Document:

Exhibit 10.2

 

AMENDED
AND RESTATED

CONTRIBUTION
AGREEMENT

 

by and between

 

DLJ MB IV HRH, LLC

a Delaware limited
liability company

and

Morgans Hotel Group Co.

a Delaware
corporation

 

Dated as of December 2, 2006

 

TABLE
OF CONTENTS

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  DEFINITIONS

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  CLOSING

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  EVENTS OCCURRING ON OR PRIOR TO THE CLOSING DATE

  	
   

  	
  7

  
	
   

  	
  3.1.

  	
  Organization of Holdings and Assignment of Rights

  	
   

  	
  7

  
	
   

  	
  3.2.

  	
  Initial Capital Contributions

  	
   

  	
  7

  
	
   

  	
  3.3.

  	
  Deliveries by DLJMB

  	
   

  	
  8

  
	
   

  	
  3.4.

  	
  Deliveries by Morgans

  	
   

  	
  8

  
	
   

  	
  3.5.

  	
  Deliveries by Holdings

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  CLOSING CONDITIONS

  	
   

  	
  9

  
	
   

  	
  4.1.

  	
  Conditions Precedent to Obligations of DLJMB

  	
   

  	
  9

  
	
   

  	
  4.2.

  	
  Conditions Precedent to Obligations of Morgans

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  REPRESENTATIONS AND WARRANTIES OF DLJMB

  	
   

  	
  10

  
	
   

  	
  5.1.

  	
  Organization, Good Standing

  	
   

  	
  11

  
	
   

  	
  5.2.

  	
  Authorization; No Breach

  	
   

  	
  11

  
	
   

  	
  5.3.

  	
  Brokerage

  	
   

  	
  11

  
	
   

  	
  5.4.

  	
  Investment Representation

  	
   

  	
  11

  
	
   

  	
  5.5.

  	
  Sufficient Funds

  	
   

  	
  11

  
	
   

  	
  5.6.

  	
  Hart-Scott-Rodino

  	
   

  	
  12

  
	
   

  	
  5.7.

  	
  Equity Commitment Letter

  	
   

  	
  12

  
	
   

  	
  5.8.

  	
  Litigation

  	
   

  	
  12

  
	
   

  	
  5.9.

  	
  No Other Representations and Warranties

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  REPRESENTATIONS AND WARRANTIES OF THE MORGANS
  PARTIES

  	
   

  	
  12

  
	
   

  	
  6.1.

  	
  Organization, Good Standing, Qualification

  	
   

  	
  12

  
	
   

  	
  6.2.

  	
  Authorization; No Breach

  	
   

  	
  12

  
	
   

  	
  6.3.

  	
  No Knowledge of Misrepresentations or Omissions

  	
   

  	
  13

  
	
   

  	
  6.4.

  	
  Litigation

  	
   

  	
  13

  
	
   

  	
  6.5.

  	
  Escrow Deposits

  	
   

  	
  14

  
	
   

  	
  6.6.

  	
  Casino Lease

  	
   

  	
  14

  
	
   

  	
  6.7.

  	
  Brokerage

  	
   

  	
  14

  
	
   

  	
  6.8.

  	
  Investment Representation

  	
   

  	
  14

  
	
   

  	
  6.9.

  	
  Credit Facility Commitment Letter

  	
   

  	
  15

  
	
   

  	
  6.10.

  	
  No Prior Activities

  	
   

  	
  15

  
	
   

  	
  6.11.

  	
  No Other Representations and Warranties

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  ADDITIONAL COVENANTS

  	
   

  	
  16

  
	
   

  	
  7.1.

  	
  Access to Information

  	
   

  	
  16

  
	
   

  	
  7.2.

  	
  Payment of Expenses by Holdings

  	
   

  	
  16

  
	
   

  	
  7.3.

  	
  Actions Relating to the Acquisition Agreements

  	
   

  	
  17

  
	
   

  	
  7.4.

  	
  Actions with Respect to Debt Financing

  	
   

  	
  18

  
	
   

  	
  7.5.

  	
  Gaming Approvals

  	
   

  	
  20

  
	
   

  	
  7.6.

  	
  Exclusivity

  	
   

  	
  20

  
	
   

  	
  7.7.

  	
  Cooperation by DLJMB

  	
   

  	
  20

  

 

 

 

	
  

  	
  7.8.

  	
  Actions with Respect to Equity Financing

  	
   

  	
  21

  
	
   

  	
  7.9.

  	
  Actions with Respect to Casino Lease

  	
   

  	
  21

  
	
   

  	
  7.10.

  	
  Confidentiality

  	
   

  	
  21

  
	
   

  	
  7.11.

  	
  Approved Development Budget

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  TERMINATION

  	
   

  	
  22

  
	
   

  	
  8.1.

  	
  Termination

  	
   

  	
  22

  
	
   

  	
  8.2.

  	
  Effect of Termination

  	
   

  	
  23

  
	
   

  	
  8.3.

  	
  Escrow Deposits

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  INDEMNIFICATION

  	
   

  	
  26

  
	
   

  	
  9.1.

  	
  Survival of Representations and Warranties

  	
   

  	
  26

  
	
   

  	
  9.2.

  	
  General Indemnification

  	
   

  	
  26

  
	
   

  	
  9.3.

  	
  Survival

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  MISCELLANEOUS

  	
   

  	
  28

  
	
   

  	
  10.1.

  	
  Public Statements

  	
   

  	
  28

  
	
   

  	
  10.2.

  	
  Injunctive Relief

  	
   

  	
  28

  
	
   

  	
  10.3.

  	
  Governing Law/Choice of Law and Forum

  	
   

  	
  28

  
	
   

  	
  10.4.

  	
  Entire Agreement; Amendment; Waiver

  	
   

  	
  29

  
	
   

  	
  10.5.

  	
  Binding Effect/Nonassignment

  	
   

  	
  29

  
	
   

  	
  10.6.

  	
  Invalidity of Provision

  	
   

  	
  29

  
	
   

  	
  10.7.

  	
  Notices

  	
   

  	
  29

  
	
   

  	
  10.8.

  	
  Headings; Execution in Counterparts

  	
   

  	
  30

  
	
   

  	
  10.9.

  	
  No Strict Construction

  	
   

  	
  30

  
	
   

  	
  10.10.

  	
  Amended and Restated Terms

  	
   

  	
  30

  
	
   

  	
  10.11.

  	
  Survival

  	
   

  	
  30

  

 

LIST OF EXHIBITS

Exhibits Referenced

A             FORM
OF LLC AGREEMENT

B             ACQUISITION
AGREEMENTS

C             FORM
OF MANAGEMENT AGREEMENT

D             MERGER
AGREEMENT

E              FORM
OF TECHNICAL SERVICES AGREEMENT

F              CASINO
LEASE

G             PROPOSED TRANSACTION
STRUCTURE CHART

H             EQUITY COMMITMENT
LETTER

I               FORM OF INDEMNITY
AGREEMENT

J              PERMANENT FINANCING
TERM SHEET

K             APPROVED DEVELOPMENT
BUDGET

 

AMENDED AND RESTATED
CONTRIBUTION AGREEMENT

THIS AMENDED AND RESTATED CONTRIBUTION AGREEMENT (the “Agreement”)
is made and entered into as of December 2, 2006 (the “Effective Date”)
by and between DLJ MB IV HRH, LLC, a Delaware limited liability company (“DLJMB”),
and Morgans Hotel Group, Co., a Delaware corporation (“Morgans”).
Capitalized terms not otherwise defined in this Agreement shall have the
respective meanings specified in the LLC Agreement.

RECITALS

A.            Hard
Rock Holdings, LLC, a Delaware limited liability company (“Holdings”), will be formed to effect the acquisition of the
Hard Rock Hotel & Casino (the “Hotel/Casino”) in Las Vegas, Nevada,
including (a) the capital stock of Hard Rock Hotel, Inc. (“HRH”); (b)
the approximately twenty-three (23) acres of land adjacent thereto and all
related entitlements; (c) the land under the Hard Rock Café site located
adjacent to the Hotel/Casino; (d) certain intellectual property and trademarks;
and (e) any other assets being acquired by the Morgans Parties under the Merger
Agreement or any related agreements with Peter Morton, PM Realty, LLC, Red,
White and Blue Pictures, Inc. and HR Condominium Investors (Vegas), LLC, as
applicable (collectively, as more specifically described in the Acquisition
Agreements (as defined below) the “Acquired Assets”).  Upon the acquisition of the Acquired Assets
(the “Acquisition”), Holdings will own, manage, renovate and develop
such Acquired Assets.

B.            The Morgans Parties (as defined below) previously entered
into agreements for the purchase of the Acquired Assets (together with all
documents, instruments, certificates, schedules and exhibits attached or
related thereto, as each may be amended, modified or supplemented from time to
time in accordance with the provisions of this Agreement, the “Acquisition
Agreements,” each of which is set forth on Exhibit B).

C.            As set forth in, and subject to the terms of, this
Agreement, the Morgans Parties intend to assign all of their right, title and
interest in the Acquisition Agreements and the Acquired Assets to Holdings, and
Holdings will assume the Acquisition Agreements.

D.            On
the Closing Date, and subject to the terms of this Agreement, (a) DLJMB will
contribute, and will cause DLJMB LLC to contribute the DLJMB Initial Capital
Commitment to Holdings and (b) Morgans will be deemed to have contributed the
Morgans Initial Capital Commitment to Holdings, in each case in exchange for
the respective Percentage Interest, as adjusted from time to time, and on the
terms and subject to the conditions set forth in the LLC Agreement.

E.             Following
the consummation of the transactions contemplated by this Agreement and the
Acquisition Agreements, and subject to the terms of this Agreement, Morgans
Management shall manage the Hard Rock Hotel and Casino pursuant to the terms
and conditions of the form of Management Agreement attached hereto as Exhibit
C.

 1
 

 

AGREEMENT

NOW, THEREFORE, for and
in consideration of the foregoing premises, and the mutual representations,
warranties, covenants, agreements and undertakings herein contained, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:

1.             DEFINITIONS

For purposes of this Agreement:

“Acquired Assets” has the
meaning specified in the Recitals.

“Acquisition” has the meaning
specified in the Recitals.

“Acquisition Agreements” has the
meaning specified in the Recitals.

“Affiliate” means, as to any
Person, any other Person that directly or indirectly controls, is controlled
by, or is under common control with such first Person.  For the purposes of this Agreement, a Person
shall be deemed to control another Person if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management,
policies and/or decision making of such other Person, whether through the
ownership of voting securities, by contract or otherwise.

“Agreement” has the meaning
specified in the Preamble.

“Applied Amount” has the meaning
set forth in Section 3.2(b).

“Assignment Agreements” has the
meaning set forth in Section 3.1(b).

“Breach” means, with respect to
a representation, warranty, covenant, obligation or other provision, any
inaccuracy in or breach of, or any failure to comply with or perform, such
representation, warranty, covenant, obligation or other provision.

“Break Up Amount” means (a) for
the period beginning on the termination date of the Merger Agreement through
the second anniversary thereof, an amount, not to exceed Twenty Five Million
Dollars ($25,000,000), equal to fifty percent (50%) of the aggregate amount of
funds released to the Selling Parties from the escrows established under the
Escrow Agreements; and (b) for the period after the second anniversary of the
termination date of the Merger Agreement, Twenty Five Million Dollars
($25,000,000), less fifty percent (50%) of any amounts released from such
escrows to the Morgans Parties, in each case, exclusive of any interest or
other investment income earned thereon from and after May 11, 2006.

“Casino Lease” means that
certain Casino Sublease attached hereto as Exhibit F, dated as of
November 6, 2006, among Merger Sub, Morgans and Golden HRC, LLC or, in the
event that Golden HRC, LLC does not receive the Gaming Approvals before
Closing, such other casino lease as Holdings or an Affiliate of Holdings enters
into with another lessee on terms taken as a whole no less favorable to
Holdings or such Affiliate in any material respect, as amended, modified or
supplemented in accordance with the terms of this Agreement.

