Document:

EXHIBIT 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

 

	
   

  	
   

  	
   

  
	
  ARTICLE 1 -
  DEFINITIONS; INTERPRETATION

  
	
   

  	
   

  	
   

  
	
  Section 1.01

  	
  Definitions

  	
  1

  
	
  Section
  1.02

  	
  Accounting
  Terms

  	
  24

  
	
  Section
  1.03

  	
  General

  	
  24

  
	
   

  
	
  ARTICLE 2 - ISSUE OF NOTES

  
	
   

  	
   

  	
   

  
	
  Section
  2.01

  	
  No
  Limit on Issue

  	
  25

  
	
  Section
  2.02

  	
  Notes
  Deemed to be Outstanding

  	
  25

  
	
  Section
  2.03

  	
  Conditions
  Precedent to the Issue of Notes

  	
  25

  
	
  Section
  2.04

  	
  Issue
  of Notes

  	
  26

  
	
  Section
  2.05

  	
  Form
  of Notes

  	
  27

  
	
  Section
  2.06

  	
  Registration

  	
  27

  
	
  Section
  2.07

  	
  Transfers
  of Notes

  	
  28

  
	
  Section
  2.08

  	
  Inspection
  of Registers

  	
  28

  
	
  Section
  2.09

  	
  Title
  to Registered Notes

  	
  28

  
	
  Section
  2.10

  	
  Mutilation,
  Loss, Theft or Destruction

  	
  28

  
	
  Section
  2.11

  	
  Cancellation
  of Notes

  	
  28

  
	
   

  
	
  ARTICLE 3 - PAYMENT
  MECHANICS

  
	
   

  
	
  Section
  3.01

  	
  Requirements
  of Payment

  	
  29

  
	
  Section
  3.02

  	
  Additional
  Provisions

  	
  29

  
	
  Section
  3.03

  	
  Priority
  of Payments

  	
  29

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4 -
  SECURITY AND ASSET DEALING

  
	
   

  
	
  Section
  4.01

  	
  Charges
  and Security Interest

  	
  29

  
	
  Section
  4.02

  	
  Holders
  of Security

  	
  30

  
	
  Section
  4.03

  	
  Further
  Assurances

  	
  30

  
	
  Section
  4.04

  	
  Power
  of Attorney

  	
  30

  
	
  Section
  4.05

  	
  Dealings
  with the Security Trust Agreement and the Pledge

  	
  31

  
	
  Section
  4.06

  	
  No
  Obligation to Advance Funds

  	
  31

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5 -
  CANCELLATION AND DISCHARGE

  
	
   

  
	
  Section
  5.01

  	
  Cancellation
  and Destruction

  	
  31

  
	
  Section
  5.02

  	
  Non-Presentation
  of Notes

  	
  31

  
	
  Section
  5.03

  	
  Unclaimed
  Moneys

  	
  31

  
	
  Section
  5.04

  	
  Discharge

  	
  32

  

 

i

 

	
  ARTICLE 6 -
  REPRESENTATIONS AND WARRANTIES

  
	
   

  
	
  Section
  6.01

  	
  Issuer
  Representations

  	
   

  
	
  Section
  6.02

  	
  Survival
  of Representations

  	
  32

  
	
   

  	
   

  	
  45

  
	
  ARTICLE 7 - ISSUER
  COVENANTS

  
	
   

  
	
  Section
  7.01

  	
  Affirmative
  Covenants

  	
  45

  
	
  Section
  7.02

  	
  Negative
  Covenants

  	
  57

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8
  - INSURANCE; CASUALTY; CONDEMNATION

  
	
   

  
	
  Section
  8.01

  	
  Insurance

  	
  65

  
	
  Section
  8.02

  	
  Casualty

  	
  69

  
	
  Section
  8.03

  	
  Condemnation

  	
  69

  
	
  Section
  8.04

  	
  Restoration

  	
  70

  
	
  Section
  8.05

  	
  Casualty/Condemnation
  Generally

  	
  73

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9 - DEFAULTS

  
	
   

  
	
  Section
  9.01

  	
  Event
  of Default

  	
  74

  
	
  Section
  9.02

  	
  Remedies

  	
  76

  
	
  Section
  9.03

  	
  Exculpation

  	
  78

  
	
  Section
  9.04

  	
  Manager
  Termination

  	
  79

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10 - RESERVE FUNDS

  
	
   

  
	
  Section
  10.01

  	
  Required
  Repair Funds

  	
  80

  
	
  Section
  10.02

  	
  Tax
  and Insurance Escrow Fund

  	
  81

  
	
  Section
  10.03

  	
  Replacements
  and Replacement Reserve

  	
  81

  
	
  Section
  10.04

  	
  Interest
  Reserve Interest

  	
  82

  
	
  Section
  10.05

  	
  Reserve
  LC

  	
  82

  
	
  Section
  10.06

  	
  Reserve
  Funds, Generally

  	
  83

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11
  - MATTERS CONCERNING THE TRUSTEE

  
	
   

  
	
  Section
  11.01

  	
  Duties
  of the Trustee

  	
  85

  
	
  Section
  11.02

  	
  Rights
  of Trustee

  	
  90

  
	
  Section
  11.03

  	
  Individual
  Rights of Trustee

  	
  91

  
	
  Section
  11.04

  	
  Trustee’s
  Disclaimer

  	
  91

  
	
  Section
  11.05

  	
  Notice
  of Defaults

  	
  92

  
	
  Section
  11.06

  	
  Compensation
  and Indemnity

  	
  92

  
	
  Section
  11.07

  	
  Replacement
  of Trustee

  	
  92

  
	
  Section
  11.08

  	
  Resignation
  or Removal of Trustee; Conflict of Interest

  	
  93

  
	
  Section
  11.09

  	
  Successor
  Trustee

  	
  94

  
	
  Section
  11.10

  	
  Authorization
  and Duties of Trustee

  	
  94

  
	
  Section
  11.11

  	
  Trustee
  Not Required to Give Security

  	
  95

  
	
  Section
  11.12

  	
  Trustee
  May Deal In Notes

  	
  95

  

 

ii

 

	
  Section
  11.13

  	
  Administration
  of the Trust and Protection of the Trustee

  	
  95

  
	
  Section
  11.14

  	
  Service
  Providers.

