period, if any Borrower shall be in default under such term,
covenant or condition after the giving of such notice or the expiration of such grace period;



(xi) if any of the assumptions contained in the Insolvency Opinion delivered to Lender in
connection with the Loan, or in any Additional Insolvency Opinion delivered subsequent to the
closing of the Loan, is or shall become untrue in any material respect;



(xii) if a material default by any 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 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 commenced to cure such failure within such thirty (30)
day period and shall thereafter diligently and expeditiously proceed to cure the


 


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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 sixty (60) days, subject to Excusable Delay;



(xvi) if a material default by Hotel Casino Borrower has occurred and continues beyond any
applicable cure period under the Liquor Management Agreement (or any Replacement Liquor Management
Agreement) and as a result of such default the Liquor Manager thereunder terminates or cancels such
Liquor Management Agreement (or any Replacement Liquor Management Agreement);



(xvii) if (A) any revenues generated from gaming activities at the Property are applied other
than in accordance with the provisions of Section 2.6.1(c) hereof 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 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
hereof;



(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 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 Borrower or any Affiliate thereof shall
ever become the Liquor Manager, if Gaming Borrower, such other 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 Lender Successor Owner as and to the
extent required pursuant to 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 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; or



(xxvi) if Borrower fails to comply with the provisions of Section 2.7.2(b)(xii)
hereof.



(b) Upon the occurrence and during the continuance of an Event of Default (other than an Event
of Default described in clauses (vi) or (vii) above) and at any time thereafter, in
addition to any other rights or remedies available to it pursuant to this Agreement and the other
Loan Documents or at law or in equity, to the extent permitted by applicable law, Lender may take
such action, without notice or demand, that Lender deems advisable to protect and enforce its
rights against Borrowers and in and to any Property and/or the IP, 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, 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
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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 Properties, the IP and any other collateral and the Mortgage 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
Properties and the IP, nothing contained herein or in any other Loan Document shall be construed as
requiring Lender to resort to any particular Property or to the IP for the satisfaction of any of
the obligations in preference or priority to any other Property or the IP, and Lender may seek
satisfaction out of all of the Properties, any Property, the IP or any part of any 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 the Mortgage
in any manner and for any amounts secured by the Mortgage 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 the Mortgage to recover such delinquent
payments, and/or (ii) in the event Lender elects to accelerate less than the entire Outstanding
Principal Balance, Lender may foreclose the Mortgage to recover so much of the Outstanding
Principal Balance as Lender may accelerate and such other sums secured by the Mortgage as Lender
may elect in its sole discretion. Notwithstanding one or more partial foreclosures, the
Properties, the IP and any other collateral shall remain subject to the Mortgage to secure payment
of sums secured by the Mortgage 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 either or both of the Notes and the
other Loan Documents into one or more separate notes, mortgages and


 


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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 any Property, the IP
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 to any other amounts due under the
Loan Documents in such order, priority and proportions as Lender in its sole discretion shall
determine.



(f) Upon the occurrence and during the continuance of an Event of Default, Lender may declare
Lender’s obligations to make Construction Loan Advances hereunder to be terminated, whereupon the
same shall terminate, and/or declare all unpaid principal of and accrued interest on one or both of
the Notes, 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


 


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applicable law; provided, however, that Lender may make Construction Loan
Advances or parts of Construction Loan Advances thereafter without thereby waiving the right to
demand payment of the Notes, without becoming liable to make any other or further Construction Loan
Advances, and without affecting the validity of or enforceability of the Loan Documents.
Notwithstanding and without limiting the generality of the foregoing or anything else to the
contrary contained in this Agreement, upon the occurrence and during the continuance of an Event of
Default, Lender’s obligations to make Construction Loan Advances hereunder shall automatically
terminate.



(g) Upon the occurrence and during the continuance of an Event of Default, Lender may cause
the construction of the Project to be completed and may enter upon the Property and construct,
equip and complete the Project in accordance with the Plans and Specifications, with such changes
therein as Lender may, from time to time, and in its sole and absolute discretion, deem
appropriate. In connection with any construction of the Project undertaken by Lender pursuant to
the provisions of this subsection, Lender may:



(i) use any funds of Borrowers, including any balance which may be held by Lender as security
or in escrow, including, without limitation, any Shortfall Funds and/or any funds on deposit in the
Construction Loan Reserve Account, the Working Capital Reserve Account, the Initial Renovations
Reserve Account, the Interest Reserve Account, the General Reserve Account, the Casino Account and
any and all other Reserves;



(ii) draw down on any Letter of Credit then held by Lender and use the proceeds thereof;



(iii) employ existing contractors, subcontractors, agents, architects, engineers and the like,
or terminate the same and employ others;




(iv) employ security watchmen to protect the Properties;



(v) make such additions, changes and corrections in the Plans and Specifications as shall, in
the judgment of Lender, be necessary or desirable;



(vi) take over and use any and all Personal Property contracted for or purchased by Borrowers,
if appropriate, or dispose of the same as Lender sees fit in accordance with applicable law;



(vii) to the extent permitted by applicable law, execute all applications and certificates on
behalf of Borrowers which may be required by any Governmental Authority or Legal Requirement or
contract documents or agreements;



(viii) pay, settle or compromise all existing or future bills and claims which are or may be
Liens against any of the Properties, or may be necessary for the completion of construction of the
Project or the clearance of title to any of the Properties, including, without limitation, all
taxes and assessments;



(ix) complete the marketing and leasing of leasable space in the Project, enter into new
leases and occupancy agreements at any of the Properties, and modify or


 


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amend existing leases and occupancy agreements, all as Lender shall deem to be necessary or
desirable;



(x) to the extent permitted by applicable law, prosecute and defend all actions and
proceedings in connection with the completion of the construction of the Project or in any other
way affecting any of the Properties and take such action and require such performance as Lender
deems necessary under any Payment and Performance Bonds; and



(xi) to the extent permitted by applicable law, take such other action hereunder, or refrain
from acting hereunder, as Lender may, in its sole and absolute discretion, from time to time
determine, and without any limitation whatsoever, to carry out the intent of this Section
8.2.



Subject to Section 9.4 hereof, Borrowers shall be liable to Lender for all costs paid
or incurred for the construction, completion and equipping of the Project, whether the same shall
be paid or incurred pursuant to the provisions of this Section 8.2 or otherwise, and all
payments made or liabilities incurred by Lender hereunder of any kind whatsoever shall be deemed
advances made to Borrowers under this Agreement and shall be secured by the Mortgage and the other
applicable Loan Documents. In the event Lender takes possession of any Property and assumes
control of such construction as aforesaid, Lender shall not be obligated to continue such
construction longer than Lender shall see fit and may thereafter, at any time, change any course of
action undertaken by it or abandon such construction and decline to make further payments for the
account of Borrowers, whether or not the construction of the Project shall have been completed.
For the purpose of this Section 8.2 the construction, equipping and completion of the
Project shall be deemed to include any action necessary to cure any existing Event of Default by
Borrowers under any of the terms and provisions of any of the Loan Documents.



