Document:

EXHIBIT 4.22

 

KERZNER INTERNATIONAL
LIMITED

2005 STOCK INCENTIVE PLAN

 

SECTION 1.  Adoption
and Purpose.  The Company hereby adopts this Plan providing for
the granting of Incentive Stock Options, Nonqualified Stock Options, Restricted
Shares and Other Stock-Based Awards to directors, officers, employees and
consultants of the Company and its Subsidiaries (including prospective
directors, officers, employees and consultants). The general purpose of the
Plan is to promote the interests of the Company and its Subsidiaries by
providing to their directors, officers, employees and consultants incentives to
continue and increase their efforts with respect to, and remain in the employ
of, the Company and its Subsidiaries.

 

SECTION 2.  Administration.  (a)  The
Plan will be administered by the Committee, which shall be composed of two or
more persons. The Committee shall hold meetings at such times and places as it
may determine. Acts approved at a meeting by a majority of the members of the
Committee or acts approved in writing by the unanimous consent of the members
of the Committee shall be the valid acts of the Committee. To the extent
required for any transactions under the Plan to qualify for any available
exemptions under Rule 16b-3 promulgated under the Exchange Act, all
actions relating to Awards to persons subject to Section 16 of the
Exchange Act may be taken by the Board or a committee or subcommittee of the
Board composed of two or more persons, each of whom shall qualify as a “non-employee
director” within the meaning of Rule 16b-3.

 

(b)  Subject
to the express provisions of the Plan, the Committee shall have plenary
authority, in its discretion, to administer the Plan and to exercise all powers
and authority either specifically granted to it under the Plan or necessary and
advisable in the administration of the Plan, including, without limitation, the
authority to (i) interpret, and reconcile any inconsistency and/or correct
any default and/or supply any omission in, the Plan, (ii) prescribe,
amend, suspend, waive and rescind rules and regulations relating to the Plan,
(iii) appoint such agents as it shall deem desirable for the proper
administration of the Plan, (iv) determine the terms and conditions of all
Awards granted under the Plan (which need not be identical), the purchase price
(if applicable) of the shares covered by each Award, the individuals to whom
and the time or times at which Awards shall be granted, when an Award can be
exercised and whether in whole or in installments, (v) determine the
number of shares to be covered by, or with respect to which payments, rights or
other matters are to be calculated in connection with, each Award,
(vi) determine whether, to what extent and under what circumstances each
Award may be settled or exercised in cash, shares, other securities, other
Awards or other property, or canceled, forfeited or suspended and the method or
methods by which Awards may be settled, exercised, canceled, forfeited or
suspended, (vii) determine whether, to what extent and under what
circumstances cash, shares, other securities, other Awards, other property and
other amounts payable with respect to an Award shall be deferred either
automatically or at the election of the holder thereof or the Committee,

 

 

(viii) amend an outstanding Award or grant a replacement Award for
an Award previously granted under the Plan if, in its sole discretion, the
Committee determines that (A) the tax consequences of such Award to the
Company or the participant differ from those consequences that were expected to
occur on the date the Award was granted or (B) clarifications or
interpretations of, or changes to, tax law or regulations permit Awards to be
granted that have more favorable tax consequences than initially anticipated
and (ix) make all other determinations and take all other actions that the
Committee deems necessary or desirable with respect to the Plan.

 

(c)  Unless
otherwise expressly provided in the Plan, all designations, determinations,
interpretations and other decisions under or with respect to the Plan or any
Award shall be in the sole discretion of the Committee, may be made at any time
and shall be final, conclusive and binding upon all Persons, including the
Company, any of its Affiliates, any participant, any holder or beneficiary of
any Award and any shareholder.

 

(d)  The
Committee may delegate, on such terms and conditions as it determines in its
sole discretion, to one or more senior officers of the Company the authority to
make grants of Awards to officers, employees and consultants of the Company and
its Subsidiaries (including any prospective officer, employee or consultant).

 

(e)  Determinations
under the Plan made by the Board or the Committee, including, without
limitation, determinations as to the persons to receive Awards, the terms and
provisions of such Awards and the agreements evidencing the same, need not be
uniform and may be made selectively among persons who receive or are eligible
to receive Awards under the Plan, whether or not such persons are similarly
situated.

 

SECTION 3.  Participants.  The
Committee shall from time to time select the directors, officers, employees and
consultants of the Company and its Subsidiaries (including any prospective
director, officer, employee or consultant) to whom Awards are to be granted,
and who will, upon such grant, become participants in the Plan. The term “participant”
as used in this Plan shall refer to those directors, officers, employees and
consultants granted Awards by the Committee and to any person or entity to
which such Awards are transferred or assigned pursuant to Section 16
hereof.

 

SECTION 4.  Shares
Subject to Plan.  Subject to adjustment as provided in
Section 14, the aggregate number of Ordinary Shares that may be delivered
pursuant to Awards granted under the Plan is 2,000,000, all of which may be
delivered pursuant to Incentive Stock Options granted under the Plan. Ordinary
Shares to be awarded may be made available from either authorized but unissued
Ordinary Shares or Ordinary Shares held by the Company in its treasury. If any
Award is forfeited or otherwise terminated or is canceled without the delivery
of Ordinary Shares, Ordinary Shares are surrendered or withheld from any Award
to satisfy a participant’s income tax or other withholding obligations, or
Ordinary Shares owned by a participant are tendered to pay the exercise price
of any Award granted under the Plan, then the Ordinary Shares covered by such
forfeited, terminated or canceled Award or which are equal to the number of
Ordinary

 

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Shares surrendered, withheld or tendered shall again become available
for issuance or delivery pursuant to Awards granted or to be granted under the
Plan; provided, however, that in no event shall such Ordinary
Shares increase the number of Ordinary Shares that may be delivered pursuant to
Incentive Stock Options granted under the Plan.

 

SECTION 5.  Grant
of Options.  All Options under the Plan shall be granted by the
Committee. The Committee shall determine the number of Ordinary Shares to be
offered from time to time by grant of Options to participants of the Plan. More
than one Option may be granted to the same participant. The grant of an Option
to a participant shall not be deemed either to entitle the participant to, or
to disqualify the participant from, participation in any other grant of Options
or other Awards under the Plan. The grant of Options shall be evidenced by
stock option agreements as may be prescribed by the Committee from time to
time, containing such terms, provisions and rules, including, without
limitation, the number of Ordinary Shares underlying such Options and the
exercise price thereof, as are approved by the Board, but not inconsistent with
the Plan. In the case of Incentive Stock Options, the terms and conditions of
such grants shall be subject to and comply with such rules as may be prescribed
by Section 422 of the Code and any regulations related thereto, as may be
amended from time to time. All Options granted under the Plan shall be
Nonqualified Stock Options unless the applicable stock option agreement
expressly states that the Option is intended to be an Incentive Stock Option. If
an Option is intended to be an Incentive Stock Option, and if for any reason
such Option (or any portion thereof) shall not qualify as an Incentive Stock
Option, then, to the extent of such failure to so qualify, such Option (or
portion thereof) shall be regarded as a Nonqualified Stock Option appropriately
granted under the Plan; provided that such Option (or portion thereof)
otherwise complies with the Plan’s requirements relating to Nonqualified Stock
Options. The Company shall execute stock option agreements upon instructions
from the Committee.

 

SECTION 6.  Option
Price.  The exercise price per Ordinary Share under each Option
shall be equal to 100% of the Fair Market Value per Ordinary Share on the date
the Option is granted; provided, however, that no more than five
percent of the Ordinary Shares that may be delivered pursuant to Awards granted
under the Plan may be delivered pursuant to Nonqualified Stock Options that
have an exercise price per Ordinary Share equal to less than 100% of the Fair
Market Value per Ordinary Share on the date the Nonqualified Stock Option is
granted; provided further, that in the case of an Incentive Stock Option
granted to an employee who, at the time of the grant of such Option, owns stock
representing more than 10% of the voting power of all classes of stock of the
Company or any Affiliate, the exercise price per Ordinary Share shall be no
less than 110% of the Fair Market Value per Ordinary Share on the date of the
grant.

 

SECTION 7.  Exercisability
of Options.  Unless otherwise specifically provided by the
Committee in the applicable stock option agreement, an Option may not be
exercised later than the earlier of (a) the day prior to the seventh
anniversary of the date the Option is granted or, in the case of an Incentive
Stock Option granted to an employee who, at the time of the grant of such
Option, owns stock representing more than 10% of the voting power of all
classes of stock of the Company or any Affiliate, the day

 

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prior to the fifth anniversary of the date the Option is granted, and
(b) the expiration of the time period set forth in Section 11 with
respect to a participant that ceases to be a director, officer, employee or
consultant of the Company and its Subsidiaries. Each Option shall be vested and
exercisable at such times, in such manner and subject to such terms and
conditions as the Committee may, in its sole discretion, specify in the
applicable stock option agreement or thereafter. Except as otherwise specified
by the Committee in the applicable stock option agreement, an Option may only
be exercised to the extent that it has already vested at the time of exercise. Notwithstanding
any provision of the Plan to the contrary and except as specifically provided
in Section 11(b) or Section 12, an Option shall not become vested and
exercisable with respect to all Ordinary Shares covered thereby over a period
that is shorter than three years; provided that an Option that is
subject to performance-based vesting criteria may become vested and exercisable
with respect to all Ordinary Shares covered thereby over a period that is not
shorter than one year. Unless otherwise provided in the applicable stock option
agreement, Options shall become vested and exercisable in accordance with the
following schedule:

 

	
  Vesting
  Dates

  (Anniversaries of Grant Date)

  	
   

  	
  Aggregate Percentage of

  Ordinary Shares Vested and

  Exercisable

  	
   

  
	
  First

  	
   

  	
  25

  	
  %

  
	
  Second

  	
   

  	
  50

  	
  %

  
	
  Third

  	
   

  	
  75

  	
  %

  
	
  Fourth

  	
   

  	
  100

  	
  %

  

 

SECTION 8.  Payment;
Method of Exercise; Disposition.  (a)  Payment upon the
exercise of Options shall be made in cash or by such other method as the
Committee may from time to time prescribe, including without limitation by
payment of Ordinary Shares already owned for a period of at least six months
and one day by the holder of the Option or a note issued to the Company by such
participant or pursuant to a “cashless exercise”, in each case if permitted by
the Committee and applicable law. No Ordinary Shares may be issued upon
exercise of an Option until payment of the exercise price therefor has been
made, and a participant will have none of the rights of a shareholder of the
Company until such Ordinary Shares are issued to such participant. Except as
otherwise provided in the Plan or in a stock option agreement, no Option may be
exercised at any time unless the holder thereof is then a director, officer,
employee or consultant of the Company or a Subsidiary.

 

(b)  An
Option shall be exercised by written notice to the Company. Such notice shall
state that the holder of the Option elects to exercise the Option, the number
of Ordinary Shares in respect of which it is being exercised, the per share
exercise price thereof and the manner of payment for such Ordinary Shares and
shall either (i) be accompanied by payment of the full purchase price of
such Ordinary Shares or (ii) in the

 

4

 

case of any individual who is not subject to Section 402 of the
Sarbanes-Oxley Act of 2002, fix a date (not more than ten business days
from the date of exercise) for the payment of the full purchase price of such
Ordinary Shares. Cash payments shall be made by cash or check payable to the
order of the Company. Ordinary Share payments (valued at Fair Market Value on
the date of exercise) shall be made by delivery of stock certificates in
negotiable form, free from all liens, claims and encumbrances. Any Ordinary
Share payments shall be made using Ordinary Shares that have been held by the
holder of the Option for a period of at least six months and one day. If
certificates representing Ordinary Shares are used to pay all or part of the
exercise price of an Option, a separate certificate shall be delivered by the
Company representing the same number of Ordinary Shares as each certificate so
used, and an additional certificate shall be delivered representing the
additional Ordinary Shares to which the holder of the Option is entitled as a
result of the exercise of the Option. Ordinary Share certificates shall be
issued as soon as practicable following the date of exercise of an Option.

 

(c)  If
any participant shall make any disposition of Ordinary Shares delivered
pursuant to the exercise of an Incentive Stock Option under the circumstances
described in Section 421(b) of the Code (relating to certain disqualifying
dispositions) or any successor provision of the Code, such participant shall
notify the Company of such disposition within ten days of such disposition.

 

SECTION 9.  Restricted
Shares.  (a)  The Committee shall determine any
restrictions, terms and conditions applicable to the Restricted Shares,
including, without
limitation, the applicable vesting schedule and the price, if any, to be
paid by the participant for the Restricted Shares; provided that the
issuance of Restricted Shares shall be made for at least the minimum
consideration necessary to permit such Restricted Shares to be deemed fully
paid and nonassessable. Each Award shall be evidenced by a restricted stock
agreement which may contain such terms as the Committee from time to time shall
approve provided that such terms are not inconsistent with the provisions of
the Plan. All determinations made by the Committee pursuant to this
Section 9 shall be specified in the restricted stock agreement. Each
grantee of Restricted Shares shall be notified promptly of such grant and a
written restricted stock agreement shall be promptly executed and delivered by
the Company and the grantee; provided that such grant of Restricted
Shares shall terminate if such written restricted stock agreement is not signed
by such grantee (or his or her attorney or representative) and delivered to the
Company within 60 days after the effective date of such grant.

 

(b)  Restricted
Shares subject to Awards shall be issued at the beginning of the period during
which the restrictions are in effect (the “Restriction Period”). Restricted
Shares shall constitute issued and outstanding Ordinary Shares for all
corporate purposes. Unless otherwise specifically provided in the Plan and the
applicable restricted stock agreement, the participant will have the right to
exercise all rights, powers and privileges of a holder of Ordinary Shares with
respect to such Restricted Shares, except that, unless otherwise provided by
the Committee, (i) the participant will not be entitled to delivery of the
certificate or certificates representing such Restricted Shares until the end
of the Restriction Period and unless all other vesting requirements with
respect

 

5

 

thereto shall have been fulfilled or waived; (ii) other than
regular cash dividends and such other distributions as the Board may in its
sole discretion designate, the Company will retain custody of all distributions
(“Retained Distributions”) made or declared with respect to the
Restricted Shares, if any (and such Retained Distributions will be subject to
the same restrictions, terms and vesting and other conditions as are applicable
to the Restricted Shares), until such time, if ever, as the Restricted Shares
with respect to which such Retained Distributions shall have been made, paid or
declared shall have become vested, and such Retained Distributions shall not
bear interest or be segregated in a separate account; (iii) subject to
Section 16, the participant may not sell, assign, transfer, pledge,
exchange, encumber or dispose of the Restricted Shares or any Retained
Distributions or his or her interest in any of them during the Restriction
Period; and (iv) a breach of any restrictions, terms or conditions
provided in the Plan or established by the Committee with respect to any
Restricted Shares or Retained Distributions will cause a forfeiture to the
Company of such Restricted Shares and Retained Distributions.

 

(c)  The
certificate or certificates representing such Restricted Shares shall be
registered in the name of the participant to whom such Restricted Shares shall
have been awarded. During the Restriction Period, certificates representing the
Restricted Shares and any securities constituting Retained Distributions shall
bear a restrictive legend to the effect that ownership of the Restricted Shares
(and such Retained Distributions), and the enjoyment of all rights appurtenant
thereto, are subject to the restrictions, terms and conditions provided in the
Plan and the applicable restricted stock agreement. Such certificates shall
remain in the custody of the Company and the participant shall, as a condition
to receiving an Award of Restricted Shares, deposit with the Company stock
powers or other instruments of assignment, endorsed in blank, so as to permit
retransfer to the Company of all or any portion of such Restricted Shares and
any Retained Distributions that shall not become vested in accordance with the
Plan and the applicable restricted stock agreement.

 

(d)  Subject
to Section 11, at the end of the Restriction Period, (i) the
Restricted Shares shall become vested and (ii) any Retained Distributions
with respect to such Restricted Shares shall become vested to the extent that
the Restricted Shares related thereto shall have become vested, each in
accordance with the terms and conditions of the Plan and the applicable
restricted stock agreement. Any such Restricted Shares and Retained
Distributions that do not become vested shall be forfeited to the Company and
the participant shall not thereafter have any rights with respect to such
Restricted Shares and Retained Distributions that shall have been so forfeited.

 

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(e)  Notwithstanding
any provision of the Plan to the contrary and except as provided in
Section 11(i) or Section 12, no grant of Restricted Shares shall
become vested with respect to all Restricted Shares subject to such grant over
a period that is shorter than three years; provided that Restricted
Shares that are subject to performance-based vesting criteria, may become
vested with respect to all Restricted Shares covered by a particular grant over
a period that is not shorter than one year. Unless otherwise provided in the
applicable restricted stock agreement, a grant of Restricted Shares shall
become vested in accordance with the following schedule:

 

	
  Vesting
  Dates

  (Anniversaries of Grant Date)

  	
   

  	
  Aggregate Percentage of

  Restricted Shares Vested

  	
   

  
	
  Second

  	
   

  	
  33

  	
  %

  
	
  Third

  	
   

  	
  66

  	
  %

  
	
  Fourth

  	
   

  	
  100

  	
  %

  

 

(f)  No
election under Section 83(b) of the Code (to include in gross income in
the year of transfer the amounts specified in Section 83(b) of the Code)
or under a similar provision of law may be made with respect to a Restricted
Share unless expressly permitted by the terms of the applicable restricted
stock agreement or by action of the Committee in writing prior to the making of
such election. If a participant, in connection with the acquisition of
Restricted Shares under the Plan or otherwise, is expressly permitted under the
terms of the applicable restricted stock agreement or by such Committee action
to make such an election and the participant makes the election, the
participant shall notify the Company of such election in accordance with
Section 25 within ten days of filing notice of the election with the
United States Internal Revenue Service or other governmental authority, in
addition to any filing and notification required pursuant to regulations issued
under Section 83(b) of the Code or any other applicable provision.

 

SECTION 10.  Other
Stock-Based Awards.  (a)  The Committee may grant other
types of equity-based or equity-related Awards (including, without limitation,
the grant or offer for sale of unrestricted Ordinary Shares and the grant of
restricted stock units and stock appreciation rights) as deemed by the
Committee to be consistent with the purposes of the Plan. Each Other
Stock-Based Award shall be evidenced by a written Award agreement which may
contain such terms as the Committee from time to time shall approve provided
that such terms are not inconsistent with the provisions of the Plan. Such Awards
may include, without limitation, the transfer of actual Ordinary Shares to
participants or payment in cash or otherwise of amounts based on the value of
Ordinary Shares, and Awards designed to comply with or take advantage of the
applicable local laws of jurisdictions other than the United States.

 

(b)  If
and to the extent that Ordinary Shares are to be issued to a participant upon
the vesting of an Other Stock-Based Award, then, upon vesting of such

 

7

 

Other Stock-Based Award, unless otherwise determined by the Committee,
the participant shall be entitled to receive an amount in cash equal to the
value of the cash dividends and such other distributions as the Board may in
its sole discretion designate (“Dividend Equivalents”) with respect to
the Ordinary Shares covered thereby during the period beginning on the date the
Other Stock-Based Award is awarded and ending on the date that it vests; provided,
however, that unless otherwise provided in the applicable Award
agreement, the foregoing provisions shall not apply to any Exercisable Other
Stock-Based Awards.

 

SECTION 11.  Termination
of Employment or Service.  (a)  Unless otherwise
provided by the Committee, if the participant’s employment or service as a
director or consultant terminates prior to the complete exercise of an Option,
then the vested portion of such Option shall thereafter be exercisable solely
to the extent provided herein, and any unvested portion of the Option (to the
extent the vesting is not accelerated under Section 11(b) or
Section 12) shall immediately terminate.

 

(b)  Unless
otherwise provided by the Committee, if the participant’s employment or service
as a director or consultant terminates by reason of death, all Options held by
the participant shall become immediately vested and exercisable and shall
remain exercisable for a period of one year following such termination, but in
no event later than the originally scheduled expiration of such Options.

 

(c)  Unless
otherwise provided by the Committee, if the participant’s employment or service
as a director or consultant terminates by reason of Disability, the vested
portion of any Options held by the participant shall remain exercisable for a
period of one year following such termination, but in no event later than the
originally scheduled expiration of such Options.

 

(d)  Unless
otherwise provided by the Committee, if the participant’s employment or service
as a director or consultant terminates (other than by reason of death, Disability
or Cause) (i) at or after age 60 or (ii) at or after age 55 with ten
years of service with the Company (“Retirement”), the vested portion of
any Options held by the participant shall remain exercisable for a period of
two years following such termination, but in no event later than the originally
scheduled expiration of such Options; provided, however, that the
vested portion of the Options shall remain exercisable for a period of only
90 days following termination of employment (or, if such 90-day period has
expired, shall be deemed retroactively to have ceased to be exercisable at the
end of such 90-day period) if, during the two-year period following the
participant’s Retirement, the participant, directly or
indirectly:  (A) engages in or has any interest in any sole
proprietorship, partnership, corporation or business or any other Person or
entity (whether as an employee, officer, director, partner, agent, security
holder, creditor, consultant or otherwise) that directly or indirectly (or
through any affiliated entity) engages in competition with the Company; provided,
however, that such provision shall not apply to the acquisition by the
participant, solely as an investment, of securities of any issuer that is
registered under Section 12(b) or 12(g) of the Exchange Act, and that are
listed or admitted for trading on any United States national securities
exchange or that are quoted

 

8

 

on the National Association of Securities Dealers Automated Quotations
System, or any similar system or automated dissemination of quotations of
securities prices in common use, so long as the participant does not control,
acquire a controlling interest in or become a member of a group that exercises
direct or indirect control of, more than five percent of any class of capital
stock of such corporation; or (B) for himself or herself or for any other
person, firm, corporation, partnership, association or other
entity:  (1) hires or attempts to hire, whether as an employee,
consultant or otherwise, any employee or former employee of the Company or any
of its Subsidiaries, unless such employee or former employee has not been
employed by the Company or any of its Subsidiaries for a period in excess of
six months; (2) calls on or solicits any of the actual or targeted
prospective clients of the Company on behalf of any Person or entity in
connection with any business competitive with the business of the Company; or
(3) makes known the names and addresses of such clients or any information
relating in any manner to the Company’s trade or business relationships with
such clients. For the avoidance of doubt, if, pursuant to the foregoing
provision, a vested portion of any Option is deemed retroactively to have
ceased to be exercisable, and the participant had exercised such Option
subsequent to the 90-day period, the participant shall pay to the Company, in
cash, promptly upon demand by the Company, an amount equal to the excess of the
Fair Market Value of the Shares over the exercise price on the date of such
exercise.

 

(e)  If
the participant’s employment or service as a director or consultant is
terminated by the Company for Cause, then all Options held by such participant
shall immediately terminate.

 

(f)  Unless
otherwise provided by the Committee, if the participant’s employment or service
as a director or consultant terminates for any reason other than death,
Disability, Retirement or Cause, the vested portion of any Options held by the
participant shall remain exercisable for a period of 90 days following
such termination, but in no event later than the originally scheduled
expiration of such Options.

 

(g)  Unless
otherwise provided by the Committee, if any participant whose employment or
service as a director or consultant has terminated for a reason other than
death shall die within the period during which any Options held by the
participant remain exercisable but prior to the complete exercise of such
Options, such Options may be exercised at any time within the greater of one year
after such date of death or the remainder of the period in which the
participant could have exercised such Options had he or she not died, but in no
event later than the originally scheduled expiration of such Options.

 

(h)  Unless
otherwise provided by the Committee, if the participant’s employment or service
as a director or consultant is terminated for any reason other than death
during the Restriction Period with respect to any Restricted Shares, such
participant’s rights to all Restricted Shares and Retained Distributions shall
be forfeited immediately.

 

9

 

(i)  Unless
otherwise provided by the Committee, if the participant’s employment or service
as a director or consultant terminates by reason of death, all Restricted
Shares held by the participant and any Retained Distributions that relate to
those Restricted Shares shall become immediately vested and nonforfeitable.

 

(j)  Unless
otherwise provided by the Committee, if the participant’s employment or service
as a director or consultant is terminated for any reason other than death, any
outstanding Other Stock-Based Awards held by the participant (other than any
outstanding Exercisable Other Stock-Based Awards) and any Dividend Equivalents
that relate to those Other Stock-Based Awards shall immediately terminate.

 

(k)  Unless
otherwise provided by the Committee, if the participant’s employment or service
as a director or consultant terminates by reason of death, all Other
Stock-Based Awards held by the participant (other than any outstanding
Exercisable Other Stock-Based Awards) and any Dividend Equivalents that relate
to those Other Stock-Based Awards shall become immediately vested and
nonforfeitable.

 

(l)  Unless
otherwise provided by the Committee, the provisions of Sections 11(a)
through (g) rather than Sections 11(j) and (k) shall apply, mutatis mutandis (substituting
Exercisable Other Stock-Based Award for Option), to any Other Stock-Based Award
that provides for the delivery of cash, shares or other securities upon
exercise of such Award, rather than immediately upon vesting (each, an “Exercisable
Other Stock-Based Award”).

 

(m)  The
Committee may determine whether any given leave of absence constitutes a
termination of employment or service. Unless otherwise provided by the
Committee, Awards made under the Plan shall not be affected by any change of
employment so long as the participant continues to be a director, employee or
consultant of the Company or a Subsidiary.

 

SECTION 12.  Acceleration
of an Award.  Notwithstanding any provision contained
herein, the Committee shall have the discretion at any time to accelerate the
vesting and exercisability of an Award granted to a participant pursuant to the
Plan. Unless otherwise determined by the Committee or as set forth in an Award
agreement, with respect to all outstanding Awards held by any participant, such
Awards shall become fully vested (and, in the case of Options and Exercisable
Other Stock-Based Awards, immediately exercisable), all restrictions on such
Awards shall lapse and all performance criteria applicable to such Awards shall
be deemed satisfied at the maximum level, (a) in the case of a participant
who is an employee of the Company or its Subsidiaries on the date of a Change
of Control, upon the earlier to occur of (i) the expiration of the
18-month period immediately following such Change of Control and (ii) a
Qualifying Termination, provided that such Awards are still outstanding at (and
have not terminated prior to) the relevant time, (b) in the case of a
participant who is a non-employee director of the Company or its Subsidiaries
on the date of a Change of Control, upon the consummation of such Change of
Control and (c) in the case of a participant who is a consultant of the
Company or its Subsidiaries on the date of a Change of Control, upon

 

10

 

the earlier to occur of (i) the expiration of the 18-month period
immediately following such Change of Control or (ii) the termination of
the participant’s service with the Company, its Subsidiaries or the Surviving
Entity without Cause, provided that such Awards are still outstanding at (and
have not terminated prior to) the relevant time.

 

SECTION 13.  Withholding
Taxes.  In connection with the transfer of Ordinary Shares as a
result of the vesting of an Award or upon any other event that would subject
the holder of an Award to taxation, the Company shall have the right to require
the holder to pay an amount in cash or to retain or sell without notice, or to
demand surrender of, Ordinary Shares that have a value sufficient to cover any
tax, including, without limitation, any United States Federal, state or local
income tax, required by any governmental entity to be withheld or otherwise
deducted and paid with respect to such transfer (“Withholding Tax”), and
to make payment (or to reimburse itself for payment made) to the appropriate
taxing authority of an amount in cash equal to the amount of such Withholding
Tax, remitting any balance to such holder. The holder of an Award shall be
entitled to satisfy the obligation to pay any Withholding Tax, in whole or in
part, by providing the Company with funds sufficient to enable the Company to
pay such Withholding Tax or by having the Company retain Ordinary Shares
otherwise deliverable in respect of such Award, or accept upon delivery thereof
Ordinary Shares (other than unvested Restricted Shares) held by the holder for
at least six months and one day, that have a value sufficient to cover the
amount of such Withholding Tax. Each election by such holder to have Ordinary
Shares retained or to deliver Ordinary Shares for this purpose shall be subject
to the following restrictions:  (a) the election must be in
writing and made on or prior to the date that the amount of the Withholding Tax
is to be determined; and (b) the election shall be subject to the
disapproval of the Committee. The obligations of the Company under the Plan
shall be conditional on such payment or arrangements being made to the
satisfaction of the Committee.

 

SECTION 14.  Effect
of Certain Changes.  (a)  In the event that the
Committee determines that any dividend or other distribution (whether in the
form of cash, Ordinary Shares, other securities or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase or exchange of
Ordinary Shares or other securities of the Company, issuance of warrants or
other rights to purchase Ordinary Shares or other securities of the Company,
other similar corporate transaction or event (including, without limitation, a
Change of Control), change in applicable rule, ruling, regulation or other
requirement of any governmental body or securities exchange, accounting principles
or law, or other unusual or nonrecurring event affects the Company, any of its
Subsidiaries, the financial statements of the Company or any of its
Subsidiaries, or Ordinary Shares such that an adjustment is determined by the
Committee in its discretion to be appropriate or desirable, then the Committee
may make any such adjustment, which may include, without limitation,
(i) adjusting any or all of (A) the aggregate number of Ordinary
Shares or other securities of the Company (or number and kind of other
securities or property) with respect to which Awards may be granted under the
Plan, as provided in Section 4, (B) the number of Ordinary Shares or
other securities of the Company (or number and kind of other securities or
property) subject to outstanding Awards and (C) the exercise

 

11

 

price or base price with respect to any Option or Exercisable Other
Stock-Based Award; provided, however, that any fractional shares
resulting from any such adjustment may be eliminated, and/or
(ii) canceling outstanding Awards in exchange for a cash payment in an
amount equal to the excess, if any, of the Fair Market Value of the number of
Ordinary Shares subject to or underlying such Awards over the aggregate
exercise price (or applicable base price), if any, of such Awards (it being
understood that, if there is no such excess, then such Awards may be canceled
without any payment or consideration therefor).

 

(b)  Awards
may, in the discretion of the Committee, be granted under the Plan in
assumption of, or in substitution for, outstanding awards previously granted by
the Company or its Subsidiaries or a company acquired by the Company or with
which the Company combines (or a Subsidiary or parent corporation of such
company) in connection with a corporate merger, consolidation, acquisition of
assets or stock, reorganization, liquidation or otherwise (“Substitute
Awards”). The number of Ordinary Shares underlying any Substitute Awards
shall be counted against the aggregate number of Ordinary Shares available for
Awards under the Plan; provided, however, that Substitute Awards
issued in connection with the assumption of, or in substitution for,
outstanding awards previously granted by an entity that is acquired by the
Company or any of its Affiliates through a corporate merger or acquisition of
assets or stock shall not be counted against the aggregate number of Ordinary
Shares available for Awards under the Plan; provided further, however,
that Substitute Awards issued in connection with the assumption of, or in
substitution for, outstanding stock options intended to qualify for special tax
treatment under Sections 421 and 422 of the Code that were previously granted
by an entity that is acquired by the Company or any of its Affiliates through a
corporate merger or acquisition of assets or stock shall be counted against the
aggregate number of Ordinary Shares available for Incentive Stock Options under
the Plan. In the event that a written agreement pursuant to which such a
corporate transaction is completed is approved by the Board and such agreement
sets forth the terms and conditions of the substitution for or assumption of
outstanding equity or equity-based awards of the acquired corporation, such
terms and conditions shall be deemed to be the action of the Committee
hereunder without any further action by the Committee and the Persons holding
such awards shall be deemed to be participants in the Plan; provided, however,
that the Committee may, to the extent applicable, take any further action with
respect to such awards as may be necessary in connection with Rule 16b-3
under the Exchange Act to qualify such Substitute Awards for the favorable
treatment intended to be afforded by Rule 16b-3 under the Exchange Act.

 

(c)  Nothing
in the Plan or any Award agreement shall be construed as limiting or preventing
the Company or any of its Affiliates from taking any action with respect to the
operation and conduct of their business that they deem appropriate or in their
best interests, including, without limitation, any or all adjustments,
recapitalizations, reorganizations, exchanges or other changes in the capital
structure of the Company or any of its Affiliates, any merger or consolidation
of the Company or any of its Affiliates, any issuance of Ordinary Shares or
other securities or subscription rights thereto, any issuance of bonds,
debentures, preferred or prior preference stock ahead of or affecting

 

12

 

the Ordinary Shares or other securities or the rights thereof, any
dissolution or liquidation of the Company or any of its Affiliates, any sale or
transfer of all or any part of the assets or business of the Company or any of
its Affiliates, or any other corporate act or proceeding, whether of a similar
character or otherwise.

 

(d)  In
the event of a change in the Ordinary Shares of the Company as presently
constituted, the shares resulting from any such change shall be deemed to be
the Ordinary Shares within the meaning of the Plan.

 

(e)  To
the extent that the foregoing adjustments relate to stock or securities of the
Company, such adjustment shall be made by the Committee, whose determination in
that respect shall be final, binding and conclusive.

 

SECTION 15. Nonexclusive
Plan.  Neither the adoption of the Plan by the Board nor the
submission of the Plan to the shareholders of the Company for approval shall be
construed as creating any limitations on the power of the Board to adopt such
other incentive arrangements as it may deem desirable, including, without
limitation, the granting of stock options otherwise than under the Plan, and
such arrangements may be either generally applicable or applicable only in
specific cases.

 

SECTION 16.  Restrictions
on Transfers.  Awards may not be transferred other than by will
or by the laws of descent and distribution; provided, however,
that, subject to the approval of the Committee, Nonqualified Stock Options and
Restricted Shares may be transferred or assigned by a participant to (a) a
trust with respect to which such participant or a member of his or her family
is a beneficiary or (b) a corporation or other entity with respect to
which the participant holds directly or indirectly more than 50% of the
outstanding common stock or other equity interests. All vesting and forfeiture
provisions shall continue to apply with respect to any Nonqualified Stock
Options and Restricted Shares that are transferred in accordance with this
Section 16 to the same extent that such provisions would have been applicable
in the absence of any transfer. During a participant’s lifetime, Options
granted to a participant may be exercised only by the participant, by his or
her guardian or legal representative or by a transferee specified in this
Section 16. Any purported transfer or assignment of an Award inconsistent with
the foregoing restrictions shall cause the Award to terminate.

 

SECTION 17.  Securities
Laws; Other Laws.  The obligation of the Company to offer, sell
and deliver shares with respect to Awards granted hereunder and the
exercisability of Awards shall be subject to all applicable laws, rules and
regulations, including, without limitation, all applicable United States
Federal and state securities laws, the availability of exemptions from the
registration requirements of such United States Federal and state securities
laws, and the obtaining of all approvals by governmental authorities as may be
deemed necessary or appropriate by the Committee. In no event shall the Company
be obligated to register shares under United States Federal or state securities
laws, to comply with the requirements of any exemption from registration
requirements or to take any other action that may be required in order to
permit, or to remove any prohibition or limitation on, the issuance of shares
pursuant to

 

13

 

Awards granted hereunder which may be imposed by any applicable law,
rule or regulation. Notwithstanding anything to the contrary in the Plan or any
Award agreement, the Committee may revoke any Award if it is contrary to law or
modify any Award to bring it into compliance with any applicable laws or
regulations. The Committee may impose such other terms, conditions, and
restrictions upon any Award, including any Award theretofore granted, that the
Committee concludes, in its absolute discretion, are necessary or desirable to
ensure compliance with any applicable law, regulation or rule. Certificates for
Ordinary Shares issued under the Plan may be legended as the Committee shall
deem appropriate.

 

SECTION 18.  No
Employment Rights.  The adoption of this Plan and the grant of
Awards shall not confer upon any participant any right to continued employment
in any capacity with the Company or any of its Subsidiaries.

 

SECTION 19.  No
Impact on Benefits.  Awards granted under the Plan shall not be
treated as compensation for purposes of calculating an employee’s rights under
any employee benefit plan, except to the extent expressly provided in any such
plan.

 

SECTION 20.  Severability.  If
any provision of the Plan or any Award granted hereunder is, becomes or is
deemed to be invalid, illegal or unenforceable in any jurisdiction or as to any
Person or Award, or would disqualify the Plan or any Award under any law, rule,
ruling, regulation or other requirement deemed applicable by the Committee,
(a) in the case of a provision that is held to be void or to constitute an
unreasonable restriction against the participant, such provision shall not be
rendered void but shall be deemed to be modified to the minimum extent
necessary to make such provision enforceable for the longest duration and the
greatest scope as such court may determine constitutes a reasonable restriction
under the circumstances and (b) in the case of any other provision, such
provision shall be construed or deemed amended to conform to the applicable
law, rule, ruling, regulation or other requirement or, if it cannot be
construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan or the Award, such provision shall
be stricken as to such jurisdiction, Person or Award and, in any event, the
remainder of the Plan and any such Award shall remain in full force and effect.

 

SECTION 21.  Indemnification.  No
member of the Board, the Committee or any employee of the Company or its
Subsidiaries (each such person, a “Covered Person”) shall be liable for
any action taken or omitted to be taken or any determination made in good faith
with respect to the Plan or any Award hereunder. Each Covered Person shall be
indemnified and held harmless by the Company from and against (a) any
loss, cost, liability or expense (including attorneys’ fees) that may be
imposed upon or incurred by such Covered Person in connection with, based upon
or arising or resulting from any claim, action, suit or proceeding to which
such Covered Person may be a party or in which such Covered Person may be
involved by reason of any action taken or omitted to be taken under or in
connection with the Plan or any Award and (b) any and all amounts paid by
such Covered Person, with the Company’s approval, in settlement

 

14

 

thereof, or paid by such Covered Person in satisfaction of any judgment
in any such action, suit or proceeding against such Covered Person; provided
that the Company shall have the right, at its own expense, to assume and defend
against any such claim, action, suit or proceeding, and, once the Company gives
notice of its intent to assume the defense, the Company shall have sole control
over such defense with counsel of the Company’s choice. The foregoing right of
indemnification shall not be available to a Covered Person to the extent that a
court of competent jurisdiction in a final judgment or other final adjudication,
in either case not subject to further appeal, determines that the acts or
omissions of such Covered Person giving rise to the indemnification claim
resulted from such Covered Person’s bad faith, fraud or willful criminal act or
omission or that such right of indemnification is otherwise prohibited by law
or by the Company’s Amended and Restated Articles of Association or Memorandum
of Association. The foregoing right of indemnification shall not be exclusive
of any other rights of indemnification to which Covered Persons may be entitled
under the Company’s Amended and Restated Articles of Association or Memorandum
of Association, as a matter of law, or otherwise, or any other power that the
Company may have to indemnify such persons or hold them harmless.

 

SECTION 22.  Income
Taxes and Deferred Compensation.  Participants
are solely responsible and liable for the satisfaction of all taxes and
penalties that may arise in connection with Awards (including any taxes arising
under Section 409A of the Code), and the Company shall not have any obligation
to indemnify or otherwise hold any participant harmless from any or all of such
taxes. The Committee shall have the discretion to organize any deferral
program, to require deferral election forms, and to grant or to unilaterally
modify any Award in a manner that (a) conforms with the requirements of Section
409A of the Code, (b) voids any participant election to the extent it would
violate Section 409A of the Code and (c) for any distribution event or election
that could be expected to violate Section 409A of the Code, make the
distribution only upon the earliest of the first to occur of a “permissible
distribution event” within the meaning of Section 409A of the Code, or a
distribution event that the participant elects in accordance with Section 409A
of the Code. The Committee shall have the sole discretion to interpret the
requirements of the Code, including Section 409A, for purposes of the Plan and
all Awards.

 

SECTION 23.  GOVERNING
LAW.  THE PLAN AND ANY AWARDS GRANTED HEREUNDER SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF THE
BAHAMAS, WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW.

 

SECTION 24.  Amendment
or Discontinuance.  Subject to any government regulation and to
any applicable rules of the New York Stock Exchange or any successor exchange
on which the Ordinary Shares may be listed, the Plan may be amended, modified
or terminated by the Board without the approval of the shareholders of the
Company except that shareholder approval shall be required for any amendment
that would (a) increase the maximum number of Ordinary Shares for which
Awards may be granted under the Plan or increase the maximum number of Ordinary
Shares that may

 

15

 

be delivered pursuant to Incentive Stock Options granted under the
Plan; provided, however, that any adjustment under
Section 14(a) shall not be an increase for purposes of this
Section 24 or (b) change the class of employees or other individuals
eligible to participate in the Plan. No modification, amendment or termination
of the Plan may, without the consent of the participant to whom any Award shall
theretofore have been granted, adversely affect the rights of such participant (or
his or her transferee) under such Award, unless otherwise provided by the
Committee in the applicable Award agreement.

 

SECTION 25.  Notices.  All notices, claims, certificates, requests, demands
and other communications hereunder shall be in writing and shall be deemed to
have been duly given and delivered if personally delivered or if sent by
nationally recognized overnight courier, by telecopy or by registered or
certified mail, return receipt requested and postage prepaid, addressed as
follows:

 

(a)   if
to the Company:

 

Kerzner
International Limited

Stock Award Administration

1000 South Pine Island Road

Plantation, FL 33024

Telecopy:   (954) 809-2310

Attention:  Human Resources

 

(b)   if
to the participant, to such participant’s address as most recently supplied to
the Company and set forth in the Company’s records;

 

or to such
other address as the party to whom notice is to be given may have furnished to
the other party in writing in accordance herewith. Any such notice or
communication shall be deemed to have been received (i) in the case of
personal delivery, on the date of such delivery (or if such date is not a
business day, on the next business day after the date sent), (ii) in the
case of nationally-recognized overnight courier, on the next business day after
the date sent, (iii) in the case of telecopy transmission, when received
(or if not sent on a business day, on the next business day after the date
sent), and (iv) in the case of mailing, on the third business day
following the date on which the piece of mail containing such communication is
posted.

 

SECTION 26.  Headings.  The
headings contained in this Plan are for reference purposes only and shall not
affect the meaning or interpretation of this Plan.

 

SECTION 27.  Successors
and Assigns.  This Plan shall inure to the benefit of and be
binding upon each successor and assign of the Company. All obligations imposed
upon a participant, and all rights granted to the Company hereunder, shall be
binding upon the participant’s heirs, legal representatives and successors.

 

SECTION 28.  Effect
of Plan.  Neither the adoption of the Plan nor any action of the
Board or Committee shall be deemed to give any director, officer, employee

 

16

 

or consultant any right to be granted any Awards hereunder except as
may be evidenced by an Award agreement, or any amendment thereto, duly
authorized by the Committee and executed on behalf of the Company, and then
only to the extent and on the terms and conditions expressly set forth therein.

 

SECTION 29.  Term.  Unless
sooner terminated by action of the Board, the right to grant Awards under this
Plan shall terminate ten years from the date of adoption of the Plan. The
Committee may not grant Awards under the Plan after that date, but Awards
granted before that date will continue to be effective in accordance with their
terms and the terms of the Plan.

 

SECTION 30.  Effectiveness.  The
Plan shall take effect upon its adoption by the Board; provided, however,
that no Incentive Stock Options may be granted under the Plan unless the Plan
is approved by the Company’s shareholders within twelve (12) months before
or after the date it is adopted by the Board.

 

SECTION 31.  Definitions.  For
the purposes of this Plan, unless the context requires otherwise, the following
terms shall have the meanings indicated:

 

“Affiliate”
of a Person means any other Person which, directly or indirectly, controls, is
controlled by or is under common control with such Person (excluding any
trustee under, or any committee with responsibility for administering, any
plan).

 

“Award”
means, collectively, Options, Restricted Shares and Other Stock-Based Awards
granted under the Plan.

 

“Board”
means the board of directors of the Company.

 

“Cause”
shall have the meaning provided in the applicable Award agreement.

 

“Change of
Control” means the occurrence of any one of the following events:

 

(a)
any “person” (as such term is defined in Section 3(a)(9) of the Exchange
Act, and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act)
becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company’s then
outstanding securities eligible to vote for the election of the Board (the “Company
Voting Securities”); provided, however, that the event
described in this paragraph (a) shall not be deemed to be a Change of
Control if such event results from any of the
following:  (i) the acquisition of Company Voting Securities by
the Company or any of its Subsidiaries, (ii) the acquisition of Company
Voting Securities by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any of its Subsidiaries, (iii) the
acquisition of Company Voting Securities by

 

17

 

any underwriter temporarily holding securities
pursuant to an offering of such securities or (iv) the acquisition of
Company Voting Securities pursuant to a Non-Qualifying Transaction (as defined
in paragraph (c) below); provided further, however, that a
Change of Control shall be deemed not to have occurred solely as a result of
(x) two or more persons who as of the date hereof are beneficial owners of Company
Voting Securities or (y) one or more persons who as of the date hereof are
beneficial owners of Company Voting Securities together with one or more
persons who as of the date hereof are not beneficial owners of Company Voting
Securities, being treated as a single person (under Section 3(a)(9),
13(d)(3) or 14(d)(2) of the Exchange Act) for purposes of this
paragraph (a) unless, in either such case, (A) such persons
consummate a “going private” transaction (as determined by the Incumbent
Directors (as defined in paragraph (b) below) in their sole discretion) or
(B) an event described in paragraph (b) or (c) below otherwise
occurs;

 

(b)
individuals who, as of the date on which the Plan is adopted by the Board,
constitute the Board (the “Incumbent Directors”) cease for any reason to
constitute at least a majority of the Board without the approval of the
Incumbent Directors; provided, however, that any individual
becoming a director subsequent to the date on which the Plan is adopted by the
Board, whose election or nomination for election was approved (either by a
specific vote or by approval of the proxy statement of the Company in which
such individual is named as a nominee for director, without written objection
to such nomination) by a vote of at least a majority of the directors who were,
as of the date of such approval, Incumbent Directors, shall be an Incumbent
Director; provided further, however, that no individual initially
appointed, elected or nominated as a director of the Company as a result of an
actual or threatened election contest with respect to the election or removal
of directors or as a result of any other actual or threatened solicitation of
proxies or consents by or on behalf of any person other than the Board shall be
an Incumbent Director;

 

(c)
the consummation of a Reorganization or a Sale, unless, immediately following
such Reorganization or Sale:  (i) more
than 50% of the total voting power (in respect of the election of directors, or
similar officials in the case of an entity other than a corporation) of
(A) the entity resulting from such Reorganization, or the entity which has
acquired all or substantially all the Company’s assets (in either case, the “Surviving
Entity”), or (B) if applicable, the ultimate parent entity that
directly or indirectly has beneficial ownership of more than 50% of the total
voting power (in respect of the election of directors, or similar officials in
the case of an entity other than a corporation) of the Surviving Entity (the “Parent
Entity”), is represented by Company Voting Securities that were outstanding
immediately prior to such Reorganization or Sale (or, if applicable, is
represented by shares into which such Company Voting Securities were converted
pursuant to such Reorganization or Sale), (ii) no person (other than any
employee benefit plan (or related trust) sponsored or maintained by the
Surviving Entity or the Parent Entity) is or becomes the beneficial owner,
directly

 

18

 

or indirectly, of 50% or more of the total voting
power in respect of the election of directors (or similar officials in the case
of an entity other than a corporation) of the outstanding voting securities of
the Parent Entity (or, if there is no Parent Entity, the Surviving Entity) and
(iii) at least a majority of the members of the board of directors (or
similar officials in the case of an entity other than a corporation) of the
Parent Entity (or, if there is no Parent Entity, the Surviving Entity)
following the consummation of the Reorganization or Sale were Incumbent
Directors at the time of the approval by the Board of the execution of the
initial agreement providing for such Reorganization or Sale or, in the absence
of such an agreement, at the time at which approval of the Board was obtained
for such Reorganization or Sale (any Reorganization or Sale that satisfies all
the criteria specified in the foregoing clauses (i), (ii) and (iii) shall be
deemed to be a “Non-Qualifying Transaction”); or

 

(d)
the shareholders of the Company approve a plan of complete liquidation or
dissolution of the Company.

 

Notwithstanding
the foregoing, if any person becomes the beneficial owner of 50% or more of the
combined voting power of Company Voting Securities solely as a result of the
acquisition of Company Voting Securities by the Company which reduces the
number of Company Voting Securities outstanding, such increased percentage of
beneficial ownership shall be deemed not to result in a Change of Control; provided,
however, that if such person subsequently becomes the beneficial owner
of additional Company Voting Securities that increases the percentage of
outstanding Company Voting Securities beneficially owned by such person, a
Change of Control shall then be deemed to occur.

 

“Code”
means the United States Internal Revenue Code of 1986, as amended, and all
rules and regulations promulgated thereunder.

 

“Committee”
means the committee of two or more directors designated by the Board to operate
and administer the Plan (or, in the absence of any such designation, means the
Board). To the extent the Committee has delegated authority pursuant to
Section 2(d) of the Plan, references to the Committee shall be deemed to
refer to the person to whom such authority has been delegated, as the context
may require.

 

“Company”
means Kerzner International Limited, a corporation organized under the laws of
the Commonwealth of the Bahamas.

 

“Disability”
means a mental or physical illness that entitles the participant to receive
benefits under the long-term disability plan of the Company or an Affiliate
provided the participant remains totally disabled for six (6) consecutive
months. If the participant is not covered by such a plan, Disability shall be
defined by reference to the Company’s long-term disability plan as if such plan
applied to the participant.

 

“Dividend
Equivalent” has the meaning given such term in Section 10(b) of the
Plan.

 

19

 

“Exchange
Act” means the United States Securities Exchange Act of 1934, as amended,
and all rules and regulations promulgated thereunder.

 

“Exercisable
Other Stock-Based Award” has the meaning given such term in
Section 11(l) of the Plan.

 

“Fair
Market Value” means, as of any date, the closing price per Ordinary Share
on the New York Stock Exchange on such date (or, if such date is not a trading
day on the New York Stock Exchange, on the next preceding trading day) or, if
the Ordinary Shares are not listed on the New York Stock Exchange, the closing
price per Ordinary Share on the principal national securities exchange on which
the Ordinary Shares are listed (or, if such date is not a trading day on such
exchange, on the next preceding trading day) or, in all other cases, such value
as determined by the Committee in good faith.

 

“Incentive
Stock Option” means an option to acquire Ordinary Shares granted pursuant
to the Plan, which option is intended to qualify as an “incentive stock option”
within the meaning of Section 422(b) of the Code and which is so
designated in the applicable Award agreement.

 

“Nonqualified
Stock Option” means any option to acquire Ordinary Shares granted pursuant
to the Plan, other than an Incentive Stock Option.

 

“Option”
means an Incentive Stock Option, a Nonqualified Stock Option or both, as the
context requires.

 

“Ordinary
Shares” means the ordinary shares, par value U.S.$ 0.001 per share, of the
Company which the Company is currently authorized to issue or may in the future
be authorized to issue, provided that any such future authorized ordinary
shares of the Company either do not vary from the currently authorized ordinary
shares of the Company or vary only in amount of par value.

 

“Other
Stock-Based Award” means an award granted under Section 10 of the
Plan.

 

“Plan”
means this Kerzner International Limited 2005 Stock Incentive Plan, as amended
from time to time.

 

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

 

“Qualifying
Termination” means:

 

(a)
the termination by the Company of the participant’s employment other than for
Cause and other than due to the participant’s death or Disability; or

 

20

 

(b)
the termination by the participant of the participant’s employment following
the occurrence, without the participant’s express written consent, of any of
the following acts by the Company, or failures by the Company to act, unless,
in the case of any act or failure to act described in paragraph (iii)
below, such act or failure to act is corrected within ten days following
the notice of termination given by the participant in respect thereof:

 

(i)
a material reduction by the Company in the participant’s annual base salary and/or
the level of the participant’s entitlement under the Company’s annual bonus
plan;

 

(ii)
the Company’s requiring the participant to be based at any location beyond 50
miles of the location of such participant’s then current principal place of
employment, except for required travel on the Company’s business to an extent
substantially consistent with the participant’s duties and responsibilities;

 

(iii)
(A) the failure by the Company to continue to provide the participant with
benefits not materially less favorable in the aggregate than those then
currently enjoyed by the participant under any of the Company’s compensation,
pension, savings, life insurance, medical, health and accident, or disability
plans, (B) the taking of any action by the Company which would directly or
indirectly materially reduce any of such benefits or deprive the participant of
any material fringe benefit then currently enjoyed by the participant (without
otherwise providing the participant with a substantially equivalent replacement
benefit or cash equivalent), or (C) the failure by the Company to provide
the participant with the number of paid vacation days to which the participant
is entitled on the basis of years of service with the Company in accordance
with the Company’s vacation policy.

 

The
participant’s right to terminate the participant’s employment under the
preceding clause (b) shall not be affected by the participant’s incapacity
due to physical or mental illness. The participant will be deemed to have
waived his or her rights to claim a Qualifying Termination relating to
circumstances described in the preceding clause (b) if he or she has not
provided to the Company a written notice of termination within ninety
(90) days following his or her knowledge of such circumstances.

 

“Reorganization”
means a merger, consolidation, statutory share exchange or similar form of
corporate transaction involving (a) the Company or (b) any of its
wholly owned Subsidiaries, but in the case of this clause (b), only if
Company Voting Securities are issued or issuable, unless, in the case of either
clause (a) or clause (b), the Committee determines, in its sole discretion,
that, immediately prior to the consummation of such transaction, the primary
party thereto, other than the Company and any of its Subsidiaries, directly or
indirectly, controlled, was controlled by or was under common control with the
Company.

 

21

 

“Restricted
Share” means an Ordinary Share subject to such restrictions as the Committee
may determine from time to time.

 

“Restriction
Period” has the meaning given such term in Section 9(b) of the Plan.

 

“Retained
Distribution” has the meaning given such term in Section 9(b) of the
Plan.

 

“Retirement”
has the meaning given such term in Section 11(d) of the Plan.

 

“Sale”
means the sale or disposition of all or substantially all the assets of the
Company, unless the Committee determines, in its sole discretion, that,
immediately prior to such acquisition, the entity acquiring such assets,
directly or indirectly, controlled, was controlled by or was under common
control with the Company.

 

“Subsidiary”
of any Person means another Person, an amount of the voting securities, other
voting ownership or voting partnership interests of which is sufficient to
elect at least a majority of its board of directors or other governing body
(or, if there are no such voting interests, 50% or more of the equity interests
of which) is owned directly or indirectly by such first Person or by another
Subsidiary of such first Person. The term “Subsidiaries” means more than one of
any such Persons.

 

“Substitute
Awards” has the meaning given such term in Section 14(b) of the Plan.

 

“Withholding
Tax” has the meaning given such term in Section 13 of the Plan.

 

22EXHIBIT 4.24(a)

 

KERZNER PALMILLA
BEACH PARTNERS, S. de R.L. de C.V.,

KERZNER PALMILLA HOTEL PARTNERS, S. de R.L. de C.V.,

KERZNER SERVICIOS HOTELEROS, S. de R.L. de C.V.,

KERZNER COMPANIA DE SERVICIOS, S. de R.L. de C.V. and

KERZNER PALMILLA GOLF PARTNERS, S. de R.L. de C.V.