 2
 

 

“Claim” has the meaning
specified in Section 9.2(d).

“Closing” has the meaning
specified in Section 2.

“Closing Date” has the meaning
specified in Section 2.

“Column” means
Column Financial, Inc. or any successor thereto.

“Credit Facility Commitment Letter” means
the commitment letter from Column, dated as of May 11, 2006, pursuant to which
Column committed to provide a credit facility with an aggregate principal
amount equal to the lesser of Seven Hundred Million Dollars ($700,000,000) and
eighty-two and one half percent (82.5%) of the capitalized cost of the
Acquisition, as amended, modified or supplemented from time to time in
accordance with this Agreement, or, instead of such commitment letter, any
substitute commitment letter or definitive agreement, entered into by the
Morgans Parties or Holdings in accordance with Section 7.4, including,
without limitation, any commitment letter regarding the financing contemplated
by the Permanent Financing Term Sheet.

“Debt Financing” has the meaning
specified in Section 6.9.

“DLJMB” has the meaning
specified in the Preamble.

“DLJMB Condition Failure” has
the meaning specified in Section 8.1(c).

“DLJMB Expenses” has the meaning
specified in Section 7.2.

“DLJMB Initial Capital Commitment” has
the meaning specified in Section 3.2(a).

“DLJMB LLC” means the entity
identified as DLJMB VoteCo, LLC, a Delaware limited liability company, in the
LLC Agreement.

“DLJMB Termination Notices” has
the meaning specified in Section 7.3.

“DLJMB’s Cap” has the meaning
set forth in Section 9.2(b).

“Effective Date” has the meaning
set forth in the Preamble.

“Encumbrance” means any lien,
pledge, hypothecation, charge, mortgage, security interest, encumbrance,
equity, trust, equitable interest, claim, preference, right of possession,
lease, tenancy, license, encroachment, covenant, infringement, interference,
Order, proxy, option, right of first refusal, preemptive right, community
property interest, legend, defect, impediment, exception, reservation,
limitation, impairment, imperfection of title, condition or restriction of any
nature (including any restriction on the voting of any security, any
restriction on the transfer of any security or other asset, any restriction on
the receipt of any income derived from any asset, any restriction on the use of
any asset and any restriction on the possession, exercise or transfer of any
other attribute of ownership of any asset).

 3
 

 

“Entity” means any corporation
(including any nonprofit corporation), general partnership, limited
partnership, limited liability partnership, joint venture, estate, trust or
company (including any limited liability company or joint stock company).

“Equity Commitment Letter” means
the commitment letter attached hereto as Exhibit H from DLJ Merchant
Banking Partners IV, L.P. and certain of its affiliated entities dated as of
November 7, 2006, pursuant to which such entities committed to provide One
Hundred Million Dollars ($100,000,000) of equity capital to DLJMB in connection
with the transactions contemplated by this Agreement, as amended, restated or
supplemented to provide for an additional commitment of Twenty Million Dollars
($20,000,000) of equity capital to DLJMB by such parties in accordance with Section
7.8.

“Escrow Agreements” means,
collectively, the Escrow Agreement dated May 11, 2006 by and among Lily Pond
Investments, Inc., Morgans, and Chicago Title Agency of Nevada, Inc. and the
Escrow Agreement dated May 11, 2006 by and among PM Realty, LLC, Red, White and
Blue Pictures, Inc., Peter A. Morton, 510 Development Corporation, Morgans
Group LLC, and Chicago Title Agency of Nevada, Inc.

“Escrow Deposits” means the
aggregate amount of Fifty Million Dollars ($50,000,000) deposited into escrow
by the Morgans Parties pursuant to the Acquisition Agreements, plus any
interest accrued thereon from and after the date of such deposit in accordance
with the Acquisition Agreements.

“Gaming Approvals” means all
licenses, permits, approvals, authorizations, registrations, findings of
suitability, franchises, entitlements, waivers and exemptions issued by any
Gaming Authority required to permit the parties hereto to consummate the
transactions contemplated by this Agreement, including for the avoidance of
doubt, all liquor licenses and all such approvals issued by a Gaming Authority as
may be required to permit the operation under the Casino Lease of the casino at
the Hotel/Casino.

“Gaming Authorities” means any
governmental authority or agency with regulatory control or jurisdiction over
the conduct of lawful gaming or gambling, including the Nevada Gaming
Commission, the Nevada State Gaming Control Board and the Clark County Liquor
and Gaming Licensing Board.

“Governmental Body” means any
(a) nation, principality, state, province, territory, county, municipality,
district or other jurisdiction of any nature; (b) Federal, state, local,
municipal, foreign or other government; or (c) individual, Entity or body
exercising, or entitled to exercise, any executive, legislative, judicial,
administrative, regulatory, police, military or taxing authority or power of
any nature.

“Holdings” has the meaning
specified in the Recitals.

“Hotel/Casino” has the meaning
specified in the Recitals.

“HRH” has the meaning specified
in the Recitals.

 4
 

 

“HRH Bond Documents” means both (a) the Indenture dated as of
May 30, 2003 between HRH and U.S. Bank National Association, as supplemented on
November 20, 2003 and November 24, 2003 and (b) the HRH Junior Notes.

“HRH Bonds”
means both (a) the HRH Second Lien Notes and (b) the HRH Junior Notes.

“HRH Junior Notes”
means HRH’s Junior Subordinated Notes due 2014.

“HRH Second Lien Notes”
means HRH’s 8-7/8% Second Lien Notes due 2013.

“Indemnitee” has the meaning
specified in Section 9.2(d).

“Indemnitor” has the meaning
specified in Section 9.2(d).

“Indemnity Agreement” means the
Payment Contribution and Indemnity Agreement in the form attached hereto as Exhibit
I.

“Initial Capital Commitments”
means the DLJMB Initial Capital Commitment and the Morgans Initial Capital
Commitment as set forth in Section 3.2(a).

“Knowledge” means
the actual knowledge of Edward Scheetz, Marc Gordon, David Smail, Jennifer
Nellany, Matt Armstrong, Arthur Blee and Ana Nekhamkin after reasonable
inquiry; and the knowledge of no other Person shall be imputed to any such
individual.

“LLC Agreement” has the meaning
specified in Section 3.3(a).

“Loss” or “Losses” means
any loss, liability, demand, claim, action, cause of action, cost, damage,
diminution in value, deficiency, tax, penalty, fine or expense, whether or not
arising out of third party claims (including interest, penalties, reasonable
attorneys’ fees and expenses and all amounts paid in investigation, defense or
settlement of any of the foregoing and the enforcement of any rights
hereunder).

“Management Agreement” means
that certain Hotel Management Agreement in substantially the form attached
hereto as Exhibit C to be entered into at the Closing by Morgans
Management, Holdings and the other parties thereto.

“Material Adverse Effect” has
the meaning specified in the Merger Agreement.

“Merger Agreement” means that
certain Agreement and Plan of Merger, dated May 11, 2006, by and among Morgans,
MHG HR Acquisition Corp., Hard Rock Hotel, Inc. and Peter H. Morton as attached
to this Agreement as Exhibit D, as amended, modified or supplemented
from time to time in accordance with this Agreement.

“Merger Sub” has the meaning
specified in Section 6.6.

“Morgans” has the meaning
specified in the Preamble.

 5
 

 

“Morgans Condition Failure” has
the meaning specified in Section 8.1(b).

“Morgans Expenses” has the meaning
specified in Section 7.2.

“Morgans Initial Capital Commitment”
shall have the meaning specified in Section 3.2(b).

“Morgans Management” shall mean
Morgans Hotel Group Management LLC, a Delaware limited liability company.

“Morgans Parties” means, collectively,
Morgans and any Affiliate of Morgans that is a party to any of the Acquisition
Agreements or any of the Exhibits to this Agreement; provided, however,
that Holdings shall not be deemed to be a Morgans Party.

“Order” means any (a) order,
judgment, injunction, edict, decree, ruling, subpoena, writ or award that is or
has been issued, made, entered, rendered or otherwise put into effect by or
under the authority of any court, administrative agency or other Governmental
Body or any arbitrator or arbitration panel; or (b) contract or agreement with
any Governmental Body that is or has been entered into in connection with any
proceeding.

“Percentage Interest” means the
percentage interests in Holdings specified in Exhibit E of the LLC Agreement.

“Permanent Financing Term Sheet”
means the term sheet from Column attached hereto as Exhibit J.

“Person” means any individual,
Entity or Governmental Body.

“Proposed Transaction Structure Chart”
means the Proposed Transaction Structure Chart attached hereto as Exhibit G,
as may be modified from time to time by Morgans with the prior written consent
of DLJMB, which consent shall not be unreasonably withheld, delayed or
conditioned.

“Representative”
means, as to any Person, such Person’s Affiliates and its and their directors,
officers, investors, employees, agents, advisors (including, without
limitation, financial advisors, counsel and accountants) provided, however,
that all such Persons shall be bound by the same restrictions on disclosure and
use of confidential information as apply to DLJMB and Morgans hereunder.

“Securities Act” means the
Securities Act of 1933, as amended.

“Selling Parties” means,
collectively, Hard Rock Hotel, Inc., Peter H. Morton, PM Realty, LLC, Red,
White and Blue Pictures, Inc. and HR Condominium
Investors (Vegas), L.L.C.

“Technical Services Agreement”
means that certain Technical Services Agreement in substantially the form
attached hereto as Exhibit E to be entered into at Closing by Morgans
Management, Holdings and the other parties thereto with such changes and
modifications as may be mutually agreed in writing.

 6
 

 

2.             CLOSING

If the conditions in Article 4 have been
satisfied or waived, then the closing of the contribution of assets provided
for in this Agreement (the “Closing”) shall be held at the offices of
Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York 10019, on the same
date as the closing of the transactions contemplated by the Merger Agreement,
at 9:00 a.m. New York time, or at such other time and place as may be fixed by
mutual agreement of all the parties hereto (the “Closing Date”).

3.             EVENTS OCCURRING ON OR PRIOR TO
THE CLOSING DATE

3.1.                            Organization
of Holdings and Assignment of Rights.

On or prior to the
Closing Date:

(a)           Morgans shall cause Holdings to be formed as a limited
liability company under the laws of the State of Delaware, and shall take such
other steps as may be necessary to form the subsidiaries contemplated in the
Proposed Transaction Structure Chart.

(b)           The Morgans Parties shall assign all of their right, title
and interest in the Acquisition Agreements to Holdings and Morgans and DLJMB
shall cause Holdings to (i) assume all of the obligations of the Morgans
Parties thereunder and (ii) indemnify the Morgans Parties from and against any
Losses in connection therewith (except to the extent Morgans has indemnity or
other contractual obligations to DLJMB with respect to such Losses under this
Agreement) pursuant to one or more assignment, transfer and conveyance
agreements in form and substance reasonably satisfactory to the Morgans Parties
and DLJMB (collectively, the “Assignment Agreements”).  At the Closing, the Escrow Deposits shall be
credited towards the purchase price of the Acquisition (as contemplated in the
Acquisition Agreements).

3.2.                            Initial
Capital Contributions.

(a)           DLJMB Initial Capital Contribution.  At the Closing,
DLJMB and DLJMB LLC shall contribute to Holdings an aggregate cash amount
of One Hundred Twenty Million Dollars ($120,000,000), or such lesser amount as
the parties shall mutually agree in writing (the “DLJMB Initial Capital
Commitment”) via wire transfer of immediately available funds to a bank
account of Holdings designated by Morgans at least three (3) business days
before Closing.