  	
  97

  
	
   

  	
   

  	
   

  
	
  ARTICLE 12 -
  SUPPLEMENTAL INDENTURES

  
	
   

  
	
  Section
  12.01

  	
  Supplemental
  Trust Indentures

  	
  97

  
	
  Section
  12.02

  	
  Further
  Assurances

  	
  97

  
	
  Section
  12.03

  	
  Amendment
  or Modification

  	
  98

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  13 - NOTEHOLDER MEETINGS AND APPROVALS

  
	
   

  
	
  Section
  13.01

  	
  Conduct
  of Meetings

  	
  98

  
	
  Section
  13.02

  	
  Extraordinary
  Resolution

  	
  99

  
	
  Section
  13.03

  	
  Signed
  Instruments

  	
  100

  
	
  Section
  13.04

  	
  Binding
  Effect of Resolutions

  	
  100

  
	
   

  	
   

  	
   

  
	
  ARTICLE 14 - MISCELLANEOUS

  
	
   

  
	
  Section
  14.01

  	
  Survival

  	
  100

  
	
  Section
  14.02

  	
  Trustee’s
  Discretion

  	
  100

  
	
  Section
  14.03

  	
  Notices

  	
  100

  
	
  Section
  14.04

  	
  Governing
  Law

  	
  102

  
	
  Section
  14.05

  	
  Modification,
  Waiver in Writing

  	
  103

  
	
  Section
  14.06

  	
  Delay
  Not a Waiver

  	
  103

  
	
  Section
  14.07

  	
  Trial
  by Jury

  	
  104

  
	
  Section
  14.08

  	
  Headings

  	
  104

  
	
  Section
  14.09

  	
  Severability

  	
  104

  
	
  Section
  14.10

  	
  Preferences

  	
  104

  
	
  Section
  14.11

  	
  Waiver
  of Notice

  	
  104

  
	
  Section
  14.12

  	
  Expenses;
  Indemnity

  	
  104

  
	
  Section
  14.13

  	
  Offsets,
  Counterclaims and Defenses

  	
  106

  
	
  Section
  14.14

  	
  No
  Joint Venture or Partnership; No Third Party Beneficiaries

  	
  106

  
	
  Section
  14.15

  	
  Publicity

  	
  106

  
	
  Section
  14.16

  	
  Waiver
  of Marshalling of Assets

  	
  107

  
	
  Section
  14.17

  	
  Waiver
  of Counterclaim

  	
  107

  
	
  Section
  14.18

  	
  Conflict;
  Construction of Documents; Reliance

  	
  107

  
	
  Section
  14.19

  	
  Brokers
  and Financial Advisors

  	
  107

  
	
  Section
  14.20

  	
  Prior
  Agreements

  	
  108

  
	
  Section
  14.21

  	
  Duplicate
  Originals, Counterparts

  	
  108

  
	
  Section
  14.22

  	
  Joint
  and Several Liability

  	
  108

  
	
   

  	
   

  	
   

  
	
  ARTICLE 15 - EXECUTION

  
	
   

  
	
  Section
  15.01

  	
  Effective
  Upon Execution

  	
  108

  

 

iii

 

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.

 

“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.

 

3

 

“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,            ,
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.

 

“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 

 

4

 

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.

 

“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.

 

5

 

“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, 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

 

6

 

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.

 

“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,

 

7

 

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 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.

 

8

 

“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 to the
Trustee at least five (5) Business Day 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.

 

9

 

“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.

 

“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.

 

10

 

“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.

 

“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.

 

11

 

“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).

 

“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

 

12

 

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
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;
(l) 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

 

13

 

with the financing of such equipment or other personalty permitted by
the Loan Documents, (e) access and utility easements 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.

 

14

 

“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
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,

 

15

 

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.

 

“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.

 

16

 

“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. 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.

 

17

 

“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, División Fiduciaria, as trustee under the Security Trust Agreement.

 

“Service Company Issuer” shall mean
Kerzner Compañía 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 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).

 

18

 

“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, 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

 

19

 

(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 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;

 

20

 

(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 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;

 

21

 

(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 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

 

22

 

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;

 

(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.

 

23

 

“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.

 

“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

 

24

 

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:

 

(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; ands

 

(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.

 

25

 

(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:

 

(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

 

26

 

(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

  	
   

  

 

(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

 

27

 

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 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.

 

28

 

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.

 

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

 

29

 

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 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

 

30

 

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.

 

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

 

31

 

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 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.

 

32

 

(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 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 personalty (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

 

33

 

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 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

 

34

 

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 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 set forth

 

35

 

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-1 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 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

 

36

 

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 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

 

37

 

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 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.

 

38

 

(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 “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

 

39

 

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

 

(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)  (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

 

40

 

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);

 

(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

 

41

 

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;

 

(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

 

42

 

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;

 

(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;

 

43

 

(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, 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.

 

44

 

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 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

 

45

 

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 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.

 

46

 

(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.

 

(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

 

47

 

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 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

 

48

 

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 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

 

49

 

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 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

 

50

 

fluctuate with occupancy levels. 
Servicer on behalf of Trustee shall use good faith 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 or
modification thereto, in electronic form and prepared using a Microsoft Word
for Windows or WordPerfect

 

51

 

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.

 

(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

 

52

 

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’ 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

 

53

 

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 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).

 

54

 

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 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

 

55

 

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.

 

(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

 

56

 

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.

 

(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

 

57

 

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.

 

(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.

 

58

 

(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 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

 

59

 

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 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

 

60

 

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 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:

 

61

 

(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;

 

(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

 

62

 

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
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);

 

63

 

(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;

 

(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.

 

64

 

(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.