(collectively, Issuers)

 

 

and

 

 

LASALLE BANK
NATIONAL ASSOCIATION

(Trustee)

 

 

 

NOTE INDENTURE

 

 

 

	
  Location:

  	
  The One & Only Palmilla

  
	
   

  	
  Los Cabos, Mexico

  

 

 

Dated as of December 17, 2004

 

PREPARED BY AND UPON

FILING RETURN TO:

 

Cadwalader, Wickersham & Taft LLP

100 Maiden Lane

New York, New York 10038

U.S.A.

Attention:  William P. McInerney, Esq.

 

 

TABLE OF CONTENTS

 

	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE 1 – DEFINITIONS; INTERPRETATION

  
	
   

  	
   

  
	
  Section 1.01 Definitions

  	
  1

  
	
  Section 1.02 Accounting Terms

  	
  26

  
	
  Section 1.03 General

  	
  26

  
	
   

  	
   

  
	
  ARTICLE 2 – ISSUE OF NOTES

  
	
   

  	
   

  
	
  Section 2.01 No Limit on Issue

  	
  26

  
	
  Section 2.02 Notes Deemed to be Outstanding

  	
  26

  
	
  Section 2.03 Conditions Precedent to the Issue of Notes

  	
  26

  
	
  Section 2.04 Issue of Notes

  	
  27

  
	
  Section 2.05 Form of Notes

  	
  28

  
	
  Section 2.06 Registration

  	
  29

  
	
  Section 2.07 Transfers of Notes

  	
  29

  
	
  Section 2.08 Inspection of Registers

  	
  29

  
	
  Section 2.09 Title to Registered Notes

  	
  30

  
	
  Section 2.10 Mutilation, Loss, Theft or Destruction

  	
  30

  
	
  Section 2.11 Cancellation of Notes

  	
  30

  
	
   

  	
   

  
	
  ARTICLE 3 – PAYMENT MECHANICS

  
	
   

  	
   

  
	
  Section 3.01 Requirements of Payment

  	
  30

  
	
  Section 3.02 Additional Provisions

  	
  30

  
	
  Section 3.03 Priority of Payments

  	
  31

  
	
   

  	
   

  
	
  ARTICLE 4 – SECURITY AND ASSET DEALING

  
	
   

  	
   

  
	
  Section 4.01 Charges and Security Interest

  	
  31

  
	
  Section 4.02 Holders of Security

  	
  32

  
	
  Section 4.03 Further Assurances

  	
  32

  
	
  Section 4.04 Power of Attorney

  	
  32

  
	
  Section 4.05 Dealings with the Security Trust Agreement and the
  Pledge

  	
  32

  
	
  Section 4.06 No Obligation to Advance Funds

  	
  33

  
	
   

  	
   

  
	
  ARTICLE 5 – CANCELLATION AND DISCHARGE

  
	
   

  	
   

  
	
  Section 5.01 Cancellation and Destruction

  	
  33

  
	
  Section 5.02 Non-Presentation of Notes

  	
  33

  
	
  Section 5.03 Unclaimed Moneys

  	
  33

  
	
  Section 5.04 Discharge

  	
  33

  

 

i

 

	
  ARTICLE 6 – REPRESENTATIONS AND WARRANTIES

  
	
   

  	
   

  
	
  Section 6.01 Issuer Representations

  	
  34

  
	
  Section 6.02 Survival of Representations

  	
  47

  
	
   

  	
   

  
	
  ARTICLE 7 – ISSUER COVENANTS

  
	
   

  	
   

  
	
  Section 7.01 Affirmative Covenants

  	
  47

  
	
  Section 7.02 Negative Covenants

  	
  61

  
	
   

  	
   

  
	
  ARTICLE 8 – INSURANCE; CASUALTY; CONDEMNATION

  
	
   

  	
   

  
	
  Section 8.01 Insurance

  	
  69

  
	
  Section 8.02 Casualty

  	
  73

  
	
  Section 8.03 Condemnation

  	
  73

  
	
  Section 8.04 Restoration

  	
  74

  
	
  Section 8.05 Casualty/Condemnation Generally

  	
  78

  
	
   

  	
   

  
	
  ARTICLE 9 – DEFAULTS

  
	
   

  	
   

  
	
  Section 9.01 Event of Default

  	
  78

  
	
  Section 9.02 Remedies

  	
  81

  
	
  Section 9.03 Exculpation

  	
  82

  
	
  Section 9.04 Manager Termination

  	
  84

  
	
   

  	
   

  
	
  ARTICLE 10 – RESERVE FUNDS

  
	
   

  	
   

  
	
  Section 10.01 Required Repair Funds

  	
  84

  
	
  Section 10.02 Tax and Insurance Escrow Fund

  	
  85

  
	
  Section 10.03 Replacements and Replacement Reserve

  	
  86

  
	
  Section 10.04 Interest Reserve Interest

  	
  87

  
	
  Section 10.05 Reserve LC

  	
  87

  
	
  Section 10.06 Reserve Funds, Generally

  	
  88

  
	
   

  	
   

  
	
  ARTICLE 11 – MATTERS CONCERNING THE TRUSTEE

  
	
   

  	
   

  
	
  Section 11.01 Duties of the Trustee

  	
  90

  
	
  Section 11.02 Rights of Trustee

  	
  96

  
	
  Section 11.03 Individual Rights of Trustee

  	
  97

  
	
  Section 11.04 Trustee’s Disclaimer

  	
  97

  
	
  Section 11.05 Notice of Defaults

  	
  97

  
	
  Section 11.06 Compensation and Indemnity

  	
  98

  
	
  Section 11.07 Replacement of Trustee

  	
  98

  
	
  Section 11.08 Resignation or Removal of Trustee; Conflict of
  Interest

  	
  99

  
	
  Section 11.09 Successor Trustee

  	
  100

  
	
  Section 11.10 Authorization and Duties of Trustee

  	
  100

  
	
  Section 11.11 Trustee Not Required to Give Security

  	
  100

  
	
  Section 11.12 Trustee May Deal In Notes

  	
  100

  

 

ii

 

	
  Section 11.13 Administration of the Trust and Protection of the
  Trustee

  	
  101

  
	
  Section 11.14 Service Providers

  	
  103

  
	
   

  	
   

  
	
  ARTICLE 12 – SUPPLEMENTAL INDENTURES

  
	
   

  	
   

  
	
  Section 12.01 Supplemental Trust Indentures

  	
  103

  
	
  Section 12.02 Further Assurances

  	
  103

  
	
  Section 12.03 Amendment or Modification

  	
  104

  
	
   

  	
   

  
	
  ARTICLE 13 – NOTEHOLDER MEETINGS AND APPROVALS

  
	
   

  	
   

  
	
  Section 13.01 Conduct of Meetings

  	
  104

  
	
  Section 13.02 Extraordinary Resolution

  	
  105

  
	
  Section 13.03 Signed Instruments

  	
  106

  
	
  Section 13.04 Binding Effect of Resolutions

  	
  106

  
	
   

  	
   

  
	
  ARTICLE 14 – MISCELLANEOUS

  
	
   

  	
   

  
	
  Section 14.01 Survival

  	
  106

  
	
  Section 14.02 Trustee’s Discretion

  	
  106

  
	
  Section 14.03 Notices

  	
  107

  
	
  Section 14.04 Governing Law

  	
  108

  
	
  Section 14.05 Modification, Waiver in Writing

  	
  109

  
	
  Section 14.06 Delay Not a Waiver

  	
  110

  
	
  Section 14.07 Trial by Jury

  	
  110

  
	
  Section 14.08 Headings

  	
  110

  
	
  Section 14.09 Severability

  	
  110

  
	
  Section 14.10 Preferences

  	
  111

  
	
  Section 14.11 Waiver of Notice

  	
  111

  
	
  Section 14.12 Expenses; Indemnity

  	
  111

  
	
  Section 14.13 Offsets, Counterclaims and Defenses

  	
  112

  
	
  Section 14.14 No Joint Venture or Partnership; No Third Party
  Beneficiaries

  	
  112

  
	
  Section 14.15 Publicity

  	
  113

  
	
  Section 14.16 Waiver of Marshalling of Assets

  	
  113

  
	
  Section 14.17 Waiver of Counterclaim

  	
  114

  
	
  Section 14.18 Conflict; Construction of Documents; Reliance

  	
  114

  
	
  Section 14.19 Brokers and Financial Advisors

  	
  114

  
	
  Section 14.20 Prior Agreements

  	
  114

  
	
  Section 14.21 Duplicate Originals, Counterparts

  	
  115

  
	
  Section 14.22 Joint and Several Liability

  	
  115

  
	
   

  	
   

  
	
  ARTICLE 15 – EXECUTION

  
	
   

  	
   

  
	
  Section 15.01 Effective Upon Execution

  	
  115

  
	
   

  	
   

  
	
  EXHIBIT A

  	
  -

  	
  Form of Note

  	
   

  
	
  SCHEDULE 6.01A

  	
  -

  	
  Organizational Chart

  	
   

  
	
  SCHEDULE 6.01E

  	
  -

  	
  Agreements

  	
   

  

 

iii

 

	
  SCHEDULE 6.01Q

  	
  -

  	
  Assessments

  	
   

  
	
  SCHEDULE 6.01T

  	
  -

  	
  Insurance Claims

  	
   

  
	
  SCHEDULE 6.01Z

  	
  -

  	
  Leases

  	
   

  
	
  SCHEDULE 10.01

  	
  -

  	
  Required Repairs

  	
   

  

 

iv

 

THIS NOTE
INDENTURE (the “Indenture”)
made as of the 17th day of December, 2004, between KERZNER
PALMILLA BEACH PARTNERS, S. de R.L. de C.V., KERZNER PALMILLA HOTEL PARTNERS,
S. de R.L. de C.V., KERZNER SERVICIOS HOTELEROS, S. de R.L. de C.V., KERZNER
COMPANIA DE SERVICIOS, S. de R.L. de C.V. and KERZNER PALMILLA GOLF PARTNERS,
S. de R.L. de C.V., each a limited liability company with variable
capital (sociedad de responsabilidad limitada de capital
variable), duly organized and validly existing under the laws of the
United Mexican States and each having an address at Palmilla Resort &
Golf Club Apartado Postal 52, 33400 San Jose Del Cabo, BCS, Mexico
(hereinafter collectively the “Issuers”) and LASALLE BANK NATIONAL ASSOCIATION, having an address at 35
S. LaSalle Street, Suite 1625, Chicago, Illinois 60603, as note trustee
and collateral agent for the benefit of the Holders of the Notes (as such terms
are hereinafter defined) (hereinafter the “Trustee”).

 

RECITALS

 

The parties
hereto have duly authorized the execution and delivery of this Indenture to
provide for the issuance of the Notes to be issued by the Issuers as provided
herein in an aggregate principal amount of $110,000,000.

 

All things
necessary to make the Notes when executed by the Issuers and authenticated and
delivered by the Trustee hereunder and duly issued by the Issuers, the valid
and legally binding obligations of the Issuers enforceable in accordance with
their terms, and to make this Indenture a valid and legally binding agreement
of the Issuers and the Trustee for the benefit of the Noteholders enforceable
in accordance with its terms, have been done.

 

ARTICLE 1 – DEFINITIONS;
INTERPRETATION

 

Section 1.01  Definitions. For
purposes of this Indenture, the Notes, the Security Trust Agreement and the
other Financing Documents, unless there is something in the subject matter or
context inconsistent therewith, the following terms shall have the following
meanings:

 

“Acceptable Counterparty” shall mean any counterparty to the
Interest Rate Cap Agreement that has and shall maintain, until the expiration
of the applicable Interest Rate Cap Agreement a long-term unsecured debt rating
of at least “AA” by S&P and “Aa2” from Moody’s, which rating shall not
include a “t” or otherwise reflect a termination risk.

 

“Additional Insolvency Opinion” shall have the meaning set
forth in Section 6.01(dd)(iii) hereof.

 

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

 

 

“Affiliated Manager” shall mean, collectively, Kerzner
International Management Services, Inc. and Kerzner International
Management Services Mexico, S. de R.L. de C.V. or any Manager in which any
Issuer, Principal, or Guarantor has, directly or indirectly, any legal,
beneficial or economic interest.

 

“Annual Budget” shall mean the operating budget, including
all planned Capital Expenditures, for the Property prepared by the Issuers for
the applicable Fiscal Year or other period.

 

“Applicable Interest Rate” shall having the meaning set forth
in the Note.

 

“Approved Annual Budget” shall have the meaning set forth in Section 7.01(k)(iv) hereof.

 

“Assignment of Golf Management Agreement” shall mean that
certain Assignment of Management Agreement, dated as of the date hereof, among
the Trustee, the Issuers and Golf Manager, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.

 

“Assignment of Management Agreement” shall mean that certain
Assignment of Management Agreement, dated as of the date hereof, among the
Trustee, the Issuers and Manager, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.

 

“Assignment of Spa Management Agreement” shall mean that
certain Assignment of Management Agreement, dated as of the date hereof, among
the Trustee, the Issuers and Spa Manager, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.

 

“Award” shall mean any compensation paid by any Governmental
Authority in connection with a Condemnation.

 

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

 

2

 

“Bankruptcy Code” shall mean Title 11 of the United States
Code entitled “Bankruptcy”, as amended from time to time, and any successor
statute or statutes and all rules and regulations from time to time
promulgated thereunder, and any comparable foreign laws relating to bankruptcy,
insolvency or creditors’ rights (including, but not limited to, the Mexican Ley de Concursos Mercantiles).

 

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

 

“Beach Issuer” shall mean Kerzner Palmilla Beach Partners, S.
de R.L. de C.V.

 

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

 

“Capital Expenditures” shall mean, for any period, the amount
expended for items capitalized under GAAP (including expenditures for building
improvements or major repairs and tenant improvements).

 

“Cash Management Account” shall have the meaning set forth in
the Note.

 

“Cash Management Agreement” shall mean that certain Cash
Management Agreement, dated as of the date hereof, by and among Issuers,
Manager and Trustee, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.

 

“Cash Trap Event” shall have the meaning set forth in the
Cash Management Agreement.

 

“Casualty” shall have the meaning set forth in Section 8.02
hereof.

 

“Casualty Consultant” shall have the meaning set forth in Section 8.04(d) hereof.

 

“Casualty Retainage” shall have the meaning set forth in Section 8.04(e) hereof.

 

“CNBV” shall mean the Mexican Comisión
Nacional Bancaria y de Valores.

 

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

 

3

 

“Collateral Assignment of Interest Rate Cap Agreement” shall
mean that certain Collateral. Assignment of Interest Rate Cap Agreement, dated
as of the date hereof, executed by Issuers in connection with the issuance of
the Notes in favor of Trustee for the benefit of the Noteholders, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time.

 

“Condemnation” shall mean a temporary or permanent taking
(including an expropriation under Mexican law) by any Mexican Governmental
Authority of all or any part of the Property, or any interest therein or
right accruing thereto, including any right of access thereto or any change of
grade affecting the Property or any part thereof.

 

“Condemnation Proceeds” shall have the meaning set forth in Section 8.04(a)(iv) hereof.

 

“Condominium” shall mean that certain condominium regime
created pursuant to the Condominium Documents.

 

“Condominium Documents” shall mean, collectively, that
certain Public Deed Number 36,681 dated April 10, 1991 granted before Mr. Armando
Antonio Aguilar Rubial, Notary Public No. 1 of La Paz, Baja California
Sur, which Public Deed creates the condominium regime of the Palmilla Tourist
Development and contains the condominium incorporation and subdivision of
parcels, together with the lot description (memoria descriptiva)
and the rules and regulations of the Condominium.

 

“Condominium Laws” shall have the meaning set forth in Section 6.01(nn).

 

“Corporate Trust Office” shall mean the principal office of
the Trustee at which at any particular time its corporate trust business shall
be administered, which as of the Closing Date is 135 S. LaSalle Street, Suite 1625,
Chicago, Illinois 60603, Attention: Global Securitization Trust Services Group —
Palmilla Los Cabos Notes due January 9, 2007.

 

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

 

“Debt” shall mean the outstanding principal amount set forth
in, and evidenced by, the Notes together with all interest accrued and unpaid
thereon and all other sums due to Trustee or Noteholders in respect of the
obligations under the Notes, the Indenture and the other Financing Documents.

 

“Debt Service” shall mean with respect to any particular
period of time, scheduled principal and/or interest payments under this
Indenture, the Notes and the other Financing Documents.

 

4

 

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

 

“Default Rate” shall have the meaning defined in the Notes.

 

“Dollars” or “$” shall mean
lawful money of the United States of America.

 

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

 

“Eligible Institution” shall mean (1) LaSalle Bank
National Association (provided that the rating by S&P, Moody’s and Fitch
for LaSalle Bank National Association’s short term unsecured debt obligations
or commercial paper and long term unsecured debt obligations does not decrease
below its current rating) or such lower rating as may be acceptable to the
Rating Agencies or (2) any other federal or state-chartered depository
institution or trust company, the short term unsecured debt obligations or
commercial paper of which are rated at least “A-1+” by S&P, “P-1” by Moody’s
and “F-1+” by Fitch in the case of accounts in which funds are held for thirty
(30) days or less (or, in the case of accounts in which funds are held for more
than thirty (30) days, the long term unsecured debt obligations of which are
rated at least “AA” by Fitch and S&P and “Aa2” by Moody’s).

 

“Embargoed Person” shall have the meaning set forth in Section 6.01(KK)
hereof.

 

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

 

“Event” shall have the meaning set forth in Section 11.01(a)(ix) hereof.

 

“Event of Default” shall have the meaning set forth in Section 9.01(a) hereof.

 

“Excess Cash Flow” shall have the meaning set forth in the
Cash Management Agreement.

 

5

 

“Extraordinary Resolution” means a resolution passed by
Noteholders holding sixty-six and two thirds per cent (66 2/3%) of the
principal amount of the issued and outstanding Notes.

 

“Financing Documents” shall mean, collectively, this
Indenture, the Notes, the Security Trust Agreement, the Pledge, the Assignment
of Golf Management Agreement, the Assignment of Management Agreement, the
Assignment of Spa Management Agreement, the Guaranty, the Cash Management
Agreement, the Collateral Assignment of Interest Rate Cap Agreement, the
Securitization Cooperation Agreement and all other documents executed and/or
delivered in connection with the issuance of the Notes.

 

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

 

“Fitch” shall mean Fitch, Inc.

 

“GAAP” shall mean generally accepted accounting principles in
the United States of America (“US GAAP”) as of the date of the applicable
financial report; provided that, with respect to any Issuer’s individual
annual financial statements required to be provided to Trustee under this
Indenture, the term “GAAP” shall mean generally accepted accounting principles
in effect in Mexico (“Mexican GAAP”)
as of the date of such annual financial statements, provided, further,
that such annual financial statements shall be prepared in English (or prepared
in Spanish and accompanied by an English translation).

 

“Goldman” shall mean Goldman Sachs Emerging Markets Real
Estate Fund.

 

“Golf Issuer” shall mean Kerzner Palmilla Golf Partners, S.
de R.L. de C.V.

 

“Golf Management Agreement” shall mean that certain Golf
Facility Management Agreement, dated December 5, 2003, between Golf Issuer
and Golf Manager, or, if the context requires, the Replacement Golf Management
Agreement.

 

“Golf Manager” shall mean Troon Mexico, S. de R.L. de C.V.

 

“Governmental Authority” shall mean any national or federal
government, any state, regional, local or other political subdivision of the United States
of America or the United Mexican States thereof with jurisdiction and any
Person with jurisdiction exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government or quasi
governmental issues (including, without limitation, any court).

 

“Gross Income from Operations” shall mean all income and
proceeds (whether in cash or on credit, and computed on an accrual basis, but
excluding non-recurring income and proceeds) received by any Issuer or Manager
for the use,

 

6

 

occupancy or
enjoyment of the Property, or any part thereof, or received by any Issuer
or Manager for the sale of any goods, services or other items sold on or
provided from the Property in the ordinary course of the Property operation,
including without limitation: (a) all income and proceeds received from
rental of rooms, Leases and commercial space, meeting, conference and/or
banquet space within the Property including net parking revenue; (b) all
income and proceeds received from food and beverage operations, including
catering services conducted from the Properties even though rendered outside of
the Property; (c) all income and proceeds from business interruption,
rental interruption and use and occupancy insurance with respect to the
operation of the Property (after deducting therefrom all necessary costs and
expenses incurred in the adjustment or collection thereof); (d) all Awards
for temporary use (after deducting therefrom all costs incurred in the
adjustment or collection thereof and in Restoration of the Property); (e) all
income and proceeds from judgments, settlements and other resolutions of
disputes with respect to matters which would be includable in this definition
of “Gross Income from Operations” if received in the ordinary course of the
Property operation (after deducting therefrom all necessary costs and expenses
incurred in the adjustment or collection thereof); and (f) interest on
credit accounts, rent concessions or credits, and other required pass-throughs
and interest on Reserve Funds to the extent Issuers are entitled to such
interest under this Indenture and the Cash Management Agreement; but excluding,
(1) gross receipts received by lessees, licensees or concessionaires of
the Property; (2) consideration received at the Property for hotel
accommodations, goods and services to be provided at other hotels, although
arranged by, for or on behalf of any Issuer or Manager; (3) income and
proceeds from the sale or other disposition of goods, capital assets and other
items not in the ordinary course of the Property operation; (4) federal,
state and municipal excise, sales and use taxes collected directly from patrons
or guests of the Property as a part of or based on the sales price of any
goods, services or other items, such as gross receipts, room, admission,
cabaret, value-added or equivalent taxes; (5) Awards (except to the extent
provided in clause (d) above); (6) refunds of amounts not
included in Operating Expenses at any time and uncollectible accounts; (7) gratuities
collected by the Property employees; (8) the proceeds of any financing; (9) other
income or proceeds resulting other than from the use or occupancy of the
Property, or any part thereof, or other than from the sale of goods,
services or other items sold on or provided from the Property in the ordinary
course of business; (10) any credits or refunds made to customers, guests
or patrons in the form of allowances or adjustments to previously recorded
revenues; (11) payments made to Issuers pursuant to the Interest Rate Cap
Agreement; and (12) any disbursements to any Issuer from the Tax and Insurance
Escrow Fund, the Replacement Reserve Fund, the Interest Reserve Fund, or any
other escrow fund established by the Financing Documents. Notwithstanding the
foregoing, Gross Income from Operations shall not include any unrealized
translation profit on remeasuring the Pesos.

 

“Guarantor” shall mean, collectively, Goldman and Kerzner.

 

“Guaranty” shall mean that certain Guaranty Agreement, dated
as of the date hereof, from Guarantor to Trustee for the benefit of
Noteholders, as the same may be amended, restated, replaced, supplemented
or otherwise modified from time to time.

 

7

 

“Hotel Issuer” shall mean Kerzner Palmilla Hotel Partners, S.
de R.L. de C.V.

 

“Hotel Service Issuer” shall mean Kerzner Servicios
Hoteleros, S. de R.L. de C.V.

 

“Improvements” shall mean the buildings, structures,
fixtures, additions, enlargements, extensions, modifications, repairs,
replacements and improvements now or hereafter erected or located on the Land.

 

“Indebtedness” of a Person, at a particular date, means the
sum (without duplication) at such date of (a) all indebtedness or
liability of such Person (including, without limitation, amounts for borrowed
money and indebtedness in the form of mezzanine debt and preferred
equity); (b) obligations evidenced by bonds, debentures, notes, or other
similar instruments; (c) obligations for the deferred purchase price of
property or services (including trade obligations); (d) obligations under
letters of credit; (e) obligations under acceptance facilities; (f) all
guaranties, endorsements (other than for collection or deposit in the ordinary
course of business) and other contingent obligations to purchase, to provide
funds for payment, to supply funds, to invest in any Person or entity, or
otherwise to assure a creditor against loss; and (g) obligations secured
by any Liens (other than Liens constituting Permitted Encumbrances), whether or
not the obligations have been assumed.

 

“Independent Director” or “Independent
Manager” shall mean a Person who is not at the time of initial
appointment, or at any time while serving as a director or manager, as
applicable, and has not been at any time during the preceding five (5) years:
(a) a stockholder, director (with the exception of serving as the
Independent Director or Independent Manager), officer, employee, partner,
member, attorney or counsel of any Issuer or Principal or any Affiliate of either
of them; (b) a creditor, customer, supplier or other person who derives
any of its purchases or revenues from its activities with any Issuer or
Principal or any Affiliate of either of them; (c) a Person controlling or
under common control with any such stockholder, director, officer, partner,
member, customer, supplier or other Person; or (d) a member of the
immediate family of any such stockholder, director, officer, employee, partner,
member, customer, supplier or other Person. Notwithstanding anything to the
contrary contained herein, a natural Person who satisfies the foregoing
definition other than clause (b) shall not be disqualified
from serving as an Independent Director or Independent Manager of the
applicable Person if such natural Person is an independent director provided by
a nationally recognized company that provides professional independent
directors in the ordinary course of its business. A natural Person who
otherwise satisfies the foregoing definition, except for being the independent
director of more than one Issuer or a “special purpose entity” affiliated with
any Issuer or Principal, shall not be disqualified from serving as an
Independent Director or Independent Manager if such Person is an independent
director provided by a nationally-recognized company that provides professional
independent directors in the ordinary course of its business. As used in this
definition, the term “control” means the possession, directly or
indirectly, of the power to direct or cause the direction of management,
policies or activities of a Person, whether

 

8

 

through
ownership of voting securities, by contract or otherwise and a “special
purpose entity” is an entity, whose organizational documents contain restrictions
on its activities substantially similar to those set forth in the definition of
Special Purpose Entity in this Indenture.

 

“Individual Parcel” shall mean the particular portion of the
Land and the Improvements thereon contributed by an Issuer to the Security
Trust Agreement, together with all rights pertaining to such portion of the
Land and Improvements.

 

“Initial Note” shall mean, collectively, that certain
Promissory Note A and that certain Promissory Note B in the aggregate principal
amount of One Hundred Ten Million and No/100 Dollars ($110,000,000), in each
case issued as of the Note Issuance Date and made by Issuers, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time as provided herein.

 

“Initial Noteholder” shall mean Column Financial, Inc.,
in its capacity as the assignee of Initial Purchaser of one or more of the
Notes.

 

“Initial Purchaser” shall mean Credit Suisse First Boston
LLC.

 

“Insolvency Opinion” shall mean, collectively, that certain
non-consolidation opinion letter delivered by Creel, Garcia-Cuellar y
Muggenburg, S.C., that certain non-consolidation opinion letter delivered by
Cravath, Swaine & Moore LLP and such other non-consolidation opinions
as may be required hereunder, in each case dated the date hereof and
delivered in connection with the issuance of the Notes.

 

“Insurance Premiums” shall have the meaning set forth in Section 8.01(b) hereof.

 

“Insurance Proceeds” shall have the meaning set forth in Section 8.04(a) hereof.

 

“Interest Period” shall have the meaning set forth in the
Note.

 

“Interest Rate Cap Agreement” shall have the meaning set
forth in the Note.

 

“Interest Reserve Account” shall have the meaning set forth
in Section 10.04 hereof.

 

“Interest Reserve Fund” shall have the meaning set forth in Section 10.04
hereof.

 

“Issuer” shall mean any of Beach Issuer, Golf Issuer, Hotel
Issuer, Hotel Service Issuer or Service Company Issuer.

 

“Issuer Order” and “Issuer Request”
shall mean a written order or request signed in the name of an Issuer by any
one of its authorized officers and delivered

 

9

 

to the Trustee
at least five (5) Business Days prior to the date of the requested action
specified therein.

 

“Kerzner” shall mean Kerzner International Limited.

 

“Land” shall mean the real property contributed by Beach
Issuer, Golf Issuer and Hotel Issuer to the Security Trust Agreement, as fully
described in the Security Trust Agreement.

 

“Lease” shall mean any lease, sublease or subsublease,
letting, license, concession or other agreement (whether written or oral and
whether now or hereafter in effect) pursuant to which any Person is granted a
possessory interest in, or right to use or occupy all or any portion of the
Property, and (a) every modification, amendment or other agreement
relating to such lease, sublease, subsublease, or other agreement entered into
in connection with such lease, sublease, subsublease, or other agreement and (b) every
guarantee of the performance and observance of the covenants, conditions and
agreements to be performed and observed by the other party thereto, provided
that the term “Lease” shall not include any short-term arrangements with
transient guests of the hotel located in the Improvements or the golf course
located at the Property pursuant to which such guests acquire a right to use or
occupy all or a portion of the Property.

 

“Legal Requirements” shall mean all country, federal, state,
county, municipal and other governmental statutes, laws, rules, orders,
regulations, official standards (normas tecnicas),
ordinances, judgments, decrees and injunctions of Governmental Authorities
affecting the Property or any part thereof, or the construction, use,
alteration or operation thereof, or any part thereof, whether now or
hereafter enacted and in force, and all permits, licenses and authorizations
and regulations relating thereto, and all covenants, agreements, restrictions
and encumbrances contained in any instruments, either of record or known to any
Issuer, at any time in force affecting the Property or any part thereof,
including, without limitation, any which may (a) require repairs,
modifications or alterations in or to the Property or any part thereof, or
(b) in any way limit the use and enjoyment thereof.

 

“Letter of Credit” shall mean an irrevocable, unconditional,
transferable, clean sight draft letter of credit reasonably acceptable to
Servicer on behalf of Trustee (either an evergreen letter of credit or one
which does not expire until at least thirty (30) Business Days after the
Maturity Date) in favor of Trustee for the benefit of Noteholders and entitling
Trustee to draw thereon in Chicago, Illinois or New York, New York, issued by a
U.S. Eligible Institution or the U.S. agency or U.S. branch of a foreign
Eligible Institution. If at any time the bank issuing any such Letter of Credit
shall cease to be an Eligible Institution, Trustee shall have the right upon
ten (10) Business Days’ prior notice to Issuers to draw down the same in
full and hold the proceeds of such draw in accordance with the applicable
provisions hereof unless within such ten (10) Business Day period Issuers
have delivered an extension thereof or a replacement Letter of Credit issued by
an Eligible Institution meeting the requirements set forth herein.

 

“LIBOR” shall having the meaning set forth in the Notes.

 

10

 

“Licenses” shall have the meaning set forth in Section 6.01(v) hereof.

 

“Lien” shall mean any mortgage, deed of trust, lien, pledge,
hypothecation, assignment, security interest, or any other encumbrance, charge
or transfer of, on or affecting any Issuer, the Property, any portion thereof
or any interest therein, including, without limitation, any conditional sale or
other title retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing, the filing of any financing
statement, and mechanic’s, materialmen’s and other similar liens and
encumbrances.

 

“Lockbox Account” shall have the meaning set forth in the
Notes.

 

“Lockbox Bank” shall have the meaning set forth in the Notes.

 

“Management Agreement” shall mean the management agreement
entered into by and between Issuers and the Manager, pursuant to which the
Manager is to provide management and other services with respect to the
Property, or, if the context requires, the Replacement Management Agreement.

 

“Manager” shall mean, collectively, Kerzner International
Management Services, Inc. and Kerzner International Management Services
Mexico, S. de R.L. de C.V., or, if the context requires, a Qualified Manager
who is managing the Property in accordance with the terms and provisions of
this Indenture.

 

“Material Adverse Effect” shall mean any material adverse
effect upon (i) the business operations, economic performance or financial
condition of the Issuers taken as a whole or the Property, (ii) the
ability of Issuers to perform, in all material respects, their obligations
under this Indenture and each of the other Financing Documents or (iii) the
enforceability or validity of the Security Trust Agreement, the Pledge, any
other Financing Document, the perfection or priority of any Lien created under
any Financing Document or the remedies of Trustee for the benefit of
Noteholders under any Financing Document.

 

“Maturity Date” shall have the meaning defined in the Notes.

 

“Maximum Legal Rate” shall have the meaning set forth in the
Notes.

 

“Mexico” shall mean the United Mexican States. “Moody’s”
shall mean Moody’s Investors Service, Inc.

 

“Net Cash Flow” shall mean, for any period, the amount
obtained by subtracting Operating Expenses and Capital Expenditures for such
period from Gross Income from Operations for such period.

 

“Net Cash Flow Schedule” shall have the meaning set forth in Section 7.01(k)(ii) hereof.

 

11

 

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

 

“Net Proceeds” shall have the meaning set forth in Section 8.04(a)(iv) hereof.

 

“Net Proceeds Deficiency” shall have the meaning set forth in
Section 8.04(g) hereof.

 

“NOI” shall have the meaning set forth in Section 10.05(a).

 

“Note A” shall mean that certain Promissory Note A in the
original principal amount of Sixty Five Million and No/100 Dollars
($65,000,000), issued as of the Note Issuance Date and made by Issuers, as the
same may be amended, restated, replaced, supplemented or otherwise
modified from time to time as provided herein.

 

“Note B” shall mean that certain Promissory Note B in the
original principal amount of Forty Five Million and No/100 Dollars
($45,000,000), issued as of the Note Issuance Date and made by Issuers, as the
same may be amended, restated, replaced, supplemented or otherwise
modified from time to time as provided herein.

 

“Note Issuance Date” means the date upon which the Notes are
issued and signed by the Issuers pursuant to the terms of this Indenture.

 

“Noteholders” or “Holders” means,
at any time, the Persons holding any one or more of the Notes issued under the
terms of this Indenture and entered in the Register as holders of such Note or
Notes.

 

“Noteholders’ Approval” means an instrument signed in one or
more counterparts by all the Registered Holders of Notes at the time of
issuance of the approval, or approved pursuant to resolution, in accordance
with the provisions of this Indenture.

 

“Notes” shall mean, collectively, the Initial Note and all
other notes issued hereunder, governed by the provisions of this Indenture and
at the time of determination then being outstanding.

 

“Obligations” means all present and future debts, expenses
and liabilities, direct or indirect, absolute or contingent, due, owing, or
accruing due, or owing, from time to time by the Issuers hereunder or under the
Notes and the other Financing Documents.

 

“Officer’s Certificate” shall mean a certificate delivered to
Initial Purchaser, Initial Noteholder or Trustee by any Issuer or Issuers, as
the case may be, which is signed by an authorized senior officer of such
Issuer (if the Officer’s Certificate is being delivered by such Issuer) or of
any Issuer (if the Owner’s Certificate is being delivered by Issuers).

 

12

 

“Operating Expenses” shall mean the sum of all costs and
expenses of operating, maintaining, directing, managing and supervising the
Property (excluding, (i) depreciation and amortization, (ii) any Debt
Service, or (iii) any Capital Expenditures in connection with the
Property, incurred by Issuers or by Manager on behalf of Issuers pursuant to
the Management Agreement, or as otherwise specifically provided therein, which
are properly attributable to the period under consideration under Issuers’
system of accounting, including without limitation: (a) the cost of all
food and beverages sold or consumed and of all necessary chinaware, glassware,
linens, flatware, uniforms, utensils and other items of a similar nature,
including such items bearing the name or identifying characteristics of the
hotels as Issuers and/or Manager shall reasonably consider appropriate (“Operating Equipment”) and paper supplies, cleaning materials
and similar consumable items (“Operating Supplies”)
placed in use (other than reserve stocks thereof in storerooms). Operating
Equipment and Operating Supplies shall be considered to have been placed in use
when they are transferred from the storerooms of the Property to the
appropriate operating departments; (b) salaries and wages of personnel of
the Property, including costs of payroll taxes and employee benefits (which
benefits may include, without limitation, a pension plan, medical
insurance, life insurance, travel accident insurance and an executive bonus
program) and the costs of moving employees, personnel, their families and their
belongings to the area in which the Property is located at the commencement of
their employment at the Property and other administrative and general operating
expenses not otherwise specifically referred to in this definition. Except as
otherwise expressly provided under the Management Agreement with respect to
employees regularly employed at the Property, the salaries or wages of other
employees or executives of Manager, Guarantor or any of its Affiliates shall in
no event be Operating Expenses, but they shall be entitled to free room and
board and the free use of all facilities at such times as they visit any
Individual Parcel exclusively in connection with the management of such
Individual Parcel. Notwithstanding the foregoing, if it becomes necessary for a
Guarantor employee or an employee or executive of Guarantor Affiliate to
temporarily perform services at any Individual Parcel of a nature normally
performed by personnel of the Property, his or her salary (including any Issuer’s
or Manager’s payroll taxes and employee benefits) as well as his or her
traveling expenses will be Operating Expenses and he or she will be entitled to
free room, board and use of the facilities as aforesaid, while performing such
services; (c) the cost of all other goods and services obtained by Issuers
or Manager in connection with its operation of the Property including, without
limitation, heat and utilities, office supplies including any operating leases
and all services performed by third parties; (d) the cost of repairs to
and maintenance of the Property other than Capital Expenditures; (e) insurance
premiums and losses incurred on any self-insured risks, provided that
Issuers and Manager have specifically approved in advance such self-insurance
or insurance is unavailable to cover such risks. Insurance premiums on policies
for more than one year will be pro rated over the period of insurance and
premiums under blanket policies will be allocated among properties covered; (f) all
Taxes and Other Charges (other than federal, state or local income taxes and
franchise taxes or the equivalent) payable by or assessed against Issuers or
Manager with respect to the operation of the Property; (g) legal fees,
administrative and general expenses, security costs, trustee expenses, master
condominium association fees and fees of any firm of independent certified
public accounts designated from time to

 

13

 

time by
Issuers (the “Independent CPA”) for services
directly related to the operation of the Property; (h) the costs and
expenses of technical consultants and specialized operational experts for
specialized services in connection with non-recurring work on operational,
legal, functional, decorating, design or construction problems and activities,
including the reasonable fees of Guarantor or any Guarantor subsidiary or
division in connection therewith, provided that such costs and expenses
are reasonable and customary; (i) all expenses for advertising for the
Property and all expenses of sales promotion, marketing, advertising and public
relations activities; (j) all out-of-pocket expenses and disbursements
determined by the Independent CPA to have been reasonably, properly and
specifically incurred by Issuers, Manager, Guarantor or any of their Affiliates
pursuant to, in the course of and directly related to, the management and
operation of the Property under the Management Agreement. Without limiting the
generality of the foregoing, such charges may include all reasonable
travel, telephone, telegram, radiogram, cablegram, air express and other
incidental expenses, but, excluding costs relating to the offices maintained by
any Issuer, Manager, Guarantor or any of their Affiliates other than any sales
offices maintained off-site or offices maintained at the Individual Parcel for
the management of such Individual Parcel; (k) the cost of any reservations
system, any accounting services or other group benefits, programs or services
from time to time made available to properties in the Issuers’ system; (I) the
cost associated with any retail Leases; (m) any management fees, basic and
incentive fees or other fees and reimbursables paid or payable to Manager under
the Management Agreement or Golf Manager under the Golf Management Agreement;
and (n) all costs and expenses of owning, maintaining, conducting and
supervising the operation of the Property to the extent such costs and expenses
are not included above. Notwithstanding anything herein contained to the
contrary, Operating Expenses shall not include, and shall not be deemed to
include, (i) any unrealized translation loss on remeasuring the Pesos and (ii) any
costs or expenses, including, but not limited to, the costs and expenses of
technical consultants and other specialized operational workers, incurred in
connection with any Capital Expenditure program (including pre-opening costs),
where such costs and expenses are capitalized to the Property as permitted by
GAAP.

 

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

 

“Payment Date” shall have the meaning set forth in the Notes.

 

“Permitted Encumbrances” shall mean, collectively (a) the
Liens and security interests created by the Financing Documents, (b) all
Liens, encumbrances and other matters disclosed in the Title Insurance Policy
or liens that are being contested in accordance with Section 7.01(j)(iii) hereof,
(c) Liens, if any, for Taxes imposed by any Governmental Authority not yet
due or delinquent or that are being contested in accordance with Section 7.01(b) hereof,
(d) Liens on equipment and other personalty used on the Property, if any,
granted in connection with the financing of such equipment or other personalty
permitted by the Loan Documents, (e) access and utility easements

 

14

 

which do not
have a Material Adverse Effect, and (f) such other title and survey
exceptions as Initial Noteholder or Trustee has approved or may approve in
writing in Initial Noteholder’s or Trustee’s sole discretion.

 

“Permitted Equipment Financing” shall have the meaning set
forth in clause (t) of the definition of the term “Special Purpose Entity”.

 

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

 

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

 

“Personal Property” shall mean all the movable property and
rights and interests pledged by the Issuers pursuant to the Pledge and all other
personal property owned by any Issuer and encumbered by any of the Financing
Documents, together with all rights pertaining to such property.

 

“Pesos” shall mean lawful money of Mexico.

 

“Physical Conditions Report” shall mean that certain report
of a Hotel Resort, dated November 18, 2004, prepared by Merritt &
Harris, Inc.

 

“Pledge” shall mean the Pledge Without Transmission of
Possession (Prenda Sin Transmision de Posesion), as
the same may be amended, modified, restated or supplemented from time to
time, created on the collateral described therein and granted by Issuers to
secure the payment of the Notes.

 

“Policies” shall have the meaning specified in Section 8.01(b) hereof.

 

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

 

“Principal” shall mean, collectively, Palmilla Holdings I,
LLC and Palmilla Holdings II, LLC.

 

“Property” shall mean, collectively, each and every
Individual Parcel and all Personal Property.

 

15

 

“Provided Information” shall mean any and all financial and
other information provided at any time by, or on behalf of, any Issuer or
Guarantor with respect to the Property, any Issuer, Principal, Guarantor and/or
Manager.

 

“Qualified Golf Manager” shall mean either (a) Golf
Manager or (b) a management organization possessing similar reputation and
experience as Golf Manager in managing a golf course of comparable class,
luxury and quality as the golf course at the Property.

 

“Qualified Manager” shall mean either (a) Manager or (b) in
the reasonable judgment of Servicer on behalf of Trustee, a reputable and
experienced management organization (which may be an Affiliate of an
Issuer) possessing experience in managing properties similar in size, scope,
use and value as the Property, provided, that Issuers shall have
obtained prior written confirmation from the applicable Rating Agencies that
management of the Property by such Person will not cause a downgrade,
withdrawal or qualification of the then current ratings of the Securities or
any class thereof.

 

“Qualified Spa Manager” shall mean either (a) Spa
Manager or (b) a management organization possessing similar reputation and
experience as Spa Manager in managing a spa facility of comparable class,
luxury and quality as the spa facility at the Property.

 

“Rating Agencies” shall mean each of S&P, Moody’s and
Fitch, or any other nationally recognized statistical rating agency which has
been approved by Trustee.

 

“Register” means the register or registers providing for the
registration of Notes and the registration of transfers and exchanges of Notes,
which register the Trustee will cause to be kept.

 

“Registered Holder” shall mean any Noteholder who appears on
the Register as the owner and holder of one or more Notes.

 

“Related Party” shall have the meaning set forth in Section 6.01(mm)
hereof.

 

“REMIC Trust” shall mean a “real estate mortgage investment
conduit” within the meaning of Section 860D of the Code that holds the
Note.

 

“Rents” shall mean, with respect to each Individual Parcel,
all rents, rent equivalents, moneys payable as damages or in lieu of rent or
rent equivalents, royalties (including, without limitation, all oil and gas or
other mineral royalties and bonuses), income, receivables, receipts, revenues,
deposits (including, without limitation, security, utility and other deposits),
accounts, cash, issues, profits, charges for services rendered, and other
consideration of whatever form or nature received by or paid to or for the
account of or benefit of Issuers or their agents or employees from any and all
sources arising from or attributable to the Individual Parcel, and proceeds, if
any, from business interruption or other loss of income or insurance,
including, without limitation, all hotel

 

16

 

receipts,
revenues and credit card receipts collected from guest rooms, restaurants,
bars, meeting rooms, banquet rooms, golf course and other recreational
facilities, all receivables, customer obligations, installment payment
obligations and other obligations now existing or hereafter arising or created
out of the sale, lease, sublease, license, concession or other grant of the
right of the use and occupancy of property or rendering of services by any
Issuer or any operator or manager of the hotel, the golf course or the
commercial space located in the Improvements or at the Property or acquired
from others (including, without limitation, from the rental of any office
space, retail space, guest rooms or other space, halls, stores, and offices,
and deposits securing reservations of such space), license, lease, sublease and
concession fees and rentals, health club membership fees, food and beverage
wholesale and retail sales, service charges, vending machine sales.

 

“Replacement Golf Management Agreement” shall mean,
collectively, either (a) a management agreement with a Qualified Golf
Manager substantially in the same form and substance as the Golf
Management Agreement, or (b) a management agreement with a Qualified Golf
Manager, which management agreement shall be reasonably acceptable to the
Servicer, on behalf of the Trustee in form and substance, provided,
with respect to this clause (b), an assignment of management
agreement substantially in the form then used by Servicer (or of such
other form and substance reasonably acceptable to Servicer, on behalf of
the Trustee) shall be executed and delivered to Trustee by Issuers and such
Qualified Golf Manager at Issuers’ expense.

 

“Replacement Interest Rate Cap Agreement” means an interest
rate cap agreement from an Acceptable Counterparty with terms identical to the
Interest Rate Cap Agreement except that the same shall be effective in
connection with replacement of the Interest Rate Cap Agreement following a
downgrade, withdrawal or qualification of the long-term unsecured debt rating
of the Counterparty; provided that to the extent any such interest rate
cap agreement does not meet the foregoing requirements, a “Replacement Interest
Rate Cap Agreement” shall be such interest rate cap agreement approved in
writing by each of the Rating Agencies with respect thereto.

 

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

 

“Replacement Reserve Account” shall have the meaning set
forth in Section 10.03(a) hereof.

 

17

 

“Replacement Reserve Fund” shall have the meaning set forth
in Section 10.03(a) hereof.

 

“Replacement Reserve Monthly Deposit” shall have the meaning
set forth in Section 10.03(a) hereof.

 

“Replacement Spa Management Agreement” shall mean,
collectively, either (a) a management agreement with a Qualified Spa
Manager substantially in the same form and substance as the Spa Management
Agreement, or (b) a management agreement with a Qualified Spa Manager,
which management agreement shall be reasonably acceptable to the Servicer, on
behalf of the Trustee in form and substance, provided, with respect
to this clause (b), an assignment of management agreement
substantially in the form then used by Servicer (or of such other form and
substance reasonably acceptable to Servicer, on behalf of the Trustee) shall be
executed and delivered to Trustee by Issuers and such Qualified Spa Manager at
Issuers’ expense.

 

“Replacements” shall have the meaning set forth in Section 10.03(a) hereof.

 

“Required Repair Account” shall have the meaning set forth in
Section 10.1(a) hereof.

 

“Required Repair Fund” shall have the meaning set forth in Section 10.1(a) hereof.

 

“Required Repairs” shall have the meaning set forth in Section 10.1(a) hereof.

 

“Reserve Funds” shall mean, collectively, the Tax and
Insurance Escrow Fund, the Replacement Reserve Fund, the Interest Reserve Fund,
the Required Repair Fund, and any other escrow fund established pursuant to the
Financing Documents.

 

“Reserve LC” shall mean the NOI LC or the Spa LC.

 

“Responsible Officer” shall mean a person designated by
Trustee as an authorized officer of Trustee in connection with the
administration of the Notes in accordance with this Indenture.

 

“Restaurant Lease” shall mean that certain Agreement, dated May 26,
2003, between Charlie Trotter Enterprises, Inc. and Hotel Issuer.

 

“Restoration” shall mean the repair and restoration of any
Individual Parcel after a Casualty or Condemnation as nearly as possible to the
condition such Individual Parcel was in immediately prior to such Casualty or
Condemnation, with such alterations as may be reasonably approved by
Trustee.

 

“Restricted Party” shall mean (a) any Issuer, Principal,
Affiliated Manager, Palmilla JV, LLC, GSEM Palmilla LLC and Kerzner Investment
Palmilla, Inc.

 

18

 

and (b) any
shareholder, partner, member, non-member manager and any direct or indirect
legal or beneficial owner of any Issuer, Principal, Affiliated Manager,
Palmilla JV, LLC, GSEM Palmilla LLC and Kerzner Investment Palmilla, Inc.

 

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

 

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

 

“Securities” shall have the meaning set forth in the Securitization
Cooperation Agreement.

 

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

 

“Securitization” shall have the meaning set forth in the
Securitization Cooperation Agreement.

 

“Securitization Cooperation Agreement” shall mean that
certain letter agreement dated the date hereof between Issuers and Column
Financial, Inc.

 

“Security Trust Agreement” shall mean that certain Amended
and Restated Trust Agreement Number 0023, established with Security Trust
Trustee to secure the payment of the Notes and the performance of the other
Obligations, as the same has been or may be amended, restated or
supplemented from time to time.

 

“Security Trust First Beneficiary” shall mean Trustee, as
first beneficiary under the Security Trust Agreement.

 

“Security Trust Second Beneficiary” shall mean, collectively,
Beach Issuer, Golf Issuer, Hotel Issuer, Palmilla Holdings I, LLC and Palmilla
Holdings II, LLC, each as second beneficiary under the Security Trust
Agreement.

 

“Security Trust Trustee” shall mean Banco J.P. Morgan, S.A.,
Institución de Banca Múltiple, J.P. Morgan Grupo Financiero, Division
Fiduciaria, as trustee under the Security Trust Agreement.

 

“Service Company Issuer” shall mean Kerzner Compañia de
Servicios, S. de R.L. de C.V.

 

“Servicer” shall mean Orix Capital Markets, LLC or such other
Person designated in writing pursuant to Section 11.14 hereof by a
majority of the Noteholders to act as Servicer, and who shall have accepted in
writing such appointment to so act, on behalf of the Trustee for the benefit of
the Noteholders, with power and responsibility to perform all
responsibilities identified as being performed by the Servicer hereunder and as
may be more specifically described in a servicing agreement between the
Noteholders and the Servicer, either prior to or upon any Securitization, as
shall be determined by the

 

19

 

a majority of
the Noteholders. The Servicer may be a Noteholder designated as such in
writing by a majority of the Noteholders. It is understood and agreed that any
servicing agreement may provide that the Servicer may take certain
actions, or refrain from an action, only with the consent of a specified
portion (which may be all) of the Noteholders.

 

“Spa LC” shall have the meaning set forth in Section 10.05(b).

 

“Spa Management Agreement” shall mean that certain Spa
Operation Agreement, dated September 19, 2003, between Hotel Issuer and
Spa Manager, or, if the context requires, the Replacement Spa Management
Agreement.

 

“Spa Manager” shall mean Mandara Spa de Mexico, S. de R.L. de
C.V.