ARTICLE IX.

SPECIAL PROVISIONS




Section 9.1. Sale of Notes and Securitization. (a) Borrowers acknowledge and agree
that Lender may sell all or any portion of the Loan and the Loan Documents, including all or any
portion of any of the Components, or require Borrowers to restructure the Loan or any of the
Components, into additional 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 and/or any
of the Components, which restructuring may include reallocation of principal amounts of the Loan
and/or any of the Components, the First Mezzanine Loan, the Second Mezzanine Loan and/or the Third
Mezzanine Loan amongst each other and/or the restructuring of a portion of the Loan and/or any of
the Components, the First Mezzanine Loan, the Second Mezzanine Loan and/or the Third Mezzanine 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/or any of the Components and the Loan Documents or a pool of assets
that include the Loan and/or any of the Components and the Loan Documents (such sales,
participations and/or


 


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securitizations, collectively, a “Securitization”). At the request of Lender, and to the
extent not already required to be provided by Borrowers under this Agreement, Borrowers shall use
commercially reasonable good faith efforts to provide information not in the possession of Lender
or which may be reasonably required by Lender in order to satisfy the market standards to which
Lender customarily adheres or which may be reasonably required by prospective investors (including,
without limitation, any purchaser of all or any portion of the Loan, the First Mezzanine Loan, the
Second Mezzanine Loan and/or the Third 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 and/or the IP 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, (i) deliver updated opinions of counsel as to non-consolidation, due
execution and enforceability with respect to the Properties, the IP, any Borrower, HRHI, any
Guarantor, any of their respective Affiliates and the Loan Documents, and (ii) amend the Special
Purpose Entity provisions of the organizational documents for each Borrower, 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 or the IP, 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 the Securitization and/or deliver one or more new component notes to
replace any original note or modify any original note to reflect multiple components of the Loan or
any Component (and such new notes or modified note shall have the same initial weighted average
coupon of the original note, but such



 


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new notes or modified note may change the interest rate of the Loan or any Component), and modify
the Cash Management Agreement with respect to the newly created components such that the pricing
and marketability of the Securities and the size of each class of Securities and the rating
assigned to each such class by the Rating Agencies shall provide the most favorable rating levels
and achieve the optimum rating levels for the Loan, provided, however, that (i)
such new notes or modified note will not change the interest rate, the stated maturity or the
amortization of principal set forth in either of the Notes unless the varying interest rates shall
have the same initial weighted average coupon of the original Notes, (ii) 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 Borrowers, HRHI or Guarantors or any of
their respective Constituent Members, or (iii) such amendments to the Loan Documents will not
materially increase Borrowers’ 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, any
Borrower, any First Mezzanine Borrower, any Second Mezzanine Borrower, any Third Mezzanine
Borrower, HRHI, the Gaming Operator, any Manager, the Liquor Manager and/or the Loan (including
each of the Components) 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
Borrower, any First Mezzanine Borrower, any Second Mezzanine Borrower, any Third Mezzanine
Borrower, HRHI, any Guarantor, the Loan (including each of the Components), any Property and/or the
IP 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 its legal
counsel and its 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 New 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


 


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Documents, by up to ten (10) days (such action and all related action is a “Re-Dating”) so long as
such modification shall not have a materially adverse effect on Borrowers. Borrowers shall
cooperate with Lender to implement any Re-Dating. If any Borrower fails to cooperate with Lender
within ten (10) Business Days of written request by Lender, Lender is hereby appointed as each
Borrower’s attorney-in-fact to execute any and all documents necessary to accomplish the Re-Dating,
the foregoing power of attorney being coupled with an interest.



Section 9.3. Securitization Indemnification. (a) Each Borrower understands that
information provided to Lender by Borrowers and their agents, counsel and representatives may be
included in Disclosure Documents in connection with the Securitization and may also be included in
filings with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended (the “Securities Act”), or the Securities and Exchange Act of 1934, as amended (the
“Exchange Act”), and may be made available to investors or prospective investors in the Securities,
the Rating Agencies, and service providers relating to the Securitization. In the event that the
Disclosure Document is required to be revised prior to the sale of all Securities, Borrower will
cooperate with the holder(s) of the Notes 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 Borrowers, Borrowers’ Affiliates, Guarantors, HRHI, the
Properties, the IP, the Manager, the Liquor Manager, the Gaming Operator and/or the Loan (including
each of the Components), 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, Credit Suisse (whether or not it is Lender), any
Affiliate of Lender or Credit Suisse 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 or Credit Suisse 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 Borrowers,
Borrowers’ Affiliates, Guarantors, HRHI, the Properties, the IP, the Manager, the Liquor Manager,
the Gaming Operator and/or the Loan (including each of the Components), 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 Borrower, 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 Borrowers, Borrowers’ Affiliates, Guarantors, HRHI, the
Properties, the IP, the Manager, the Liquor Manager, the Gaming Operator and/or the Loan (including
any of the Components), or the omission or alleged omission to state in any such Disclosure
Document a material fact in any Borrower’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 Borrower, 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 Credit Suisse or Lender, as applicable (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 Credit
Suisse or Lender, as applicable, 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


 


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further agree that the Indemnified Persons are intended third party beneficiaries under this
Section 9.3.



(h) Subject to the provisions of Section 9.4 hereof, the liabilities and obligations
of Borrowers and Lender under this Section 9.3 shall survive the termination of this
Agreement and the satisfaction and discharge of the Debt.



Section 9.4. Exculpation. Subject to the qualifications below, Lender shall not
enforce the liability and obligation of Borrowers to perform and observe the obligations contained
in the Notes, this Agreement, the Mortgage 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 Notes, this
Agreement, the Mortgage and the other Loan Documents, or in any Property, the Rents, the IP or any
other 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 its Property,
in its Rents, in the IP and in any other collateral given by it to Lender, and Lender, by accepting
the Notes, this Agreement, the Mortgage 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 Notes, this Agreement, the Mortgage 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 Mortgage; (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) impair the enforcement of the Assignment of Leases; (f)
constitute a prohibition against Lender seeking a deficiency judgment against any Borrower in order
to fully realize the security granted by the Mortgage or commencing any other appropriate action or
proceeding in order for Lender to exercise its remedies against any Property or the IP; or (g)
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 Borrower, 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 Borrower, 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;


 


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(iii) Intentionally Deleted;



(iv) the misappropriation or conversion by any Borrower, by any Person Controlled by any
Borrower, including, without limitation, any Affiliated Manager, a Liquor Manager who is an
Affiliate of any Borrower or a Gaming Operator who is an Affiliate of any Borrower, by any agent of
any Borrower, or by any other Person with whom any Borrower 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 Borrower 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 to pay (or to deposit into the Reserve Funds amounts sufficient to pay) all
Taxes and all other costs giving rise to any Lien on any portion of 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 Borrower fails to maintain its status as a Special Purpose Entity as required
pursuant to the terms hereof;