 

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;

 

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(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 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);

 

66

 

(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;

 

(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.

 

67

 

(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 “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 later than
five (5)

 

68

 

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.

 

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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 condition 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 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

 

70

 

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.

 

(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

 

71

 

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 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

 

72

 

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 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 8.05  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

 

73

 

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 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

 

74

 

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 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

 

75

 

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 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

 

76

 

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 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.

 

77

 

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 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;

 

78

 

(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 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; (b) 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

 

79

 

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
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

 

80

 

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 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

 

81

 

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 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.  (a)    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

 

82

 

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 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.

 

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(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 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 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

 

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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, 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.

 

86

 

(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 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.

 

87

 

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

 

(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

 

88

 

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, 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

 

89

 

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.

 

(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 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.

 

90

 

(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.

 

(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 therefore.

 

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

 

91

 

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.

 

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.

 

92

 

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.

 

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

 

93

 

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.

 

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.

 

94

 

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.

 

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

 

95

 

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 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

 

96

 

and the failure of the Trustee to discharge this duty and
responsibility will not in any way 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 affect 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 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

 

97

 

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)  Quorum.  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 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.

 

98

 

(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 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

 

99

 

(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.

 

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):

 

100

 

	
   

  	
  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.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  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

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  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

 

101

 

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 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

 

102

 

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 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.

 

103

 

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.

 

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

 

104

 

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 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

 

105

 

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 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

 

106

 

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 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

 

107

 

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.

 

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.

 

108

 

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

  
	
   

  	
   

  
	
   

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

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John R. Allison

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John R. Allison

  
	
   

  	
   

  
	
   

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

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John R. Allison

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John R. Allison

  
	
   

  	
   

  
	
   

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

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John R. Allison

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John R. Allison

  
	
   

  	
   

  
	
   

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

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John R. Allison

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John R. Allison

  
					

 

 

	
   

  	
  TRUSTEE:

  
	
   

  	
   

  
	
   

  	
  LASALLE BANK NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/Alyssa Steal

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Alyssa Steal

  
	
   

  	
   

  	
  Title:

  	
  FVPEXHIBIT 4.24(b)

 

GUARANTY AGREEMENT

 

THIS GUARANTY AGREEMENT
(the “Guaranty”) is executed as of December 17,
2004, by GS EMERGING MARKET REAL ESTATE FUND, L.P.,
a Cayman Island exempted limited partnership, having an address at c/o Goldman
Sachs, 85 Broad Street, New York, New York 
10004 (“Goldman”) and KERZNER
INTERNATIONAL LIMITED, a Bahamian corporation, having an address at c/o
Kerzner International North America, 1000 South Pine Island Road, Plantation,
Florida  33324-3906 (“Kerzner; together with Goldman, “Guarantor”),
in favor of LASALLE BANK NATIONAL ASSOCIATION,
a national banking association, having an address at 35 S. LaSalle Street,
Suite 1625, Chicago, Illinois 60603, in its capacity as note trustee and
collateral agent (“Trustee”), for
the benefit of Noteholders (as herein defined).

 

W I  T  N  E
S  S  E  T  H :

 

WHEREAS, pursuant to certain promissory notes,
dated of even date herewith (as the same may be amended, restated, replaced,
supplemented, or otherwise modified from time to time, the “Notes”), executed by 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) (collectively, “Issuers”) and issued pursuant to that certain Note Indenture
dated as of the date hereof between Issuers and Trustee (as the same may be
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 the date hereof (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
Notes (together with the Notes, the Indenture and the Security Trust Agreement,
collectively, the “Financing Documents”);

 

WHEREAS, Initial Noteholder (as defined in the
Indenture) is not willing to purchase the Notes or otherwise extend credit to Issuers
unless Guarantor unconditionally guarantees payment and performance to Trustee
for the benefit of Noteholders of the Guaranteed Obligations (as herein
defined);

 

WHEREAS, Guarantor is the owner of a direct or
indirect interest in Issuers, and Guarantor will directly benefit from the
issuance of the Notes, it being understood that the proceeds of the Notes shall
be advanced to Issuers; and

 

WHEREAS, Guarantor has been provided copies of,
and has reviewed, each of the Financing Documents.

 

 

NOW, THEREFORE, as an inducement to Trustee to perform
its obligations under the Indenture and for Initial Noteholder to purchase the Notes,
and for other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, the parties do hereby agree as
follows:

 

ARTICLE
I

NATURE AND SCOPE OF GUARANTY

 

1.1  Guaranty of
Obligation.  Guarantor hereby irrevocably and unconditionally
guarantees to Trustee for the benefit of Noteholders the payment and
performance of the Guaranteed Obligations as and when the same shall be due and
payable, whether by lapse of time, by acceleration of maturity or
otherwise.  Guarantor hereby irrevocably
and unconditionally covenants and agrees that it is liable for the Guaranteed
Obligations as a primary obligor.

 

1.2  Definition of
Guaranteed Obligations.  (a)  As used herein, the term “Guaranteed Obligations” means the obligations and
liabilities of Issuers to Trustee or Noteholders for any loss, damage, cost,
expense, liability, claim and any other obligation incurred by Trustee or Noteholders
(including attorneys’ fees and costs reasonably incurred) arising out of or in
connection with the matters described in Section 9.03 of the Indenture (other
than Section 9.03(a)(ix)), a copy of which Indenture is attached hereto as
Exhibit A.  The provisions of Section 9.03
are hereby incorporated into this Guaranty to the same extent and with the same
force as if fully set forth herein.

 

(b)  Notwithstanding anything to the
contrary contained herein or in any other Financing Document, with respect to
Guarantor’s obligations and liabilities for the Guaranteed Obligations, the
parties hereby agree (and by accepting this Guaranty, Trustee on behalf of
Noteholders hereby agrees) that all of the Guaranteed Obligations of Guarantor
under this Guaranty are recourse obligations of Guarantor, but not of any
direct or indirect member, shareholder, partner, principal, affiliate,
employee, officer, director, agent or representative of Guarantor (other than any
Issuer) and none of such direct or indirect member, shareholder, partner,
principal, affiliate, employee, officer, director, agent or representative of
Guarantor (other than any Issuer) shall have any liability in its personal or
individual capacity, but instead, all parties shall look solely to the property
and the assets of Guarantor for satisfaction of any Guaranteed Obligations of
any nature required to be paid by Guarantor to Trustee for the benefit of
Noteholders under this Guaranty.