 

“Special Purpose Entity” shall mean a corporation, limited
partnership or limited liability company which at all times on and after the
date hereof:

 

(a)  is
organized solely for the purpose of (i) acquiring, developing, owning,
holding, selling, leasing, transferring, exchanging, managing and operating the
Property or its Individual Parcel, entering into this Indenture with the
Trustee, refinancing the Property or its Individual Parcel in connection with a
permitted repayment of the Notes, and transacting lawful business that is
incident, necessary and appropriate to accomplish the foregoing; or (ii) acting
as a general partner of the limited partnership that owns the Property or an
Individual Parcel or member of the limited liability company that owns the
Property or an Individual Parcel;

 

(b)  is
not engaged and will not engage in any business unrelated to (i) the
acquisition, development, ownership, management or operation of the Property or
its Individual Parcel, (ii) acting as general partner of the limited
partnership that owns the Property or an Individual Parcel; or (iii) acting
as a member of the limited liability company that owns the Property or an
Individual Parcel, as applicable;

 

(c)  other
than, in the case of Hotel Issuer, the ownership of seven (7) residences
currently utilized as employee housing, does not have and will not have any
material assets other than its Individual Parcel and personal property
necessary or incidental to the ownership and operation of the Property or its
Individual Parcel or its partnership interest in the limited partnership or the
member interest in the limited liability company that owns the Property or an
Individual Parcel or acts as the general partner or managing member thereof, as
applicable;

 

(d)  has
not engaged in, sought or consented to and will not engage in, seek or consent
to any dissolution, winding up, liquidation, consolidation, merger, sale of all
or substantially all of its assets, transfer of partnership or membership
interests (if such entity is a general partner in a limited partnership or a
member in a limited liability company) or amendment of its limited partnership
agreement,

 

20

 

articles of incorporation,
articles of organization, by-laws, certificate of formation or operating
agreement (as applicable) with respect to the matters set forth in this
definition;

 

(e)  if
such entity is a limited partnership, has, as its only general partners,
Special Purpose Entities that are corporations, limited partnerships or limited
liability companies;

 

(f)  if
such entity is a corporation, has at least two (2) Independent Directors,
and has not caused or allowed and will not cause or allow the board of
directors of such entity to take any action requiring the unanimous affirmative
vote of one hundred percent (100%) of the members of its board of directors
unless two Independent Directors shall have participated in such vote;

 

(g)  if
such entity is a limited liability company with more than one member, has at
least one member that is a Special Purpose Entity that is a corporation that
has at least two Independent Directors and that owns at least one percent
(1.0%) of the equity of the limited liability company;

 

(h)  if
such entity is a limited liability company with only one member, is a limited
liability company organized in the State of Delaware that has (i) as its
only member a non-managing member, (ii) at least two (2) Independent
Managers and has not caused or allowed and will not cause or allow the board of
managers of such entity to take any action requiring the unanimous affirmative
vote of one hundred percent (100%) of the managers unless two (2) Independent
Managers shall have participated in such vote and (iii) at least two (2) springing
members that will become the non-managing members of such entity upon the
dissolution of the existing non-managing member;

 

(i)  if
such entity is (i) a limited liability company, has articles of
organization, a certificate of formation and/or an operating agreement, as
applicable, (ii) a limited partnership, has a limited partnership
agreement, or (iii) a corporation, has a certificate of incorporation or
articles that, in each case, provide that such entity will not: (A) dissolve,
merge, liquidate, consolidate; (B) sell all or substantially all of its
assets or the assets of the Issuers or any Issuer (as applicable); (C) engage
in any other business activity, or amend its organizational documents with
respect to the matters set forth in this definition without the consent of the
Servicer on behalf of Trustee for the benefit of Noteholder; or (D) without
the affirmative vote of two Independent Directors and of all other directors of
the corporation (that is such entity or the general partner or managing or
co-managing member of such entity), file a bankruptcy or insolvency petition or
otherwise institute insolvency proceedings with respect to itself or to any other
entity in which it has a direct or indirect legal or beneficial ownership
interest;

 

(j)  is and will remain solvent and pay its debts
and liabilities (including, as applicable, shared personnel and overhead
expenses) from its assets as the same shall become due, and is maintaining and
will maintain adequate capital for

 

21

 

the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations;

 

(k)  will not fail to correct any known
misunderstanding regarding the separate identity of such entity;

 

(l)  will maintain its accounts, books and records
separate from any other Person and will file its own tax returns, except to the
extent that it is required to file consolidated tax returns by law;

 

(m)  will maintain its own records, books,
resolutions and agreements;

 

(n)  other than as provided in the Cash Management
Agreement, (i) will not commingle its funds or assets with those of any
other Person and (2) will not participate in any cash management system
with any other Person;

 

(o)  will hold its assets in its own name;

 

(p)  will conduct its business in its name, in the
name of “One and Only Palmilla” (in the case of an Issuer) or in a name
franchised or licensed to it by an entity other than an Affiliate of Issuers or
any Issuer, except for services rendered under a business management services
agreement with an Affiliate that complies with the terms contained in Subsection (dd)
below, so long as the manager, or equivalent thereof, under such business
management services agreement holds itself out as an agent of the Issuers or
the applicable Issuer;

 

(q)  will maintain its financial statements,
accounting records and other entity documents separate from any other Person
and has not permitted and will not permit its assets to be listed as assets on
the financial statement of any other entity except as required by GAAP; provided,
however, that any such consolidated financial statement shall contain a
note indicating that its separate assets and liabilities are neither available
to pay the debts of the consolidated entity nor constitute obligations of the
consolidated entity;

 

(r)  will pay its own liabilities and expenses,
including the salaries of its own employees, out of its own funds and assets,
and has maintained and will maintain a sufficient number of employees in light
of its contemplated business operations;

 

(s)  will observe all partnership, corporate or
limited liability company formalities, as applicable;

 

(t)  has and will have no Indebtedness other than (i) indebtedness
evidenced by the Notes and the other Financing Documents, (ii) liabilities
incurred in the ordinary course of business relating to the ownership and
operation of the Property or its Individual Parcel and the routine
administration of Issuers or any Issuer, in amounts not to exceed one percent
(1%) of the principal balance of the Notes which liabilities are not more than
sixty (60) days past the date

 

22

 

incurred, are not evidenced by
a note and are paid when due, and which amounts are normal and reasonable under
the circumstances, (iii) in the case of an Issuer, indebtedness incurred
in connection with the financing of equipment and other personal property used
on the Property, provided that the aggregate amount of such indebtedness
from all Issuers does not exceed $512,000 at any one time (the “Permitted Equipment Financing”), and (iv) such
other liabilities that are permitted pursuant to this Indenture;

 

(u)  other than in connection with the Permitted
Equipment Financing and the indebtedness evidenced by the Notes and the other
Financing Documents, will not assume or guarantee or become obligated for the
debts of any other Person or hold out its credit as being available to satisfy
the obligations of any other Person except as permitted pursuant to this
Indenture or the other Financing Documents;

 

(v)  will
not acquire obligations or securities of its partners, members or shareholders
or any other Affiliate;

 

(w)  will allocate fairly and reasonably any
overhead expenses that are shared with any Affiliate, including, but not
limited to, paying for shared office space and services performed by any
employee of an Affiliate;

 

(x)  maintains and uses and will maintain and use
separate stationery, invoices and checks bearing its name or, in the case of an
Issuer, the name “One and Only Palmilla”. The stationery, invoices, and checks
utilized by the Special Purpose Entity or utilized to collect its funds or pay
its expenses shall bear its own name or, in the case of an Issuer, the name “One
and Only Palmilla” and shall not bear the name of any other entity unless such
entity is clearly designated as being the Special Purpose Entity’s agent;

 

(y)  other than pursuant to the Financing
Documents, will not pledge its assets for the benefit of any other Person;

 

(z)  other than, in the case of an Issuer,
pursuant to its use of the name “One and Only Palmilla,” will hold itself out
and identify itself as a separate and distinct entity under its own name or in
a name franchised or licensed to it by an entity other than an Affiliate of
Issuers and any Issuer and not as a division or part of any other Person,
except for services rendered under a business management services agreement
with an Affiliate that complies with the terms contained in Subsection (dd)
below, so long as the manager, or equivalent thereof, under such business
management services agreement holds itself out as an agent of the Issuers or
the applicable Issuer;

 

(aa)  will maintain its assets in such a manner
that it will not be costly or difficult to segregate, ascertain or identify its
individual assets from those of any other Person;

 

(bb)  will not make loans to any Person or hold
evidence of indebtedness issued by any other Person or entity (other than cash
and investment-grade

 

23

 

securities issued by an entity
that is not an Affiliate of or subject to common ownership with such entity);

 

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

 

(dd)  will not enter into or be a party to, any
contract or agreement with any of its Affiliates, constituents or owners, or
any guarantors of any of its obligations or any Affiliate of any of the
foregoing except (A) in the ordinary course of its business and on terms
which are intrinsically fair, commercially reasonable and are no less favorable
to it than would be obtained in a comparable arm’s-length transaction with an
unrelated third party and (B) in connection with this Indenture and the
other Financing Documents;

 

(ee)  except as set forth in the organizational
documents of the Issuers as of the Note Issuance Date, will not have any
obligation to, and will not, indemnify its partners, officers, directors or
members, as the case may be, unless such an obligation is fully subordinated
to the Debt and will not constitute a claim against it in the event that cash
flow in excess of the amount required to pay the Debt is insufficient to pay
such obligation;

 

(ff)  if such entity is a corporation, it shall
consider the interests of its creditors in connection with all corporate
actions;

 

(gg)  other than, in the case of an Issuer, the
Permitted Equipment Financing, does not and will not have any of its
obligations guaranteed by any Affiliate;

 

(hh)  complies and will comply with all of the
terms and provisions contained in its organizational documents. The statement
of facts contained in its organizational documents are true and correct and
will remain true and correct; and

 

(ii)  in
the case of a limited liability company (sociedad de
responsabilidad limitada de capital variable) organized in Mexico,
observes all formalities in all material respects applicable to such types of
entities in the Mexican General Corporations Law (Ley General
de Sociedades Mercantiles), and has by-laws (estatutos
sociales) which provide that, for so long as the Notes are
outstanding and the limited liability company’s assets continue to be subject
to the Liens securing the Debt, the limited liability company shall not take
any of the following actions:

 

(i)  the
dissolution, liquidation, consolidation, merger or sale of all or substantially
all of the assets of the company, except with the unanimous approval of all of
its members;

 

24

 

(ii)  the
engagement by any Issuer in any business other than the ownership, leasing,
maintenance and operation of the Property or its Individual Parcel; and

 

(iii)  the
filing, or consent to the filing, of a bankruptcy or insolvency petition (concurso mercantil), any general assignment for the benefit
of creditors or the appointment of a receiver, liquidator, síndico,
assignee, trustee, sequestrator, custodian or any similar official for any
Issuer or a substantial portion of its properties without the unanimous vote of
all members of the limited liability company.

 

“State” shall mean Mexico or the State or Commonwealth in the
United States of America, as applicable, in which the Property or any part thereof
is located.

 

“Substitute Guarantor” shall mean a Person with (a) $250,000,000
in net worth and (b) $20,000,000 in liquidity, including for purposes of
determination (i) availability under any existing lines of credit and (ii) outstanding
capital commitments by “Qualified Institutional Investors” or “Accredited
Investors” (as such terms are defined under the Securities Act) pursuant to
subscription or other similar agreements or arrangements.

 

“Survey” shall mean that certain survey of the One &
Only Palmilla Hotel located at Los Cabos, Baja California Sur, Mexico, dated November 30,
2004, by Pedro Sotres Hernandez, Surveyor.

 

“Tax and Insurance Escrow Fund” shall have the meaning set
forth in Section 10.02(a) hereof.

 

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

 

“Threshold Amount” shall have the meaning set forth in Section 7.01(v) hereof.

 

“Title Insurance Policy” shall mean a title insurance policy
in a form (acceptable to Initial Purchaser) issued with respect to the
Property and insuring the Trustee that the Security Trust Agreement creates a
valid first lien on the applicable Property.

 

“Transfer” shall have the meaning set forth in Section 7.02(j)(ii) hereof.

 

“Transferee” shall have the meaning set forth in Section 7.02(j)(v) hereof.

 

“Transferee Related Entities” shall have the meaning set
forth in Section 7.02(j)(vi) hereof.

 

25

 

“Trustee” shall have the meaning set forth on the first page hereof

 

“Trustee Indemnified Party” or “Trustee
Indemnified Parties” shall mean the Trustee, any of its directors,
officers, shareholders, agents or employees.

 

“UCC” or “Uniform Commercial
Code” shall mean the Uniform Commercial Code as in effect from
time to time in the State or Commonwealth of the United States of America
in which the Property or any part thereof is located.

 

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

 

Section 1.02  Accounting Terms. All
accounting terms not otherwise defined herein have the meanings assigned to
them in accordance with GAAP.

 

Section 1.03  General. The
division of this Indenture into sections and the insertion of headings are for
convenience of reference only and shall not affect the interpretation of this
Indenture. Any reference in this Indenture to any act or statute or any section thereof
shall be deemed to be a reference to such act, statute or section as
amended or re-enacted from time to time, except as otherwise provided herein. Words
importing the singular number include the plural and vice versa. Any defined
term used in the singular preceded by “any” shall be taken to indicate any
number of the members of the relevant class. Any reference in this Indenture to
any Person shall include the successors and permitted assigns of such Person. All
references to sections and schedules are to sections and schedules in or to
this Indenture unless otherwise specified. All uses of the word “including”
shall mean “including, without limitation” unless the context shall indicate
otherwise. Unless otherwise specified, the words “hereof,” “herein” and “hereunder”
and words of similar import when used in this Indenture shall refer to this
Indenture as a whole and not to any particular provision of this Indenture. Wherever
a representation, warranty or certificate is based upon the knowledge of any
Issuer or Issuers, the knowledge of each Issuer shall be imputed to each other
Issuer and Issuers.

 

ARTICLE 2 – ISSUE OF NOTES

 

Section 2.01  No Limit on Issue. The
aggregate principal amount of the Notes authorized to be issued under this
Indenture and outstanding at any one time shall be limited to the amount of
$110,000,000 and subject to compliance with Section 2.03.

 

Section 2.02  Notes Deemed to be Outstanding. Every
Note signed and delivered by the Issuers hereunder shall be deemed to be
outstanding until it shall be cancelled or delivered to the Trustee for
cancellation, or moneys for the payment thereof shall have been set aside
pursuant hereto.

 

Section 2.03  Conditions Precedent to the Issue of Notes.
(a)  No Note shall be signed by the Trustee
and issued hereunder unless on the Note Issuance Date relating thereto each of
the following conditions shall be satisfied:

 

26

 

(i)  No Event of Default. No event shall have occurred and
be continuing which would constitute an Event of Default or, with the giving of
notice or lapse of time or both, would constitute an Event of Default, nor
shall the issue of the Note, with the giving of notice or lapse of time or
both, constitute or result in the occurrence of an Event of Default;

 

(ii)  Representations. The representations and warranties
of the Issuers set forth in herein and in the other Financing Documents shall
be true and accurate in all material respects;

 

(iii)  Security Trust Agreement and Pledge. The Issuers
shall have executed the Security Trust Agreement and the Pledge, and shall have
presented for registration the Security Trust Agreement and the Pledge with the
corresponding public registries in Mexico and shall have received stamped
copies thereof confirming receipt of the relevant documentation by such public
registries;

 

(iv)  No Insolvency. No Issuer is insolvent within the
meaning thereof in the Bankruptcy Code; and

 

(v)  Conditions Precedent in Other Documents. Any terms,
conditions, including conditions precedent, set forth in the Security Trust
Agreement and in the Pledge, have been fully and properly satisfied in the
judgment and discretion of the Initial Purchaser.

 

(vi)  Appointment of Process Agent. The Issuers shall have
granted their appointed process agent (as provided in Section 14.04
hereof) a power-of-attorney for lawsuits and collections, in form and
substance satisfactory to Initial Purchaser.

 

(vii)  Registration of Notes with CNBV. The Notes shall
have been approved for registration with the Special Section (Sección Especial) of the National Registry
of Securities (Registro Nacional de Valores)
maintained by the CNBV.

 

(b)  The Trustee shall have no responsibility for determining the
satisfaction of any such conditions, nor for the delivery, receipt or custody
of any agreements, documents or other materials specified in the Security Trust
Agreement, or in the Pledge or in this Agreement, which are required to be
delivered to or received by any party other than the Trustee. With respect to
any agreements, documents or other materials which are to be received by the
Trustee, the Trustee shall have no responsibility for the review of such
documents, but shall be responsible only to receive such agreements, documents
or other materials as are actually delivered to it, and any review thereof and
determination with respect to compliance with the requirements of this
Agreement or the Security Trust Agreement or the Pledge shall be made by the
Noteholders.

 

Section 2.04  Issue of Notes. The
Notes to be issued hereunder shall be issued subject to the following terms,
conditions and attributes:

 

27

 

(a)  the Notes shall be issued in the form of the Exhibit A
attached hereto and made a part hereof;

 

(b)  the Notes shall bear interest from the Note Issuance Date at
the rate specified in the Notes issued and should there be an Event of Default
at any time, including failure to pay in accordance with any stated payment
obligation, interest shall be payable on the amount in default at the Default
Rate;

 

(c)  the principal of the Notes, together with interest, if any,
thereon, will be payable as specified in the Notes issued;

 

(d)  every Note, whether issued originally or in exchange for one
or more other Notes, shall be entitled to the payments as designated in the
issued form of Note;

 

(e)  wherever in this Indenture or the Notes there is mention, in
any context, of the payment of interest, such mention shall be deemed to
include the payment of interest on amounts in default;

 

(f)  the Notes may be assigned or otherwise transferred by
Initial Purchaser and thereafter any Noteholder, provided that such assignment
or other transfer in the United States of America is effected pursuant to
an exemption from any applicable federal and state securities laws, which may be
exemptions provided by Rule 144A under the Securities Act, Regulation D
under the Securities Act, Regulation S under the Securities Act or any other
exemption from registration available under the applicable federal and state
securities laws in the United States of America; and

 

(g)  the terms and conditions of this Indenture are otherwise met.

 

Section 2.05  Form of Notes. (a) 
All Notes issued hereunder shall be in substantially the form of Exhibit A
hereto, shall be signed by the Issuers, and shall be authenticated by the
Trustee, to be validly issued hereunder. The Trustee’s certificates of authentication
for the Notes shall be in substantially the following form:

 

This Note is
one of the Notes referred to in the above-mentioned Indenture.

 

	
   

  	
   

  	
  [                                       ],
  as Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Authorized
  Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  or

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [                                       ],
  as Trustee

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  as
  Authenticating Agent

  

 

28

 

(b)  The following legend shall be placed on each Note:

 

THIS NOTE MAY BE
ASSIGNED OR OTHERWISE TRANSFERRED BY THE INITIAL PURCHASER THEREOF AND
THEREAFTER BY ANY HOLDER THEREOF, PROVIDED THAT SUCH ASSIGNMENT OR OTHER
TRANSFER IN THE UNITED STATES OF AMERICA IS EFFECTED PURSUANT TO AN EXEMPTION
FROM ANY APPLICABLE FEDERAL AND STATE SECURITIES LAWS IN THE UNITED STATES OF
AMERICA, WHICH MAY BE THE EXEMPTIONS PROVIDED BY RULE 144A UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
REGULATION D UNDER THE SECURITIES ACT, REGULATION S UNDER THE SECURITIES ACT OR
ANY OTHER EXEMPTION FROM REGISTRATION AVAILABLE UNDER ANY SUCH APPLICABLE
REGISTRATION REQUIREMENT.

 

Section 2.06  Registration. The
Issuers shall cause to be kept at the Corporate Trust Office of Trustee a
register (the “Register”), for the
registration or transfer of the Notes. The Register shall be maintained by the
Trustee, acting as the agent of the Issuers for this purpose, and the Trustee,
is hereby appointed as “Registrar” for the purpose of registering Notes and
transfers of Notes as provided herein. The name and address of the Holder of
each Note, records of any transfers of the Notes and the name and address of
any transferee of a Note shall be entered in the Register under such reasonable
regulations as the Trustee may prescribe, and the Issuers shall be entitled
to treat the Person whose name and address is entered in the Register as the
Holder of a Note or Notes as the owner of such Note(s) for all purposes. There
shall be no more than one Registered Holder for each Note. The Trustee may appoint
one or more co-registrars, and the term “Registrar” includes any such
co-registrar. The Registrar shall (i) at all reasonable times during
office hours make the Register available to the Issuers and to any Person
authorized by the Issuers in writing for inspection and the making of copies
thereof or extracts therefrom and (ii) mail a copy of the Register to the
Issuers and to any other such Person promptly after request therefor from the
Issuers.

 

Section 2.07  Transfers of Notes. No
transfer of a Note shall be valid unless (a) such Note shall have been
surrendered to the Trustee for cancellation whereupon, a new Note or Notes of
an equal aggregate principal amount shall be issued to the transferee in
exchange therefor or (b) such Note has been validly endorsed and assigned
to the transferee and notice of such assignment and transfer has been given to
the Trustee for recordation in the Register. The registered Holder for the time
being of any Note shall be entitled to the principal moneys and interest
evidenced by such Notes free from all equities or rights of set-off,
counterclaim or compensation between the Issuers and the original or any
intermediate Noteholder thereof and all Persons may act accordingly.

 

Section 2.08  Inspection of Registers. The
Register maintained by the Issuers at the Corporate Trust Office of Trustee
shall, at all reasonable times, be open for inspection by any Noteholders. Every
Registered Holder of a Note, by receiving and

 

29

 

holding such a
Note, agrees with the Trustee that neither the Issuers, the Trustee, nor any of
their respective agents, shall be held accountable by reason of the disclosure
of such information as to the names and addressed of such Noteholders,
regardless of the sources from which such information was derived.

 

Section 2.09  Title to Registered Notes. The
Person in whose name the Notes shall be registered shall be deemed and regarded
as the owner thereof for all purposes of this Indenture and payment of or on
account of the principal of or interest on such Notes shall be made only to or
upon the order in writing of such Registered Holder thereof.

 

Section 2.10  Mutilation, Loss, Theft or Destruction. In
case any of the Notes issued hereunder shall become mutilated or be lost, stolen
or destroyed, the Issuers shall, at the request of a Noteholder, issue, and
thereupon the Trustee shall certify and deliver, a new Note upon surrender or
cancellation of the mutilated Note, or in the case of a lost, stolen or
destroyed Note, in lieu of and in substitution for the same, and the
substituted Note shall be in a form approved by the Trustee and shall be
entitled to the benefit of this Indenture identically with the Note replaced. In
case of loss, theft or destruction, the applicant for a substituted Note shall
furnish to the Issuers and to the Trustee such evidence of such loss, theft or
destruction as shall be satisfactory to them in their discretion and shall also
furnish an indemnity or note satisfactory to them in their discretion. The applicant
shall pay all reasonable expenses incidental to the issuance of any substituted
Note.

 

Section 2.11  Cancellation of Notes. Upon
payment in full to any Noteholder, pursuant to the terms of the applicable
Note, and the delivery by such Noteholder to the Trustee of the fully repaid
Notes then held by such Noteholder, for cancellation, the Trustee shall cancel
such Notes pursuant hereto. Notes may only be repaid in accordance with
the terms of such Note, the Note shall specifically contemplate whether
repayment may be made by way of prepayment, and will specify the terms,
and conditions, of such prepayment.

 

ARTICLE 3 – PAYMENT MECHANICS

 

Section 3.01  Requirements of Payment. The
Notes shall specifically provide for the requirements for payment, including
repayment of principal and payment of interest and costs and expenses, and the
Issuers agree, subject to all of the terms and conditions of this Indenture and
the Notes, that payment shall be made in the manner, at the times, in the
amounts, and otherwise, as provided in the Notes.

 

Section 3.02  Additional Provisions. The
Issuers shall be required to honor the terms and conditions, and to make each
and every of the payments, required by the terms of each Note, as issued, in
favor of the Trustee for the benefit of Noteholders, and specifically shall be
required to honor each and every of the conditions and provisions of this
Indenture and the other Financing Documents, all of such conditions and
provisions to be paid, performed and undertaken, in favor of the Trustee for
the benefit of the Noteholders.

 

30

 

Section 3.03  Priority of Payments. (a) 
All payments or collections received under the Notes on or before an Event of
Default that are available pursuant to the Cash Management Agreement for
payments on the Notes (after any amounts payable to the Trustee hereunder) with
respect to any Payment Date, or any other unscheduled payments received under
the Notes, this Indenture or the other Financing Documents that are so
available, will be distributed in the following order of priority (the “Priority of Payments”):

 

(i)  First, to the payment of all accrued and unpaid interest on
Note A at the Interest Rate provided in Note A;

 

(ii)  Second, to the payment of principal on Note A in an amount
equal to Note A’s pro rata portion (based on the principal balance outstanding)
of the principal portion of the amount that is due and payable on the Notes on
such date;

 

(iii)  Third, to the payment of all accrued and unpaid interest on
Note B at the Interest Rate provided in Note B; and

 

(iv)  Fourth, to the payment of principal on Note B in an amount
equal to Note B’s pro rata portion (based on the principal balance outstanding)
of the principal portion of the amount that is due and payable on the Notes on
such date.

 

(b)  Any Prepayment Premium will be allocated between the Notes, pro rata, based on the respective amounts of principal then
being prepaid on each Note.

 

(c)  On or after an Event of Default, any such payments,
collections or prepayment shall be applied by Trustee for the benefit of the
Noteholders to any amounts then due and owing in any manner in the discretion
of the Servicer on behalf of Trustee.

 

ARTICLE 4 – SECURITY AND ASSET
DEALING

 

Section 4.01  Charges and Security Interest. In
consideration of the premises and the sum of One Dollar ($1.00) paid to it by
the Trustee, the receipt and sufficiency of which is hereby acknowledged, and
in pursuance of each and every power and authority enabling it to do so, and
for the purposes of securing the due payment of the principal amount of the
Notes and of the interest thereon (including interest on amounts in default)
(the “Note Amount”), together with
the payment of all other sums, if any, from time to time due hereunder to such
Noteholders or to the Trustee, or their successors and assigns, and the payment
of all other moneys, if any, for the time being and from time to time owing
pursuant hereto, the Notes or the other Financing Documents and the performance
by the Issuers of their obligations hereunder and thereunder, the Issuers agree
to grant, in favor of the Trustee and its successors and assigns in the trust,
as trustee and collateral agent for the benefit of such Noteholders, all of the
Issuers’ right, title and interest in and to the Property, and the Issuers
agree to grant a security interest in and to all such present and after
acquired real or immovable and personal or movable property of every nature and
kind used or to be used in the Property. The Issuers agree that the Security
Trust Agreement and the Pledge are intended to carry out the intent of this
provision, and to provide a valid and enforceable lien, charge, encumbrance and
security

 

31

 

interest in
and to the Property, and no Notes shall be issued other than where a valid and
perfected first priority security interest on the Property has been created by
the Issuers in favor of the Trustee for the benefit of the Holders pursuant to
the Security Trust Agreement and the Pledge.

 

Section 4.02  Holders of Security. The
Property and security interests, hypothecations, mortgages, pledges and
charges, cessions and transfers thereon and thereof and all rights hereby
conferred on the Trustee, its successors and assigns under this Indenture, the
Notes, the Pledge and the Security Trust Agreement shall be held for the
benefit and security of the Holders of Notes as security for the payment of the
principal of and interest on such Notes in the manner herein and therein
provided and of all other sums from time to time due hereunder or under the
other Financing Documents to such Holders or to the Trustee and for the
purposes and subject to the conditions, provisions, covenants and stipulations
herein contained, subject specifically to the segregation, allocation and
priority herein provided. However, until the Trustee has determined or become
bound to realize pursuant to the Security Trust Agreement and Pledge, the
Issuers shall be suffered and permitted in the same manner and to the same
extent as if these presents had not been executed, but subject to the express
terms hereof, and of the Notes, the Pledge and the Security Trust Agreement to
possess, dispose of, operate, and manage the Property, to control the conduct
of their business and to take and use the rents, income, dividends, profits and
issues of the Property, and claims and demand in judgment or otherwise, forming
part of the Property, but subject, always, to the terms of this Indenture
and of the Notes, the Pledge and the Security Trust Agreement.

 

Section 4.03  Further Assurances. The
Issuers shall forthwith, and from time to time, execute and do all deeds,
documents and things which, in accordance with an opinion of legal counsel to
the Trustee, are reasonably necessary for giving the Trustee the lien and
security interest upon the Property intended to be created by the Security
Trust Agreement and the Pledge and for conferring upon the Trustee such power
of sale (or the right to cause a sale), and other powers over the Property as
are expressed by the Security Trust Agreement and the Pledge to be conferred.

 

Section 4.04  Power of Attorney. The
Trustee hereby agrees to act as the holder of the power of attorney of the
present and future Holders of all Notes to the extent necessary or desirable
for the purposes of creating, maintaining or enforcing the Security Trust Agreement
and the Pledge under applicable laws. Each Holder, by the acceptance of its
Note, accepts and confirms, on its own behalf and on behalf of its successors
and assigns, the appointment of the Trustee as the attorney of the present and
future Holders for such purposes. The provisions of this Section shall be
deemed to form part of and be included in any indenture supplemental
hereto as well as in the Notes.

 

Section 4.05  Dealings with the Security Trust Agreement
and the Pledge. The Trustee shall act as first
beneficiary under the Security Trust Agreement and as pledgee under the Pledge,
for and on behalf of the Holders of the Notes. The Trustee shall deal with, and
shall exercise the rights, under the Security Trust Agreement and the Pledge,
at the direction of the Noteholders.

 

32

 

Section 4.06  No Obligation to Advance Funds. The
Trustee will not be required to pay premiums of insurance, taxes or charges for
public utility services and late payments, or costs of repair or maintenance of
the Property or legal fees or disbursements of counsel except to funds
available and provided therefor by the Issuers as provided for in Section 10.02
hereof.

 

ARTICLE 5 – CANCELLATION AND
DISCHARGE

 

Section 5.01  Cancellation and Destruction. All
Notes shall, forthwith after payment as described in this Indenture and the
relevant Note, and the Notes have been delivered to the Trustee, be cancelled
by it. All Notes cancelled or required to be cancelled under this or any other
provision of this Indenture shall be destroyed after the requisite period of
retention by the Trustee, in accordance with the Trustee’s customary
procedures, and, if required by the Issuers, the Trustee shall furnish to it a
destruction certificate setting out the designating numbers of the Notes so
destroyed.

 

Section 5.02  Non-Presentation of Notes. In
case a Holder shall fail to present for payment any Note on the date due or on
the date fixed for redemption thereof or on the maturity date of such Note, as
the case may be, or shall not accept payment on account thereof and give
such receipt therefor, if any, as the Trustee may require, the principal
moneys and/or the interest payable, as the case may be, shall be set
aside, either in the deposit department of the Trustee or in financial
institution, in trust to be paid to the Holder of such Note upon due
presentation or surrender thereof in accordance with the provisions of this
Indenture; and thereupon the principal moneys and/or the interest payable on or
represented by each Note in respect whereof such moneys have been set aside,
shall be deemed to have been paid, and not to be outstanding for any purpose
hereof, and the Holder thereof shall thereafter have no right in respect
thereof except that of receiving payment of the moneys so set aside by the
Trustee upon due presentation and surrender thereof.

 

Section 5.03  Unclaimed Moneys. Any
moneys set aside under Section 5.02 and not claimed by and paid to
Holders of Notes as provided in Section 5.02 within three (3) years
(or by the expiry of such lesser period as would result in a claim therefor
being statute barred under the laws of the State of New York) after the date of
such setting aside shall be repaid to the Issuers by the Trustee on demand and
thereupon the Trustee and Trustee shall be released from all further liability
with respect to such moneys and thereafter the Holders of the Notes in respect
of which such moneys were so repaid to the Issuers shall have no rights in
respect thereof except to obtain payment of the moneys due thereon from the
Issuers up to such time as the right to proceed against the Issuers for
recovery of such moneys has become statute barred under the laws of the State
of New York.

 

Section 5.04  Discharge. The
Trustee shall, after satisfaction of the obligations hereunder and under the
other Financing Documents, including specifically the payment in full of the
indebtedness evidenced by the Notes and the performance of the other
Obligations, at the request and expense of the Issuers take all actions
reasonably necessary to release and discharge this Indenture and execute and
deliver such

 

33

 

instruments as
it shall be advised by legal counsel are requisite for that purpose and to
release the Issuers from their covenants herein contained (other than the
provisions relating to the indemnification of the Trustee), upon proof being
given to the reasonable satisfaction of the Trustee that the principal and the
interest (including interest on amounts in default, if any) on all the Notes
and all other moneys payable hereunder have been paid in accordance with the
terms of this Indenture and that all the Notes having matured have been duly
cancelled. Trustee shall, upon the written request and at the expense of
Issuers (it being understood and agreed that such expenses shall be limited to
reasonable out-of-pocket expenses incurred by Trustee, including, without
limitation, applicable recording charges and taxes), cause the security
interests created by the Security Trust Agreement and the Pledge to be
terminated if the other terms and conditions of this Section 5.04
have been satisfied.

 

ARTICLE 6 – REPRESENTATIONS AND
WARRANTIES

 

Section 6.01  Issuer Representations. Each
Issuer represents and warrants (as to itself in each instance where the
representation or warranty relates to Issuers or Issuer and as to its
Individual Parcel where the representation or warranty relates to the Property
or Individual Parcel) as of the Note Issuance Date that:

 

(a)  Organization. Each
Issuer has been duly organized and is validly existing under the laws of Mexico
with requisite power and authority to own its properties and to transact the
businesses in which it is now engaged. Each Issuer is duly qualified to do
business and is in good standing in each jurisdiction where it is required to
be so qualified in connection with its properties, businesses and operations. Each
Issuer possesses all rights, licenses, permits and authorizations, governmental
or otherwise, necessary to entitle it to own its properties and to transact the
businesses in which it is now engaged, and the sole business of each Issuer is
the ownership, management and/or operation of the Property. The ownership
interests of each Issuer are as set forth on the organizational chart attached
hereto as Schedule 6.01A.

 

(b)  Proceedings. Each
Issuer has taken all necessary action to authorize the execution, delivery and
performance of this Indenture and the other Financing Documents to which it is
a party. This Indenture and such other Financing Documents have been duly
executed and delivered by or on behalf of Issuers and constitute legal, valid
and binding obligations of Issuers enforceable against Issuers in accordance
with their respective terms, subject only to applicable bankruptcy, insolvency
and similar laws affecting rights of creditors generally.

 

(c)  No Conflicts. The
execution, delivery and performance of this Indenture and the other Financing
Documents by Issuers will not conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance (other than pursuant
to the Financing Documents) upon any of the property or assets of any Issuer
pursuant to the terms of its by-laws (estatutos sociales)
or any indenture, mortgage, deed of trust, loan agreement, partnership agreement,
management agreement or other agreement or instrument to which any Issuer is a
party or by which any Issuer’s property or assets is

 

34

 

subject, nor
will such action result in any violation of the provisions of any statute or
any order, rule or regulation of any Governmental Authority having
jurisdiction over any Issuer or any Issuer’s properties or assets, and any
consent, approval, authorization, order, registration or qualification of or
with any such Governmental Authority required for the execution, delivery and
performance by Issuers of this Indenture or any other Financing Documents has
been obtained and is in full force and effect.

 

(d)  Litigation. There
are no actions, suits or proceedings at law or in equity by or before any
Governmental Authority or other agency now pending or, to any Issuer’s
knowledge, threatened (i) in writing against any Issuer, Principal,
Guarantor or the Property, which actions, suits or proceedings, if determined
against such Issuer, Principal, Guarantor or the Property, are reasonably
likely to have a Material Adverse Effect, or (ii) that are not adequately
covered by insurance.

 

(e)  Agreements. Except
as otherwise set forth on Schedule 6.01E, no Issuer is a party to
any agreement or instrument or subject to any restriction which is reasonably
likely to have a Material Adverse Effect. No Issuer is in default in any
material respect in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or instrument
to which it is a party or by which such Issuer or the Property is bound which
is reasonably likely to have a Material Adverse Effect. No Issuer has any
material financial obligation under any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which such Issuer is a party
or by which such Issuer or the Property is otherwise bound, other than (a) obligations
incurred in the ordinary course of the operation of the Property as permitted
pursuant to clause (t) of the definition of “Special Purpose Entity” set
forth in Section 1.1 hereof and (b) obligations under the
Financing Documents.

 

(f)  Title. Security
Trustee is the record owner of the Property and each Issuer owns its Personal
Property free and clear of all Liens whatsoever, except the Permitted
Encumbrances. Issuers hold the Security Trust Second Beneficiary’s rights free
and clear of all Liens whatsoever, except the Permitted Encumbrances. The
Permitted Encumbrances in the aggregate do not have a Material Adverse Effect. The
Security Trust Agreement and the Pledge, when properly registered in the public
registries of the jurisdictions where the Land is located and of the domicile
of each Issuer, together with any Uniform Commercial Code financing
statements required to be filed in connection therewith, will create (a) a
valid, perfected first priority lien in and to the Property, subject only to
Permitted Encumbrances and (b) perfected security interests in and to, and
perfected collateral assignments of, Issuers’ right, title and interest in and
to all personally (including the Leases), all in accordance with the terms
thereof, in each case subject only to any applicable Permitted Encumbrances. To
Issuers’ knowledge, there are no claims for payment for work, labor or
materials affecting the Property which are or may become a Lien prior to,
or of equal priority with, the Liens created by the Financing Documents.

 

(g)  Solvency. Issuers
have (a) not entered into the transaction or executed or issued the Notes,
this Indenture or any other Financing Documents with the actual intent to
hinder, delay or defraud any creditor and (b) received reasonably
equivalent

 

35

 

value in exchange
for its obligations under such Financing Documents. The fair saleable value of
Issuers’ assets exceeds and will, immediately following the issuance of the
Notes, exceed Issuers’ total liabilities, including, without limitation,
subordinated, unliquidated, disputed and contingent liabilities. The fair
saleable value of Issuers’ assets is and will, immediately following the
issuance of the Notes, be greater than Issuers’ probable liabilities, including
the maximum amount of its contingent liabilities on its debts as such debts
become absolute and matured. Issuers’ assets do not and, immediately following
the issuance of the Notes will not, constitute unreasonably small capital to
carry out their business as conducted or as proposed to be conducted. No Issuer
intends to, and does not believe that it will, incur debt and liabilities
(including contingent liabilities and other commitments) beyond its ability to
pay such debt and liabilities as they mature (taking into account the timing
and amounts of cash to be received by such Issuer and the amounts to be payable
on or in respect of obligations of such Issuer). No petition in bankruptcy has
been filed against such Issuer or any Affiliate in the immediately preceding
seven (7) years, and neither any Issuer nor any Affiliate has ever made an
assignment for the benefit of creditors or taken advantage of any insolvency
act for the benefit of debtors in the immediately preceding seven (7) years.
Neither any Issuer nor any of its Affiliates are contemplating either the
filing of a petition by it under any applicable bankruptcy or insolvency laws
or the liquidation of all or a major portion of any Issuer’s assets or
properties, and no Issuer has knowledge of any Person contemplating the filing
of any such petition against it or such Affiliates.

 

(h)  Full and Accurate
Disclosure. To each Issuer’s knowledge, no statement of fact
made by Issuer in this Indenture or in any of the other Financing Documents
contains any untrue statement of a material fact or omits to state any material
fact necessary to make statements contained herein or therein not misleading. There
is no material fact presently known to any Issuer which has not been disclosed
to Initial Noteholder which has, or is reasonably likely to have, a Material Adverse
Effect.

 

(i)  No Plan Assets. No
Issuer or Principal is an “employee benefit plan,” as defined in Section 3(3) of
ERISA, subject to Title I of ERISA, and none of the assets of any Issuer
constitutes or will constitute “plan assets” of one or more such plans within
the meaning of 29 C.F.R. Section 2510.3-101. In addition, (a) no
Issuer or Principal is a “governmental plan” within the meaning of Section 3(32)
of ERISA and (b) transactions by or with any Issuer are not subject to any
state statute regulating investments of, or fiduciary obligations with respect
to, governmental plans similar to the provisions of Section 406 of ERISA
or Section 4975 of the Code currently in effect, which prohibit or
otherwise restrict the transactions contemplated by this Indenture.

 

(j)  Compliance. Except as otherwise set
forth in the Physical Conditions Report or environmental report or disclosed in
writing to the Initial Purchaser, Issuers and the Property (including the use
thereof) comply in all material respects with all Legal Requirements applicable
to the operation and maintenance of the Property, including, without
limitation, building and zoning ordinances and codes and Prescribed Laws. No
Issuer is in material default or violation of any order, writ, injunction,
decree or demand of any Governmental Authority. To each Issuer’s knowledge,
there has not been committed by any Issuer or any other Person in occupancy of
or involved with the

 

36

 

operation or
use of the Property any act or omission affording the federal government or any
other Governmental Authority the right of forfeiture as against the Property or
any part thereof or any monies paid in performance of Issuers’ obligations
under any of the Financing Documents.

 

(k)  Financial Information. All financial
data, including, without limitation, the statements of cash flow and income and
operating expense, that have been delivered to Initial Purchaser (i) are
true, complete and correct in all material respects, (ii) accurately
represent the financial condition of the Property as of the date of such
reports, and (iii) to the extent prepared or audited by an independent
certified public accounting firm, have been prepared in accordance with GAAP
throughout the periods covered, except as disclosed therein. Except for
Permitted Encumbrances, Issuers do not have any material contingent
liabilities, liabilities for taxes, unusual forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments that are
known to any Issuer and reasonably likely to have a Material Adverse Effect,
except as referred to or reflected in said financial statements. Since the date
of such financial statements, there has been no material adverse change in the
financial condition, operation or business of any Issuer from that set forth in
said financial statements.

 

(l)  Condemnation. Except as otherwise
disclosed in the Title Insurance Policy, no Condemnation or other proceeding
has been commenced or, to each Issuer’s knowledge, is threatened or
contemplated with respect to all or any portion of the Property or for the
relocation of roadways providing access to the Property.

 

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

 

(n)  Utilities and Public Access. Except as
set forth in the Title Insurance Policy or the survey of the Property provided
to Initial Purchaser in connection with the issuance of the Notes, and subject
to the Condominium Documents, the Property has rights of access to public ways
and is served by water, sewer, sanitary sewer and storm drain facilities adequate
to service the Property for its intended uses. All public utilities necessary
or convenient to the full use and enjoyment of the Property are located either
in the public right-of-way abutting the Property (which are connected so as to
serve the Property without passing over other property) or in recorded
easements serving the Property and such easements are set forth in and insured
by the Title Insurance Policy. All roads necessary for the use of the Property
for its current purpose have been completed and dedicated to public use and
accepted by all Governmental Authorities.

 

(o)  Payment of Taxes. Issuers have paid all
Taxes due and payable on or prior to the date hereof (other than Taxes being
contested in accordance with the terms

 

37

 

set forth in Section 7.01(b)),
including all property taxes (predial)
relating to the Property and asset taxes (imperesto al activo)
relating to the Personal Property.

 

(p)  Separate Lots. The Property is
comprised of one (1) or more parcels which constitute a separate tax lot
or lots and does not constitute a portion of any other tax lot not a part of
the Property; provided, however, Lot AP-6A and Lot AP-6B have a
single cadastral number for the payment of property taxes (impuesto
predial) and Lots APG-l through APG-18 and AS-4 have a single
cadastral number for the payment of property taxes (impuesto
predial).

 

(q)  Assessments. Other than Condominium
charges and assessments, and except as otherwise disclosed in Schedule 6.01Q
or as set forth in the Title Insurance Policy, there are no pending or, to each
Issuer’s knowledge, proposed special or other assessments for public
improvements or otherwise affecting the Property, nor are there any
contemplated improvements to the Property that may result in such special
or other assessments.

 

(r)  Enforceability. The Financing Documents
are not subject to any right of rescission, set-off, counterclaim or defense by
any Issuer, Principal or Guarantor, including the defense of usury, nor would
the operation of any of the terms of the Financing Documents, or the exercise
of any right thereunder, render the Financing Documents unenforceable (subject
to principles of equity and bankruptcy, insolvency and other laws generally
affecting creditors’ rights and the enforcement of debtors’ obligations), and
neither any Issuer, Principal nor Guarantor have asserted any right of
rescission, set-off, counterclaim or defense with respect thereto.

 

(s)  No Prior Assignment. There are no prior
assignments of the Leases or any portion of the Rents due and payable or to
become due and payable which are presently outstanding.

 

(t)  Insurance. Issuers have obtained and
have delivered to Trustee certified copies of all Policies (or certificates and
other evidence reasonably satisfactory to Trustee evidencing the existence of
the same) reflecting the insurance coverages, amounts and other requirements
set forth in this Indenture. Except as set forth in Schedule 6.01T,
no outstanding claims have been made under any property insurance Policies and
no Issuer has done, by act or omission, anything which would materially impair
the coverage of any Policies.

 

(u)  Use of Property. The Property is used
exclusively as a hotel and golf course and other appurtenant and related uses.

 

(v)  Certificate of
Occupancy; Licenses. All certifications, permits, licenses and
approvals, including without limitation, certificates of completion and
occupancy permits and any applicable liquor license required under applicable
law for the legal use, occupancy and operation of the Property as a hotel
(collectively, the “Licenses”),
have been obtained and are in full force and effect, except where the failure
to obtain such Licenses does not have, and is not reasonably expected to have,
a Material

 

38

 

Adverse Effect.
Issuers shall keep and maintain all Licenses necessary for the operation of the
Property as a hotel, except where the failure to keep and maintain such
Licenses does not have, and is not reasonably expected to have, a Material Adverse
Effect. The use being made of the Property is in conformity with the
certificate of occupancy issued for the Property.

 

(w)  Intentionally Omitted.

 

(x)  Physical Condition. To Issuers’
knowledge, and except as set forth in the Physical Conditions Report, the
Property, including, without limitation, all buildings, improvements, parking
facilities, sidewalks, storm drainage systems, roofs, plumbing systems, HVAC
systems, fire protection systems, electrical systems, equipment, elevators,
exterior sidings and doors, landscaping, irrigation systems and all structural
components, are in good condition, order and repair in all material respects. To
Issuers’ knowledge, and except as set forth in the Physical Conditions Report,
there exists no structural or other material defects or damages in the
Property, whether latent or otherwise, and no Issuer has received notice from
any insurance company or bonding company of any defects or inadequacies in the
Property, or any part thereof, which would adversely affect the
insurability of the same or cause the imposition of extraordinary premiums or
charges thereon or of any termination or threatened termination of any policy
of insurance or bond.

 

(y)  Boundaries. To Issuers’ knowledge,
except as set forth on the Survey, the Title Insurance Policy or the Physical
Condition Report, all of the improvements which were included in determining
the appraised value of the Property lie wholly within the boundaries and building
restriction lines of the Property, and no improvements on adjoining properties
encroach upon the Property, and no easements or other encumbrances upon the
Property encroach upon any of the improvements, so as to affect the value or
marketability of the Property except (i) those which are insured against
by the Title Insurance Policy or are Permitted Encumbrances and (ii) a
portion of a staircase giving access from the hotel Individual Parcel to the
beach is located within the boundaries of the Federal Maritime Zone under
concession by the Federal Government of Mexico.

 

(z)  Leases. The Property is not subject to
any Leases other than the Leases described in Schedule 6.01Z
attached hereto and made a part hereof. Issuers are the owner and lessor
of landlord’s interest in the Leases. No Person has any possessory interest in
the Property or right to occupy the same except under and pursuant to the
provisions of the Leases. The current Leases are in full force and effect and,
to Issuers’ knowledge, there are no defaults thereunder by either party and
there are no conditions that, with the passage of time or the giving of notice,
or both, would constitute defaults thereunder. No Rent has been paid more than
one (1) month in advance of its due date. All work to be performed prior
to the date hereof by Issuers under each Lease has been performed as required
and has been accepted by the applicable tenant, and any payments, free rent,
partial rent, rebate of rent or other payments, credits, allowances or
abatements required to be given by Issuers to any tenant has already been
received by such tenant. There has been no prior sale, transfer or assignment,
hypothecation or pledge of any

 

39

 

Lease or of
the Rents received therein which is still in effect. To Issuers’ knowledge, no
tenant has assigned its Lease or sublet all or any portion of the premises
demised and no such tenant holds its leased premises under assignment or
sublease. To Issuers’ knowledge, no tenant under any Lease has a right or
option pursuant to such Lease or otherwise to purchase all or any part of
the leased premises or the building of which the leased premises are a part. No
tenant under any Lease has any right or option to lease additional space in the
Improvements.

 

(aa)  Survey. To Issuers’ knowledge, the
Survey for the Property delivered in connection with this Indenture does not
fail to reflect any material matter affecting the Property or the title
thereto.

 

(bb)  Principal Place of Business; State of Organization. Each
Issuer’s principal place of business as of the date hereof is the address set
forth in the introductory paragraph of this Indenture. Each Issuer is organized
under the laws of Mexico.

 

(cc)  Filing and Recording Taxes. All transfer
taxes, deed stamps, intangible taxes, value added taxes or other amounts in the
nature of transfer taxes required to be paid by any Person under applicable
Legal Requirements currently in effect in connection with the transfer of the
Property to Issuers have been paid. All mortgage, mortgage recording, stamp,
intangible or other similar tax required to be paid by any Person under
applicable Legal Requirements currently in effect in connection with the
execution, delivery, recordation, filing, registration, perfection or
enforcement of any of the Financing Documents, including, without limitation,
the Security Trust Agreement and the Pledge, have been paid, and, under current
Legal Requirements, the Security Trust Agreement and the Pledge are enforceable
against the settlers or pledgors, as the case may be, in accordance with
their respective terms, subject to principles of equity, public policy and
bankruptcy, insolvency and other laws generally applicable to creditors’ rights
and the enforcement of debtors’ obligations.

 

(dd)  Special Purpose Entity/Separateness. (i) 
Until the Debt has been paid in full, each Issuer hereby represents, warrants
and covenants that (A) such Issuer is, shall be and shall continue to be a
Special Purpose Entity, provided that the requirements set forth in the
definition of the term “Special Purpose Entity” will not apply to such Issuer’s
relationship with the other Issuers, and (B) Principal is, shall be and
shall continue to be a Special Purpose Entity.

 

(ii)  The representations, warranties and covenants set forth in Section 6.01(dd)(i) shall
survive for so long as any amount remains payable to Trustee for the benefit of
Noteholders under this Indenture or any other Financing Document.

 

(iii)  All of the assumptions made in the Insolvency Opinion,
including, but not limited to, any exhibits attached thereto, are true and
correct in all respects and any assumptions made in any subsequent
non-consolidation opinion required to be delivered in connection with the
Financing Documents (an “Additional
Insolvency Opinion”), including, but not limited to, any exhibits
attached thereto, will have been and shall be true and correct in all respects.
Each Issuer has complied and will comply with, and

 

40

 

Principal has
complied and Issuers will cause Principal to comply with, all of the
assumptions made with respect to each Issuer and Principal in the Insolvency
Opinion. Each Issuer will have complied and will comply, or cause Principal to
comply, with all of the assumptions made with respect to such Issuer and
Principal in any Additional Insolvency Opinion. Each entity other than an
Issuer or Principal with respect to which an assumption shall be made in any
Additional Insolvency Opinion will have complied and will comply with all of
the assumptions made with respect to it in any Additional Insolvency Opinion.

 

(ee)  Management Agreement. As of the date
hereof, the Management Agreement is in full force and effect and, to Issuers’
knowledge, there is no default thereunder by any party thereto and no event has
occurred that, with the passage of time and/or the giving of notice would
constitute a default by Issuers thereunder that would have a Material Adverse
Effect.

 

(ff)  Golf Management Agreement. As of the
date hereof, the Golf Management Agreement is in full force and effect and, to
Issuers’ knowledge, there is no default thereunder by any party thereto and no
event has occurred that, with the passage of time and/or the giving of notice
would constitute a default by Issuers thereunder that would have a Material
Adverse Effect.

 

(gg)  Spa Management Agreement. As of the
date hereof, the Spa Management Agreement is in full force and effect and, to
Issuers’ knowledge, there is no default thereunder by any party thereto and no
event has occurred that, with the passage of time and/or the giving of notice
would constitute a default by Issuers thereunder that would have a Material
Adverse Effect.

 

(hh)  Illegal Activity. No portion of the
Property has been or will be purchased with proceeds of any illegal activity.

 

(ii)  No Change in Facts or
Circumstances; Disclosure. To the best of Issuers’ knowledge,
all information submitted by any Issuer to Initial Purchaser and in all
financial statements, rent rolls, reports, certificates and other documents
submitted in connection with the issuance of the Notes or in satisfaction of
the terms thereof and all statements of fact made by any Issuer in this
Indenture or in any other Financing Document, are accurate, complete and
correct in all material respects. To the best of Issuers’ knowledge, there has
been no material adverse change in any condition, fact, circumstance or event
that would make any such information inaccurate, incomplete or otherwise
misleading in any material respect or that otherwise has, or may reasonably
be expected to have, a Material Adverse Effect. Issuers have disclosed to
Trustee all material facts and have not failed to disclose any material fact
that could cause any Provided Information or representation or warranty made
herein to be materially misleading.

 

(jj)  Investment Company Act. No Issuer is (a) an
“investment company” or a company “controlled” by an “investment company,”
within the meaning of the Investment Company Act of 1940; as amended; (b) a
“holding company” or a

 

41

 

“subsidiary
company” of a “holding company” or an “affiliate” of either a “holding company”
or a “subsidiary company” within the meaning of the Public Utility Holding
Company Act of 1935, as amended; or (c) subject to any other federal or
state law or regulation which purports to restrict or regulate its ability to
borrow money.

 

(kk)  Embargoed Person. At all times
throughout the term of the Notes, including after giving effect to any
Transfers permitted pursuant to the Financing Documents, (a) none of the
funds or other assets of any Issuer, Principal or Guarantor constitute property
of, or are beneficially owned, directly or indirectly, by any person, entity or
government subject to trade restrictions under U.S. law, including, but not
limited to, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701
et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any
Executive Orders or regulations promulgated thereunder with the result that the
investment in any Issuer, Principal or Guarantor, as applicable (whether
directly or indirectly), is prohibited by law or the issuance of the Notes by
Issuers or the purchase of the Notes by Initial Purchaser or Initial Noteholder
is in violation of law (“Embargoed Person”);
(b) no Embargoed Person has any interest of any nature whatsoever in any
Issuer, Principal or Guarantor, as applicable, with the result that the
investment in any Issuer, Principal or Guarantor, as applicable (whether
directly or indirectly), is prohibited by law or the issuance of the Notes by
Issuers or the purchase of the Notes by Initial Purchaser or Initial Noteholder
is in violation of law; and (c) none of the funds of any Issuer, Principal
or Guarantor have been derived from any unlawful activity by any Issuer,
Principal or Guarantor with the result that the investment in any Issuer,
Principal or Guarantor, as applicable (whether directly or indirectly), is
prohibited by law or the issuance of the Notes by Issuers or the purchase of
the Notes by Initial Purchaser or Initial Noteholder is in violation of law.

 

(ll)  Cash Management Account. (i)  This
Indenture, together with the other Financing Documents, creates a valid and
continuing lien and security interest (under Mexican law or as such terms are
defined under the Uniform Commercial Code of the State, as applicable) in
the Lockbox Accounts and the Cash Management Account in favor of Trustee, for
the benefit of Holders, which lien and security interest are prior to all other
Liens, other than Permitted Encumbrances, and are enforceable as such against
creditors of and purchasers from Issuers. Other than in connection with the
Financing Documents and except for Permitted Encumbrances, Issuers have not
sold or otherwise conveyed the Lockbox Accounts and Cash Management Account;

 

(ii)  The Cash Management Account constitutes a “deposit account”
within the meaning of the Uniform Commercial Code of the State.

 

(iii)  Pursuant and subject to the terms hereof, each Lockbox Bank
has agreed to comply with all instructions originated by Trustee, without
further consent by any Issuer, directing disposition of the applicable Lockbox
Account and all sums at any time held, deposited or invested therein, together
with any interest or other earnings thereon, and all proceeds thereof
(including proceeds of sales and other dispositions), whether accounts, general
intangibles, chattel paper, deposit accounts, instruments, documents or
securities; and

 

42

 

(iv)  The Lockbox Accounts and Cash Management Account are not in
the name of any Person other than Issuers, as pledgor, or Trustee, for the
benefit of Noteholders, as pledgee.