(b)           Morgans Initial
Capital Contribution.  At the Closing,
Morgans shall contribute to Holdings an aggregate cash amount of Sixty Million
Dollars ($60,000,000), or such lesser amount as the parties shall mutually
agree in writing (the “Morgans Initial Capital Commitment”); provided,
however, that the amount to be contributed by Morgans at Closing
pursuant to this Section 3.2(b) shall be deemed satisfied by the
application of (i) the Escrow Deposits as contemplated by Section 3.1(b)
and (ii) the Morgans Expenses as contemplated by Section 7.2 (the
amounts referred to in clauses (i) and (ii), collectively, the “Applied
Amounts”), to the extent that the Applied Amounts credited is equal to or
greater than Morgans Initial Capital Commitment; and provided, further,
that DLJMB and Morgans shall cause Holdings to 

 7
 

 

pay to Morgans
at Closing the entire amount by which the Applied Amounts exceed the Morgans
Initial Capital Commitment.

3.3.         Deliveries by DLJMB.  On the Closing Date, DLJMB shall execute and
deliver, or cause to be executed and delivered, as applicable, the following:

(a)           LLC
Agreement.  Two originals of the
Limited Liability Company Agreement to Morgans, each duly executed by DLJMB and
DLJMB LLC, substantially in the form attached hereto as Exhibit A; provided,
however, that the parties shall cooperate in good faith to incorporate
the terms referenced in Annex A attached thereto into the definitive form of
such agreement to be executed on the Closing Date (the “LLC Agreement”).

(b)           DLJMB
Initial Capital Commitment. The DLJMB Initial Capital Commitment to
Holdings.

(c)           Officer’s
Certificate.  An officer of DLJMB
shall deliver to Morgans an officer’s certificate confirming, with respect to
DLJMB, the items set forth in (a) and (b) of Section 4.2.

(d)           Indemnity
Agreement.  Two originals of the
Indemnity Agreement to Morgans, each duly executed by DLJ Merchant Banking
Partners IV, L.P. and/or such Affiliates of DLJ Merchant Banking Partners IV,
L.P., as shall sign the Joinder Agreement (as defined in the Indemnity
Agreement).

3.4.         Deliveries by Morgans.  On the Closing Date, Morgans shall execute
and deliver, or cause to be executed and delivered, as applicable, the
following:

(a)   LLC Agreement.  Two
originals of the LLC Agreement to DLJMB, each duly executed by Morgans.

(b)   Management Agreement. 
Two originals of the Management Agreement to DLJMB, each duly executed
by Morgans Management.

(c)   Technical Services Agreement.  Two originals of the Technical Services
Agreement to DLJMB, each duly executed by Morgans Management.

(d)   Morgans Initial Capital Commitment.  Officers of the Morgans Parties shall deliver
to DLJMB an officers’ certificate confirming that the Morgans Initial Capital
Commitment has been credited to the purchase price of the Acquisition.

(e)   Officer’s Certificate. 
An officer of Morgans shall deliver to DLJMB an officer’s certificate
confirming, with respect to Morgans, the items set forth in (a) and (b) of Section
4.1.

(f)    Assignment Agreements. 
Two originals of each Assignment Agreement to DLJMB, each duly executed
by the applicable Morgans Parties, as assignors.

(g)           Indemnity
Agreement.  Two originals of the
Indemnity Agreement to DLJMB, each duly executed by Morgans.

 8
 

 

3.5.         Deliveries by Holdings.  On the Closing Date, Morgans and DLJMB shall
cause Holdings to execute and deliver the following:

(a)   Assignment Agreements. 
Two originals of each Assignment Agreement to DLJMB and Morgans, each
duly executed by Holdings, as assignee.

(b)   LLC Agreement.  Two
originals of the LLC Agreement to each of DLJMB and Morgans, each duly executed
by Holdings.

(c)   Management Agreement. Two originals of the Management
Agreement to each of DLJMB, Morgans, and Morgans Management, each duly executed
by Holdings.

(d)   Technical Services Agreement.  Two originals of the Technical Services
Agreement to each of DLJMB, Morgans, and Morgans Management, each duly executed
by Holdings.

4.             CLOSING CONDITIONS

4.1.         Conditions Precedent to Obligations
of DLJMB. 
The obligations of DLJMB to execute and deliver the LLC Agreement and to
pay the DLJMB Initial Capital Commitment in accordance with Section 3.2(a)
shall be subject to the satisfaction on or prior to the Closing Date, of the
following conditions, any of which may be waived, in writing, by DLJMB in its
discretion:

(a)           All
of the representations and warranties of the Morgans Parties contained in Article
6 of this Agreement shall be true and correct in all material respects on
the date of this Agreement and, in the case of the representations and
warranties contained in Sections 6.1, 6.2, 6.5, 6.6,
6.7, 6.8, 6.9, 6.10 and 6.11 of this
Agreement only, on the Closing Date (other than with respect to matters
consented to in writing by DLJMB in accordance with this Agreement) as if made
at and as of such date (or, in the case of representations and warranties which
address matters only as of a particular date, as of such date);

(b)           The
Morgans Parties shall have complied with and performed in all material respects
all of their respective covenants contained herein which are to be performed by
them on or prior to the Closing Date;

(c)           All
of the conditions to the obligations of the Morgans Parties to close under the
Merger Agreement (as set forth in Section 5.1 and 5.2 of the Merger Agreement)
shall have been satisfied and the transactions contemplated by such agreements
shall occur concurrently with the Closing hereunder;

(d)           There
shall be no temporary restraining order or preliminary or permanent injunction
of any court or administrative agency of competent jurisdiction prohibiting the
consummation of any transactions contemplated by this Agreement;

(e)           Either (i) Golden HRC, LLC or one of its Affiliates shall
have obtained the Gaming Approvals or (ii) Holdings (or a direct or
indirect subsidiary of Holdings) shall have entered into a Casino Lease with
another casino operator and such other casino operator shall

 9
 

 

have obtained the Gaming Approvals such that
the casino at the Hard Rock Hotel & Casino is able to be open for business
on the date following the Closing Date; and

(f)         The condition set
forth in Section 5.3(c) of the Merger Agreement (as in effect on the date
hereof) shall have been satisfied, and the liens securing the obligations referenced
in such condition shall have been released; provided, however, in
the event that the condition described in this clause (f) has not been
satisfied at the Closing but (i) the Selling Parties have waived the condition
set forth in Section 5.3(c) of the Merger Agreement, and (ii) the lenders under
the Permanent Financing Term Sheet have (A) waived and/or funded over any condition
which would require that the outstanding HRH Bonds shall have been defeased,
repaid, discharged or otherwise satisfied at the time of Closing and that the
liens securing the Second Lien Notes shall have been released, and (B) not
reduced the amount of funds that would have been available to the borrowers
prior to the granting of such waivers due to the failure of any condition
referred to in the preceding clause (A) to be satisfied, and (iii) the Morgans
Parties are in compliance with their obligations under the third sentence of Section
7.3 hereof, then the condition in this clause (f) shall be deemed to be satisfied.

4.2.         Conditions Precedent to Obligations
of Morgans. 
The obligations of Morgans to execute and deliver the LLC Agreement and
to pay the Morgans Initial Capital Commitment in accordance with Section
3.2(a) shall be subject to the satisfaction on or prior to the Closing
Date, of the following conditions, any of which may be waived, in writing, by
Morgans in its discretion:

(a)           The
representations and warranties of DLJMB contained in Article 5 of this
Agreement shall be true and correct in all material respects both on the date
of this Agreement and the Closing Date as if made at and as of such date (or,
in the case of representations and warranties which address matters only as of
a particular date, as of such date);

(b)           DLJMB
shall have complied with and performed in all material respects, its covenants
contained herein which are to be performed by DLJMB on or prior to the Closing
Date;

(c)           All
of the conditions to the obligations of any of the Morgans Parties to close
under the Merger Agreement (as set forth in Section 5.1 and 5.2 of the Merger
Agreement) shall have been satisfied and the transactions contemplated by such
agreements shall occur concurrently with the Closing hereunder; and

(d)           There
shall be no temporary restraining order or preliminary or permanent injunction
of any court or administrative agency of competent jurisdiction prohibiting the
consummation of any transactions contemplated by this Agreement.

5.             REPRESENTATIONS AND WARRANTIES
OF DLJMB

Except as specifically
set forth in certain schedules provided by DLJMB to Morgans and attached to
this Agreement, which are numbered to correspond to the Section numbers of this
Agreement, DLJMB hereby represents and warrants to Morgans as of the Effective
Date and as of the Closing Date as follows:

 10
 

 

5.1.         Organization, Good Standing.  DLJMB is a Delaware limited liability
company, duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization. 
DLJMB has the requisite power and authority necessary to carry out the
transactions contemplated by this Agreement.

5.2.         Authorization; No Breach.  This Agreement has been duly authorized, executed
and delivered by DLJMB.  Assuming that
this Agreement is a valid and binding obligation of Morgans, this Agreement
constitutes a valid and binding obligation of DLJMB, enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy laws,
other similar laws affecting creditors’ rights and general principles of equity
affecting the availability of specific performance and other equitable
remedies.  The execution, delivery and
performance by DLJMB of this Agreement does not and shall not (i) conflict with
any of the provisions of the articles of incorporation, bylaws or similar
organizational documents of DLJMB (ii) conflict with, result in a breach
of the terms, conditions or provisions of, or constitute a default under (whether
with or without the passage of time, the giving of notice or both) any
agreement, contract or instrument to which DLJMB is subject, (iii) result
in the creation of any lien or Encumbrance upon Holdings’ equity interests or
assets or any equity interests or assets that comprise part of the Acquired
Assets, other than as contemplated herein or by the Credit Facility Commitment
Letter, (iv) result in a violation of any law, statute, rule, regulation,
order, judgment or decree to which DLJMB is subject or (v) require any
authorization, consent, approval, exemption or other action by or notice or
declaration to, or filing with, any third party or any Governmental Body.

5.3.         Brokerage.  There are no claims for brokerage
commissions, finders’ fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of DLJMB or any of its respective Affiliates.

5.4.         Investment Representation.  Each of DLJMB and DLJMB LLC is making the
DLJMB Initial Capital Commitment for its own account with the present intention
of holding its interests in Holdings for investment purposes and not with a
view to or for sale in connection with any public distribution of such
interests in violation of any federal or state securities laws.  Each of DLJMB and DLJMB LLC is an “accredited
investor” as defined in Regulation D promulgated under the Securities Act.  Each of DLJMB and DLJMB LLC acknowledges that
it is informed as to the risks of the transactions contemplated hereby and of
ownership of interests in Holdings.  Each
of DLJMB and DLJMB LLC acknowledges that the interests in Holdings have not
been registered under the Securities Act or any state or foreign securities
laws and that such interests may not be sold, transferred, offered for sale,
pledged hypothecated or otherwise disposed of unless such transfer, sale,
assignment, pledge, hypothecation or other disposition is pursuant to the terms
of an effective registration statement under the Securities Act and are
registered under any applicable state or foreign securities laws or pursuant to
an exemption from registration under the Securities Act and any applicable
state or foreign securities laws.

5.5.         Sufficient Funds.  DLJMB and DLJMB LLC have (and at Closing will
have) sufficient unrestricted cash available to enable them to satisfy their
respective obligations hereunder on and after the Closing Date.

 11
 

 

5.6.         Hart-Scott-Rodino.
Neither DLJMB nor DLJMB LLC is required to make a filing under Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the “HSR Act”), in
connection with the Acquisition or the performance of DLJMB’s obligations under
this Agreement.

5.7.         Equity Commitment Letter.  A true and correct copy of the Equity
Commitment Letter is attached hereto as Exhibit H.  Pursuant to the Equity Commitment Letter, DLJ
Merchant Banking Partners IV, L.P. and certain of its affiliated entities have
agreed to provide DLJMB an aggregate amount of equity financing for the
transactions contemplated by this Agreement equal to One Hundred Million
Dollars ($100,000,000).  The Equity
Commitment Letter has not been amended, modified or supplemented and is in full
force and effect and no event has occurred which, with or without notice, the
lapse of time or both, would constitute a default on the part of DLJMB under
the Equity Commitment Letter.  There are
no conditions precedent or other contingencies related to the funding of the
full amount of such equity, other than as set forth in the Equity Commitment
Letter.