 

1.3  Nature of
Guaranty.  This Guaranty is an irrevocable, absolute, continuing guaranty of
payment and performance and not a guaranty of collection.  This Guaranty may not be revoked by Guarantor
and shall continue to be effective with respect to any Guaranteed Obligations
arising or created after any attempted revocation by Guarantor.  The fact that at any time or from time to
time the Guaranteed Obligations may be increased or reduced shall not release
or discharge the obligation of Guarantor to Trustee with respect to the
Guaranteed Obligations.  This Guaranty
may be enforced by Trustee for the benefit of Noteholders and shall not be
discharged by the assignment or negotiation of all or part of the Notes.

 

2

 

1.4  Guaranteed
Obligations Not Reduced by Offset.  The Guaranteed Obligations and the
liabilities and obligations of Guarantor to Trustee hereunder, shall not be
reduced, discharged or released because or by reason of any existing or future
offset, claim or defense of Issuers, or any other party, against Trustee or any
Noteholder or against payment of the Guaranteed Obligations, whether such
offset, claim or defense arises in connection with the Guaranteed Obligations
(or the transactions creating the Guaranteed Obligations) or otherwise.

 

1.5  Payment By
Guarantor.  If all or any part of the Guaranteed Obligations shall
not be punctually paid when due, whether at demand, maturity, acceleration or
otherwise, Guarantor shall, immediately upon demand by Trustee on behalf of
Noteholders, and without presentment, protest, notice of protest, notice of
non-payment, notice of intention to accelerate the maturity, notice of
acceleration of the maturity, or any other notice whatsoever, pay in lawful
money of the United States of America, the amount due on the Guaranteed
Obligations to Trustee for the benefit of Noteholders at Trustee’s address as
set forth herein.  Such demand(s) may be
made at any time coincident with or after the time payment of all or part of
the Guaranteed Obligations is due, and may be made from time to time with
respect to the same or different items of Guaranteed Obligations.  Such demand shall be deemed made, given and
received in accordance with the notice provisions hereof.

 

1.6  No Duty To
Pursue Others.  It shall not be necessary for Trustee or any
Noteholder (and Guarantor hereby waives any rights which Guarantor may have to
require Trustee or any Noteholder), in order to enforce the obligations of
Guarantor hereunder, first to (a) institute suit or exhaust its remedies
against Issuers or others liable on the Note Indebtedness or the Guaranteed
Obligations or any other Person, (b) enforce Trustee’s rights for the benefit
of Noteholders against any collateral which shall ever have been given to
secure the Note Indebtedness, (c) enforce Trustee’s rights for the benefit of
Noteholders against any other guarantors of the Guaranteed Obligations, (d)
join Issuers or any other Person liable on the Guaranteed Obligations in any
action seeking to enforce this Guaranty, (e) exhaust any remedies available to Trustee
for the benefit of Noteholders against any collateral which shall ever have
been given to secure the Note Indebtedness, or (f) resort to any other means of
obtaining payment of the Guaranteed Obligations.  Neither Trustee nor any Noteholder shall be
required to mitigate damages or take any other action to reduce, collect or
enforce the Guaranteed Obligations.

 

1.7  Waivers.  Guarantor agrees to the provisions of the
Financing Documents, and hereby waives notice of (a) any loan or advances made
by, or on behalf of, any Noteholder to Issuers, (b) acceptance of this
Guaranty, (c) any amendment or extension of the Notes, the Indenture or of any
other Financing Documents, (d) the execution and delivery by Issuers and Trustee
of any loan or credit agreement or of Issuers’ execution and delivery of any
promissory notes or other documents arising under the Financing Documents or in
connection with the Property, (e) the occurrence of any breach by Issuers or an
Event of Default, (f) any Noteholder’s transfer or disposition of the Guaranteed
Obligations or any part thereof, (g) sale or foreclosure (or posting or
advertising for sale or foreclosure) of any collateral for the Guaranteed
Obligations, (h) protest, proof of non-payment or default by Issuers, and (i)
any other action at any time taken or omitted by Trustee or any Noteholder,
and, generally, all demands and notices of every kind in connection with this
Guaranty, the Financing Documents, any documents or

 

3

 

agreements evidencing, securing or relating to any of the Guaranteed
Obligations, except as specifically provided for herein.

 

1.8  Payment of
Expenses.  In the event that Guarantor should breach or fail to timely perform any
provisions of this Guaranty, Guarantor shall, promptly after written demand by Trustee,
pay Trustee for the benefit of Noteholders all reasonable costs and expenses
(including court costs and attorneys’ fees) incurred by Trustee on behalf of
Noteholders in the enforcement hereof or the preservation of Trustee’s rights
hereunder.  The covenant contained in
this Section 1.8 shall survive the payment and performance of the
Guaranteed Obligations.

 

1.9  Intentionally
Omitted.

 

1.10  Effect of
Bankruptcy.  In the event that, pursuant to any insolvency,
bankruptcy, reorganization, receivership or other debtor relief law, or any
judgment, order or decision thereunder, Trustee or any Noteholder must rescind
or restore any payment, or any part thereof, received by Trustee or any
Noteholder in satisfaction of the Guaranteed Obligations, as set forth herein,
any prior release or discharge from the terms of this Guaranty given to
Guarantor by Trustee shall be without effect, and this Guaranty shall remain in
full force and effect. It is the intention of Issuers and Guarantor that
Guarantor’s obligations hereunder shall not be discharged except by Guarantor’s
performance of such obligations and then only to the extent of such
performance.