 

(mm)  SPE Prior Act Representations. Except
as set forth on Schedule 6.01MM and subject to the limitation that the
requirements set forth below in this Section 6.01(mm) are not
applicable to an Issuer’s relationship with the other Issuers, each Issuer
hereby represents and warrants to Trustee for the benefit of Noteholders that
since its formation or the formation of the applicable Principal, as
applicable:

 

(i)  neither such Issuer nor any Principal has owned any material
asset or property other than (A) its Individual Parcel, and (B) incidental
personal property necessary for the ownership or operation of the Property or
its Individual Parcel other than the Parcel in the Condominium designated as
AP-9A which parcel was previously owned by the Hotel Issuer and, provided
further that, Issuers represent and warrant that such parcel was (a) vacant
at the time owned by Hotel Issuer, (b) there are no continuing obligations
or liability with respect to such parcel, and (c) there are no known
environmental conditions existing with respect to such parcel in violation of
applicable law;

 

(ii)  neither such Issuer nor any Principal has engaged in any
business other than the ownership, management and operation of the Property or
its Individual Parcel and Issuer has conducted and operated its business as
presently conducted and operated;

 

(iii)  neither such Issuer nor any Principal has entered into any
contract or agreement with any of its Affiliates, constituents, or owners, or
any guarantors of any of its obligations or any Affiliate of any of the
foregoing (individually, a “Related Party”)
except upon terms and conditions that are commercially reasonable and
substantially similar to those available in an arm’s-length transaction with an
unrelated party and in connection with this Indenture;

 

(iv)  neither such Issuer nor any Principal has incurred any
Indebtedness other than (A) subject to clause (xxiv) below,
acquisition financing with respect to the Property; construction financing with
respect to the Improvements and certain off-site improvements required by
municipal and other authorities as conditions to the construction of the
Improvements; and first mortgage financings secured by the Property (or
financing secured by security trusts holding title to the Property); and
Indebtedness pursuant to letters of credit, guaranties, interest rate
protection agreements and other similar instruments executed and delivered in
connection with such financings, (B) unsecured trade payables and
operational debt not evidenced by a note, and (C) Indebtedness incurred in
the financing of equipment and other personal property used on the Property;

 

(v)  neither such Issuer nor any Principal has made any loans to
any Person or held evidence of indebtedness issued by any other Person or
entity (other than cash and investment-grade securities issued by an entity
that is not an Affiliate of or subject to common ownership with such entity);

 

43

 

(vi)  each of such Issuer and each Principal has remained solvent
and has paid its debts and liabilities from its own assets and generally as the
same have became due;

 

(vii)  each of such Issuer and each Principal has allocated fairly
and reasonably any overhead expenses that have been shared with an Affiliate,
including paying for office space and services performed by any employee of an
Affiliate or Related Party;

 

(viii)  each of such Issuer and each Principal has done or caused
to be done all things necessary to observe all its organizational formalities
and to preserve its existence or has promptly taken curative action with
respect thereto;

 

(ix)  (A) each of such Issuer and each Principal has
maintained all of its accounts (including bank accounts), books and records
separate from those of any other Person; (B) each of such Issuer and each
Principal has maintained separate financial statements and its assets have not
been listed as assets on the financial statement of any other Person except as
required by GAAP and Financial Accounting Standards Board Interpretation No. 46R;
provided, however, that any such consolidated financial statement
shall contain a note indicating that its separate assets and liabilities are
neither available to pay the debts of the consolidated entity nor constitute
obligations of the consolidated entity; (C) each of such Issuer and each
Principal has filed its own tax returns and has not filed a consolidated
federal income tax return with any other Person, except to the extent that
Issuer was required to file consolidated tax returns by law; and (D) each
of such Issuer and each Principal has maintained its books, records,
resolutions and agreements as official records;

 

(x)  (A) other than in
connection with the operation and management of the Property or, in the case of
such Issuer, pursuant to its use of the name “One and Only Palmilla,” each of
such Issuer and each Principal has been, and at all times has held itself out
and identified itself as a separate and distinct entity and has conducted
business under its own name or in a name franchised or licensed to it by an
entity other than an Affiliate of such Issuer or another Issuer and not as a
division or part of any other Person, except for services rendered under a
business management services agreement with an Affiliate that complies with the
terms contained in subsection (iii) above, so long as the
manager, or equivalent thereof, under such business management services
agreement holds itself out as an agent of such Issuer; (B) has not
identified itself or any of its Affiliates as a division or part of the
other; and (C) other than in connection with the operation and management
of the Property or, in the case of such Issuer, pursuant to its use of the name
“One and Only Palmilla,” has used separate stationery, invoices and checks
bearing its own name and not the name of any Affiliate;

 

(xi)  other than in connection
with the operation and management of the Property or, in the case of such
Issuer, pursuant to its use of the name “One and Only Palmilla,” each of such
Issuer and each Principal has corrected any known misunderstanding regarding
its status as a separate entity;

 

44

 

(xii)  each of such Issuer and
each Principal has maintained adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations;

 

(xiii)  neither such Issuer nor
any Principal has, nor have any of its constituent parties, sought or effected
the liquidation, dissolution, winding up, liquidation, consolidation or merger,
in whole or in part of any Issuer;

 

(xiv)  other than in connection
with (A) in the case of such Issuer, acquisition financing with respect to
the Property, (B) in the case of such Issuer, construction financing with
respect to the Improvements and certain off-site improvements required by
municipal and other authorities as conditions to the construction of the
Improvements, (C) in the case of such Issuer, first mortgage financings
secured by the Property (or financing secured by security trusts holding title
to the Property), (D) Indebtedness pursuant to letters of credit,
guaranties, interest rate protection agreements and other similar instruments
executed and delivered in connection with such financings described in clauses
(A), (B) and (C), and (E) in the case of such Issuer, the Permitted
Equipment Financing, neither such Issuer nor any Principal has commingled its
funds or other assets with those of any Affiliate or constituent party or any
other Person, and each of such Issuer and each Principal has held all of its
assets in its own name;

 

(xv)  each of such Issuer and
each Principal has maintained its assets in such a manner that it would not be
costly or difficult to segregate, ascertain or identify its individual assets
from those of any Affiliate or constituent party or any other Person;

 

(xvi)  neither such Issuer nor
any Principal has guaranteed or become obligated for the debts of any other
Person, except for the debts of the other Issuers or Issuers, as applicable,
pursuant to (A) acquisition financing with respect to the Property, (B) construction
financing with respect to the Improvements and certain off-site improvements
required by municipal and other authorities as conditions to the construction
of the Improvements, (C) first mortgage financings secured by the Property
(or financing secured by security trusts holding title to the Property), (D) Indebtedness
pursuant to letters of credit, guaranties, interest rate protection agreements
and other similar instruments executed and delivered in connection with such
financings described in clauses (A), (B) and (C), and (E) in the case
of such Issuer, the Permitted Equipment Financing, neither such Issuer nor any
Principal has held itself out to be responsible for or to have its credit
available to satisfy the debts or obligations of any other Person;

 

(xvii)  each of such Issuer and
each Principal is presently conducting its businesses so that the assumptions
made with respect to such Issuer or Principal, as applicable, in the Insolvency
Opinion are currently true and correct in all material respects;

 

(xviii)  neither such Issuer nor
any Principal has permitted any Affiliate or constituent party independent
access to its bank accounts;

 

45

 

(xix)  each of such Issuer and
each Principal has paid the salaries of each of its own employees (if any) from
its own funds and has maintained a sufficient number of employees (if any) in
light of its contemplated business operations;

 

(xx)  each of such Issuer and
each Principal has compensated each of its consultants and agents from its own
funds for services provided to it and pay from its own assets all obligations
of any kind incurred;

 

(xxi)  neither such Issuer nor
any Principal has acquired any obligations or securities of any of its
Affiliates;

 

(xxii)  such Issuer has not
acquired or held any equity interest or subsidiary interest in any entity and,
other than Issuers, no Principal has acquired or held any equity interest or
subsidiary interest in any entity except that Beach Issuers briefly owned a
subsidiary known as CP Baja, S.A. de C.V. but such subsidiary engaged in no
activities and has been liquidated;

 

(xxiii)  neither such Issuer nor
any Principal has pledged its assets for to secure the obligations of any other
Person other than with respect to loans or other indebtedness secured by the
Property and no such pledge remains outstanding except in connection with the
issuance of the Notes;

 

(xxiv)  neither such Issuer nor
any Principal has incurred any Indebtedness that is still outstanding other
than, in the case of an Issuer, the Permitted Equipment Financing, and
indebtedness that is evidenced by the Financing Documents or permitted under
the Financing Documents;

 

(xxv)  such Issuer is and always
has been duly formed and validly existing under the laws of Mexico, each
Principal is and always has been duly formed and validly existing under the
laws of the State of Delaware and each of such Issuer and each Principal is and
has always been duly qualified to do business and in good standing in all other
jurisdictions where it is required to be or to have been qualified to do
business;

 

(xxvi)  neither such Issuer nor
any Principal has any judgments or liens of any nature against it except for
tax liens not yet due or delinquent;

 

(xxvii)  each of such Issuer and
each Principal is in material compliance with all laws, regulations, and orders
applicable to it and has received all permits necessary for it to operate;

 

(xxviii)  neither such Issuer nor
any Principal is involved in any material dispute with any taxing authority;

 

(xxix)  subject to clause (xxviii),
each of such Issuer and each Principal has paid all taxes which it owes;

 

(xxx)  neither such Issuer nor
any Principal is now, nor has ever been, party to any lawsuit, arbitration,
summons, or legal proceeding, which has not been settled, 

 

46

dismissed or otherwise proceeded to conclusion and none of which has
had or can be reasonably expected to have a Material Adverse Effect;

 

(xxxi)  each of such Issuer and
each Principal has materially complied with the separateness covenants referred
to in the Insolvency Opinion; and

 

(xxxii)  neither such Issuer nor
any Principal has any material contingent or actual obligations not related to
the Property.

 

(nn)  Condominium Documents. To Issuer’s
knowledge, after inquiry, the Condominium Documents comply with all applicable
local, state and federal laws, rules and regulations which affect the
establishment and maintenance of condominiums in the State relating to
condominiums (collectively, the “Condominium
Laws”). To Issuer’s knowledge, after inquiry, the Condominium
Documents are in full force and effect and there are no defaults thereunder by
any party. Each Issuer has paid all common expenses, assessments, maintenance
fees and other charges due in connection with the Condominium in accordance
with the Condominium Documents. To Issuer’s knowledge, after inquiry, the
Condominium Documents have not been amended, modified or supplemented by any
document that is not of public record and there is no agreement, document or
instrument to which the Condominium is a party that affects the Condominium or
any obligations of Issuers with respect to the Condominium or the Property that
is not of public record.

 

Section 6.02  Survival of Representations. Each
Issuer agrees that all of the representations and warranties of Issuers set
forth in Section 6.01 and elsewhere in this Indenture and in the
other Financing Documents shall survive for so long as any amount remains
outstanding under the Notes. All representations, warranties, covenants and
agreements made in this Indenture or in the other Financing Documents by any
Issuer shall be deemed to have been relied upon by Initial Purchaser, Initial
Noteholder and Trustee notwithstanding any investigation heretofore or
hereafter made by Initial Purchaser, Initial Noteholder or Trustee or on its
behalf.

 

ARTICLE 7 – ISSUER COVENANTS

 

Section 7.01  Affirmative Covenants. From
the date hereof and until payment and performance in full of all obligations
under the Financing Documents or the earlier reconveyance of title to the
Property held by Security Trust Trustee pursuant to the Security Trust
Agreement to Issuers or release and discharge of the security interests created
by the Security Trust Agreement and the Pledge (and all related obligations) in
accordance with the terms of this Indenture and the other Financing Documents,
Issuers hereby covenant and agree with Trustee, for the benefit of Noteholders,
as set forth in this Section 7.01. All such covenants and
agreements shall be enforced, and all associated rights shall be exercised, by
the Servicer on behalf of the Trustee for the benefit of the Noteholders, and all
related documents to be delivered to the Trustee, amounts to be deposited with
the Trustee and all accounts to be maintained by the Trustee shall be so
delivered, deposited and maintained in accordance with the Cash Management

 

47

 

Agreement or
otherwise by the Servicer on behalf of the Trustee for the benefit of the
Noteholders.

 

(a)  Existence; Compliance
with Legal Requirements. To the extent necessary to avoid a
material adverse change in the financial condition or business condition of any
Issuer, Issuers shall do or cause to be done with the reasonable promptness all
things necessary to preserve, renew and keep in full force and effect its
existence, rights, licenses, permits and franchises and comply with all
material Legal Requirements applicable to Issuers and the Property, including,
without limitation, Prescribed Laws. There shall never be committed by any
Issuer and Issuers shall use commercially reasonable efforts not to permit any
other Person in occupancy of or involved with the operation or use of the
Property to commit any act or omission affording the sovereign or federal
government or any state or local government the right of forfeiture against the
Property or any part thereof or any monies paid in performance of Issuers’
obligations under any of the Financing Documents. Issuers shall at all times
maintain, preserve and protect in all material respects all franchises and
trade names and preserve all the remainder of their property used or useful in
the conduct of its business and shall keep the Property in good working order
and repair, and from time to time make, or cause to be made, all reasonably
necessary repairs, renewals, replacements, betterments and improvements
thereto, all as more fully provided herein, in the Security Trust Agreement and
the Pledge. After prior notice to Trustee, Issuers, at their own expense, may contest
by appropriate legal proceeding promptly initiated and conducted in good faith
and with due diligence, the validity of any Legal Requirement, the
applicability of any Legal Requirement to Issuers or the Property or any
alleged violation of any Legal Requirement, provided that (i) no
Event of Default has occurred and remains uncured; (ii) intentionally
omitted; (iii) such proceeding shall not result in a default under any
material agreement to which any Issuer is subject and such proceeding shall be
conducted in accordance with all applicable statutes, laws and ordinances; (iv) neither
the Property nor any part thereof or interest therein will be in imminent
danger of being sold, forfeited, terminated, cancelled or lost; (v) Issuers
shall promptly upon final determination thereof comply with any such Legal
Requirement determined to be valid or applicable or cure any violation of any
Legal Requirement; (vi) such proceeding shall suspend the enforcement of
the contested Legal Requirement against Issuers and the Property; and (vii) Issuers
shall furnish such security as may be required in the proceeding, or as may be
reasonably requested by Trustee, to insure compliance with such Legal
Requirement, together with all interest and penalties payable in connection
therewith. Trustee may apply any such security, as necessary to cause
compliance with such Legal Requirement at any time when, in the reasonable
judgment of Trustee, the validity, applicability or violation of such Legal
Requirement is finally established or the Property (or any part thereof or
interest therein) shall be in danger of being sold, forfeited, terminated,
cancelled or lost.

 

(b)  Taxes and Other Charges.
Issuers shall pay all Taxes and Other Charges now or hereafter
levied or assessed or imposed against the Property or any part thereof as
the same become due and payable; provided, however, Issuers’
obligation to directly pay Taxes shall be suspended for so long as Issuers
comply with the terms and provisions of Section 2.4 of the Note or
contests such Taxes and Other Charges pursuant

 

48

 

to this Section 7.01(b).
Issuers shall furnish to Trustee no later than ten (10) days prior to the
date the same shall become delinquent receipts for the payment of the Taxes and
the Other Charges; provided, however, Issuers are not required to
furnish such receipts for payment of Taxes in the event that such Taxes have
been paid by Trustee pursuant to Section 10.02 hereof. Issuers
shall not suffer and shall promptly cause to be paid and discharged any Lien or
charge whatsoever which may be or become a Lien or charge against the
Property, and shall promptly pay for all utility services provided to the
Property. After prior notice to Trustee, Issuers, at their own expense, may contest
by appropriate legal proceeding, promptly initiated and conducted in good faith
and with due diligence, the amount or validity or application in whole or in part of
any Taxes or Other Charges, provided that (a) no Default or Event
of Default has occurred and remains uncured; (b) intentionally omitted; (c) such
proceeding shall be permitted under and be conducted in accordance with the
provisions of any other instrument to which Issuers are subject and shall not
constitute a default thereunder and such proceeding shall be conducted in
accordance with all applicable statutes, laws and ordinances; (d) neither
the Property nor any part thereof or interest therein will be in imminent
danger of being sold, forfeited, terminated, cancelled or lost; (e) Issuers
shall promptly upon final determination thereof pay the amount of any such
Taxes or Other Charges, together with all costs, interest and penalties which may be
payable in connection therewith; (f) such proceeding shall suspend the
collection of such contested Taxes or Other Charges from the applicable
Individual Parcel; and (g) Issuers shall furnish such security as may be
required in the proceeding, or as may be reasonably requested by Trustee,
to insure the payment of any such Taxes or Other Charges, together with all
interest and penalties thereon. Trustee may pay over any such cash deposit
or part thereof held by or on behalf of Trustee to the claimant entitled
thereto at any time when, in the judgment of Trustee, the entitlement of such
claimant is established or the applicable Individual Parcel (or part thereof
or interest therein) shall be in imminent danger of being sold, forfeited,
terminated, cancelled or lost or there shall be any danger of the rights of
Trustee under the Security Trust Agreement and/or the Pledge being primed by or
being subject to any related Lien.

 

(c)  Litigation. Issuers
shall give prompt notice to Trustee of any litigation or governmental
proceedings pending or threatened in writing against any Issuer, Principal and
Guarantor which might reasonably be expected to have a Material Adverse Effect.

 

(d)  Access to Property. Issuers
shall permit agents, representatives and employees of Trustee to inspect the
Property or any part thereof at reasonable hours upon reasonable advance
notice, provided such inspections do not materially interfere with the use and
operation of the Property.

 

(e)  Notice of Default. Issuers
shall promptly advise Trustee of any material adverse change in any Issuer’s,
Principal’s or Guarantor’s condition, financial or otherwise, or of the
occurrence of any Event of Default of which any Issuer has knowledge.

 

49

 

(f)  Cooperate in Legal
Proceedings. Issuers shall reasonably cooperate with Trustee
with respect to any proceedings before any court, board or other Governmental
Authority which may in any way materially and adversely affect the rights
of Trustee hereunder or any rights obtained by Trustee under any of the other
Financing Documents and, in connection therewith, permit Trustee, at its
election, to participate in any such proceedings.

 

(g)  Perform Financing
Documents. Issuers shall pay when due all costs, fees and
expenses to the extent required under the Financing Documents executed and
delivered by, or applicable to, Issuers.

 

(h)  Award and Insurance
Benefits. Issuers shall cooperate with Trustee in obtaining for
Trustee the benefits of any Awards or Insurance Proceeds lawfully or equitably
payable in connection with the Property to the extent Trustee is entitled to
same under the terms of this Indenture, the Security Trust Agreement or the
Pledge, and Trustee shall be reimbursed for any expenses incurred in connection
therewith (including attorneys’ fees and disbursements, and the payment by
Issuers of the expense of an appraisal on behalf of Trustee in case of Casualty
or Condemnation affecting the Property or any part thereof) out of such
Insurance Proceeds.

 

(i)  Further Assurances. Issuers
shall, at Issuers’ sole cost and expense:

 

(i)  furnish to Trustee all instruments, documents, boundary
surveys, footing or foundation surveys, certificates, plans and specifications,
appraisals, title and other insurance reports and agreements, and each and
every other document, certificate, agreement and instrument required to be
furnished by Issuers pursuant to the terms of the Financing Documents or which
are reasonably requested by Trustee in connection therewith;

 

(ii)  execute and deliver to Trustee such documents, instruments,
certificates, assignments and other writings, and do such other acts reasonably
necessary, to evidence, preserve and/or protect the collateral at any time
securing or intended to secure the obligations of Issuers under the Financing
Documents, as Trustee may reasonably require;

 

(iii)  do and execute all and such further lawful and reasonable
acts, conveyances and assurances for the better and more effective carrying out
of the intents and purposes of this Indenture and the other Financing
Documents, as Trustee shall reasonably require from time to time; and

 

(iv)  pay all taxes, filing, registration or recording fees, and
all expenses incident to the preparation, execution, acknowledgment and/or
recording of the Security Trust Agreement, the Pledge, the other Financing
Documents, any mortgage supplemental thereto, any security instrument with
respect to the Property and any instrument of further assurance, and any
modification or amendment of any of the foregoing documents, and all federal,
state, county and municipal taxes, duties, imposts, assessments and charges
arising out of or in connection with the execution and delivery

 

50

 

of the
Security Trust Agreement, the Pledge, any mortgage supplemental thereto, any
security instrument with respect to the Property or any instrument of further
assurance, and any amendment or other modification of any of the foregoing
documents, except where prohibited by law so to do.

 

(j)  Maintenance of Property. (i)  Issuers
shall cause the Property to be maintained in a good and safe condition and
repair. The Improvements and the Personal Property shall not be removed,
demolished or materially altered (except for replacement of the Personal
Property in the ordinary course of business) without the prior consent of
Trustee.

 

(ii)  Issuers shall not commit or suffer any waste of the Property
or make any change in the use of the Property which will in any way materially
increase the risk of fire or other hazard arising out of the operation of the
Property, or take any action that might invalidate or allow the cancellation of
any Policy, or do or permit to be done thereon anything that may in any
way materially impair the value of the Property or the security of the Security
Instrument or the Pledge. Issuers will not, without the prior written consent
of Trustee, permit any drilling or exploration for or extraction, removal, or
production of any minerals from the surface or the subsurface of the Land,
regardless of the depth thereof or the method of mining or extraction thereof.

 

(iii)  Issuers will promptly pay when due all bills and costs for
labor, materials, and specifically fabricated materials incurred in connection
with the Property and never permit to exist beyond the due date thereof in
respect of the Property or any part thereof any lien or security interest,
even though inferior to the liens and the security interests hereof, and in any
event never permit to be created or exist in respect of the Property or any part thereof
any other or additional lien or security interest other than the liens or
security interests hereof except for the Permitted Encumbrances. After prior
notice to Trustee, Issuers, at their own expense, may contest by
appropriate legal proceeding, promptly initiated and conducted in good faith
and with due diligence, the amount or validity or application such liens or
security interests, provided that (a) no Default or Event of
Default has occurred and remains uncured; (b) intentionally omitted; (c) such
proceeding shall be permitted under and be conducted in accordance with the
provisions of any other instrument to which Issuers are subject and shall not
constitute a default thereunder and such proceeding shall be conducted in
accordance with all applicable statutes, laws and ordinances; (d) neither
the Property nor any part thereof or interest therein will be in imminent
danger of being sold, forfeited, terminated, cancelled or lost; (e) Issuers
shall promptly upon final determination thereof pay the amount of any such
liens or security interests, together with all costs, interest and penalties
which may be payable in connection therewith; (f) such proceeding
shall suspend the collection of such contested liens or security interests from
the applicable Individual Parcel; and (g) Issuers shall furnish such
security as may be required in the proceeding, or as may be
reasonably requested by Trustee, to insure the payment of any such liens or
security interests, together with all interest and penalties thereon. Trustee may pay
over any such cash deposit or part thereof held by or on behalf of Trustee
to the claimant entitled thereto at any time when, in the judgment of Trustee,
the entitlement of such claimant is established or the applicable Individual
Parcel (or part thereof or interest therein) shall be

 

51

 

in imminent
danger of being sold, forfeited, terminated, cancelled or lost or there shall
be any danger of the rights of Trustee under the Security Trust Agreement
and/or the Pledge being primed by or being subject to any related Lien.

 

(k)  Financial Reporting. (i)  Issuers
will keep and maintain or will cause to be kept and maintained on a Fiscal Year
basis, in accordance with GAAP (or such other accounting basis reasonably
acceptable to Trustee), proper and accurate books, records and accounts
reflecting all of the financial affairs of each Issuer and all items of income
and expense in connection with the operation of the Property. Trustee shall
have the right from time to time at all reasonable times during normal business
hours upon reasonable prior notice to examine such books, records and accounts
at the office of any Issuer or any other Person maintaining such books, records
and accounts and to make such copies or extracts thereof as Trustee may reasonably
require. After the occurrence and during the continuance of an Event of
Default, Issuers shall pay any costs and expenses incurred by Trustee to
examine Issuers’ accounting records with respect to the Property, as Trustee
shall determine to be necessary or appropriate in the protection of Trustee’s
interest.

 

(ii)  Issuers will furnish, or cause to be furnished, to Trustee
annually, within one hundred twenty (120) days following the end of each Fiscal
Year of Issuers, (A) a complete copy of each Issuer’s individual annual
financial statements prepared in Pesos and audited by a “Big Four” accounting
firm or other independent certified public accountant acceptable to Trustee in
accordance with GAAP (or such other accounting basis acceptable to Trustee)
covering such Issuer’s Individual Parcel for such Fiscal Year and containing
statements of profit and loss for such Issuer and its Individual Parcel and a
balance sheet for such Issuer and (B) a completed copy of a consolidated
annual financial statements prepared in Dollars for the Principals and Palmilla
JV LLC audited by a “Big Four” accounting firm or other independent certified
public accountant acceptable to Trustee in accordance with GAAP (or such other
accounting basis acceptable to Trustee) covering the Property for such Fiscal
Year and containing consolidated statements of profit and loss for Issuers and
the Property and a consolidated balance sheet for Issuers. Such statements
shall set forth the financial condition and the results of operations for an
Individual Parcel (in case of financial statements furnished pursuant to clause (A) above)
or the Property (in case of financial statements furnished pursuant to clause (B) above)
for such Fiscal Year, and shall include, but not be limited to, amounts
representing annual Net Cash Flow, Net Operating Income, Gross Income from
Operations and Operating Expenses. The consolidated annual financial statements
shall be accompanied by (i) a comparison of the budgeted income and
expenses and the actual income and expenses for the prior Fiscal Year, (ii) a
list of tenants, if any, occupying more than twenty percent (20%) of the total
floor area of the Improvements as of the last day of the Fiscal Year, (iii) if
there are Leases in the aggregate affecting more than twenty percent (20%) of
the total floor area of the Improvements, a breakdown showing the year in which
each Lease then in effect expires and the percentage of total rentable area of
the Improvements and the base rent with respect to which Leases shall expire in
each such year, (iv) a schedule audited by such independent certified
public accountant reconciling Net Operating Income to Net Cash Flow (the “Net Cash Flow Schedule”), which shall
itemize all adjustments made to Net Operating Income to arrive at Net Cash Flow
deemed material

 

52

 

by such independent
certified public accountant, (v) occupancy reports, room rate
reports, RevPAR calculations, STR reports (or other market competition reports)
for the Property, and (vi) an Officer’s Certificate certifying that, to
such officer’s knowledge, each annual financial statement presents fairly the
financial condition and the results of operations of Issuers and the Property
being reported upon and that such financial statements have been prepared in
accordance with GAAP or such other accounting basis as Trustee shall reasonably
accept and as of the date thereof whether, to such officer’s knowledge, there
exists an event or circumstance which constitutes a Default or Event of Default
under the Financing Documents executed and delivered by, or applicable to,
Issuers, and if such Default or Event of Default exists, the nature thereof,
the period of time it has existed and the action then being taken to remedy the
same.

 

(iii)  Issuers will furnish, or cause to be furnished, to Trustee
on or before forty-five (45) days after the end of each calendar month the
following items, accompanied by an Officer’s Certificate stating that, to such
officer’s knowledge such items are true, correct, accurate, and complete in all
material respects and fairly present the financial condition and results of the
operations of Issuers and the Property as of such date (subject to normal
year-end adjustments): (i) an occupancy report for the subject month,
including an average daily rate during such month; (ii) monthly and
year-to-date operating statements (including Capital Expenditures) prepared for
each calendar month, noting Net Operating Income, Gross Income from Operations,
and Operating Expenses (not including any contributions to the Replacement
Reserve Fund), and, upon Trustee’s request, other information necessary and
sufficient to fairly represent the financial position and results of operation
of the Property during such calendar month, and containing a comparison of
budgeted income and expenses and the actual income and expenses, all in form satisfactory
to Trustee; (iii) a reconciliation of the monthly statement as prepared on
an accrual basis with a monthly statement prepared on a cash basis; and (iv) a
Net Cash Flow Schedule.

 

(iv)  For the partial year period commencing on the date hereof,
and for each Fiscal Year thereafter, Issuers shall submit to Trustee an Annual
Budget not later than forty-five (45) days prior to the commencement of such
period or Fiscal Year in form reasonably satisfactory to Trustee. At all
times during the term of the Notes when there is a Cash Trap Event in effect,
the Annual Budget so submitted to Trustee (and the applicable expenses budgeted
or projected to be incurred during the period when a Cash Trap Event is in
effect) shall be subject to the approval of Servicer on behalf of Trustee,
which shall not be unreasonably withheld or delayed (each such Annual Budget,
an “Approved Annual Budget”). Notwithstanding
anything to the contrary contained herein, the approval by Servicer on behalf
of Trustee of any Annual Budget shall not be required if such Annual Budget
submitted by Issuers provide for projected Net Cash Flow which is in excess of
an amount determined by subtracting the Capital Expenditures for the preceding
Fiscal Year from $8.0 million (with respect to an Annual Budget for Fiscal Year
2008) or $9.0 million (with respect to an Annual Budget for Fiscal Year 2009),
as applicable, and provides for expenses that are comparable to the expenses
for the preceding year (with increases for fixed costs) and with such other
changes as are reasonably consistent with income growth, marketing conditions
and other variable items that fluctuate with occupancy levels. Servicer on
behalf of Trustee shall use good faith

 

53

 

efforts to
respond within five (5) Business Days after Trustee’s receipt of Issuers’
proposed Annual Budget. If Servicer on behalf of Trustee fails to respond to
such request within five (5) Business Days, and Issuers send a second
request for approval of such Annual Budget containing a legend clearly marked
in not less than fourteen (14) point bold face type, underlined, in all capital
letters “REQUEST DEEMED APPROVED IF NO
RESPONSE WITHIN 5 BUSINESS DAYS”, the approval of Servicer on behalf
of Trustee shall be deemed given if no objection is made by Servicer within
five (5) Business Days after receipt thereof. In the event that Servicer
objects to a proposed Annual Budget submitted by Issuers which requires the
approval of Servicer on behalf of Trustee hereunder, Servicer on behalf of
Trustee shall advise Issuers of such objections within five (5) Business
Days after receipt thereof (and deliver to Issuers a reasonably detailed
description of such objections) and Issuers shall promptly revise such Annual
Budget and resubmit the same to Trustee. Servicer on behalf of Trustee shall
advise Issuers of any objections to such revised Annual Budget within five (5) Business
Days after receipt thereof (and deliver to Issuers a reasonably detailed description
of such objections) and Issuers shall promptly revise the same in accordance
with the process described in this subsection until Servicer approves or
is deemed to have approved the Annual Budget. Until such time that Servicer
approves or is deemed to have approved a proposed Annual Budget which requires
the approval of Servicer on behalf of Trustee hereunder, the most recently
Approved Annual Budget shall apply; provided that such Approved Annual
Budget shall be adjusted to reflect actual increases in Taxes, Insurance
Premiums, utilities expenses, union labor and fixed increases under previously
executed agreements; provided, further, that the Approved Annual
Budget shall be adjusted to reflect increased variable expenses as a result of
increased occupancy levels from the prior year.

 

(v)  In the event that a Cash Trap Event is in effect, if Issuers
must incur an extraordinary Operating Expense or Capital Expenditure (other
than an Emergency Expense) not set forth in the Approved Annual Budget (each, an
“Extraordinary Expense”), then
Issuers shall promptly deliver to Trustee a reasonably detailed explanation of
such proposed Extraordinary Expense for the approval of Servicer on behalf of
Trustee, which approval shall not be unreasonably withheld or delayed. Notwithstanding
anything to the contrary contained herein, no approval from Servicer shall be
required if (i) a single Extraordinary Expense is equal to or less than
five percent (5%) of the amount set forth in the Approved Annual Budget for
such expense, or (ii) if no sum was budgeted for such expense in the
Approved Annual Budget, the Extraordinary Expense is less than or equal to five
percent (5%) of the Approved Annual Budget, provided that all
Extraordinary Expenses in any Fiscal Year do not exceed five percent (5%) of
the Approved Annual Budget or (iii) an emergency exists which requires the
immediate expenditure of the Extraordinary Expense to preserve the value of the
Property or to protect the health and safety of persons located on the Property
or adjacent to the Property or (iv) such expense is an expense required to
be made to cause the Property to comply with the terms of this Agreement or the
other Financing Documents.

 

(vi)  Any reports, statements or other information required to be
delivered under this Indenture shall be delivered (i) in paper form, (ii) on
a diskette, and (iii) if requested by Trustee and within the capabilities
of Issuers’ data systems without change

 

54

 

or
modification thereto, in electronic form and prepared using a Microsoft
Word for Windows or WordPerfect for Windows files (which files may be
prepared using a spreadsheet program and saved as word processing files).

 

(l)  Business and Operations. Each Issuer
will continue to engage in the businesses presently conducted by it as and to
the extent the same are necessary for the ownership, maintenance, management
and operation of the Property. Each Issuer will qualify to do business and will
remain in good standing under the laws of each jurisdiction as and to the
extent the same are required for the ownership, maintenance, management and
operation of the Property, except to the extent that the failure to do so would
not have a Material Adverse Effect.

 

(m)  Title to the Property. Issuers will
warrant and defend (a) the title to the Property and every part thereof,
subject only to Permitted Encumbrances, and (b) the validity and priority
of the Security Trust Agreement and the Pledge, subject only to Permitted
Encumbrances, in each case against the claims of all Persons whomsoever. Issuers
shall reimburse Trustee for any losses, costs, damages or expenses (including
reasonable attorneys’ fees and court costs) incurred by Trustee if an interest
in the Property, other than as permitted hereunder, is claimed by another
Person.

 

(n)  Costs of Enforcement. In the event (a) that
a foreclosure procedure is initiated under the Security Trust Agreement or the
Pledge, (b) of the foreclosure of any mortgage, deed of trust, trust
agreement or pledge prior to or subsequent to the Security Trust Agreement or
the Pledge in which proceeding Trustee is made a party, or (c) of the
bankruptcy, concurso mercantil, insolvency,
rehabilitation or other similar proceeding in respect of any Issuer or any of
its Affiliates or an assignment by any Issuer or any of its constituent Persons
for the benefit of its creditors, or (d) Trustee, on behalf of any Issuer,
attempts to remedy any Event of Default hereunder, Issuers, their respective
successors or permitted assigns, shall be chargeable with and agrees to pay all
costs of collection and defense, including attorneys’ fees and costs, incurred
by Trustee or Issuers in connection therewith and in connection with any
appellate proceeding or post judgment action involved therein, together with
all required service or use taxes.

 

(o)  Estoppel Statement. (i)  Trustee
and Issuers shall within thirty (30) days of a written request furnish the
other party with a statement, duly acknowledged and certified, setting forth (i) the
original principal amount of the Notes, (ii) the unpaid principal amount
of the Notes, (iii) the Applicable Interest Rate of the Notes, (iv) the
date installments of interest and/or principal were last paid, (v) any
offsets or defenses to the payment of the Debt, if any, and (vi) that the
Notes, this Indenture, the Security Trust Agreement, the Pledge and the other
Financing Documents are valid, legal and binding obligations and have not been
modified or if modified, giving particulars of such modification.

 

(ii)  At Trustee’s request (which may be made no more than
one (1) time in any calendar year), Issuers shall request tenant estoppel
certificates from each commercial tenant leasing space at the Property in the form required
by such tenant’s lease or, at Issuers’ election, in the form previously
accepted by Trustee.

 

55

 

 

(iii)  Issuers shall use commercially reasonable
efforts (but shall not be required to expend any money), within forty-five (45)
Business Days after request, to furnish Trustee with a statement, duly
executed, acknowledged and certified by the Board of Surveillance of the
Condominium setting forth (i) whether or not there are any defaults or
conditions that, with the passage of time or the giving of notice, or both,
would constitute a default under the Condominium Documents, (ii) whether or not
all common expenses, assessments, maintenance fees and other charges due in
connection with the Condominium Documents have been paid and (iii) such other
statements as Trustee may reasonably require.

 

(p)  Construction
Cost; Use of Proceeds. The aggregate cost of construction
incurred by Issuers in the development, redevelopment and renovation of the
Property was not less than $102,000,000 (including pre-opening expenses). Issuers
shall use the proceeds of the Notes received by them on the Note Issuance Date
to (a) refinance the Property and/or repay and discharge any existing loans
relating to the Property, (b) pay all past-due Basic Carrying Costs, if any,
with respect to the Property, (c) make initial deposits into the Reserve Funds
on the Note Issuance Date in the amounts provided herein, (d) pay costs and
expenses incurred in connection with the issuance of the Notes, (e) fund any
working capital requirements of the Property, (f) repayment of subordinated
debt and guaranty fees and obligations in favor of Kerzner International North
America, Inc., (g) payment of accrued management fees payable to Manager and
(h) distribute the balance, if any, to Issuers.

 

(q)  Performance
by Issuers. Issuers shall in a timely manner observe, perform
and fulfill each and every covenant, term and provision of each Financing
Document executed and delivered by Issuers subject to all applicable notice,
grace and cure periods therein.

 

(r)  CNBV
Fees. Issuers shall (i) comply at all times with the
requirements imposed by CNBV while this Indenture shall remain in full force
and effect or the Notes shall remain outstanding and (ii) pay any and all fees
or other charges payable to CNBV in connection with the Notes and promptly
forward to Trustee an original official receipt or a copy thereof or other
documentation issued by CNBV evidencing the payment of such fees or charges.

 

(s)  No Joint
Assessment. No Issuer shall suffer, permit or initiate the joint
assessment of the Property (a) with any other real property constituting a tax
lot separate from the Property, and (b) which constitutes real property with
any portion of the Property which may be deemed to constitute personal
property, or any other procedure whereby the lien of any taxes which may be
levied against such personal property shall be assessed or levied or charged to
such real property portion of the Property.

 

(t)  Leasing
Matters. Any Leases with respect to the Property executed after
the date hereof, for more than 1,600 square feet shall be approved by Trustee,
which approval shall not be unreasonably withheld and shall be deemed granted
if Trustee shall not have disapproved same in writing within fifteen (15)
Business Days after Issuers’

 

56

 

request for
approval, so long as the written request to Trustee for approval contains a
legend clearly marked in not less than fourteen (14) point bold face type,
underlined, in all capital letters “REQUEST
DEEMED APPROVED IF NO RESPONSE WITHIN 15 BUSINESS DAYS”. Upon
request, Issuers shall furnish Trustee with executed copies of all Leases. All
proposed Leases shall be on commercially reasonable terms and shall not contain
any terms which would materially affect Trustee’s rights under the Financing
Documents. All Leases executed after the date hereof shall provide that they
are subordinate to the Security Trust Agreement and the Pledge and that the
lessee agrees to attorn to Trustee or any purchaser at a sale by foreclosure or
power of sale. Issuers (i) shall observe and perform the obligations
imposed upon the lessor under the Leases in a commercially reasonable manner;
(ii) shall enforce and may amend or terminate the terms, covenants and
conditions contained in the Leases upon the part of the lessee thereunder to be
observed or performed in a commercially reasonable manner and in a manner not
to impair the value of the Property involved except that no termination by
Issuers or acceptance of surrender by a tenant of any Leases shall be permitted
unless by reason of a tenant default and then only in a commercially reasonable
manner to preserve and protect the Property; provided, however,
that no such termination or surrender of any Lease covering more than 1,600
square feet will be permitted without the consent of Trustee; provided, further,
that notwithstanding anything to the contrary contained in this Section 7.01(t),
(A) consent to the termination or surrender of the Restaurant Lease shall not
be withheld if Hotel Issuer shall enter into a new Lease with a replacement
tenant that has or has had a restaurant or food establishment operation serving
a clientele similar to the clientele frequenting the Property and having a
strong regional or national reputation and (B) Hotel Issuer may, upon not less
than fifteen (15) Business Days notice to, but without the approval of,
Trustee, terminate or accept a surrender of the Restaurant Lease in the event
Issuers shall elect to self manage the applicable facility and operation; (iii)
shall not collect any of the rents more than one (1) month in advance (other
than security deposits); (iv) shall not execute any other assignment of lessor’s
interest in the Leases or the Rents (except as contemplated by the Financing
Documents); (v) shall not alter, modify or change the terms of the Leases in a
manner inconsistent with the provisions of the Financing Documents; and (vi)
shall execute and deliver at the request of Trustee all such further
assurances, confirmations and assignments in connection with the Leases as
Trustee shall from time to time reasonably require. Notwithstanding anything to
the contrary contained herein, no Issuer shall enter into a Lease of all or
substantially all of the Property without Trustee’s prior consent.

 

(u)  Alterations.
Issuers shall obtain Trustee’s prior consent to any alterations
to any Improvements, which consent shall not be unreasonably withheld or
delayed. Notwithstanding the foregoing, Trustee’s consent shall not be required
in connection with (i) any alterations in connection with Required Repairs,
Replacements or Restorations performed in accordance with the terms and
provisions of this Indenture, (ii) alterations provided for in any Annual
Budget, (iii) (A) any emergency alterations in response to a material threat of
danger to the safety and well-being of hotels guests and employees of Issuers
or a material threat of injury to or destruction of the Improvements or (B)
alterations that are required by a change in the applicable law, provided
that, in the case of clause (A) or (B), Issuers shall give notice thereof
to Trustee, together with a reasonably detailed description of the alteration
and the emergency or change in law

 

57

 

giving rise to
such alteration (it being understood and agreed that if the cost of such
alterations exceed $2,000,000, the excess costs shall be the liability of the
Issuers in accordance with Section 9.03(a)(vi) until such
alteration has been approved by Servicer for the Trustee, such approval not to
be unreasonably withheld, conditioned or delayed); or (iv) alterations that
will not have a Material Adverse Effect; provided that the alterations
under clause (iv) above (I) are made in connection with tenant improvement
work performed pursuant to the terms of any Lease executed on or before the
date hereof or (II) do not adversely affect any structural component of any
Improvements, any utility or HVAC system contained in any Improvements or the
exterior of any building constituting a part of any Improvements and the
aggregate cost thereof does not exceed Five Hundred Thousand and 00/100 Dollars
($500,000). If the total unpaid amounts due and payable with respect to
alterations to the Improvements at the Property (other than such amounts to be
paid or reimbursed by tenants under the Leases or to be paid from any
applicable Reserve Fund) shall at any time exceed Five Hundred Thousand and
00/100 Dollars ($500,000) (the “Threshold
Amount”), Issuers shall promptly deliver to Trustee as security for
the payment of such amounts and as additional security for Issuers’ obligations
under the Financing Documents any of the following: (A) cash, (B) U.S.
Obligations, (C) other securities having a rating acceptable to Trustee and
that the applicable Rating Agencies have confirmed in writing will not, in and
of itself, result in a downgrade, withdrawal or qualification of the initial,
or, if higher, then current ratings assigned to any Securities or any class
thereof in connection with any Securitization, or (D) a completion and
performance bond or an irrevocable letter of credit (payable on sight draft
only) issued by a financial institution having a rating by S&P of not less
than “A-1+” if the term of such bond or letter of credit is no longer than
three (3) months or, if such term is in excess of three (3) months, issued by a
financial institution having a rating that is acceptable to Trustee and that
the applicable Rating Agencies have confirmed in writing will not, in and of
itself, result in a downgrade, withdrawal or qualification of the initial, or,
if higher, then current ratings assigned to any Securities or any class thereof
in connection with any Securitization. Such security shall be in an amount
equal to the excess of the total unpaid amounts with respect to alterations to
the Improvements on the Property (other than such amounts to be paid or
reimbursed by tenants under the Leases) over the Threshold Amount and, subject
to the terms of Section 10.06, Trustee shall (or, with respect to a
letter of credit or performance bond, may) apply such security from time to time
to pay for such alterations in accordance with the procedures and requirements
set forth in Section 10.03 relating to the disbursement of funds
from the Replacement Reserve Account.

 

(v)  Operation
of Property. (i)  Issuers
shall cause the Property to be operated, in all material respects, in
accordance with the Management Agreement (or Replacement Management Agreement)
as applicable; provided, however, that no Issuer shall be deemed
to be in default hereunder if Manager, and not Issuers, is in default under the
terms of the Management Agreement or Replacement Management Agreement and
Issuers are otherwise complying with the provisions of this Section 7.01(v).
In the event that the Management Agreement expires or is terminated (without
limiting any obligation of Issuers to obtain Trustee’s consent to any
termination or modification of the Management Agreement in accordance with the
terms and provisions of this Indenture), Issuers shall promptly enter into a
Replacement Management Agreement with Manager

 

58

 

or another
Qualified Manager, as applicable. Any breach of the covenants contained in this
Section 7.01(v) with respect to the Management Agreement shall not
result in an Event of Default as long as Issuers are actively seeking Trustee’s
consent to enter into a Replacement Management Agreement with Manager or
another Qualified Manager or, in the case of a termination, the Manager is
replaced within thirty (30) days by a Qualified Manager pursuant to Section 9.04.

 

(ii)  Issuers shall:  (A) promptly perform and/or observe, in all
material respects, all of the covenants and agreements required to be performed
and observed by Issuers under the Management Agreement and do all things necessary
to preserve and to keep unimpaired their material rights thereunder; (B)
promptly notify Trustee of any material default under the Management Agreement
of which they are aware; (C) promptly deliver to Trustee a copy of each
material financial statement, business plan, capital expenditures plan, notice,
report and estimate received by Issuers under the Management Agreement; and (D)
use commercially reasonable efforts to enforce the performance and observance
of all of the covenants and agreements required to be performed and/or observed
by Manager under the Management Agreement, in a commercially reasonable manner.

 

(w)  Golf Operation. (i)  Issuers shall cause the golf course at the
Property to be operated, in all material respects, in accordance with the Golf
Management Agreement; provided, however, that no Issuer shall be
deemed to be in default hereunder if the Golf Manager, and not Issuers, is in
default under the terms of the Golf Management Agreement and Issuers are
otherwise complying with the provisions of this Section 7.01(w). In
the event that the Golf Management Agreement expires or is terminated (without
limiting any obligation of Issuers to obtain Trustee’s consent to any
termination or modification of the Golf Management Agreement in accordance with
the terms and provisions of this Indenture), Issuers shall promptly enter into
a Replacement Golf Management Agreement with Golf Manager or with a Qualified
Golf Manager. Any breach of the covenants contained in this Section 7.01(w)
with respect to the Golf Management Agreement shall not result in an Event of
Default as long as Issuers are actively seeking Trustee’s consent to enter into
a Replacement Golf Management Agreement with Golf Manager or Qualified Golf
Manager or, in the case of a termination, Golf Manager is replaced within
thirty (30) days by Qualified Golf Manager pursuant to Section 9.04.

 

(ii)  Issuers shall:  (A) promptly perform and/or observe, in all
material respects, all of the covenants and agreements required to be performed
and observed by Issuers under the Golf Management Agreement and do all things
necessary to preserve and to keep unimpaired their material rights thereunder;
(B) promptly notify Trustee of any material default under the Golf Management
Agreement of which they are aware; (C) promptly deliver to Trustee a copy of
each material financial statement, business plan, capital expenditures plan,
notice, report and estimate received by Issuers under the Golf Management
Agreement; and (D) use commercially reasonable efforts to enforce the performance
and observance of all of the covenants and agreements required to be performed
and/or observed by Golf Manager under the Golf Management Agreement, in a
commercially reasonable manner.

 

59

 

(x)  Spa Operation.
(i)  Issuers shall cause
the spa facility at the Property to be operated, in all material respects, in
accordance with the Spa Management Agreement; provided, however,
that no Issuer shall be deemed to be in default hereunder if the Spa Manager, and
not Issuers, is in default under the terms of the Spa Management Agreement and
Issuers are otherwise complying with the provisions of this Section 7.01(x).
In the event that the Spa Management Agreement expires or is terminated
(without limiting any obligation of Issuers to obtain Trustee’s consent to any
termination or modification of the Spa Management Agreement in accordance with
the terms and provisions of this Indenture), Issuers shall promptly enter into
a Replacement Spa Management Agreement with Spa Manager or with a Qualified Spa
Manager. Any breach of the covenants contained in this Section 7.01(x)
with respect to the Spa Management Agreement shall not result in an Event of
Default as long as Issuers are actively seeking Trustee’s consent to enter into
a Replacement Spa Management Agreement with Spa Manager or Qualified Spa
Manager or, in the case of a termination, Spa Manager is replaced within thirty
(30) days by Qualified Spa Manager pursuant to Section 9.04.

 

(ii)  Issuers shall:  (A) promptly perform and/or observe, in all
material respects, all of the covenants and agreements required to be performed
and observed by Issuers under the Spa Management Agreement and do all things
necessary to preserve and to keep unimpaired their material rights thereunder;
(B) promptly notify Trustee of any material default under the Spa Management
Agreement of which they are aware; (C) promptly deliver to Trustee a copy
of each material financial statement, business plan, capital expenditures plan,
notice, report and estimate received by Issuers under the Spa Management
Agreement; and (D) use commercially reasonable efforts to enforce the
performance and observance of all of the covenants and agreements required to
be performed and/or observed by Spa Manager under the Spa Management Agreement,
in a commercially reasonable manner.

 

(iii)  Notwithstanding anything to the contrary
contained in this Section 7.01(x), upon fifteen (15) Business Days
notice to Trustee, Issuers may elect to terminate the Spa Management Agreement
in accordance with the terms thereof or consent to the termination or surrender
of the Spa Management Agreement and elect to self manage the spa facility and
operation at the Property, provided that Kerzner (thereafter, a “Qualified Spa Manager”) shall have
theretofore initiated a spa program and is then operating and managing a spa
facility of comparable class, luxury and quality as the spa facility located at
the Property on the date hereof.

 

(y)  Condominium.
(i)  Issuers shall comply
with all of the terms, covenants and conditions of the Condominium Documents
applicable to Issuers, as the same shall be in force and effect from time to
time.

 

(ii)  Issuers shall pay all assessments for common
charges and expenses made against the Condominium units owned by Issuers
pursuant to the Condominium Documents as the same shall become due and payable.

 

60

 

(iii)  Issuers shall comply with any state, local or
federal law, rule and regulation applicable to the Condominium as it relates to
the Property.

 

(iv)  Issuers shall take all actions as may be
reasonably necessary from time to time to preserve and maintain the Condominium
in accordance with the Condominium Laws.

 

(v)  Issuers (A) irrevocably waive any applicable
law which grants to Issuers rights in the event of a Casualty or a Condemnation
which are inconsistent with the provisions of Article 8 hereof and (B)
expressly agrees to the application of the insurance proceeds and condemnation
awards in accordance with Article 8 hereof.

 

Section
7.02  Negative Covenants. From
the date hereof until payment and performance in full of all obligations of
Issuers under the Financing Documents or the earlier reconveyance of title to
the Property held by Security Trust Trustee to Issuers or release of the Lien
of the Pledge in accordance with the terms of this Indenture and the other
Financing Documents, each of the Issuers covenants and agrees with Trustee that
it will not do, directly or indirectly, any of the covenants or agreements set
forth in this Section 7.02. All such covenants and agreements shall
be enforced, and all associated rights shall be exercised, by the Servicer on
behalf of the Trustee for the benefit of the Noteholders, and all related
documents to be delivered to the Trustee, amounts to be deposited with the
Trustee and all accounts to be maintained by the Trustee shall be so delivered,
deposited and maintained in accordance with the Cash Management Agreement or
otherwise by the Servicer on behalf of the Trustee for the benefit of the
Noteholders.

 

(a)  Operation
of Property. (i)  No
Issuer shall, without Trustee’s prior consent (which consent shall not be
unreasonably withheld or delayed): (A) surrender, terminate or cancel the
Management Agreement; provided, that Issuers may, without Trustee’s
consent, replace the Manager so long as the replacement manager is a Qualified
Manager pursuant to a Replacement Management Agreement; (B) reduce or consent
to the reduction of the term of the Management Agreement; (C) increase or
consent to the increase of the amount of any charges under the Management
Agreement; or (D) otherwise modify, change, supplement, alter or amend, or
waive or release any of its rights and remedies under, the Management Agreement
in any material respect.

 

(ii)  Subject to Section 7.01(w)(iii),
no Issuer shall, without Trustee’s prior consent (which consent shall not be
unreasonably withheld or delayed): (A) surrender, terminate or cancel the Golf
Management Agreement; provided, that Issuers may, without Trustee’s
consent, replace the Golf Manager so long as the replacement manager is a:
Qualified Golf Manager pursuant to a Replacement Golf Management Agreement; (B)
reduce or consent to the reduction of the term of the Golf Management Agreement;
(C) increase or consent to the increase of the amount of any charges payable to
Golf Manager or reduce or consent to the reduction of the amount payable to
Issuers under the Golf Management Agreement; or (D) otherwise modify, change,
supplement, alter or amend, or waive or release any of its rights and remedies
under, the Golf Management Agreement in any material respect.

 

61

 

(iii)  Subject to Section 7.01(x)(iii),
no Issuer shall, without Trustee’s prior consent (which consent shall not be
unreasonably withheld or delayed): (A) surrender, terminate or cancel the Spa
Management Agreement; provided, that Issuers may, without Trustee’s
consent, replace the Spa Manager so long as the replacement manager is a Qualified
Spa Manager pursuant to a Replacement Spa Management Agreement; (B) reduce or
consent to the reduction of the term of the Spa Management Agreement; (C)
increase or consent to the increase of the amount of any charges payable to Spa
Manager or reduce or consent to the reduction of the amount payable to Issuers
under the Management Agreement; or (D) otherwise modify, change, supplement,
alter or amend, or waive or release any of its rights and remedies under, the
Spa Management Agreement in any material respect.

 

(iv)  Following the occurrence and during the
continuance of an Event of Default, no Issuer shall exercise any rights, make
any decisions, grant any approvals or otherwise take any action under the
Management Agreement without the prior consent of Trustee, which consent may be
withheld in Trustee’s sole discretion.

 

(b)  Liens. No
Issuer shall create, incur, assume or suffer to exist any Lien on any portion
of the Property or permit any such action to be taken, except:

 

(i)  Permitted Encumbrances; and

 

(ii)  Liens created by or permitted pursuant to the
Financing Documents.

 

(c)  Dissolution.
No Issuer shall (a) engage in any dissolution, liquidation or
consolidation or merger with or into any other business entity, (b) engage in
any business activity not related to the ownership and operation of the
Property, (c) transfer, lease or sell, in one transaction or any combination of
transactions, the assets or all or substantially all of the. properties or
assets of such Issuer except to the extent permitted by the Financing
Documents, (d) modify, amend, waive or terminate its organizational documents
or its qualification and good standing in any jurisdiction where such
qualification is required for such Issuer to own its assets or conduct its business
or (e) cause the Principal to (i) dissolve, wind up or liquidate or take
any action, or omit to take an action, as a result of which the Principal would
be dissolved, wound up or liquidated in whole or in part, or (ii) amend,
modify, waive or terminate the certificate of incorporation or bylaws of the
Principal, in each case, without obtaining the prior consent of Trustee.

 

(d)  Intentionally
Omitted.

 

(e)  Debt
Cancellation. No Issuer shall cancel or otherwise forgive or
release any claim or debt (other than in connection with termination of Leases
in accordance herewith) owed to Issuers by any Person, except for adequate
consideration and in the ordinary course of Issuers’ business or if such
cancellation, forgiveness or release is prudent and commercially reasonable.

 

(f)  Zoning. No
Issuer shall initiate or consent to any zoning reclassification of any portion
of the Property or seek any variance under any existing

 

62

 

zoning
ordinance or use or permit the use of any portion of the Property in any manner
that could result in such use becoming a non-conforming use under any zoning
ordinance or any other applicable land use law, rule or regulation, without the
prior consent of Trustee.

 

(g)  Intentionally
Omitted.

 

(h)  Principal
Place of Business and Organization. No Issuer shall change its
principal place of business set forth in the introductory paragraph of this
Indenture without first giving Trustee thirty (30) days prior notice. No Issuer
shall change the place of its organization as set forth in Section 6.01(cc)
without the consent of Trustee, which consent shall not be unreasonably
withheld or delayed. Upon Trustee’s request, Issuers shall execute and deliver
additional financing statements, security agreements and other instruments
which may be necessary to effectively evidence or perfect Trustee’s lien or
security interest in the Property as a result of such change of principal place
of business or place of organization.

 

(i)  ERISA. (i)  No Issuer shall engage in any transaction
which would cause any obligation, or action taken or to be taken, hereunder (or
the exercise by Trustee of any of its rights under the Note, this Indenture or
the other Financing Documents) to be a non-exempt (under a statutory or
administrative class exemption) prohibited transaction under ERISA.