(vii) if Borrowers fail to obtain Lender’s consent to any subordinate financing, mortgage or
other voluntary Lien encumbering 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, deed in lieu of foreclosure, or other consensual Transfer
to Lender or any Mezzanine Lender shall in no event give rise to any liability under this clause
9.4(x) and provided further, that any such Transfer to Lender or any Mezzanine Lender shall not
limit or waive any other liability of the Borrowers or any Guarantor under the other provisions of
this Section 9.4 or the Non-Recourse Guaranty, as applicable);



(xi) Intentionally Deleted;


 


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(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 5 of the Second
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 Borrower or any Affiliate thereof
shall be the Liquor Manager, if HRHI, Gaming Borrower, such other Borrower or such Affiliate
thereof shall fail to provide liquor management 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 (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 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 (i) to HRHH Gaming Junior Mezz, LLC, and then (ii) to HRHH
Gaming Senior Mezz, LLC, 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;



(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)
hereof, as applicable, rather than pursuant to a customary direct deed transfer, including, without
limitation, (A) the imposition of any tax (including interest and penalties) provided in NRS
§§375.020 and 375.023, (B) in connection with any Bankruptcy Action filed by or against any
Subsidiary Transferee prior to or following the consummation of such sale, and/or (C) in connection
with any delay in accomplishing any of the steps identified in said Section 2.5.1(f)
hereof, as applicable;



(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 Notes 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 Mortgage or to require that all


 


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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
Borrower, 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 Borrower, 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/or the
Administrative Agent, and such petition is not dismissed within ninety (90) days after filing, or
any Borrower, or any Affiliate of any of them who Controls any Borrower, or HRHI or both
Guarantors, solicit or cause to be solicited petitioning creditors for any involuntary petition
against any Borrower, HRHI or both Guarantors from any Person (other than if requested to do so by
or on behalf of Lender and/or the Administrative Agent); (iii) any Borrower, HRHI or both
Guarantors filing an answer consenting to, or any Borrower, HRHI or both Guarantors, or any
Affiliate of any of them who Controls any Borrower, otherwise consenting to or acquiescing or
joining in, any involuntary petition filed against any Borrower, HRHI or both Guarantors, by any
other Person (other than if filed by or on behalf of Lender and/or the Administrative Agent) under
the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (iv) any Borrower,
HRHI or both Guarantors, or any Affiliate of any of them who Controls any Borrower, consenting to
or acquiescing or joining in an application for the appointment of a custodian, receiver, trustee
or examiner for any Borrower or any portion of any Property or any portion of the IP (other than
any such appointment at the request or petition of Lender and/or the Administrative Agent); or (v)
any Borrower, HRHI or both Guarantors voluntarily making an assignment for the benefit of creditors
(other than Lender and/or the Administrative Agent), or admitting, in writing or in any legal
proceeding, its insolvency or inability to pay its debts as they become due; unless, in the case of
any of the foregoing clauses (i), (ii), (iii), (iv) or (v) as it relates to or
affects both Guarantors, one or more guarantors acceptable to Lender in its sole discretion remains
or becomes a guarantor of the Loan.



Notwithstanding anything to the contrary in this Agreement or any other Loan Document, and
except for (1) Guarantors’ obligations under the Non-Recourse Guaranty, the Closing Completion
Guaranty and the Construction Completion Guaranty, (2) HRHI’s obligations under the HRHI Guaranty,
and (3) with respect to the DLJ Guarantor, DLJ Merchant Banking Partners IV, L.P., MBP IV Plan
Investors, L.P., DLJMB HRH Co-Investments, L.P., DLJ Offshore Partners IV, L.P., and DLJ Merchant
Banking Partners IV (Pacific), L.P. (such limited partnerships, collectively, the “DLJMB Parties”)
as provided in that certain commitment letter of the DLJMB Parties dated as of November 6, 2007
addressed to the DLJ Guarantor, 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 or the IP or to which any Property
or the IP is now or hereafter subject, except as may be expressly set forth therein.


 


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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 Manager 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 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, the applicable Borrower shall, at the request of
Lender, terminate the applicable Management Agreement and replace the Manager thereunder
with a Qualified Manager pursuant to a Replacement Management Agreement, it being understood
and agreed that the management fee for such Qualified Manager shall not exceed then
prevailing market rates.




9.5.2. If (a) an Event of Default occurs and is continuing, (b) without the consent of
Lender, HR Holdings ceases to Control the Liquor Manager, unless following such change of
Control, the Liquor Manager still constitutes a Qualified Liquor Manager, (c) the Liquor
Manager shall become bankrupt or insolvent, or (d) the Liquor Manager commits fraud, gross
negligence, willful misconduct or misappropriation of funds with respect to Hotel/Casino
Borrower and/or the Hotel/Casino Property or any material default otherwise occurs under the
Liquor Management Agreement beyond any applicable grace and cure periods, Hotel/Casino
Borrower shall, 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) Hotel/Casino Borrower
shall, 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


 


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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, Hotel/Casino Borrower shall, 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) Hotel/Casino Borrower
shall, at its sole cost and expense, diligently pursue the engagement and licensing of a
replacement Qualified Gaming Operator.



Section 9.7. Servicer. (a) At the option of Lender, the Loan may be serviced by a
servicer/trustee (the “Servicer”) selected by Lender and Lender may delegate all or any portion of
its responsibilities under this Agreement and the other Loan Documents to the Servicer pursuant to
a servicing agreement (the “Servicing Agreement”) between Lender and Servicer. Borrowers shall not
be responsible for any set up fees or any other initial costs relating to or arising under the
Servicing Agreement nor shall Borrowers be responsible for payment of the monthly servicing fee due
to the Servicer under the Servicing Agreement.



(b) Lender shall endeavor in good faith (without liability for failure to do so) to provide
Borrowers with notification of any change in the Person servicing the Loan; provided that
it is expressly acknowledged and agreed by Lender that it shall not constitute a Default or Event
of Default hereunder if due to such failure to provide notification Borrowers send any payments
required to be made hereunder to Lender or any predecessor Person servicing the Loan.