5.8.         Litigation.  There are no actions, suits, proceedings,
orders or claims pending, or to the knowledge (after reasonable inquiry) of
DLJMB, threatened in writing against DLJMB or DLJMB LLC at law or in equity, by
any Person or before or by any Governmental Body which would reasonably be
expected to materially adversely affect DLJMB’s performance under this
Agreement, which relate to the transactions contemplated by this Agreement or
which would reasonably be expected to materially adversely affect the
consummation of the transactions contemplated by this Agreement.

5.9.         No Other Representations and
Warranties. 
Other than the representations and warranties expressly set forth in
this Article 5, DLJMB shall not be deemed to have made any other
representation or warranty to Morgans in connection with this Agreement or the
transactions contemplated hereby, and no other Person shall be deemed to have
made any representation or warranty to Morgans in connection with this
Agreement or the transactions contemplated hereby.

6.             REPRESENTATIONS AND WARRANTIES OF THE MORGANS PARTIES

Except as specifically
set forth in certain schedules provided by the Morgans Parties to DLJMB and
attached to this Agreement, which are numbered to correspond to the Section
numbers of this Agreement, Morgans hereby represents and warrants to DLJMB as
of the Effective Date as follows (provided, that the representations and
warranties set forth in Sections  6.3 and 6.4 shall be true
and correct only as of the Effective Date and shall not be deemed to be made as
of the Closing Date:

6.1.         Organization, Good Standing,
Qualification. 
Morgans is a Delaware corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization.  Morgans has the requisite power and authority
necessary to carry out the transactions contemplated by this Agreement.

6.2.         Authorization; No Breach.  This Agreement has been duly authorized,
executed and delivered by Morgans.  No
vote of the shareholders of Morgans is required for Morgans to

 12
 

 

authorize, execute, deliver and perform this
Agreement.  Assuming that this Agreement
is a valid and binding obligation of DLJMB, this Agreement constitutes a valid
and binding obligation of Morgans, enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy laws, other similar laws
affecting creditors’ rights and general principles of equity affecting the
availability of specific performance and other equitable remedies.  Except as set forth on Schedule 6.2,
the execution, delivery and performance by Morgans of this Agreement
(including, without limitation, the assignment of the Morgans Parties’ rights
under the Acquisition Agreements to Holdings) does not and shall not (i)
conflict with any of the provisions of the articles of incorporation or bylaws
of Morgans (ii) conflict with, result in a breach of the terms, conditions
or provisions of, or constitute a default under (whether with or without the
passage of time, the giving of notice or both) any agreement, contract or
instrument to which Morgans is bound, (iii) result in the creation of any
lien or Encumbrance upon Holdings’ equity interests or assets or any equity
interests or assets that comprise part of the Acquired Assets, other than as
contemplated herein or by the Credit Facility Commitment Letter,
(iv) result in a violation of any law, statute, rule, regulation, order,
judgment or decree to which Morgans is subject or (v) except for Gaming
Approvals, require any authorization, consent, approval, exemption or other
action by or notice or declaration to, or filing with, any third party or any
Governmental Body.  Except as set forth
on Schedule 6.2, none of the Morgans Parties is (and following the
assignment of the Acquisition Agreements to Holdings, Holdings will not be)
bound by any agreement, or party to any written non-binding term sheet, (a)
with respect to the Acquired Assets (including, without limitation, any
agreement to sell or dispose of any interests therein), or (b) committing it to
issue or sell any equity interest in Holdings to a third party.  The Acquisition Agreements identified in Exhibit
B are the only agreements among the Morgan Parties, or any of their
Affiliates, and the Selling Parties, or any of their Affiliates, which are in
existence as of the date hereof in connection with the Acquisition.

6.3.         No Knowledge of Misrepresentations
or Omissions. 
Morgans has no Knowledge that the representations and warranties of any
party to the Acquisition Agreements (including, but not limited to, the Morgans
Parties) are untrue or incorrect in any material respect.  The Morgans Parties have not Breached, and
Morgans has no Knowledge that any other party to the Acquisition Agreements has
Breached, any of the material covenants, agreements, representations or
warranties in any of the Acquisition Agreements.  Except as set forth in Schedule 6.2,
none of the actions and transactions contemplated by this Agreement and the
agreements contemplated hereby and none of the terms, covenants or agreements
in this Agreement or the agreements contemplated hereby, in any way Breach or
will Breach any of the material terms, covenants or agreements of the Morgans
Parties under the Acquisition Agreements. 
To Morgans’ Knowledge, there has not been any change, event or effect
that has had a Material Adverse Effect. 
Morgans has delivered to DLJMB copies of all material reports,
investigations, analyses and other similar materials or information relating to
the proposed Acquisition or the Acquired Assets (a) prepared or created for
Morgans by its representatives; or (b) prepared or created by Morgans
internally (to the extent such internal reports, investigations, analyses and
other materials or information summarize due diligence findings in a manner comparable
to that of third parties).

6.4.         Litigation.  There are no actions, suits, proceedings,
orders or claims pending, or to the Knowledge of Morgans, threatened in writing
against the Morgans Parties or Holdings at law or in equity, by any Person or before
or by any Governmental Body which would reasonably

 13
 

 

be expected to materially adversely affect
Morgans’ performance under this Agreement, which relate to the transactions
contemplated by this Agreement or which would reasonably be expected to materially
adversely affect the consummation of the transactions contemplated by this
Agreement.

6.5.         Escrow Deposits.  An aggregate of Fifty Million Dollars
($50,000,000) has been deposited into escrow under the Acquisition
Agreements.  On the date hereof, the amount
held in such escrows aggregate an amount equal to at least Fifty Million
Dollars ($50,000,000).

6.6.         Casino Lease.  The Casino Lease has been duly authorized,
executed and delivered by MHG HR Acquisition Corp. (“Merger Sub”). 
Assuming that the Casino Lease is a valid and binding obligation of the lessee
thereunder, the Casino Lease constitutes a valid and binding obligation of
Merger Sub, subject to the terms and conditions thereof, enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy laws, other similar laws affecting creditors’ rights and general
principles of equity affecting the availability of specific performance and
other equitable remedies.  Except as set forth on Schedule 6.2, the execution,
delivery and performance of the Casino Lease by Merger Sub does not and, upon
consummation of the Acquisition, the assumption by the Surviving Corporation
(as defined in the Merger Agreement) of the obligations of Merger Sub
thereunder, shall not (i) conflict with any of the provisions of the
organizational documents of Merger Sub or the Surviving Corporation, as
applicable, (ii) conflict with, result in a breach of the terms,
conditions or provisions of, or constitute a default under (whether with or
without the passage of time, the giving of notice or both) any agreement,
contract or instrument to which Merger Sub or the Surviving Corporation, as
applicable is bound, (iii) result in the creation of any lien or
Encumbrance upon Merger Sub’s or the Surviving Corporation’s equity interests
or assets, as applicable, or any equity interests or assets that comprise part
of the Acquired Assets, other than as contemplated herein or by the Credit
Facility Commitment Letter, (iv) result in a violation of any law,
statute, rule, regulation, order, judgment or decree to which Merger Sub or the
Surviving Corporation is subject or (v) require any authorization,
consent, approval, exemption or other action by or notice or declaration to, or
filing with, any third party or any Governmental Body.

6.7.         Brokerage.  Except as set forth on Schedule 6.7,
there are no claims for brokerage commissions, finders’ fees or similar
compensation in connection with the transactions contemplated by this Agreement
based on any arrangement or agreement made by or on behalf of any of the
Morgans Parties.

6.8.         Investment Representation.  Morgans is making the Morgans Initial Capital
Commitment for its own account with the present intention of holding its
interests in Holdings for investment purposes and not with a view to or for
sale in connection with any public distribution of such interests in violation
of any federal or state securities laws. 
Morgans is an “accredited investor” as defined in Regulation D
promulgated by the Securities Act. 
Morgans acknowledges that it is informed as to the risks of the
transactions contemplated hereby and of ownership of interests in
Holdings.  Morgans acknowledges that the
interests in Holdings have not been registered under the Securities Act or any
state or foreign securities laws and that such interests may not be sold,
transferred, offered for sale, pledged hypothecated or otherwise disposed of
unless such transfer, sale, assignment, pledge, hypothecation or other
disposition is

 14
 

 

pursuant to the terms of an effective
registration statement under the Securities Act and are registered under any
applicable state or foreign securities laws or pursuant to an exemption from
registration under the Securities Act and any applicable state or foreign
securities laws.

6.9.         Credit Facility Commitment Letter.  As of the date hereof, Morgans has delivered
to DLJMB a true and correct copy of the Credit Facility Commitment Letter
pursuant to which Column has agreed to an aggregate principal amount of debt
financing in connection with the transactions contemplated by the Acquisition
Agreements (together with any additional or replacement financing therefor,
including, the financing contemplated by the Permanent Financing Term Sheet in
the event a commitment letter therefor is executed by Column, Morgans and DLJMB
(if required by Column), the “Debt Financing”) equal to the lesser of
Seven Hundred Million Dollars ($700,000,000) and Eighty-Two and Five-Tenths
Percent (82.5%) of the capitalized costs of the Acquisition.  Except as permitted under Section 7.4,
the Credit Facility Commitment Letter has not been amended, modified or
supplemented and is in full force and effect and no event has occurred which,
with or without notice, the lapse of time or both, would constitute a default
on the part of the Morgans Parties under the Credit Facility Commitment Letter
(excluding, in the event that DLJMB is a party to the Credit Facility
Commitment Letter, any such default primarily caused by any action or omission
of DLJMB).  There are no conditions
precedent or other contingences related to the funding of the full amount of
the Debt Financing, other than as set forth in the Credit Facility Commitment
Letter.  The Morgans Parties have
received no written notice from the lenders under the Credit Facility
Commitment Letter causing them to believe that the financing under the Credit
Facility Commitment Letter will not be funded.

6.10.       No Prior Activities.  As of the Closing Date, Holdings and each of
its subsidiaries will have been formed for the purpose of consummating the
transactions contemplated by this Agreement and will not have engaged in any
business activities of any type whatsoever, or entered into any agreements or
arrangements with any Person or become subject to or bound by any obligation or
undertaking (other than as contemplated hereby or by the Credit Facility
Commitment Letter or the Proposed Transaction Structure Chart).  As of the Closing Date, none of Holdings or
any of such subsidiaries has or will have any liabilities or assets of any kind
prior to Closing Date (other than as contemplated hereby or by the Credit
Facility Commitment Letter or the Proposed Transaction Structure Chart).  As of the Closing Date, all interests in
Holdings will be owned beneficially and of record by Morgans or one of its
Affiliates free can clear of all liens or Encumbrances.  When acquired by Holdings pursuant to the
Acquisition Agreements, the Acquired Assets will not have any lien,
Encumbrance, defect or any other type of limitation or Loss resulting from,
arising from or related to any actions or omissions of the Morgans Parties
(other than as contemplated hereby or by the Credit Facility Commitment Letter
or the Proposed Transaction Structure Chart).

6.11.       No Other Representations and
Warranties. 
Other than the representations and warranties expressly set forth in
this Article 6, Morgans shall not be deemed to have made any other
representation or warranty to DLJMB in connection with this Agreement or the
transactions contemplated hereby, and no other Person shall be deemed to have
made any representation or warranty to DLJMB in connection with this Agreement
or the transactions contemplated hereby.