 

(ii)  Each Issuer further covenants and agrees to
deliver to Trustee such certifications or other evidence from time to time
throughout the term of the Notes, as requested by Trustee in its sole
discretion, that (i) such Issuer is not an “employee benefit plan” as defined
in Section 3(3) of ERISA, which is subject to Title I of ERISA, or a “governmental
plan” within the meaning of Section 3(32) of ERISA; (ii) such Issuer is
not subject to any state statute regulating investments of, or fiduciary
obligations with respect to, governmental plans; and (iii) one or more of the
following circumstances is true:

 

(1)  Equity interests in each Issuer are publicly
offered securities, within the meaning of 29 C.F.R. §2510.3-101(b)(2);

 

(2)  Less than twenty-five percent (25%) of each
outstanding class of equity interests in each Issuer is held by “benefit plan
investors” within the meaning of 29 C.F.R. §2510.3-101(f)(2); or

 

(3)  Each Issuer qualifies as an “operating
company” or a “real estate operating company” within the meaning of 29 C.F.R.
§2510.3-101(c) or (e).

 

(j)  Transfers.
(i)  Each Issuer
acknowledges that Initial Noteholder has examined and relied, and each
Noteholder will rely, on the experience of Issuers and their respective general
partners, members, principals and (if Issuer is a trust) beneficial owners in
owning and operating properties such as the Property in agreeing to purchase
the Notes, and will continue to rely on Issuers’ ownership of the Property as a
means of maintaining the value of the Property as security for repayment of the
Debt and the

 

63

 

performance of
the obligations contained in the Financing Documents. Each Issuer acknowledges
that Trustee has a valid interest in maintaining the value of the Property so
as to ensure that, should Issuers default in the repayment of the Debt or the
performance of the obligations contained in the Financing Documents, Trustee
can recover the Debt by a sale of the Property.

 

(ii)  Except to the extent otherwise set forth in
this Section 7.02(j), no Issuer shall, nor shall any Issuer permit
any Restricted Party to, (i) sell, convey, mortgage, grant, bargain, encumber,
pledge, assign, grant options with respect to, or otherwise transfer or dispose
of (directly or indirectly, voluntarily or involuntarily, by operation of law
or otherwise, and whether or not for consideration or of record) the Property
or any part thereof or any legal or beneficial interest therein or (ii) permit
a Sale or Pledge of an interest in any Restricted Party (collectively, a “Transfer”), other than pursuant to Leases
of space in the Improvements to tenants in accordance with the provisions of Section 7.01(t).
Notwithstanding anything to the contrary contained herein or in the other
Financing Documents, Transfers of interests in Guarantor or in any Person
having any direct or indirect legal or beneficial interest in Guarantor shall
not be prohibited or restricted in any manner whatsoever, including by sale,
merger, consolidation or otherwise.

 

(iii)  A Transfer shall include, but not be limited
to, (i) an installment sales agreement wherein Issuers agree to sell the
Property or any part thereof for a price to be paid in installments; (ii) an
agreement by Issuers leasing all or a substantial part of the Property for
other than actual occupancy by a space tenant thereunder or a sale, assignment
or other transfer of, or the grant of a security interest in, Issuers’ right,
title and interest in and to any Leases or any Rents; (iii) if a Restricted
Party is a corporation, any merger, consolidation or Sale or Pledge of such
corporation’s stock or the creation or issuance of new stock; (iv) if a
Restricted Party is a limited or general partnership or joint venture, any
merger or consolidation or the change, removal, resignation or addition of a
general partner or the Sale or Pledge of the partnership interest of any
general partner or any profits or proceeds relating to such partnership
interest, or the Sale or Pledge of limited partnership interests or any profits
or proceeds relating to such limited partnership interest or the creation or
issuance of new limited partnership interests; (v) if a Restricted Party is a
limited liability company, any merger or consolidation or the change, removal,
resignation or addition of a managing member or non-member manager (or if no
managing member, any member) or the Sale or Pledge of the membership interest
of a managing member (or if no managing member, any member) or any profits or
proceeds relating to such membership interest, or the Sale or Pledge of
non-managing membership interests or the creation or issuance of new
non-managing membership interests; (vi) if a Restricted Party is a trust or
nominee trust, any merger, consolidation or the Sale or Pledge of the legal or
beneficial interest in a Restricted Party or the creation or issuance of new
legal or beneficial interests; or (vii) the removal or the resignation of the
managing agent (including, without limitation, an Affiliated Manager) other
than in accordance with Section 7.02(a) hereof.

 

(iv)  Notwithstanding the provisions of this Section 7.02(j),
the following Transfers shall be permitted hereunder: (A) the sale or transfer,
in one or a series of

 

64

 

transactions,
of not more than forty-nine percent (49%) of the stock in a Restricted Party; provided,
however, no such sales or transfers shall result in the change of voting
control in the Restricted Party, and (B) the sale or transfer, in one or a
series of transactions, of not more than forty-nine percent (49%) of the
limited partnership interests or non-managing membership interests (as the case
may be) in a Restricted Party; provided, however, no such sales
or transfers shall result in the change of voting control in the Restricted
Party, and (C) transfers of direct or indirect ownership interests in the
Issuers, Principals or the Property (1) by Goldman to Kerzner or (2) by Kerzner
to Goldman, pursuant to which transfer a change of control of the Issuers may
occur. Each of the Transfers described in this Section 7.02(j)(iv)
shall satisfy the following conditions: (a) Trustee shall receive no less than
thirty (30) days’ prior written notice of such proposed Transfer, (b) if after
giving effect to any of the foregoing Transfers, more than forty-nine percent
(49%) in the aggregate of direct or indirect interests in a Restricted Party
are owned by any Person and its Affiliates that owned less than forty-nine
percent (49%) direct or indirect interest in such Restricted Party as of the
date hereof, Issuers shall, no less than thirty (30) days prior to the
effective date of any such Transfer, deliver to Trustee an Additional
Insolvency Opinion reasonably acceptable to Trustee and acceptable to the
Rating Agencies, (c) each Issuer and Principal, if applicable, continue to
satisfy all the representations and covenants set forth in Section 6.01(dd)
of this Indenture following such Transfer, (d) in the case of a Transfer under
(iv)(C) above, any existing guarantor of the obligations of the Issuers under
any of the Financing Documents shall affirm its obligations under its
applicable guaranty or one (1) or more substitute guarantors reasonably acceptable
to Trustee shall have assumed all of the liabilities and obligations of such
guarantor, and (e) Issuers covenant and agree to pay all reasonable costs and
expenses (including reasonable attorneys’ fees and disbursements) incurred by
Trustee in connection with such Transfer.

 

(v)  Notwithstanding the provisions of this Section 7.02(j),
Goldman and Kerzner shall each have a collective one-time right during the term
of the Notes to transfer direct or indirect ownership interests in the Property
(but not the Property) to one or more third parties (each individually or
collectively, “Transferee”), provided
that Trustee receives sixty (60) days prior written notice of such Transfer and
no Event of Default has occurred and is continuing, and further provided
that the following additional requirements are satisfied:

 

(A)  Issuers are and shall remain Special Purpose
Entities that are able to satisfy all the representations and covenants set
forth in Section 6.01(dd) of this Indenture;

 

(B)  Transferee shall assume any applicable
obligations of Issuers or the Principals under the Financing Documents in a
manner satisfactory to Trustee in all respects, and Issuers shall provide
evidence satisfactory to Trustee that all required approvals, if any, relating
to the Transfer and the assumption of such obligations by Transferee have been
obtained;

 

65

 

(C)  Issuers or Transferee, at its sole cost and
expense, shall deliver to Trustee an Additional Insolvency Opinion reflecting
such Transfer satisfactory in form and substance to Trustee;

 

(D)  Transferee shall be approved by the Rating
Agencies, which approval, if required by Trustee, shall take the form of a
confirmation in writing from such Rating Agencies to the effect that such
Transfer will not result in a requalification, reduction, downgrade or
withdrawal of the ratings in effect immediately prior to such assumption or
transfer for the Securities or any class thereof issued in connection with a
Securitization which are then outstanding;

 

(E)  Issuers shall pay any and all reasonable
out-of-pocket costs incurred by Trustee and the Rating Agencies in connection
with such Transfer (including, without limitation, the reasonable fees and
disbursements of Trustee’s and Rating Agencies’ attorneys);

 

(F)  Transferee or Transferee’s principals must
have demonstrated expertise in owning and operating hotel properties similar in
size, class and operation to the Property, which expertise shall be reasonably
determined by Trustee (or Transferee or Transferee’s Principals employ a
Qualified Manager in lieu of having direct managerial experience required
hereunder); and

 

(G)  Prior to any release of Guarantor, one (1) or
more Substitute Guarantors shall have assumed all of the liabilities and
obligations of Guarantor under the Guaranty executed by Guarantor or execute a
replacement guaranty reasonably satisfactory to Trustee.

 

(H)  Immediately upon a Transfer to such
Transferee and the satisfaction of all of the above requirements, the named
Issuers and Guarantor herein shall be released from all liability under this
Indenture, the Notes, the Security Trust Agreement and the other Financing
Documents accruing after such Transfer. The foregoing release shall be
effective upon the date of such Transfer, but Trustee agrees to provide written
evidence thereof reasonably requested by Issuers.

 

(vi)  Notwithstanding the provisions of this Section 7.02(j),
and in addition to other transfer rights under Section 7.02, the
Issuers shall have the right to transfer the Property to a Transferee, provided
that Trustee receives sixty (60) days prior written notice of such Transfer and
no Event of Default has occurred and is continuing, and further provided
that the following additional requirements are satisfied:

 

(A)  Issuers shall pay Trustee a transfer fee
equal to one percent (1%) of the outstanding principal balance of the Notes at
the time of such transfer;

 

(B)  Transferee shall be Special Purpose Entity;

 

(C)  Transferee and Transferee’s principals must
be able to satisfy all the representations and covenants set forth in Section 6.01(dd)
of this Indenture, no Event of Default shall otherwise occur as a result of
such Transfer, and Transferee

 

66

 

and Transferee’s
principals shall deliver (1) all organizational documentation reasonably
requested by Trustee, which shall be reasonably satisfactory to Trustee and (2)
all certificates, agreements and covenants reasonably required by Trustee;

 

(D)  Transferee shall assume all of the
obligations of Issuers under the Financing Documents in a manner satisfactory
to Trustee in all respects, including, without limitation, by entering into an
assumption agreement in form and substance satisfactory to Trustee and Issuers
shall provide evidence satisfactory to Trustee that all required approvals, if
any, relating to the Transfer and the assumption of such obligations by
Transferee have been obtained;

 

(E)  Issuers or Transferee, at its sole cost and
expense, shall deliver to Trustee an Additional Insolvency Opinion reflecting
such Transfer satisfactory in form and substance to Trustee;

 

(F)  Transferee shall be approved by the Rating
Agencies, which approval, if required by Trustee, shall take the form of a
confirmation in writing from such Rating Agencies to the effect that such
Transfer will not result in a requalification, reduction, downgrade or
withdrawal of the ratings in effect immediately prior to such assumption or
transfer for the Securities or any class thereof issued in connection with a
Securitization which are then outstanding;

 

(G)  Issuers shall pay any and all reasonable
out-of-pocket costs incurred by Trustee and the Rating Agencies in connection
with such Transfer (including, without limitation, the fees and disbursements
of Trustee’s and Rating Agencies’ attorneys and all recording fees, title
insurance premiums and mortgage and intangible taxes);

 

(H)  Transferee or Transferee’s principals must
have demonstrated expertise in owning and operating hotel properties similar in
size, class and operation to the Property, which expertise shall be reasonably
determined by Trustee (or Transferee or Transferee’s Principals employ a
Qualified Manager in lieu of having direct managerial experience required
hereunder);

 

(I)  Transferee and Transferee’s principals shall,
as of the date of such transfer, have an aggregate net worth and liquidity
reasonably acceptable to Trustee;

 

(J)  Transferee, Transferee’s principals and all
other entities which may be owned or Controlled directly or indirectly by
Transferee’s principals (“Transferee Related
Entities”) must not have been party to any bankruptcy proceedings,
voluntary or involuntary, made an assignment for the benefit of creditors or
taken advantage of any insolvency act, or any act for the benefit of debtors
within seven (7) years prior to the date of the proposed Transfer;

 

(K)  There shall be no material litigation or
regulatory action pending or threatened against Transferee, Transferee’s
principals or Transferee Related Entities which is not reasonably acceptable to
Trustee;

 

67

 

(L)  Transferee, Transferee’s principals and
Transferee Related Entities shall not have defaulted under its or their
obligations with respect to any other Indebtedness in a manner which is not
reasonably acceptable to Trustee;

 

(M)  Prior to any release of Guarantor, one (1) or
more Substitute Guarantors shall have assumed all of the liabilities and
obligations of Guarantor under the Guaranty executed by Guarantor or execute a
replacement guaranty reasonably satisfactory to Trustee; and

 

(N)  (i) The hotel Individual Parcel shall be
managed by a Qualified Manager pursuant to a Replacement Management Agreement;
(ii) the golf Individual Parcel shall be managed by a Qualified Golf Manager
pursuant to a Replacement Golf Management Agreement, and (iii) the spa shall be
managed by a Qualified Spa Manager pursuant to a Replacement Spa Management
Agreement.

 

Immediately
upon a Transfer to such Transferee and the satisfaction of all of the above
requirements, the named Issuers and Guarantor herein shall be released from all
liability under this Indenture, the Notes, the Security Trust Agreement and the
other Financing Documents accruing after such Transfer. The foregoing release
shall be effective upon the date of such Transfer, but Trustee agrees to
provide written evidence thereof reasonably requested by Issuers.

 

(k)  Condominium
Documents. (i)  Issuers
shall not, without the Trustee’s prior written consent, amend, modify or
supplement in any material respect, or consent to or suffer any material
amendment, modification or supplementation of any of the Condominium Documents.
Issuers shall not, without the Trustee’s prior written consent, terminate or consent
to or suffer the termination of any of the Condominium Documents.

 

(ii)  Issuers shall not, without the Trustee’s
prior written consent, transfer any of its rights and obligations to any other
party to the Condominium Documents, which consent shall not be unreasonably
withheld or delayed.

 

(iii)  Issuers shall not, without the Trustee’s
prior written consent, take (and hereby assigns to Trustee any right it may
have to take) any action to terminate the Condominium, withdraw the Condominium
from the Condominium Laws, or cause a partition of the Condominium.

 

(iv)  Issuers shall not, without the Trustee’s
prior written consent, exercise any right it may have to vote for, (A) any
additions or improvements to the common elements of the Condominium, except as
such additions or improvements are completed in accordance with Section 8.04
hereof, (B) any borrowing on behalf of the Condominium or (C) the expenditure
of any insurance proceeds or condemnation awards for the repair or restoration
of the related Improvements other than in accordance with Section 8.04
hereof.

 

68

 

ARTICLE 8 – INSURANCE; CASUALTY; CONDEMNATION

 

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

 

(i)  comprehensive all risk insurance on the
Improvements and the Personal Property, including contingent liability from
Operation of Building Laws, Demolition Costs and Increased Cost of Construction
Endorsements, in each case (A) in an amount equal to one hundred percent (100%)
of the “Full Replacement Cost,” which for purposes of this Indenture shall mean
actual replacement value (exclusive of costs of excavations, foundations,
underground utilities and footings) with a waiver of depreciation, but the
amount shall in no event be less than the outstanding principal balance of the
Notes; (B) containing an agreed amount endorsement with respect to the
Improvements and Personal Property waiving all co-insurance provisions; (C)
providing for no deductible in excess of One Hundred Thousand and No/100
Dollars ($100,000) for all such insurance coverage; and (D) containing an “Ordinance
or Law Coverage” or “Enforcement” endorsement if any of the Improvements or the
use of the Property shall at any time constitute legal non-conforming
structures or uses. In addition, Issuers shall obtain coastal windstorm
insurance in amounts and in form and substance satisfactory to Trustee in the
event the Property is located in any coastal region, provided that the
insurance shall be on terms consistent with the comprehensive all risk
insurance policy required under this subsection (i) and provided
further that coastal windstorm insurance shall not be required with respect
to the golf course located at the Property;

 

(ii)  commercial general liability insurance
against claims for personal injury, bodily injury, death or property damage
occurring upon, in or about the Property, such insurance (A) to be on the
so-called “occurrence” form with a combined limit of not less than Two Million
and No/100 Dollars ($2,000,000) in the aggregate and One Million and No/100
Dollars ($1,000,000) per occurrence (and, if on a blanket policy, containing an
“Aggregate Per Location” endorsement); (B) to continue at not less than the
aforesaid limit until required to be changed by Trustee in writing by reason of
changed economic conditions making such protection inadequate; and (C) to cover
at least the following hazards: (1) premises and operations; (2) products and
completed operations on an “if any” basis; (3) independent contractors; (4)
blanket contractual liability for all legal contracts; and (5) contractual
liability covering the indemnities contained herein and in the other Financing
Documents to the extent the same is available;

 

(iii)  business income insurance (A) with loss
payable to Trustee; (B) covering all risks required to be covered by the
insurance provided for in subsection (i) above; (C) containing an
extended period of indemnity endorsement which provides that after the physical
loss to the Improvements and Personal Property has been repaired, the continued
loss of income will be insured until such income either returns to the same
level it was at prior to the loss, or the expiration of twenty-four (24) months
from the date that the Property is repaired or replaced and operations are
resumed, whichever first occurs, and notwithstanding that the policy may expire
prior to the end of such period; and (D) in an amount equal to one hundred
percent (100%) of the projected

 

69

 

gross income
from the Property for a period of twenty-four (24) months from the date of such
Casualty (assuming such Casualty had not occurred) and notwithstanding that the
policy may expire at the end of such period. The amount of such business income
insurance shall be determined prior to the date hereof and at least once each
year thereafter based on Issuers’ reasonable estimate of the gross income from
the Property for the succeeding twenty-four (24) month period. All proceeds
payable to Trustee pursuant to this subsection shall be held by Trustee and
shall be applied at Trustee’s sole discretion (but after consultation with
Issuers) to (I) the obligations secured by the Financing Documents from time to
time due and payable hereunder and under the Note or (II) Operating Expenses
approved by Trustee in its reasonable discretion; provided, however,
that nothing herein contained shall be deemed to relieve Issuers of their
obligations to pay the obligations secured by the Financing Documents on the
respective dates of payment provided for in the Note and the other Financing
Documents except to the extent such amounts are actually paid out of the proceeds
of such business income insurance;

 

(iv)  at all times during which structural
construction, repairs or alterations are being made with respect to the
Improvements, and only if the Property coverage form does not otherwise apply,
(A) owner’s contingent or protective liability insurance covering claims not
covered by or under the terms or provisions of the above mentioned commercial
general liability insurance policy; and (B) the insurance provided for in subsection
(i) above written in a so-called builder’s risk completed value form (1) on
a non-reporting basis, (2) against all risks insured against pursuant to subsection
(i) above, (3) including permission to occupy the Property, and (4) with an
agreed amount endorsement waiving co-insurance provisions;

 

(v)  if the Property includes commercial property,
worker’s compensation insurance with respect to any employees of Issuers, as
required by any Governmental Authority or Legal Requirement;

 

(vi)  comprehensive boiler and machinery insurance,
if applicable, in amounts as shall be reasonably required by Trustee on terms
consistent with the commercial property insurance policy required under subsection
(i) above;

 

(vii)  umbrella liability insurance in an amount not
less than Fifty Million and No/100 Dollars ($50,000,000) per occurrence on
terms consistent with the commercial general liability insurance policy
required under subsection (ii) above;

 

(viii)  motor vehicle liability coverage for all
owned and non-owned vehicles, including rented and leased vehicles containing
minimum limits per occurrence, including umbrella coverage, of Two Million and
No/100 Dollars ($2,000,000);

 

(ix)  if the Property is or becomes a legal “non-conforming”
use, ordinance or law coverage and insurance coverage to compensate for the
cost of demolition or rebuilding of the undamaged portion of the Property along
with any reduced value and the increased cost of construction in amounts as
requested by Trustee;

 

70

 

(x)  the commercial property and business income
insurance required under Sections 8.01(a)(i) and (iii) above
shall cover perils of terrorism and acts of terrorism and Issuers shall
maintain commercial property and business income insurance for loss resulting
from such perils and acts on terms (including amounts) consistent with those
required under Sections 8.01(a)(i) and (iii) above at all times
during the term of the Notes so long as Trustee determines that either (I)
prudent owners of real estate comparable to the Property in Mexico securing
non-recourse financings provided by institutional lenders from the
United States of America are maintaining same or (II) prudent
institutional lenders (including, without limitation, investment banks) from
the United States of America to such owners are requiring that such owners
maintain such insurance in connection with non-recourse financings secured by
real estate comparable to the Property in Mexico; provided, however,
in the event that losses arising from perils and acts of terrorism
(collectively, “Terrorism Losses”)
are excluded from the insurance required under Sections 8.01(a)(i) and (iii)
above, then Issuers shall either (A) maintain such coverage through a policy or
policies covering multiple locations so long as such coverage is on terms
consistent with those required under Sections 8.01(a)(i) and (iii)
above with a deductible of not greater than $100,000 and such coverage is in an
amount equal to, the lesser of (a) the outstanding principal balance of the
Notes (provided such policy contains a waiver of coinsurance) or (b) the
sum of the business income insurance equal to 100% of the projected gross
income from the Property for a period of twenty-four (24) months from the date
that the Property is repaired or replaced and operations are resumed plus the
Full Replacement Cost and further provided that if any claim is made
(unless on a per occurrence basis) under such policy or policies reducing the
amount of coverage below that which is required to be maintained under this Section 8.01(a)(x),
then Issuers shall increase the amount of such policy or policies to an amount
that satisfies the requirements of Section 8.01(a)(x), or (B)
Issuers shall obtain a stand-alone policy or policies that covers solely the
Property against Terrorism Losses, which stand-alone policy or policies shall
be on terms consistent with those required under Sections 8.01(a)(i) and
(iii) above with a deductible of not greater than $100,000 and such
coverage is in an amount equal to, the lesser of (a) the outstanding principal
balance of the Notes (provided such policy contains a waiver of
coinsurance) or (b) the sum of the business income insurance equal to 100% of
the projected gross income from the Property for a period of twenty-four (24)
months from the date that the Property is repaired or replaced and operations
are resumed plus the Full Replacement Cost. Notwithstanding the foregoing, in
no event shall Issuers be required to pay annual premiums for insurance
covering such Terrorism Losses in excess of an amount equal to two and one-half
times the cost of a stand-alone policy or policies that covers the Property on
the date hereof (i.e., if the cost exceeds such limit, Issuers shall obtain as
much coverage as is available at a cost equal to such limit); and

 

(xi)  upon sixty (60) days’ notice, such other
reasonable insurance and in such reasonable amounts as Trustee from time to
time may reasonably request against such other insurable hazards which at the
time are commonly insured against for property similar to the Property located
in or around the region in which the Property is located.

 

(b)  All insurance provided for in Section 8.01(a)
shall be obtained under valid and enforceable policies (collectively, the “Policies” or in the singular, the

 

71

 

“Policy”), and shall be (to the extent not
specified in Section 8.01(a)) subject to the approval of Trustee as
to insurance companies, amounts, deductibles, loss payees and insureds. The
Policies shall be issued by financially sound and responsible insurance
companies authorized to do business in the State and having a claims paying
ability rating of “A” or better (and the equivalent thereof) by at least two
(2) of the Rating Agencies rating the Securities (one of which shall be S&P
if they are rating the Securities and one of which will be Moody’s if they are
rating the Securities), or if only one Rating Agency is rating the Securities,
then only by such Rating Agency. The Policies described in Section 8.01(a)
(other than those strictly limited to liability protection) shall designate
Trustee as loss payee. Not less than ten (10) days prior to the expiration
dates of the Policies theretofore furnished to Trustee, certificates of
insurance evidencing the Policies accompanied by evidence satisfactory to
Trustee of payment of the premiums due thereunder (the “Insurance Premiums”), shall be delivered by
Issuers to Trustee.

 

(c)  Any blanket insurance Policy shall
specifically allocate to the Property the amount of coverage from time to time
required hereunder and shall otherwise provide the same protection as would a
separate Policy insuring only the Property in compliance with the provisions of
Section 8.01(a).

 

(d)  All Policies provided for or contemplated by Section 8.01(a),
except for the Policy referenced in Section 8.01(a)(v), shall name.
Issuers as the insured and Trustee as the additional insured, as its interests
may appear, and in the case of property damage, boiler and machinery, flood and
earthquake insurance, shall contain a so-called New York standard
non-contributing mortgagee clause in favor of Trustee providing that the
loss thereunder shall be payable to Trustee.

 

(e)  All Policies provided for in Section 8.01
shall contain clauses or endorsements to the effect that:

 

(i)  no act or negligence of any Issuer, or anyone
acting for any Issuer, or of any tenant or other occupant, or failure to comply
with the provisions of any Policy, which might otherwise result in a forfeiture
of the insurance or any part thereof, shall in any way affect the validity or
enforceability of the insurance insofar as Trustee is concerned;

 

(ii)  the Policies shall not be materially changed
(other than to increase the coverage provided thereby) or canceled without at
least thirty (30) days’ notice to Trustee and any other party named therein as
an additional insured;

 

(iii)  the issuers thereof shall give notice to
Trustee if the Policies have not been renewed fifteen (15) days prior to its
expiration; and

 

(iv)  Trustee shall not be liable for any Insurance
Premiums thereon or subject to any assessments thereunder.

 

(f)  If at any time Trustee is not in receipt of
written evidence that all Policies are in full force and effect, Trustee shall
have the right, without notice to Issuers (or, upon three (3) Business Days’
notice to Issuers if such notice period shall end not 

 

72

 

later than
five (5) Business Days prior to the date upon which the Policies are to
expire), to take such action as Trustee deems necessary to protect its interest
in the Property, including, without limitation, the obtaining of such insurance
coverage as Trustee in its sole discretion deems appropriate. All premiums
incurred by Trustee in connection with such action or in obtaining such
insurance and keeping it in effect shall be paid by Issuers to Trustee upon
demand and, until paid, shall be secured by the Security Trust Agreement and
the Pledge and shall bear interest at the Default Rate.

 

Section
8.02  Casualty. If
the Property shall be damaged or destroyed, in whole or in part, by fire or
other casualty (a “Casualty”) such
that the estimated cost of Restoration exceeds One Million and No/100 Dollars
($1,000,000), Issuers shall give prompt notice of such damage to Trustee and
shall promptly commence and diligently prosecute the completion of the
Restoration of the Property as nearly as possible to the condition the Property
was in immediately prior to such Casualty, with such alterations as may be
reasonably approved by Trustee and otherwise in accordance with Section 8.04.
Issuers shall pay all costs of such Restoration whether or not such costs are
covered by insurance. Trustee may, but shall not be obligated to, make proof of
loss if not made promptly by Issuers. In addition, Trustee may participate in
any settlement discussions with any insurance companies with respect to any
Casualty in which the Net Proceeds or the costs of completing the Restoration
are equal to or greater than Four Million and No/100 Dollars ($4,000,000) and
Issuers shall deliver to Trustee all instruments required by Trustee to permit
such participation.

 

Section
8.03  Condemnation. Issuers
shall promptly give Trustee notice of the actual or threatened commencement of
any proceeding for the Condemnation of the Property and shall deliver to
Trustee copies of any and all papers served in connection with such proceedings.
Trustee may participate in any such proceedings, and Issuers shall from time to
time deliver to Trustee all instruments requested by it to permit such
participation. Issuers shall, at their expense, diligently prosecute any such
proceedings, and shall consult with Trustee, its attorneys and experts, and
cooperate with them in the carrying on or defense of any such proceedings. Notwithstanding
any taking by any public or quasi-public authority through Condemnation or
otherwise (including, but not limited to, any transfer made in lieu of or in
anticipation of the exercise of such taking), Issuers shall continue to pay the
Debt at the time and in the manner provided for its payment in the Note and in
this Indenture and the Debt shall not be reduced until any Award shall have
been actually received and applied by Trustee, after the deduction of expenses
of collection, to the reduction or discharge of the Debt. Trustee shall not be
limited to the interest paid on the Award by the condemning authority but shall
be entitled to receive out of the Award interest at the rate or rates provided
herein or in the Note. If the Property or any portion thereof is taken by a
condemning authority, Issuers shall promptly commence and diligently prosecute
the Restoration of the Property and otherwise comply with the provisions of Section 8.04.
If the Property is sold, through foreclosure or otherwise, prior to the receipt
by Trustee of the Award, Trustee shall have the right, whether or not a
deficiency judgment on the Note shall have been sought, recovered or denied, to
receive the Award, or a portion thereof sufficient to pay the Debt.

 

73

 

Section
8.04  Restoration. (a)  The following provisions shall apply in
connection with the Restoration:

 

(i)  If the Net Proceeds shall be less than Four
Million and No/100 Dollars ($4,000,000) and the costs of completing the
Restoration shall be less than Four Million and No/100 Dollars ($4,000,000),
the Net Proceeds will be disbursed by Trustee to Issuers upon receipt, provided
there is no Event of Default at the time of such disbursement and Issuers
hereby covenant and agree to comply with the conditions set forth in Section 8.04(b),
(vii), (viii), (ix) and (x) during the Restoration and
Issuers expeditiously commence and satisfactorily complete with due diligence
the Restoration in accordance with the terms of this Indenture.

 

(ii)  If the Net Proceeds shall be greater than
Four Million and No/100 Dollars ($4,000,000) and the costs of completing the
Restoration shall be greater than Four Million and No/100 Dollars ($4,000,000),
the Net Proceeds will be disbursed by Trustee to Issuers upon receipt, provided
that all of the conditions set forth in Section 8.04(b) are met and
Issuers deliver to Trustee a written undertaking to expeditiously commence and
to satisfactorily complete with due diligence the Restoration in accordance
with the terms of this Indenture.

 

(iii)  The term “Net
Proceeds” for purposes of this Section 8.04 shall mean:
(i) the net amount of all insurance proceeds received by Trustee pursuant to Section 8.01(a)(i),
(iii), (iv), (vi), (ix) and (x) as a result
of such damage or destruction, after deduction of its reasonable costs and
expenses (including, but not limited to, reasonable counsel fees), if any, in
collecting same (“Insurance Proceeds”),
or (ii) the net amount of the Award, after deduction of its reasonable costs
and expenses (including, but not limited to, reasonable counsel fees), if any,
in collecting same (“Condemnation Proceeds”),
whichever the case may be.

 

(b)  The Net Proceeds shall be made available to
Issuers for Restoration upon the approval of Trustee in its reasonable
discretion that all or some of the following conditions are met:

 

(i)  no Event of Default shall have occurred and
be continuing;

 

(ii)  the costs of completing the Restoration shall
be equal to or less than Thirty Million and No/100 Dollars ($30,000,000);

 

(iii)  intentionally omitted;

 

(iv)  subject to excusable delays due to acts of
god, governmental restrictions, stays, judgments, orders, decrees, enemy
actions, civil commotion, fire, casualty, strikes, work stoppages, shortages of
labor or materials or other cases beyond the reasonable control of Issuers,
Issuers shall commence the Restoration as soon as reasonably practicable (but
in no event later than sixty (60) days after such Casualty or Condemnation,
whichever the case may be, occurs) (it being understood and agreed that, among
other things, the engagement of an architect, engineer or construction manager

 

74

 

shall
constitute commencement of Restoration for purposes of this Section 8.01(b)(iv))
and shall diligently pursue the same to satisfactory completion;

 

(v)  any operating deficits, including all
scheduled payments of principal and interest under the Note, which will be
incurred with respect to the Property as a result of the occurrence of any such
Casualty or Condemnation, whichever the case may be, will be covered out of (1)
the Net Proceeds, (2) the insurance coverage referred to in Section 8.01(a)(iii),
if applicable, or (3) by other funds of Issuers;

 

(vi)  Trustee shall be reasonably satisfied that
the Restoration will be completed on or before the earliest to occur of (1) the
Maturity Date, (2) such time as may be required under applicable Legal
Requirements or (3) the expiration of the insurance coverage referred to in Section 8.01(a)(iii);

 

(vii)  the Property and the use thereof after the
Restoration will be in material compliance with and permitted under all
applicable Legal Requirements;

 

(viii)  the Restoration shall be done and completed
by Issuers in compliance with all applicable Legal Requirements;

 

(ix)  such Casualty or Condemnation, as applicable,
does not result in the permanent loss of material access to the Property or the
related Improvements;

 

(x)  the Condominium Documents shall remain in
full force and effect;

 

(xi)  Issuers shall deliver, or cause to be
delivered, to Trustee a signed detailed budget approved in writing by Issuers’
architect or engineer stating the entire cost of completing the Restoration,
which budget shall be reasonably acceptable to Trustee; and

 

(xii)  the Net Proceeds together with any cash or
cash equivalent deposited by Issuers with Trustee are in an amount sufficient
in Trustee’s reasonable discretion to cover the estimated cost of the
Restoration, taking into account the budget delivered to Trustee in subsection
(xi) above.

 

(c)  The Net Proceeds shall be held by Trustee in
an interest-bearing account and, until disbursed in accordance with the
provisions of Section 8.04(b), shall constitute additional security
for the Debt and other obligations under the Financing Documents. The Net
Proceeds shall be disbursed by Trustee to, or as directed by, Issuers from time
to time during the course of the Restoration, upon receipt of evidence
satisfactory to Trustee that (A) all materials installed and work and labor
performed (except to the extent that they are to be paid for out of the
requested disbursement) in connection with the Restoration have been paid for
in full, and (B) there exist no notices of pendency, stop orders, mechanic’s or
materialman’s liens or notices of intention to file same, or any other liens or
encumbrances of any nature whatsoever on the Property which have not either
been fully bonded to the satisfaction of Trustee and discharged of record or in
the alternative fully insured to the satisfaction of Trustee by the title
company issuing the Title Insurance Policy.

 

75

 

(d)  In the event that the estimated cost of
Restoration exceeds Four Million and No/100 Dollars ($4,000,000), all plans and
specifications required in connection with the Restoration shall be subject to
prior review and acceptance in all respects by Trustee and by an independent
consulting engineer selected by Trustee (the “Casualty
Consultant”), such approval (A) not to be unreasonably withheld or
delayed and (B) to be deemed granted if Trustee shall not have disapproved same
in writing within twenty (20) Days after Issuers’ request for approval, so long
as the written request to Trustee for approval contains a legend clearly marked
in not less than fourteen (14) point bold face type, underlined, in all capital
letters “REQUEST DEEMED APPROVED IF NO
RESPONSE WITHIN TWENTY (20) DAYS”. Trustee shall have the use of the
plans and specifications and all permits, licenses and approvals required or
obtained in connection with the Restoration. The identity of the contractors,
subcontractors and materialmen engaged in the Restoration for contracts in
excess of $250,000, as well as the contracts under which they have been
engaged, shall be subject to prior review and acceptance by Trustee and the
Casualty Consultant, such approval (A) not to be unreasonably withheld or
delayed and (B) to be deemed granted if Trustee shall not have disapproved same
in writing within fifteen (15) Days after Issuers’ request for approval, so
long as the written request to Trustee for approval contains a legend clearly
marked in not less than fourteen (14) point bold face type, underlined, in all
capital letters “REQUEST DEEMED APPROVED IF
NO RESPONSE WITHIN FIFTEEN (15) DAYS”. All costs and expenses
incurred by Trustee in connection with making the Net Proceeds available for
the Restoration including, without limitation, reasonable counsel fees and
disbursements and the Casualty Consultant’s fees, shall be paid by Issuers.

 

(e)  In no event shall Trustee be obligated to
make disbursements of the Net Proceeds in excess of an amount equal to the
costs actually incurred from time to time for work in place as part of the
Restoration, as certified by the Casualty Consultant, minus the Casualty
Retainage. The term “Casualty Retainage”
shall mean an amount equal to ten percent (10%) of the costs actually incurred
for work in place as part of the Restoration, as certified by the Casualty
Consultant, until the Restoration has been completed. The Casualty Retainage
shall in no event, and notwithstanding anything to the contrary set forth above
in Section 8.04(b), be less than the amount actually held back by
Issuers from contractors, subcontractors and materialmen engaged in the
Restoration. The Casualty Retainage shall not be released until the Casualty
Consultant certifies to Trustee that the Restoration has been completed in
accordance with the provisions of Section 8.04(b) and that all
approvals necessary for the re-occupancy and use of the Property have been
obtained from all appropriate governmental and quasi-governmental authorities,
and Trustee receives evidence satisfactory to Trustee that the costs of the
Restoration have been paid in full or will be paid in full out of the Casualty
Retainage; provided, however, that Trustee will release the
portion of the Casualty Retainage being held with respect to any contractor,
subcontractor or materialman engaged in the Restoration as of the date upon
which the Casualty Consultant certifies to Trustee that the contractor,
subcontractor or materialman has satisfactorily completed all work and has
supplied all materials in accordance with the provisions of the contractor’s,
subcontractor’s or materialman’s contract, the contractor, subcontractor or
materialman delivers the evidence of payment in full of all sums due to the
contractor, subcontractor

 

76

 

or materialman
as may be reasonably requested by Trustee or by the title company issuing the
Title Insurance Policy. If required by Trustee, the release of any such portion
of the Casualty Retainage shall be approved by the surety company, if any,
which has issued a payment or performance bond with respect to the contractor,
subcontractor or materialman.

 

(f)  Trustee shall not be obligated to make
disbursements of the Net Proceeds more frequently than once every calendar
month.

 

(g)  If at any time the Net Proceeds or the
undisbursed balance thereof shall not, in the opinion of Trustee in
consultation with the Casualty Consultant, be sufficient to pay in full the
balance of the costs which are estimated by the Casualty Consultant to be
incurred in connection with the completion of the Restoration, Issuers shall
deposit the deficiency (the “Net Proceeds
Deficiency”) with Trustee before any further disbursement of the Net
Proceeds shall be made. The Net Proceeds Deficiency deposited with Trustee
shall be held by Trustee and shall be disbursed for costs actually incurred in
connection with the Restoration on the same conditions applicable to the
disbursement of the Net Proceeds, and until so disbursed pursuant to Section 8.04(b)
shall constitute additional security for the Debt and other obligations under
the Financing Documents.

 

(h)  The excess, if any, of the Net Proceeds and
the remaining balance, if any, of the Net Proceeds Deficiency deposited with
Trustee after the Casualty Consultant certifies to Trustee that the Restoration
has been completed in accordance with the provisions of Section 8.04(b),
and the receipt by Trustee of evidence satisfactory to Trustee that all costs
incurred in connection with the Restoration have been paid in full, shall be
remitted by Trustee to Issuers, provided no Event of Default shall have
occurred and shall be continuing.

 

(i)  All Net Proceeds not required (a) to be made
available for the Restoration or (b) to be returned to Issuers as excess Net
Proceeds pursuant to Section 8.04(h) may be retained and applied by
Trustee in accordance with Section 2.3(b) of the Notes toward the
payment of the Debt whether or not then due and payable in such order, priority
and proportions as Trustee in its sole discretion shall deem proper, or, at the
discretion of Trustee, the same may be paid, either in whole or in part, to
Issuers for such purposes as Trustee shall approve, in its discretion, so long
as Trustee either commences to apply such Net Proceeds to Restoration in
accordance with the terms and conditions of this Indenture or applies such Net
Proceeds toward the payment of the outstanding principal balance of the Notes,
in each case within thirty (30) days of receipt thereof.

 

(j)  In the event Security Trust First Beneficiary
conveys, sells or otherwise transfers (or takes steps to effect a conveyance,
sale or other transfer of) the Security Trust Second Beneficiary’s interest
under the security trust formed pursuant to the Security Trust Agreement, or
other transfer of title to the Property in extinguishment in whole or in part
of the Debt all right, title and interest of Issuers in and to the Policies
that are not blanket Policies then in force concerning the Property and all
proceeds

 

77

 

payable
thereunder shall thereupon vest in the purchaser at such foreclosure or Trustee
or other transferee in the event of such other transfer of title.

 

(k)  Notwithstanding anything to the contrary
contained in this Section 2.3(b), in the event the costs of
completing any Restoration shall exceed Thirty Million and No/100 Dollars
($30,000,000) and Servicer on behalf of Trustee elects not to make Net Proceeds
available to Issuers, the Issuers may, within sixty (60) days, offer such
election by Servicer on behalf of Trustee to prepay the Debt in whole, but not
in part, without the payment of any prepayment premium or penalty.

 

Section
2.05  Casualty/Condemnation Generally.
In all matters pertaining to insurance, Casualty,
Condemnation and/or Restoration, the Issuers’ covenants and agreements shall be
enforced, and all associated rights shall be exercised, by the Servicer on
behalf of the Trustee for the benefit of the Noteholders, and all related
documents to be delivered to the Trustee, amounts to be deposited with the
Trustee and all accounts to be maintained by the Trustee shall be so delivered,
deposited and maintained by the Servicer or Cash Manager, as the case may be,
on behalf of the Trustee for the benefit of the Noteholders.

 

ARTICLE 9 – DEFAULTS

 

Section
9.01  Event of Default. (a)  Each of the following events shall constitute
an event of default hereunder (an “Event of
Default”):

 

(i)  if any portion of the Debt is not paid when
due;

 

(ii)  if any of the Taxes or Other Charges are not
paid on or before the same are due and payable (and such non-payment, in case
of Other Charges (other than Condominium charges and assessments with respect
to which no notice shall be required) continues for five (5) Business Days
following notice thereof to Issuers), except to the extent sums sufficient to
pay such Taxes and Other Charges have been deposited with Trustee in accordance
with Section 10.02 hereof or those Taxes or Other Charges being
contested in accordance with the terms and provisions of this Indenture;

 

(iii)  if the Policies are not kept in full force
and effect or if the Policies or insurance certificates or other evidence of
insurance acceptable to Trustee are not delivered to Trustee within 10 days
after written notice thereof from Trustee;

 

(iv)  if Issuers Transfer or otherwise encumbers
any portion of the Property in violation of the provisions of this Indenture;

 

(v)  if any representation or warranty made by
Issuers herein or in any other Financing Document, or in any report,
certificate, financial statement or other instrument, agreement or document
furnished in connection with the Financing Documents shall have been false or
misleading in any material respect as of the date the representation or
warranty was made; provided, however, that if (1) such
misrepresentation was not intentional, and (2) the condition causing the
representation or warranty to be false is susceptible of being cured, the same
shall be an Event of Default

 

78

 

hereunder only
if the same is not cured within thirty (30) days after written notice to
Issuers from Trustee; and provided, further, if the condition
causing the representation or warranty to be false is susceptible of cure but
cannot reasonably be cured within such thirty (30) day period and Issuers shall
have commenced to cure such condition within such thirty (30) day period and
thereafter diligently proceeds to cure the same, then such thirty (30) day
period shall be extended for such an additional period of time as is reasonably
necessary for Issuers in the exercise of due diligence to cure such condition,
such additional period not to exceed one hundred fifty (150) days;

 

(vi)  if any Issuer, Principal or any Guarantor
shall make an assignment for the benefit of creditors;

 

(vii)  if a receiver, liquidator, síndico or trustee shall be appointed for any Issuer,
Principal or Guarantor, or if any Issuer, Principal or Guarantor shall be
adjudicated a bankrupt or insolvent, or if any petition for concurso mercantil, bankruptcy, reorganization or
arrangement pursuant to federal bankruptcy law, or any similar federal or state
law, shall be filed by or against, consented to, or acquiesced in by, Issuer,
Principal or Guarantor, or if any proceeding for the dissolution or liquidation
of Issuers, Principal or Guarantor shall be instituted; provided, however,
if such appointment, adjudication, petition or proceeding was involuntary and
not consented to by Issuers, Principal or Guarantor, upon the same not being
discharged, stayed or dismissed within ninety (90) days;

 

(viii)  if any Issuer attempts to assign its rights
under this Indenture or any of the other Financing Documents or any interest
herein or therein in contravention of the Financing Documents;

 

(ix)  if any Issuer breaches any of its respective
covenants contained in Sections 6.01(dd) and (kk), and any such
breach is not cured within fifteen (15) Business Days after written notice to
Issuers from Trustee;

 

(x)  with respect to any term, covenant or
provision set forth herein which specifically contains a notice requirement or
grace period, if Issuers shall be in default under such term, covenant or
condition after the giving of such notice or the expiration of such grace
period;

 

(xi)  if any of the assumptions contained in the
Insolvency Opinion delivered to Trustee in connection with the issuance of the
Notes, or in the Additional Insolvency Opinion delivered subsequent to the
issuance of the Notes, is or shall become untrue in any material respect;

 

(xii)  if a material default has occurred and
continues beyond any applicable cure period under the Management Agreement, the
Golf Management Agreement or the Spa Management Agreement (or any Replacement
Management Agreement, Replacement Golf Management Agreement or Replacement Spa
Management Agreement, as applicable) and (A) if such default permits the
Manager, Golf Manager or Spa Manager, as applicable, to terminate or cancel the
Management Agreement, the Golf

 

79

 

Management
Agreement or the Spa Management Agreement (or any Replacement Management
Agreement, Replacement Golf Management Agreement or Replacement Spa Management
Agreement, as applicable) or (B) if the Management Agreement, the Golf
Management Agreement or the Spa Management Agreement (or any Replacement Management
Agreement, Replacement Golf Management Agreement or Replacement Spa Management
Agreement, as applicable) is terminated and in the case of either (A) or (B) a
Qualified Manager, Qualified Golf Manager or Qualified Spa Manager, as
applicable, is not appointed within forty five (45) days thereafter;

 

(xiii)  if (A) any provision of the applicable
statutes pursuant to which the Condominium was established or any section,
sentence, clause, phrase or word or the application thereof in any circumstance
is held invalid and such invalidity materially adversely affects the security
interest of the Security Trust Agreement or Trustee’s rights under the
Financing Documents; (B) the Condominium shall become subject to an action for
partition by any condominium unit owner which could reasonably be expected to
result in partition and said action has been commenced and not dismissed within
sixty (60) days after commencement thereof; or (C) the Condominium is withdrawn
from the condominium regime established under the Condominium Laws;

 

(xiv)  if Issuers fail to comply with the covenants
as to Prescribed Laws set forth in Section 7.01(a) hereof;

 

(xv)  with respect to any term, covenant or
provision set forth herein or in any other Financing Document which specifically
contains a notice requirement, grace period or both, if Issuers shall be in
default under such term, covenant or condition after the giving of such notice,
the expiration of such grace period or both, as applicable; or

 

(xvi)  if Issuers shall continue to be in Default
under any of the other terms, covenants or conditions of this Indenture not
specified in subsections (i) to (xiv) above, or under any of the
terms, covenants or conditions in any other Financing Document not specified in
Section (xv) above, for ten (10) days after notice to Issuers from
Trustee, in the case of any Default which can be cured by the payment of a sum
of money, or for thirty (30) days after notice from Trustee in the case of any
other Default; provided, however, that if such non-monetary
Default is susceptible of cure but cannot reasonably be cured within such
thirty (30) day period and provided, further, that Issuers shall
have commenced to cure such Default within such thirty (30) day period and
thereafter diligently and expeditiously proceeds to cure the same, such thirty
(30) day period shall be extended for such time as is reasonably necessary for
Issuers in the exercise of due diligence to cure such Default, such additional
period not to exceed sixty (60) days.

 

(b)  Upon the occurrence of an Event of Default
(other than an Event of Default described in clauses (vi), (vii) or (viii)
above) and at any time thereafter, in addition to any other rights or remedies
available to it pursuant to this Indenture and the other Financing Documents or
at law or in equity, Trustee, and Servicer on its behalf, for the benefit of
Noteholders may take such action, without notice or demand, that Trustee or
Servicer deems advisable to protect and enforce its rights against Issuers and
in and to the Property, including, without limitation, declaring the Debt to be
immediately due and

 

80

 

payable, and
Trustee for the benefit of Noteholders may enforce or avail itself of any or
all rights or remedies provided in the Financing Documents against Issuers and
the Property, including, without limitation, all rights or remedies available
at law or in equity; and upon any Event of Default described in clauses (vi),
(vii) or (viii) above, the Debt and all other obligations of Issuers hereunder
and under the other Financing Documents shall immediately and automatically
become due and payable, without notice or demand, and Issuers hereby expressly
waive any such notice or demand, anything contained herein or in any other
Financing Document to the contrary notwithstanding.

 

Section
9.02  Remedies. (a)  Upon the occurrence of an Event of Default,
all or any one or more of the rights, powers, privileges and other remedies
available to Trustee against Issuers under this Indenture or any of the other
Financing Documents executed and delivered by, or applicable to, Issuers or at
law or in equity may be exercised by Trustee at any time and from time to time,
whether or not all or any of the Debt shall be declared due and payable, and
whether or not Trustee shall have commenced any foreclosure proceeding or other
action for the enforcement of its rights and remedies under any of the
Financing Documents. Any such actions taken by Trustee shall be cumulative and
concurrent and may be pursued independently, singularly, successively, together
or otherwise, at such time and in such order as Trustee may determine in its
sole discretion, to the fullest extent permitted by law, without impairing or
otherwise affecting the other rights and remedies of Trustee permitted by law,
equity or contract or as set forth herein or in the other Financing Documents. Without
limiting the generality of the foregoing, Issuers agree that if an Event of
Default is continuing (i) Trustee is not subject to any “one action” or “election
of remedies” law or rule, and (ii) all liens and other rights, remedies or
privileges provided to Trustee shall remain in full force and effect until
Trustee has exhausted all of its remedies against the Property and a foreclosure
procedure has been initiated under the Security Trust Agreement or the Pledge
and the proceeds of such foreclosure procedure are applied in full satisfaction
of the Debt or the Debt has been otherwise paid in full.

 

(b)  Right to
Cure Defaults. Upon the occurrence and during the continuance of
any Event of Default, Trustee may, but without any obligation to do so and
without notice to or demand on Issuers and without releasing Issuers from any
obligation hereunder, make any payment or do any act required of Issuers
hereunder in such manner and to such extent as Trustee may deem necessary to
protect the security of the Security Trust Agreement and the other Financing
Documents. Trustee is authorized to enter upon the Property for such purposes,
or appear in, defend, or bring any action or proceeding to protect its interest
in the Property for the benefit of Noteholders or to foreclose or cause the
foreclosure under the Security Trust Agreement or collect the Debt, and the
cost and expense thereof (including reasonable attorneys’ fees to the extent
permitted by law), with interest at the Default Rate, shall constitute a
portion of the Debt and shall be due and payable to Trustee upon demand. All
such costs and expenses incurred by Trustee in remedying such Event of Default
or such failed payment or act or in appearing in, defending, or bringing any
such action or proceeding shall bear interest at the Default Rate for the
period after notice from Trustee that such cost or expense was incurred to the
date of payment to Trustee. All such costs and expenses incurred by Trustee
together with interest thereon calculated at the Default Rate shall be deemed
to

 

81

 

constitute a
portion of the Debt and be secured by and subject to the Security Trust
Agreement and the other Financing Documents and shall be immediately due and
payable upon demand by Trustee therefor.

 

(c)  The rights, powers and remedies of Trustee
under this Indenture shall be cumulative and not exclusive of any other right,
power or remedy which Trustee for the benefit of Noteholders may have against
Issuers pursuant to this Indenture or the other Financing Documents, or
existing at law or in equity or otherwise. Trustee’s rights, powers and
remedies may be pursued singularly, concurrently or otherwise, at such time and
in such order as Trustee may determine in Trustee’s sole discretion. No delay
or omission to exercise any remedy, right or power accruing upon an Event of
Default shall impair any such remedy, right or power or shall be construed as a
waiver thereof, but any such remedy, right or power may be exercised from time
to time and as often as may be deemed expedient. A waiver of one Default or
Event of Default with respect to Issuers shall not be construed to be a waiver
of any subsequent Default or Event of Default by Issuers or to impair any
remedy, right or power consequent thereon.

 

(d)  All rights, powers, privileges and other
remedies of Trustee hereunder shall be enforced and exercised by Servicer on
behalf of Trustee for the benefit of Noteholders.

 

Section
9.03  Exculpation. (a)  Subject to the qualifications below, Trustee
shall not enforce the liability and obligation of Issuers to perform and
observe the obligations contained in the Notes, this Indenture, the Security
Trust Agreement or the other Financing Documents by any action or proceeding
wherein a money judgment shall be sought against Issuers, except that Trustee
may bring a foreclosure action, an action for specific performance or any other
appropriate action or proceeding to enable Trustee to enforce and realize upon
its interest under the Notes, this Indenture, the Security Trust Agreement and
the other Financing Documents, or in the Property, the Rents, or any other
collateral given to Trustee pursuant to the Financing Documents; provided,
however, that, except as specifically provided herein, any judgment in
any such action or proceeding shall be enforceable against Issuers only to the
extent of Issuers’ interest in the Property, in the Rents and in any other
collateral given to Trustee, and Trustee, by accepting the Notes, this
Indenture, the Security Trust Agreement and the other Financing Documents,
agrees for itself and its successors and assigns that it and its successors and
assigns shall not sue for, seek or demand any deficiency judgment against
Issuers or any of its Affiliates in any such action or proceeding under, or by
reason of, or in connection with, the Note, this Indenture, the Security Trust
Agreement or the other Financing Documents. The provisions of this
Section shall not, however, (a) constitute a waiver, release or impairment
of any obligation evidenced or secured by any of the Financing Documents; (b)
impair the right of Trustee for the benefit of Noteholders to name any Issuer
as a party defendant in any action or suit for foreclosure and sale under the
Security Trust Agreement or the Pledge; (c) affect the validity or
enforceability of or any Guaranty made in connection with the issuance of the
Notes or any of the rights and remedies of Trustee under the Financing
Documents; (d) impair the right of Trustee to obtain the appointment of a
receiver; (e) impair the enforcement of the Security Trust Agreement or the
Pledge; (f) constitute a prohibition against Trustee to seek a deficiency

 

82

 

judgment
against Issuers in order to fully realize the security granted by the Security
Trust Agreement or the Pledge or to commence any other appropriate action or
proceeding in order for Trustee to exercise its remedies against the Property;
or (g) constitute a waiver of the right of Trustee to enforce the liability and
obligation of Issuers under the terms of this Indenture, by money judgment or
otherwise, to the extent of any actual out of pocket loss, damage, cost,
expense, liability, claim or other obligation incurred by Trustee or
Noteholders (including attorneys’ fees and costs reasonably incurred) arising
out of or in connection with the following:

 

(i)  fraud or intentional misrepresentation by
Issuers or any Guarantor in connection with the issuance of the Notes or in
connection with the Financing Documents;

 

(ii)  if any Issuer fails to maintain its status as
a Special Purpose Entity as required by, and in accordance with, the terms and
provisions of this Indenture;

 

(iii)  a breach of any representation or warranty
set forth in Section 6.01(kk) hereof;

 

(iv)  the misappropriation or conversion by or on
behalf of Issuers of (A) any Insurance Proceeds paid by reason of any Casualty,
(B) any Awards received in connection with a Condemnation, or (C) any Rents
following an Event of Default, in each case only to the extent of the amounts
received by Issuers;

 

(v)  any security deposits, advance deposits or
any other deposits collected with respect to the Property which are not
delivered to Trustee upon a foreclosure of the Property or action in lieu
thereof under the Security Trust Agreement, except to the extent any such
security deposits, advance deposits or other deposits were applied in
accordance with the terms and conditions of any of the Leases or reservation
rules and policies prior to such foreclosure or action in lieu thereof;

 

(vi)  any alterations pursuant to Section 7.01(u)(iii)
hereof, the aggregate cost of which alterations exceed Two Million and No/100
Dollars ($2,000,000) and which are not otherwise approved as required by such
section;

 

(vii)  if any Issuer fails to obtain Trustee’s prior
consent to any Indebtedness for borrowed money as required by this Indenture;

 

(viii)  if any Issuer files a voluntary petition
under the Bankruptcy Code or any other Federal or state bankruptcy or
insolvency law; and

 

(ix)  if any Issuer fails to pay any Non-Excluded
Taxes as required by the provisions of each Note.