 

1.11  Intentionally
Omitted.

 

1.12  Waiver of
Subrogation, Reimbursement and Contribution.  Notwithstanding anything to the contrary
contained in this Guaranty, Guarantor hereby unconditionally and irrevocably
waives, releases and abrogates, but only for so long as the Debt shall remain
outstanding, any and all rights it may now or hereafter have under any
agreement, at law or in equity (including, without limitation, any law
subrogating the Guarantor to the rights of Trustee or any Noteholder), to
assert any claim against or seek contribution, indemnification or any other
form of reimbursement from Issuers or any other Person liable for payment of
any or all of the Guaranteed Obligations for any payment made by Guarantor
under or in connection with this Guaranty or otherwise.  Notwithstanding anything contained herein to
the contrary, nothing contained herein shall prohibit or be deemed to prohibit
the execution and delivery by Goldman and Kerzner of a Contribution Agreement
between themselves, and the performance of the terms therein, relating to their
respective payment and reimbursement obligations arising out of or related to
this Guaranty; provided that neither the foregoing provisions of this
sentence nor the execution, delivery or performance by Goldman or Kerzner of
such Contribution Agreement shall in any way affect, limit or otherwise modify
(or be deemed to affect, limit or otherwise modify) the rights of Trustee or
any Noteholder hereunder.

 

1.13  Issuers.  The term “Issuer”
as used herein shall include any new or successor corporation, association,
partnership (general or limited), joint venture, trust or other individual or
organization formed as a result of any merger, reorganization, sale, transfer,
devise, gift or bequest of any Issuer or any interest in any Issuer.

 

4

 

ARTICLE
II

EVENTS AND CIRCUMSTANCES NOT REDUCING

OR DISCHARGING GUARANTOR’S OBLIGATIONS

 

To the extent permitted by law, Guarantor hereby
consents and agrees to each of the following, and agrees that Guarantor’s
obligations under this Guaranty shall not be released, diminished, impaired,
reduced or adversely affected by any of the following, and waives any common
law, equitable, statutory or other rights (including without limitation rights
to notice) which Guarantor might otherwise have as a result of or in connection
with any of the following:

 

2.1  Modifications.  Any renewal, extension,
increase, modification, alteration or rearrangement of all or any part of the
Guaranteed Obligations, the Notes, the Indenture, the other Financing Documents,
or any other document, instrument, contract or understanding between Issuers
and Trustee on behalf of Noteholders, or any other Person, pertaining to the
Guaranteed Obligations or any failure of Trustee to notify Guarantor of any
such action.

 

2.2  Adjustment.  Any adjustment, indulgence, forbearance
or compromise that might be granted or given by Trustee on  behalf of Noteholders to any Issuer or any guarantor
or indemnitor.

 

2.3  Condition of Issuers
or Guarantor.  The
insolvency, bankruptcy, arrangement, adjustment, composition, liquidation,
disability, dissolution or lack of power of any Issuer, Guarantor or any other Person
at any time liable for the payment of all or part of the Guaranteed
Obligations; or any dissolution of any Issuer or Guarantor, or any sale, lease
or transfer of any or all of the assets of any Issuer or Guarantor, or any
changes in the shareholders, partners or members of any Issuer or Guarantor; or
any reorganization of any Issuer or Guarantor.

 

2.4  Invalidity of
Guaranteed Obligations.  The invalidity, illegality or unenforceability of all
or any part of the Guaranteed Obligations, or any document or agreement
executed in connection with the Guaranteed Obligations, for any reason
whatsoever, including without limitation the fact that (a) the Guaranteed
Obligations, or any part thereof, exceeds the amount permitted by law, (b) the
act of creating the Guaranteed Obligations or any part thereof is ultra  vires,
(c) the officers or representatives executing the Notes, the Indenture or the
other Financing Documents or otherwise creating the Guaranteed Obligations
acted in excess of their authority, (d) the Guaranteed Obligations violate
applicable usury laws, (e) the Issuers have valid defenses, claims or offsets
(whether at law, in equity or by agreement) which render the Guaranteed
Obligations wholly or partially uncollectible from Issuers (except for payment
and performance of the Guaranteed Obligations, and then only to the extent of
such payment and performance by Issuers), (f) the creation, performance or
repayment of the Guaranteed Obligations (or the execution, delivery and
performance of any document or instrument representing part of the Guaranteed
Obligations or executed in connection with the Guaranteed Obligations, or given
to secure the repayment of the Guaranteed Obligations) is illegal,
uncollectible or unenforceable, or (g) the Notes, the Indenture or any of the
other Financing Documents have been forged or otherwise are irregular or not
genuine or authentic, it being

 

5

 

agreed that Guarantor shall remain liable hereon regardless of whether Issuers
or any other Person be found not liable on the Guaranteed Obligations or any
part thereof for any reason.

 

2.5  Release of
Obligors.  Any full or partial release of the liability of Issuers on the
Guaranteed Obligations, or any part thereof, or of any co-guarantors, or any
other Person now or hereafter liable, whether directly or indirectly, jointly,
severally, or jointly and severally, to pay, perform, guarantee or assure the
payment of the Guaranteed Obligations, or any part thereof, it being
recognized, acknowledged and agreed by Guarantor that Guarantor may be required
to pay the Guaranteed Obligations in full without assistance or support of any
other Person, and Guarantor has not been induced to enter into this Guaranty on
the basis of a contemplation, belief, understanding or agreement that other
Persons will be liable to pay or perform the Guaranteed Obligations, or that Trustee
will look to other Persons to pay or perform the Guaranteed Obligations.

 

2.6  Other
Collateral.  The taking or accepting of any other security,
collateral or guaranty, or other assurance of payment, for all or any part of
the Guaranteed Obligations.

 

2.7  Intentionally
Omitted.

 

2.8  Release of
Collateral.  Any release, surrender, exchange, subordination,
deterioration, waste, loss or impairment (including without limitation
negligent, willful, unreasonable or unjustifiable impairment) of any
collateral, property or security at any time existing in connection with, or
assuring or securing payment of, all or any part of the Guaranteed Obligations.