 15

 

7.             ADDITIONAL COVENANTS

7.1.         Access to Information.
 The Morgans Parties shall, to the extent
permitted and authorized under the terms of the Acquisition Agreements,
reasonably request that the Selling Parties, fully cooperate with any due
diligence investigation by DLJMB and its representatives of the Acquired
Assets.  Without limiting the foregoing,
to the extent that any of the following is permitted and authorized under the
terms of the Acquisition Agreements, the Morgans Parties shall permit, and the
Morgans Parties shall use reasonable efforts to cause the Selling Parties to
permit, DLJMB and its representatives (including legal counsel and accountants)
(i) to have full access during normal business hours to all premises,
properties, books, records, financial information, contracts, documents,
employees, personnel, agents or other representatives of the Selling Parties or
related to the Acquired Assets, (ii) to make copies of any such books, records,
financial information, contracts or documents, (iii) to enter, inspect and
perform testing on any properties, assets and equipment that comprise the
Acquired Assets, and (iv) have access to the work papers of the independent
accountants of any of the Selling Parties. 
In addition, promptly upon request of DLJMB or its representatives, the
Morgans Parties shall, and the Morgans Parties shall, to the extent permitted
and authorized under the terms of the Acquisition Agreements, reasonably
request that the Selling Parties promptly furnish all such additional documents
and information with respect to the Selling Parties and Acquired Assets as
DLJMB or its representatives shall reasonably request.  To the extent that the Selling Parties do not
permit DLJMB access to the books, records, financial information, contracts,
documents or other information as provided in this Section 7.1, upon
DLJMB’s request, the Morgans Parties will promptly request copies of such
books, records, financial information, contracts, documents or other
information from the Selling Parties and deliver such materials to DLJMB, to
the extent permitted and authorized under the terms of the Acquisition
Agreements.

7.2.         Payment of Expenses by Holdings.  Morgans represents and warrants to DLJMB that
as of the date of this Agreement the Morgans Parties have paid in connection
with this Agreement, the Acquisition Agreements and the transactions
contemplated hereby and thereby only the out-of-pocket costs and expenses
(including legal, accounting and financing expenses) listed and described on Schedule
7.2.  Schedule 7.2 also sets
forth Morgans’ reasonable estimate of the additional out-of-pocket costs and
expenses the Morgans Parties and Holdings expect to incur in connection with
this Agreement, the Acquisition Agreements and the transactions contemplated
hereby and thereby through the Closing Date. 
At least three (3) business days prior to the Closing, Morgans shall
provide DLJMB with a reasonably updated and detailed list of all out-of-pocket
costs and expenses incurred or reasonably expected to be incurred by the
Morgans Parties or Holdings since the date of this Agreement through the
Closing and related to the transactions contemplated by this Agreement and the
Acquisition Agreements.  Upon the
Closing, DLJMB and Morgans shall cause Holdings to pay all reasonable
out-of-pocket costs and expenses of the Morgans Parties related to the
transactions contemplated by this Agreement and the Acquisition Agreements,
including, without limitation, any costs and expenses incurred or reasonably
expected to be incurred through the Closing in connection with the Credit
Facility Commitment Letter and the Permanent Financing Term Sheet
(collectively, the “Morgans Expenses”), in each case, to the extent that
such Morgans Expenses are not applied to the Morgans Initial Capital Commitment
in accordance with Section 3.2(b), by wire transfer of immediately
available funds to an account designated by Morgans.  At least three (3) business days prior to the
Closing, DLJMB shall provide Morgans with a reasonably detailed list of all

 16
 

 

out-of-pocket costs and
expenses incurred or reasonably expected to be incurred through the Closing by
it related to the transactions contemplated by this Agreement and the
Acquisition Agreements.  Upon the
Closing, DLJMB and Morgans shall cause Holdings to pay all reasonable
out-of-pocket costs and expenses of DLJMB related to the transactions
contemplated by this Agreement and the Acquisition Agreements, including,
without limitation, any costs and expenses incurred or reasonably expected to
be incurred through the Closing in connection with the Permanent Financing Term
Sheet (collectively, the “DLJMB Expenses”), by wire transfer of
immediately available funds to an account designated by DLJMB.  Notwithstanding anything to the contrary in
this Section 7.2, costs (a) incurred by Morgans and DLJMB for filing
fees, fees and expenses of their respective outside counsel and other fees and
expenses reasonably relating to the preparation, negotiation and finalization
of this Agreement, the LLC Agreement, the Management Agreement, the Casino
Lease, the Technical Services Agreement, the Debt Financing and the
applications for the Gaming Approvals and (b) attorneys’ fees and expenses paid
or payable by Morgans to its outside counsel in connection with the preparation,
negotiation and finalization of the Acquisition Agreements and the consummation
of the transactions contemplated thereby, shall be deemed to be part of the
Morgans Expenses or the DLJMB Expenses, as applicable, and paid or reimbursed
by Holdings in accordance with this Section 7.2; provided, however,
that, in the case of the Morgans Expenses, such amounts shall be paid or
reimbursed to Morgans only to the extent not applied to the Morgans Initial
Capital Commitment in accordance with Section 3.2(b).

7.3.         Actions Relating to the Acquisition
Agreements. 
The Morgans Parties will disclose to DLJMB in writing, promptly (within
three (3) Business Days) after Morgans has Knowledge thereof (without
obligation of reasonable inquiry), (i) any Breach, variance, update or
modification of or to any material representations or warranties of any party
to any of the Acquisition Agreements, (ii) any Breach or variance of or to any
material covenant or agreement of any party to any of the Acquisition
Agreements, (iii) any notice, request for waiver, consent, approval or
amendment (in each case made in writing) to or regarding any of the Acquisition
Agreements by any party to any of the Acquisition Agreements, or (iv) any
material request to enter into any new or additional agreements, arrangements,
terms or conditions (by any Person) binding upon the Acquired Assets or related
to the transactions contemplated by the Acquisition Agreements or this
Agreement or to which any of the Selling Parties or any of their Affiliates are
party.  Without the prior written consent
of DLJMB, which may not be unreasonably withheld, delayed or conditioned, the
Morgans Parties shall not (a) intentionally Breach any material representation,
warranty, covenant or agreement in any of the Acquisition Agreements, (b) give
any material notice under or request any waiver, approval, supplement or
amendment to any of the Acquisition Agreements, (c) grant any material waiver
or approval related to any of the Acquisition Agreements or enter into or agree
to any supplement or amendment to any of the Acquisition Agreements, or (d)
enter into any material new or additional agreements, arrangements, terms or
conditions (with any Person) binding upon the Acquired Assets or relating to
the transactions contemplated by the Acquisition Agreements or this Agreement
or which otherwise involve the Selling Parties (other than in connection with
any financing in accordance with Section 7.4).  Notwithstanding the foregoing sentence, the
Morgans Parties shall be permitted to take the actions contemplated by the
Merger Agreement to retire, redeem or defease the HRH Bonds pursuant to Section
4.4 thereof without the prior written consent of DLJMB, except that (other than
as set forth in Schedule 7.3) DLJMB’s prior written consent shall be
required for any premiums or amounts necessary to defease the HRH Bonds paid or
to

 17
 

 

be paid to holders of the HRH
Bonds that exceed (for each $1,000 principal amount of HRH Bonds tendered or
defeased) the Treasury Calculation Amount (as defined in the Merger
Agreement).  The Morgans Parties shall
use their reasonable best efforts to cause the conditions to closing in the
Acquisition Agreements to be satisfied and to consummate the transactions contemplated
therein.  Notwithstanding this Section
7.3, if Morgans has reasonable grounds to conclude that a Material Adverse
Effect has occurred or is reasonably likely to occur, then the Morgans Parties
may, without the consent of DLJMB, deliver written notices under the
Acquisition Agreements to terminate such agreements in accordance with their
terms.  If DLJMB has reasonable grounds
to conclude that a Material Adverse Effect has occurred or is reasonably likely
to occur, then DLJMB may in its discretion notify Morgans in writing of its
election to cause the Morgans Parties to terminate the Acquisition Agreements,
in which case the Morgans Parties shall promptly deliver written notices under
the Acquisition Agreements to terminate such agreements in accordance with
their terms (the “DLJMB Termination Notices”).  In the event that Morgans is required to
deliver the DLJMB Termination Notices, Morgans shall at the direction of DLJMB
diligently and promptly pursue and enforce all rights and remedies of the
Morgans Parties under the Acquisition Agreements for the return of the Escrow
Deposits to the Morgans Parties.  Without
limiting the generality of the foregoing, in the reasonable discretion of
DLJMB, Morgans shall commence litigation, arbitration or other proceedings
against the Selling Parties to enforce such rights and remedies, which shall be
prosecuted according to DLJMB’s instructions and, at DLJMB’s election, by
counsel selected and retained by DLJMB in its reasonable discretion; provided,
however, that DLJMB shall not settle such litigation, arbitration or
proceedings without Morgans’ consent, which consent shall not be unreasonably
withheld, delayed or conditioned.  The
costs and expenses incurred by Morgans to prosecute such litigation,
arbitration or proceedings shall be promptly reimbursed by DLJMB; provided,
that if all or any portion of the Escrow Deposits are returned to the Morgans
Parties as a result of the conclusion or settlement of such litigation,
arbitration or other proceedings, then the parties shall equally bear the costs
and expenses thereof (and Morgans shall promptly after such conclusion or
settlement pay to DLJMB one-half of any such costs and expenses previously
reimbursed by DLJMB).

7.4.         Actions with Respect to Debt
Financing.  
The Morgans Parties will perform all obligations required to be
performed by them in accordance with and pursuant to the Credit Facility
Commitment Letter, will use their commercially reasonable efforts to maintain
the same in full force and effect, and will not amend, terminate or waive any
material provisions under such Credit Facility Commitment Letter without the
prior written consent of DLJMB, which consent shall not be unreasonably
withheld, delayed or conditioned (it being understood that any failure by DLJMB
to approve material changes to the economic terms of the Debt Financing shall
not be deemed to be unreasonable).  DLJMB
and Morgans shall reasonably cooperate with each other in (a) seeking a
commitment letter from Column with respect to the Debt Financing contemplated
in the Permanent Financing Term Sheet; (b) negotiating definitive documentation
regarding such Debt Financing and any substitute or additional financing; (c)
providing such information as the other may reasonably request regarding the
status of such financing and negotiations; and (d) causing the Debt Financing
contemplated by the Permanent Financing Term Sheet to be funded on the Closing
Date.  Without limiting the generality of the foregoing clause (a), but
subject to the next two sentences, DLJMB or an Affiliate of DLJMB (as required
by the lender) and Morgans agree to provide, on a joint and several basis (to
the extent required), the guarantees and other assurances contemplated by the
Credit Facility Commitment Letter,