Section 9.8. Restructuring of Loan. Lender, without in any way limiting Lender’s
other rights hereunder, in its sole and absolute discretion, shall have the right at any time, at
Lender’s sole cost and expense, to require Borrowers to restructure the Loan or any of the
Components into additional multiple notes (which may include component notes and/or senior and
junior notes) and/or to create participation interests in the Loan or any of the Components, which
restructuring may include reallocation of principal amounts of the Loan and/or any of the
Components, the First Mezzanine Loan, the Second Mezzanine Loan and/or the Third Mezzanine Loan
and/or the restructuring of a portion of the Loan and/or any of the Components, the First Mezzanine
Loan, the Second Mezzanine Loan and/or the Third Mezzanine Loan to one or more of the foregoing or
to one or more additional mezzanine loans (each, a “New Mezzanine Loan”) 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, the establishment of different interest rates for the Loan and/or any of the
Components, the First Mezzanine Loan, the Second Mezzanine Loan, the Third Mezzanine Loan and any
New Mezzanine Loan(s) and the payment of the Loan and/or any of the Components, the First Mezzanine
Loan, the Second Mezzanine Loan, the Third Mezzanine Loan and any New Mezzanine Loan(s) in such
order of priority as may be designated


 


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by Lender; provided, that (i) the total amounts of the Reduced Acquisition Loan, the
Construction Loan, the First Mezzanine Loan, the Second Mezzanine Loan, the Third Mezzanine Loan
and any New Mezzanine Loan(s) immediately following such restructuring shall equal the amount of
the Reduced Acquisition Loan, the Construction Loan, the First Mezzanine Loan, the Second Mezzanine
Loan, the Third Mezzanine Loan and any previously existing New Mezzanine Loan(s), if any,
immediately prior to the restructuring, (ii) the weighted average spread above LIBOR of the Reduced
Acquisition Loan, the Construction Loan, the First Mezzanine Loan, the Second Mezzanine Loan, the
Third Mezzanine Loan and any New Mezzanine Loan(s), if any, immediately following such
restructuring, shall, in the aggregate, equal the weighted average spread for all of the Reduced
Acquisition Loan, the Construction Loan, the First Mezzanine Loan, the Second Mezzanine Loan, the
Third Mezzanine Loan and any previously existing New Mezzanine Loan(s), if any, immediately prior
to the restructuring, and (iii) the debt service payments on the Reduced Acquisition Loan, the
Construction Loan, the First Mezzanine Loan, the Second Mezzanine Loan, the Third Mezzanine Loan
and any New Mezzanine Loan(s), if any, as calculated immediately following such restructuring,
shall equal the aggregate debt service payments which would have been payable under the Reduced
Acquisition Loan, the Construction Loan, the First Mezzanine Loan, the Second Mezzanine Loan, the
Third Mezzanine Loan and any previously existing New Mezzanine Loan(s), if any, had the
restructuring not occurred. Borrowers shall cooperate with all reasonable requests of Lender in
order to restructure the Loan and/or any of the Components, the First Mezzanine Loan, the Second
Mezzanine Loan and/or the Third Mezzanine Loan and/or to create and/or restructure one or more New
Mezzanine Loan(s), if applicable, and shall, upon fifteen (15) Business Days written notice from
Lender, which notice shall include the forms of documents for which Lender is requesting execution
and delivery, (A) execute and deliver such documents, including, without limitation, in the case of
any New Mezzanine Loan, a mezzanine note, a mezzanine loan agreement, a pledge and security
agreement and a mezzanine cash management agreement, (B) cause Borrowers’ counsel to deliver such
legal opinions, and (C) create such a bankruptcy remote borrower under each New Mezzanine Loan as,
in each of the case of clauses (A), (B) and (C) above, shall be reasonably required
by Lender and required by any Rating Agency in connection therewith, all in form and substance
reasonably satisfactory to Lender, including, without limitation, the severance of this Agreement,
the Mortgage and the other Loan Documents if requested by Lender. Except as may be required in
connection with a Securitization pursuant to Section 9.1 hereof, Borrowers shall not be
obligated to pay any costs or expenses incurred in connection with any such restructuring as set
forth in this Section 9.8. In the event any Borrower fails to execute and deliver such
documents to Lender within five (5) Business Days following such written notice by Lender, and
Lender sends a second notice to Borrowers with respect to the delivery of such documents containing
a legend clearly marked in not less than fourteen (14) point bold face type, underlined, in all
capital letters “POWER OF ATTORNEY IN FAVOR OF LENDER DEEMED EFFECTIVE FOR EXECUTION AND DELIVERY
OF DOCUMENTS IF NO RESPONSE WITHIN 5 BUSINESS DAYS”, 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 such transactions,
each Borrower ratifying all that such attorney shall do by virtue thereof, if any Borrower fails to
execute and deliver such documents within five (5) Business Days of receipt of such second notice.
It shall be an Event of Default if any Borrower


 


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fails to comply with any of the terms, covenants or conditions of this Section 9.8 after
the expiration of five (5) Business Days after the second notice thereof.



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 Notes, 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 NOTES 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 NOTES AND THE OTHER LOAN DOCUMENTS, AND THIS AGREEMENT, THE NOTES 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 either of the Notes, 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 either of the Notes 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, either of the Notes 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, either of the Notes or the other Loan Documents, or to declare a default for failure to
effect prompt payment of any such other amount.




 


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Section 10.6. Notices. Except as otherwise required by applicable law, all notices,
consents, approvals and requests required or permitted hereunder or under any other Loan Document
(each, a “Notice”) shall be given in writing and shall be effective for all purposes if (a) hand
delivered, (b) sent by reputable overnight courier, (c) sent by (i) certified or registered United
States mail, postage prepaid, return receipt requested or (ii) expedited prepaid delivery service,
either commercial or United States Postal Service, with proof of attempted delivery, or (d) sent by
telecopier (with answer back acknowledged and followed by a hard copy via one of the other methods
described above), addressed as follows (or to such other address and Person as shall be designated
from time to time by any party hereto, as the case may be, in a Notice to the other parties hereto
in the manner provided for in this Section 10.6):



	 	 	 	 	 
	 

	 	If to Lender:
	 	Vegas HR Private Limited
	 

	 	 	 	c/o GIC Real Estate, Inc.
	 

	 	 	 	156 W. 56th Street
	 

	 	 	 	Suite 1900
	 

	 	 	 	New York, New York 10019
	 

	 	 	 	Attention: Jesse Hom or Hard Rock Portfolio Manager
	 

	 	 	 	Facsimile No.: (212) 468-1940
	 
	 	 	 	 
	 

	 	with a copy to:
	 	Dechert LLP
	 

	 	 	 	90 State House Square
	 

	 	 	 	12th Floor
	 

	 	 	 	Hartford, CT 06103
	 

	 	 	 	Attention: Laura Ciabarra, Esq.
	 

	 	 	 	Facsimile No.: (860) 524-3930
	 
	 	 	 	 
	 	 	with a copy to Administrative Agent:
	 
	 	 	 	 
	 

	 	 	 	TriMont Real Estate Advisors
	 

	 	 	 	3424 Peachtree Rd, Suite 2200
	 

	 	 	 	Atlanta, GA 30326
	 

	 	 	 	Attention: Sean Donahue
	 

	 	 	 	Facsimile No.: (404) 581-7798
	 
	 	 	 	 
	 

	 	 	 	and at such time as Lender has notified Borrowers of a
replacement Administrative Agent, such replacement
Administrative Agent’s address(es) for Notice
	 
	 	 	 	 
	 

	 	If to Borrowers:
	 	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






 


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	 	 	 	29th Floor
	 

	 	 	 	New York, New York 10019
	 

	 	 	 	Attention: Stephen Gellman, Esq.
	 