 

2.9  Care and
Diligence.  The failure of Trustee, any Noteholder or any other Person
to exercise diligence or reasonable care in the preservation, protection,
enforcement, sale or other handling or treatment of all or any part of such
collateral, property or security, including but not limited to any neglect,
delay, omission, failure or refusal of Trustee or any Noteholder (a) to take or
prosecute any action for the collection of any of the Guaranteed Obligations or
(b) to foreclose, or initiate any action to foreclose, or, once commenced,
prosecute to completion any action to foreclose upon any security therefor, or
(c) to take or prosecute any action in connection with any instrument or
agreement evidencing or securing all or any part of the Guaranteed Obligations.

 

2.10  Unenforceability.  The fact that any collateral, security,
security interest or lien contemplated or intended to be given, created or
granted as security for the repayment of the Guaranteed Obligations, or any
part thereof, shall not be properly perfected or created, or shall prove to be
unenforceable or subordinate to any other security interest or lien, it being recognized
and agreed by Guarantor that Guarantor is not entering into this Guaranty in
reliance on, or in contemplation of the benefits of, the validity,
enforceability, collectibility or value of any of the collateral for the
Guaranteed Obligations.

 

2.11  Offset.  Any existing or future right
of offset, claim or defense of Issuers against Trustee or any other Person, or
against payment of the Guaranteed Obligations, whether such right of offset,
claim or defense arises in connection with the Guaranteed Obligations (or

 

6

 

the transactions creating the Guaranteed Obligations) or otherwise
(except for payment and performance of the Guaranteed Obligations, and then
only to the extent of such payment and performance).

 

2.12  Merger.  The reorganization, merger or
consolidation of any Issuer into or with any other corporation or entity.

 

2.13  Preference.  Any payment by Issuers to Trustee or any
Noteholder is held to constitute a preference under bankruptcy laws, or for any
reason Trustee or any Noteholder is required to refund such payment or pay such
amount to Issuers or other Person.

 

2.14  Other Actions
Taken or Omitted.  Any other action taken or omitted to be taken with
respect to the Financing Documents, the Guaranteed Obligations, or the security
and collateral therefor, whether or not such action or omission prejudices
Guarantor or increases the likelihood that Guarantor will be required to pay
the Guaranteed Obligations pursuant to the terms hereof, it is the unambiguous
and unequivocal intention of Guarantor that Guarantor shall be obligated to pay
the Guaranteed Obligations when due, notwithstanding any occurrence,
circumstance, event, action, or omission whatsoever, whether contemplated or
uncontemplated, and whether or not otherwise or particularly described herein,
which obligation shall be deemed satisfied only upon the full and final payment
and satisfaction of the Guaranteed Obligations.

 

ARTICLE
III

REPRESENTATIONS AND WARRANTIES

 

To induce Trustee to enter into the Financing Documents
and to induce Initial Noteholder to purchase the Notes, Guarantor represents
and warrants to Trustee as follows:

 

3.1  Benefit.  Guarantor is an affiliate of Issuers,
is the owner of a direct or indirect interest in Issuers, and has received, or
will receive, direct or indirect benefit from the making of this Guaranty with
respect to the Guaranteed Obligations.

 

3.2  Familiarity and
Reliance.  Guarantor
is familiar with, and has independently reviewed books and records regarding,
the financial condition of the Issuers and is familiar with the value of any
and all collateral intended to be created as security for the payment of the Notes
or Guaranteed Obligations; however, Guarantor is not relying on such financial
condition or the collateral as an inducement to enter into this Guaranty.

 

3.3  No
Representation By Trustee.  Neither Trustee, any Noteholder nor any
other Person has made any representation, warranty or statement to Guarantor in
order to induce the Guarantor to execute this Guaranty.

 

3.4  Guarantor’s
Financial Condition.  As of the date hereof, and after giving effect to this
Guaranty and the contingent obligation evidenced hereby, Guarantor is, and will
be, solvent, and has and will have assets which, fairly valued, exceed its
obligations, liabilities (including contingent liabilities) and debts, and has
and will have property and assets sufficient to satisfy and repay its
obligations and liabilities.  Guarantor
hereby represents and

 

7

 

warrants that its Net Worth (hereinafter defined) as September 30, 2004
is $1,097,956,000.  Guarantor agrees
that, except for the payment of employee salaries and benefits and dividends in
the ordinary course, not to voluntary dispose of its assets other than on an
arms-length basis in exchange for fair consideration.  For purposes hereof, “Net Worth”
shall mean the excess of total assets of Guarantor and its subsidiaries at such
time over the total liabilities of Guarantor and its subsidiaries at such time,
in each case as determined on a consolidated basis in accordance with GAAP.

 

3.5  Legality.  The execution, delivery and
performance by Guarantor of this Guaranty and the consummation of the
transactions contemplated hereunder do not, and will not, contravene or
conflict with any applicable law, statute or regulation of any court or
governmental agency or body having jurisdiction over the Guarantor (except for
such violations that would not reasonably be expected to result in a material
adverse effect on the financial condition of Guarantor, any Issuer or the
Property), or constitute a default under, or result in the breach of, any
indenture, mortgage, deed of trust, charge, lien, or any contract, agreement or
other instrument to which Guarantor is a party or which may be applicable to
Guarantor (except for such violations that would not reasonably be expected to
result in a material adverse effect on the financial condition of Guarantor, any
Issuer or the Property).  This Guaranty
is a legal and binding obligation of Guarantor and is enforceable in accordance
with its terms, except as limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or other rights and to general equity
principles.