 

(b)  Notwithstanding anything to the contrary in
this Indenture, the Note or any of the Financing Documents, (A) Trustee shall
not be deemed to have waived any right which Trustee may have under
Section 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy
Code to file a claim for the full amount of the Debt or to

 

83

 

require that
all collateral shall continue to secure all of the Obligations in accordance
with the Financing Documents, and (B) the Debt shall be fully recourse to any
Issuer (i) in the event of: (a) intentionally omitted; the filing of an
involuntary petition against any Issuer under the Bankruptcy Code or any other
Federal or state bankruptcy or insolvency law if and only if such Issuer has
acted in concert with, colluded or conspired with the petitioning creditors for
any involuntary petition from any Person in order to cause the filing thereof
to interfere with the enforcement rights of Trustee; (c) any Issuer
consenting to or acquiescing in or joining in an application for the
appointment of a custodian, receiver, trustee, or examiner for such Issuer or
any portion of the Property if and only if such Issuer has acted in concert
with, colluded or conspired with the Persons bringing such application; (d) any
Issuer making an assignment for the benefit of creditors, or admitting, in
writing or in any legal proceeding, its insolvency or inability to pay its
debts as they become due, and, with respect to such events described in the
foregoing clauses (b) and (c), either any or all of Issuers, Principal or
Guarantor has acted in concert with, colluded or conspired to cause such
condition or event in order to interfere with the enforcement of Trustee’s
rights and remedies; or (ii) if any Issuer fails to obtain Trustee’s prior
consent to any Transfer as required by this Indenture.

 

Section
9.04  Manager Termination. If
(a) an Event of Default occurs and is continuing, (b) the Manager, Golf Manager
or Spa Manager shall become bankrupt or insolvent or (c) a material default
occurs under the Management Agreement, the Golf Management Agreement or the Spa
Management Agreement beyond any applicable grace and cure periods, Issuers
shall, at the request of Servicer on behalf of Trustee, terminate the Management
Agreement, the Golf Management Agreement or the Spa Management Agreement and
replace the Manager, Golf Manager or Spa Manager with a Qualified Manager,
Qualified Golf Manager or Qualified Spa Manager pursuant to a Replacement
Management Agreement, Replacement Golf Management Agreement or Replacement Spa
Management Agreement, as applicable.

 

ARTICLE 10 – RESERVE FUNDS

 

Section
10.01  Required Repair Funds. (a)  Deposits.
Issuers shall perform the repairs at the Property as more
particularly set forth on Schedule 10.01 hereto (such repairs
hereinafter collectively referred to as “Required
Repairs”). Subject to excusable delays due to acts of god,
governmental restrictions, stays, judgments, orders, decrees, enemy actions,
civil commotion, fire, casualty, strikes, work stoppages, shortages of labor or
materials or other cases beyond the reasonable control of Issuers, Issuers
shall complete the Required Repairs on or before the required deadline for each
repair as set forth on Schedule 10.01. Upon the occurrence and during
the continuance of an Event of Default, Trustee, at its option, may withdraw
all Required Repair Funds from the Required Repair Account and Trustee may
apply such funds either to completion of the Required Repairs or toward payment
of the Debt in such order, proportion and priority as Trustee may determine in
its sole discretion. Trustee’s right to withdraw and apply Required Repair
Funds shall be in addition to all other rights and remedies provided to Trustee
under this Indenture and the other Financing Documents. On the Closing Date,
Issuers shall deposit with Trustee the amount set forth on such Schedule
10.01 hereto to perform the Required Repairs multiplied by one hundred
twenty-five

 

84

 

percent (125%).
Amounts so deposited with Trustee shall be held by Trustee in accordance with Section 10.06
hereof. Amounts so deposited shall hereinafter be referred to as Issuers’ “Required Repair Fund” and the account in
which such amounts are held shall hereinafter be referred to as Issuers’ “Required Repair Account.”

 

(b)  Release
of Required Repair Funds. Trustee shall disburse to Issuers the
Required Repair Funds from the Required Repair Account from time to time, but
not more frequently than once in any ten (10) day period, upon satisfaction by
Issuers of each of the following conditions: (a) Issuers shall submit a written
request for payment to Trustee at least ten (10) days prior to the date on
which Issuers requests such payment be made and specifies the Required Repairs
to be paid, (b) on the date such request is received by Trustee and on the date
such payment is to be made, no Default or Event of Default shall exist and
remain uncured, (c) Trustee shall have received an Officer’s Certificate (i) stating
that all Required Repairs to be funded by the requested disbursement have been
completed in good and workmanlike manner and in accordance with all applicable
federal, state and local laws, rules and regulations, such Officer’s
Certificate to be accompanied by a copy of any license, permit or other
approval by any Governmental Authority required to commence and/or complete the
Required Repairs, (ii) identifying each Person that supplied materials or labor
in connection with the Required Repairs to be funded by the requested
disbursement, and (iii) stating that each such Person has been paid in full or
will be paid in full upon such disbursement, such Officer’s Certificate to be
accompanied by evidence of payment satisfactory to Trustee, (d) intentionally
omitted, and (e) Trustee shall have received such other evidence as Trustee
shall reasonably request that the Required Repairs to be funded by the
requested disbursement have been completed and are paid for or will be paid
upon such disbursement to Issuers. Trustee shall not be required to make
disbursements from the Required Repair Account unless such requested
disbursement is in an amount greater than $5,000 (or a lesser amount if the
total amount in the Required Repair Account is less than $5,000, in which case
only one disbursement of the amount remaining in the account shall be made) and
such disbursement shall be made only upon satisfaction of each condition
contained in this Section 10.01(b).

 

Section 10.02 Tax and Insurance Escrow Fund. Issuers
shall pay to Trustee on each Payment Date (a) one twelfth of the Taxes and the
Condominium charges and assessments that Trustee estimates will be payable
during the next ensuing twelve (12) months in order to accumulate with Trustee
sufficient funds to pay all such Taxes thirty (30) days prior to their
respective due dates, and (b) one twelfth of the Insurance Premiums that
Trustee estimates will be payable for the renewal of the coverage afforded by
the Policies upon the expiration thereof in order to accumulate with Trustee
sufficient funds to pay all such Insurance Premiums thirty (30) days prior to
the expiration of the Policies (said amounts in (a) and (b) above hereinafter
called the “Tax and Insurance Escrow Fund”). The
Tax and Insurance Escrow Fund and the payment of the monthly Debt Service,
shall be added together and shall be paid as an aggregate sum by Issuers to
Trustee. Trustee will apply the Tax and Insurance Escrow Fund to payments of
Taxes and Insurance Premiums required to be made by Issuers pursuant to Section 7.01(b)
hereof. In making any payment relating to the Tax and Insurance Escrow Fund,
Trustee may do so according to any bill, statement or estimate procured from
the

 

85

 

appropriate public office (with respect to
Taxes) or insurer or agent (with respect to Insurance Premiums), without
inquiry into the accuracy of such bill, statement or estimate or into the
validity of any tax, assessment, sale, forfeiture, tax lien or title or claim
thereof, except where Issuers are contesting the Taxes in accordance with the
terms and provisions of this Indenture and have notified Trustee in writing of
such contest.  If the amount of the Tax
and Insurance Escrow Fund shall exceed the amounts due for Taxes and Insurance
Premiums pursuant to Section 7.01(b) hereof, Trustee shall, in its
reasonable discretion, return any excess to Issuers or credit such excess
against future payments to be made to the Tax and Insurance Escrow Fund.  Any amount remaining in the Tax and Insurance
Escrow Fund after the Debt has been paid in full shall be returned to
Issuers.  In allocating such excess,
Trustee may deal with the Person shown on the records of Trustee to be the
owner of the Property.  If at any time
Trustee reasonably determines that the Tax and Insurance Escrow Fund is not or
will not be sufficient to pay Taxes and Insurance Premiums by the dates set
forth in (a) and (b) above, Trustee shall notify Issuers of such determination
and Issuers shall increase its monthly payments to Trustee by the amount that
Trustee estimates is sufficient to make up the deficiency at least thirty (30)
days prior to the due date of the Taxes and/or thirty (30) days prior to
expiration of the Policies, as the case may be.

 

Section
10.03  Replacements and Replacement
Reserve.

 

(a)  Replacement
Reserve Fund.  Issuers
shall pay to Trustee (i) on each Payment Date commencing with the Payment Date
occurring in January 2005, one twelfth (1/12) of two percent (2%) of Gross
Income from Operations for the calendar month two (2) months prior to the month
in which such Payment Date occurs, (ii) on each Payment Date commencing with
the Payment Date occurring in January 2006, one twelfth (1/12) of three
percent (3%) of Gross Income from Operations for the calendar month two (2)
months prior to the month in which such Payment Date occurs, and (iii) on each
Payment Date thereafter, one twelfth (1/12) of four percent (4%) of Gross
Income from Operations for the calendar month two (2) months prior to the month
in which such Payment Date occurs, which is the amount (the “Replacement Reserve Monthly Deposit”)
reasonably estimated for the calendar month two (2) months prior to the month
in which such Payment Date occurs by Trustee in its sole discretion to be due
for replacements and repairs required to be made to the Property during the
calendar year (collectively, the “Replacements”).  Amounts so deposited shall hereinafter be
referred to as Issuers’ “Replacement Reserve Fund” and the account in which
such amounts are held shall hereinafter be referred to as Issuers’ “Replacement Reserve Account.”

 

(b)  Disbursements
from Replacement Reserve Account.  Trustee shall make disbursements from the
Replacement Reserve Fund as requested by Issuers, and approved by Trustee, no
more frequently than once in any thirty (30) day period of no less than
$5,000.00 upon delivery by Issuers of Trustee’s standard form of draw request
accompanied by copies of paid invoices for the amounts requested or invoices showing
payments due, together with such evidence as Trustee shall reasonably request
that the Replacements to be reimbursed or funded by the requested disbursement
have been completed in good and workmanlike manner and in accordance with all
applicable Legal Requirements, and, if required by Trustee for requests in
excess of $10,000.00 for a

 

86

 

single item, releases from all parties
furnishing materials and/or services in connection with the requested payment.  Trustee may require an inspection of the
Property at Issuers’ expense prior to making a monthly disbursement in order to
verify completion of replacements and repairs of items in excess of $10,000.00
for which reimbursement is sought; provided that Trustee may not require
such inspection more frequently than twice during any calendar year unless the
average monthly disbursement from the Replacement Reserve Fund during the
trailing twelve (12) month period exceeds $250,000 (at which time Trustee may require
such inspections prior to making any monthly disbursement from the Replacement
Reserve Fund).

 

(c)  Balance
in the Replacement Reserve Account.  The insufficiency of any balance in the
Replacement Reserve Account shall not relieve Issuers from their obligation to
fulfill all preservation and maintenance covenants in the Financing Documents.

 

Section
10.04  Interest Reserve Interest.  Issuers shall pay to Trustee on the date
hereof the sum of $750,000, which amount shall be deposited with and held by Trustee
for the benefit of Noteholders as additional security for payment of the Debt, provided
that if the Net Operating Income for the trailing twelve (12) month period for
the Property exceeds $11,000,000 on any one of January 9, 2007,
January 9, 2008 or January 9, 2009, then all amounts then held in the
Interest Reserve Account shall be released to Issuers, provided that no
Event of Default shall have occurred and be continuing.  Notwithstanding the foregoing, if the Net
Operating Income for the trailing twelve (12) month period for the Property
does not exceed $11,000,000 on any such date, but thereafter exceeds
$11,000,000 as of each Payment Date occurring in (a) April and July of the same
calendar year or (b) July and October of the same calendar year, then all
amounts then held in the Interest Reserve Account shall be released to Issuers,
provided that no Event of Default shall have occurred and be
continuing.  All such amounts so
deposited shall hereinafter be referred to as the “Interest Reserve Fund” and the account to which such amounts
are held shall hereinafter be referred to as the “Interest Reserve Account.”

 

Section
10.05  Reserve LC.

 

(a)  Issuers shall deliver to Trustee on the date
hereof a Letter of Credit in an amount equal to $2,500,000 (the “NOI LC”). 
The NOI LC shall be released by Trustee to Issuers in the event the Net
Operating Income for the trailing twelve (12) month period for the Property
exceeds $9,500,000 on any Payment Date occurring in January, April, July or
October during the term of the Notes (commencing with the Payment Date
occurring in January 2006), provided that no Event of Default shall
have occurred and be continuing.

(b)  Issuers shall deliver to Trustee on the date
hereof a Letter of Credit in an amount equal to $2,500,000 (the “Spa LC”). 
Issuers shall have the right to reduce the amount of the Spa LC from
time to time by an amount equal to the reduction (other than a reduction by
payment) in the amount of the termination fee payable by Hotel Issuer pursuant
to Section 2.7 of the Spa Management Agreement, provided that the
amount of

 

87

 

the Spa LC shall not be less than the amount
of such potential termination fee at any time. 
In connection with such reduction, Issuers shall deliver (i) a
replacement Spa LC for the reduced amount and (ii) a calculation of the
potential termination fee, together with an Officer’s Certificate certifying
that such calculation has been determined in accordance with Section 2.7
of the Spa Management Agreement.

(c)  Each Reserve LC shall be additional security
for the payment of the Debt.  Upon the
occurrence and during the continuance of an Event of Default, Trustee shall
have the right, at its option, to draw on any Reserve LC and to apply the
proceeds thereof to payment of the Debt in such order, proportion or priority
as Trustee may determine.  Trustee’s
right to draw on any Reserve LC and apply the proceeds thereof in accordance
with this Section 10.05 shall be in addition to all other rights
and remedies provided to Trustee under the Financing Documents.

 

(d)  In addition to any other right Trustee may
have to draw upon any Reserve LC pursuant to the terms and conditions of this
Indenture, Trustee shall have the additional rights to draw in full any Reserve
LC: (i) if the Reserve LC is an evergreen letter of credit, if Trustee has
received a notice from the issuing bank that such Reserve LC will not be
renewed and a replacement Reserve LC is not provided at least thirty (30) days
prior to the date on which such Reserve LC is scheduled to expire; (ii) if the
Reserve LC has a stated expiration date, if Trustee has not received a notice
from the issuing bank that it has renewed such Reserve LC at least thirty (30)
days prior to the date on which such Reserve LC is scheduled to expire and an
extension of such Reserve LC or a replacement Reserve LC is not provided at
least thirty (30) days prior to the date on which such Reserve LC is scheduled
to expire; or (iii) upon receipt of notice from the issuing bank that such
Reserve LC will be terminated (except if a replacement Reserve LC is
provided).  Notwithstanding anything to
the contrary contained in the above, Trustee is not obligated to draw any
Reserve LC upon the happening of an event specified in (i), (ii) or (iii) above
and shall not be liable for any losses sustained by Issuers due to the
insolvency of the bank issuing any Reserve LC if Trustee has not drawn such
Reserve LC.

 

Section
10.06  Reserve Funds, Generally.  (a) 
Issuers grant to Trustee a first-priority perfected security interest in
each of the Reserve Funds and any and all monies now or hereafter deposited in
each Reserve Fund as additional security for payment of the Debt.  Until expended or applied in accordance
herewith, the Reserve Funds shall constitute additional security for the
Debt.  Upon the occurrence of an Event of
Default, Trustee may, in addition to any and all other rights and remedies
available to Trustee, apply any sums then present in any or all of the Reserve
Funds to the payment of the Debt in any order in its sole discretion.  The Reserve Funds shall not constitute trust
funds and may be commingled with other monies held by Trustee for the benefit
of Noteholders.

 

(b)  Issuers shall not, without obtaining the prior
consent of Trustee, further pledge, assign or grant any security interest in
any Reserve Fund or the monies deposited therein or permit any lien or
encumbrance to attach thereto, or any levy to be

 

88

 

made thereon, or any UCC-1 Financing
Statements, except those naming Trustee as the secured party, to be filed with
respect thereto.

 

(c)  The Reserve Funds shall be held in an
Eligible Account and shall bear interest at a money market rate selected by Trustee.  All interest or other earnings on a Reserve
Fund shall be added to and become a part of such Reserve Fund and shall be
disbursed in the same manner as other monies deposited in such Reserve Fund,
except for any such taxes applicable to the interest or income earned on the
Tax and Insurance Escrow Funds which is retained by Trustee.  Issuers shall have the right to direct
Trustee to invest sums on deposit in the Eligible Account in Permitted
Investments provided (a) such investments are then regularly offered by Trustee
for accounts of this size, category and type, (b) such investments are
permitted by applicable federal, state and local rules, regulations and laws,
(c) the maturity date of the Permitted Investment is not later than the date on
which the applicable Reserve Funds are required for payment of an obligation
for which such Reserve Fund was created, and (d) no Event of Default shall have
occurred and be continuing.  Issuers
shall be responsible for payment of any federal, state or local income or other
tax applicable to the interest or income earned on the Reserve Funds to the
extent Issuers are entitled to such interest under this Indenture and the Cash
Management Agreement.  No other
investments of the sums on deposit in the Reserve Funds shall be permitted
except as set forth in this Section 10.06(c).  Issuers shall bear all reasonable costs
associated with the investment of the sums in the account in Permitted
Investments.  Such costs shall be
deducted from the income or earnings on such investment, if any, and to the
extent such income or earnings shall not be sufficient to pay such costs, such
costs shall be paid by Issuers promptly on demand by Trustee.  Trustee shall have no liability for the rate of
return earned or losses incurred on the investment of the sums in Permitted
Investments.

 

(d)  Issuers shall indemnify Trustee and hold
Trustee harmless from and against any and all actions, suits, claims, demands,
liabilities, losses, damages, obligations and costs and expenses (including litigation
costs and reasonable attorneys fees and expenses) arising from or in any way
connected with the Reserve Funds or the performance of the obligations for
which the Reserve Funds were established. 
Issuers shall assign to Trustee all rights and claims Issuers may have
against all Persons supplying labor, materials or other services which are to
be paid from or secured by the Reserve Funds; provided, however,
that Trustee may not pursue any such right or claim unless an Event of Default
has occurred and remains uncured.

 

(e)  In all matters pertaining to the Reserve
Funds or the Reserve LC, the Issuers’ covenants and agreements shall be
enforced, and all associated rights shall be exercised, by the Servicer on
behalf of the Trustee for the benefit of the Noteholders, and all related
documents to be delivered to the Trustee, amounts to be deposited with the
Trustee and all accounts to be maintained by the Trustee shall be so delivered,
deposited and maintained by the Servicer on behalf of the Trustee for the
benefit of the Noteholders.

 

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ARTICLE 11 – MATTERS
CONCERNING THE TRUSTEE

 

Section
11.01  Duties of the Trustee.  (a) 
The duties, responsibilities and liabilities of the Trustee in respect
of the Financing Documents and the other duties and liabilities of the Trustee
under this Indenture shall be as follows:

 

(i)  The Trustee (and the Servicer on its behalf)
shall have the full power and authority to do all things not inconsistent with
the provisions of this Indenture or any other Financing Document that it may
deem advisable in order to enforce the provisions hereof or thereof or to take
any action with respect to a default or an Event of Default hereunder or
thereunder, or to institute, appear in or defend any suit or other proceeding
with respect hereto or thereto, or to protect the interests of the Holders; provided,
however, that notwithstanding the foregoing or any other provisions of
this Indenture to the contrary, the Notes shall be serviced by the Servicer and
the powers vested in the Servicer hereunder shall not be exercised by the
Trustee except as expressly set forth herein. 
Neither the Trustee nor any of its directors, officers, shareholders,
agents or employees (each, a “Trustee
Indemnified Party” and, collectively, the “Trustee Indemnified Parties”) shall be
answerable to or accountable for, except for its or their own bad faith,
willful misconduct or negligence, and the Issuers agree to indemnify and save
harmless the Trustee Indemnified Parties from, any costs, expenses, liabilities
and damages that any of them may incur or sustain, in good faith and without
willful misconduct or negligence, in the exercise and performance of the
Trustee’s powers and duties hereunder and the acceptance or administration of
the trust or trusts hereunder, under the Indenture or under any other Financing
Document, including the cost and expense of defending themselves against any
claim or liability in connection with the exercise or performance thereof; provided,
however, that if it is found that any such claim or liability has
resulted from the bad faith, willful misconduct or negligence of any Trustee
Indemnified Party in the performance of its duties hereunder, such Trustee
Indemnified Party shall repay such portion of the reimbursed amounts that is
attributable to expenses incurred in relation to that portion of its acts or
omissions that is the subject of such finding. 
If any Trustee Indemnified Party is entitled to receive indemnification
hereunder with respect to any such action or proceeding brought by a third
party, the Issuers shall be entitled to assume the defense of any such action
or proceeding with counsel reasonably satisfactory to such Trustee Indemnified
Party who shall not, except with the consent of such Trustee Indemnified Party,
be counsel to the Issuers or any Affiliate thereof.  Upon assumption by the Issuers of the defense
of any such action or proceeding, such Trustee Indemnified Party shall have the
right to participate in such action or proceeding and to retain its own
separate counsel, but the Issuers shall not be liable for any legal fees or
expenses of such a separate counsel subsequently incurred by such Trustee
Indemnified Party in connection with the defense thereof unless (i) the Issuers
have agreed to pay such fees and expenses or (ii) counsel provided by the
Issuers pursuant to the foregoing is counsel to the Issuers and such Trustee
Indemnified Party shall have been advised by such counsel that representation
of such Trustee Indemnified Party by such counsel provided by the Issuers
pursuant to the foregoing would be inappropriate due to actual or potential
conflicting interests between the Issuers and such Trustee Indemnified Party,
including situations in which there are one or more legal defenses available to
such Trustee Indemnified Party that are different from or additional

 

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to those available to the Issuers; provided,
however, that the Issuers shall not, in connection with any such action
or proceeding, or separate but substantially similar action or proceeding
arising out of the same general allegations, be liable for the fees and
expenses of more than one separate firm of attorneys at any time, in addition
to any local counsel, for any such Trustee Indemnified Party.  The Issuers shall not consent to the terms of
any compromise or settlement of any action defended by the Issuers in
accordance with the foregoing without the prior consent of the Trustee
Indemnified Party.  The Issuers shall not
be required to indemnify any Trustee Indemnified Party for any amount paid or
payable by such Trustee Indemnified Party in settlement of any action,
proceeding or investigation without the prior written consent of the Issuers,
which consent shall not be unreasonably withheld.  Promptly after receipt by any Trustee
Indemnified Party of notice of its involvement (or the involvement of any of
its Affiliates or such Affiliate’s directors, officers, shareholders, agents or
employees) in any action, proceeding or investigation, such Trustee Indemnified
Party shall, if a claim for indemnification in respect thereof is to be made
against the Issuers hereunder, notify the Issuers in writing of such
involvement, but the failure of such Trustee Indemnified Party to provide such
notice shall neither cause the forfeiture of the right to receive indemnity
hereunder nor limit such right, except to the extent, if any, that the Issuers
are prejudiced by the failure of the Trustee Indemnified Party to promptly give
such notice.  The Issuers’
indemnification obligations under this Section 11.01(i) shall
survive payment of the Notes and any resignation, removal or replacement of the
Trustee.  The indemnification provided
herein is limited in each case to actual damages and does not extend to
consequential damages.

 

(ii)  The Trustee shall be authorized to make, at
the expense of the Issuers, all required refilings of any Financing Document to
preserve the liens created thereby to the extent not so done by the Issuers,
the Servicer as provided herein or therein, but shall have no obligation to
take any action to protect, preserve or enforce any rights or interests in the
Financing Documents or towards the execution or enforcement of the trusts
hereby or thereby created which, in its opinion, shall be likely to involve
expense or liability to the Trustee, unless the Trustee shall have received an
agreement satisfactory to the Trustee in its sole discretion to indemnify it
against such liability and expense.  The
Trustee shall not be required to ascertain or inquire as to the performance or
observance of any of the covenants or agreements contained herein, or in any
other Financing Document or in any other instruments to be performed or
observed by the Issuers or any other party to any Financing Document
(including, without limitation, the necessity or desirability under any
applicable state law to re-record, re-register or re-file any Financing
Document).  In accepting the trusts
hereunder and under the Financing Documents, the Trustee is acting solely as
Trustee hereunder and not in its individual capacity and all Persons, other
than the Issuers and the Holders, having any claim against the Trustee arising
by reason hereof shall look only to the Property for payment or satisfaction
thereof except as provided herein.

 

(iii)  The Trustee shall incur no liability in
acting upon any signature, notice, request, consent, certificate, opinion, or
other instrument reasonably believed by it to be genuine.  In administering the trusts, the Trustee may
exercise any of the powers hereof directly or through its agents or attorneys
and may, at the expense of the Issuers,

 

91

 

consult with counsel, accountants and other
skilled Persons to be selected and employed by it, and the reasonable expenses
thereof shall be paid by the Issuers, and the Trustee shall not be liable for
anything done, suffered or omitted in good faith by it in accordance with the
advice of any such Person nor for any error of judgment made in good faith by a
Responsible Officer, unless it shall be proved that the Trustee was negligent
in ascertaining the pertinent facts.

 

(iv)  The Trustee shall have no duty to make,
arrange or ensure the completion of any recording, filing or registration of
any Financing Document, any instrument of further assurance, any instrument
constituting part of any of the Property, or any amendments or supplements to
any of said instruments and the Trustee shall have no duty to make, arrange or
ensure the completion of the payment of any fees, charges or taxes in
connection therewith (and the Trustee may act with respect to the Financing
Documents and pay out deposited monies without regard thereto), or to give any
notice thereof, or to make, arrange or ensure the completion of the payment of
or be under any duty in respect of any tax, assessment or other governmental
charge that may be levied or assessed on any of the Property or any part
thereof or against the Issuers. 
Notwithstanding the foregoing, the Trustee agrees that it will notify
the Issuers in writing of any filings, fees, taxes or other payments required
in connection with the satisfaction of the Issuers’ obligations hereunder and
under the other Financing Documents known to any Responsible Officer of the
Trustee assigned to its Corporate Trust Office and actively involved in the
administration of the Loan.

 

(v)  Whenever, in administering the trust, the
Trustee shall deem it necessary or desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the Trustee may,
in the absence of bad faith on the part of the Trustee, request and rely upon
(unless other evidence in respect thereof be specifically prescribed herein or
in any Financing Document) an Officer’s Certificate of the Issuers, and such
Officer’s Certificate shall be full warrant to the Trustee for any action
taken, suffered or omitted by it on the faith thereof, but in its discretion
the Trustee may in lieu thereof accept other evidence of such fact or matter or
may require such further or additional evidence as it may deem reasonable.

 

(vi)  Whenever, in administering the trust, the
Trustee shall be permitted whether pursuant to the terms of this Indenture or
any other Financing Document, to determine to grant or withhold its consent to
or waiver or approval of any matter described herein or therein or to take or
omit to take any action or course of conduct permitted or required hereunder or
thereunder, the Trustee shall be fully protected in making such determination
based solely upon the written direction of the Servicer or, absent such
direction, (a) on the basis of the related submission required by this
Indenture or by such other Financing Document, as the case may be, or (b) if a
standard for such determination is specified herein or therein, on the basis of
its determination in good faith as to whether or not such standard has been
satisfied, or (c) if no such standard is specified, on the basis of its
determination in good faith as to (x) with respect to any act, omission or
course of conduct, whether such act, omission or course of conduct is
reasonable (which determination may be made solely on the basis of advice from
professionals selected by the Trustee with reasonable care) and (y) with
respect to the

 

92

 

selection of any professional, whether the
party proposing the engagement of such professional is motivated primarily by
interests contrary to those of the Holders in making such proposal; provided,
that in each case, that the Trustee grants or withholds its consent or approval
or takes any other action on a timely basis. 
The Trustee shall not be required to seek the individual consents or
approvals of the Holders with respect to any such consent or approval unless
the same shall be explicitly required by the terms of this Indenture or such
other Financing Document, as the case may be. 
Without limiting the generality of the foregoing, in the event the
approval of the Trustee is requested by the Servicer with respect to a
settlement of an insurance claim pursuant to the Indenture, the Trustee shall
be fully protected in granting such approval based on directions from the
Servicer.

 

(vii)  The Trustee shall have no obligation to see
to the payment or discharge of any liens (other than the liens of the Financing
Documents, and then only to the extent therein provided), or to see to the
application of any payment of the principal of or interest on any Note secured
thereby or to the delivery or transfer to any Person of any property released
from any such lien, or to give notice to or make demand upon any mortgagor,
mortgagee, trustor, beneficiary or other Person for the delivery or transfer of
any such property.

(viii)  The Trustee shall not be concerned with or
accountable to any Person for the use or application of any deposited monies
that shall be released or withdrawn in accordance with the provisions hereof or
of any other Financing Document or of any property or securities or the
proceeds thereof that shall be released from the lien hereof or thereof in
accordance with the provisions hereof or thereof and the Trustee shall have no
liability for the acts of other parties hereto that are not in accordance with
the provisions hereof.

(ix)  Trustee shall not be charged with knowledge
of any Event of Default hereunder or under any other Financing Document (except
default in the payment of monies to the Trustee that the Issuers are required
to pay or cause to be paid to the Trustee on or before a specified date and
except default in the delivery of any certificate, opinion or other document
expressly required to be delivered to the Trustee by any provision hereof or
any Financing Document) or any condition which after notice and/or the passage
of time would constitute an Event of Default or any other fact, circumstance or
event the occurrence of which would require the Trustee to give any notice or
otherwise take any action (any such Event of Default, condition, circumstance
or other event, an “Event”),
unless either (i) a Responsible Officer of the Trustee assigned to its
Corporate Trust Office shall have actual knowledge of such Event or (ii)
written notice of such Event shall have been given to and received by the
Trustee, by any Issuer, the Servicer or any Holder or Holders of at least 25%
in aggregate principal amount of the Notes.

 

(x)  The Trustee shall not be responsible for any
act or omission of the Servicer and Servicer shall not be responsible for any
act or omission of the Trustee.

 

93

 

(xi)  Except during the continuance of an Event of
Default, the Trustee undertakes to perform such duties and only such duties as
are specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee.

(xii)  In the absence of actual knowledge on the
part of a Responsible Officer to the contrary or bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this Indenture;
but in the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall be
under a duty to examine the same to determine whether or not they conform on
their face to the requirements of this Indenture.

 

(xiii)  In the case an Event of Default known to the
Trustee has occurred and is continuing, the Trustee shall exercise (subject, in
all cases, to the rights and powers vested in the Servicer pursuant to this
Indenture), with respect to the Notes, such of the rights and powers vested in
it by this Indenture, and use the same degree of care and skill in their
exercise, as a prudent Person would exercise or use under the circumstances in
the conduct of his own affairs.

 

(xiv)  No provision of this Indenture shall be
construed to relieve the Trustee from liability for its own negligent action,
its own negligent failure to act, or its own willful misconduct or bad faith,
except that:

 

(A)  the Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer, unless it is proved by
a court of competent jurisdiction that the Trustee was negligent in
ascertaining the pertinent facts; and

 

(B)  the Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith and without
negligence in accordance with the directions of the Noteholders or the Servicer
required by this Indenture relating to the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred upon the Trustee, under this Indenture with respect to the
Notes or the Financing Documents.

 

(xv)  At any time or times, for the purpose of
meeting the legal requirements of any jurisdiction in which any of the Property
may at the time be located, the Issuers and the Trustee shall have power to
appoint, and, upon the written request of the Trustee or of the Holders of a
majority of the Noteholders, the Issuers shall for such purpose join with the
Trustee in the execution, delivery and performance of all instruments and
agreements necessary or proper to appoint, one or more Persons approved by the
Trustee either to act as co-trustee, jointly with the Trustee, of all or any
part of the Collateral, or to act as separate trustee of any such property, in
either case with such powers as may be provided in the instrument of
appointment, and to vest in such Person or Persons in the capacity aforesaid,
any property, title, right or power deemed necessary or desirable,

 

94

 

subject to the other provisions of this Section 11.01.  If the Issuers do not join in such
appointment within 15 days after the receipt by them of a request so to do, or
in case an Event of Default has occurred and is continuing, the Trustee alone
shall have power to make such appointment.

 

(xvi)  If any written instrument from the Issuers
should be required by any co-trustee or separate trustee so appointed to more
fully verify such co-trustee’s or separate trustee’s power with respect to such
property, title, right or power, any and all such instruments shall, on
request, be executed, acknowledged and delivered by the Issuer.

 

(xvii)  Every co-trustee or separate trustee shall,
to the extent permitted by law, but to such extent only, be appointed subject
to the following terms:

 

(A)  The Notes shall be authenticated and
delivered, and all rights, powers, duties and obligations hereunder in respect
of the custody of securities, cash and other personal property held by, or
required to be deposited or pledged with, the Trustee hereunder, shall be
exercised solely, by the Trustee.

 

(B)  The rights, powers, duties and obligations
hereby conferred or imposed upon the Trustee in respect of any property covered
by such appointment shall be conferred or imposed upon and exercised or
performed by the Trustee (or by the Trustee and such co-trustee or separate
trustee jointly, as shall be provided in the instrument appointing such
co-trustee or separate trustee), except to the extent that, under any law of
any jurisdiction in which any particular act is to be performed, the Trustee
shall be incompetent or unqualified to perform such act, in which event such
rights, powers, duties and obligations shall be exercised and performed by such
co-trustee or separate trustee.

 

(C)  The Trustee, at any time, by an instrument in
writing executed by it, with the consent of the Issuers evidenced by a Board
Resolution, may accept the resignation of or remove any co-trustee or separate
trustee appointed under this Section 11.01, and, if an Event of
Default has occurred and is continuing, the Trustee shall have power to accept
the resignation of, or remove, any such co-trustee or separate trustee without
the consent of the Issuers.  Upon the
written request of the Trustee, the Issuers shall join with the Trustee in the
execution, delivery and performance of all instruments and agreements necessary
or proper to effectuate such resignation or removal.  A successor to any co-trustee or separate
trustee so resigned or removed may be appointed in the manner provided in this Section 11.01.

 

(D)  No co-trustee or separate trustee hereunder
shall be personally liable by reason of any act or omission of the Trustee, or
any other such trustee hereunder.  Any
fees or expenses of any co-trustee or separate trustee shall not be an expense
of the Trustee.

 

95

 

(E)  Any at of Noteholders delivered to the
Trustee shall be deemed to have been delivered to each such co-trustee and
separate trustee.

 

Section
11.02  Rights of Trustee.  (a) 
The Trustee may rely on any document believed by it to be genuine and to
have been signed or presented by the proper Person.  The Trustee need not investigate any fact or
matter stated in such document.

 

(b)  Any request or direction of the Issuers
mentioned herein shall be sufficiently evidenced by an Issuer request and any
resolution of a board of directors may be sufficiently evidenced by a
resolution of such board of directors.

 

(c)  Before the Trustee acts or refrains from
acting, it may require an Officer Certificate or an opinion of counsel.  The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such Officer
Certificate or opinion of counsel.

 

(d)  The Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through delegates, agents or attorneys or a custodian or nominee, and the
Trustee shall not be responsible for any misconduct or negligence on the part
of, or for the supervision of, any such agent, attorney, custodian or nominee
appointed with due care by it hereunder.

 

(e)  The Trustee shall not be liable for any
action it takes or omits to take in good faith which it believes to be
authorized or within its rights or powers.

 

(f)  The Trustee may consult with counsel, and the
advice or opinion of such counsel or any opinion of counsel shall be full and
complete authorization and protection from liability in respect of any action
taken, omitted or suffered by it hereunder in good faith and in reliance
thereon.

 

(g)  The Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Indenture at the
request or direction of any of the Noteholders pursuant to this Indenture or to
institute, conduct or defend any litigation hereunder or in relation hereto at
the request, order or direction of any of the Noteholders pursuant to this
Indenture, unless such Noteholders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which might
be incurred by it in compliance with such request or direction;

 

(h)  The Trustee shall not be bound to make any
investigation into the facts or matters stated in any document, but the
Trustee, in its direction, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Issuers, personally or by an agent or
attorney; and

 

(i)  The Trustee shall not be required to give any
bond or surety in respect of the execution of the trust created hereby or the
powers granted hereunder.

 

96

 

(j)  With respect to all conditions to be
satisfied or determinations permitted or required to be made by or to the
satisfaction of the Trustee hereunder with respect to the closing the Trustee
shall be entitled to receive and rely conclusively upon a certificate or
instruction from the Initial Purchaser.

 

(k)  With respect to the exercise of all rights,
powers and authority of the Trustee hereunder, and with respect to any actions
permitted or required to be taken by the Trustee hereunder, the Trustee shall
at all times be entitled to request, rely, and act only upon, the written
instruction of the Noteholders, and in the absence of such instruction and
indemnity reasonably acceptable to the Trustee with respect thereto, the
Trustee shall have no obligation to act.

 

(l)  With respect to all matters relating to the
ongoing administration and servicing of the Notes, including without limitation
all matters relating to monitoring and enforcing the Issuers’ obligations
hereunder, the Trustee shall enter into such servicing agreements as the
Noteholder shall request, with such servicers, master servicers and/or special
servicers (including the initial Servicer) as shall be selected and designated
by a majority of the Noteholders, and the Trustee shall have no responsibility
or liability therefor.

 

Section
11.03  Individual Rights of Trustee.  The Trustee, in its individual or any other
capacity, may become the owner or pledgee of Notes and may otherwise deal with
the Issuers or its Affiliates with the same rights it would have had if it were
not Trustee.

 

Section
11.04  Trustee’s Disclaimer.  The Trustee (i) shall not be responsible for,
and makes no representation, as to the validity or adequacy of this Indenture
or the Notes and (ii) shall not be accountable for the Issuers’ use of the
proceeds from the Notes, or responsible for any statement of the Issuers in
this Indenture or in any document issued in connection with the sale of the
Notes or in the Notes other than the Trustee’s certificate of authentication.

 

Section
11.05  Notice of Defaults.  If a Default occurs and is continuing and if
it is actually known to a Responsible Officer of the Trustee, the Trustee shall
mail to each Noteholder and the Issuers with a copy to the Rating Agency,
notice of such Default within thirty (30) calendar days after obtaining actual
knowledge of such Default.  Except in the
case of a Default in payment of principal of or interest on any Note, the
Trustee may withhold the notice, and be protected against liability in
withholding such notice, if, and so long as the Trustee in good faith
determines that withholding the notice is in the best interests of the
Noteholders and shall so advise the Issuers in writing.  Where a notice of the occurrence of an Event
of Default has been given to the Noteholders pursuant to this Section 11.05
and the Event of Default is thereafter cured, the Trustee shall give notice
that the Event of Default is no longer continuing to the Noteholders within
thirty (30) calendar days after a Responsible Officer of the Trustee obtains
actual knowledge that the Event of Default has been cured.

 

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Section
11.06  Compensation and Indemnity.  (a)  On
the Note Issuance Date and from time to time thereafter, the Trustee shall receive
any costs, fees and expenses of its counsel and a fee, agreed to in writing
between the Trustee and the Noteholders, payable monthly and calculated in the
same manner as interest is calculated under the Notes from the monthly payments
required under the Notes in advance upon the outstanding principal balance of
the Notes as of the related Determination Date and payable in accordance with
the Cash Management Agreement, as compensation for its services as Trustee
hereunder.  The Trustee’s compensation shall
not be limited by any law on compensation of a trustee of an express
trust.  The Issuers shall reimburse the
Trustee upon request for all reasonable out-of-pocket expenses incurred or made
by it, including costs of collection, in addition to the compensation for its
services.  Such expenses shall include,
but will not be limited to, the reasonable compensation and expenses,
disbursements and advances of the Trustee’s agents (including any receiver),
delegates, counsel, accountants and experts. 
The Issuers shall indemnify the Trustee against any and all loss,
liability or expense (including reasonable attorney’s fees) incurred by it in
connection with the administration of this trust and the performance of its
duties in its various capacities hereunder including the costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder.  The Trustee shall notify the Issuers and the
Noteholders promptly of any claim for which it may seek indemnity.  Failure by the Trustee to so notify the
Issuers shall not relieve the Issuers of its obligations hereunder.  The Issuers need not reimburse any expense or
indemnity against any loss, liability or expense incurred by the Trustee
through the Trustee’s own willful misconduct, negligence or bad faith.

 

(b)  The payment obligations to the Trustee
pursuant to this Section 11.06 shall survive the resignation or
removal of the Trustee and the discharge of this Indenture.

 

Section
11.07  Replacement of Trustee.  The Trustee may resign its trust and be
discharged from all further duties and liabilities hereunder by giving to the
Noteholders thirty (30) days prior notice in writing or such shorter notice as
the Noteholders may accept as sufficient. 
In addition, the Trustee shall resign upon the request of a majority of
the Noteholders.  In the event of the
Trustee resigning or being removed or being dissolved, becoming bankrupt, going
into liquidation or otherwise becoming incapable of acting hereunder, the
Noteholders shall forthwith appoint a new Trustee by Noteholders’
Approval.  On any new appointment, the
Trustee shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as Trustee.  Any company into which the Trustee may be
merged or with which it may be consolidated or amalgamated or any company
resulting from any merger, consolidation or amalgamation to which the Trustee
shall be a party, shall be the successor Trustee under this Indenture without
the execution of any instrument or any further act.  If no successor Trustee is appointed within
thirty (30) days of the aforesaid notice being provided, the Trustee or any of
the Noteholders may apply, at the cost of the Issuers, to a court of competent
jurisdiction to appoint a successor.

 

98

 

Section
11.08  Resignation or Removal of
Trustee; Conflict of Interest.  (a) 
The Trustee may resign its trust, after giving sixty (60) days’ notice
in writing to Noteholders or such shorter notice as the Noteholders, may accept
as sufficient, after the Trustee becomes aware that it has a material conflict
of interest it shall provide the Noteholders with written notice of the nature
of that conflict.  If, notwithstanding
the foregoing provisions of this section, the Trustee has such a material
conflict of interest, the validity and enforceability of this Indenture and of
the Notes issued hereunder shall not be affected in any manner whatsoever by reason
only of the existence of such material conflict of interest.  The Trustee represents to Initial Purchaser
and Initial Noteholder that, to the best of its knowledge, at the time of the
execution and delivery hereof, no material conflict of interest exists in the
Trustee’s role as a fiduciary hereunder. 
Upon any resignation, the Trustee shall be discharged from all further
duties and liabilities under this indenture.

 

(b)  In the event of the Trustee resigning or
being removed or being dissolved, becoming bankrupt, going into liquidation or
otherwise becoming incapable of acting hereunder, the Noteholders shall
forthwith appoint a new Trustee; failing such appointment by the retiring
Trustee or any Holder may apply to any applicable Governmental Authority, for
the appointment of a new Trustee at the Issuers’ expense.  Any new Trustee so appointed shall be subject
to removal by the Noteholders.  On any
new appointment the new Trustee shall be vested with the same powers, rights,
duties and responsibilities as if it had been originally named herein as
Trustee.  The expense of any act,
document or other instrument or thing required under this Section shall be
paid by Issuers.

 

(c)  Any new or successor Trustee shall, forthwith
upon appointment, become vested with all the estates, properties, rights,
powers and trusts of its predecessors in the trusts hereunder, with like effect
as if originally named as Trustee herein. 
Nevertheless, upon the written request of the successor Trustee or of
the Noteholders and upon payment of all outstanding fees and expenses properly
payable to the Trustee hereunder, the Trustee ceasing to act shall execute and
deliver an instrument assigning and transferring to such successor Trustee,
upon the trusts herein expressed, all the rights, powers and trusts of the
Trustee so ceasing to act, and shall duly assign, transfer and deliver all
property and money held by such Trustee to the successor Trustee so appointed
in its place.  Should any deed,
conveyance or instrument in writing from the Trustee on behalf of the Issuers
be required by any new Trustee for more fully and certainly vesting in and
confirming to it such estates, properties, rights, powers and trusts, then any
and all such deeds, conveyances and instruments in writing shall, on the
request of the new or successor Trustee, be made, executed, acknowledged and
delivered by the Issuers, as the case may be.

 

(d)  Any company into which the Trustee may be
consolidated or amalgamated or any company resulting from any merger, consolidation
or amalgamation to which the Trustee shall be a party shall be a successor
Trustee under this indenture without the execution of any instrument or any
further act; provided that such successor Trustee shall not have a
material conflict of interest in its role as a fiduciary under this Indenture.

 

99

 

Section
11.09  Successor Trustee.  Upon the written request of any successor
Trustee, the Trustee ceasing to act shall, upon receiving payment for any outstanding
fees and expenses, execute and deliver an instrument assigning and transferring
to such successor Trustee, upon the trusts herein expressed, all the rights,
powers and trusts of the Trustee so ceasing to act, and shall duly assign,
transfer and deliver all property and money held by such Trustee to the
successor Trustee so appointed in its place. 
Should any deed, conveyance or instrument in writing from the Issuers be
required by any new Trustee for more fully and certainly vesting in and confirming
to it such estates, properties, rights, powers and trusts, then any and all
such deeds, conveyances and instruments in writing shall on the request of said
new Trustee, be made, executed, acknowledged and delivered by the Issuers.

 

Section
11.10  Authorization and Duties of
Trustee. 
(a)  In the exercise of the
rights, duties and obligations prescribed or conferred by the terms of this
Indenture, the Trustee shall act honestly and in good faith and shall exercise
the care, diligence and skill that a reasonably prudent Trustee would exercise
in comparable circumstances.  For greater
certainty, provided that the Trustee fulfills the above noted standard
of care and there is no willful misconduct or gross negligence on the part of
the Trustee or its officers, directors, employees or agents, the Trustee shall
not be liable for any act or default on the part of any agent employed by it.

 

(b)  Trustee shall be authorized to take such
action as trustee on behalf of the Noteholders and to exercise such powers under
the Financing Documents as are delegated to Trustee by the terms hereof or
thereof, together with such powers as are reasonably incidental thereto.

 

(c)  By their acquisition of the Notes, the
Noteholders hereby authorize and direct Trustee to act on their behalf in all
respects in connection with the Financing Documents (but subject to Section 13.02
hereof) and agree with Issuers that Issuers shall only be required to and shall
only deal with Trustee and each Noteholder shall be bound by any acts of Trustee;
provided that Issuers shall not be entitled to rely upon any acts of
Trustee, and Noteholders shall not be bound by any acts of Trustee, that (i)
amend or otherwise modify in writing this Indenture or any other Financing
Document, (ii) waive any Event of Default or (iii) contradicts any
Extraordinary Resolution, a copy of which has been provided to Issuers; provided
further that with respect to each matter under clause (i), (ii) or
(iii) above, Issuers shall be entitled to rely upon copies of the applicable
Noteholders’ Approval or Extraordinary Resolution provided to Issuers by
Trustee.

 

Section
11.11  Trustee Not Required to Give
Security. 
The Trustee shall not be required to give any security in respect of the
execution of the trusts and powers of this Indenture or otherwise in respect of
the premises.

 

Section
11.12  Trustee May Deal In Notes.  The Trustee may buy, sell, lend upon and deal
in the Notes and generally contract and enter into financial transactions with
the Issuers without being liable to account for any profits made thereby.

 

100

 

Section
11.13  Administration of the Trust and
Protection of the Trustee.  By way of supplement to the provisions of any
law of the State of New York from time to time relating to trustees and in
addition to any other provision of this Indenture for the relief of the
Trustee, it is expressly declared as follows:

 

(a)  the Trustee may in relation to these presents
act on the opinion or advice of or information obtained from any legal counsel,
auditor, or other expert, whether obtained by the Trustee or by the Trustee or
otherwise, but will not be bound to act upon the opinion or advice or
information and will not be responsible for any loss occasioned by so acting or
not acting in good faith, as the case may be, and may pay proper and reasonable
compensation for all legal and other advice as aforesaid; any advice or opinion
or information may be sent or obtained by letter, telegram, cablegram or by
electronic facsimile transmission, and the Trustee will not be liable for
acting on any advice, opinion or information purporting to be conveyed by any
of these means although the same will contain some error or will not be
authentic;

 

(b)  except where some other mode of proof is
required by this Indenture, the Trustee will be at liberty to accept a
certificate signed by an officer of the Issuers, provided that the
Trustee examines the same and determines that such certificate complies with
the applicable requirements of this Indenture (i) as to any statement of facts
as conclusive evidence of the truth of the statement, (ii) as to any particular
act or transaction or step or thing which, in the opinion of the officers so
certifying, is expedient, as sufficient evidence that the act, transaction,
step or thing is expedient, and (iii) as to any expenditure made or
indebtedness incurred by the Trustee or any successor trustee to the Trustee as
sufficient evidence that the expenditure or indebtedness was made or incurred for
the purpose set forth in the certificate; and the Trustee will be in no way
bound to call for further evidence or be responsible for any loss that may be
occasioned by its failing to do so; however, the Trustee may cause to be made
any independent investigations as it may reasonably require and the expense
thereof (together with interest at the rate of interest charged to the Trustee
by its bankers from the date of the Trustee’s expenditure to the date of its
reimbursement) will be paid by the Trustee upon demand and will be payable out
of any funds coming into the possession of the Trustee; if as a result of any
independent investigation the Trustee is not satisfied as to any matter or
thing set forth in the certificate, the Trustee may refuse to act thereon;

 

(c)  in the exercise of the rights and duties
prescribed or conferred by the terms of this Indenture, the Trustee will act
honestly and in good faith and exercise that degree of care, diligence and
skill that a reasonably prudent trustee would exercise in comparable
circumstances;

 

(d)  the Trustee may, but is not required to,
employ any agents or other assistants as it may reasonably require for the
proper discharge of its duties hereunder and will not be responsible for any
misconduct on the part of any agents or other assistants or for any liability
incurred by any Person as a result of not appointing such agents or other
assistants and may pay reasonable remuneration for all services performed for
it in the

 

101

 

discharge of the trusts hereof without
taxation of any costs or fees of any counsel, and will be entitled to receive
reasonable remuneration for all services performed by it in the discharge of
the trusts hereof and compensation for all disbursements, costs, liabilities
and expenses made or incurred by it in the discharge of its duties hereunder
and in the management of the trusts hereof; all such remuneration,
disbursements, costs, liabilities and expenses and all remuneration and
expenses incidental to the preparation, execution and recording of this
Indenture or of any instrument ancillary or supplemental hereto and to the
preparation, execution and issue of Notes or other Financing Documents, whether
done or incurred at the request of the Trustee or the Issuers, will bear
interest at the rate of interest charged to the Trustee by its bankers from the
date of the same being incurred or expended until the date of reimbursement and
will (together with such interest) be paid by the Trustee upon demand and will
be payable out of any funds coming into the possession of the Trustee.  Where the Trustee has delegated its duties
pursuant to this section, it shall be deemed to have satisfied its duty of
care, if such delegation is reasonable;

 

(e)  wherever by this Indenture the Trustee is
authorized to employ or consult counsel and to pay costs, the costs need not be
taxed unless the Trustee deems it necessary to tax the same but may be agreed
to by the Trustee and paid as a lump sum; costs paid by the Trustee under the
provisions of this Section in good faith will not be disallowed in the
taking of any accounts by reason only of the fact that the costs are greater
than they might have been if taxed, or by reason of their not being taxed, but
the costs so paid by the Trustee will, if not improperly incurred by it, be
allowed and paid to the Trustee and will be payable out of any funds coming
into the possession of the Trustee; any counsel employed or consulted by the
Trustee may, but need not, be counsel for the Trustee;

 

(f)  the Trustee, in its individual or any other
capacity, may, sell, own, lend upon, become a pledgee of and deal with the
Notes and generally contract and enter into financial transactions with or act
as bankers for the Issuers or otherwise, without being liable to account for
any profits made thereby; provided, however, that except as
expressly provided in this Indenture, the Trustee shall not have any right of
set-off, combination, consolidation or banker’s lien against, and no right to otherwise
deduct from, any funds on deposit in the Lockbox Account or the Cash Management
Account or in any other account from time to time maintained by the Issuers
with the Trustee and all investments thereof for any amount owed to it by
virtue of any of the foregoing dealings or activities;

 

(g)  the Trustee will not be liable for or by
reason of the statements or implications of fact or law contained in or arising
out of anything contained in this Indenture or in the Notes or be required to
verify the same, but all statements or implications will be deemed to have been
made by the Trustee only, and it will not be the duty of the Trustee, except as
herein otherwise specifically provided, to see to the registration or filing or
renewal of this Indenture, if necessary, or to keep itself informed or advised
as to the payment by the Trustee of any taxes or assessments or premiums of
insurance or other payments which the Trustee should make or to require
payments to be made, it being hereby agreed and declared that as to all matters
and things in this subsection, the duty and responsibility will rest upon the
Issuers and not upon the Trustee and the failure of the Trustee to discharge
this duty and responsibility will not in any way

 

102

 

render the Trustee liable or cast upon it any
duty or responsibility for breach of which it would be liable;

 

(h)  the Trustee may in the exercise of all or any
of the trusts, powers and discretions vested in it hereunder act by its
officers; the Trustee may delegate to any Person the performance of any of the
trusts and powers vested in it by this Indenture or the other Financing
Documents subject to the limitation set forth in Section 11.08, and
any delegation may be made upon such terms and conditions as the Trustee may
think to be in the interest of the holders of Notes and the Trustee shall have
no responsibility for the actions of any such delegate; and

 

(i)  the regularity and validity of all acts,
consents, requests and directions of the Issuers will, for the protection of
the Trustee, be deemed conclusively proved by a certificate duly executed by an
officer of the Issuers; the Trustee will not be responsible for any error made
or act done by it resulting from reliance upon the signature of any officer of
the Issuers or of any Person on whose signature the Trustee may be called upon
to act or refrain from acting under this Indenture.