	 	 	 	Facsimile No.: (212) 403-2000
	 
	 	 	 	 
	 

	 	With a copy to:
	 	DLJ Merchant Banking Partners
	 

	 	 	 	11 Madison Avenue
	 

	 	 	 	New York, New York 10010
	 

	 	 	 	Attention: Ryan Sprott
	 

	 	 	 	Facsimile No.: (212) 743-1667
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Latham & Watkins LLP
	 

	 	 	 	885 Third Avenue
	 

	 	 	 	Suite 1000
	 

	 	 	 	New York, New York 10022
	 

	 	 	 	Attention: Michelle Kelban, Esq.
	 

	 	 	 	Facsimile No.: (212) 751-4864
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Latham & Watkins LLP
	 

	 	 	 	633 West Fifth Street
	 

	 	 	 	Suite 4000
	 

	 	 	 	Los Angeles, California 90071
	 

	 	 	 	Attention: Tom Sadler, Esq.
	 

	 	 	 	Facsimile No.: (213) 891-8763





A Notice shall be deemed to have been given: in the case of hand delivery or delivery by a
reputable overnight courier, at the time of delivery; in the case of registered or certified mail,
when delivered or the first attempted delivery on a Business Day; in the case of expedited prepaid
delivery and telecopy, upon the first attempted delivery on a Business Day; or in the case of
telecopy, upon sender’s receipt of a machine-generated confirmation of successful transmission on a
Business Day after advice by telephone to recipient that a telecopy Notice is forthcoming;
provided, that within three (3) Business Days thereafter, a hard copy of such Notice shall
have been delivered pursuant to the provisions of clause (a), (b)or (c) of this
Section 10.6. Any failure to deliver a Notice by reason of a change of address not given
in accordance with this Section 10.6, or any refusal to accept a Notice, shall be deemed to
have been given when delivery was attempted. Any Notice required or permitted to be given by any
party hereunder or under any other Loan Document may be given by its respective counsel.
Additionally, any Notice required or permitted to be given by Lender hereunder or under any other
Loan Document may also be given by the Servicer. Any Notice sent to one Borrower shall constitute
and shall be deemed to 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



 


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WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR
HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION
ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND
VOLUNTARILY BY EACH BORROWER AND LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE
AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. EACH PARTY IS
HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS
WAIVER BY THE OTHER.



Section 10.8. Headings. The Article and/or Section headings and the Table of Contents
in this Agreement are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.



Section 10.9. Severability. Wherever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.



Section 10.10. Preferences. Lender shall have the continuing and exclusive right to
apply or reverse and reapply any and all payments by Borrowers to any portion of the Obligations of
Borrowers hereunder. To the extent Borrowers make a payment or payments to Lender, which payment
or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, receiver or any other party under
any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of
such payment or proceeds received, the Obligations hereunder or part thereof intended to be
satisfied shall be revived and continue in full force and effect, as if such payment or proceeds
had not been received by Lender.



Section 10.11. Waiver of Notice. Each Borrower hereby expressly waives, and shall not
be entitled to, any notices of any nature whatsoever from Lender except with respect to matters for
which this Agreement or the other Loan Documents specifically and expressly provide for the giving
of notice by Lender to Borrowers and except with respect to matters for which Borrowers are not,
pursuant to applicable Legal Requirements, permitted to waive the giving of notice.



Section 10.12. Remedies of Borrowers. In the event that a claim or adjudication is
made that Lender or its agents have acted unreasonably or unreasonably 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



 


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notice from Lender, for all reasonable costs and expenses (including reasonable attorneys’
fees and disbursements) incurred by Lender in connection with (i) Borrowers’ ongoing performance of
and compliance with Borrowers’ respective agreements and covenants contained in this Agreement and
the other Loan Documents on their part to be performed or complied with after the Closing Date,
including, without limitation, confirming compliance with environmental, gaming and insurance
requirements; (ii) the negotiation, preparation, execution, delivery and administration of any
consents, amendments, waivers or other modifications to this Agreement and the other Loan Documents
and any other documents or matters requested by or benefiting any Borrower; (iii) securing
Borrowers’ compliance with their obligations pursuant to the provisions of this Agreement and the
other Loan Documents; (iv) the filing and recording fees and expenses, title insurance and
reasonable fees and expenses of counsel for providing to Lender all required legal opinions, and
other similar expenses incurred in creating and perfecting the Liens in favor of Lender pursuant to
this Agreement and the other Loan Documents; (v) all fees payable hereunder, including, without
limitation, the Administrative Agent Fee, the Unused Advance Fee, the Exit Fee and the fees of the
Construction Consultant; (vi) reviewing and processing any requested Construction Loan Advance or
Change Order; (vii) dealing with any Letter of Credit delivered to Lender hereunder; (viii)
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 or any
other security given for the Loan; and (ix) 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 or the IP 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 Mortgage or as otherwise permitted in this Agreement and the other Loan Documents and
(B) Lender has sold or transferred any interests in either of the Notes, 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



 


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indemnify, defend and hold harmless set forth in the preceding sentence may be unenforceable
because it violates any law or public policy, Borrowers shall pay the maximum portion that they are
permitted to pay and satisfy under applicable law to the payment and satisfaction of all
Indemnified Liabilities incurred by Lender.



(c) Borrowers, jointly and severally, covenant and agree to pay for or, if Borrowers fail to
pay, to reimburse Lender for, any fees and expenses incurred by any Rating Agency in connection
with any consent, approval, waiver or confirmation obtained from such Rating Agency and required
pursuant to the terms and conditions of this Agreement or any other Loan Document in connection
with any request or approval sought by Borrowers, and Lender shall be entitled to require payment
of such fees and expenses as a condition precedent to the obtaining of any such consent, approval,
waiver or confirmation; provided, however, that Lender expressly acknowledges and
agrees that Borrowers shall not be required to pay any Rating Agency surveillance charges.



Section 10.14. Schedules and Exhibits Incorporated. The Schedules and Exhibits
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, either of the Notes 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 any Property or the IP other than that of
mortgagee, beneficiary 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



 


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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 any Borrower as a result of such relationship between Original
Lender and the DLJ Entities, including, without limitation, under any theory of lender liability.



(d) The benefits of this Agreement shall not inure to any third party, nor shall this
Agreement be construed to make or render Lender liable to any Trade Contractors including any Major
Contractors or others for goods and materials supplied or work and labor furnished in connection
with the construction or rehabilitation of the Project or for debts or claims accruing to any such
Persons against Borrowers. Lender shall not be liable for the manner in which any Construction
Loan Advances under this Agreement may be applied by Borrowers, any Major Contractor or any of
Borrower’s other Trade Contractors. 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. Without
limiting the generality of the foregoing, Construction Loan Advances made directly to any Major
Contractor or other Trade Contractor pursuant to any requests for Construction Loan Advances,
whether or not such request is required to be approved by Borrowers, shall not be deemed a
recognition by Lender of a third-party beneficiary status of any such Person.