 18
 

 

including, without limitation, any customary
non-recourse (“bad boy”) assurances that any lender or other financing source
under the Credit Facility Commitment Letter may request; provided that
the parties shall enter into the Indemnity Agreement which shall govern each
party’s liabilities to the other with respect to such assurances.  With respect to the completion guaranty
referred to in the Permanent Financing Term Sheet, each of Morgans and DLJMB or
an Affiliate of DLJMB (as required by the lender) shall share ratably in any
liability under such completion guaranty in accordance with their Percentage
Interests (as defined in the LLC Agreement) provided, however,
that Morgans will be responsible for the first Fifty Million Dollars
($50,000,000) (the “Initial Completion Guaranty Costs”) of such
liability provided that (a) DLJMB and its Affiliates shall have fully funded
(including for purposes of this paragraph, by posting letters of credit with
respect to, and the funding of all such letters of credit by the issuer
thereof) all of the expansion
equity capital required to secure debt financing for the Approved Development
Budget for the Expansion Project (each as defined in the LLC Agreement) (except
to the extent that Morgans has elected to fund up to its pro rata portion
thereof or a new equity source shall have funded a portion of the expansion
capital as described in the next clause), (b) if applicable, any new source of
equity financing pursuant to the LLC Agreement shall have fully funded its
required equity in connection with the expansion (or if such party fails to so
fund its contribution, DLJMB or its designee has fully funded such amount), (c)
the construction lender shall have funded the construction loan proceeds as
required pursuant to the construction loan agreement, and (d) any cost or
liability under such completion guaranty does not arise due to changes by the
board of directors of Holdings to the scope or budget of the Expansion Project
(as defined in the LLC Agreement).  With
respect to the letter of credit or guaranty referred to in the section of the
Permanent Financing Term Sheet entitled “Mandatory Prepayment — Scheduled
Amortization Payments,” each of Morgans and DLJMB or an Affiliate of DLJMB (as
required by the lender) shall share on an equal basis in any liability under
such letter of credit or guaranty.  Each
of Morgans and DLJMB will provide prompt written notice to the other (i) if it
has Knowledge (in the case of Morgans) or knowledge (in the case of DLJMB) that
the financing contemplated by the Credit Facility Commitment Letter will not be
made available to the Morgans Parties or Holdings on the Closing Date and (ii)
following any receipt of notification in writing by any financing source under
the Credit Facility Commitment Letter or in connection with any substitute debt
or other financing of such source’s refusal or intended refusal to provide the
financing described in the applicable Credit Facility Commitment Letter and, in
each case, the stated reasons therefor (if any).  In any such event, Morgans and DLJMB will use
their commercially reasonable efforts to arrange substitute financing on terms
and conditions reasonably satisfactory to Morgans and DLJMB as promptly as
practicable (it being understood that any failure by either party to approve
material changes to the economic terms of the Debt Financing shall not be
deemed to be unreasonable).  Neither the
Morgans Parties nor Holdings or any of its subsidiaries, on the one hand, and
DLJMB, on the other hand, will enter into or execute any agreements,
arrangements, documents or instruments related to the financing contemplated by
the Credit Facility Commitment Letter, any substitute or additional financing
or any other Debt Financing, without the prior written consent of DLJMB or
Morgans, as applicable, which consent shall not be unreasonably withheld,
delayed or conditioned (it being understood that any failure by DLJMB or
Morgans to approve material changes to the economic terms of the Debt Financing
shall not be deemed to be unreasonable). 
Morgans and DLJMB shall promptly provide the other with copies of all
draft and final agreements, documents and instruments related to the Debt
Financing.

 19
 

 

7.5.         Gaming Approvals.  Each of DLJMB and Morgans shall use its
reasonable best efforts to cause the Persons listed under its name on Schedule
7.5 (or, alternatively, such of those Persons who, based on the advice of
both Snell & Wilmer, L.L.P. and Schreck Brignone, are required to so file
gaming applications in connection with obtaining the Gaming Approvals) to
promptly as practicable, but in no event later than December 12, 2006 (or, with
respect to such individuals not required in the opinion of both such firms to
file gaming applications by December 12, 2006, such other date as both firms
shall advise would be sufficient to obtain the Gaming Approvals on or prior to
January 27, 2007), file or cause to be filed gaming applications in connection
with obtaining the Gaming Approvals, and thereafter to promptly respond to
requests for additional information or documents as reasonably requested by the
Gaming Authorities and cause counsel to such party to schedule and attend any
hearings or meetings with Gaming Authorities as reasonably necessary.  Each party shall (a) notify the other party
of the receipt of any comments or requests from the Gaming Authorities with
respect to such applications, (b) upon the reasonable request by the other
party, supply it with copies of all such correspondence, and (c) otherwise keep
the other party reasonably informed of the status of such applications.  Notwithstanding anything to the contrary,
nothing herein shall require DLJMB to submit, or cause the submission of,
gaming applications for Persons other than the investment committee of DLJ
Merchant Banking Partners IV, L.P.

7.6.         Exclusivity.  The
Morgans Parties will not, will cause Holdings not to and each of the Morgans
Parties will cause their respective officers, directors, affiliates,
representatives and agents not to, directly or indirectly, solicit, initiate or
knowingly encourage any inquiries or proposals from, discuss or negotiate with,
provide any information to, or enter into any contract or agreement with, any
Person (other than DLJMB and its representatives) relating to (i) any merger,
consolidation, reorganization, business combination, asset sale, stock sale,
equity investment or similar transaction involving the Acquired Assets or
Holdings, or (ii) any equity investment, partnership, joint venture or other
transactions in connection with the Acquired Assets that is similar in
structure or purpose to those contemplated by this Agreement (except as
disclosed to and approved by DLJMB in writing). 
Notwithstanding the preceding sentence, the parties acknowledge that the
Morgans Parties have had and may have discussions with interested parties with
respect to potential transactions (to be consummated after Closing) regarding
real estate and intellectual property comprising a part of the Acquired Assets;
provided that no agreement may be entered into as a result of such
discussions except in accordance with the provisions of Section 7.3.  The Morgans Parties will, and will cause
their respective officers, directors, affiliates, representatives and agents
to, promptly notify DLJMB if any proposal, with respect to the foregoing, or
any inquiry or contact with any Person with respect thereto is made, and such
notification shall contain the material terms of such proposal, inquiry or
contact.

7.7.         Cooperation by DLJMB.  Subject to the other terms and conditions of
this Agreement, DLJMB shall reasonably cooperate with the Morgans Parties and
use its commercially reasonable efforts to assist the Morgans Parties, Holdings
and/or its subsidiaries as the borrower under the Credit Facility Commitment
Letter (in all cases, except as provided in the Credit Facility Commitment
Letter, without being obligated to make any payment, guarantee any indebtedness
or otherwise incur liability to any third party) to consummate the closings
contemplated by the Acquisition Agreements and the Credit Facility Commitment
Letter, including (without limitation) (a) providing to the lender under the
Credit Facility Commitment Letter any documents, agreements, information and
materials relating to DLJMB as such lender

 20
 

 

may reasonably request, (b)
subject to DLJMB’s approval rights under Section 7.4, executing all
closing documents, certificates or agreements as such lender may reasonably
request to consummate the Credit Facility Commitment Letter or as the Morgans
Parties may reasonably to consummate the closing under the Acquisition
Agreements, and (c) organizing the subsidiaries contemplated in the Proposed
Transaction Structure Chart attached hereto as Exhibit G.  Nothing in this Section 7.7 shall be
deemed to require DLJMB to take any action, or cause any Affiliate to take any
action, with respect to the Gaming Approvals, which shall be governed
exclusively by Section 7.5

7.8.         Actions with Respect to Equity
Financing. 
DLJMB will use its commercially reasonable efforts to maintain the
Equity Commitment Letter in full force and effect, and will not amend,
terminate or waive any provisions under such Equity Commitment Letter without
the prior written consent of Morgans, which consent shall not be unreasonably
withheld, delayed or conditioned.  DLJMB
will not enter into or execute any agreements, arrangements, documents or
instruments related to the financing contemplated by the Equity Commitment
Letter, without the prior written consent of Morgans, which consent shall not
be unreasonably withheld, delayed or conditioned.  On or before the third (3rd) business day after the date hereof,
DLJMB shall deliver to Morgans an amendment to the Equity Commitment Letter,
which amendment shall provide for an additional commitment of Twenty Million
Dollars ($20,000,000) of equity capital by the applicable parties thereto on
the same terms and conditions provided in the Equity Commitment Letter prior to
its amendment.

7.9.         Actions with Respect to Casino Lease.  Morgans shall not, and shall not permit
Merger Sub to, amend, terminate or waive any provisions under such Casino Lease
without the prior written consent of DLJMB, which consent shall not be
unreasonably withheld, delayed or conditioned (it being understood that any
failure by DLJMB to approve material changes to the economic terms of the
Casino Lease shall not be deemed to be unreasonable).  Morgans will, and will cause Merger Sub to,
perform all obligations required to be performed by them in accordance with and
pursuant to the Casino Lease, and will use their commercially reasonable
efforts to maintain the same in full force and effect.

7.10.       Confidentiality.  Unless otherwise agreed to in writing by the
other party, each of DLJMB and Morgans, on behalf of itself and its
Representatives, agrees (i) except as required by law, rule or regulation
(including the regulations of the Securities and Exchange Commission), to keep
confidential and not to disclose or reveal any Confidential Information (as
defined below) to any Person (other than such party’s Representatives), and
(ii) not to use Confidential Information for any purpose other than in
connection with its performance of its obligations hereunder and the
consummation of the transactions contemplated hereby, and its investment in
Holdings.  In the event that either DLJMB
or Morgans or their respective Representatives are requested pursuant to, or
required by, law or legal process to disclose any Confidential Information,
each of them agrees that it will provide the other with prompt notice of such
request or requirement in order to enable the other to seek an appropriate
protective order or other remedy (and if the other party seeks such an order,
such Person will provide such cooperation as the other party  shall reasonably request) or to consult with
such other party with respect to taking steps to resist or narrow the scope of
such request or legal process.

 21
 

 

“Confidential
Information” means all information about Morgans and its Affiliates (the “Morgans
Parties”), DLJMB and its Affiliates (the “DLJMB Parties”) or the
transactions contemplated hereby, which is furnished by or on behalf of the
Morgans Parties or the DLJMB Parties, as applicable,  to the other party or its Representatives,
whether furnished before or after the date hereof, whether oral or written, and
regardless of the manner or form in which it is furnished, including, without
limitation, all notes, analyses, compilations, studies, forecasts,
interpretations or other documents prepared by any DLJMB Party or Morgans Party
which contain, reflect or are based upon, in whole or in part, the information
furnished to any such Person by the other party or its Representatives.  Confidential Information does not include,
however, information which (i) is or becomes generally available to the public
other than as a result of a disclosure by any such Person in violation of this
Agreement or other obligation of confidentiality, (ii) was available to any
such Person on a non-confidential basis prior to its disclosure by  such other party, or (iii) becomes available
to any such party on a non-confidential basis from a Person  who is not prohibited from disclosing such
information by a legal or contractual obligation

7.11.       Approved Development Budget.  Morgans and DLJMB acknowledge and agree that
the timely completion of the Expansion Project (as defined in the LLC
Agreement) is critical to the success of the joint venture contemplated by this
Agreement.  Morgans and DLJMB covenant
and agree to use good faith and diligent efforts to cooperate with each other
to finalize the preliminary development budget for the Expansion Project
attached hereto as Exhibit K.

8.             TERMINATION.

8.1.                            Termination.  This Agreement may be terminated at any time
prior to the Closing:

(a)           by mutual written consent of Morgans
and DLJMB;

(b)           by Morgans, by written notice to
DLJMB, if (i) DLJMB shall have breached or failed to perform in any material
respect any of its representations, warranties, covenants (including, without
limitation, Section 7.5) or other agreements contained in this
Agreement, which breach or failure to perform would give rise to the failure of
a condition set forth in Section 4.2 (the “Morgans Condition Failure”),
and (ii) such Morgans Condition Failure is incapable of being cured by DLJMB
or, if curable, is not cured by DLJMB within three (3) business days following
receipt of written notice from Morgans of such Morgans Condition Failure;

(c)           by DLJMB, by written notice to Morgans, if
(i) the Morgans Parties shall have breached or failed to perform in any
material respect any of their representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to perform
would give rise to the failure of a condition set forth in Section 4.1
(the “DLJMB Condition Failure”), and (ii) such DLJMB Condition Failure
is incapable of being cured by Morgans or, if curable, is not cured by Morgans
within three (3) business days following receipt;

(d)           by DLJMB or Morgans, by written
notice to the other, if the Merger Agreement has been terminated; or

 22
 

 

(e)           by either Morgans or DLJMB, by
written notice to the other, if the Closing has not occurred on or before the
Outside Date (as defined in the Merger Agreement as in effect on the date
hereof); provided, however, that if the Outside Date under the
Merger Agreement has been extended to allow for additional time to obtain the
Gaming Approvals (the terms of which extension, notwithstanding anything to the
contrary in this Agreement, may be agreed to by Morgans without the consent of
DLJMB, so long as after giving effect to any such extension the terms of the
transactions contemplated by this Agreement and the Acquisition Agreements
taken as a whole are substantially similar to the economic or other terms of
the transactions contemplated by this Agreement and the Acquisition Agreements
taken as a whole prior to such extension), then the Outside Date for purposes
of this Agreement shall be extended to the new Outside Date under the Merger
Agreement, not to occur subsequent to the earlier of June 11, 2007 and the
expiration date of the Credit Facility Commitment Letter.