 

3.6  Survival.  All representations and warranties made
by Guarantor herein shall survive the execution hereof.

 

ARTICLE
IV

SUBORDINATION OF CERTAIN INDEBTEDNESS

 

4.1  Subordination
of All Guarantor Claims.  As used herein, the term “Guarantor
Claims” shall mean all debts and liabilities of Issuers to
Guarantor, whether such debts and liabilities now exist or are hereafter
incurred or arise, or whether the obligations of Issuers thereon be direct,
contingent, primary, secondary, several, joint and several, or otherwise, and
irrespective of whether such debts or liabilities be evidenced by note,
contract, open account, or otherwise, and irrespective of the Person in whose
favor such debts or liabilities may, at their inception, have been, or may
hereafter be created, or the manner in which they have been or may hereafter be
acquired by Guarantor.  The Guarantor
Claims shall include without limitation all rights and claims of Guarantor
against Issuers (arising as a result of subrogation or otherwise) as a result
of Guarantor’s payment of all or a portion of the Guaranteed Obligations.  Upon the occurrence of an Event of Default or
Default, Guarantor shall not receive or collect, directly or indirectly, from Issuers
or any other Person any amount upon the Guarantor Claims.

 

4.2  Claims in
Bankruptcy.  In
the event of receivership, bankruptcy, reorganization, arrangement, debtor’s
relief, or other insolvency proceedings involving Guarantor as debtor, Trustee on
behalf of Noteholders shall have the right to prove its claim in any such
proceeding so as to establish its rights hereunder and receive directly from
the receiver, trustee or other court custodian dividends and payments which
would otherwise be payable upon

 

8

 

Guarantor Claims.  Guarantor
hereby assigns such dividends and payments to Trustee for the benefit of
Noteholders.  Should Trustee for the
benefit of Noteholders receive, for application upon the Guaranteed
Obligations, any such dividend or payment which is otherwise payable to
Guarantor, and which, as between Issuers and Guarantor, shall constitute a
credit upon the Guarantor Claims, then upon payment to Trustee for the benefit
of Noteholders in full of the Guaranteed Obligations, Guarantor shall become
subrogated to the rights of Trustee to the extent that such payments to Trustee
on the Guarantor Claims have contributed toward the liquidation of the
Guaranteed Obligations, and such subrogation shall be with respect to that
proportion of the Guaranteed Obligations which would have been unpaid if Trustee
had not received dividends or payments upon the Guarantor Claims.

 

4.3  Payments Held
in Trust.  In
the event that, notwithstanding anything to the contrary in this Guaranty,
Guarantor should receive any funds, payment, claim or distribution which is
prohibited by this Guaranty, Guarantor agrees to hold in trust for Trustee for
the benefit of Noteholders an amount equal to the amount of all funds,
payments, claims or distributions so received, and agrees that it shall have
absolutely no dominion over the amount of such funds, payments, claims or
distributions so received except to pay them promptly to Trustee for the
benefit of Noteholders, and Guarantor covenants promptly to pay the same to Trustee
for the benefit of Noteholders.

 

4.4  Liens
Subordinate.  Guarantor
agrees that any liens, security interests, judgment liens, charges or other
encumbrances upon Issuers’ assets securing payment of the Guarantor Claims
shall be and remain inferior and subordinate to any liens, security interests,
judgment liens, charges or other encumbrances upon Issuers’ assets securing
payment of the Guaranteed Obligations, regardless of whether such encumbrances
in favor of Guarantor or Trustee for the benefit of Noteholders presently exist
or are hereafter created or attach. 
Without the prior written consent of Trustee, Guarantor shall not (a)
exercise or enforce any creditor’s right it may have against Issuers or (b)
foreclose, repossess, sequester or otherwise take steps or institute any action
or proceedings (judicial or otherwise, including without limitation the
commencement of, or joinder in, any liquidation, bankruptcy, rearrangement,
debtor’s relief or insolvency proceeding) to enforce any liens, mortgages,
deeds of trust, security interests, collateral rights, judgments or other
encumbrances on assets of Issuers held by Guarantor.

 

ARTICLE
V

MISCELLANEOUS

 

5.1  Waiver.  No failure to exercise, and no delay in
exercising, on the part of Trustee for the benefit of Noteholders, any right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right.  The rights of Trustee
hereunder shall be in addition to all other rights provided by law.  Subject to the further provisions of Section
5.5, no consent, or any modification or waiver of any provision of, this
Guaranty, nor any consent to departure therefrom, shall be effective unless in
writing and no such consent or waiver shall extend beyond the particular case
and purpose involved.  No notice or
demand given in any case shall constitute a waiver of the right to take other
action in the same, similar or other instances without such notice or demand.

 

9

 

5.2  Intentionally
Omitted.

 

5.3  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
5.3:

 

	
   

  	
  Guarantor:

  	
  c/o Kerzner
  International North America

  1000 South Pine Island
  Road

  Plantation, Florida
  33324-3906

  Attention: John Allison

  Facsimile No. (954)
  809-2346

  
	
   

  	
   

  	
   

  
	
   

  	
  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

  
	
   

  	
   

  	
   

  
	
   

  	
  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. [                                          ]

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  	
  Column Financial, Inc.

  11 Madison Avenue

  New York, New York
  10010

  Attention: Edmund
  Taylor

  Facsimile No. (212)
  325-8106

  

 

10

 

	
   

  	
  with a copy to:

  	
  Column Financial, Inc.

  11 Madison Avenue

  New York, New York
  10010

  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

  

 

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.

 

5.4  Governing Law.  This Guaranty shall be
governed in accordance with the State of New York and the applicable law of the
United States of America.

 

5.5  Invalid
Provisions.  If
any provision of this Guaranty is held to be illegal, invalid, or unenforceable
under present or future laws effective during the term of this Guaranty, such
provision shall be fully severable and this Guaranty shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part of this Guaranty, and the remaining provisions of this
Guaranty shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance from this
Guaranty, unless such continued effectiveness of this Guaranty, as modified,
would be contrary to the basic understandings and intentions of the parties as
expressed herein.

 

5.6  Amendments.  This Guaranty may be amended
only by an instrument in writing executed by the party or an authorized
representative of the party against whom such amendment is sought to be
enforced.