(e) Observation, inspection and approvals 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 or Lender’s Construction Consultant
and no Borrower, Trade Contractor or other interested Person, under any circumstances, shall be
entitled to rely upon such inspections and approvals by Lender or Lender’s Construction Consultant
for any reason. Approvals granted by Lender for any matters covered under this Agreement shall be
narrowly construed to cover only the parties and facts identified in any such approval.



(f) All terms, provisions, covenants and other conditions of the obligations of Lender to make
Construction Loan Advances hereunder are imposed, and all funds held by Lender pursuant to this
Agreement are held, solely and exclusively for the benefit of Lender. No Person, other than
Borrowers, shall have standing to require satisfaction of such terms, provisions, covenants and
other conditions in accordance with their terms; neither Borrowers nor any other Person shall be
entitled to assume that Lender will refuse to make Construction Loan Advances in the absence of
strict compliance with any or all of such terms, covenants and other conditions; and no Person,
other than Borrowers, shall be entitled to require any particular application of such funds (but
Borrowers shall be entitled to require the application of such funds as provided in this
Agreement). No one, other than Lender, under any



 


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circumstances, shall be deemed to be beneficiary of such terms, provisions, covenants and
other conditions, any or all of which may be freely waived, in whole or in part, by Lender at any
time if, in Lender’s discretion, Lender deems it advisable or desirable to do so.



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 any Property or the IP, or to a sale in inverse order of alienation in the event of
foreclosure of the Mortgage, 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 any Property and/or the IP 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 Properties and/or the IP in
preference to every other claimant whatsoever. In addition, to the fullest extent permitted by
law, each Borrower, for itself and its successors and assigns, waives in the event of foreclosure
of the Mortgage, any equitable right otherwise available to such Borrower which would require the
separate sale of any Property and/or the IP or require Lender to exhaust its remedies against any
Property and/or the IP before proceeding against any other Property and/or the IP; and further in
the event of such foreclosure, each Borrower does hereby expressly consent to and authorize, at the
option of Lender, the foreclosure and sale either separately or together of any combination of the
Properties and the IP.



Section 10.19. Waiver of Counterclaim. To the fullest extent permitted by law, each
Borrower hereby waives the right to assert a counterclaim, other than a compulsory counterclaim, in
any action or proceeding brought against it by Lender or its agents or otherwise to offset any
Obligations under the Loan Documents. No failure by Lender to perform any of its obligations
hereunder shall be a valid defense to, or result in any offset against, any payments which any
Borrower is obligated to make under any of the Loan Documents.



Section 10.20. Conflict; Construction of Documents; Reliance. In the event of any
conflict between the provisions of this Agreement and any of the other Loan Documents, the
provisions of this Agreement shall control. The parties hereto acknowledge that they were
represented by competent counsel in connection with the negotiation, drafting and execution of the
Loan Documents and that such Loan Documents shall not be subject to the principle of construing
their meaning against the party which drafted same. Each Borrower acknowledges that, with respect
to the Loan, such Borrower shall rely solely on its own judgment and advisors in entering into the
Loan without relying in any manner on any statements, representations or recommendations of Lender
or any parent, subsidiary or Affiliate of Lender. Lender shall not be



 


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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.



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.


 


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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. Future Funding, Participations and Assignment.



(a) Borrowers hereby acknowledge that Lender intends, at Lender’s sole cost and expense, to
transfer one or both of the Notes and the other Loan Documents to one or more special purpose
entities in one or more transactions (collectively, with their respective successors, assigns and
beneficiaries, the “Trust”) in connection with the issuance of Securities. Whether or not any such
transfer occurs, it is intended that a participation agreement (the “Participation Agreement”) will
be executed and delivered pursuant to which (i) one or more senior participation interests will be
created representing a portion of the principal amount of one or both of the Notes previously
advanced, and (ii) one or more junior participation interests (each, a “Junior Participation”) will
be created which may or may not represent funded portions of one or both of the Notes and shall
represent all future funding obligations under the Construction Loan Note. Each Junior
Participation will be transferred to one or more third parties (in such capacity, each, a “Junior
Holder”). The documentation associated with the Construction Loan Note obligates Lender to make
future advances of funds to Borrowers with respect to the Properties (such obligation, the “Future
Funding Obligations”), it being understood and agreed that Future Funding Obligations do not
include obligations to fund Construction Loan Advances from the Construction Loan Account in
accordance with the terms and conditions of Sections 3.3 and 3.4 hereof. From and
after the date on which the Remaining Construction Loan Advance has been made, there shall be no
further Future Funding Obligations



 


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and all references to the same or restrictions relating to the same shall cease to have any
further force or effect without the need for any amendment of any Loan Document, including this
Agreement. Lender will not transfer the Future Funding Obligations to the Trust, but instead to
one or more Junior Holders. By its execution and delivery of this Agreement and its acceptance of
the Loan on the date hereof in accordance with the terms hereof, Borrowers hereby acknowledge,
confirm, reaffirm and agree that: (i) one or both of the Notes may be transferred to the Trust;
(ii) whether or not either of the Notes has been or ever is transferred to the Trust, any and all
Junior Participations will be transferred to one or more Junior Holders; (iii) from and after the
date of transfer to the Junior Holders, the Future Funding Obligations will be solely the
obligation of the applicable Junior Holder(s), on the same terms and conditions specified in the
Construction Loan Note and the related Loan Documents; and (iv) Borrowers will not have any right
of offset or other claim against any Trust (or its assigns or beneficiaries) as holder of any Note
or any interest therein in connection with the Future Funding Obligations or against any Junior
Holder, other than with respect to the Future Funding Obligations associated with its Junior
Participation.



(b) Lender and/or any Junior Holder may assign, transfer or sell all or any portion of its
Future Funding Obligation and shall thereafter be relieved of such Future Funding Obligation,
provided that such assignee at the time of assignment assumes such Future Funding
Obligation in writing in a manner directly enforceable by, and reasonably acceptable to, Borrowers
and such assumption is delivered to Borrowers. At such time as Lender has so transferred all of
the Future Funding Obligations pursuant to this Section 10.25, the named Lender hereunder
shall have no Future Funding Obligations hereunder or under the other Loan Documents.
Notwithstanding the foregoing, Lender expressly agrees that no matter how many participations
Lender may create, assign, transfer or sell with respect to the Future Funding Obligations,
Borrowers shall only have to deal with the Administrative Agent in connection with obtaining any
Advance under the Future Funding Obligations.



Section 10.26. Note Register. Administrative Agent shall maintain on behalf of
Borrowers pursuant to the last sentence of this Section 10.26, or cause to be maintained,
(i) a copy of each assignment of all or any portion of either of the Notes (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, Lenders and the Administrative Agent may not treat any Person whose name is
not recorded in the Register pursuant to the terms hereof as a Lender for the purposes of this
Agreement, notwithstanding notice to the contrary or any notation of ownership or other writing on
any Note. The Register shall be available for inspection by any Lender at Administrative Agent’s
principal place of business, at any reasonable time and from time to time, upon reasonable prior
notice. Borrowers hereby appoint Administrative Agent as their agent for purposes of compliance
with US Treasury Regulation Section 5(f).103-1(c) and Administrative Agent hereby accepts such
appointment.