Notwithstanding anything
contained in this Agreement to the contrary, except as provided in Section
8.1(a), in no event shall a party who has breached or failed to perform in
any material respect any if its representations, warranties or covenants
contained in this Agreement, which breach or failure to perform would give rise
to the failure of, in the case of a breach of failure to perform by Morgans, a
condition set forth in Section 4.1 and, in the case of a breach of
failure to perform by DLJMB, a condition set forth in Section 4.2, to be
satisfied on or before the Outside Date.

8.2.         Effect of Termination.  In the event of termination of this Agreement
by either Morgans or DLJMB as set forth above, the provisions of this Agreement
shall immediately become void and of no further force and effect (other than Section
7.2, Section 8.1, this Section 8.2, Section 8.3, Article
9 and Article 10, which provisions shall survive the termination of
this Agreement).

8.3.                            Escrow
Deposits.

(a)           Each party acknowledges and agrees
that notwithstanding DLJMB’s entry into this Agreement and obligation to
provide the DLJMB Initial Capital Commitment, subject to the terms and
conditions of this Agreement, DLJMB shall have no obligation or liability to
any Person with respect to the Escrow Deposits, including without limitation
any obligation or liability to the Morgans Parties as a result of any failure
of all or any portion of the Escrow Deposits to be returned or credited to the
Morgans Parties.

(b)           Notwithstanding the foregoing if (A)
the Merger Agreement is terminated pursuant to Section 6.1(e) thereof by the
Selling Parties (other than as a result of the Morgans Parties material Breach
of any representation, covenant or condition of the Merger Agreement) and (B) prior
to such termination by the Selling Parties all of the conditions set forth in Section
4.1 of this Agreement to the obligations of DLJMB shall have been satisfied
or waived by DLJMB (except for the occurrence of the Closing as referenced in Section
4.1(c)), then in the event that the failure of the Closing to occur on or
prior to the Outside Date (as defined in the Merger Agreement) was:

(i)            primarily caused by DLJMB’s Breach
of its material obligations hereunder; or

 23
 

 

(ii)           not primarily caused by any Breach by
either the Morgans Parties or DLJMB of their respective material obligations
hereunder; or

(iii)          attributable to the election of DLJMB
to cause the Morgans Parties to deliver the DLJMB Termination Notices to the
Selling Parties prior to the Outside Date, which termination is either (A) sent
by Morgans at the direction of DLJMB without the concurrence of Morgans, or (B)
sent jointly by Morgans and DLJMB;

(c)           If, as a result of the foregoing
matters described in Section 8.3(b), the Escrow Deposits are either
released to the Selling Parties pursuant to the terms of the Merger Agreement
or not released to either the Selling Parties or the Morgans Parties pending
the resolution of any dispute related thereto, then, in each case, DLJMB shall
pay the Break-Up Amount to Morgans on the 20th business day after the earliest
of (x) the date on which the Escrow Deposits are released to the Selling
Parties pursuant to Section 6.2(b)(v) of the Merger Agreement, (y) the date on
which all disputes relating to the release of such Escrow Deposits are finally
resolved and (z) the second anniversary of the termination date of the Merger
Agreement.

(d)           If DLJMB is required to pay Morgans
the Break-Up Amount under the circumstances described in Section 8.3(b)(iii)
above, then DLJMB shall pay to Morgans, concurrently with the payment of the
Break-Up Amount, interest on the Break-Up Amount, for the period beginning on
the termination date of the Merger Agreement to the date on which the Escrow
Deposits are released to the Selling Parties in accordance with Section
8.3(c), at a rate per annum equal to the interest earned on the Escrow
Deposits for the same period.  In the event that after DLJMB has paid
Morgans the Break-Up Amount all or any portion of the Escrow Deposits are returned
or credited to the Morgans Parties, then Morgans shall promptly repay to DLJMB (i) half of such
returned or credited amount and (ii) a pro rata portion of the amount of interest it received from DLJMB on
the Break-Up Amount calculated based on the proportion such returned or
credited amount bears to the
entire Break-Up Amount.

(e)           Any payment pursuant to this Section
8.3 shall be made by the payor to the payee via wire transfer of
immediately available funds to a bank account designated by the payee at least
three (3) business days prior to the applicable payment date.

(f)            The payment by DLJMB of any amounts
required to be paid by this Section 8.3 shall be the sole remedy of the
Morgans Parties against DLJMB and its Affiliates in the event that the all or
any portion of the Escrow Deposits are not returned or credited to the Morgans
Parties, which payments shall be compensation and liquidated damages as
provided in Section 8.3(g).

 24
 

 

(g)           BY INITIALING BELOW,

	
  On behalf of Morgans:

  	
   

  	
  On behalf of DLJMB:

  
	
   

  	
   

  	
   

  
	
  Initials:  ES

  	
   

  	
  Initials:  SR

  
	
  Name:  W. Edward Scheetz

  	
   

  	
  Name:  Steven
  Rattner

  
	
  Title:

  	
   

  	
  Title:

  

 

EACH OF THE PARTIES
HERETO AGREES THAT IT WOULD BE IMPRACTICAL OR EXTREMELY DIFFICULT TO FIX ACTUAL
DAMAGES IF ALL OR ANY PORTION OF THE ESCROW DEPOSITS ARE NOT RETURNED OR
CREDITED TO THE MORGANS PARTIES UNDER THE ACQUISITION AGREEMENTS, AND,
THEREFORE, EACH OF THE MORGANS PARTIES AND DLJMB AGREES THAT THE PAYMENTS
PROVIDED IN SECTION 8.3 SHALL BE THE SOLE AND EXCLUSIVE REMEDY OF THE
MORGANS PARTIES FROM DLJMB AND ITS AFFILIATES UPON, AND LIQUIDATED DAMAGES FOR,
ANY FAILURE OF THE ESCROW DEPOSITS TO BE RETURNED OR CREDITED TO THEM, AND SUCH
REMEDY SHALL BE LIMITED TO THE PAYMENT STIPULATED IN SECTION 8.3.

 25
 

 

9.             INDEMNIFICATION

9.1.         Survival of Representations and
Warranties. 
The representations and warranties in this Agreement and the Schedules
attached hereto shall survive the Closing and terminate on the date which is
one year (1) year after the Closing Date; provided that any representation
or warranty in respect of which indemnity may be sought under Section 9.2,
and the indemnity with respect thereto, shall survive the time at which it
would otherwise terminate pursuant to this Section 9.1 with respect to a
specific alleged breach thereof if written notice of such inaccuracy or breach
giving rise to such right or potential right of indemnity shall have been given
to the party against whom such indemnity may be sought prior to such time
(regardless of when Losses in respect thereof may actually be incurred).  The representations and warranties in this
Agreement and the Schedules attached hereto or in any writing delivered by any
party to another party in connection with this Agreement shall survive for the
periods set forth in this Section 9.1 and shall in no event be affected
by any investigation, inquiry or examination made for or on behalf of any
party, or the knowledge of any party’s officers, directors, shareholders,
employees or agents or the acceptance by any party of any certificate or
opinion hereunder.

9.2.                            General
Indemnification.

(a)           Indemnification by Morgans.  Morgans shall indemnify DLJMB and save and
hold DLJMB harmless against and pay on behalf of or reimburse DLJMB as and when
incurred for any Losses which it may suffer, sustain or become subject to, as a
result of, in connection with, relating or incidental to or by virtue of: (i)
any breach of any representation or warranty of Morgans under this Agreement or
any of the Schedules attached hereto, or in any of the documents or
certificates furnished by any of them pursuant to this Agreement (other than
the Acquisition Agreements); (ii) any nonfulfillment or breach of any covenant,
agreement or other provision by Morgans, under this Agreement or any of the
Schedules attached hereto required to be performed or complied with by any of
them at or prior to the Closing; and (iii) any nonfulfillment or breach of
any covenant, agreement or other provision by Morgans under this Agreement or
any of the Schedules attached hereto required to be performed or complied with
by any of them after the Closing.

(b)           Indemnification by DLJMB.  DLJMB shall indemnify Morgans and save and
hold it harmless against and pay on behalf of or reimburse Morgans as and when
incurred for any Losses which it may suffer, sustain or become subject to, as a
result of, in connection with, relating or incidental to or by virtue of: (i)
any breach of any representation or warranty of DLJMB under this Agreement or
any of the Schedules attached hereto, or in any of the documents or
certificates furnished by it pursuant to this Agreement; (ii) any
nonfulfillment or breach of any covenant, agreement or other provision by DLJMB
under this Agreement or any of the Schedules attached hereto required to be
performed or complied with by it at or prior to the Closing; and (iii) any
nonfulfillment or breach of any covenant, agreement or other provision by DLJMB
under this Agreement or any of the Schedules attached hereto required to be
performed or complied with by any of them after the Closing, in each case,
other than Losses for which DLJMB is required to pay Morgans liquidated damages
pursuant to Section 8.3. 
Notwithstanding anything to the contrary, the maximum amount of Losses
for which DLJMB shall be liable for any breach or nonfulfillment of any or all
representations, warranties, covenants, agreements or other provisions of this
Agreement or any Schedule attached hereto, or

 26
 

 

for any other Losses arising under or
relating to this Agreement or such Schedules, shall be Twenty Five Million
Dollars ($25,000,000) (“DLJMB’s Cap”). 
For the avoidance of doubt, if DLJMB is required to pay Twenty Five
Million Dollars ($25,000,000) of liquidated damages pursuant to Section 8.3,
then the amount of DLJMB’s Cap shall be reduced to zero (0).

(c)           Manner of Payment.  In the event that the Merger Agreement is
terminated prior to Closing, DLJMB shall not be required to make any payment to
Morgans pursuant to this Section 9.2 until all disputes relating to the
Escrow Deposits have been finally resolved. 
Subject to the preceding sentence, any indemnification obligation of
DLJMB or Morgans pursuant to this Section 9.2 shall be paid within ten
(10) days after the determination thereof. 
Any such indemnification payment shall be effected by wire transfer of
immediately available funds from the Indemnitor to a bank account designated by
the Indemnitee.  Any indemnification
payment shall include interest at the rate of three percent (3%) per annum
calculated on the basis of the actual number of days elapsed from the date any
such Loss is suffered or sustained to the date of payment.