 

Section
11.14  Service Providers.  A majority of the Noteholders shall designate
a servicer, initially the Servicer designated herein, to service the
obligations of the Issuers with respect to the Notes, the Financing Documents
and the Property, as may be generally described herein, with such powers as are
specifically delegated to the Servicer herein and as designated by a majority
of the Noteholders, whether pursuant to this Indenture, a servicing agreement
or otherwise, together with such other powers as are reasonably incidental
thereto.  Issuers shall be responsible
for the payment of such Servicer’s fees and expenses for servicing, master
servicing or subservicing, including, without limitation, any fee or expense
for any special servicing and any fees and expenses of such servicer,
including, without limitation, in connection with a release of the Property,
satisfaction of any Financing Document, assumption of the Notes, modification
of the Notes made at Issuers’ request, any requests by Issuers for waivers or
consents, protective advances, and the enforcement of the Financing Documents.  Issuers shall have the right to rely on any
notices given by the Servicer with the same force and effect as if Trustee had
given such notices.

 

ARTICLE 12 – SUPPLEMENTAL INDENTURES

 

Section
12.01  Supplemental Trust Indentures.  Supplemental Trust Indentures may be issued,
from time to time, to evidence those matters agreed between the Issuers and the
Trustee, and supplemental Trust Indentures may be issued, to document and
evidence such matters from time to time. 
The execution of a supplemental Trust Indenture by the Trustee shall be
evidence that such supplemental Trust Indenture documents the amendment,
modification or other agreement, permitted by the terms of this Indenture.

 

Section
12.02  Further Assurances.  From time to time the Trustee and the Issuers
shall, when so directed by this Indenture, execute, acknowledge and deliver, by
their proper officers, deeds or instruments supplemental to this Indenture,
which

 

103

 

thereafter shall form part of this Indenture,
or any other deeds or instruments, or do and perform any other acts and things
for any one or more of the purposes of hypothecating, mortgaging, pledging,
ceding, transferring or assuring to or confirming or vesting in the Trustee, or
charging in favor of the Trustee, any Property now owned or hereafter acquired
by the Issuers; adding to the limitations or restrictions specified in the
terms, provisions and conditions of this Indenture further limitations or
restrictions, thereafter to be observed, with respect to dealing with the
Property or the release of Property from the charges and security interest
created hereby; and adding to the terms, provisions and conditions contained in
this Indenture for the protection of the Noteholders or providing for Events of
Default in addition to those herein specified. 
It is also specifically acknowledged and agreed that such further
agreements, and further assurances as provided therein, as shall be agreed from
time to time between the Trustee and the Issuers, and set out in a Note or
other Financing Documents, shall specifically be permitted to be entered into
and agreed, and notwithstanding any such changes, additions, or deletions,
shall form Notes and other Financing Documents issued under the terms of this Indenture
if so noted.

 

Section
12.03  Amendment or Modification.  No modification or amendment to the terms of
this Indenture, whether by supplemental deeds or indentures or otherwise, shall
be effective unless and until sanctioned by a Noteholders’ Approval.  Issuers acknowledge and agree that the terms
and provisions of this Indenture and the other Financing Documents may be
amended or otherwise modified pursuant to and in accordance with the terms and
provisions of the Securitization Cooperation Agreement.

 

ARTICLE 13 – NOTEHOLDER MEETINGS AND APPROVALS

 

Section
13.01  Conduct of Meetings.  Meetings of the Holders of the Notes shall be
convened, held and conducted in the manner following:

 

(a)  Calling of Meetings.  At any time and from time to time the Trustee
or any Noteholder, at the expense of the Issuers, may call a meeting of
Noteholders in New York City, New York or at such other place as the Trustee
may in any case determine or approve.

 

(b)  Notice of Meetings.  Unless the Noteholders waive such notice, at
least five (5) clear days’ previous notice of such meeting shall be given to
the Noteholders and such notice shall state the time when, and the place where,
said meeting is to be held and shall specify in general terms the nature of the
business to be transacted thereat, but it shall not be necessary to specify in
the notice the text of the resolutions to be passed.

 

(c)  Ouorum.  At any meeting of the Noteholders, subject as
herein provided, a quorum shall consist of two or more Persons present in
person holding either personally or as proxies for Holders not less than thirty
percent (30%) of principal amount of the Notes. 
In the event of a quorum not being present on the date for which the
meeting is called within thirty (30) minutes after the time fixed for the
holding of such meeting, the meeting shall be adjourned to be held at a place
and upon a date and at

 

104

 

an hour to be fixed by the Trustee who shall
give not less than five (5) days’ notice of the date and time to which such
meeting is adjourned and of the place where such adjourned meeting is to be
held and at such adjourned meeting a quorum shall consist of the Noteholders
then and there represented in person or by proxy and voting.

 

(d)  Chairman.  The Noteholders and proxies for Noteholders
present shall choose one of their number to be Chairman.

 

(e)  Voting.  Every question submitted to a meeting, except
an Extraordinary Resolution, shall be decided in the first place by a majority
of the votes given on a show of hands and shall be binding on all
Noteholders.  A poll shall be taken on
every Extraordinary Resolution.  On a
poll each Noteholder shall have one vote for every One Thousand Dollars
($1,000.00) principal amount of Notes of which such Noteholder shall then be
the holder according to the Register. 
Votes may be given in person or by proxy and a proxy need not be a
Noteholder.

 

(f)  Regulations.  The Trustee may make and from time to time
vary such regulations as it shall think fit providing for and governing the
conduct at meetings of Noteholders.

 

Section
13.02  Extraordinary Resolution.  A resolution, adopted under this
Section 13.02 shall be binding upon all the Noteholders and the Trustee
shall be bound to give effect thereto accordingly.  Save as herein expressly otherwise provided,
no action shall be taken at a meeting of the Noteholders which changes any
provision of this Indenture or changes or prejudices the exercise of any right
of any Noteholder except by Extraordinary Resolution.  In addition to the powers conferred upon them
by any other provisions of this Indenture or by law, the Holders holding the
Notes shall have the following powers exercisable from time to time as a
Noteholders’ Approval exercisable by Extraordinary Resolution:

 

(a)  power to sanction any modification,
abrogation, alteration, compromise or arrangement of the rights of the
Noteholders and/or the Trustee against the Issuers, or against the Property,
whether such rights arise under this Indenture or the Notes or, with respect to
the rights of the Trustee only, otherwise;

 

(b)  power to assent to any modification of or
change in or addition to or omission from the provisions contained in this
Indenture or in any Note which shall be agreed to by the Issuers and to
authorize the Trustee to concur in and execute any indenture supplemental
hereto embodying any such modification, change, addition or omission;

 

(c)  power to direct or authorize the Trustee to
exercise any power, right, remedy or authority given to it by this Indenture in
any manner specified in any such Noteholders’ Approval or to refrain from
exercising any such power, right, remedy or authority;

 

(d)  power to waive and direct the Trustee
accelerating payment or commencing realization to waive any Event of Default
hereunder and/or cancel any

 

105

 

declaration made by the Trustee pursuant to Section 9.02,
either unconditionally or upon any condition specified in such Noteholders’
Approval;

 

(e)  power to assent to any compromise or
arrangement with any creditor or creditors or any class or classes of
creditors, whether secured or otherwise, and with holders of any shares or
other securities of the Issuers;

 

(f)  power to remove the Trustee from office and
to appoint a new Trustee or Trustees; and

 

(g)  power to amend, alter or repeal any
Noteholders’ Approval previously passed or sanctioned by the Noteholders.

 

Section
13.03  Signed Instruments.  Any resolution or instrument signed in one or
more counterparts by the Holders of sixty-six and two-thirds percent (66-2/3%)
of the aggregate principal amount of the Notes then outstanding shall have the
same force and effect as an Extraordinary Resolution duly passed at a meeting
of the Noteholders.

 

Section
13.04  Binding Effect of Resolutions.  Every resolution passed in accordance with
this Indenture at a meeting of the Holders shall be binding upon all Holders of
Notes whether present or absent from such meeting, and every document in
writing signed by the Holders shall be binding upon all Holders of Notes
whether signatories thereto or not, and each and every Holder of Notes shall be
bound by the effect of every such resolution and document in writing.

 

ARTICLE 14 – MISCELLANEOUS

 

Section
14.01  Survival.  This Indenture and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto shall survive the issuance of the Notes, and shall continue in
full force and effect so long as all or any of the Debt is outstanding and
unpaid unless a longer period is expressly set forth herein or in the other
Financing Documents.  Whenever in this
Indenture any of the parties hereto is referred to, such reference shall be deemed
to include the legal representatives, successors and assigns of such
party.  All covenants, promises and
agreements in this Indenture, by or on behalf of Issuers, shall inure to the
benefit of the legal representatives, successors and assigns of Trustee.

 

Section
14.02  Trustee’s Discretion.  Whenever pursuant to this Indenture,
exercises any right given to it to approve or disapprove, or any arrangement or
term is to be satisfactory to Trustee, the decision of Trustee to approve or
disapprove or to decide whether arrangements or terms are satisfactory or not
satisfactory shall (except as is otherwise specifically herein provided) be in
the sole discretion of Trustee and shall be final and conclusive.  Whenever this Indenture expressly provides
that Trustee may not withhold its consent or its approval of an arrangement or
term, such provisions shall also be deemed to prohibit Trustee from delaying or
conditioning such consent or approval.

 

106

 

Section
14.03  Notices.  All notices, consents, approvals and requests
required or permitted hereunder or under any other Financing Document shall be
given in writing and shall be effective for all purposes if hand delivered or
sent by (a) certified or registered United States mail, postage prepaid,
return receipt requested or (b) expedited prepaid delivery service, either
commercial or United States Postal Service, with proof of attempted
delivery, and by telecopier (with answer back acknowledged), addressed as
follows (or at such other address and Person as shall be designated from time
to time by any party hereto, as the case may be, in a notice to the other
parties hereto in the manner provided for in this Section 14.03):

 

 

	
  If to
  Trustee:

  	
   

  	
  LaSalle Bank
  National Association

  135 South LaSalle Street, Suite 1625

  Chicago, Illinois 60603

  Attention: Global Securitization Trust Services Group

  Palmilla Los Cabos Notes due January 9, 2007

  Facsimile No. (312) 904-2084

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy
  to:

  	
   

  	
  Column
  Financial, Inc.

  11 Madison Avenue

  New York, New York 10010

  Attention: Edmund Taylor

  Facsimile No. (212) 325-8106

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy
  to:

  	
   

  	
  Column
  Financial, Inc.

  One Madison Avenue

  New York, New York 10019

  Legal and Compliance Department

  Attention: Casey McCutcheon, Esq.

  Facsimile No. (212) 326-8282

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy
  to:

  	
   

  	
  Cadwalader,
  Wickersham & Taft LLP

  100 Maiden Lane

  New York, New York 10038

  Attention: William P. McInerney, Esq.

  Facsimile No. (212) 504-6666

  
	
   

  	
   

  	
   

  
	
  If to
  Issuers:

  	
   

  	
  c/o Kerzner
  International North America

  1000 South Pine Island Road

  Plantation, Florida 33324-3906

  Attention: John Allison

  Facsimile No. (954) 809-2346

  

 

107

 

	
   

  	
  with a copy to:

  	
   

  	
  Goldman Sachs Emerging Markets Real Estate Fund

  c/o Goldman Sachs

  85 Broad Street

  New York, New York 10004

  Attention: Peter Weidman

  Facsimile No. (212) 357-5505

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy
  to:

  	
   

  	
  Cravath,
  Swaine & Moore LLP

  825 Eighth Avenue

  New York, New York 10019-7475

  Attention: Kevin J. Grehan, Esq.

  Facsimile No. (212) 474-3700

  

 

A notice shall be deemed to have been given:
in the case of hand delivery, at the time of delivery; in the case of
registered or certified mail, when delivered or the first attempted delivery on
a Business Day; or in the case of expedited prepaid delivery and telecopy, upon
the first attempted delivery on a Business Day; or in the case of telecopy,
upon sender’s receipt of a machine-generated confirmation of successful
transmission after advice by telephone to recipient that a telecopy notice is
forthcoming.

 

Section
14.04  Governing Law.  (A)  THIS INDENTURE WAS NEGOTIATED IN THE STATE OF
NEW YORK, THE NOTES WERE ISSUED BY ISSUERS AND ACCEPTED BY TRUSTEE IN THE STATE
OF NEW YORK, AND THE PROCEEDS OF THE NOTES DELIVERED PURSUANT HERETO WERE
DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL
RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY,
AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS INDENTURE,
THE NOTES AND THE OTHER FINANCING DOCUMENTS AND THE OBLIGATIONS ARISING
HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS) AND
ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES
THE PROVISIONS FOR THE CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS AND
SECURITY INTERESTS CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER FINANCING
DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE
OR COUNTRY IN WHICH THE PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE
FULLEST EXTENT PERMITTED BY THE LAW OF SUCH COUNTRY, THE LAW OF THE STATE OF
NEW YORK SHALL GOVERN THE CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL
FINANCING DOCUMENTS AND ALL OF THE OBLIGATIONS ARISING HEREUNDER OR
THEREUNDER.  TO THE FULLEST EXTENT
PERMITTED BY LAW, EACH

 

108

 

OF THE PARTIES HERETO HEREBY UNCONDITIONALLY
AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER
JURISDICTION GOVERNS THIS INDENTURE, THE NOTE AND THE OTHER FINANCING
DOCUMENTS, AND THIS INDENTURE, THE NOTE AND THE OTHER FINANCING DOCUMENTS SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

 

(B)  ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST
TRUSTEE OR ISSUERS ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE OTHER
FINANCING DOCUMENTS MAY BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY
OF NEW YORK, COUNTY OF NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK
GENERAL OBLIGATIONS LAW AND EACH OF THE PARTIES HERETO WAIVES ANY OBJECTIONS
WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS
OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND EACH ISSUER HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR
PROCEEDING.  EACH ISSUER DOES HEREBY
DESIGNATE AND APPOINT, WITH DOMICILE AT:

 

	
   

  	
  CT
  CORPORATION

  
	
   

  	
  111
  EIGHTH AVENUE

  
	
   

  	
  NEW YORK, NEW YORK 10011

  

 

AS ITS AUTHORIZED AGENT TO ACCEPT AND
ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN
ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK,
NEW YORK, AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS
AND NOTICE OF SAID SERVICE MAILED OR DELIVERED TO ISSUERS IN THE MANNER
PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS
UPON ISSUERS IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW
YORK.  ISSUERS (I) SHALL GIVE PROMPT
NOTICE TO TRUSTEE OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER,
(II) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED
AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE AGENT AND OFFICE
SHALL BE DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND
(III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES
TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A
SUCCESSOR.

 

Section
14.05  Modification, Waiver in
Writing.  No
modification, amendment, extension, discharge, termination or waiver of any
provision of this

 

109

 

Indenture, or of the Note, or of any other
Financing Document, nor consent to any departure by Issuers therefrom, shall in
any event be effective unless the same shall be in a writing signed by the
party against whom enforcement is sought, and then such waiver or consent shall
be effective only in the specific instance, and for the purpose, for which
given.  Except as otherwise expressly
provided herein, no notice to, or demand on Issuers, shall entitle Issuers to
any other or future notice or demand in the same, similar or other
circumstances.

 

Section
14.06  Delay Not a Waiver.  Neither any failure nor any delay on the part
of Trustee in insisting upon strict performance of any term, condition,
covenant or agreement, or exercising any right, power, remedy or privilege
hereunder, or under the Note or under any other Financing Document, or any
other instrument given as security therefor, shall operate as or constitute a
waiver thereof, nor shall a single or partial exercise thereof preclude any
other future exercise, or the exercise of any other right, power, remedy or
privilege.  In particular, and not by way
of limitation, by accepting payment after the due date of any amount payable
under this Indenture, the Note or any other Financing Document, Trustee shall
not be deemed to have waived any right either to require prompt payment when
due of all other amounts due under this Indenture, the Note or the other
Financing Documents, or to declare a default for failure to effect prompt payment
of any such other amount.

 

Section
14.07  Trial by Jury.  EACH ISSUER
AND TRUSTEE HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF
RIGHT BY JURY, AND WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT
ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE FINANCING
DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION
THEREWITH.  THIS WAIVER OF RIGHT TO TRIAL
BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY EACH ISSUER AND TRUSTEE, AND IS
INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE
RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.  EACH ISSUER AND TRUSTEE ARE HEREBY AUTHORIZED
TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF
THIS WAIVER BY EACH ISSUER AND TRUSTEE.

 

Section
14.08  Headings.  The Article and/or Section headings and
the Table of Contents in this Indenture are included herein for convenience of
reference only and shall not constitute a part of this Indenture for any other
purpose.

 

Section
14.09  Severability.  Wherever possible, each provision of this
Indenture shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Indenture shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Indenture.

 

110

 

Section
14.10  Preferences.  Trustee shall have the continuing and
exclusive right to apply or reverse and reapply any and all payments by Issuers
to any portion of the obligations of Issuers hereunder or under the other
Financing Documents.  To the extent
Issuers makes a payment or payments to Trustee, which payment or proceeds or
any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, receiver or any
other party under any bankruptcy law, state or federal law, common law or
equitable cause, then, to the extent of such payment or proceeds received, the
obligations hereunder or part thereof intended to be satisfied shall be revived
and continue in full force and effect, as if such payment or proceeds had not
been received by Trustee.

 

Section
14.11  Waiver of Notice.  Each Issuer hereby expressly waives, and
shall not be entitled to, any notices of any nature whatsoever from Trustee
except with respect to matters for which this Indenture or the other Financing
Documents specifically and expressly provide for the giving of notice by
Trustee to Issuers and except with respect to matters for which such Issuer is
not, pursuant to applicable Legal Requirements, permitted to waive the giving of
notice.

 

Section
14.12  Expenses; Indemnity.  (a) 
Issuers covenant and agree to pay or, if Issuers fail to pay, to
reimburse, Trustee upon receipt of notice from Trustee for all reasonable
out-of-pocket costs and expenses (including reasonable attorneys’ fees and
disbursements) incurred by Trustee in connection with (i) the preparation,
negotiation, execution and delivery of this Indenture, the other Financing
Documents and the consummation of the transactions contemplated hereby and
thereby and all the costs of furnishing all opinions by counsel for Issuers
(including without limitation any opinions requested by Trustee as to any legal
matters arising under this Indenture and the other Financing Documents with
respect to the Property); (ii) except as otherwise provided in this Indenture,
Issuers’ ongoing performance of and compliance with Issuers’ respective
agreements and covenants contained in this Indenture and the other Financing
Documents on its part to be performed or complied with after the Closing Date,
including, without limitation, confirming compliance with environmental and
insurance requirements; (iii) the negotiation, preparation, execution, delivery
and administration of any consents, amendments, waivers or other modifications
to this Indenture, the other Financing Documents and any other documents or
matters requested by Trustee; (iv) securing Issuers’ compliance with any
requests made pursuant to the provisions of this Indenture; (v) the filing and
recording fees and expenses, title insurance and reasonable fees and expenses
of counsel for providing to Trustee all required legal opinions, and other
similar expenses incurred in creating and perfecting the Liens in favor of
Trustee pursuant to this Indenture and the other Financing Documents; (vi)
enforcing or preserving any rights, either in response to third party claims or
in prosecuting or defending any action or proceeding or other litigation, in
each case against, under or affecting Issuers, this Indenture, the other
Financing Documents, the Property, or any other security given for the Debt;
and (vii) enforcing any obligations of or collecting any payments due from
Issuers under this Indenture, the other Financing Documents or with respect to
the Property or in connection with any refinancing or restructuring of the
credit arrangements provided under this Indenture in the nature of a “work-out”
or of any insolvency or bankruptcy proceedings; provided, however,
that Issuers shall not be liable for the

 

111

 

payment of any such costs and expenses to the
extent the same arise by reason of the gross negligence, illegal acts, fraud or
willful misconduct of Trustee.  Any cost
and expenses due and payable to Trustee may be paid from any amounts in the
Cash Management Account.

 

(b)  Issuers shall indemnify, defend and hold
harmless Trustee from and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature whatsoever (including, without
limitation, the reasonable fees and disbursements of counsel for Trustee in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not Trustee shall be designated a party
thereto), that may be imposed on, incurred by, or asserted against Trustee in
any manner relating to or arising out of (i) any breach by Issuers of their
obligations under, or any material misrepresentation by Issuers contained in,
this Indenture or the other Financing Documents, or (ii) the use or intended
use of the proceeds of the Notes (collectively, the “Indemnified Liabilities”); provided, however,
that Issuers shall not have any obligation to Trustee hereunder to the extent
that such Indemnified Liabilities arise from the gross negligence, illegal
acts, fraud or willful misconduct of Trustee. 
To the extent that the undertaking to indemnify, defend and hold
harmless set forth in the preceding sentence may be unenforceable because it
violates any law or public policy, Issuers shall pay the maximum portion that
they are permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by Trustee.

 

(c)  Issuers covenant and agree to pay for or, if
Issuers fail to pay, to reimburse Trustee for, any fees and expenses incurred
by any Rating Agency in connection with any Rating Agency review of the
Financing Documents or any transaction contemplated thereby or any consent,
approval, waiver or confirmation obtained from such Rating Agency pursuant to
the terms and conditions of this Indenture or any other Financing Document and
the Trustee shall be entitled to require payment of such fees and expenses as a
condition precedent to the obtaining of any such consent, approval, waiver or
confirmation.

 

Section
14.13  Offsets, Counterclaims and
Defenses. 
Any assignee of Trustee’s interest in and to this Indenture, the Note
and the other Financing Documents shall take the same free and clear of all offsets,
counterclaims or defenses which are unrelated to such documents which Issuers
may otherwise have against any assignor of such documents, and no such
unrelated counterclaim or defense shall be interposed or asserted by Issuers in
any action or proceeding brought by any such assignee upon such documents and
any such right to interpose or assert any such unrelated offset, counterclaim
or defense in any such action or proceeding is hereby expressly waived by
Issuers.

 

Section
14.14  No Joint Venture or
Partnership; No Third Party Beneficiaries.  (a) 
Issuers and Trustee intend that the relationships created hereunder and
under the other Financing Documents be solely that of borrower and lender.  Nothing herein or therein is intended to
create a joint venture, partnership, tenancy-in-common, or

 

112

 

joint tenancy relationship between Issuers
and Trustee nor to grant Trustee any interest in the Property other than that
of mortgagee, beneficiary, lender, collateral agent, or trustee.

 

(b)  This Indenture and the other Financing
Documents are solely for the benefit of Trustee and Issuers and nothing
contained in this Indenture or the other Financing Documents shall be deemed to
confer upon anyone other than Trustee and Issuers any right to insist upon or
to enforce the performance or observance of any of the obligations contained
herein or therein.  All conditions to the
obligations of the Initial Noteholder to acquire the Notes are imposed solely
and exclusively for the benefit of Trustee and no other Person shall have
standing to require satisfaction of such conditions in accordance with their
terms or be entitled to assume that the Initial Noteholder will refuse to
acquire the Notes in the absence of strict compliance with any or all thereof
and no other Person shall under any circumstances be deemed to be a beneficiary
of such conditions, any or all of which may be freely waived in whole or in
part by Trustee if, in Trustee’s sole discretion, Trustee deems it advisable or
desirable to do so.

 

Section
14.15  Publicity.  All news releases, publicity or advertising
by Issuers, Trustee, Initial Purchaser or their respective Affiliates through
any media intended to reach the general public which refers to the Financing
Documents or the transactions evidenced by the Financing Documents, to any
Issuer, Trustee, Initial Purchaser, Initial Noteholder, or any of their
respective Affiliates shall be subject to, (i) in case of release, publicity or
advertising by any Issuer or any of its Affiliates, the prior approval of
Trustee (after a Securitization), Initial Purchaser or Initial Noteholder
(prior to a Securitization), (ii) in case of release, publicity or advertising
by Trustee or any of its Affiliates, the prior approval of Issuers, Initial
Purchaser and Initial Noteholder, (iii) in case of release, publicity or
advertising by Initial Purchaser, Initial Noteholder or any of its Affiliates,
the prior approval of Issuers (except in connection with a Securitization, in
which case approval of Issuers shall not be required).  In addition, neither any Issuer, Trustee,
Initial Purchaser, Initial Noteholder nor any of their respective Affiliates
shall be prohibited from disclosing to any Person any information to the extent
reasonably necessary or desirable to comply with applicable law (including,
without limitation, applicable federal or state securities laws) or any
required filings with any Governmental Authority or regulatory agency or with
the New York Stock Exchange or any other nationally or globally recognized
securities exchange.

 

Section
14.16  Waiver of Marshalling of
Assets.  To
the fullest extent permitted by law, each Issuer, for itself and its successors
and assigns, waives all rights to a marshalling of the assets of Issuers,
Issuers’ partners and others with interests in Issuers, and of the Property, or
to a sale in inverse order of alienation in the event Security Trust First
Beneficiary conveys, sells or otherwise transfers Security Trust Second
Beneficiary’s interest under the security trust formed pursuant to the Security
Trust Agreement, and agrees not to assert any right under any laws pertaining
to the marshalling of assets, the sale in inverse order of alienation,
homestead exemption, the administration of estates of decedents, or any other
matters whatsoever to defeat, reduce or affect the right of Trustee under the
Financing Documents to a sale of the Property for the collection of the Debt
without any prior or different resort for collection or of the

 

113

 

right of Trustee to the payment of the Debt
out of the net proceeds of the Property in preference to every other claimant
whatsoever.

 

Section
14.17  Waiver of Counterclaim.  Each Issuer hereby waives the right to assert
a counterclaim, other than a compulsory counterclaim, in any action or
proceeding brought against it by Trustee or its agents.

 

Section
14.18  Conflict; Construction of
Documents; Reliance.  In the event of any conflict between the
provisions of this Indenture and any of the other Financing Documents, the
provisions of this Indenture shall control. 
The parties hereto acknowledge that they were represented by competent
counsel in connection with the negotiation, drafting and execution of the Financing
Documents and that such Financing Documents shall not be subject to the
principle of construing their meaning against the party which drafted
same.  Issuers acknowledge that, with
respect to the issuance of the Notes, Issuers shall rely solely on their own
judgment and advisors in issuing the Notes without relying in any manner on any
statements, representations or recommendations of Trustee or any parent,
subsidiary or Affiliate of Trustee. 
Trustee shall not be subject to any limitation whatsoever in the
exercise of any rights or remedies available to it under any of the Financing
Documents or any other agreements or instruments relating to the transactions
contemplated thereunder by virtue of the ownership by it or any parent,
subsidiary or Affiliate of Trustee of any equity interest any of them may
acquire in Issuers, and Issuers hereby irrevocably waive the right to raise any
defense or take any action on the basis of the foregoing with respect to
Trustee’s exercise of any such rights or remedies.  Issuers acknowledges that Trustee, Initial
Noteholder or their Affiliates engage in the business of real estate financings
and other real estate transactions and investments which may be viewed as
adverse to or competitive with the business of Issuers or their Affiliates.

 

Section
14.19  Brokers and Financial Advisors.  Issuers and Trustee hereby represent that in
connection with the issuance of the Notes they have dealt with no financial
advisors, brokers, underwriters, placement agents, agents or finders (other
than Initial Purchaser or its Affiliates). 
Issuers and Trustee hereby agree to indemnify, defend and hold the other
party harmless from and against any and all claims, liabilities, costs and
expenses of any kind (including attorneys’ fees and expenses) in any way
relating to or arising from a claim by any Person (other than Initial Purchaser
or its Affiliates) that such Person acted on behalf of Issuers or Trustee in
connection with the transactions contemplated herein.  The provisions of this Section 14.19
shall survive the expiration and termination of this Indenture and the payment
of the Debt.

 

Section
14.20  Prior Agreements.  This Indenture and the other Financing
Documents contain the entire agreement of the parties hereto and thereto in respect
of the transactions contemplated hereby and thereby, and all prior agreements
among or between such parties, whether oral or written, including, without
limitation, the Term Sheet dated on or about October 7, 2004 (as amended)
between Kerzner International Limited and Column Financial Inc. are superseded
by the terms of this Indenture and the other Financing Documents.

 

114

 

Section
14.21  Duplicate Originals,
Counterparts. 
This Indenture may be executed in any number of duplicate originals and
each duplicate original shall be deemed to be an original.  This Indenture may be executed in several
counterparts, each of which counterparts shall be deemed an original instrument
and all of which together shall constitute a single Indenture.  The failure of any party hereto to execute
this Indenture, or any counterpart hereof, shall not relieve the other
signatories from their obligations hereunder.

 

Section
14.22  Joint and Several Liability.  The parties hereto acknowledge that the
defined term “Issuers” has been
defined to collectively include each Issuer. 
It is the intent of the parties hereto in determining whether (a) a
breach of a representation or a covenant has occurred, (b) there has occurred a
Default or Event of Default, or (c) an event has occurred which would create
recourse obligations under Section 9.03 of this Indenture, that any
such breach, occurrence or event with respect to any Issuer shall be deemed to
be such a breach, occurrence or event with respect to all Issuers and that all
Issuers need not have been involved with such breach, occurrence or event in
order for the same to be deemed such a breach, occurrence or event with respect
to every Issuer.  The obligations and
liabilities of each Issuer shall be joint and several.

 

ARTICLE 15 – EXECUTION

 

Section
15.01  Effective Upon Execution.  Upon the execution hereof by the parties
hereto, this Indenture shall be binding on the Issuers, in favor of the Trustee
and the Holders, and shall enure to the benefit of the Trustee and the Holders,
from time to time.

 

115

 

IN WITNESS WHEREOF
the parties hereto have executed this Indenture under the hands of their proper
officers duly authorized in that behalf.

 

	
   

  	
  ISSUERS:

  
	
   

  	
   

  
	
   

  	
  KERZNER
  PALMILLA BEACH

  PARTNERS, S. de R.L. de C.V.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ John R. Allison

  	
   

  
	
   

  	
   

  	
  Name: John R. Allison

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  KERZNER PALMILLA HOTEL

  PARTNERS, S. de R.L. de C.V.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ John R. Allison

  	
   

  
	
   

  	
   

  	
  Name: John R. Allison

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  KERZNER SERVICIOS HOTELEROS,

  S. de R.L. de C.V.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ John R. Allison

  	
   

  
	
   

  	
   

  	
  Name: John R. Allison

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  KERZNER COMPANIA de

  SERVICIOS, S. de R.L. de C.V.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ John R. Allison

  	
   

  
	
   

  	
   

  	
  Name: John R. Allison

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  KERZNER PALMILLA GOLF

  PARTNERS, S. de R.L. de C.V.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ John R. Allison

  	
   

  
	
   

  	
   

  	
  Name: John R. Allison

  
	
   

  	
   

  	
  Title: Vice President

  

 

116

 

	
   

  	
  TRUSTEE:

  
	
   

  	
   

  	
   

  
	
   

  	
  LASALLE
  BANK NATIONAL

  ASSOCIATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Alyssa C. Stahl

  	
   

  
	
   

  	
   

  	
  Name: Alyssa C. Stahl

  
	
   

  	
   

  	
  Title: FVP

  

 

117

 

EXHIBIT A

 

Form of Note

 

 

THIS NOTE MAY
BE ASSIGNED OR OTHERWISE TRANSFERRED BY THE INITIAL PURCHASER THEREOF AND
THEREAFTER BY ANY HOLDER THEREOF, PROVIDED THAT SUCH ASSIGNMENT OR OTHER
TRANSFER IN THE UNITED STATES OF AMERICA IS EFFECTED PURSUANT TO AN EXEMPTION
FROM ANY APPLICABLE FEDERAL AND STATE SECURITIES LAWS IN THE UNITED STATES OF
AMERICA, WHICH MAY BE THE EXEMPTIONS PROVIDED BY RULE 144A UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), REGULATION D
UNDER THE SECURITIES ACT, REGULATION S UNDER THE SECURITIES ACT OR ANY OTHER
EXEMPTION FROM REGISTRATION AVAILABLE UNDER ANY SUCH APPLICABLE REGISTRATION
REQUIREMENT.

 

PROMISSORY NOTE

 

	
  $

  	
   

  	
  New York, New York

  
	
   

  	
   

  	
  December      , 2004

  

 

FOR VALUE RECEIVED
KERZNER PALMILLA BEACH PARTNERS, S. de R.L. de C.V., KERZNER PALMILLA HOTEL
PARTNERS, S. de R.L. de C.V., KERZNER SERVICIOS HOTELEROS, S. de R.L. de C.V.,
KERZNER COMPANIA DE SERVICIOS, S. de R.L. de C.V. and KERZNER PALMILLA GOLF
PARTNERS, S. de R.L. de C.V., each a limited liability company with variable
capital (sociedad de responsabilidad limitada de capital
variable), duly organized and validly existing under the laws of the
United Mexican States and each having an address at Palmilla Resort & Golf
Club Apartado Postal 52, 33400 San Jose Del Cabo, BCS, Mexico
(collectively the “Issuers”),
hereby unconditionally jointly and severally promise to pay to the order of
CREDIT SUISSE FIRST BOSTON LLC, a Delaware limited liability company, as a
holder of this Note, having an address at 11 Madison Avenue, New York, New York
10010 (together with its successors and assigns, collectively, “Noteholder”), or at such other place as the holder hereof
may from time to time designate in writing, the principal sum of                     
Million and No/100 Dollars ($                        ),
in lawful money of the United States of America with interest thereon to
be computed from the date of this Note at the Applicable Interest Rate, and to
be paid in accordance with the terms of this Note and that certain Note
Indenture, dated as of December 17, 2004, between Issuers and LaSalle Bank
National Association (the “Trustee”) (as
the same may be amended, restated, replaced, supplemented or otherwise modified
from time to time, the “Indenture”).
All capitalized terms not defined herein shall have the respective meanings set
forth in the Indenture.

 

 

ARTICLE 1: 
TERMS AND DEFINITIONS

 

For purposes of this Note, unless there is
something in the subject matter or content inconsistent therewith, the
following terms shall have the following meanings:

 

“Applicable Interest Rate”
shall mean the rate or rates at which the outstanding principal amount of the
Note bears interest from time to time in accordance with the provisions of Section 2.1(c)
hereof.

 

“Breakage Costs”
shall have the meaning set forth in Section 2.1(c)(viii) hereof.

 

“Cash Management Account”
shall have the meaning set forth in Section 2.4(b) hereof.

 

“Default Rate”
shall mean a rate per annum (adjusted monthly on each Determination Date) equal
to the lesser of (a) the Maximum Legal Rate and (b) two percent (2%) above the
Applicable Interest Rate.

 

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

 

“Extended Maturity Date”
shall have the meaning set forth in Section 2.5(a) hereof.

 

“Extension Option”
shall have the meaning set forth in Section 2.5(a) hereof.

 

“Initial Maturity Date”
shall mean January 9, 2007.

 

“Interest Period”
shall mean, with respect to any Payment Date, the period commencing on the
ninth (9th) day of the preceding calendar month and terminating on
the eighth (8th) day of the calendar month in which such Payment
Date occurs; provided, however, that no Interest Period shall end
later than the Maturity Date (other than for purposes of calculating interest
at the Default Rate), and the initial Interest Period shall begin on the Note
Issuance Date and shall end on the eighth (8th) day of the same
calendar month in which the Note Issuance Date occurs (in the event the Note
Issuance Date shall occur during the first eight (8) days of such calendar
month) or the eighth (8th) day of the calendar month immediately
following the calendar month in which the Note Issuance Date occurs (in the
event the Note Issuance Date shall occur on or after the ninth (9th)
day of the calendar month in which the Note Issuance Date occurs).

 

“Interest Rate Cap
Agreement” shall mean, as applicable, an Interest Rate Cap Agreement
(together with the confirmation and schedules relating thereto) in form and
substance reasonably satisfactory to Trustee between Issuers and an Acceptable
Counterparty or a Replacement Interest Rate Cap Agreement.

 

2

 

“Libor” shall
mean, with respect to each Interest Period, the rate (expressed as a percentage
per annum and rounded upward, if necessary, to the next nearest 1/8 of 1%) for
deposits in U.S. dollars, for a one-month period, that appears on Telerate Page
3750 (or the successor thereto) as of 11:00 a.m., London time, on the related
Determination Date. If such rate does not appear on Telerate Page 3750 as of
11:00 a.m., London time, on such Determination Date, LIBOR shall be the
arithmetic mean of the offered rates (expressed as a percentage per annum) for
deposits in U.S. dollars for a one-month period that appear on the Reuters Screen
Libor Page as of 11:00 a.m., London time, on such Determination Date, if at
least two such offered rates so appear. If fewer than two such offered rates
appear on the Reuters Screen Libor Page as of 11:00 a.m., London time, on such
Determination Date, Trustee shall request the principal London office of any
four major reference banks in the London interbank market selected by Trustee
to provide such bank’s offered quotation (expressed as a percentage per annum)
to prime banks in the London interbank market for deposits in U.S. dollars for
a one-month period as of 11:00 a.m., London time, on such Determination Date
for the amounts of not less than U.S. $1,000,000. If at least two such offered
quotations are so provided, LIBOR shall be the arithmetic mean of such
quotations. If fewer than two such quotations are so provided, Trustee shall
request any three major banks in New York City selected by Trustee to provide
such bank’s rate (expressed as a percentage per annum) for loans in U.S. dollars
to leading European banks for a one-month period as of approximately 11:00
a.m., New York City time on the applicable Determination Date for amounts of
not less than U.S. $1,000,000. If at least two such rates are so provided,
LIBOR shall be the arithmetic mean of such rates. LIBOR shall be determined
conclusively by Trustee or its agent.

 

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

 

“Lockbox Account”
shall have the meaning set forth in Section 2.4(a) hereof.

 

“Lockbox Bank”
shall mean any of Banco Nacional de Mexico, S.A., Bancomer, S.A. and Wells
Fargo Bank, N.A.

 

“Lockout Release Date”
shall mean January 9, 2006.

 

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

 

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

 

3

 

“Monthly Debt Service Payment”
shall mean (a) a payment of interest only on the outstanding principal balance
of Note for each Interest Period through the Maturity Date and (b) during the
term of any Extension Option, a payment of principal based on a 25-year
amortization schedule in the amounts set forth on Schedule I hereto; provided,
however, such payment of principal shall be waived and not required to be paid
by Issuers if the Net Operating Income for the Property during the twelve (12)
month period immediately preceding the first day of such Extension Option term
equals or exceeds the following amounts: (i) with respect to the Extension
Option term commencing on January 9, 2007, $7.5 million, (ii) with respect
to the Extension Option term commencing on January 9, 2008, $9.0 million,
and (iii) with respect to the Extension Option term commencing on January 9,
2009, $11.5 million; provided, further, that if the Net Operating Income for
the trailing twelve (12) month period for the Property does not equal or exceed
the applicable required amount on the first day of any Extension Option term,
but thereafter exceeds such amount as of the first day of (1) April and July of
the same calendar year or (2) July and October of the same calendar year, then
principal amortization shall be waived and not required for the remainder of
the applicable Extension Option term.

 

“Non-Excluded Taxes”
shall have the meaning set forth in Section 2.1(c)(v)(A) hereof.

 

“Note A” shall
mean that certain Promissory Note A in the original principal amount of                     
Million and No/100 Dollars ($                      ),
issued as of the Note Issuance Date and made by Issuers, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time as provided herein.

 

“Note B” shall
mean that certain Promissory Note B in the original principal amount of                         
Million and No/100 Dollars ($                        ),
issued as of the Note Issuance Date and made by Issuers, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time as provided herein.

 

“Note Indebtedness”
shall mean the indebtedness of Issuers evidenced by the Notes.

 

“Other Taxes”
shall have the meaning set forth in Section 2.1(c)(v)(C) hereof.

 

“Payment Date”
shall mean the ninth (9th) day of each calendar month during the
term of the Loan or, if such day is not a Business Day, the immediately
preceding Business Day.

 

“Prepayment Premium”
shall mean an amount equal to the following: (i) one and one-half percent
(1.5%) of the outstanding principal balance of the Note being prepaid if the
prepayment occurs on or after the Lockout Release Date through, and including,
July 9, 2006; (ii) one percent (1%) of the outstanding principal balance of the
Note being prepaid if the prepayment occurs after July 9, 2006 through, and
including, December 9, 2006; and (iii) zero if the prepayment occurs after
December 9, 2006.

 

4

 

“Prime Rate”
shall mean the annual rate of interest publicly announced by Citibank, N.A. in
New York, New York, as its base rate, as such rate shall change from time to
time. If Citibank, N.A. ceases to announce a base rate, Prime Rate shall mean
the rate of interest published in The Wall Street Journal from time to
time as the “Prime Rate.” If more than one “Prime Rate” is published in The
Wall Street Journal for a day, the average of such “Prime Rates” shall be
used, and such average shall be rounded up to the nearest one-eighth of one
percent (0.125%). If The Wall Street Journal ceases to publish the “Prime
Rate,” the Lender shall select an equivalent publication that publishes such “Prime
Rate,” and if such “Prime Rates” are no longer generally published or are
limited, regulated or administered by a governmental or quasigovermnental body,
then Lender shall select a comparable interest rate index.

 

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

 

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

 

“Spread” shall
mean three and three-quarters percent (3.75%).

 

“Spread Maintenance Premium”
shall mean, with respect to any prepayment of the Notes prior to the Lockout Release
Date, an amount equal to the product of (a) the principal amount of such
prepayment, (b) the Spread and (c) a fraction, the numerator of which shall
equal the actual number of days from the date of such payment through the
Lockout Release Date and the denominator of which is 360.

 

“Strike Price”
shall mean five percent (5.00%).

 

“Taxes” shall
have the meaning set forth in Section 2.1(c)(v)(A) hereof.

 

ARTICLE 2: 
INTEREST RATE AND PAYMENT TERMS

 

Section 2.1 
Interest Rate.

 

(a)  Interest Generally. Interest on the
outstanding principal balance of this Note shall accrue from the Note Issuance
Date to but excluding the Maturity Date at the Applicable Interest Rate. Issuers
shall pay to Noteholder on each Payment Date the interest accrued on this Note
for the preceding Interest Period.

 

(b)  Interest Calculation. Interest on
the outstanding principal balance of this Note shall be calculated by
multiplying (a) the actual number of days elapsed in the period for which the
calculation is being made by (b) a daily rate based on a three hundred sixty
(360) day year by (c) the outstanding principal balance.

 

5

 

(c)  Determination of Interest Rate. (i)  The Applicable Interest Rate with respect to
this Note shall be: (i) LIBOR plus the Spread with respect to the applicable
Interest Period for a Libor Indebtedness or (ii) the Prime Rate plus the Prime
Rate Spread for a Prime Rate Indebtedness if the Note Indebtedness is converted
to a Prime Rate Indebtedness pursuant to the provisions of Section 2.1(c)(iii)
or (vi).

 

(ii)  Subject
to the terms and conditions of this Section 2.1, the Note
Indebtedness shall be a Libor Indebtedness and Issuers shall pay interest on
the outstanding principal amount of this Note at LIBOR plus the Spread for the
applicable Interest Period. Any change in the rate of interest hereunder due to
a change in the Applicable Interest Rate shall become effective as of the
opening of business on the first day on which such change in the Applicable Interest
Rate shall become effective. Each determination by Trustee of the Applicable
Interest Rate shall be conclusive and binding for all purposes, absent manifest
error.

 

(iii)  In
the event that Trustee shall have determined (which determination shall be conclusive
and binding upon Issuers absent manifest error) that by reason of circumstances
affecting the interbank eurodollar market, adequate and reasonable means do not
exist for ascertaining LIBOR, then Trustee shall forthwith give notice by
telephone of such determination, confirmed in writing, to Issuers at least one
(1) Business Day prior to the last day of the related Interest Period. If such
notice is given, the related outstanding Libor Indebtedness shall be converted,
on the last day of the then current Interest Period, to a Prime Rate
Indebtedness.

 

(iv)  If,
pursuant to the terms of this Note, any portion of the outstanding principal
balance of this Note has been converted to a Prime Rate Indebtedness and
Trustee shall determine (which determination shall be conclusive and binding
upon Issuers absent manifest error) that the event(s) or circumstance(s) which
resulted in such conversion shall no longer be applicable, Trustee shall give
notice by telephone of such determination, confirmed in writing, to Issuers at
least one (1) Business Day prior to the last day of the related Interest Period.
If such notice is given, the related outstanding Prime Rate Indebtedness shall
be converted to a Libor Indebtedness on the last day of the then current
Interest Period.

 

(v)  Taxes;
Non-Excluded Taxes and Other Taxes.

 

(A)                              Any and all payments by
the Issuers, the Guarantor or any other Person under or in respect of this Note
or any other Financing Documents shall be made free and clear of, and without
deduction or withholding for or on account of, any and all present or future
taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities (including penalties, interest and additions to tax) with respect
thereto, whether now or hereafter imposed, levied, collected, withheld or
assessed by any taxation authority or other Governmental Authority
(collectively, “Taxes”). If the Issuers, the
Guarantor and/or any other Person shall be required under any applicable law to
deduct or withhold any Taxes from or in respect

 

6

 

of any sum payable under or in respect of this Note or any of the other
Financing Documents to the Noteholder, (i) the Issuers, the Guarantor and/or
any other such Person, as applicable, shall make all such deductions and
withholdings in respect of Taxes, (ii) the Issuers, the Guarantor and/or any
other such Person, as applicable, shall pay the full amount deducted or
withheld in respect of Taxes to the relevant taxation authority or other Governmental
Authority in accordance with any applicable law, (iii) the sum payable by the
Issuers, the Guarantor and/or any other such Person, as applicable, shall be
increased as may be necessary so that after the Issuers, the Guarantor and/or
any other such Person, as applicable, has made all required deductions and
withholdings (including deductions and withholdings applicable to additional
sums payable under this Section 2.1(c)(v)) the Noteholder receives
an amount equal to the sum it would have received had no such deductions or
withholdings been made in respect of Non-Excluded Taxes, and (iv) the Issuers
shall promptly forward to the Noteholder and the Trustee an original official
receipt or a copy thereof or other documentation issued by such Governmental
Authority or other taxing authority evidencing payment of such Taxes upon
Issuers’ receipt thereof. For purposes of this Note the term “Non-Excluded Taxes” are Taxes other than Taxes that are
imposed on the Noteholder’s overall net income (and branch profits taxes or
franchise taxes imposed in lieu thereof) by the jurisdiction under the laws of
which such Noteholder is organized or in which its principal office is located
or in which such Noteholder’s applicable lending office is located, or any
political subdivision thereof, unless such Taxes are imposed solely as a result
of the Noteholder or the Trustee, on behalf of the Noteholder, having executed,
delivered or performed its obligations or received payments under or enforced,
this Note or any of the other Financing Documents (in which case such Taxes
will be treated as Non-Excluded Taxes).

 

(B)                                If, on the date of the
assignment or participation pursuant to which a Noteholder assignee or
participant becomes subject to this Note, the assigning Noteholder was entitled
to payments under this Section 2.1(c)(v), then, to such extent, the
term “Non-Excluded Taxes” shall include (in addition to Taxes that may be
imposed in the future or other amounts otherwise includable in Taxes) such
Taxes, if any, applicable with respect to such Noteholder assignee or
participant on such date.

 

(C)                                In addition, Issuers
agree to pay to the relevant Governmental Authority or other taxing authority
in accordance with applicable law any current or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies (including,
without limitation, recording taxes and similar fees) that arise from

 

7

 

any payment made under this Note or any other Financing Document, or
from the execution, delivery, registration, or enforcement, of this Note or any
other Financing Document (“Other Taxes”).

 

(D)                               Issuers hereby agree to
indemnify the Noteholder for, and to hold the Noteholder harmless against, the
full amount of Non-Excluded Taxes and Other Taxes, and the full amount of Taxes
of any kind imposed by any jurisdiction on amounts payable under this Section 2.1(c)(v),
imposed on or paid by the Noteholder, and any liability (including penalties,
additions to tax, interest and expenses) arising therefrom or with respect
thereto. The indemnity by Issuers provided for in this Section 2.1(c)(v)
shall apply and be made whether or not the Non-Excluded Taxes or Other Taxes
for which indemnification hereunder is sought have been correctly or legally
asserted. Amounts payable by Issuers under the indemnity set forth in this Section 2.1(c)(v)
shall be paid within 10 days from the date on which Noteholder makes written
demand therefor.

 

(E)                                 Issuers shall (i)
comply at all times with the information requirements imposed by the Mexican Resolución Miscelánea Fiscal or any equivalent
administrative general rules in effect (including, without limitation, in
respect of Article 195 of the Mexican Income Tax Law), (ii) promptly provide to
the Trustee copies of forms, certificates, documents, information,
applications, declarations or returns prescribed by any law, rule or regulation
enacted by Mexico or any political subdivision thereof or taxing authority
therein, that Issuers provided to the tax authorities in compliance with clause (i)
above of this subsection (E).

 

(F)                                 By the acceptance of
this Note, Noteholder agrees to cooperate with all reasonable requests of
Issuers to achieve the lowest rate of withholding on payments of interest under
the Note then imposed by the United Mexican States; provided, however,
that Noteholder will not be required to take any action that would be, in the
reasonable judgment of Noteholder, legally inadvisable or commercially
disadvantageous to Noteholder in any respect, and in no event shall Noteholder
be required to disclose any information that, in the sole judgment of
Noteholder, is confidential.

 

(G)                                Notwithstanding
anything to the contrary contained in this Note or the other Financing
Documents, all Persons may disclose to any and all Persons, without limitations
of any kind, the purported or claimed U.S. federal, state and local income tax
treatment of this Note, any fact that may be relevant to understanding the
purported or claimed U.S. federal, state and local income tax treatment of this
Note, and all materials of any kind (including opinions or other tax

 

8

 

analyses) relating to such U.S. federal, state and local income tax
treatment or fact, other than the name of the parties or any other Person named
herein, or information that would permit identification of the parties or such
other Persons, and any pricing terms or other nonpublic business or financial
information that is unrelated to the purported or claimed federal income tax
treatment of this Note to the taxpayer and is not relevant to understanding the
purported or claimed federal income tax treatment of this Note to the taxpayer.

 

(H)                               If as a result of any
change in or amendment to the laws of Mexico, or any change in an official
written interpretation of such laws, which change is announced after the date
hereof (a “Change in Law”), and the Issuers
have or will be obligated for reasons outside their control to pay additional
amounts pursuant to Section (v)(A) hereof in excess of those attributable
to the Mexican withholding tax imposed at a rate of ten percent (10%) on
payments of interest under any Note, (i) the Issuers shall notify the
Noteholder and the Trustee of any Change in Law (“Notice of a
Change in Law”) and (ii) unless, within sixty (60) days of the
Notice of a Change in Law, a holder of a Note has agreed to treat any such
withholding in excess of 10% as Taxes that are not Non-Excluded Taxes, the
Issuers shall be entitled to redeem such Note on the next Payment Date
following sixty (60) days after such Notice of a Change in Law in whole, but
not in part, without any prepayment premium or penalty, at 100% of its
principal amount, plus accrued and unpaid interest to the date of such redemption
and all other amounts due and unpaid under the Indenture and the other
Financing Documents. Prior to any such redemption by the Issuers the Issuers
shall deliver to Trustee: (A) an Officer’s Certificate stating that the Issuers
are entitled to redeem this Note pursuant to this subsection and (B) an opinion
from counsel acceptable to Trustee that such change in Law occurred and would
impose a withholding in excess of ten percent (10%).

 

(vi)  If
any requirement of law or any change therein or in the interpretation or
application thereof, shall hereafter make it unlawful for the Note Indebtedness
to be maintained as a Libor Indebtedness as contemplated hereunder (i) the
obligation of Trustee or Noteholder hereunder or under the other Financing Documents
to administer, extend, make or maintain a Libor Indebtedness or to convert a
Prime Rate Indebtedness to a Libor Indebtedness shall be canceled forthwith and
(ii) any outstanding Libor Indebtedness shall be converted automatically to a
Prime Rate Indebtedness on the next succeeding Payment Date or within such
earlier period as required by law. Issuers hereby agree promptly to pay to
Noteholder, upon demand, any additional amounts necessary to compensate
Noteholder for any costs incurred by, or on behalf of, Noteholder in making any
conversion in accordance with this Note, including, without limitation, any
interest or fees payable by, or on behalf of, Noteholder to lenders of funds

 

9

 

obtained by it
in order to extend, make or maintain the Libor Indebtedness hereunder. Trustee’s
notice of such costs, as certified to Issuers, shall be conclusive absent
manifest error.

 

(vii)  In
the event that any change in any requirement of law or in the interpretation or
application thereof; or compliance by Trustee or Noteholder with any request or
directive (whether or not having the force of law) issued from any central bank
or other Governmental Authority:

 

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

 

(B)                                shall hereafter have
the effect of reducing the rate of return on Noteholder’s capital as a consequence
of Trustee’s or Noteholder’s obligations hereunder or under the other Financing
Documents to a level below that which Noteholder could have achieved but for
such adoption, change or compliance (taking into consideration Noteholder’s
policies with respect to capital adequacy) by any amount deemed by Trustee to
be material; or

 

(C)                                shall hereafter impose
on Trustee or Noteholder any other condition and the result of any of the
foregoing is to increase the cost to Noteholder of making, renewing or maintaining
loans or extensions of credit or to reduce any amount receivable hereunder

 

then, in any
such case, Issuers shall promptly pay Noteholder, upon demand, any additional
amounts necessary to compensate Noteholder for such additional cost or reduced
amount receivable which Trustee deems to be material as determined by Trustee
in its reasonable discretion. If Trustee, on behalf of Noteholder, becomes
entitled to claim any additional amounts pursuant to this Section 2.1(c)(vii),
Trustee shall provide Issuers with not less than ninety (90) days notice
specifying in reasonable detail the event by reason of which Noteholder has
become so entitled and the additional amount required to fully compensate
Noteholder for such additional cost or reduced amount. A certificate as to any
additional costs or amounts payable pursuant to the foregoing sentence
submitted by Trustee or Noteholder to Issuers shall be conclusive in the
absence of manifest error. This provision shall survive payment of the Note and
the satisfaction of all other obligations of Issuers under this Note and the
other Financing Documents.