Section 10.27. Corporate Rate Policy. Borrowers shall provide lodging at the
Hotel/Casino Property for Lender’s employees, officers and directors (together the “Corporate
Persons”) visiting the Property in all instances for a rate of $100 per night (or if less, the then



 


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prevailing rate), provided that absent Borrowers reasonable consent thereto the aggregate
number of rooms to be provided per night in accordance with the terms of this Section 10.27 shall
not exceed (a) five (5) rooms on any Sunday night, Monday night, Tuesday night, Wednesday night or
Thursday night and (b) two (2) rooms on any Friday night or Saturday night. Additionally, Borrower
shall upgrade each Corporate Person’s lodging accommodations to suite product, on a space-available
basis (with availability to be determined on the date of stay), at no extra charge. Furthermore,
Corporate Persons will be granted admission to all events (excluding ticketed concerts) in any of
the Property’s facilities, in all instances without any charge (it being acknowledged and agreed
that Corporate Persons will be obligated to pay other generally applicable charges, fees or
expenses payable following admission).



ARTICLE XI.

MEZZANINE LOANS




Section 11.1. Mezzanine Loan Deliveries.



(a) Promptly after receipt, Borrowers shall deliver (or cause First Mezzanine 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) First Mezzanine
Lender by any First Mezzanine Borrower or any guarantor under the First Mezzanine 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 First Mezzanine 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) First
Mezzanine Borrowers to First Mezzanine Lender under the First Mezzanine Loan Documents as and when
due under the First Mezzanine 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. 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 First Mezzanine Borrowers to) from time to time, use
reasonable efforts to obtain from First Mezzanine Lender such estoppel certificates with respect to
the status of the First Mezzanine Loan and compliance by First Mezzanine Borrowers with the terms
of the First Mezzanine Loan Documents as may reasonably be requested by Lender. In the event or to
the extent that First Mezzanine Lender is not legally obligated to deliver such estoppel
certificates and is unwilling to deliver the same, or is legally obligated to deliver such estoppel
certificates but breaches such obligation, then



 


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Borrowers shall not be in breach of this provision so long as Borrowers furnish to Lender
estoppels executed by Borrowers and First Mezzanine Borrowers expressly representing to Lender the
information requested by Lender regarding the status of the First Mezzanine Loan and the compliance
by First Mezzanine Borrowers with the terms of the First Mezzanine Loan Documents. Borrowers
hereby jointly and severally indemnify Lender from and against all liabilities, obligations,
losses, damages, penalties, assessments, actions, or causes of action, judgments, suits, claims,
demands, costs, expenses (including reasonable attorneys’ and other professional fees, whether or
not suit is brought and settlement costs) and reasonable disbursements of any kind or nature
whatsoever which may be imposed on, actually incurred by, or asserted against Lender based in whole
or in part upon any fact, event, condition or circumstance relating to the First Mezzanine Loan
which was misrepresented in any material respect by Borrowers in, or which warrants disclosure and
was omitted from, such estoppel executed by Borrowers and First Mezzanine Borrowers.



(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



 


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and the compliance by Third Mezzanine Borrowers with the terms of the Third Mezzanine Loan
Documents. Borrowers hereby jointly and severally indemnify Lender from and against all
liabilities, obligations, losses, damages, penalties, assessments, actions, or causes of action,
judgments, suits, claims, demands, costs, expenses (including reasonable attorneys’ and other
professional fees, whether or not suit is brought and settlement costs) and reasonable
disbursements of any kind or nature whatsoever which may be imposed on, actually incurred by, or
asserted against Lender based in whole or in part upon any fact, event, condition or circumstance
relating to the Third Mezzanine Loan which was misrepresented in any material respect by Borrowers
in, or which warrants disclosure and was omitted from, such estoppel executed by Borrowers and
Third Mezzanine Borrowers.



Section 11.3. Intercreditor Agreement. Borrowers hereby acknowledge and agree that
(a) the Intercreditor Agreement entered into by and among Lender, First Mezzanine Lender, Second
Mezzanine Lender and Third Mezzanine Lender will be solely for the benefit of Lender, First
Mezzanine Lender, Second Mezzanine Lender and Third Mezzanine Lender, (b) none of (i) any of the
Borrowers, (ii) any First Mezzanine Borrower, (iii) any Second Mezzanine Borrower, or (iv) any
Third Mezzanine Borrower shall be intended third-party beneficiaries of any of the provisions
therein, and (c) none of (i) any of the Borrowers, (ii) any First Mezzanine Borrower, (iii) any
Second Mezzanine Borrower, or (iv) any Third Mezzanine Borrower shall have any rights thereunder or
shall be entitled to rely on any of the provisions contained therein. None of Lender, First
Mezzanine 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.



ARTICLE XII.

GAMING PROVISIONS




Section 12.1. Operation of Casino Component.



(a) Borrowers shall (i) 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 amend, terminate or modify 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; (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 assign its interests under the Casino Component Lease or
any similar replacement Lease for purposes of operating the Casino Component except to the extent
otherwise permitted by Section 5.2.10 hereof.



(b) Gaming Borrower shall operate the Casino Component pursuant to the Casino Component Lease
and in accordance with all Gaming Laws and all other applicable Legal Requirements.


 


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(c) Borrowers shall maintain all Gaming Licenses (in the name of Gaming Borrower), Operating
Permits and Governmental Approvals necessary for the lawful operation of the Casino Component as a
casino consistent with Comparable Hotel/Casinos and use its commercially reasonable efforts to
operate the Casino Component in a manner designed to maximize revenues from the Properties in the
aggregate. No Borrowers shall take, permit or omit any action that would adversely affect the
status or good standing of Gaming Borrower under such Operating Permits, Gaming Licenses or
Governmental Approvals.



(d) Borrowers hereby acknowledge and agree that the Casino Component Lease and any and all
rights and interests (whether choate or inchoate and including, without limitation, all mechanic’s
and materialmen’s liens under applicable law) owned, claimed or held, by Gaming Borrower thereunder
or otherwise in and to the Casino Component, shall be in all respects subordinate and inferior to
the liens and security interests created, or to be created, for the benefit of Lender under the
Loan Documents, and securing the repayment of the Notes 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 Lender Successor Owner, Gaming Borrower shall (A) recognize such 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 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 Lender Successor Owner (which period shall in all events
terminate upon 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 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
Lender Successor Owner, at the option of such Lender Successor Owner exercised by written notice to
Gaming Borrower, such 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 Gaming Borrower or any other Borrower to surrender or relinquish
one or more or all of the Gaming Licenses held by such Person(s). If Gaming Borrower or such other
Borrower 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 Borrower’s



 


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attorney in fact with full authority to surrender or relinquish each such Gaming License on
each such Borrower’s behalf, the foregoing power being irrevocable and coupled with an interest.