(d)           Defense of Third Party Claims.  Any person making a Claim for indemnification
under this Section 9.2 (an “Indemnitee”) shall notify
 the indemnifying party (an “Indemnitor”) of the claim in writing
promptly after receiving written notice of any action, lawsuit, proceeding,
investigation or other claim (a “Claim”) against it (if by a third
party), describing the claim, the amount thereof (if known and quantifiable)
and the basis thereof, provided that the failure to so notify an
Indemnitor shall not relieve the Indemnitor of its obligations hereunder except
to the extent that (and only to the extent that) such failure shall have caused
the damages for which the Indemnitor is obligated pursuant to this Agreement to
be greater than such damages would have been had the Indemnitee given the
Indemnitor prompt notice hereunder.  The
Indemnitor shall be entitled to participate in the defense of such Claim giving
rise to an Indemnitee’s Claim for indemnification at the Indemnitor’s expense,
and at the Indemnitor’s option (subject to the limitations set forth below)
shall be entitled at any time to assume the defense thereof by appointing a
reputable counsel reasonably acceptable to the Indemnitee to be the lead
counsel in connection with such defense, provided that, prior to the
Indemnitors assuming control of such defense the Indemnitor shall first (i)
verify to the Indemnitee in writing that such Indemnitor shall be fully
responsible (with no reservation of any rights) for all liabilities and
obligations relating to such Claim for indemnification and that it shall
provide full indemnification (whether or not otherwise required hereunder) to
the Indemnitee with respect to such Claim giving rise to such Claim for
indemnification hereunder and (ii) enter into an agreement with the Indemnitee
in form and substance satisfactory to the Indemnitee which agreement
unconditionally guarantees the payment and performance of any liability or obligation
which may arise with respect to such action, lawsuit, proceeding, investigation
or facts giving rise to such
Claim for indemnification hereunder; and provided, further, that: (x)
the Indemnitee shall be entitled to participate in the defense of such Claim
and to employ counsel of its choice for such purpose, provided that the
reasonable fees and expenses of such separate counsel shall be borne by the
Indemnitee (other than any reasonable fees and expenses of such separate
counsel that are incurred prior to the date the Indemnitor effectively assumes
control of such defense which, notwithstanding the foregoing, shall be borne by
the Indemnitor, and except that the Indemnitor shall pay all of the reasonable
fees and expenses of such separate counsel if the Indemnitee has been advised
by counsel that a reasonable likelihood exists of a conflict of interest
between the Indemnitor and the Indemnitee); (y) the Indemnitor

 27
 

 

shall not be entitled to assume control of such defense (unless
otherwise agreed to in writing by the Indemnitee) and shall pay the reasonable
fees and expenses of counsel retained by the Indemnitee if (A) the Claim
for indemnification relates to or arises in connection with any criminal or
quasi-criminal proceeding, action, indictment, allegation or
investigation; (B) the Indemnitee reasonably believes an adverse
determination with respect to the Claim giving rise to such Claim for
indemnification would be materially detrimental to or materially injure the
Indemnitee’s reputation or future business prospects; (C) the Claim seeks an
injunction or equitable relief against the Indemnitee; (D) the Indemnitee has
been advised by counsel that a reasonable likelihood exists of a conflict of
interest between the Indemnitor and the Indemnitee; or (E) upon petition by the
Indemnitee, the appropriate court rules that the Indemnitor failed or is
failing to vigorously prosecute or defend such Claim; and (z) if the Indemnitor
shall control the defense of any such Claim, the Indemnitor shall obtain the
prior written consent of the Indemnitee before entering into any settlement of
a Claim or ceasing to defend such Claim if, pursuant to or as a result of such
settlement or cessation, injunctive or other equitable relief will be imposed
against the Indemnitee or if such settlement does not expressly and
unconditionally release the Indemnitee from all liabilities and obligations
with respect to such Claim, without prejudice.

9.3.                            Survival.  This Article 9 shall survive the
termination of this Agreement.

10.          MISCELLANEOUS

10.1.       Public Statements.  No party or its Affiliates or representatives
will make any public statement regarding the existence of or the details of the
matters contemplated by this Agreement without the prior written consent of the
other parties hereto, and the parties hereto will consult with each other upon
any issued news release with respect to such arrangements, unless such party is
compelled to make such statements by judicial or administrative process or in
the reasonable opinion of its counsel by the requirements of law or the
applicable regulations of any relevant stock exchange, gaming authorities or
other Governmental Body.

10.2.       Injunctive Relief.  Each party hereto acknowledges that it will
be impossible to measure in money the damages that shall be suffered if any
party fails to comply with any of the obligations herein imposed on such party
and that in the event of any such failure, an aggrieved person will be
irreparably damaged and will not have an adequate remedy at law.  Any such Person shall, therefore, be entitled
to injunctive relief and/or specific performance (without the requirement of
posting a bond or other security) to enforce such obligations, and if any
action should be brought in equity to enforce any of the provisions of this
Agreement, none of the parties shall raise the defense that there is an
adequate remedy at law.

10.3.       Governing Law/Choice of Law and Forum.  This Agreement shall be governed by and
construed in accordance with the laws of the State of New York (without giving
effect to the choice of law principle thereof). 
All Claims, demands, controversies, disputes, actions or causes of
action of any nature or character arising out of or in connection with this
Agreement, whether legal or equitable, known or unknown, contingent or
otherwise shall be resolved in the United States District Court for the
Southern District of New York and any appellate courts thereto, or if federal
jurisdiction is lacking, then the courts of the State of New York.  The prevailing party in any such action shall
be entitled to reasonable attorneys’ fees and costs.

 28
 

 

10.4.       Entire Agreement; Amendment; Waiver.  This Agreement together with the Exhibits and
Schedules hereto (a) contain the entire agreement among the parties with
respect to the subject matter hereof, and (b) supersede all prior written
agreements and negotiations and oral understandings, if any, with respect
thereto.  This Agreement may not be
amended, supplemented or modified except by an instrument or counterparts
thereof in writing signed by Morgans and DLJMB. 
No waiver of any term or provision of this Agreement shall be effective
unless in writing signed by the party to be charged.  The waiver by any party of a breach of any
term or provision of this Agreement shall not be construed as a waiver of any
subsequent breach.

10.5.       Binding Effect/Nonassignment.  This Agreement shall be binding on and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns, except that neither this Agreement nor any of the rights,
interests or obligations hereunder may be assigned or delegated by (i) Morgans
to any Person that is not its Affiliate without the prior written consent of
DLJMB or (ii) by DLJMB to any Person that is not its Affiliate without the prior
written consent of Morgans.

10.6.       Invalidity of Provision.  The invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the validity or enforceability of this Agreement, including that provision, in
any other jurisdiction.

10.7.       Notices.  All notices and other communications required
or permitted to be given under this Agreement shall be in writing and shall be
delivered by (a) personal delivery, or (b) overnight DHL, FedEx, UPS or other
similar courier service, or shall be transmitted by facsimile (provided that a
copy of such facsimile transmission together with confirmation of such
facsimile transmission is delivered to the addressee in the manner provided in
(a) or (b) above by no later than the second (2nd) business day following such
transmission), to the following addresses:

If to
DLJMB:

DLJ Merchant
Banking Partners IV, L.P.

Eleven Madison
Avenue, 16th Floor

New York, NY 10010

Attention:  Steven Rattner

Facsimile:  (646) 935-7910

with a
copy to:

Latham &
Watkins LLP

633 West Fifth
Street, Suite 4000

Los Angeles, CA
90071-2007

Attention:  Thomas C. Sadler, Esq.

Facsimile:  (213) 891-8763

 29
 

 

If to
Morgans:

Morgans Hotel
Group

475 Tenth Avenue

New York, New York
10018

Attention:  David Smail

Facsimile:  (212) 277-4172

with a
copy to:

Wachtell, Lipton,
Rosen & Katz

51 West 52nd
Street

New York, New York
10019

Attention: Stephen
G. Gellman, Esq.

Facsimile:  (212) 403-2000

or to such other address
as any party shall hereafter specify by notice in writing to the other
parties.  Any such notice or
communication shall be deemed to have been received by the party to whom such
notice or other communication is sent upon (i) delivery to the address of the
recipient party (or transmission by facsimile to the facsimile number of the
recipient party), provided that such delivery is made prior to 5:00 p.m. (local
time for the recipient party) on a business day, and otherwise the following
business day, or (ii) the attempted delivery of such notice or other
communication if such recipient party refuses delivery.

10.8.       Headings; Execution in Counterparts.  The headings and captions contained herein
are for convenience of reference only and shall not control or affect the
meaning or construction of any provision hereof.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which together shall constitute one and the same instrument.

10.9.       No Strict Construction.  The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any party.

10.10.     Amended and Restated Terms.  This Agreement amends, restates, modifies and
supersedes in its entirety the Contribution Agreement between the parties
hereto, dated as of November 7, 2006, as amended prior to the date hereof.

10.11.     Survival.  This Article 10 shall survive the
termination of this Agreement.

(Signature Page Follows)

 30

 

IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.

	
   

  	
  MORGANS HOTEL GROUP CO.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ W. Edward Scheetz

  	
   

  
	
   

  	
   

  	
  Name:   W.
  Edward Scheetz

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DLJ MB IV HRH, LLC,

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Steven Rattner

  	
   

  
	
   

  	
   

  	
  Name: Steven Rattner

  
	
   

  	
   

  	
  Title:

  

 

 S-1Exhibit 10.1

THIRD
AMENDMENT TO LOAN AND SECURITY AGREEMENT

This Third
Amendment to Loan and Security Agreement (this “Amendment”) is entered into as
of November 30, 2006, by and between COMERICA BANK (“Bank”) and COMMODORE
RESOURCES (NEVADA), INC., LYRIS TECHNOLOGIES INC., UPTILT INC., MCC NEVADA,
INC. and CLICKTRACKS ANALYTICS, INC. 
(each a “Borrower” and collectively, “Borrowers”).

RECITALS

Borrowers and Bank
are parties to that certain Loan and Security Agreement dated as of October 4,
2005, as amended from time to time including by that certain First Amendment to
Loan and Security Agreement dated as of April 25, 2006 and that certain Second
Amendment to Loan and Security Agreement dated as of August 18, 2006 (the “Agreement”).  The parties desire to amend the Agreement in
accordance with the terms of this Amendment to change certain of the financial
covenants.

NOW, THEREFORE, the parties agree as follows:

1.             Section 6.7(b) of the
Agreement is hereby amended and restated in its entirety to read as follows:

“(b)         EBITDA.  Measured monthly on a rolling three-month
basis, an EBITDA of not less than (i) One Million Two Hundred Thousand Dollars
($1,200,000) for the measuring period ending October 31, 2006, (ii) One Million
One Hundred Thousand Dollars ($1,100,000) for the measuring period ending
November 30, 2006, (iii) One Million Three Hundred Thousand Dollars
($1,300,000) for the measuring period ending December 31, 2006, (iv)  Two Million Dollars ($2,000,000) for the measuring
period ending January 31, 2007 through the measuring period ending February 28,
2007, and (v) Two Million Five Hundred Thousand Dollars ($2,500,000) at all
times thereafter.”

2.             Exhibit C to the
Agreement is hereby replaced with Exhibit C attached hereto.

3.             No course of dealing
on the part of Bank or its officers, nor any failure or delay in the exercise
of any right by Bank, shall operate as a waiver thereof, and any single or
partial exercise of any such right shall not preclude any later exercise of any
such right.  Bank’s failure at any time
to require strict performance by Borrowers of any provision shall not affect
any right of Bank thereafter to demand strict compliance and performance.  Any suspension or waiver of a right must be
in writing signed by an officer of Bank.

4.             Unless otherwise
defined, all initially capitalized terms in this Amendment shall be as defined
in the Agreement.  The Agreement, as
amended hereby, shall be and remain in full force and effect in accordance with
its respective terms and hereby is ratified and confirmed in all respects.  Except as expressly set forth herein, the
execution, delivery, and performance of this Amendment shall not operate as a
waiver of, or as an amendment of, any right, power, or remedy of Bank under the
Agreement, as in effect prior to the date hereof.

5.             Each Borrower
represents and warrants that the Representations and Warranties contained in
the Agreement are true and correct in all material respects as of the date of
this Amendment, and that no Event of Default has occurred and is continuing.

6.             As a condition to the
effectiveness of this Amendment, Bank shall have received, in form and
substance satisfactory to Bank, the following:

(a)           this Amendment, duly
executed by each Borrower;

(b)           a Certificate of the
Secretary of each Borrower with respect to incumbency and resolutions
authorizing the execution and delivery of this Amendment;

(c)           all reasonable Bank
Expenses incurred through the date of this Amendment, which may be debited from
any of Borrowers’ accounts; and

 1
 

 

(d)           such other documents,
and completion of such other matters, as Bank may reasonably deem necessary or
appropriate.

7.             This Amendment may be
executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one instrument.

 2

 

IN WITNESS
WHEREOF, the undersigned have executed this Amendment as of the first date
above written.

 

	
  

  	
  COMMODORE RESOURCES (NEVADA), INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David R. Burt

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Assistant Secretary

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LYRIS TECHNOLOGIES INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David R. Burt

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Secretary

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  UPTILT RESOURCES INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David R. Burt

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Secretary

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MCC NEVADA, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David R. Burt

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CLICKTRACKS ANALYTICS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David R. Burt

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Secretary

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  COMERICA BANK

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Philip Koblis

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  

 

[Signature Page to
Third Amendment to Loan & Security Agreement

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