 

(viii) 
Issuers agree to indemnify Trustee and Noteholder and to hold Trustee
and Noteholder harmless from any loss or expense which Trustee or Noteholder
sustains or incurs as a consequence of (i) any default by Issuers in payment of
the principal of or

 

10

 

interest on a
Libor Indebtedness, including, without limitation, any such loss or expense
arising from interest or fees payable by, or on behalf of, Noteholder to
lenders of funds obtained by, or on behalf of, Noteholder in order to maintain
a Libor Indebtedness hereunder, (ii) any prepayment (whether voluntary or
mandatory) of the Libor Indebtedness on a day that (A) is not the Payment Date
immediately following the last day of an Interest Period with respect thereto
or (B) is the Payment Date immediately following the last day of an Interest
Period with respect thereto if Issuers did not give the prior notice of such
prepayment required pursuant to the terms of this Note, including, without
limitation, such loss or expense arising from interest or fees payable by, or
on behalf of, Noteholder to lenders of funds obtained by it in order to
maintain the Libor Indebtedness hereunder and (iii) the conversion (for any
reason whatsoever, whether voluntary or involuntary) of the Applicable Interest
Rate from LIBOR plus the Spread to the Prime Rate plus the Prime Rate Spread
with respect to any portion of the outstanding principal amount of the Loan
then bearing interest at LIBOR plus the Spread on a date other than the Payment
Date immediately following the last day of an Interest Period, including,
without limitation, such loss or expenses arising from interest or fees payable
by, or on behalf of, Noteholder to lenders of funds obtained by, or on behalf
of, Noteholder in order to maintain a Libor Indebtedness hereunder (the amounts
referred to in clauses (i), (ii) and (iii) are herein referred to collectively
as the “Breakage Costs”); provided, however,
Issuers shall not indemnify Trustee or Noteholder from any loss or expense
arising from Trustee’s or Noteholder’s willful misconduct or gross negligence. This
provision shall survive payment of the Note in full and the satisfaction of all
other obligations of Issuers under this Note and the other Financing Documents.

 

(ix)  Noteholder
shall not be entitled to claim compensation pursuant to this Section 2.1
for any increased cost or reduction in amounts received or receivable hereunder,
or any reduced rate of return, which was incurred or which accrued more than
ninety (90) days before the date Trustee notified Issuers of the change in law
or other circumstance on which such claim of compensation is based and
delivered to Issuers a written statement setting forth in reasonable detail the
basis for calculating the additional amounts owed to Noteholder under this Section 2.1,
which statement shall be conclusive and binding upon all parties hereto absent
manifest error.

 

(d)  Additional Costs. Trustee will use
commercially reasonable efforts (consistent with legal and regulatory
restrictions) to maintain the availability of the Libor Indebtedness and to
avoid or reduce any increased or additional costs payable by Issuers under Section 2.1(c).

 

(e)  Default Rate. In the event that,
and for so long as, any Event of Default shall have occurred and be continuing,
the outstanding principal balance of this Note and, to the extent permitted by
law, all accrued and unpaid interest in respect of this Note and any other
amounts due pursuant to the Financing Documents, shall accrue interest at the
Default Rate, calculated from the date such payment was due without regard to
any grace or cure periods contained herein.

 

(f)  Usury Savings. This Note, the
Indenture and the other Financing Documents are subject to the express
condition that at no time shall Issuers be obligated

 

11

 

or required to
pay interest on the principal balance of this Note at a rate which could
subject Trustee or Noteholder to either civil or criminal liability as a result
of being in excess of the Maximum Legal Rate. If, by the terms of this Note or
the other Financing Documents, Issuers are at any time required or obligated to
pay interest on the principal balance due hereunder at a rate in excess of the
Maximum Legal Rate, the Applicable Interest Rate or the Default Rate, as the
case may be, shall be deemed to be immediately reduced to the Maximum Legal
Rate and all previous payments in excess of the Maximum Legal Rate shall be
deemed to have been payments in reduction of principal and not on account of
the interest due hereunder. All sums paid or agreed to be paid to Noteholder
for the use, forbearance, or detention of the sums due under this Note, shall,
to the extent permitted by applicable law, be amortized, prorated, allocated,
and spread throughout the full stated term of the Note until payment in full so
that the rate or amount of interest on account of this Note does not exceed the
Maximum Legal Rate of interest from time to time in effect and applicable to
this Note for so long as the Note Indebtedness is outstanding.

 

(g)  Interest Rate Cap Agreement. (i)  Prior to or contemporaneously with the Note
Issuance Date, Issuers shall enter into an Interest Rate Cap Agreement with a
LIBOR strike price equal to the Strike Price. The Interest Rate Cap Agreement
(i) shall be in a form and substance reasonably acceptable to Initial
Noteholder, (ii) shall be with an Acceptable Counterparty, (iii) shall direct
such Acceptable Counterparty to deposit directly into the Cash Management
Account any amounts due Issuers under such Interest Rate Cap Agreement so long
as any portion of the Debt exists, provided that the Debt shall be deemed to exist
if the Property is transferred pursuant to the terms and provisions of the
Security Trust Agreement or by judicial or non judicial foreclosure or
deed-in-lieu thereof, (iv) shall be for a period equal to the term of this Note
and (v) shall have an initial notional amount equal to the principal balance of
this Note. Issuers shall collaterally assign to Trustee for the benefit of
Noteholders pursuant to the Collateral Assignment of Interest Rate Cap
Agreement, all of their right, title and interest to receive any and all
payments under the Interest Rate Cap Agreement, and shall deliver to Trustee an
executed counterpart of such Interest Rate Cap Agreement (which shall, by its
terms, authorize the assignment to Trustee for the benefit of Noteholders and require
that payments be deposited directly into the Cash Management Account).

 

(ii)  Issuers
shall comply with all of their obligations under the terms and provisions of
the Interest Rate Cap Agreement. All amounts paid by the Counterparty under the
Interest Rate Cap Agreement to Issuers or Trustee for the benefit of
Noteholders shall be deposited immediately into the Cash Management Account or
if the Cash Management Account is not then required to be in effect, into such
account as specified by Trustee. Issuers shall take all actions reasonably
requested by Trustee to enforce Trustee’s rights, on behalf of Noteholders,
under the Interest Rate Cap Agreement in the event of a default by the
Counterparty and shall not waive, amend or otherwise modify any of their rights
thereunder.

 

(iii)  In
the event of any downgrade, withdrawal or qualification of the rating of the
Counterparty by S&P or Moody’s, Issuers shall replace the Interest Rate Cap
Agreement with a Replacement Interest Rate Cap Agreement not later than fifteen
(15)

 

12

 

Business Days
following receipt of notice from Trustee of such downgrade, withdrawal or
qualification.

 

(iv)  In
the event that Issuers fail to purchase and deliver to Trustee the Interest
Rate Cap Agreement or fail to maintain the Interest Rate Cap Agreement in
accordance with the terms and provisions of this Note, Trustee, on behalf of
Noteholders, may purchase the Interest Rate Cap Agreement and the cost incurred
by Trustee in purchasing such Interest Rate Cap Agreement shall be paid by
Issuers to Trustee with interest thereon at the Default Rate from the date such
cost was incurred by Trustee until such cost is reimbursed by Issuers to
Trustee.

 

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

 

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

 

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

 

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

 

(D)                               the Interest Rate Cap
Agreement, and any other agreement which the Counterparty has executed and
delivered pursuant thereto, has been duly executed and delivered by the Counterparty
and constitutes the legal, valid and binding obligation of the Counterparty,
enforceable against the Counterparty in accordance with its terms, subject to
applicable bankruptcy, insolvency and similar laws affecting creditors’ rights
generally, and subject, as to

 

13

 

enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).

 

Section 2.2 
Loan Payment.

 

(a)  Payments Generally. Issuers shall
make a payment to Noteholder of interest only on the Note Issuance Date for the
period from the Note Issuance Date up to and including January 8, 2005
(unless the Note Issuance Date is the ninth (9th) day of a calendar
month, in which case no such separate payment of interest shall be due). Issuers
shall make a payment to Noteholder in the amount of the Monthly Debt Service
Payment on the Monthly Payment Date occurring on February 9, 2005 and on each
Monthly Payment Date thereafter to and including the Maturity Date. Each
payment shall be applied in accordance with the priority of payments set forth
in Section 3.03 of the Indenture.

 

(b)  Payment on Maturity Date. Issuers
shall pay to Noteholder on the Maturity Date the outstanding principal balance
of this Note, all accrued and unpaid interest and all other amounts due
hereunder and shall pay to Trustee, for the benefit of Noteholders, all other
amounts due under the Indenture and the other Financing Documents.

 

(c)  Late Payment Charge. If any principal,
interest or any other sums due under the Financing Documents (other than the
outstanding principal balance due on the Maturity Date) is not paid by Issuers
by the date on which it is due, Issuers shall pay to Noteholder upon demand an
amount equal to the lesser of two percent (2%) of such unpaid sum or the
maximum amount permitted by applicable law in order to defray the expense
incurred by, or on behalf of, Noteholder in handling and processing such
delinquent payment and to compensate Noteholder for the loss of the use of such
delinquent payment. Any such amount shall be secured by the Security Trust
Agreement, the Pledge and the other Financing Documents to the extent permitted
by applicable law.

 

(d)  Method and Place of Payment. Except
as otherwise specifically provided herein, all payments and prepayments under
this Note shall be made to Noteholder not later than 1:00 P.M., New York City
time, on the date when due and shall be made in lawful money of the United States
of America in immediately available funds at Noteholder’s office or as
otherwise directed by Noteholder, and any funds received by Noteholder after
such time shall, for all purposes hereof, be deemed to have been paid on the
next succeeding Business Day.

 

(e)  Interest Accrual Period. The first
interest accrual period hereunder shall commence on and include the Note
Issuance Date and end on (i) the eighth (8th) day of the calendar
month in which the Note Issuance Date occurs (if the Note Issuance Date shall
occur during the first eight (8) days of such calendar month) or (ii) on the
eighth (8th) day of the calendar month immediately following the
calendar month in which the Note Issuance Date occurs (if the Note Issuance
Date shall occur on or after the ninth (9th) day of the calendar
month in which the Note Issuance Date occurs). Each interest accrual period
thereafter shall commence on the ninth (9th) day of each calendar
month

 

14

 

during the
term of this Note and shall end on and include the eighth (8th) day
of the next occurring calendar month. For purposes of making payments
hereunder, but not for purposes of calculating interest accrual periods, if the
day on which such payment is due is not a Business Day, then amounts due on such
date shall be due on the immediately preceding Business Day and with respect to
payments of principal due on the Maturity Date, interest shall be payable at
the Applicable Interest Rate or the Default Rate, as the case may be, through
and including the day immediately preceding such Maturity Date. All amounts due
pursuant to this Note and the other Financing Documents shall be payable
without setoff, counterclaim, defense or any other deduction whatsoever.

 

Section 2.3 
Prepayments.

 

(a)  Voluntary Prepayments. Prior to the
Lockout Release Date, the outstanding principal amount of this Note may not be
prepaid in whole or in part. On any Payment Date occurring on, or after, the
Lockout Release Date, Issuers may, at their option and upon fifteen (15) days
prior written notice to Trustee, prepay the Debt in whole or in part; provided
that such prepayment is accompanied by the Prepayment Premium, if any. Except
for any prepayment pursuant to Section 2.3(b) hereof (provided that
no Event of Default has occurred and is continuing at the time of such
prepayment), neither Trustee nor Noteholder shall be obligated to accept any
prepayment unless it is accompanied by the Prepayment Premium due in connection
therewith. All prepayments under this Section 2.3(a) shall be
applied in accordance with the priority of payments set forth in Section 3.03
of the Indenture.

 

(b)  Mandatory Prepayments. On the next
occurring Payment Date following the date on which Trustee, on behalf of
Noteholders, actually receives any Net Proceeds, if Trustee is not obligated to
make such Net Proceeds available to Issuers for Restoration, Issuers shall
prepay, or authorize Trustee to apply Net Proceeds as a prepayment of, the
outstanding principal balance of the Notes in an amount equal to one hundred
percent (100%) of such Net Proceeds. Other than following an Event of Default,
no Prepayment Premium shall be due in connection with any prepayment made
pursuant to this Section 2.3(b). Any partial prepayment under this Section 2.3(b)
shall be applied in accordance with the priority of payments set forth in Section 3.03
of the Indenture.

 

Prepayments
After Default. If following an Event of Default
and prior to the Lockout Release Date, payment of all or any part of the Debt
is tendered by Issuers or otherwise recovered by Trustee for the benefit of
Noteholders (including through application of any Reserve Funds), such tender
or recovery shall be (a) made on the next occurring Payment Date together with
the Monthly Debt Service Payment and (b) deemed a voluntary prepayment by
Issuers in violation of the prohibition against prepayment set forth in Section 2.3(a)
and Issuers shall pay, in addition to the Debt, an amount equal to the sum of
(i) the Spread Maintenance Premium and (ii) the Prepayment Premium.

 

15

 

Section 2.4 
Cash Management.

 

(a)  Lockbox Accounts. Issuers shall
establish and maintain a segregated Eligible Account (a “Lockbox
Account”) with each Lockbox Bank in trust in favor of Trustee for
the benefit of Noteholders, which Lockbox Account shall be under the sole
dominion and control of Trustee. Each Lockbox Account shall be entitled “LaSalle
Bank National Association, as Trustee, pursuant to Note Indenture dated as of December 17,
2004 – Lockbox Account.”  Issuers hereby
grant to Trustee for the benefit of Noteholders a first priority security
interest in each Lockbox Account and all deposits at any time contained therein
and the proceeds thereof and will take all actions necessary to maintain in
favor of Trustee for the benefit of Noteholders a perfected first priority
security interest in each Lockbox Account, including, without limitation,
executing and filing UCC-1 Financing Statements and continuations thereof, if
applicable. Trustee and Servicer shall have the sole right to make withdrawals
from any Lockbox Account and all costs and expenses for establishing and
maintaining any Lockbox Account shall be paid by Issuers. Issuers shall, or
shall cause Manager to, deliver written instructions to all tenants under
Leases to deliver all Rents payable thereunder directly to a Lockbox Account. Issuers
shall, and shall cause Manager to, deposit all amounts received by Issuers or
Manager constituting Rents into a Lockbox Account within one (1) Business Day
after receipt. Issuers shall obtain from each Lockbox Bank its agreement to
transfer to the Cash Management Account in immediately available funds by wire
transfer all amounts on deposit in the applicable Lockbox Account once every
Business Day throughout the term of the Note (with the exception of the amounts
on deposit in the Pesos Account (as defined in the Cash Management Agreement),
which amounts shall be transferred to the Cash Management Account at such times
as set forth the Cash Management Agreement).

 

(b)  Cash Management Account. Issuers
shall establish and maintain a segregated Eligible Account (the “Cash Management Account”) to be held in trust in favor of
Trustee for the benefit of Noteholders, which Cash Management Account shall be
under the sole dominion and control of Trustee. The Cash Management Account
shall be entitled “LaSalle Bank National Association, as Trustee, pursuant to
Note Indenture. dated as of December 17, 2004 - Cash Management Account.”
Issuers hereby grant to Trustee for the benefit of Noteholders a first priority
security interest in the Cash Management Account and all deposits at any time
contained therein and the proceeds thereof and will take all actions necessary
to maintain in favor of Trustee for the benefit of Noteholders a perfected
first priority security interest in the Cash Management Account, including,
without limitation, executing and filing UCC-l Financing Statements and
continuations thereof. Issuers will not in any way alter or modify the Cash
Management Account and will notify Trustee of the account number thereof. Trustee
and Servicer shall have the sole right to make withdrawals from the Cash
Management Account and all costs and expenses for establishing and maintaining
the Cash Management Account shall be paid by Issuers. All funds on deposit in
the Cash Management Account shall be applied in accordance with the terms of
the Cash Management Agreement. The insufficiency of funds on deposit in the
Cash Management Account shall not relieve Issuers from the obligation to make
any payments, as and when due pursuant to the Notes and the other Financing
Documents, and such obligations shall be separate and independent, and not
conditioned on any event or circumstance

 

16

 

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

 

(c)  Payments Received Under Cash Management Agreement.
Notwithstanding anything to the contrary contained in this Note and the
other Financing Documents, and provided no Event of Default has occurred and is
continuing, Issuers’ obligations with respect to the monthly payment of Debt
Service and amounts due for the Tax and Insurance Escrow Fund, Required Repair
Fund, Replacement Escrow Fund, Interest Reserve Escrow Fund and any other
payment reserves established pursuant to this Note or any other Financing
Document shall be deemed satisfied to the extent sufficient amounts are
deposited in the Cash Management Account established pursuant to the Cash
Management Agreement to satisfy such obligations on the dates each such payment
is required, regardless of whether any of such amounts are so applied by
Trustee.

 

(d)  Interest Reserve. Issuers
acknowledge and agree that Excess Cash Flow (as defined in the Cash Management
Agreement) shall be deposited and held in the Interest Reserve Fund in
accordance with the terms and provisions of the Cash Management Agreement.

 

Section 2.5 
Extension of the Initial Maturity Date. (a)  Issuers shall have the option to extend the
term of the Notes beyond the Initial Maturity Date for three successive terms
(each, an “Extension Option”) of one (1) year
each (the Initial Maturity Date following the exercise of each such option is
hereinafter the “Extended Maturity Date”) upon
satisfaction of the following terms and conditions:

 

(i)  no
Event of Default shall have occurred and be continuing at the time the
applicable Extension Option is exercised and on the date that the applicable
extension term is commenced;

 

(ii)  Issuers
shall notify Trustee of their irrevocable election to extend the Maturity Date
as aforesaid not earlier than six (6) months, and no later than sixty (60)
days, prior to (i) with respect to the first Extension Option, the Initial
Maturity Date, (ii) with respect to the second Extension Option, the end of the
first Extension Option term and (iii) with respect to the third Extension
Option, the end of the second Extension Option term. The term of each then
outstanding Note must be extended pursuant to the applicable provision and no
extension of less than all of the then outstanding Notes shall be permitted;

 

(iii)  if
the Interest Rate Cap Agreement is scheduled to mature prior to the applicable
Extended Maturity Date, Issuers shall obtain and deliver to Trustee for the
benefit of Noteholders not later than ten (10) Business Days prior to the first
day of each Extension Option, one or more Replacement Interest Rate Cap
Agreements from an Acceptable Counterparty which Replacement Interest Rate Cap
Agreement shall be effective commencing on the first date of such Extension

 

17

 

Option and shall have a maturity date not earlier than the applicable
Extended Maturity Date;

 

(iv)  In
connection with each Extension Option Issuers shall have delivered to Trustee
together with their notice pursuant to subsection (a)(ii) of this Section 2.5
and as of the commencement of the applicable Extension Option, an Officer’s
Certificate in form acceptable to the Trustee certifying that each of the
representations and warranties of Issuers contained in the Financing Documents
is true, complete and correct in all material respects as of the date of such
Officer’s Certificate to the extent such representation and warranties are not
matters which by their nature can no longer be true and correct as a result of
the passage of time.

 

(v)  Issuers
shall pay to Trustee for the benefit of Noteholders in connection with the
exercise of the second and third Extension Option an extension fee equal to
twenty-five hundredths of one percent (.25%) of the outstanding principal
amount of the Notes simultaneously with delivery of the extension notice
pursuant to subsection (a)(ii) above, which extension fee shall be
deemed earned by Noteholders as of the first day of the applicable Extension
Option term and non-refundable thereafter; and

 

(vi)  Issuers
shall provide evidence reasonably satisfactory to Trustee that there is
sufficient capital available to pay for necessary capital expenditures, tenant
improvements and leasing commissions (it being understood that an Officer’s
Certificate certifying the same shall constitute reasonably satisfactory
evidence for purposes of this Section 2.5(a)(vi)).

 

(b)  Issuers
shall pay all reasonable costs and expenses of Trustee and Noteholders in
connection with any Extension Option.

 

ARTICLE 3: 
FINANCING DOCUMENTS

 

This Note is issued pursuant to the Indenture
and secured by the Security Trust Agreement, the Pledge and the other Financing
Documents. All of the terms, covenants and conditions contained in the
Indenture, the Security Trust Agreement, the Pledge and the other Financing
Documents are hereby made part of this Note to the same extent and with the
same force as if they were fully set forth herein.

 

ARTICLE 4: 
NO ORAL CHANGE

 

This Note may not be modified, amended,
waived, extended, changed, discharged or terminated orally or by any act or
failure to act on the part of Issuers or Trustee, but only by an agreement in
writing signed by the party against whom enforcement of any modification,
amendment, waiver, extension, change, discharge or termination is sought.

 

18

 

ARTICLE 5: 
WAIVERS

 

Issuers and all others who may become liable
for the payment of all or any part of the Debt do hereby severally waive
presentment and demand for payment, notice of dishonor, notice of intention to
accelerate, notice of acceleration, protest and notice of protest and
non-payment and, except as otherwise expressly provided in the Financing
Documents, all other notices of any kind in connection with the delivery,
acceptance, performance, default or enforcement of the payment of this Note. No
release of any security for the Debt or extension of time for payment of this
Note or any installment hereof, and no alteration, amendment or waiver of any
provision of this Note, the Indenture or the other Financing Documents made by
agreement between Trustee on behalf of Noteholders or any other Person shall
release, modify, amend, waive, extend, change, discharge, terminate or affect
the liability of Issuers, and any other Person who may become liable for the
payment of all or any part of the Debt under this Note, the Indenture or the
other Financing Documents. No notice to or demand on Issuers shall be deemed to
be a waiver of the obligation of Issuers or of the right of Trustee on behalf
of Noteholders to take further action without further notice or demand as
provided for in this Note, the Indenture or the other Financing Documents. If
any Issuer is a partnership, the agreements herein contained shall remain in
force and be applicable, notwithstanding any changes in the individuals or
entities comprising the partnership, and the term “Issuer,”
as used herein, shall include any alternate or successor partnership, but any
predecessor partnership and their partners shall not thereby be released from
any liability. If any Issuer is a corporation, the agreements contained herein
shall remain in full force and be applicable notwithstanding any changes in the
shareholders comprising, or the officers and directors relating to, the
corporation, and the term “Issuer” as used
herein, shall include any alternative or successor corporation, but any
predecessor corporation shall not be relieved of liability hereunder. If any
Issuer is a limited liability company, the agreements herein contained shall
remain in force and be applicable, notwithstanding any changes in the members
comprising the limited liability company, and the term “Issuer”
as used herein, shall include any alternate or successor limited liability
company, but any predecessor limited liability company and their members shall
not thereby be released from any liability. Nothing in the foregoing three
sentences shall be construed as a consent to, or a waiver of, any prohibition
or restriction on transfers of interests in such partnership, corporation or
limited liability company, as applicable, which may be set forth in the
Indenture or any other Financing Document.

 

ARTICLE 6: 
TRANSFER

 

Upon the transfer of this Note, Issuers
hereby waiving notice of any such transfer, Noteholder may deliver, or cause to
be delivered, all the collateral mortgaged, granted, pledged or assigned
pursuant to the Financing Documents, or any part thereof, to, or for the
benefit of, the transferee who shall thereupon become vested with all the
rights and obligations herein or under applicable law given to Noteholder with
respect thereto, and Noteholder shall thereafter forever be relieved and fully
discharged from any liability or responsibility in any matter first arising
after such transfer; but Noteholder shall retain all rights hereby given to it
with respect to any liabilities and the collateral not so transferred.

 

19

 

ARTICLE 7: 
NUMBER AND GENDER/JOINT AND SEVERAL LIABILITY

 

All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular or plural as
the identity of the Person or Persons referred to may require. Without limiting
the effect of specific references in any provision of this Agreement, the term “Issuers” shall be deemed to refer to each and every Person
comprising an Issuer from time to time, as the sense of a particular provision
may require, and to include the heirs, executors, administrators, legal
representatives, successors and assigns of each Issuer, all of whom shall be
bound by the provisions of this Agreement, provided that no obligation of
Issuers may be assigned except with the written consent of Trustee. Each
reference herein to Trustee or Noteholder shall be deemed to include their
respective successors and assigns.

 

If Issuers are comprised of more than one
Person, all representations, warranties, covenants (both affirmative and
negative) and all other obligations of Issuers hereunder shall be the joint and
several obligation of each entity making up Issuers and a Default or Event of
Default by any such Person shall be deemed a Default or Event of Default by all
such entities and Issuers. The representations, covenants and warranties
contained herein shall be read to apply to the individual entities comprising
Issuers when the context so requires but a breach of any such representation,
covenant or warranty or a breach of any obligation under this Note shall be
deemed a breach by all such entities and Issuers, entitling Trustee, on behalf
of Noteholders, to exercise all of its rights and remedies under this Note and
the other Financing Documents and under applicable law.

 

ARTICLE 8: 
EXCULPATION

 

The provisions of Section 9.03 of the
Indenture are hereby incorporated by reference into this Note to the same
extent and with the same force as if fully set forth herein.

 

ARTICLE 9: 
GOVERNING LAW

 

This Note shall be governed in accordance
with the terms and provisions of Section 14.04 of the Indenture.

 

ARTICLE 10: 
NOTICES

 

All notices or other written communications
hereunder shall be delivered in accordance with Section 14.03 of the
Indenture.

 

[NO FURTHER TEXT ON THIS PAGE]

 

20

 

IN WITNESS WHEREOF,
Issuers have duly executed this Note as of the day and year first above
written.

 

	
   

  	
  ISSUERS:

  
	
   

  	
   

  	
   

  
	
   

  	
  KERZNER
  PALMILLA BEACH

  PARTNERS, S. de R.L. de C.V.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Allison

  	
   

  
	
   

  	
   

  	
  Name: 
  John Allison

  
	
   

  	
   

  	
  Title: 
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KERZNER
  PALMILLA HOTEL

  PARTNERS, S. de R.L. de C.V.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Allison

  	
   

  
	
   

  	
   

  	
  Name: 
  John Allison

  
	
   

  	
   

  	
  Title:  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KERZNER SERVICIOS HOTELEROS,

  S. de R.L. de C.V.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Allison

  	
   

  
	
   

  	
   

  	
  Name: 
  John Allison

  
	
   

  	
   

  	
  Title: 
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KERZNER
  COMPANIA de

  SERVICIOS, S. de R.L. de C.V.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Allison

  	
   

  
	
   

  	
   

  	
  Name: 
  John Allison

  
	
   

  	
   

  	
  Title: 
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KERZNER
  PALMILLA GOLF

  PARTNERS, S. de R.L. de C.V.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Allison

  	
   

  
	
   

  	
   

  	
  Name: 
  John Allison

  
	
   

  	
   

  	
  Title:   
  Vice President

  

 

21

 

SCHEDULE 6.01A 

 

Organizational Chart

 

 

 

SCHEDULE 6.01E

 

Agreements

 

None

 

 

SCHEDULE 6.01Q

 

Assessments

 

None

 

 

SCHEDULE 6.01T

 

Insurance Claims

 

None

 

 

SCHEDULE 6.01Z

 

Leases

 

1.             A
lease for storage space in the town of San Jose. This lease expired on
November 30, 2004 but was automatically renewed for another 6 months.

 

2.             A
lease for the rental of a plot of land from the Palmilla Condominium
Association (this is common land of the members) for a nominal amount of
US$1.00 per year. This agreement is in the final stages of completion but has
not yet been executed.

 

 

SCHEDULE 10.01

 

Required Repairs

 

 

We have
prepared a column for the estimated costs of each item. Required
expenditures indicate deficiencies, which are in violation of codes, which pose
a danger to public safety, or which if left uncorrected, will lead to further
deterioration of the property.

 

A Capital Expenditure Analysis Chart, based on
industry-accepted life spans of major building components, is included for all
major components which will exceed or reach their published service lives
within 7 years.

 

Maintenance
type deficiencies that in-house personnel and/or current Service Contractors
should address appear without estimates. There are no ADA
related costs at this property, since the project is outside the jurisdiction
of the U.S. Department of Justice.

 

All estimated
cost are engineering estimates and not bid prices. Costs are in year-2004 U.S. dollars
and assume use of union labor unless otherwise noted.

 

	
   

  	
   

  	
  One&Only
  Palmilla Resort

  	
   

  	
   

  	
   

  

 

	
   

  	
   

  	
   

  	
   

  	
  REQUIRED

  	
   

  
	
  

  

  1.

  	
   

  	
  Site

  

  Provide a drainage swale behind the South Chiller yard to prevent erosion.
  Storm water flows down the slope against the back wall of the chiller fence.
  The swale would direct storm water away from the wall towards the
  asphalt-paved parking lot and to the storm drainage system. Not having a
  swale will most likely erode the slope. It appeared that drainage control in
  this area was mitigated by the use of sandbags.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Estimated
  Cost

  	
   

  	
  $

  	
  2,500

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  

  2.

  	
   

  	
  Roof

  

  The engineering staff should inspect the existing roof tiles at
  the 1992-constructed guestroom buildings. Casa Cristina and the Chapel to
  ensure that they are tied/anchored so that in the event of high winds, they
  remain in place. Cost is to inspect the roofs.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Estimated
  Cost

  	
   

  	
  $

  	
  1,500

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  

  3.

  	
   

  	
  Structural

  

  The Butlers’ pantry building and the mechanical enclosure located near the
  guest parking, are built into a hillside. The building walls are retaining
  over 6 feet of earth. It is not clear from the structural drawings that this
  height of earth pressure was taken into account. The design engineer should
  review this condition. Cost is to inspect the above-described condition.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Estimated
  Cost

  	
   

  	
  $

  	
  2,500

  	
   

  

 

 

	
   

  	
   

  	
   

  	
   

  	
  REQUIRED

  	
   

  
	
  4.

  	
   

  	
  The walls of the Wastewater Treatment Plant
  are seeping moisture. Moisture within the walls can cause reinforcing steel
  to rust and fail. The contractor and design engineer should be notified to
  inspect and repair the seepage. The cost for the remediation of this issue is
  estimated at $75,000. This item should be covered under the contractor’s
  warranty, with no cost to the resort.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Warranty
  Item

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  

  5.

  	
   

  	
  Electrical

  

  The electrical switchgear at Charlie Trotter’s is exposed to rain water. At a
  minimum, the existing roof cover should be extended to better protect the
  cabinet.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Estimated
  Cost

  	
   

  	
  $

  	
  2,500

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Change/provide weatherproof outlets in all
  mechanical/service areas that are exposed to the weather. Also, panel boxes
  were observed either with missing covers or not provided with a weather
  protective enclosure. This item should be remediated.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Estimated
  Cost

  	
   

  	
  $

  	
  4,000

  	
   

  

 

 

	
   

  	
   

  	
   

  	
   

  	
  REQUIRED

  	
   

  
	
  

  

  7.

  	
   

  	
  Anchorage

  

  The seismic anchorage of building service equipment is recommended to prevent
  fire hazards from broken natural gas lines, to maintain building functions
  following an earthquake, and to prevent heavy equipment from causing
  structural damage or creating a safety hazard by being thrown about in an
  earthquake. Most of the ‘smaller’ mechanical equipment observed were
  unrestrained. The unrestrained equipment should be anchored.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Estimated
  Cost

  	
   

  	
  $

  	
  12,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Total
  Estimated One&Only Palmilla Costs

  	
   

  	
  $

  	
  25,000

  	
   

  

 

 

	
   

  	
   

  	
  Troon
  Golf at Palmilla

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  REQUIRED

  	
   

  
	
  

  

  1.

  	
   

  	
  Site

  

  The pipe for the septic tank, located in the yard behind the Clubhouse
  building does not have a cover. The exposed pipe is being covered with a
  tray. A proper cover should be provided.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Estimated
  Cost

  	
   

  	
  $

  	
  250

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Erosion was observed around the patio of
  the irrigation pump house (near Arroyo Hole #4). The erosion should be
  repaired and a concrete swale should be provided to direct storm water around
  the patio and Pump Room walls.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Estimated
  Cost

  	
   

  	
  $

  	
  2500

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  The generators at the irrigation pump room
  are poorly maintained, with evidence of oil spillage and corrosion, which
  compounded with the continuous refueling, could diminish the service life of
  the equipment. The generators should be inspected and serviced/cleaned and
  placed on a preventative maintenance program.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Estimated
  Cost

  	
   

  	
  $

  	
  10,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  The single-walled fuel tanks at the
  irrigation pump yard should be removed and replaced with a double-walled tank
  to prevent spillage. Build concrete curbs around the tanks to assist with
  containment of fuel.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Estimated
  Cost

  	
   

  	
  $

  	
  10,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  The seismic anchorage of building service
  equipment is recommended to prevent fire hazards from broken natural gas
  lines, to maintain building functions following an earthquake, and to prevent
  heavy equipment from causing structural damage or creating a safety hazard by
  being thrown about in an earthquake. Most of the mechanical equipment
  observed was unrestrained. The unrestrained equipment should be anchored.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Estimated
  Cost

  	
   

  	
  $

  	
  2,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Total
  Estimated Troon Golf at Palmilla Costs

  	
   

  	
  $

  	
  24,750

  	
   

  

 

 

ONE AND ONLY
PALMILLA

 

	
  Issue

  	
   

  	
  Cost to Remediate

  
	
  Potential presence of gasoline and diesel in soil

  	
   

  	
  $8,000

  
	
  Potential presence of gasoline and diesel in soil
  in the unpaved area surrounding the secondary containment of the tanks

  	
   

  	
  $12,000

  
	
  Potential presence of hydrocarbons in soil

  	
   

  	
  $14,000

  
	
  Floors must be impervious and antiskid because of
  potential for hazardous materials on concrete floor

  	
   

  	
  $11,000

  
	
  Floors must be impervious and antiskid because of
  potential for hazardous materials on concrete floor (at Palmilla Golf Club)

  	
   

  	
  $5,000 plus management
  time

  
	
  Floors must be impervious and antiskid because of
  potential for hazardous materials on concrete floor in the Temporary
  Hazardous Waste Storage Area

  	
   

  	
  $4,000 plus management time

  
	
  Verify in the equipment specifications document or
  plate if the dielectric oil used in the transformers is free of PCBs

  	
   

  	
  $1,000 plus management
  time

  
	
  Verify in the equipment specifications document or
  plate if the dielectric oil used in the transformers is free of PCBs (at
  Palmilla Golf Club)

  	
   

  	
  $200 plus management time

  
	
  Testing water for lead

  	
   

  	
  $2,500 plus management
  time

  
	
  If Municipality of San Jose del Cabo does not
  remove lead from water, filters must be purchased

  	
   

  	
  $28,000 plus management
  time

  
	
  Designation of a specific location at the Hotel
  for storing all hazardous materials, and this storage area should be provided
  with good ventilation, proper signs, and secondary containments for
  collecting potential spills

  	
   

  	
  $4,000 plus management
  time

  
	
  Storing hazardous materials (from Cardboard and
  Plastics storage room) in a specific location for such purpose, to avoid
  contamination of non-hazardous wastes with hazardous materials

  	
   

  	
  $4,000 plus management
  time

  
	
  Provide hazardous materials (from Trailers A, B,
  & C and in the Chemicals Storage Area) with secondary containments for
  collecting potential spills, to avoid staining the floor and a potential
  infiltration to the soil

  	
   

  	
  $2,500 plus management
  time

  
	
  Provide eight 10-L plastic containers storing a
  mixture of gasoline and diesel utilized in the grass cutting machines were
  placed on the concrete floor with no secondary containment with secondary
  containments for collecting potential spills, to avoid staining the floor and
  a potential infiltration to the soil

  	
   

  	
  $1,000 plus management
  time

  
	
  Provide six 200-L metal drums containing gasoline
  observed next to the gasoline and/or diesel spill area with secondary
  containments for collecting potential spills, to avoid staining the floor and
  a potential infiltration to the soil

  	
   

  	
  $1,000 plus management
  time

  
	
  Provide sodium hypochlorite containers that are
  placed on the cement floor and not provided with secondary containment in the
  WWTP Equipment Room with secondary containments for collecting potential
  spills, to avoid staining the cement floor and a potential infiltration to
  the soil

  	
   

  	
  $1,000 plus management
  time

  

 

 

	
  Issue

  	
   

  	
  Cost to Remediate

  
	
  Provide 2,000-L diesel AST and a 10,000-L diesel
  AST in the Golf Course Equipment Area placed on the ground with secondary
  containments and other devices for collecting potential spills, to a
  potential infiltration to the soil

  	
   

  	
  $4,000 plus management
  time

  
	
  Provide two plastic 3,600-L ASTs containing pH
  adjusting substance and liquid fertilizer in the Golf Course Equipment Room
  that are placed directly on the ground and not provided with secondary
  containment with secondary containments

  	
   

  	
  $4,000 plus management
  time

  
	
  Designation of a specific location at the Hotel
  for storing all hazardous wastes generated

  	
   

  	
  $5,000 plus management
  time

  
	
  To store the three 200-L metal drums containing
  used oil that were observed placed on the concrete floor of the Golf Course
  Equipment Room, and with no secondary containment in the Temporary Hazardous
  Waste Storage, located in the Golf Club Maintenance Area

  	
   

  	
  Management Time

  
	
  Replacing the use of the R-22 at the site for a
  non Ozone Depleting Substance

  	
   

  	
  $4,000 plus management
  time

  
	
  Dispose of equipment out of operation placed
  directly on the ground in several parts of the Golf Club Maintenance Area
  that could be leaking oil and other hazardous materials

  	
   

  	
  $4,000 plus management
  time

  
	
  Provide scrap metal that
  is placed directly on the ground in the unpaved Scrap Metal Storage Area with
  concrete floor and protect it from the environment to avoid the early
  oxidation of metal parts

  	
   

  	
  $5,000 plus management
  time

  
	
  Provide Caterpillar
  500-KVA generator, in the Golf Course Equipment Room with a secondary
  containment for collecting potential oil and diesel spills to avoid potential
  infiltration to the soil

  	
   

  	
  $1,000 plus management
  time

  

 

 

 

 

FIRST AMENDMENT TO NOTE INDENTURE

 

 

Dated as of
March        , 2005

 

 

Between

 

 

KERZNER PALMILLA BEACH PARTNERS,
S. de R.L. de C.V.,

KERZNER PALMILLA HOTEL PARTNERS, S. de R.L. de C.V.,

KERZNER SERVICIOS HOTELEROS, S. de R.L. de C.V.,

KERZNER COMPANIA DE SERVICIOS, S. de R.L. de C.V. and

KERZNER PALMILLA GOLF PARTNERS, S. DE R.L. de C.V.

(collectively,
Issuers)

 

 

and

 

 

LASALLE BANK NATIONAL ASSOCIATION

(Trustee)

 

 

 

 

FIRST AMENDMENT TO NOTE INDENTURE

 

THIS FIRST AMENDMENT TO NOTE INDENTURE (this
“Amendment”), dated as of March ___,
2005, between KERZNER PALMILLA BEACH PARTNERS, S. de R.L.
de C.V., KERZNER PALMILLA HOTEL PARTNERS, S. de R.L. de C.V., KERZNER SERVICIOS
HOTELEROS, S. de R.L. de C.V., KERZNER COMPANIA DE SERVICIOS, S. de R.L. de
C.V. and KERZNER PALMILLA GOLF PARTNERS, S. de R.L. de C.V., each a
limited liability company with variable capital (sociedad de
responsabilidad limitada de capital variable), duly organized and
validly existing under the laws of the United Mexican States and each having an
address at Palmilla Resort & Golf Club Apartado Postal 52, 33400 San Jose
Del Cabo, BCS, Mexico (hereinafter, collectively, the “Issuers”)
and LASALLE BANK NATIONAL ASSOCIATION,
having an address at 35 S. LaSalle Street, Suite 1625, Chicago, Illinois 60603,
as note trustee and collateral agent for the benefit of the Noteholders (as
hereinafter defined) (hereinafter, the “Trustee”).

 

W I  T  N  E
S  S  E  T  H:

 

WHEREAS, pursuant to certain promissory
notes, dated December 17, 2004 (collectively, the “Initial
Notes”), executed and delivered by Issuers pursuant to that certain
Note Indenture, dated as of December 17, 2004, between Issuers and Trustee
(as amended by this Amendment and as the same may be further amended, restated,
replaced, supplemented or otherwise modified from time to time, the “Indenture”), Issuers have become indebted to Noteholders (as
defined in the Indenture) in the original principal amount of One Hundred Ten
Million and No/100 Dollars ($110,000,000) (such indebtedness, the “Note Indebtedness”), which Note Indebtedness is secured by
that certain Amended and Restated Trust Agreement, dated as of December 17,
2004 (as the same may be amended, restated, replaced, supplemented, or
otherwise modified from time to time, the “Security Trust Agreement”)
and further evidenced, secured or governed by other instruments and documents
executed in connection with the issuance of the Initial Notes (together with
the Initial Notes, the Indenture and the Security Trust Agreement, collectively,
the “Financing Documents”).

 

WHEREAS, there is presently outstanding on
the Initial Notes a principal balance of $110,000,000.

 

WHEREAS, in connection with the proposed
Securitization (as defined in the Indenture) of a portion of the Note
Indebtedness, the Trustee, on behalf of the Noteholders, have requested, and
the Issuers have agreed, to re-size the Initial Notes in accordance with the
terms and provisions of the Indenture and the Securitization Cooperation
Agreement.

 

WHEREAS, the Trustee, on behalf of the
Noteholders, now wishes to amend the Indenture pursuant to the terms and
provisions of the Indenture and the Securitization Cooperation Agreement, and
the Issuers consent to such amendment, in accordance with the terms set forth
herein.

 

 

NOW, THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which are acknowledged, the
parties hereto hereby covenant, agree, represent and warrant as follows:

 

I.              DEFINITIONS

 

1.1          Replacement Definitions.
From and after the date hereof, the following terms set forth in the Indenture
are hereby deleted in their entirety and shall be redefined as follows:

 

“Note A” shall
mean that certain Promissory Note A in the original principal amount of Seventy
Five Million and No/100 Dollars ($75,000,000), dated December 17, 2004 and
made by Issuers, as the same may be amended, restated, replaced, supplemented
or otherwise modified from time to time as provided herein.

 

“Note B” shall
mean that certain Promissory Note B in the original principal amount of Thirty
Five Million and No/100 Dollars ($35,000,000), dated December 17, 2004 and
made by Issuers, as the same may be amended, restated, replaced, supplemented
or otherwise modified from time to time as provided herein.

 

II.            AMENDED PROVISIONS

 

2.1          Revised General Terms.
From and after the date hereof,

 

(a) Section 8.01(a) of the Indenture is
amended as follows:

 

(i)      By
amending and restating clause (i) thereof in its entirety to provide as
follows:

 

(i)
comprehensive all risk insurance on the Improvements and the Personal Property,
including contingent liability from Operation of Building Laws, Demolition
Costs and Increased Cost of Construction Endorsements, in each case (A) in an
amount equal to one hundred percent (100%) of the “Full Replacement Cost,”
which for purposes of this Indenture shall mean actual replacement value
(exclusive of costs of excavations, foundations, underground utilities and
footings) with a waiver of depreciation, but the amount shall in no event be
less than the outstanding principal balance of the Notes; (B) containing an
agreed amount endorsement with respect to the Improvements and Personal
Property waiving all co-insurance provisions; (C) providing for no deductible
in excess of One Hundred Thousand and No/100 Dollars ($100,000) for all such
insurance coverage; and (D) containing an “Ordinance or Law Coverage” or “Enforcement”
endorsement if any of the Improvements or the use of the Property shall at any
time constitute legal non-conforming structures or uses. In addition, Issuers
shall obtain coastal windstorm insurance in amounts and in form and substance
satisfactory to Trustee in the

 

 

event the
Property is located in any coastal region, provided that the insurance
shall be on terms consistent with the comprehensive all risk insurance policy
required under this subsection (i) and provided  further
that coastal windstorm insurance shall not be required with respect to the golf
course located at the Property. Notwithstanding anything to the contrary
contained in this Section 8.01, (1) earthquake insurance required
hereunder may provide for co-insurance in an amount up to ten percent (10%) of
the applicable insurance coverage and a deductible in an amount up to Two
Million and No/100 Dollars ($2,000,000) and (2) coastal windstorm insurance
required hereunder may provide for a deductible in an amount up to Two Million
and No/100 Dollars ($2,000,000);

 

(ii)     By
amending and restating clause (vi) thereof in its entirety to provide as
follows:

 

(vi)          intentionally
omitted;

 

(iii)    By
deleting the term “and” at the end of Clause (x) thereof;

 

(iv)    By
amending and restating clause (xi) thereof in its entirety to provide as
follows:

 

(xi) upon
sixty (60) days’ notice, such other reasonable insurance and in such reasonable
amounts as Trustee from time to time may reasonably request against such other
insurable hazards which at the time are commonly insured against for property
similar to the Property located in or around the region in which the Property
is located, provided that Trustee hereby agrees that, notwithstanding
the foregoing, Issuers shall not be required to obtain boiler and machinery
insurance; and

 

(v)     By
adding the following at the end thereof:

 

(xii)
political risk insurance in an amount not less than One Hundred Ten Million and
No/100 Dollars ($110,000,000) covering losses arising from or associated with
(A) the nationalization, confiscation, or expropriation of funds or assets
(including expropriation pursuant to unlawful government action depriving the
applicable Person of fundamental rights in its funds or assets), and (B) the
deterioration in a Person’s ability to convert profits, debt service, and other
investment returns from Mexican pesos into Dollars and to transfer Dollars out
of Mexico (including new currency restrictions or controls preventing the
conversion from Mexican pesos to Dollars and/or transfer and repatriation of
monetary returns of an investment in Mexico).

 

 

(b)     Section 8.01(d)
of the Indenture is amended and restated in its entirety to provide as follows:

 

All Policies
provided for or contemplated by Section 8.01(a), except for the
Policy referenced in Section 8.01(a)(v), shall name Issuers as the
insured and Trustee as the additional insured, as its interests may appear, and
in the case of property damage, flood and earthquake insurance; shall contain a
so-called New York standard non-contributing mortgagee clause in favor of
Trustee providing that the loss thereunder shall be payable to Trustee.

 

(c)     Section 10.02
of the Indenture is amended and restated in its entirety to provide as follows:

 

Tax and
Insurance Escrow Fund. Issuers shall pay to Trustee
(a) on each Payment Date (i) one twelfth of the Taxes and the Condominium
charges and assessments that Trustee estimates will be payable during the next
ensuing twelve (12) months in order to accumulate with Trustee sufficient funds
to pay all such Taxes and Condominium charges and assessments thirty (30) days
prior to their respective due dates and (ii) one twelfth of the Insurance
Premiums that Trustee estimates will be payable for the renewal of the coverage
afforded by the Policies (other than the political risk insurance Policy
required under Section 8.01(a)(xii) hereof) upon the expiration
thereof in order to accumulate with Trustee sufficient funds to pay all such
Insurance Premiums thirty (30) days prior to the expiration of such Policies
and (b) on each Payment Date, commencing with the Payment Date occurring in
April 2005, an amount that Trustee estimates will be necessary to accumulate
with Trustee (in equal installments and after taking into account the then
remaining balance of any amounts deposited with Initial Purchaser on the Note
Issuance Date for the purchase of political risk insurance coverage) funds
sufficient to pay the Insurance Premium relating to political risk insurance
Policy required under Section 8.01(a)(xii) hereof thirty (30) days
prior to the expiration of such Policy (or thirty (30) days prior to the date
the next installment of such Insurance Premium is due and payable, as applicable)
(said amounts in (a) and (b) above hereinafter called the “Tax and
Insurance Escrow Fund”). The Tax and Insurance Escrow Fund and the
payment of the monthly Debt Service, shall be added together and shall be paid
as an aggregate sum by Issuers to Trustee. Trustee will apply the Tax and
Insurance Escrow Fund to payments of Taxes and Insurance Premiums required to
be made by Issuers pursuant to Section 7.01(b) hereof. In making
any payment relating to the Tax and Insurance Escrow Fund, Trustee may do so
according to any bill, statement or estimate procured from the appropriate
public

 

 

office (with
respect to Taxes) or insurer or agent (with respect to Insurance Premiums),
without inquiry into the accuracy of such bill, statement or estimate or into
the validity of any tax, assessment, sale, forfeiture, tax lien or title or
claim thereof except where Issuers are contesting the Taxes in accordance with
the terms and provisions of this Indenture and have notified Trustee in writing
of such contest. If the amount of the Tax and Insurance Escrow Fund shall
exceed the amounts due for Taxes and Insurance Premiums pursuant to Section 7.01(b)
hereof, Trustee shall, in its reasonable discretion, return any excess to
Issuers or credit such excess against future payments to be made to the Tax and
Insurance Escrow Fund. Any amount remaining in the Tax and Insurance Escrow
Fund after the Debt has been paid in full shall be returned to Issuers. In
allocating such excess, Trustee may deal with the Person shown on the records
of Trustee to be the owner of the Property. If at any time Trustee reasonably
determines that the Tax and Insurance Escrow Fund is not or will not be
sufficient to pay Taxes and Insurance Premiums by the dates set forth in (a)
and (b) above, Trustee shall notify Issuers of such determination and Issuers
shall increase its monthly payments to Trustee by the amount that Trustee
estimates is sufficient to make up the deficiency at least thirty (30) days
prior to the due date of the Taxes, thirty (30) days prior to expiration of the
Policies (other than the political risk insurance Policy required under Section
8.01(a)(xii) hereof) and/or thirty (30) days prior to the expiration of the
political risk insurance Policy required under Section 8.01(a)(xii)
hereof (or, if applicable, thirty (30) days prior to the date the next
installment of the Insurance Premium therefor is due and payable), as the case
may be. Notwithstanding anything to the contrary contained herein or in the
other Financing Documents, it shall be a condition precedent to the exercise of
any Extension Option that (x) Issuers shall have obtained a political risk
insurance Policy satisfying the terms of Section 8.01(a)(xii)
hereof and having an expiration date that is not earlier than the related
Extended Maturity Date and (y) Issuers shall have delivered to Trustee evidence
of such political risk insurance Policy reasonably satisfactory to Trustee not
later than ten (10) Business Days prior to the first day of the applicable
Extension Option term.

 

(d)     Section 10.03(a)
of the Indenture amended and restated in its entirety to provide as follows:

 

Replacement
Reserve Fund. Issuers shall pay to Trustee (i) on each
Payment Date commencing with the Payment Date occurring in February 2005, two
percent (2%) of Gross Income from Operations for the calendar month two (2)
months prior to the

 

 

month in which
such Payment Date occurs, (ii) on each Payment Date commencing with the Payment
Date occurring in January 2006, three percent (3%) of Gross Income from
Operations for the calendar month two (2) months prior to the month in which
such Payment Date occurs, and (iii) on each Payment Date thereafter (commencing
with the Payment Date occurring in January 2007), four percent (4%) of
Gross Income from Operations for the calendar month two (2) months prior to the
month in which such Payment Date occurs, which is the amount (the “Replacement Reserve Monthly Deposit”) reasonably estimated
for the calendar month two (2) months prior to the month in which such Payment Date
occurs by Trustee in its sole discretion to be due for replacements and repairs
required to be made to the Property during the calendar year (collectively, the
“Replacements”). Amounts so deposited
shall hereinafter be referred to as Issuers’ “Replacement Reserve Fund” and the
account in which such amounts are held shall hereinafter be referred to as
Issuers’ “Replacement Reserve Account.”

 

III.           MISCELLANEOUS

 

3.1          Except as specifically
modified and amended herein, all other terms, conditions and covenants
contained in the Indenture shall remain in full force and effect.

 

3.2          The terms and provisions
of Section 9.03 of the Indenture are incorporated herein by this express
reference.

 

3.3          All references in the
Financing Documents to the Indenture shall mean the Indenture as hereby
modified and as it may be further amended, restated, replaced, supplemented or
otherwise modified from time to time.

 

3.4          Unless otherwise defined
in this Amendment, terms defined in the Indenture or in any of the other
Financing Documents shall have their defined meanings when used herein.

 

3.5          All of the
representations, warranties, covenants and other terms and provisions of the
Notes and the other Financing Documents, as modified hereby, including, without
limitation, all defined terms and granting clauses, shall be applicable from
and after the date hereof with the same force and effect as if the same had
originally been included in the Notes and the other Financing Documents. The
Financing Documents, except as specifically modified by this Amendment, remain
unmodified and, as so modified, are in full force and effect.

 

3.6          This Amendment may be
executed in any number of counterparts with the same effect as if all patties
hereto had signed the same document. All such counterparts shall be construed
together and shall constitute one instrument, but in making proof hereof it
shall only be necessary to produce one such counterpart.

 

 

3.7          This Amendment shall be
binding upon and inure to the benefit of the parties and their respective
heirs, legal representatives, successors and assigns.

 

3.8          This Amendment shall be
governed by, and construed in accordance with, the laws of the State of New
York, without regard to principles of conflict laws, and any applicable law of
the United States of America.

 

 

IN WITNESS WHEREOF,
the parties hereto have caused this Amendment to be duly executed by their duly
authorized representatives, all as of the day and year first above written.

 

	
   

  	
  ISSUERS:

  
	
   

  	
   

  	
   

  
	
   

  	
  KERZNER
  PALMILLA BEACH

  PARTNERS, S. de R.L. de C.V.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ John R. Allison

  	
   

  
	
   

  	
   

  	
  Name: John R. Allison

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  KERZNER PALMILLA HOTEL

  PARTNERS, S. de R.L. de C.V.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ John R. Allison

  	
   

  
	
   

  	
   

  	
  Name: John R. Allison

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  KERZNER SERVICIOS HOTELEROS,

  S. de R.L. de C.V.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ John R. Allison

  	
   

  
	
   

  	
   

  	
  Name: John R. Allison

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  KERZNER COMPANIA de

  SERVICIOS, S. de R.L. de C.V.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ John R. Allison

  	
   

  
	
   

  	
   

  	
  Name: John R. Allison

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  KERZNER PALMILLA GOLF

  PARTNERS, S. de R.L. de C.V.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ John R. Allison

  	
   

  
	
   

  	
   

  	
  Name: John R. Allison

  
	
   

  	
   

  	
  Title: Vice President

  

 

 

	
   

  	
  TRUSTEE:

  
	
   

  	
   

  
	
   

  	
  LASALLE
  BANK NATIONAL ASSOCIATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

	
   

  	
  APPROVED
  as of this         
  day of March, 2005

  
	
   

  	
   

  
	
   

  	
  NOTEHOLDERS:

  
	
   

  	
   

  
	
   

  	
  CREDIT
  SUISSE FIRST BOSTON LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00101-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00101-of-00352.parquet"}]]