 

5.7  Parties Bound;
Assignment; Joint and Several.  This Guaranty shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
assigns and legal representatives; provided, however, that Guarantor may not,
without the prior written consent of Trustee, assign any of its rights, powers,
duties or obligations hereunder.  If
Guarantor consists of more than one person or entity, the obligations and
liabilities of each such person or entity shall be joint and several.

 

5.8  Headings.  Section headings are for convenience of
reference only and shall in no way affect the interpretation of this Guaranty.

 

11

 

5.9  Recitals.  The recital and introductory paragraphs
hereof are a part hereof, form a basis for this Guaranty and shall be
considered prima facie evidence of the facts and
documents referred to therein.

 

5.10  Counterparts.  To facilitate execution, this Guaranty
may be executed in as many counterparts as may be convenient or required.  It shall not be necessary that the signature
of, or on behalf of, each party, or that the signature of all Persons required
to bind any party, appear on each counterpart. 
All counterparts shall collectively constitute a single instrument.  It shall not be necessary in making proof of
this Guaranty to produce or account for more than a single counterpart
containing the respective signatures of, or on behalf of, each of the parties
hereto. Any signature page to any counterpart may be detached from such
counterpart without impairing the legal effect of the signatures thereon and
thereafter attached to another counterpart identical thereto except having
attached to it additional signature pages.

 

5.11  Rights and
Remedies.  If Guarantor becomes liable for any indebtedness owing by Issuers to Trustee
or any Noteholder, by endorsement or otherwise, other than under this Guaranty,
such liability shall not be in any manner impaired or affected hereby and the
rights of Trustee hereunder shall be cumulative of any and all other rights
that Trustee may ever have against Guarantor. 
The exercise by Trustee for the benefit of Noteholders of any right or
remedy hereunder or under any other instrument, or at law or in equity, shall
not preclude the concurrent or subsequent exercise of any other right or
remedy.

 

5.12  Intentionally
Omitted.

 

5.13  Other Defined
Terms.  Any capitalized term utilized herein shall have the meaning as
specified in the Indenture, unless such term is otherwise specifically defined
herein.

 

5.14  Entirety.  THIS
GUARANTY EMBODIES THE FINAL AND ENTIRE AGREEMENT OF GUARANTOR AND TRUSTEE WITH
RESPECT TO GUARANTOR’S GUARANTY OF THE GUARANTEED OBLIGATIONS AND SUPERSEDES
ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS,
WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF.  THIS GUARANTY IS INTENDED BY GUARANTOR AND TRUSTEE
AS A FINAL AND COMPLETE EXPRESSION OF THE TERMS OF THE GUARANTY, AND NO COURSE
OF DEALING BETWEEN GUARANTOR AND TRUSTEE, NO COURSE OF PERFORMANCE, NO TRADE
PRACTICES, AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY NATURE SHALL BE
USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS GUARANTY
AGREEMENT.  THERE ARE NO ORAL AGREEMENTS
BETWEEN GUARANTOR AND TRUSTEE.

 

5.15  Waiver of
Right To Trial By Jury.  EACH PARTY HERETO AND ALL PERSONS
CLAIMING BY, THROUGH OR UNDER SUCH PARTY EACH HEREBY AGREE NOT TO ELECT A TRIAL
BY JURY OF ANY ISSUE TRIABLE OF

 

12

 

RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY
JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH
REGARD TO THIS GUARANTY, THE NOTES, THE INDENTURE, THE SECURITY TRUST AGREEMENT,
OR THE OTHER 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
PARTY HERETO AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH
ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.  EACH PARTY HERETO IS HEREBY AUTHORIZED TO
FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS
WAIVER BY TRUSTEE OR GUARANTOR, AS THE CASE MAY BE.

 

5.16  Reinstatement
in Certain Circumstances.  If at any time any payment of the
principal of or interest under the Notes or any other amount payable by the Issuers
under the Financing Documents is rescinded or must be otherwise restored or
returned upon the insolvency, bankruptcy or reorganization of any Issuer or
otherwise, the Guarantor’s obligations hereunder with respect to such payment
shall be reinstated as though such payment has been due but not made at such
time.

 

5.17  Cooperation.  Guarantor acknowledges and
agrees that Initial Purchaser (as defined in the Indenture) may assign all of
its rights under this Guaranty, the Notes and the other Financing Documents to
Initial Noteholder on the date hereof. 
Guarantor further acknowledges that Initial Noteholder or its successors
or assigns may (i) sell this Guaranty, the Notes and other Financing
Documents to one or more investors as a whole loan, (ii) participate the
Debt secured in part by this Guaranty to one or more investors,
(iii) deposit this Guaranty, the Notes and other Financing Documents with
a trust, which trust may sell certificates to investors evidencing an ownership
interest in the trust assets, or (iv) otherwise sell the indebtedness
evidenced by the Notes or interest therein to investors (the transactions
referred to in clauses (i) through (iv) are hereinafter each referred to as “Secondary Market
Transaction”).  Guarantor
shall cooperate with Initial Noteholder or its successors or assigns in
effecting any such Secondary Market Transaction consistent with the terms and
provisions of the Securitization Cooperation Agreement (as defined in the
Indenture).  It is understood that the
information provided by Guarantor to Initial Purchaser or Initial Noteholder or
their successors or assigns may ultimately be incorporated into the offering
documents for the Secondary Market Transaction and thus various investors may
also see some or all of the information; provided that in no event shall
such offering documents include financial information about Goldman other than
a brief statement of the total amount of assets and liabilities of Goldman.

 

[NO FURTHER TEXT ON THIS PAGE]

 

13

 

EXECUTED as of the day and year first above
written.

 

	
   

  	
  GUARANTOR:

  
	
   

  	
   

  
	
   

  	
  GS EMERGING MARKET REAL ESTATE FUND, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  GSEM Advisors, L.L.C., its general partner

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/Peter Weidman

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Peter Weidman

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  KERZNER INTERNATIONAL LIMITED

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/John R. Allison

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John R. Allison

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President Finance and Chief Financial
  Officer

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