(g) Gaming Borrower agrees 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 Borrower 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
Borrower or any other Person for any loss, cost, damage, fine or other expense suffered by any
Borrower 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 to Lender,
within five (5) Business Days following the 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 Balances.




12.3.1. Borrowers shall maintain the Casino Account as an Eligible Account and the
amounts on deposit therein (or in any replacement account thereto) may only be invested in
Permitted Investments. Gaming Borrower may, upon fifteen (15)


 


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days prior written notice to Lender, replace the Casino Account with another Eligible
Account, provided that no Event of Default has occurred and is then continuing and, as a
condition precedent thereto, Gaming Borrower shall deliver to Lender a fully executed
replacement Casino Account Control Agreement in form and substance acceptable to Lender in
its reasonable discretion.




12.3.2. Borrowers shall not use any funds comprising the Gaming Account for purposes
other than payment of Permitted Gaming Expenses and Borrowers shall not transfer or withdraw
(or cause or permit any party to transfer or withdraw) any funds on deposit in the Gaming
Account other than (a) transfers to the Lockbox Account in accordance with the provisions of
Section 2.6.1(c) of this Agreement or (b) transfers or withdrawals pursuant to which
the amounts so transferred or deposited will be applied to Permitted Gaming Expenses (it
being agreed that such transfers or withdrawals described in this clause (b), shall only
occur in the event the funds then comprising the Gaming Account, together with any Prior
Day’s Cash Receipts to be deposited into the Gaming Account, are not in the Gaming
Borrower’s reasonable business judgment, after taking into consideration the cash needs of
the Casino Component, sufficient to satisfy such Permitted Gaming Expenses). As used herein,
“Permitted Gaming Expense” shall mean all costs and expenses incurred, or payments
or refunds to be made, in connection with the operation of the Casino Component in the
ordinary course of business, but not expenses which are contemplated to be paid or
reimbursed via disbursements made pursuant to Section 2.6.2 hereof or funds on
deposit in any of the Reserve Accounts. In the event that any funds comprising the Gaming
Account are used for purposes other than Permitted Gaming Expenses or any cash receipts
attributable to gaming activities at the Property are transferred to any account other than
the Lockbox Account, Borrowers shall provide notice to Lender on the same Business Day on
which any Borrower shall obtain actual knowledge of the same.




12.3.3. Gaming Borrower may from time to time request in writing that the Minimum
Gaming Account Balance be increased and Lender shall have the right to accept or reject such
request in its sole discretion, provided that if no Event of Default shall have occurred and
then be continuing, Lender shall not unreasonably reject such request in the event Borrowers
shall establish that absent any such increase, Borrowers will not be in compliance with the
Gaming Liquidity Requirement or other applicable Gaming Laws.



ARTICLE XIII.

INTENTIONALLY DELETED




ARTICLE XIV.

AMENDMENT AND RESTATEMENT




Section 14.1. Amendment and Restatement. Borrowers and Lender hereby agree that the
Second Amended and Restated 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 Second Amended and Restated Loan



 


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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 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 Property, IP or other assets owned by such Funding Borrower (whether by
foreclosure, deed 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 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 payment in full by the Mezzanine Borrowers of the Mezzanine Loans or (b) the date which
is 366 days after the 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 Property, IP or assets in an
amount equal to the Reimbursement Contribution payment required hereunder that such Defaulting
Borrower failed to make; provided, however, if



 


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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 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.



Section 15.4. 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 15.6. 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 all amounts then due
and payable by all of Borrowers to Lender, pursuant to the terms of the Loan Documents, and 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 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:




15.8.1. 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;


 


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15.8.2. 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;




15.8.3. any defense based upon any legal disability or other defense of any other
Borrower, any guarantor of any other person or by reason of the cessation or limitation of
the liability of any other Borrower or any guarantor from any cause other than full payment
of all sums payable under the Note, this Agreement and any of the other Loan Documents;




15.8.4. 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;




15.8.5. 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;




15.8.6. 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;




15.8.7. presentment, demand, protest and notice of any kind;




15.8.8. 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;




15.8.9. 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;




15.8.10. 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;




15.8.11. any defense based upon any use of cash collateral under Section 363 of the
Bankruptcy Code;




15.8.12. any defense based upon any agreement or stipulation entered into by Lender
with respect to the provision of adequate protection in any bankruptcy proceeding;




15.8.13. any defense based upon any borrowing or any grant of a security interest under
Section 364 of the Bankruptcy Code;


 


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15.8.14. any defense based upon the avoidance of any security interest in favor of
Lender for any reason;




15.8.15. 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;




15.8.16. any defense or benefit based upon any Borrower’s, or any other party’s,
resignation of the portion of any obligation secured by the applicable Security Instruments
to be satisfied by any payment from any other Borrower or any such party;




15.8.17. 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;




15.8.18. 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 Mortgage 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




15.8.19. 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 Property 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



 


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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.



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 First Mezzanine Borrower, 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 Property, the
IP 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.



[NO FURTHER TEXT ON THIS PAGE]






 


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IN WITNESS WHEREOF, the parties hereto have caused this Third Amended and Restated Loan
Agreement to be duly executed by their duly authorized representatives, all as of the day and year
first above written.



	 	 	 	 	 
	 	HRHH HOTEL/CASINO, LLC,

a Delaware limited liability company

 	 
	 	By:  	/s/ Richard Szymanski
 	 
	 	 	Name:  	Richard Szymanski 	 
	 	 	Title:  	Vice President 	 
	 
	 	HRHH CAFE, LLC,

a Delaware limited liability company

 	 
	 	By:  	/s/ Richard Szymanski
 	 
	 	 	Name:  	Richard Szymanski 	 
	 	 	Title:  	Vice President 	 
	 
	 	HRHH DEVELOPMENT, LLC,

a Delaware limited liability company

 	 
	 	By:  	/s/ Richard Szymanski
 	 
	 	 	Name:  	Richard Szymanski 	 
	 	 	Title:  	Vice President 	 
	 
	 	HRHH IP, LLC,

a Delaware limited liability company

 	 
	 	By:  	/s/ Richard Szymanski
 	 
	 	 	Name:  	Richard Szymanski 	 
	 	 	Title:  	Vice President 	 



 


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	 	HRHH GAMING, LLC,

a Nevada limited liability company

 	 
	 	By:  	/s/ Richard Szymanski
 	 
	 	 	Name:  	Richard Szymanski 	 
	 	 	Title:  	Vice President 	 



 


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	 	VEGAS HR PRIVATE LIMITED,

a Singapore corporation

 	 
	 	By:  	/s/ Tia Miyamoto
 	 
	 	 	Name:  	Tia Miyamoto 	 
	 	 	Title:  	Authorized Signatory 	 
	 
	 	By:  	/s/ Jordan Bock
 	 
	 	 	Name:  	Jordan Bock 	 
	 	 	Title:  	Authorized Signatory 	 
	 




 


249











 







Exhibits
and Schedules Omitted